EXHIBIT 2.2
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AGREEMENT AND PLAN OF MERGER
by and among
BRIDGELINE SOFTWARE, INC.,
INTERACTIVE APPLICATIONS GROUP, INC.
and
MILES XXXXXXX
December 15, 2004
AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger (the "AGREEMENT") is made as of this
15th day of December, 2004 by and among Bridgeline Software, Inc., a Delaware
corporation, with a principal place of business at 000 Xxx Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 ("BRIDGELINE"), Interactive Applications Group, Inc.
(the "COMPANY" or "IAPPS"), a Delaware subchapter S corporation, with a
principal place of business at 0000 Xxxxxxxxxxx Xxx, Xxxxx 000, Xxxxxxxxxx, XX
00000, and the sole shareholder of Iapps, Miles Xxxxxxx (the "SHAREHOLDER"),
with a mailing address of 0000 Xxxxxxxxx Xxxxxx, XX Xxxxxxxxxx, XX 00000.
RECITALS
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WHEREAS, the Shareholder owns 100% of the issued and outstanding shares
of the Common Stock of the Iapps (the "SHARES");
WHEREAS, the Boards of Directors of each of the Acquirer and the
Corporation have, in accordance with the laws of the State of Delaware,
respectively, approved the merger of the Corporation with and into the Acquirer,
pursuant to which all of the Shares will be converted into common stock of the
Acquirer, $0.001 par value per share (the "Acquirer Stock") and the Corporation
will merge with and into the Acquirer, with the Acquirer being the surviving
corporation; and;
WHEREAS, it is the intention of the parties that the merger shall
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code") and that this Agreement
shall constitute a "plan of reorganization" for the purposes of Section 368 of
the Code;
WHEREAS, each of the parties to the Agreement desires to make certain
representations, warranties, and agreements in connection with the transaction
between the parties and to prescribe various conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
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1.1 THE MERGER. Subject to and upon the terms and conditions of this
Agreement, at the effective time of the merger of the Company with and into
Bridgeline, and pursuant to the Delaware General Corporation Law ("DGCL"), the
Company will be merged with and into Bridgeline (the "MERGER") and the separate
existence of the Company shall thereupon cease, in accordance with the
applicable provisions of the DGCL. As a result of the Merger, Bridgeline will be
the surviving corporation and shall survive as a going concern (sometimes
referred to herein as the "SURVIVING COMPANY" or "BRIDGELINE"). The Certificate
of Incorporation and By-
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laws of the Surviving Company shall be those of Bridgeline as they are in
existence immediately prior to the Merger. The separate corporate existence of
Iapps with all its rights, privileges, powers, assets, liabilities, operations,
intellectual property, contract rights, employees, and franchises shall be
extinguished in the Merger. The name of the Surviving Company shall "Bridgeline
Software, Inc." On the Closing Date (as such term is defined below), the parties
shall cause a Certificate of Merger, meeting the requirements of Section 251 of
the DGCL (the "CERTIFICATE OF MERGER"), to be promptly executed and filed with
each of the Secretary of State of the State of Delaware. The Merger shall become
effective (the "EFFECTIVE TIME") upon the close of business on the date that the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware has been completed or at such other time or date than may otherwise be
indicated in the Certificate of Merger.
1.2 CONVERSION OF SHARES; EXCHANGE PROCEDURES AND BOOT.
(a) By virtue of the Merger, automatically and without any action
on the part of the holder thereof, the Shares outstanding immediately prior to
the Effective Time (other than any shares held as treasury stock by the
Corporation, which shall be cancelled, retired and cease to exist, and for which
no payment hereunder shall be made) shall become and be converted into 1,430,000
shares of Bridgeline's Common Stock (the "BRIDGELINE STOCK"); (ii) $100,000 in
immediately available funds, each to be delivered as of the Closing (as defined
below) and the Earn-Out Consideration (as defined below) (collectively, the
"MERGER CONSIDERATION").
(b) The Company shall cause to be delivered to Bridgeline on the
Closing Date the certificates representing all of the Shares of Iapps issued and
outstanding immediately prior to the Closing, as evidenced by the stock ledger
and stock transfer records of the Company (collectively, the "COMPANY
CERTIFICATES"), and a stock power separate from the certificate transferring
ownership to Bridgeline. Upon surrender of the Company Certificates for exchange
and cancellation to Bridgeline together with stock power, the Shareholder shall
receive a certificate representing 1,430,000 shares of Bridgeline Stock.
(c) No dividend or other distribution payable after the Closing
with respect to Bridgeline Stock shall be paid to the holder of any
unsurrendered Company Certificate until the holder thereof surrenders such
Company Certificate, at which time such holder shall receive all dividends and
distributions, without interest thereon, previously payable but withheld from
such holder pursuant hereto.
(d) After the Closing, the holders of any shares of the capital
stock of the Company shall cease to be, and shall have no rights as,
stockholders of the Company, other than to receive the Acquisition Consideration
pursuant to the provisions hereof.
(e) Notwithstanding the foregoing, neither Bridgeline nor the
Company or any other person shall be liable to any former holder of shares of
any capital stock of the Company for any shares or any dividends or
distributions with respect thereto properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(f) In the event any Company Certificate shall have been lost,
stolen or destroyed, upon receipt of an affidavit of lost stock certificate as
to such loss, theft or destruction
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and to the ownership of such certificate by the person claiming such certificate
to be lost, stolen or destroyed, and the receipt by Bridgeline of appropriate
indemnification, Bridgeline will cause to be delivered in exchange for such
lost, stolen or destroyed certificate the shares of Bridgeline Stock deliverable
in respect thereof.
(g) If any certificate representing shares of Bridgeline Stock is
to be issued in a name other than that in which the Company Certificate
surrendered and exchanged therefore is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer (including, but not limited to, that the signature
of the transferor shall be properly guaranteed by a commercial bank, trust
company, member firm of a national or regional securities exchange or other
eligible guarantor institution), and that the person requesting such exchange
shall pay to Bridgeline in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of Bridgeline Stock
in any name other than that of the registered holder of the Company certificate
representing the Shares surrendered, or required for any other reason, or shall
establish to the satisfaction of Bridgeline that such tax has been paid or is
not payable.
1.3 EARN-OUT CONSIDERATION.
(a) The Shareholder shall be entitled to earn additional cash
consideration (collectively, the "EARN-OUT") in an amount, up to $300,000 in the
aggregate (the "MAXIMUM EARN-OUT"), equal to 33% of the positive Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") beginning on the
Closing Date (as defined below) and continuing for the twelve (12) calendar
quarters immediately following the Closing (the "EARN-OUT PERIODS" and each
individually, an "EARN-OUT PERIOD"), with the first Earn-Out Period to include
the first full calendar quarter following the Closing Date plus the period
between the Closing Date and the first day of such first calendar quarter, all
in accordance with the terms and conditions of this Section.
(b) Within thirty (30) calendar days after the end of each
calendar quarter (i.e., the three (3) months ended March 31, June 30, September
30 and December 31 of each relevant calendar year) or portion thereof that is
included within the Earn-Out Periods, Bridgeline shall prepare an income
statement reflecting solely the business and operations associated exclusively
with the operations of Company following the completion of the Acquisition
independent of the remaining business and operations of Bridgeline (the "IAPPS
BUSINESS") calculated in accordance with generally accepted accounting
principles consistently applied ("GAAP") for such Earn-Out Period, and a related
calculation of EBITDA of the Iapps Business for such Earn-Out Period, such
calculation of EBITDA to be completed in accordance with GAAP and to reflect as
closely as reasonably possible the EBITDA that would have been achieved by the
Company during such Earn-Out Period if the Acquisition had not occurred (each
such income statement and EBITDA calculation are collectively referred to herein
as the "INCOME STATEMENT"). The maximum allocation of corporate overhead ("G&A
ALLOCATION") that will be charged by Bridgeline to the Iapps Business (operating
as a division of Bridgeline) on a monthly basis shall not exceed $12,000.00 per
month. This G&A Allocation assumes that the Iapps business unit or division will
provide all research and development and sales and marketing activity and
related expenses within its own internal expense budgets, operating as a
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division of Bridgeline. Other than the aforesaid G&A Allocation, for purposes of
computing the EBITDA of the Iapps Business, the following rules shall apply: (i)
there shall be no (A) allocations of any other Bridgeline costs, expenses or
other financial items charged to the Iapps Business Unit except to the extent
directly incurred by the Iapps Business or (B) compensation charge to the Iapps
Business Unit for issuance of stock options (regardless of whether required by
GAAP) and (ii) without the prior written consent of the Shareholder (which shall
not be unreasonably withheld, conditioned or delayed) there shall be no (A)
incurrence by Bridgeline of reimbursable expenditures on behalf of the Iapps
Business Unit, (B) charge-offs against the Iapps Business Unit (other than
charge-offs required by GAAP), or (C) other accounting adjustments with respect
to the Iapps Business by Bridgeline that adversely affect the Earn-Out (except
as required to be made in accordance with GAAP). Promptly following Bridgeline's
determination of such EBITDA for an Earn-Out Period, Bridgeline shall deliver
the Income Statement to the Shareholder, which shall include a statement of the
total amount owed collectively to the Shareholder, if any, based on the
calculation set forth above (each Income Statement and each such accompanying
statement of the Earn-Out Amount, if any, are collectively referred to herein as
the "EARN-OUT NOTICE").
(c) The Shareholder shall have fifteen (15) business days from
the date of his receipt of an Earn-Out Notice to either (i) accept the
calculations and conclusions made in the Earn-Out Notice or (ii) give notice to
Bridgeline in writing that the Shareholder intends to dispute the amounts
included in the Earn-Out Notice, and such notice shall set forth in reasonable
detail the disputed amount and the basis for such dispute. Any such dispute by
the Shareholder must be reasonable and made in good faith. If the Shareholder
accepts the Earn-Out computation, Bridgeline shall pay the Earn-Out amount no
later than five (5) days following acceptance of such computation.
(d) If, within the 15-business day period provided for in Section
1.3(c), the Shareholder either affirmatively notifies Bridgeline that he accepts
the calculations and conclusions made in the Earn-Out Notice or does not
otherwise give notice to Bridgeline in writing that he intends to dispute the
amounts included in the Earn-Out Notice, then within five (5) business days
following the expiration of such ten-business day period provided for in Section
1.3(c) or, if earlier, the date of Bridgeline's receipt of such affirmative
notice of the Shareholder's acceptance of the calculations and conclusions made
in the Earn-Out Notice, Bridgeline shall pay the relevant Earn-Out Amount, if
any, to the Shareholder.
(e) (i) If the Shareholder notifies Bridgeline that he intends to
dispute the amounts included in the Earn-Out Notice in accordance with Section
1.3(c)(ii) above, then Bridgeline and the Shareholder shall negotiate in good
faith to resolve the dispute. If Bridgeline and the Shareholder are unable to
reach a resolution within ten (10) business days after receipt by Bridgeline of
the Shareholder's written notice of dispute, then Bridgeline and the Shareholder
shall submit the matter to a mutually acceptable independent public accounting
firm (the "INDEPENDENT ACCOUNTING FIRM"), which shall, within thirty (30)
calendar days after such submission, determine the Earn-Out Amount, if any. The
determination of the Earn-Out Amount by the Independent Accounting Firm shall be
final, non-appealable and binding on the parties.
(ii) In the event that the Independent Accounting Firm
determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(b) is
accurate and correct in all
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material respects, then (A) the Shareholder shall pay all costs and expenses
charged by the Independent Accounting Firm (the "EARN-OUT IAF FEE") and (B) if
an Earn-Out Amount is due under such Earn-Out Notice, within five (5) business
days of the parties' receipt of such report by the Independent Accounting Firm,
Bridgeline shall pay such Earn-Out Amount to the Shareholder (which payment may
be in an amount net of the Earn-Out IAF Fee otherwise due from the Shareholder
to the Independent Accounting Firm, if Bridgeline chooses in its sole discretion
to pay directly to the Independent Accounting Firm the Earn-Out IAF Fee due from
the Shareholder).
(iii) In the event that the Independent Accounting Firm
determines that Bridgeline's calculations and conclusions made in the Earn-Out
Notice are inaccurate or misstated such that the Earn-Out Notice includes no
Earn-Out Amount or otherwise references an Earn-Out Amount lower than the
accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and
(B) within five (5) business days of the parties' receipt of such report by the
Independent Accounting Firm, Bridgeline shall pay to the Shareholder the
Earn-Out Amount determined by the Independent Accounting Firm.
(f) Notwithstanding any of the foregoing contained in this
Section 1.3, in no event shall any Earn-Out Amount for any individual Earn-Out
Period exceed the aggregate amount of $25,000.00.
(g) The Earn-Out is computed on a quarter-by-quarter basis and is
not cumulative. In the event that the Shareholder has not earned the aggregate
Maximum Earn-Out during the collective initial twelve (12) Earn-Out Periods, the
provisions of this Section 1.3 and shall automatically extend and continue for
an additional twelve (12) months.
1.4 TAX-FREE REORGANIZATION. It is the intention of the parties
hereto that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code. All aspects of the
transactions contemplated by this Agreement shall be implemented in a manner
consistent with this intent.
1.5 CLOSING. The closing (the "CLOSING") of the transactions
contemplated by this Agreement is taking place simultaneously with the execution
and delivery of this Agreement at the offices of XxXxxxxxx Will & Xxxxx, LLP,
000 00xx Xxxxxx, Xxxxxxxxxx, XX 00000-0000. The date of the Closing is sometimes
referred to as the "CLOSING DATE".
