AGREEMENT AND PLAN OF MERGER among: AVATECH SOLUTIONS, INC., a Delaware corporation; ASRW ACQUISITION SUB, INC., a Delaware corporation; RAND WORLDWIDE, INC., a Delaware corporation; and RWWI HOLDINGS LLC, a Delaware limited liability company
Exhibit
2.1
AGREEMENT
AND PLAN OF MERGER
among:
AVATECH
SOLUTIONS, INC.,
a
Delaware corporation;
ASRW
ACQUISITION SUB, INC.,
a
Delaware corporation;
RAND
WORLDWIDE, INC.,
a
Delaware corporation; and
RWWI
HOLDINGS LLC,
a
Delaware limited liability company
Dated
as of August 17, 2010
TABLE
OF CONTENTS
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Page
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1.
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DESCRIPTION
OF TRANSACTION
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1
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1.1
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The
Merger
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1
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1.2
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Effects
of the Merger
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2
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1.3
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Closing;
Effective Time
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2
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1.4
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Certificate
of Incorporation and Bylaws
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2
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1.5
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Conversion
of Merger Partner Shares
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2
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1.6
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Closing
of Merger Partner’s Transfer Books
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3
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1.7
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Surrender
of Certificates
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3
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1.8
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Further
Action
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3
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1.9
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Tax
Consequences
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3
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2.
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REPRESENTATIONS
AND WARRANTIES OF MERGER PARTNER
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4
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2.1
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Due
Organization; Subsidiaries; Etc
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4
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2.2
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Certificate
of Incorporation and Bylaws; Records
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5
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2.3
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Capitalization,
Etc
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5
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2.4
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Financial
Statements
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6
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2.5
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Absence
of Changes
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7
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2.6
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Title
to Assets
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9
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2.7
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Bank
Accounts; Receivables
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9
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2.8
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Equipment;
Leasehold
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9
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2.9
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Intellectual
Property
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10
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2.10
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Contracts
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12
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2.11
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Liabilities;
Fees, Costs and Expenses
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15
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2.12
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Compliance
with Legal Requirements
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15
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2.13
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Tax
Matters
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15
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2.14
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Employee
and Labor Matters; Benefit Plans
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17
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2.15
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Environmental
Matters
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22
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2.16
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Legal
Proceedings; Orders
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23
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2.17
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Non-Contravention;
Consents
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23
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2.18
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Vote
Required
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24
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2.19
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No
Broker
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24
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TABLE
OF CONTENTS
(continued)
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Page
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2.20
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Authority;
Binding Nature of Agreement
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24
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2.21
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Anti-Takeover
Law
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24
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2.22
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Insurance
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25
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2.23
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Related
Party Transactions
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25
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2.24
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Merger
Partner Action
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25
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2.25
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Controls
and Procedures
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26
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2.26
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Objections
to the Merger
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26
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3.
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REPRESENTATIONS
AND WARRANTIES OF AVATECH AND MERGER SUB
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26
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3.1
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Due
Organization; Subsidiaries; Etc
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26
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3.2
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Certificate
of Incorporation and Bylaws; Records
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27
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3.3
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Capitalization,
Etc
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28
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3.4
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SEC
Filings; Financial Statements
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29
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3.5
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Absence
of Changes
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30
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3.6
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Title
to Assets
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32
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3.7
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Bank
Accounts; Receivables
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32
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3.8
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Equipment;
Leasehold
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32
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3.9
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Intellectual
Property
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33
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3.10
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Contracts
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35
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3.11
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Liabilities;
Fees, Costs and Expenses
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37
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3.12
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Compliance
with Legal Requirements
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37
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3.13
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Tax
Matters
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38
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3.14
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Employee
and Labor Matters; Benefit Plans
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40
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3.15
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Environmental
Matters
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44
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3.16
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Legal
Proceedings; Orders
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45
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3.17
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Non-Contravention;
Consents
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45
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3.18
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No
Vote Required
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46
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3.19
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No
Broker
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46
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3.20
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Authority;
Binding Nature of Agreement
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46
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3.21
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Anti-Takeover
Law; Rights Agreement
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46
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ii
TABLE
OF CONTENTS
(continued)
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Page
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3.22
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Insurance
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47
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3.23
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Related
Party Transactions
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47
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3.24
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Valid
Issuance
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47
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3.25
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Controls
and Procedures, Certifications and Other Matters Relating to the
Xxxxxxxx-Xxxxx Act
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48
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3.26
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Objections
to the Merger
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48
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4.
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REPRESENTATIONS,
WARRANTIES AND COVENANTS OF DESIGNATOR
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48
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4.1
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Representations
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49
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4.2
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Covenants
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51
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5.
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CERTAIN
AGREEMENTS OF THE PARTIES
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51
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5.1
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Indemnification
of Officers and Directors; Liability Insurance
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51
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5.2
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Additional
Agreements
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53
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5.3
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Disclosure
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53
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5.4
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Directors
and Officers
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54
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5.5
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Tax
Matters
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55
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5.6
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Surrender
of Escrowed Shares
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55
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6.
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CONDITIONS
PRECEDENT TO OBLIGATIONS OF EACH PARTY
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56
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6.1
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No
Restraints
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56
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6.2
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Stockholder
Approval
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56
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6.3
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Governmental
Authorization
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56
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6.4
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Fairness
Opinion
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56
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6.5
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Third
Party Consents
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57
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6.6
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No
Adverse Litigation
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57
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7.
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ADDITIONAL
CONDITIONS PRECEDENT TO OBLIGATIONS OF AVATECH AND MERGER
SUB
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57
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7.1
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Accuracy
of Merger Partner Representations
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57
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7.2
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Accuracy
of Designator Representations
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57
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7.3
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Performance
of Covenants
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57
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7.4
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Merger
Partner Obligations Triggered by Contemplated Transactions
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58
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7.5
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Agreements
and Other Documents
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58
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iii
TABLE
OF CONTENTS
(continued)
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Page
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7.6
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No
Merger Partner Material Adverse Effect
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59
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8.
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ADDITIONAL
CONDITIONS PRECEDENT TO OBLIGATION OF MERGER PARTNER
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59
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8.1
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Accuracy
of Avatech and Merger Sub Representations
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59
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8.2
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Performance
of Covenants
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59
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8.3
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Avatech
Obligations Triggered by Merger
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59
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8.4
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Agreements
and Other Documents
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59
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8.5
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No
Avatech Material Adverse Effect
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60
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9.
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ADDITIONAL
CONDITIONS PRECEDENT TO OBLIGATION OF DESIGNATOR
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60
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9.1
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Accuracy
of Representations
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60
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9.2
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Performance
of Covenants
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60
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9.3
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Agreements
and Other Documents
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60
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10.
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MISCELLANEOUS
PROVISIONS
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61