1.6. AGREEMENT REGARDING DEBTS OF THE COMPANY. Bridgeline shall
pay-off Iapps' long-term debt identified in Exhibit 1.5 attached hereto and (ii)
the outstanding balance, up to a maximum amount of Thirty-five Thousand and
00/100 Dollars ($35,000.00), owing by Iapps under its line of credit to the
extent borrowed after September 30, 2004 in the ordinary course of business (the
"Guaranteed Indebtedness"). At the time of Closing, Bridgeline shall pay the
amount of the Guaranteed Indebtedness into an escrow account, such funds to be
disbursed in payment of the Guaranteed Indebtedness in the manner and at the
time as agreed by Bridgeline and the Company, in any case not more than 30
calendar days after Closing, unless otherwise agreed by Bridgeline and the
Company. In addition, Bridgeline will pay any interest that accrues on the
Guaranteed Indebtedness between the Closing and the eventual payment of the
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Guaranteed Indebtedness. Iapps represents that long-term indebted for money
borrowed or capital lease obligations shall not exceed Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00) plus any amounts Iapps may have
borrowed under its line of credit in the ordinary course of business after
September 30, 2004 (up to a maximum amount of Thirty-five Thousand and 00/100
Dollars ($35,000.00)).
1.7 AGREEMENTS REGARDING STOCK OPTIONS. At the time of the Closing,
all outstanding options to acquire Iapps common stock shall be converted to
options to acquire Bridgeline Common Stock at the same ratio of stock valuations
used to determine the merger consideration payable by Bridgeline for Iapps, and
at each option holder's current vesting schedule of such options, all as set
forth on Exhibit 1.7 to this Agreement.
Additionally, Bridgeline will provide all employees of Iapps with stock
options of Bridgeline based on the current stock option table maintained by
Bridgeline at the same rate and price as options granted to employees hired by
Bridgeline within thirty (30) days before or after the Closing, or if no such
options are granted to Bridgeline employees during such sixty (60) day period,
at the same rate and exercise price of the option last issued by Bridgeline.
1.8 OTHER AGREEMENTS AND DOCUMENTS. At the Closing, Bridgeline will
enter into an employment agreement with each of Miles Xxxxxxx, Xxx Gracombe and
Xxxxx Xxxxxxxxx, each such agreement to be substantially in the form included as
Exhibit 1.7A hereto (collectively, the "EMPLOYMENT AGREEMENTS"). In addition, at
the Closing the parties are executing and delivering the documents specified on
the Closing Agenda attached hereto as Exhibit 1.7B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IAPPS AND THE SHAREHOLDER
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In order to induce Bridgeline to enter into this transaction, the
Company and the Shareholder make the following representations and warranties.
The Iapps Disclosure Schedule will be arranged in paragraphs corresponding to
the numbered and lettered sections contained in this Article II and the
disclosure in any paragraph shall qualify other sections in this Article II to
the extent that it is apparent from a reading of such disclosure that it also
qualifies or applies to such other sections. Whenever in this Article II the
term "to the knowledge of the Company" is used, it shall mean the knowledge of
each of Miles Xxxxxxx, Xxxxx Xxxxxxxx, Xxx Gracombe and Xxxxx Xxxxxxxxx, after a
relevant inquiry and due investigation is made of the operations, intellectual
property, human resources, financial statements, assets and liabilities of the
Company, including without limitation, events or circumstances which an officer
or key employee of the Company should be investigating or viewing, and on the
assumption that each of the foregoing individuals has read and inquired into the
representations and warranties made by the Company in this Article II.
2.1 OWNERSHIP OF SHARES. The Shareholder has valid title to and owns
beneficially and of record all of the Shares of Iapps, and has good and
marketable title to such Shares, free and clear of any and all transfer
restrictions (other than those imposed by relevant securities laws), options,
liens, claims, pledges, voting trusts and agreements, security interests,
charges and other restrictions or encumbrances of any kind or nature. Iapps and
the Shareholder have the
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absolute and unconditional right, power, authority and capacity to execute and
perform this Agreement and any of the Transaction Documents (as such term is
defined below) to which it or he is a party and to consummate the transactions
contemplated hereby. Except as set forth on the Disclosure Schedule, neither
Iapps nor the Shareholder has granted any option or other commitment or is
otherwise a party to or bound by any agreement obligating Iapps or the
Shareholder to sell, pledge or otherwise grant any interest in the Shares or any
other equity interest in Iapps, actual or contingent, to any person or entity.
2.2 ORGANIZATION AND CORPORATE POWER. Iapps is a corporation duly
organized, validly existing and in corporate good standing under the laws of the
State of Delaware and has the power and authority to carry on its business as
presently conducted. Iapps is duly licensed or qualified to do business as a
foreign corporation in each jurisdiction set forth on the Disclosure Schedule
and there is no other jurisdiction wherein the character of its property, or the
nature of the activities presently conducted by it, makes such qualification
necessary, except where the failure to be so qualified will not have a Material
Adverse Effect on the Company. For purposes of this Agreement, the term
"MATERIAL ADVERSE EFFECT", when used with respect to any party to this
Agreement, means a material adverse effect upon the results of operations,
financial condition, assets, liabilities, intellectual property, tangible
properties or business of such entity, taken as a whole.
2.3 AUTHORIZATION.
(a) IAPPS. Iapps has the right, power and legal capacity and has
taken all necessary legal director and shareholder action required for the due
and valid authorization, execution, delivery and performance by Iapps of this
Agreement and any other agreement or instrument executed by Iapps in connection
herewith (collectively, the "TRANSACTION DOCUMENTS") and the consummation of the
transactions contemplated herein or therein. This Agreement is, and to the
extent that Iapps is a party thereto, each of the Transaction Documents is, a
valid and binding obligation of Iapps enforceable in accordance with its
respective terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance or
other laws affecting creditors' rights generally and to the application of
general equitable principles.
(b) SHAREHOLDER. The Transaction Documents shall include all
documents executed and delivered at the Closing to which the Shareholder is a
party. This Agreement and each of the Transaction Documents to which the
Shareholder is a party has been duly executed and delivered by the Shareholder
and constitute the valid and binding obligations of the Shareholder enforceable
against the Shareholder in accordance with its respective terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance or other laws affecting
creditors' rights generally and to the application of general equitable
principles.
2.4 NO CONFLICTS. Except as set forth on the Disclosure Schedule, the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by Iapps and the Shareholder do not and will not violate, conflict with,
result in a breach of or constitute a default under (or which with notice or
lapse of time, or both, would constitute a breach of or default under), or
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result in the creation of any lien, security interest or other encumbrance under
(a) any note, agreement, contract, license, instrument, lease or other
obligation to which Iapps or the Shareholder is a party or by which Iapps or the
Shareholder is bound, and for which Iapps or the Shareholder have not previously
obtained a written waiver of such breach or default, which waiver has been
delivered to Bridgeline, except where such violation would not have Material
Adverse Effect, (b) any judgment, order, decree, ruling or injunction known and
applicable to Iapps or the Shareholder, (c) any statute, law, regulation or rule
of any governmental agency or authority, or (d) the articles of incorporation,
by-laws, organizational documents or equivalent documents of Iapps (the "IAPPS
CHARTER"). This Agreement and the transactions contemplated hereby have been
unanimously approved by Iapps' Board of Directors and approved by the
Shareholder, as required by the Iapps Charter, and do not require any further
legal action or authorization, and are not and will not be subject to any right
of first refusal, put, call or similar right.
2.5 GOVERNMENT APPROVALS. Except for filing with and acceptance by
the Delaware Secretary of State of applicable merger certificates, no consent,
approval, license or authorization, governmental or otherwise, or designation,
declaration or filing with, any court or governmental authority is or will be
required on the part of the Shareholder or Iapps in connection with the
execution, delivery and performance of this Agreement, the other Transaction
Documents and any other agreements or instruments executed by Iapps or the
Shareholder in connection herewith or therewith, the failure of which would have
a Material Adverse Effect.
2.6 AUTHORIZED AND OUTSTANDING EQUITY INTERESTS. The Disclosure
Schedule sets forth the issued and outstanding capital stock of Iapps, all of
which are validly issued and outstanding, and all options and warrants to
acquire capital stock of Iapps. Such equity interests are all of the issued and
outstanding equity interests, actual or contingent, in Iapps and are validly
issued and free from any restrictions on transfer, except for restrictions
imposed by federal or state securities laws. Except as set forth in the Iapps
Charter, there are no voting agreements, voting trusts, registration rights,
rights of first refusal, preemptive rights, buy-sell agreements, co-sale rights,
or other restrictions applicable to any capital stock or equity interests in
Iapps. All of the issued and outstanding capital stock in Iapps were issued in
transactions complying with or exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Any equity interests
in Iapps that consist of contractual or so-called "phantom" equity interests are
separately identified on the Disclosure Schedule, and all of such interests have
been effectively terminated prior to the Closing without any direct or indirect
payment by Iapps in respect thereof.
2.7 SUBSIDIARIES. Iapps does not have, and at no time during its
existence has it had, any subsidiaries. Except as set forth on the Disclosure
Schedule, Iapps does not have any investment or other interest in, or any
outstanding loan or advance to or from, any person or entity, including, without
limitation, any officer, manager or shareholder.
2.8 FINANCIAL INFORMATION. Iapps has previously delivered to
Bridgeline the unaudited balance sheets of Iapps as of October 31, 2002,
October, 2003, and October 31, 2004, and the profit and loss statements for the
years then ended (collectively, the "IAPPS FINANCIAL STATEMENTS"). The Iapps
Financial Statements present fairly, in all material respects, the
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financial condition and results of operations of Iapps as of and for the
relevant periods in accordance with GAAP applied on a basis consistent with
prior periods, except that none of such financial statements contain footnotes.
Except as set forth on the Disclosure Schedule, Iapps has no liability,
contingent or otherwise, which is not adequately reflected in or reserved
against in the Iapps Financial Statements that could materially and adversely
affect the financial condition of Iapps. Except as set forth in the Iapps
Financial Statements or on the Disclosure Schedule,, since October 31, 2004 (the
"BALANCE SHEET DATE"), (i) there has been no change in the business, property,
assets, liabilities, condition (financial or otherwise), operations, results of
operations, affairs or prospects of Iapps except for changes in the ordinary
course of business which, in the aggregate, would not have a Material Adverse
Effect, and (ii) none of the business, property, assets, liabilities, condition
(financial or otherwise), operations, results of operations, affairs or
prospects of Iapps have been materially adversely affected by any occurrence or
development, in the aggregate, whether or not insured against.
2.9 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS. Except
as set forth on the Disclosure Schedule, or in the Iapps Financial Statements,
since the Balance Sheet Date, Iapps has not, in the excess of $10,000 (i) issued
any equity interest, (ii) borrowed any amount or incurred or become subject to
any material liability (absolute, accrued or contingent), except liabilities
under contracts entered into in the ordinary course of business, (iii)
discharged or satisfied any lien or encumbrance or incurred or paid any
obligation or liability (absolute, accrued or contingent) other than current
liabilities shown on the Iapps Financial Statements and incurred in the ordinary
course of business, (iv) declared or made any payment, other than ordinary
payments of compensation in amounts consistent with the historic levels, or
distribution to shareholder or purchased or redeemed any Shares or other equity
interests, except for the exercise of stock options or similar rights, and
distributions in the ordinary course of business of a subchapter S-corporation
and required under applicable tax laws, (v) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable or such liabilities or obligations which
would not have a Material Adverse Effect, (vi) sold, assigned or transferred any
of its tangible assets except in the ordinary course of business, or canceled
any material debt or claim, except in the ordinary course of business, in an
individual amount in excess of $2,500, or $7,500 in the aggregate, (vii) sold,
assigned, transferred or granted any license with respect to any patent,
trademark, trade name, service xxxx, copyright, trade secret or other intangible
asset, except pursuant to license or other agreements entered into in the
ordinary course of business, in an individual amount in excess of $2,500, or
$7,500 in the aggregate, (viii) suffered any material loss of property or
knowingly waived any right of substantial value whether or not in the ordinary
course of business, (ix) made any change in officer compensation, (x) made any
material change in the manner of business or operations of Iapps, (xi) entered
into any transaction except in the ordinary course of business or as otherwise
contemplated hereby, or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
2.10 LITIGATION. Except as otherwise set forth on the Disclosure
Schedule, there is no litigation or governmental proceeding or investigation,
pending or, to Iapps' and the Shareholder's knowledge, threatened, against Iapps
or affecting any of Iapps' properties or assets, or against any manager,
officer, key employee, present or former shareholder of Iapps in his capacity as
such, nor to Iapps' or the Shareholder's knowledge has there occurred any event
or does there exist any condition on the basis of which any litigation,
proceeding or investigation
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might properly be instituted. Except as set forth on the Disclosure Schedule,
each incident or proceeding described on the Disclosure Schedule is fully
covered by insurance except to the extent of applicable insurance deductibles.
To Iapps' or the Shareholder's knowledge, Iapps is not in default with respect
to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency, except for such order, writ,
injunction, decree, ruling or decision which would not have a Material Adverse
Effect.
2.11 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth
on the Disclosure Schedule, the Company is in compliance with its organization
and governing documents, and in all material respects with the provisions of
each mortgage, indenture, lease, license, other agreement or instrument,
judgment, decree, judicial order, statute and regulation by which it is bound or
to which its properties are subject and where non-compliance would not have a
Material Adverse Effect.
2.12 ABSENCE OF CHANGES. No event, occurrence, fact, condition,
change, development or effect that has not been disclosed in the Iapps Financial
Statements or on the Disclosure Schedule hereto shall exist or have occurred or
come to exist or been threatened that, individually or in the aggregate, has had
or resulted in or could be expected to become or result in a Material Adverse
Effect on Iapps.
2.13 TAXES.
(a) The term "TAXES" as used in this Agreement means all federal,
state, local, foreign net income, alternative or add-on minimum tax, estimated,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term "TAX" means any one of the foregoing Taxes.
The term "TAX RETURNS" as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term "Tax Return" means any one of the foregoing Tax Returns.
"TAX AUTHORITY" means any governmental authority responsible for the imposition
of any Tax.
(b) The Company and the Shareholder each has timely filed all Tax
Returns required to be filed by it or him and has paid all Taxes owed (whether
or not shown as due on such returns), including, without limitation, all Taxes
which the Company (or the Shareholder) is obligated to withhold for amounts paid
or owing to employees, creditors and third parties. All Tax Returns filed by the
Company (or the Shareholder) were complete and correct in all material respects.
Except as set forth on the Disclosure Schedule, none of the Tax Returns filed by
the Company or the Shareholder or Taxes payable by the Company or the
Shareholder have been the subject of an audit, action, suit, proceeding, claim,
examination, deficiency or assessment by any governmental authority, and no such
audit, action, suit, proceeding, claim, examination, deficiency or assessment is
currently pending or, to the knowledge of the Company or the Shareholder,
threatened. Except as set forth on the Disclosure Schedule, the Company or the
Shareholder is not currently the beneficiary of any extension of time within
which to file any Tax
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Return, and the Company or the Shareholder has not waived any statute of
limitation with respect to any Tax or agreed to any extension of time with
respect to a Tax assessment or deficiency. All material elections with respect
to Taxes with respect to the Company or the Shareholder, as of the date hereof,
are set forth in the Company Audited Financial Statements or in the Company
Disclosure Schedule.
(c) To the best of the Company's or the Shareholder's knowledge,
no circumstances exist or have existed which would constitute grounds for
assessment against the Company of any tax liability with respect to any period
for which Tax Returns have been filed, including, but not limited to, any
circumstances relating to the existence of a valid subchapter S corporation
election for the Company for any such period. The Company has not filed any
consent to the application of Section 341(0(2) of the Code, to any assets held,
acquired or to be acquired by it. The Company's election to be taxed as a
subchapter S corporation under Section 1361 of the Code has been in effect
throughout the existence of the Company and, accordingly, the Company has never
been subject to any federal income tax by reason of being a "C Corporation" ( as
that term is defined in the Code). No shareholder is a nonresident alien for
purposes of U.S. income taxation, including for purposes of Section 897 of the
Code.
(d) The Company or the Shareholder is not a party to any Tax
sharing agreement or similar arrangement. The Company has never been a member of
a group filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company), and the Company or the Shareholder does
not have any liability for the Taxes of any Person.
(e) There are no liens for Taxes upon any of the assets, other
than for ad valorem Taxes not yet due and payable. The unpaid Taxes of the
Company did not, as of the Balance Sheet Date, exceed by any material amount the
reserve for actual Taxes (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) as shown
on the Iapps Financial Statements, and will not exceed by any material amount
such reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing their Tax
Returns. The Company has not incurred any liability for Taxes from January 1,
2004 through the Closing Date other than in the ordinary course of business
consistent with past practice. The Company or the Shareholder is not obligated
to file any Tax Return in any jurisdiction (whether foreign or domestic) other
than those jurisdictions in which it currently files Tax Returns.
2.14 REAL PROPERTY.
(a) The Disclosure Schedule sets forth the addresses and uses of
all real property that Iapps owns, leases or subleases, and any lien or
encumbrance on any such owned real property or Iapps' leasehold interest
therein, specifying in the case of each such lease or sublease, the name of the
lessor or sublessor, as the case may be, the lease term and the rental
obligations of the lessee thereunder.
(b) There are no defaults by Iapps under any existing leases,
subleases or other contractual obligations pertaining to real property that
Iapps owns, leases or subleases, and
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to the best knowledge of Iapps, by any other party, which might curtail in any
material respect the present use of Iapps' property listed on the Disclosure
Schedule.
2.15 PERSONAL PROPERTY& CAPITAL EQUIPMENT. The Disclosure Schedule
sets forth a full and complete list of all personal property, including capital
equipment, owned or leased by Iapps. Except as set forth on the Disclosure
Schedule, and except for property sold or otherwise disposed of in the ordinary
course of business, Iapps has good and marketable title, free and clear of any
lien, charge, restriction or encumbrance, to all of such personal property. All
material items of such personal property used in the operation of the business
of Iapps are in good operating condition, normal wear and tear accepted.
2.16 INTELLECTUAL PROPERTY.
(a) The "COMPANY INTELLECTUAL PROPERTY" consists of all trade
secrets, copyrights, patents, trademarks, service marks, trade dress, all
registrations and applications with respect thereto and all licenses or rights
under the same, that are owned or used by the Company and are necessary or
incidental to the operation of the business, including without limitation, any
of the foregoing embodied or contained in any of the following: net lists;
domain names and URLs and textual information contained in web sites;
schematics; processes; customer and supplier lists; know-how and show-how;
computer software programs, source code and object code; complete system build
software; development and test tools, documentation, specifications, programmer
and user manuals used by the Company to install, operate, maintain, correct,
test, repair enhance, extend, modify, prepare derivative works based upon,
design, develop, reproduce and package software; all license and other rights in
any third-party product, intellectual property, proprietary or personal rights,
documentation, or tangible or intangible property; all documents, record and
electronic files relating to the design, end user documentation, manufacturing,
quality control, sales, marketing, or customer support; and all products of the
Company currently being licensed or sold or that are currently being developed,
including all hardware products and tools, software products and tools, and
services that are currently licensed, offered or under development by the
Company (the "COMPANY PRODUCTS & SERVICES").
As used in this Agreement "software" means any and all current
and prior and currently under development versions and releases, and
predecessors of the software and computer programs and applications of the
Company to the extent related to the business as currently being conducted or as
currently required or as reasonably can be anticipated to be conducted in the
future, including all such software and computer programs in machine readable
source code forms and in machine executable object code forms and all related
specifications (including all logic architectures, algorithms and logic flows
and all physical, functional, operating and design parameters), any data used by
or related to software, work in progress relating to corrections, modifications,
revisions, upgrades, translations or enhancements, all Company and third party
development and test tools used to develop or test the software, third party
application program interfaces to the software written by them and all methods
of implementation and packaging, together with all associated know-how and
show-how and all related Documentation. As used in this Agreement,
"DOCUMENTATION" means all documentation, specifications, manuals and other
materials relating to the software, including programmer and user manuals which
are used by the Company to install, operate, maintain, correct, test, repair,
enhance, extend, modify, prepare
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derivative works based upon, design, develop, reproduce and package such
software.
(b) The Disclosure Schedule lists: (i) all patents, copyright
registrations, mask works, trademarks, service marks, trade dress, any renewal
rights for any of the foregoing, and any applications and registrations for any
of the foregoing, which are included in the Company Intellectual Property and
owned or licensed by or on behalf of the Company and are necessary to its
business (except for standard off-the-shelf software such as Microsoft Office);
(ii) all Company Products & Services; and (iii) all licenses, sublicenses and
other agreements to which the Company is a party and pursuant to which the
Company or any other person is authorized to use the Company Intellectual
Property or exercise any other right with regard thereto. The Company has
delivered to Bridgeline true and complete copies of the agreements described in
(iii) hereof
(c) The Company Intellectual Property consists solely of items
and rights which are either: (i) owned by the Company; (ii) in the public
domain; or (iii) rightfully used and authorized for use by the Company and its
successors pursuant to a valid license. All Company Intellectual Property which
consists of licenses or other rights to third party intellectual property is set
forth on the Disclosure Schedule. The Company has all rights in the Company
Intellectual Property necessary to commercially exploit the same in connection
with the Company's current, former, and planned or scheduled (whether for
release or development) activities in all geographic locations and fields of use
in which the Company currently operates or is scheduled to operate, and to
sublicense any or all such rights to third parties, including the right to grant
further sublicenses. All software created by the Company is as described in the
Documentation and performs in all material respects in accordance with the
specifications included in the Documentation (subject to software errors or bugs
which do not interfere with the operation of the software). The Company has
taken all reasonable measures to protect the proprietary nature of each item of
Company Intellectual Property. No other person or entity has any rights to any
of the Company Intellectual Property (except pursuant to agreements or licenses
specified on the Disclosure Schedule), and no other person or entity is
infringing, violating or misappropriating any of the Company Intellectual
Property. The Company owns or has the right to use all Intellectual Property
necessary (i) to use, market and distribute the products, marketed, sold or
licensed, and to provide the services provided, by the Company to other parties,
or (ii) to operate the Company's internal systems that are material to the
business or operations of the Company, including, without limitation, computer
hardware systems, software applications and embedded systems (the "INTERNAL
SYSTEMS"). Each item of Company Intellectual Property will be owned or available
for use by Bridgeline immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing,
except for any changes that do not, either individually or on the aggregate,
have a Material Adverse Effect. Except as set forth on the Disclosure Schedule,
the Company's software, to the Company's knowledge, and the Internal Systems are
free from significant defects or programming errors which interfere with the
operation and use of the software and Internal Systems and conform in all
material respects to the written documentation and specifications therefor.
(d) The Company is not, nor as a result of the execution or
delivery of this Agreement, the other Transaction Documents and all other
agreements contemplated hereby, or performance of the Company's obligations
hereunder, will the Company be, in violation of any license, sublicense or other
agreement to which the Company is a party. The Disclosure
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Schedule lists all contracts or agreements under which the Company is obligated
to provide any consideration (whether financial or otherwise) to any third
party, or under which any third party otherwise would be entitled to any
consideration, with respect to any exercise of rights by the Company or Parent
in the Company Intellectual Property. The Disclosure Schedule identifies each
item of Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap" or "click wrap" licenses, such exclusion only extending to
programs used by the Company solely for non-revenue generating administrative
functions).
(e) Except as set forth on the Disclosure Schedules, the use,
reproduction, modification, distribution, licensing, sublicensing, sale or any
other exercise of rights by the Company with respect to any of the Company
Products & Services does not infringe any intellectual property right, right of
privacy, or right in personal data of any person or entity. No claims (i)
challenging the validity, effectiveness or ownership by the Company of any of
the Company Intellectual Property, or (ii) to the effect that the use,
reproduction, modification, manufacturing, distribution, licensing,
sublicensing, sale or any other exercise of rights by the Company with respect
to any of the Company Products and Services infringes or will infringe on any
intellectual property or other proprietary or personal right of any person, have
been asserted to the Company or, to the knowledge of the Company or the
Shareholder, are threatened by any person, nor to the knowledge of the Company
or the Shareholder, are there any valid grounds for any bona fide claim of any
such kind. All granted or issued patents and mask works and all registered
trademarks listed on the Disclosure Schedule and all registered copyrights held
by the Company are valid, enforceable and subsisting. To the knowledge of the
Company and the Shareholder, there are no pending or unissued patent rights
which infringe upon or impair the Company Intellectual Property. To the
knowledge of the Company and the Shareholder, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property by
any third party, employee or former employee.
(f) The Company has not disclosed the source code for any of the
software owned by the Company or other confidential information constituting,
embodied in or pertaining to the software to any person or entity, except
pursuant to the agreements listed on the Disclosure Schedule, and the Company
has taken reasonable measures to prevent disclosure of such source code. No
parties other than the Company possess any current or contingent rights to any
source code that is part of the Company Intellectual Property.
(g) Except as set forth on the Disclosure Schedule, all of the
copyrightable materials (including software) incorporated in or bundled with the
Company's Products & Services have been created by employees of the Company
within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to the Company. No
portion of such copyrightable materials was jointly developed with any third
party. The Disclosure Schedule lists all parties who have created any portion
of, or otherwise have any rights in or to, the Company Intellectual Property,
other than employees of the Company who have no rights in or to any Company
Intellectual Property. Except as set forth on the Disclosure Schedule, the
Company has secured from all parties who have created any portion of, or
otherwise have any rights in or to, the Company Intellectual Property valid and
enforceable
-15-
written assignments of any such work or other rights to Company and has provided
true and complete copies of such assignments to Bridgeline.
(h) The Disclosure Schedule identifies each license or other
agreement (or type of license or other agreement) pursuant to which the Company
has licensed, distributed or otherwise granted any rights to any third party
with respect to, any Company Intellectual Property. The Disclosure Schedule
includes a true and complete list of support and maintenance agreements relating
to Company Intellectual Property including the identity of the parties entitled
to receive such service or maintenance, and the term of such agreements.
(i) Except as set forth on the Disclosure Schedule, the Company
has obtained written agreements from all employees and third parties with whom
Company has shared confidential proprietary information (i) of the Company, or
(ii) received from others which the Company is obligated to treat as
confidential, which agreements require such employees and third parties to keep
such information confidential. The Company has delivered or given access to all
copies of such written agreements, as executed, to Bridgeline. None of the
present or former employees, officers or directors of the Company owns directly
or indirectly, in whole or in part, any Company Intellectual Property or
application therefor.
(j) To the knowledge of the Company and the Shareholder, none of
the Internal Systems, or the use thereof, infringes or violates, or constitutes
a misappropriation of, any Intellectual Property rights of any person or entity.
The Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by the Company alleging any such infringement, violation or
misappropriation; and the Company has provided to Bridgeline complete and
accurate copies of all written documentation in the possession of the Company
relating to any such complaint, claim, notice or threat. The Company has
provided to Bridgeline complete and accurate copies of all written documentation
in the Company's possession relating to claims or disputes known to the Company
concerning any Company Intellectual Property.
2.17 AGREEMENTS OF MANAGERS, OFFICERS, EMPLOYEES AND CONSULTANTS.
Except as set forth on the Disclosure Schedule, to Iapps' and the Shareholder's
knowledge, no current or former officer or employee of or consultant to Iapps is
in violation of any term of any employment contract, non-competition agreement,
non-disclosure agreement, patent disclosure or assignment agreement or other
contract or agreement containing restrictive covenants relating to the conduct
of any such current or former shareholder, officer, employee, or consultant or
otherwise relating to the use of trade secrets or proprietary information of
others by any such person. The Disclosure Schedule sets forth the name and
address of each person currently serving as an officer or a manager of Iapps,
and each person listed on the Disclosure Schedule was duly elected and is
presently serving as such officer or manager. Other than as set forth on the
Disclosure Schedule, all current or former employees and consultants of Iapps
have (i) executed a non-disclosure agreement with Iapps or (ii) executed a
non-competition agreement with Iapps. Except as disclosed on the Disclosure
Schedule, since the Balance Sheet Date, Iapps has not paid or become committed
to pay any bonus or similar additional compensation to any officer, manager or
employee of Iapps.
2.18 GOVERNMENTAL LICENSES. Iapps has all the material permits,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or
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regulatory bodies necessary for Iapps to conduct its business as presently
conducted. All such permits, licenses, orders, franchises and other rights and
privileges are in full force and effect and, to Iapps' knowledge, no suspension
or cancellation of any of them is threatened, and none of such permits,
licenses, orders, franchises or other rights and privileges will be Materially
Adversely Affected by the consummation of the transactions contemplated by this
Agreement or any of the Transaction Documents.
2.19 LIST OF MATERIAL CONTRACTS AND COMMITMENTS. The Disclosure
Schedule sets forth a complete and accurate list of all material contracts to
which Iapps is a party or by or to which any of its assets or properties is
bound or subject. As used on the Disclosure Schedule, the phrase "MATERIAL
CONTRACT" means and includes every material agreement or material understanding
of any kind, written or oral, which is legally enforceable by or against Iapps,
and specifically includes without limitation (a) contracts and other agreements
with any current or former officer, manager, employee, consultant or shareholder
or any partnership, company, joint venture or any other entity in which any such
person or entity has an interest; (b) agreements with any labor union or
association representing any Iapps employee; (c) contracts and other agreements
for the provision of services other than by employees of Iapps which entail a
reasonably foreseeable financial consequence to any contracting party of at
least $15,000; (d) bonds or other security agreements provided by any party in
connection with the business of Iapps; (e) contracts and other agreements for
the sale of any of the assets or properties of Iapps other than in the ordinary
course of business or for the grant to any person or entity of any preferential
rights to purchase any of said assets or properties; (f) joint venture
agreements relating to the assets, properties or business of Iapps or by or to
which any of its assets or properties are bound or subject; (g) contracts or
other agreements under which Iapps agrees to indemnify any party, to share tax
liability of any party, or to refrain from competing with any party; (h) any
contracts or other agreements with regard to any indebtedness of Iapps; or (i)
any other contract or other agreement whether or not made in the ordinary course
of business and involving a reasonably foreseeable financial consequence to any
contracting party of at least $15,000. Iapps has delivered to Bridgeline true,
correct and complete copies of all such contracts, together with all
modifications and supplements thereto. Except as set forth on the Disclosure
Schedule, each of the contracts listed on the Disclosure Schedule is in full
force and effect. Iapps is not in breach of any of the material provisions of
any such Material Contract, nor, to the best knowledge of Iapps and the
Shareholder, is any other party to any such contract in default thereunder, nor
does any event or condition exist which with notice or the passage of time or
both would constitute a default of a material provision thereunder, except for
any such breach or default that individually and in the aggregate would not have
a Material Adverse Effect on the business of Iapps. Iapps has performed in all
material respects all obligations required to be performed by it under each such
contract as of the Closing.
2.20 ACCOUNTS RECEIVABLE. The Disclosure Schedule sets forth a full
and complete list of Iapps' accounts receivable and accounts receivable reserve
as of close of business on the date immediately preceding the Closing Date.
Except as set forth on the Disclosure Schedule, all accounts and notes
receivable reflected on the Iapps' Financial Statements, and all accounts and
notes receivable arising subsequent to the date of such balance sheets, have
arisen in the ordinary course of business and represent valid obligations owing
to Iapps. Except as set forth on the Disclosure Schedule, to the best knowledge
of Iapps and the Shareholder, none of Iapps' receivables is subject to any claim
of offset, recoupment, setoff or counterclaim and neither Iapps
-17-
nor the Shareholder has knowledge of any specific facts or circumstances
(whether asserted or unasserted) that could give rise to any such claim. No
material amount of receivables are contingent upon the performance by Iapps of
any obligation or contract other than normal warranty repair and replacement. No
person has any lien on any such receivables and no agreement for deduction or
discount has been made with respect to any such receivables. Except as set forth
on the Disclosure Schedule, to the best knowledge of Iapps and the Shareholder,
all of Iapps' accounts and notes receivable reflected on the Iapps' Financial
Statements and all accounts and notes receivable arising subsequent to the date
of such balance sheets are collectible in full by Iapps in the ordinary course
of business.
2.21 INSURANCE COVERAGE. The Disclosure Schedule hereto contains an
accurate summary of the insurance policies currently maintained by Iapps. Except
as described on the Disclosure Schedule, there are currently no claims pending
against Iapps pursuant to any insurance policy currently in effect and covering
the property, the business or the employees of Iapps.
2.22 EMPLOYEE MATTERS. Except as set forth on the Disclosure Schedule,
neither the Company nor any person that together with the Company would be
treated as a single employer (an "ERISA AFFILIATE") under Section 414 of the
Code has established or maintains or is obligated to contribute to (a) any
bonus, severance, stock option, or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (written or
oral), (b) any pension, profit-sharing, retirement or other plan, program or
arrangement, or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans (individually,
a "PLAN" and collectively, the "PLANS") have been operated and administered in
all material respects in accordance with their terms, as applicable, with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. No act or failure to act by the
Company has resulted in, nor do the Company have knowledge of a non-exempt
"prohibited transaction" (as defined in ERISA) with respect to the Plans.
Neither the Company nor any ERISA Affiliate maintains or has ever maintained or
contributed to any Plan subject to Title IV of ERISA. With respect to the
employees and former employees of the Company, there are no employee
post-retirement medical or health plans in effect, except as required by Section
4980B of the Code.
2.23 CUSTOMERS. Except as set forth on the Disclosure Schedule:
(a) The relationships of Iapps with its significant customers are
good commercial working relationships and no significant customer of Iapps has
canceled or otherwise terminated, or to Iapps' or the Shareholder's knowledge,
threatened to cancel or otherwise to terminate its relationship with Iapps, or
has during the last twelve (12) months decreased materially, or threatened to
decrease or limit materially, its usage or purchase of the Company Products &
Services except for normal cyclical changes related to customers' businesses and
except for changes which have not had a Material Adverse Effect on Iapps.
(b) No supplier or customer has notified Iapps that it intends to
cancel or otherwise substantially modify its relationship with Iapps or to
decrease materially or limit its services, supplies or materials to Iapps, or
its usage or purchase of the services of Iapps, and, to
-18-
the best knowledge of Iapps and the Shareholder, the consummation of the
transactions contemplated hereby will not materially adversely affect the
relationship of Bridgeline with any such supplier or customer.
2.24 NO BROKERS OR FINDERS. Except as set forth on the Disclosure
Schedule, no person or entity has or will have, as a result of the actions of
Iapps or the Shareholder, any right, interest or claim against or upon Iapps or
Bridgeline for any commission, fee or other compensation as a finder or broker
arising from the transactions contemplated by this Agreement.
2.25 TRANSACTIONS WITH INSIDERS. Except as set forth on the Disclosure
Schedule, there are no currently outstanding loans, leases or other contracts
between Iapps and any officer or manager of Iapps, or any person or entity
owning five percent (5%) or more of the total number of Shares, or any
respective family member or affiliate of any such officer, manager or
shareholder.
2.26 GUARANTEES. Except as set forth on the Disclosure Schedule, Iapps
has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on or for any indebtedness of any other person or entity,
except guarantees by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
2.27 BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Except as
set forth on the Disclosure Schedule, Iapps has no account or safe deposit box
in any bank and no person or entity has any power, whether singly or jointly, to
sign any checks on behalf of Iapps, to withdraw any money or other property from
any bank, brokerage or other account of Iapps, or to act pursuant to any power
of attorney granted by Iapps at any time for any purpose.
2.28 BOOKS AND RECORDS. The books and records of Iapps made available
to Bridgeline for inspection include copies of the by-laws and other governing
documents as currently in effect and accurately record therein in all material
respects all actions, proceedings, consents and meetings of the Board and
shareholder of Iapps and any committees thereof.
2.29 PRIVACY AND DATA COLLECTION. The Company has at all times
complied with all laws and regulations relating or applicable to privacy,
publicity, data protection, collection, storage, transfer, release and use of
personal information and user information gathered or accessed in the course of
the business and operations of the Company. The Company has at all times
complied in all material respects with all rules, policies and procedures
established by the Company from time to time with respect to privacy, publicity,
data protection, collection, storage, transfer and use of personal information
and user information gathered or accessed in the course of the business and
operations of the Company (collectively, the "PRIVACY POLICIES"), noncompliance
with which would result in a Material Adverse Effect. No claims have been
asserted or, to the knowledge of the Company and the Shareholder, threatened
against the Company by any Person or governmental entity alleging a violation of
such Person's, or any other Person's, privacy, publicity, personal or
confidentiality rights under any such laws, or a breach or other violation of
any of the Privacy Policies, where such violation would have a Material Adverse
Effect. The Company has taken commercially reasonable measures (including but
not limited to, implementing and monitoring compliance with adequate measures
with
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respect to technical and physical security) to ensure that personal and consumer
information is protected against loss and against unauthorized access, use,
modification, disclosure or other misuse. To the knowledge of the Company and
the Shareholder, there has been no unauthorized access to, use, modification,
disclosure or other misuse of such information. Neither the execution, delivery
nor performance of this Agreement nor the consummation of the transactions
contemplated hereby shall result in any breach or violation of the Privacy
Policies or violate any Law with respect to such data or information.
2.30 TERMINATION OF BENEFIT PLAN(S). Until six (6) months following
the Closing, or earlier if otherwise agreed by the parties hereto, Bridgeline
will continue to provide coverage under the Company's health and disability
plans. Following the closing, Bridgeline will take all necessary actions
required to authorize the termination of the Company's 401K or other retirement
plan, subject to the consummation of the Merger, including without limitation
the adoption of appropriate Board of Directors' resolutions, the preparation of
appropriate notices to plan participants and the sending of an appropriate
notice to the plan sponsor and participants. The Company has funded, or made
adequate reserves for, the full amounts of the employer contributions that are
required under the terms of said plan to be paid by the Company with respect to
the year ended December 31, 2003 and the period from and including January 1,
2004 through and including the Closing Date.
ARTICLE III
REPRESENTATIONS, COVENANTS AND RIGHTS OF SHAREHOLDER
----------------------------------------------------
3.1 SHAREHOLDER' REPRESENTATIONS.
NOTWITHSTANDING THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
SECTION 3.1 WHICH ARE INTENDED TO COMPLY WITH THE REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS, FOR PURPOSES OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION THE INDEMNITY OBLIGATIONS OF BRIDGELINE SET FORTH HEREIN, BRIDGELINE
ACKNOWLEDGES AND AGREES THAT (1) THE SHAREHOLDER IS RELYING ON THE
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE SET FORTH IN THIS AGREEMENT, (2)
SUCH REPRESENTATIONS AND WARRANTIES OF BRIDGELINE ARE MATERIAL INDUCEMENT TO THE
SHAREHOLDER TO ENTER INTO THIS AGREEMENT AND TO EFFECTUATE THE TRANSACTIONS
CONTEMPLATED HEREIN AND (3) THE REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER IN
THIS SECTION 3.1 SHALL NOT LIMIT OR OTHERWISE ABROGATE IN ANY RESPECT THE
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE IN THIS AGREEMENT.
The Shareholder represents that his present intention is to acquire the
Bridgeline Stock to be issued in connection with this Agreement for his own
account and that such Bridgeline Stock are being and will be acquired for the
purpose of investment and not with a view to distribution or resale thereof. The
Shareholder represents that he has had an opportunity to ask questions of and
receive answers from the authorized representatives of Bridgeline and to review
any relevant documents and records concerning the business of Bridgeline and the
terms and conditions of this investment and that any such questions have been
answered to the Shareholder's satisfaction.
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The Shareholder acknowledges that it has been called to his attention that this
investment involves a high degree of risk and that Bridgeline and has a limited
operating history. The Shareholder acknowledges that he can bear the economic
risks of his investment in the Bridgeline Stock and that he has such knowledge
and experience in financial or business matters that he is capable of evaluating
the merits and risks of this investment in the Bridgeline Stock and protecting
his own interests in connection with this investment. Except as set forth on the
Disclosure Schedule attached hereto, the Shareholder hereby represents and
warrants to Bridgeline that he is an "accredited investor" as such term is
defined under Section 501(a) of Regulation D promulgated under the Securities
Act. The Shareholder understands that the Bridgeline Stock to be issued in
connection with the transactions contemplated hereby have not been registered
under the Securities Act and that such shares must be held indefinitely unless a
subsequent disposition thereof is permitted under the Securities Act or is
exempt from such registration. The Shareholder further represents that he
understands and agrees that until transferred as herein provided, or transferred
pursuant to the provisions of Rule 144 of the Securities Act, all certificates
evidencing the Bridgeline Stock to be issued in connection with the Closing,
whether upon initial issuance or upon transfer thereof, shall bear a legend (and
Bridgeline will make a notation on its transfer books to such effect)
prominently stamped or printed thereon reading substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
3.2 AGREEMENTS REQUIRED IN A PUBLIC OFFERING. The Shareholder agrees
that upon request by any underwriter managing a public offering of shares of
Bridgeline Common Stock, the Shareholder will agree to any lockup or other
provisions affecting the transferability of the shares of Bridgeline Common
Stock owned by the Shareholder in the form executed by the executive officers of
Bridgeline, and will provide such underwriter and its counsel with such
information with respect to the Shareholder as is reasonably required to carry
out such public offering.
3.3 REGISTRATION RIGHTS AND OTHER RIGHTS AFFECTING STOCK.
(a) (i) Bridgeline has no registration rights with any
stockholders. If at any time following the closing Bridgeline shall determine to
register in a public offering for its own account under the Securities Act any
Bridgeline Common Stock, and shall include in such registration shares of
Bridgeline Common Stock held of record or beneficially by Xxxxxx Xxxxxx,
Bridgeline shall send to the Shareholder written notice of such determination
and, if within ten (10) days after receipt of such notice, the Shareholder shall
so request in writing,
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Bridgeline shall use its best efforts to include in such registration statement
all or any part of the Shareholder's Bridgeline Common Stock the Shareholder
requests to be registered. This right shall not apply to a registration of
shares of Bridgeline Common Stock on Form S-4 or Form S-8 (or their then
equivalents) relating to share of Bridgeline Common Stock to be issued by
Bridgeline in connection with any acquisition of any entity or other business
combination involving Bridgeline, or shares of Bridgeline Common Stock issuable
in connection with any stock option, stock compensation or other employee
benefits plan of Bridgeline for the benefit of directors, officers, employees or
consultants of Bridgeline.
(ii) If, in connection with any offering involving an
underwriting of Bridgeline Common Stock to be issued by Bridgeline and/or
selling stockholders, the managing underwriter or Bridgeline shall impose a
limitation on the number of shares of such Bridgeline Common Stock which may be
included in any such registration statement because, in its judgment, such
limitation is necessary to effect an orderly public distribution of the
Bridgeline Common Stock and to maintain a stable market for the securities of
Bridgeline, then Bridgeline shall be obligated to included in such registration
statement only such limited portion (which may be none) of the Shares with
respect to which the Shareholder has requested inclusion hereunder, PRO RATA
based upon the number of shares originally requested for inclusion in such
registration statement by all selling stockholders requesting inclusion.
(b) Bridgeline covenants and agrees that from and after the
Effective Date until the registration of the Shareholder's Bridgeline Common
Stock, the Shareholder shall be granted and his shares of Bridgeline Common
Stock shall be accorded any and all anti-dilution protection or pre-emptive,
registration, tag along, first refusal or other preferential rights as shall be
granted by Bridgeline to any person with respect to any shares of Bridgeline
Common Stock. The provisions of this Section 3.3(b) shall not apply to future
issuances of Bridgeline capital stock in connection with any public or private
financing of Bridgeline or any subsidiary thereof, whether debt or equity, from
institutional or other accredited investor sources, including but not limited to
a public offering of Bridgeline Common Stock.
3.4 RESTRICTIVE UNDERTAKINGS.
(a) NONCOMPETITION COVENANT. The restrictive covenants set forth
in this Section 3.4 are a material inducement for Bridgeline to enter into this
Agreement. For good and valuable consideration provided pursuant to this
Agreement, the receipt and sufficiency of which is hereby acknowledged, the
Shareholder agrees that, during the Restrictive Period (as hereinafter defined),
he shall not, directly or indirectly, without the consent of Bridgeline: (i)
invest (except for the ownership of less than 3% of the capital stock of a
publicly held company), or hold a directorship or other position of authority in
any of Bridgeline's Direct Competitors ("DIRECT COMPETITORS" defined as: any
person or entity, or a department or division of an entity, whereby more than
25% of the person's or entity's total revenues are derived from the Competitive
Services ("COMPETITIVE SERVICES" defined as design and development for third
parties of: Internet and Intranet Web sites and solutions, content management or
document management software, custom web (internet) applications, and/or
multimedia CDs and DVDs or services such as Intranet and Extranet consulting
services or Web hosting services)), (ii) undertake planning for an organization
or offering of Competitive Services, (iii) combine or
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collaborate with other employees or representatives of Bridgeline or any third
party for the purpose of organizing, engaging in, or offering Competitive
Services, or (iv) be employed by, serve as a consultant to or otherwise provide
services to (whether as principal, partner, shareholder, member, officer,
director, stockholder, agent, joint venturer, creditor, investor or otherwise),
or participate in the management of a Direct Competitor or participate in any
other business that Bridgeline may be engaged in at the date of the termination
of Shareholder's Employment Agreement. The foregoing restrictive covenant shall
not restrict the Shareholder from providing web design services to any
organization, other than a Direct Competitor, as an employee of such
organization in the event the Shareholder's employment by Bridgeline is
terminated following the closing without "cause" or for "good reason in
accordance with the terms of the Shareholder's Employment Agreement with
Bridgeline.
(b) NONSOLICITATION OF CUSTOMERS. The Shareholder agrees that,
during the Restrictive Period, he shall not directly or indirectly, either for
himself or for any other person, corporation, partnership, limited liability
company or any other business entity, service or supervise or assist the
servicing or supervision of, divert or take away or attempt to divert or take
away, or directly or indirectly call on or solicit or attempt to call on or
solicit any of the Clients (as hereinafter defined) of Bridgeline, or
communicate, advise or consult with, write or respond to, or inform any such
Client for the purpose of soliciting, selling or recommending Competitive
Services, or otherwise attempt to induce any such Client to terminate, modify or
reduce such Client's relationship with Bridgeline.
(c) NONSOLICITATION OF EMPLOYEES. The Shareholder agrees that,
during the Restrictive Period, he shall not directly or indirectly (including
but not limited to, through the use of "headhunters," recruiters or employment
agencies, and whether on-line or off-line recruiting activities) or by action in
concert with others, hire, recruit or otherwise induce or influence (or seek to
induce or influence) any person who is or shall be hereafter engaged (as an
employee, agent, independent contractor or otherwise) by to terminate such
Person's employment or engagement, or employ or engage, seek to employ or
engage, or cause any other Person, corporation, partnership, limited liability
company or other business entity (whether for-profit or non-profit) to employ or
engage or seek to employ or engage any such person. This restriction includes
that the Shareholder shall not (i) disclose to any third party the names,
backgrounds or qualification of any of Bridgeline's employees or otherwise
identify them as potential candidates for employment, or (ii) participate in any
pre-employment interviews or consultations with such employee.
(d) RESTRICTIVE PERIOD. For purposes of this Section, the term
Bridgeline shall include Bridgeline and any of its subsidiaries, divisions or
business units. For purposes of this Section, the term "Restrictive Period"
shall mean the period commencing on the Closing Date and ending on the later of:
(i) three-year anniversary thereof, or (ii) twelve (12) months following the
termination of any employment relationship between Bridgeline. For the purposes
of this Section, "Client" shall mean any person or entity to which Bridgeline
has provided services to or made Proposals to at any time within the twelve (12)
months preceding this Agreement or thereafter. "Proposal" shall mean any
Client-specific, BONA FIDE proposal for services that included a description of
services, time line and proposed fees for the project.
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(e) GEOGRAPHIC RESTRICTIONS REASONABLE. The Shareholder expressly
declares that the territorial and time limitations contained in this Section are
entirely reasonable and are properly and necessarily required for the adequate
protection of the business, operations, trade secrets and goodwill of the
Bridgeline and are given as an integral part of the acquisition, but for which
Bridgeline would not have entered into this Agreement. It is the desire and
intent of the Shareholder and Bridgeline that the provisions of this Section
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Section, including but not
limited to, any territorial or time limitations set forth in this Section, shall
be adjudicated to be invalid or unenforceable by a court of competent
jurisdiction, whether due to passage of time, change of circumstances or
otherwise, the provisions of this Section shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, or to
reduce said territorial or time limitations to such areas or periods of time as
said court shall deem reasonable, such deletion or reduction to apply only with
respect to the operation of this Section in the particular jurisdiction in which
such adjudication is made.
(f) RIGHTS CUMULATIVE. The non-competition and non-solicitation
provisions contained herein are in addition to, and not in limitation of, any
rights that Bridgeline may have under any other under contract, law or
otherwise, including but not limit to, the respective Employment Agreement
between Bridgeline and the Shareholder. The Shareholder acknowledges that the
remedy at law for any breach of this Section may be inadequate. The Shareholder
agrees that upon any such breach of this Section, Bridgeline or shall, in
addition to all other available remedies (including but not limited to, seeking
an injunction or other equitable relief), be entitled to injunctive relief
without having to prove the inadequacy of the remedies available at law and
without being required to post bond or other security.
(g) COMPUTATION OF RESTRICTIVE PERIOD. All time periods in this
Section shall be computed by excluding from such computation any time during
which the Shareholder is in violation of any provision of this Section and any
time during which there is pending in any court of competent jurisdiction any
action (including any appeal from any final judgment) in which action Bridgeline
seeks to enforce the agreements and covenants in this Section or in which any
person or entity contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement which is
determined adversely against the Shareholder or such other party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE
--------------------------------------------
References to the "Bridgeline" in this Article IV shall mean Bridgeline
and its subsidiaries, as set forth on the Bridgeline Disclosure Schedule
attached hereto, except where the context reasonably contemplates a reference
solely to Bridgeline, on its own. In order to induce the Company and the
Shareholder to enter into this transaction, Bridgeline makes the following
representations and warranties. The Bridgeline Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered sections
contained in this Article IV and the disclosure in any paragraph shall qualify
other sections in this Article IV to the extent that it
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is apparent from a reading of such disclosure that it also qualifies or applies
to such other sections.
4.1 ORGANIZATION AND QUALIFICATION. Bridgeline is a corporation duly
organized, validly existing and in corporate good standing in the State of
Delaware and has the power and authority to carry on its business as presently
conducted. Bridgeline is duly qualified to do business and is in good standing
in all jurisdictions in which its ownership of property or the character of its
business requires such qualification, except where the failure to be so
qualified will not have a Material Adverse Effect on Bridgeline. Each subsidiary
of Bridgeline is a Company duly organized, validly existing and in corporate
good standing under the laws of its jurisdiction of incorporation.
4.2 AUTHORITY. This Agreement, and to the extent Bridgeline is a
party to the Transaction Documents, each of the Transaction Documents, has been
duly authorized, executed and delivered by Bridgeline and constitutes a legal,
valid and binding obligation of Bridgeline, enforceable against it in accordance
with its terms. Bridgeline has the right, power and authority to enter into this
Agreement and to carry out the terms and provisions of this Agreement, and to
enter into and carry out the terms of all agreements and instruments required to
be delivered by Bridgeline by the terms of this Agreement, without obtaining the
consent of any third parties or authorities. This Agreement and the transactions
contemplated hereby have been unanimously approved by the Board of Directors of
Bridgeline and no additional corporate action or authorization is required by
Bridgeline in connection with the consummation of the transactions contemplated
by this Agreement.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby by Bridgeline, and compliance with
the provisions hereof, do not and will not: (a) violate, conflict with or result
in a breach of any provision or constitute a default under (i) the Certificate
of Incorporation or By-laws of Bridgeline, or (ii) any contract or agreement to
which Bridgeline is a party or to which the assets or business of Bridgeline may
be subject, except where such violation would not have a Material Adverse
Effect; or (b) violate any judgment, ruling, order, it, injunction, award,
decree, statute, law, ordinance, code, rule or regulation of any court or
foreign, federal, state, county or local government or any other governmental,
regulatory or administrative agency or authority which is applicable to the
assets, properties or business of Bridgeline, except where such violation would
not have a Material Adverse Effect.
4.4 GOVERNMENT APPROVALS. No consent, approval, license or
authorization, governmental or otherwise, or designation, declaration or filing
with, any court or governmental authority is or will be required on the part of
Bridgeline in connection with the execution, delivery and performance of this
Agreement, the other Transaction Documents and any other agreements or
instruments executed by Bridgeline in connection herewith or therewith the
failure of which would have a Material Adverse Effect.
4.5 AUTHORIZED AND OUTSTANDING STOCK. Before giving effect to the
transactions to be consummated at the Closing, the authorized capital stock of
Bridgeline consists of 15,000,000 shares of Common Stock, of which 10,281,498
shares are validly issued and outstanding. All of the issued and outstanding
capital stock of Bridgeline were issued (i) in transactions complying
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with or exempt from the registration provisions of the Securities Act, and (ii)
in compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws. There are no outstanding
warrants, options, commitments, preemptive rights, rights to acquire or
purchase, conversion rights or demands of any character relating to the capital
stock or other securities of Bridgeline, except that Bridgeline has granted
options to purchase up to 1,490,176 shares of Bridgeline Common Stock to various
employees, officers and directors of Bridgeline, and there are warrants
outstanding to purchase [310,000] shares of Common Stock. There are no voting
trusts or voting agreements with respect to any shares of Bridgeline Common
Stock. Bridgeline is the sole owner of all capital stock of its subsidiaries.
There are no outstanding warrants, options, commitments, preemptive rights,
rights to acquire or purchase, conversion rights or demands of any character
relating to the capital stock or other securities of any of the subsidiaries of
Bridgeline. There are no voting trusts or voting agreements with respect to any
shares of any subsidiary of Bridgeline. All of the issued and outstanding
capital stock in Bridgeline were issued in transactions complying with or exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "SECURITIES ACT"). Any equity interests in Bridgeline that consist of
contractual or so-called "phantom" equity interests are separately identified on
the Disclosure Schedule.
4.6 SUBSIDIARIES. Except as set forth on the Bridgeline Disclosure
Schedule, Bridgeline does not have, and at no time during its existence has it
had, any Subsidiaries. Except as set forth on the Bridgeline Disclosure
Schedule, Bridgeline does not have any investment or other interest in, or any
outstanding loan or advance to or from, any person or entity, including, without
limitation, any officer, director or shareholder.
4.7 FINANCIAL INFORMATION. Bridgeline has previously delivered to
Iapps the audited balance sheets of Bridgeline at both December 31, 2001 and
December 31, 2002 and the related statements of earnings and cash flows for the
years then ended (the "ANNUAL BRIDGELINE FINANCIAL STATEMENTS"). In addition,
Bridgeline has previously delivered to Iapps the unaudited balance sheet of
Bridgeline at December 31, 2003 and October 31, 2004, and the related statements
of earnings and cash flows for the twelve months and ten months then ended (the
"INTERIM BRIDGELINE FINANCIAL STATEMENTS"). The Annual and Interim Bridgeline
Financial Statements present fairly, in all material respects, the financial
condition and results of operations of Bridgeline as of and for the relevant
periods in accordance with GAAP applied on a basis consistent with prior
periods, except that none of such unaudited financial statements contain
footnotes and the Interim Bridgeline Financial Statements are subject to normal
year-end adjustments, which adjustments will neither individually nor in the
aggregate have a Material Adverse Effect. Bridgeline has no liability,
contingent or otherwise, which is not adequately reflected in or reserved
against in the Interim Bridgeline Financial Statements that could materially and
adversely affect the financial condition of Bridgeline. Except as set forth in
the Interim Bridgeline Financial Statements or the Bridgeline Disclosure
Schedule, since December 31, 2003 (i) there has been no change in the business,
property, assets, liabilities, condition (financial or otherwise), operations,
results of operations, affairs or prospects of Bridgeline except for changes in
the ordinary course of business which, in the aggregate, would not have a
Material Adverse Effect on Bridgeline, and (ii) none of the business, property,
assets, liabilities, condition (financial or otherwise), operations, result of
operations, affairs or prospects of Bridgeline have been materially adversely
affected by any occurrence or development, in the aggregate, whether or not
insured against.
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4.8 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS. Except
as set forth on the Bridgeline Disclosure Schedule, or in Annual or Interim
Bridgeline Financial Statements, since October 31, 2004, Bridgeline has not (i)
issued any stock, bond or other corporate security; (ii) borrowed any amount or
incurred or become subject to any material liability (absolute, accrued or
contingent), except liabilities under contracts entered into in the ordinary
course of business; (iii) discharged or satisfied any lien or encumbrance or
incurred or paid any obligation or liability (absolute, accrued or contingent)
other than current liabilities shown on Bridgeline Financial Statements and
incurred in the ordinary course of business or such liabilities which would not
have a Material Adverse Effect; (iv) declared or made any payment, other than
ordinary payments of compensation in amounts consistent with the historic
levels, or distribution to stockholders or purchased or redeemed any shares of
its capital stock or other securities, except for the exercise of stock options
or similar, and distributions in the ordinary course of business and required
under applicable tax law; (v) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable; (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any material debt
or claim, except in the ordinary course of business; (vii) sold, assigned,
transferred or granted any license with respect to any patent, trademark, trade
name, service xxxx, copyright, trade secret or other intangible asset, except
pursuant to license or other agreements entered into in the ordinary course of
business; (viii) suffered any material loss of property or waived any right of
substantial value whether or not in the ordinary course of business; (ix) made
any change in officer compensation; (x) made any material change in the manner
of business or operations of Bridgeline; (xi) entered into any transaction
except in the ordinary course of business or as otherwise contemplated hereby;
or (xii) entered into any commitment (contingent or otherwise) to do any of the
foregoing.
4.9 LITIGATION. Except as otherwise set forth on the Bridgeline
Disclosure Schedule, there is no litigation or governmental proceeding or
investigation, pending or, to Bridgeline's knowledge, threatened, against
Bridgeline or affecting any of Bridgeline' s properties or assets, or against
any officer, director, or key employee of Bridgeline in his capacity as such,
nor has there occurred any event or, to Bridgeline's knowledge, does there exist
any condition on the basis of which any litigation, proceeding or investigation
might properly be instituted. Except as set forth on the Bridgeline Disclosure
Schedule, each incident or proceeding described on the Bridgeline Disclosure
Schedule is fully covered by insurance. To the best of Bridgeline's knowledge,
Bridgeline is not in default with respect to any order, it, injunction, decree,
ruling or decision of any court, commission, board or other government agency,
except for such order, writ, injunction, decree, ruling or decision which would
not have a Material Adverse Effect.
4.10 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Bridgeline is in
compliance with all of the provisions of this Agreement, its Certificate of
Incorporation and By-laws, and in all material respects with the provisions of
each mortgage, indenture, lease, license, other agreement or instrument,
judgment, decree, judicial order, statute and regulation by which it is bound or
to which its properties are subject, and where non-compliance would not have a
Material Adverse Effect.
4.11 ABSENCE OF CHANGES. No event, occurrence, fact, condition,
change, development or effect that has not been disclosed in the Annual or
Interim Bridgeline Financial Statements or on the Disclosure Schedule hereto
shall exist or have occurred or come to exist or
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been threatened that, individually or in the aggregate, has had or resulted in
or could be expected to become or result in a Material Adverse Effect on
Bridgeline.
4.12 TAXES.
(a) Bridgeline has timely filed all Tax Returns required to be
filed and has paid all Taxes owed (whether or not shown as due on such returns),
including, without limitation, all Taxes which Bridgeline is obligated to
withhold for amounts paid or owing to employees, creditors and third parties.
All Tax Returns filed by Bridgeline were complete and correct in all material
respects. Except as set forth on Bridgeline Disclosure Schedule, none of the Tax
Returns filed by Bridgeline or Taxes payable by Bridgeline have been the subject
of an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any governmental authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the knowledge of Bridgeline, threatened. Except as set forth on
Bridgeline Disclosure Schedule, Bridgeline is not currently the beneficiary of
any extension of time within which to file any Tax Return, and Bridgeline has
not waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. All material
elections with respect to Taxes with respect to Bridgeline, as of the date
hereof, are set forth in Bridgeline Audited Financial Statements or in
Bridgeline Disclosure Schedule.
(b) Bridgeline is not a party to any Tax sharing agreement or
similar arrangement. Bridgeline has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Bridgeline), and Bridgeline does not have any liability for the Taxes
of any Person.
(c) There are no liens for Taxes upon any of the assets, other
than for ad valorem Taxes not yet due and payable. The unpaid Taxes of
Bridgeline did not, as of October 31, 2004, exceed by any material amount the
reserve for actual Taxes (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) as shown
on Bridgeline Unaudited Balance Sheet dated October 31, 2004, and will not
exceed by any material amount such reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Bridgeline in filing its Tax Returns. Bridgeline has not incurred any liability
for Taxes from October 31, 2004 through the Closing Date other than in the
ordinary course of business consistent with past practice. Bridgeline is not
obligated to file any Tax Return in any jurisdiction (whether foreign or
domestic) other than those jurisdictions in which it currently files Tax
Returns.
4.13 REAL PROPERTY.
(a) The Bridgeline Disclosure Schedule sets forth the addresses
and uses of all real property that Bridgeline owns, leases or subleases, and any
lien or encumbrance on any such owned real property or Bridgeline's leasehold
interest therein, specifying in the case of each such lease or sublease, the
name of the lessor or sublessor, as the case may be, the lease term and the
rental obligations of the lessee thereunder.
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(b) There are no defaults under any existing leases, subleases or
other contractual obligations pertaining to real property that Bridgeline owns,
leases or subleases, and to the best knowledge of Bridgeline, by any other
party, which might curtail in any material respect the present use of
Bridgeline's property listed on the Bridgeline Disclosure Schedule.
4.14 PERSONAL PROPERTY & CAPITAL EQUIPMENT. The Bridgeline Disclosure
Schedule sets forth a full and complete list of all personal property, including
capital equipment, owned or leased by Bridgeline. Except as set forth on the
Bridgeline Disclosure Schedule, and except for property sold or otherwise
disposed of in the ordinary course of business, Bridgeline has good and
marketable title, free and clear of any lien, charge, restriction or
encumbrance, to all of such personal property. All material items of such
personal property used in the operation of the business of Bridgeline are in
good operating condition, normal wear and tear accepted.
4.15 INTELLECTUAL PROPERTY.
(a) The "BRIDGELINE INTELLECTUAL PROPERTY" consists of all
material trade secrets, copyrights, patents, trademarks, service marks, trade
dress, all registrations and applications with respect thereto and all licenses
or rights under the same, that are owned or used by Bridgeline, including
without limitation, any of the foregoing embodied or contained in any of the
following: net lists; domain names and URLs and textual information contained in
web sites; schematics; manufacturing processes; customer lists and supplier
lists; know-how and show-how; computer software programs, source code and object
code; complete system build software; development and test tools, documentation,
specifications, programmer and user manuals used by Bridgeline to install,
operate, maintain, correct, test, repair enhance, extend, modify, prepare
derivative works based upon, design, develop, reproduce and package software;
all license and other rights in any third-party product, intellectual property,
proprietary or personal rights, documentation, or tangible or intangible
property; all documents, record and electronic files relating to the design, end
user documentation, manufacturing, quality control, sales, marketing, or
customer support; and all products of Bridgeline currently being licensed or
sold or that are currently being developed, including all hardware products and
tools, software products and tools, and services that are currently licensed,
offered or under development by Bridgeline (the "BRIDGELINE PRODUCTS").
(b) The Bridgeline Disclosure Schedule lists: (i) all patents,
copyright registrations, mask works, trademarks, service marks, trade dress, any
renewal rights for any of the foregoing, and any applications and registrations
for any of the foregoing, which are included in Bridgeline Intellectual Property
and owned by or on behalf of Bridgeline; (ii) all Bridgeline Products; and (iii)
all licenses, sublicenses and other agreements to which Bridgeline is a party
and pursuant to which Bridgeline or any other person is authorized to use
Bridgeline Intellectual Property or exercise any other right with regard
thereto. Bridgeline has delivered to the Company true and complete copies of the
agreements described in (iii) hereof.
(c) Bridgeline Intellectual Property consists solely of items and
rights which are either: (i) owned by Bridgeline; (ii) in the public domain; or
(iii) rightfully used and authorized for use by Bridgeline and its successors
pursuant to a valid license. All Bridgeline Intellectual Property which consists
of licenses or other rights to third party intellectual property is set forth in
Bridgeline Disclosure Schedule. Bridgeline has all rights in Bridgeline
Intellectual
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Property necessary to commercially exploit the same in connection with
Bridgeline's current, former, and planned or scheduled (whether for release or
development) activities in all geographic locations and fields of use in which
Bridgeline currently operates or is scheduled to operate, and to sublicense any
or all such rights to third parties, including the right to grant further
sublicenses. All software created by Bridgeline is as described in the
Documentation and performs in all material respects in accordance with the
specifications included in the Documentation. Bridgeline has taken all
reasonable measures to protect the proprietary nature of each item of Bridgeline
Intellectual Property. No other person or entity has any rights to any of
Bridgeline Intellectual Property (except pursuant to agreements or licenses
specified in Bridgeline Disclosure Schedule), and no other person or entity is
infringing, violating or misappropriating any of the Bridgeline Intellectual
Property. Bridgeline owns or has the right to use all Intellectual Property
necessary (i) to use, market and distribute the products, marketed, sold or
licensed, and to provide the services provided, by Bridgeline to other parties,
or (ii) to operate Bridgeline's internal systems that are material to the
business or operations of Bridgeline, including, without limitation, computer
hardware systems, software applications and embedded systems (the "INTERNAL
SYSTEMS"). Each item of Bridgeline Intellectual Property will be owned or
available for use by Bridgeline immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to the
Closing, except for any changes that do not, either individually or on the
aggregate, have a Material Adverse Effect. Except as set forth on the Bridgeline
Disclosure Schedule, Bridgeline's software, to Bridgeline's knowledge, and the
Internal Systems are free from significant defects or programming errors and
conform in all material respects to the written documentation and specifications
therefor.
(d) Bridgeline is not, nor as a result of the execution or
delivery of this Agreement, the other Transaction Documents and all other
agreements contemplated hereby, or performance of Bridgeline's obligations
hereunder, will Bridgeline be, in violation of any license, sublicense or other
agreement to which Bridgeline is a party. The Bridgeline Disclosure Schedule
lists all contracts or agreements under which Bridgeline is obligated to provide
any consideration (whether financial or otherwise) to any third party, or under
which any third party otherwise would be entitled to any consideration, with
respect to any exercise of rights by Bridgeline in Bridgeline Intellectual
Property. The Bridgeline Disclosure Schedule identifies each item of Bridgeline
Intellectual Property that is owned by a party other than Bridgeline, and the
license or agreement pursuant to which Bridgeline uses it (excluding
off-the-shelf software programs licensed by Bridgeline pursuant to "shrink wrap"
or "click wrap" licenses, such exclusion only extending to programs used by
Bridgeline solely for non-revenue generating administrative functions).
(e) Except as set forth on the Bridgeline Disclosure Schedule,
the use, reproduction, modification, distribution, licensing, sublicensing, sale
or any other exercise of rights by Bridgeline with respect to any of the
Bridgeline Products does not infringe any copyright, trade secret, trademark,
service xxxx, trade name, trade dress or mask work, or any patent, moral right
or other intellectual property right, right of privacy, or right in personal
data of any person. No claims (i) challenging the validity, effectiveness or
ownership by Bridgeline of any of the Bridgeline Intellectual Property, or (ii)
to the effect that the use, reproduction, modification, manufacturing,
distribution, licensing, sublicensing, sale or any other exercise of rights by
Bridgeline with respect to any of the Bridgeline Products infringes or will
infringe on any intellectual property or other proprietary or personal right of
any person, have been asserted
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to Bridgeline or, to the knowledge of Bridgeline, are threatened by any person,
nor to the knowledge of Bridgeline are there any valid grounds for any bona fide
claim of any such kind. All granted or issued patents and mask works and all
registered trademarks listed on the Bridgeline Disclosure Schedule and all
registered copyrights held by Bridgeline are valid, enforceable and subsisting.
To the knowledge of Bridgeline, there are no pending or unissued patent rights
which infringe upon or impair the Bridgeline Intellectual Property. To the
knowledge of Bridgeline, there is no unauthorized use, infringement or
misappropriation of any of Bridgeline Intellectual Property by any third party,
employee or former employee.
(f) Bridgeline has not disclosed the source code for any of the
software owned by Bridgeline or other confidential information constituting,
embodied in or pertaining to the software to any person or entity, except
pursuant to the agreements listed on the Bridgeline Disclosure Schedule, and
Bridgeline has taken reasonable measures to prevent disclosure of such source
code. No parties other than Bridgeline possess any current or contingent rights
to any source code that is part of Bridgeline Intellectual Property.
(g) Except as set forth on the Bridgeline Disclosure Schedules,
all of the copyrightable materials (including software) incorporated in or
bundled with Bridgeline's products have been created by employees of Bridgeline
within the scope of their employment by Bridgeline or by independent contractors
of Bridgeline who have executed agreements expressly assigning all right, title
and interest in such copyrightable materials to Bridgeline. No portion of such
copyrightable materials was jointly developed with any third party. The
Bridgeline Disclosure Schedule lists all parties who have created any portion
of, or otherwise have any rights in or to, Bridgeline Intellectual Property,
other than employees of Bridgeline who have no rights in or to any Company
Intellectual Property. Except as set forth on the Bridgeline Disclosure
Schedule, Bridgeline has secured from all parties who have created any portion
of, or otherwise have any rights in or to, Bridgeline Intellectual Property
valid and enforceable written assignments of any such work or other rights to
Company and has provided true and complete copies of such assignments to
Bridgeline.
(h) The Bridgeline Disclosure Schedule identifies each license or
other agreement (or type of license or other agreement) pursuant to which
Bridgeline has licensed, distributed or otherwise granted any rights to any
third party with respect to, any Bridgeline Intellectual Property. The
Bridgeline Disclosure Schedule includes a true and complete list of support and
maintenance agreements relating to Bridgeline Intellectual Property including
the identity of the parties entitled to receive such service or maintenance, and
the term of such agreements.
(i) Except as set forth on the Bridgeline Disclosure Schedule,
Bridgeline has obtained written agreements from all employees and third parties
with whom Bridgeline has shared confidential proprietary information (i) of
Bridgeline, or (ii) received from others which Bridgeline is obligated to treat
as confidential, which agreements require such employees and third parties to
keep such information confidential. None of the present or former employees,
officers or directors of Bridgeline owns directly or indirectly, in whole or in
part, any Bridgeline Intellectual Property or application therefor.
(j) To the knowledge of Bridgeline, none of the Internal Systems,
or the use
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thereof, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity. The Disclosure Schedule
lists any complaint, claim or notice, or written threat thereof, received by
Bridgeline alleging any such infringement, violation or misappropriation; and
Bridgeline has provided to the Company complete and accurate copies of all
written documentation in the possession of Bridgeline relating to any such
complaint, claim, notice or threat. Bridgeline has provided to the Company
complete and accurate copies of all written documentation in Bridgeline's
possession relating to claims or disputes known to Bridgeline concerning any
Bridgeline Intellectual Property.
4.16 AGREEMENTS OF DIRECTORS, OFFICERS, EMPLOYEES AND CONSULTANTS. No
current or former director, officer or employee of or consultant to Bridgeline
is in violation of any term of any employment contract, non-competition
agreement, non-disclosure agreement, patent disclosure or assignment agreement
or other contract or agreement containing restrictive covenants relating to the
conduct of any such current or former director, officer, employee, or consultant
or otherwise relating to the use of trade secrets or proprietary information of
others by any such person. The Bridgeline Disclosure Schedule hereto sets forth
the name and address of each person currently serving as an officer or a
director of Bridgeline, and each person listed on the Bridgeline Disclosure
Schedule was duly elected and is presently serving as such officer or director.
Set forth on the Bridgeline Disclosure Schedule is a list of all current or
former employees and consultants of Bridgeline who have (i) executed a
non-disclosure agreement with Bridgeline or (ii) executed a non-competition
agreement with Bridgeline. Except as disclosed on the Bridgeline Disclosure
Schedule, since December 31, 2003, Bridgeline has not paid or become committed
to pay any bonus or similar additional compensation to any officer, director or
employee of Bridgeline.
4.17 GOVERNMENTAL LICENSES; Bridgeline has all the material permits,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or regulatory bodies necessary for the
Bridgeline to conduct its business as presently conducted. All such permits,
licenses, orders, franchises and other rights and privileges are in full force
and effect and no suspension or cancellation of any of them is threatened, and
none of such permits, licenses, orders, franchises or other rights and
privileges will be affected by the consummation of the transactions contemplated
by this Agreement or the Transaction Documents.
4.18 SECURITIES ACTS. Bridgeline has complied with all applicable
federal or state securities laws in connection with the transactions
contemplated by this Agreement and all previous issuances of securities. Neither
Bridgeline nor anyone acting on its behalf has offered any of its shares, or
similar securities, or solicited any offer to purchase any of such securities,
so as to bring this transaction within the scope of the registration provisions
of the Securities Act.
4.19 INSURANCE COVERAGE. The Bridgeline Disclosure Schedule contains
an accurate summary of the insurance policies currently maintained by
Bridgeline. Except as described on the Bridgeline Disclosure Schedule, there are
currently no claims pending against Bridgeline pursuant to any insurance policy
currently in effect and covering the property, the business or the employees of
Bridgeline. All such policies (a) are in full force and effect and (b) are
sufficient for compliance by Bridgeline with all requirements of all agreements
to which Bridgeline is a party.
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4.20 EMPLOYEE MATTERS. Except as set forth in the Bridgeline's
Disclosure Schedule, neither the Bridgeline nor any person that together with
Bridgeline would be treated as an ERISA Affiliate under Section 414 of the Code
has established or maintains or is obligated to contribute to (a) any bonus,
severance, stock option, or other type of incentive compensation plan, program,
agreement, policy, commitment, contract or arrangement (written or oral); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. All such Plans have been
operated and administered in all material respects in accordance with their
terms, as applicable, with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code.
No act or failure to act by Bridgeline has resulted in, nor do Bridgeline have
knowledge of a non-exempt "prohibited transaction" (as defined in ERISA) with
respect to the Plans. Neither Bridgeline nor any ERISA Affiliate maintains or
has ever maintained or contributed to any Plan subject to Title IV of ERISA.
With respect to the employees and former employees of Bridgeline, there are no
employee post-retirement medical or health plans in effect, except as required
by Section 4980B of the Code.
4.21 CUSTOMERS. Except as set forth on the Bridgeline Disclosure
Schedule:
(a) The relationships of Bridgeline with its significant
suppliers and customers are good commercial working relationships and no
significant supplier or customer of Bridgeline has canceled or otherwise
terminated, or to Bridgeline's knowledge, threatened to cancel or otherwise to
terminate its relationship with Bridgeline, or has during the last twelve (12)
months decreased materially, or threatened to decrease or limit materially, its
services, supplies or materials for use by Bridgeline or its usage or purchase
of the services or products of Bridgeline, except for normal cyclical changes
related to customers' businesses and except for changes which have not had a
Material Adverse Effect on Bridgeline.
(b) No supplier or customer has notified Bridgeline that it
intends to cancel or otherwise substantially modify its relationship with
Bridgeline or to decrease materially or limit its services, supplies or
materials to Bridgeline, or its usage or purchase of the services of Bridgeline,
and, to the best knowledge of Bridgeline, the consummation of the transactions
contemplated hereby will not materially adversely affect the relationship of
Bridgeline with any such supplier or customer.
4.22 NO BROKERS OR FINDERS. No person or entity has or will have, as a
result of the actions of Bridgeline, any right, interest or claim against or
upon the Shareholder or Iapps for any commission, fee or other compensation as a
finder or broker arising from the transactions contemplated by this Agreement.
4.23 TRANSACTIONS WITH INSIDERS. Except as set forth on the Bridgeline
Disclosure Schedule, there are no loans, leases or other contracts between
Bridgeline and any officer or director of Bridgeline, or any person or entity
owning five percent (5%) or more of the total number of issued and outstanding
shares of Bridgeline Common Stock or any respective family member or affiliate
of any such officer, director or shareholder.
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4.24 ASSUMPTIONS, GUARANTEES. Except as set forth on the Bridgeline
Disclosure Schedule, Bridgeline has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other person or entity, except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
4.25 BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Except as
set forth on the Bridgeline Disclosure Schedule, Bridgeline has no account or
safe deposit box in any bank and no person or entity has any power, whether
singly or jointly, to sign any checks on behalf of Bridgeline, to withdraw any
money or other property from any bank, brokerage or other account of Bridgeline,
or to act pursuant to any power of attorney granted by Bridgeline at any time
for any purpose.
4.26 CORPORATE BOOKS. The books and records of Bridgeline made
available to Iapps and the Shareholder for inspection include copies of its
Certificate of Incorporation and By-laws as currently in effect and accurately
record therein in all material respects all actions, proceedings, consents and
meetings of the Board of Directors and shareholders of Bridgeline and any
committees thereof. The books and records of Bridgeline have been, and are
being, maintained in accordance with any applicable legal and regulatory
requirements and reflect only actual transactions.
4.27 LIST OF MATERIAL CONTRACTS AND COMMITMENTS. The Disclosure
Schedule sets forth a complete and accurate list of all material contracts to
which Bridgeline is a party. As used on the Bridgeline Disclosure Schedule, the
phrase "MATERIAL CONTRACT" means any contract or other agreement whether or not
made in the ordinary course of business and involving a reasonably foreseeable
financial consequence to any contracting party of at least $250,000. Bridgeline
has delivered to the Company copies of all Material Contracts. Except as set
forth on the Bridgeline Disclosure Schedule, each of the contracts listed on the
Bridgeline Disclosure Schedule is in full force and effect. Bridgeline is not in
breach of any of the material provisions of any such Material Contract, nor, to
the best knowledge of Bridgeline, is any other party to any such contract in
default thereunder, except for any such breach or default that individually and
in the aggregate would not have a Material Adverse Effect on the business of
Bridgeline. Bridgeline has performed in all material respects all obligations
required to be performed by it under each such contract as of the Closing.
4.28 PRIVACY AND DATA COLLECTION. Bridgeline has at all times complied
with all laws and regulations relating or applicable to privacy, publicity, data
protection, collection, storage, transfer, release and use of personal
information and user information gathered or accessed in the course of the
business and operations of Bridgeline. Bridgeline has at all times complied in
all material respects with all rules, policies and procedures established by
Bridgeline from time to time with respect to privacy, publicity, data
protection, collection, storage, transfer and use of personal information and
user information gathered or accessed in the course of the business and
operations of Bridgeline (collectively, the "PRIVACY POLICIES"), noncompliance
with which would result in a Material Adverse Effect. No claims have been
asserted or, to the knowledge of Bridgeline and the Shareholder, threatened
against Bridgeline by any Person or governmental entity alleging a violation of
such Person's, or any other Person's, privacy, publicity, personal or
confidentiality rights under any such laws, or a breach or other violation of
any of the Privacy
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Policies, where such violation would have a Material Adverse Effect. Bridgeline
has taken commercially reasonable measures (including but not limited to,
implementing and monitoring compliance with adequate measures with respect to
technical and physical security) to ensure that personal and consumer
information is protected against loss and against unauthorized access, use,
modification, disclosure or other misuse. To the knowledge of Bridgeline and the
Shareholder, there has been no unauthorized access to, use, modification,
disclosure or other misuse of such information. Neither the execution, delivery
nor performance of this Agreement nor the consummation of the transactions
contemplated hereby shall result in any breach or violation of the Privacy
Policies or violate any Law with respect to such data or information.
4.29 ACCOUNTS RECEIVABLE. Except as set forth on the Disclosure
Schedule, all accounts and notes receivable reflected on the Bridgeline'
Financial Statements, and all accounts and notes receivable arising subsequent
to the date of such balance sheets, have arisen in the ordinary course of
business and represent valid obligations owing to Bridgeline. Except as set
forth on the Disclosure Schedule, to the best knowledge of Bridgeline, none of
Bridgeline' receivables is subject to any claim of offset, recoupment, setoff or
counterclaim and Bridgeline has no knowledge of any specific facts or
circumstances (whether asserted or unasserted) that could give rise to any such
claim. No material amount of receivables are contingent upon the performance by
Bridgeline of any obligation or contract other than normal warranty repair and
replacement. No person has any lien on any such receivables and no agreement for
deduction or discount has been made with respect to any such receivables. Except
as set forth on the Disclosure Schedule, to the best knowledge of Bridgeline and
the Shareholder, all of Bridgeline' accounts and notes receivable reflected on
the Bridgeline' Financial Statements and all accounts and notes receivable
arising subsequent to the date of such balance sheets are collectible in full by
Bridgeline in the ordinary course of business.
ARTICLE V
GENERAL RELEASE AND INDEMNIFICATIONS
------------------------------------
5.1 SHAREHOLDER' RELEASES. The Shareholder, effective at the Closing,
hereby releases and discharges Iapps from and against any and all claims,
demands and liabilities which the Shareholder may have against Iapps immediately
prior to the Closing, and the Shareholder specifically agrees to indemnify,
defend and hold Iapps and Bridgeline harmless against any and all obligations,
debts, bills, liabilities, causes of action and claims of every nature of the
Shareholder against Iapps which accrue or have arisen prior to the Closing.
5.2 SHAREHOLDER' INDEMNIFICATION. Subject to the limitations set
forth in Section 5.5 below, the Shareholder agrees to indemnify and hold
harmless Bridgeline and its respective officers, directors, agents and employees
to the fullest extent lawful, from and against any and all actions, suits,
claims, counterclaims, proceedings, costs, losses, liabilities, obligations,
demands, damages, judgments, amounts paid in settlement and reasonable expenses,
including, without limitation, reasonable attorneys' fees and disbursements
(hereinafter collectively referred to as a "CLAIM," "LOSS" or "LOSSES") suffered
or incurred by Bridgeline to the extent relating to or arising out of any
inaccuracy in or breach, violation or nonobservance of the representations,
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warranties, covenants or other agreements made by Iapps or the Shareholder
herein or the Transaction Documents or failure of any certificate, document or
instrument delivered by or on behalf of Iapps or the Shareholder pursuant hereto
or in connection herewith to be true and correct as of the Closing.
Notwithstanding the foregoing, to the extent that Bridgeline receives and
collects any insurance proceeds relating to a Claim or Loss covered by insurance
purchased by Iapps prior to the Closing, then Bridgeline's claim for
indemnification hereunder shall be reduced, dollar-for-dollar, by the amount of
such proceeds received by Bridgeline for any insurable Claim or Loss.
5.3 BRIDGELINE'S INDEMNIFICATION. Subject to the limitations set
forth in Section 5.5 below, Bridgeline agrees to indemnify and hold harmless the
Shareholder to the fullest extent lawful, from and against any and all Claims or
Losses suffered or incurred by the Shareholder to the extent relating to or
arising out of any inaccuracy in or breach, violation or nonobservance of the
representations, warranties, covenants or other agreements made by Bridgeline
herein or failure of any certificate, document or instrument delivered by or on
behalf of Bridgeline pursuant hereto or in connection herewith to be true and
correct as of the Closing.
5.4 THIRD PARTY CLAIMS. In the event that a party (the "INDEMNITEE")
desires to make a claim against another party (the "INDEMNITOR") pursuant to
Section 5.2 or Section 5.3 in connection with any action, suit, proceeding or
demand at any time instituted against or made upon the Indemnitee by any third
party for which the Indemnitee may seek indemnification hereunder (a "THIRD
PARTY CLAIM"), the Indemnitee shall promptly notify, in writing, the Indemnitor
of such Third Party Claim and of the Indemnitee's claim of indemnification with
respect thereto. The Indemnitor shall have thirty (30) days after receipt of
such notice to notify the Indemnitee if he or it has elected to assume the
defense of such Third Party Claim. If the Indemnitor elects to assume the
defense of such Third Party Claim, the Indemnitor shall be entitled at his or
its own expense to conduct and control the defense and settlement of such Third
Party Claim through counsel of his or its own choosing; PROVIDED, HOWEVER, that
the Indemnitee may participate in the defense of such Third Party Claim with his
or its own counsel at his or its own expense and the Indemnitor may not settle
any Third Party Claim without the Indemnitee's consent, which shall not be
unreasonably withheld. If the Indemnitor fails to notify the Indemnitee within
thirty (30) days after receipt of the Indemnitee's written notice of a Third
Party Claim, the Indemnitee shall be entitled to assume the defense of such
Third Party Claim at the expense of the Indemnitor; PROVIDED, HOWEVER, that the
Indemnitee may not settle any Third Party Claim without the Indemnitor's
consent, which shall not be unreasonably withheld.
5.5 LIMITATIONS OF LIABILITY.
(a) Solely for purposes of determining the amount of any Claim or
Loss with regard to any representation, warranty, covenant, agreement,
certificate, document or instrument that has been breached by a party, such
amount shall be determined without regard to any "materiality" or "knowledge"
qualifier, including without limitation any reference to a "Material Adverse
Effect" on such party or to the "knowledge" or "best knowledge" of such party,
or words of similar effect, which may be contained in any such representation,
warranty, covenant, agreement, certificate, document or instrument.
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(b) The Shareholder and Bridgeline shall have no liability with
respect to the matters described in Sections 5.2 and 5.3, respectively, for any
individual Claim or Loss less than $2,000 (the "MINIMUM CLAIM AMOUNT") and until
the total of all Claims or Losses, including those less than the Minimum Claim
Amount, exceeds $35,000, at which point the Shareholder or Bridgeline, as the
case may be, shall be obligated to indemnify the other party from and against
all such Claims or Losses (including Claims or Losses below the Minimum Claim
Amount), relating back to the first dollar; PROVIDED, HOWEVER, that these
limitations shall not apply to (i) any Claims or Losses incurred by Bridgeline
as a result of or with respect to any breach of the representations contained in
Sections 2.1 (Ownership of Shares), 2.13 (Taxes) and 2.16 (Intellectual
Property). Notwithstanding anything contained in this Agreement to the contrary,
except for the representations set forth in Sections 2.1 (Ownership of Shares)
and 2.13 (Taxes), each party's indemnity obligation under this Agreement shall
not exceed the sum of $350,000.
(c) In any situation in which an indemnification payment is due
from the Shareholder hereunder, Bridgeline shall seek to satisfy such
obligation, in whole or in part, in the following manner: (i) first, by
withholding or setting off the amount of the Earn-Out payments that may then be
due or may subsequently become payable to the Shareholder, and (ii) second, by
withholding or setting against the Bridgeline Common Stock and such number of
shares as is equal to the value of the Claim or Loss (the value for computing
the number of shares to be set-of shall be equal to the greater of (i) fair
market value of the Bridgeline Stock at the time of set-off or (ii) $1.25 per
share). In any situation in which an indemnification payment is due from
Bridgeline hereunder, Shareholder shall seek to satisfy such obligation, in
whole or in part, in either of the following manners or any combination thereof,
solely in BRIDGELINE'S discretion: (i) by issuance of additional shares of
Bridgeline Stock and such number of shares as is equal to the value of the Claim
or Loss) (the value for computing the number of shares to be issued shall be
equal to the greater of (i) fair market value of the Bridgeline Stock at the
time of issuance or (ii) $1.25 per share) or (ii) by acceptance of a cash
payment by Bridgeline equal to the fair value of the Claim or Loss as of the
time the Claim or Loss is incurred by the Shareholder.
(d) No action or claim for Losses pursuant to this Article V
shall be brought or asserted after the relevant date of survival referred to in
Article VI hereof (the "REPRESENTATION EXPIRATION DATE"). The amount of any
Claims or Losses suffered by an Indemnitee shall be reduced by any tax benefit
that has been realized or that is certain to be realized, and any insurance
benefits or claims against third parties which are actually received by such
party in respect of or as a result of such Claims or Losses, or the facts or
circumstances relating thereto. If any Losses for which indemnification is made
hereunder are subsequently reduced by any tax benefit or insurance payment, the
value of such tax benefit or other benefit or the amount of such payment or
other recovery shall be remitted to the Indemnitor.
(e) Bridgeline and the Shareholder acknowledge and agree that,
except as to Claims or Losses attributable to fraud, their sole remedy against
the other for any matter arising out of a breach, violation or nonobservance of
any representation, warranty, covenant or other agreement contained in this
Agreement is set forth in this Article V, and that except to the extent a party
has asserted a claim for indemnification prior to the Representation Expiration
Date, neither party shall have any remedy against the other party for any
breach, violation or
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nonobservance of a representation, warranty, covenant or other agreement made by
such other party in this Agreement. The parties acknowledge that this Section
5.5 has been negotiated fully by the parties and that neither party would have
entered into this Agreement but for the inclusion of this Section 5.5.
5.6 EXPENSES; REIMBURSEMENT. Subject to the limitations set forth in
Section 5.5 above, an Indemnitor hereunder promptly shall reimburse the
Indemnitee for all Losses constituting reasonable expenses (including reasonable
attorneys' fees and disbursements) as they are incurred in connection with
investigating, preparing to defend or defending any third-party action, suit,
claim or proceeding (including any inquiry or investigation) for which indemnity
is available under either Section 5.2 or Section 5.3, as applicable.
5.7 NOTICE. Each party shall provide written notice to the other of
any claim with respect to which it seeks indemnification promptly after the
discovery of any matters giving rise to a claim for indemnification; PROVIDED,
HOWEVER, that the failure of such party to give notice as provided herein shall
not relieve the Indemnitor of its obligations under this Article V, except if
and to the extent that the Indemnitor has been materially prejudiced thereby.
5.8 SURVIVAL. Subject to the provisions and limitations set forth in
Section 5.5(d) and in Article VI below, the obligations of Bridgeline and the
Shareholder under this Article V shall survive and continue in effect following
the Closing until all Claims or Losses are resolved.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
Except as provided herein, all representations, warranties, covenants
and other agreements of the parties contained herein shall survive the execution
and delivery of this Agreement and continue in effect following the Closing for
a period commencing on the Closing Date and ending on the date that is 24 months
after the Closing Date. Notwithstanding that set forth in the preceding
sentence, the representations set forth in Section 2.1 (Ownership of Shares)
with respect to the Shareholder's ownership of the Shares shall survive and
continue in effect indefinitely after the Closing, the representations set forth
in Section 2.13 (Taxes) shall survive until the expiration of the applicable
statute of limitations relating to any applicable Tax Return referred to
therein.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 PARTIES IN INTEREST. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective heirs, successors and assigns of the parties hereto (including
permitted transferees of any of the Shares or Bridgeline Stock). Except as may
be required to be disclosed by order of a court or otherwise required by law,
the parties agree to maintain in confidence the terms of this Agreement, except
that the parties hereto may disclose such terms to its accountants, lawyers,
bankers and advisors in the ordinary course. Except as otherwise specifically
provided herein, this Agreement shall not confer any rights or
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remedies upon any person other than the parties hereto and their respective
heirs, successors and assigns.
7.2 AMENDMENTS AND WAIVERS. Amendments, modifications or additions to
this Agreement may be made and compliance with any term, covenant, agreement,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
upon the written consent of the parties hereto. This Agreement (including the
Schedules and Exhibits annexed hereto, which are an integral part of this
Agreement) and the Transaction Documents constitutes the full and complete
agreement of the parties with respect to the subject matter hereof.
7.3 NOTICES. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by fax or other electronic
medium, or sent by Federal Express or other overnight courier service providing
proof of delivery, to Bridgeline or the Shareholder, at the addresses set forth
herein or to such other address for any such party as may be furnished in
writing to the other parties hereto.
7.4 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby; PROVIDED, HOWEVER, that
Bridgeline shall pay a portion of the costs and expenses incurred by Iapps in
connection with legal and accounting services and other transactional costs
incurred by it in connection with the parties' negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, provided such costs and expenses shall not exceed a maximum of $25,000
in the aggregate, it being acknowledged and agreed to by the parties that the
Shareholder shall be personally responsible for any such expenses of Iapps
exceeding this limit.
7.5 SEVERABILITY. All agreements and covenants contained in this
Agreement are severable, and in the event that any of them shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein.
7.6 COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original,
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via fax,
with the intention that they shall have the same effect as an original
counterpart hereof.
7.7 EFFECT OF HEADINGS/GENDER REFERENCES. The article and section
headings herein are for convenience only and shall not affect the construction
or interpretation hereof. The use of any gender in the Agreement shall be deemed
to include the other genders, and the use of the singular in this Agreement
shall be deemed to include the plural (and vice versa), wherever appropriate.
7.8 GOVERNING LAW. This Agreement shall be deemed a contract made
under the laws of the State of Delaware and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such state. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this
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Agreement or any of the transactions contemplated hereby, shall be brought
against any of the parties in the courts of the Commonwealth of Massachusetts,
and each of the parties irrevocably submits to the exclusive jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding, waives any objection to venue laid therein, agrees that all claims
in respect of any action or proceeding shall be heard and determined only in any
such court and agrees not to bring any action or proceeding arising out of or
relating to this Agreement or any transaction contemplated hereby in any other
court. Process in any action or proceeding referred to in the preceding sentence
may be served on any party anywhere in the world.
7.9 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party hereto shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other party,
which approval shall. not be unreasonably withheld.
7.10 POST-CLOSING TAX MATTERS. Bridgeline agrees that it will
cooperate with the preparation of all tax returns of Iapps for the period up to
the Closing Date. The Shareholder agrees that such tax returns shall be prepared
in a manner consistent with Iapps' historical practices.
7.11 NON-TRANSFERABILITY OF EARN-OUT PAYMENTS. Any rights of the
Shareholder to receive Earn-Out payments pursuant to this Agreement shall be
non-transferable without the prior written consent of Bridgeline.
Notwithstanding the foregoing, the Shareholder may transfer all or any of such
rights (a) as a gift to any member of his family or to any trust for the benefit
of any such family member or the Shareholder, PROVIDED THAT any such transferee
shall agree in writing with the Bridgeline, as a condition precedent to such
transfer, to be bound by all of the provisions of this Agreement relating to the
Earn-Out payments, or (b) by will or the laws of descent and distribution, in
which event each such transferee shall be bound by all of the provisions of this
Agreement relating to the Earn-Out payments or (c) by court order, in which
event each such transferee shall be bound by all of the provisions of this
Agreement relating to the Earn-Out payments,. As used herein, the word "family"
shall include any spouse, lineal ancestor or descendant, brother or sister.
7.12 BOARD OBSERVER RIGHTS; APPOINTMENT TO MANAGEMENT COMMITTEE. So
long as the Shareholder of Iapps collectively owns at least five percent (5%) of
the voting capital stock of Bridgeline, the Shareholder shall have the right to
receive notice of, attend and participate in all meetings of the Board of
Directors of Bridgeline, and any and all committees or subcommittees thereof,
subject to customary limitations (such as sensitive confidential information,
conflicts of interest or interested party transactions). If at any time any
other non-board member receives board observations rights with a lower
percentage ownership requirement, the Shareholder will be granted observation
rights based upon the same lower percentage limit. The Shareholder shall be
appointed as a member of the Management Committee of Bridgeline for so long as
the Shareholder remains as President of the Iapps subsidiary of Bridgeline.
7.13 DISCLOSURE. Certain information set forth in the Schedules has
been included and disclosed solely for informational purposes and may not be
required to be disclosed pursuant to the terms and conditions of the Agreement.
The disclosure of any such information shall not be
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deemed to constitute an acknowledgement or agreement that the information is
required to be disclosed in connection with the representations and warranties
made in the Agreement or that the information is material, nor shall any
information so included and disclosed be deemed to establish a standard of
materiality or otherwise used to determine whether any other information is
material.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
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SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date written above.
BRIDGELINE SOFTWARE, INC.
000 Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: XXXXXX X. XXXXXX
Title: President and Chief Executive Officer
INTERACTIVE APPLICATIONS GROUP, INC.
0000 Xxxxxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx, XX 00000
By: /s/ Miles Xxxxxxx
---------------------------------
Name: MILES XXXXXXX
Title: President
SHAREHOLDER
/s/ Miles Xxxxxxx
-------------------------------------
MILES XXXXXXX
c/o Interactive Applications Group
0000 Xxxxxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxxx, XX 00000
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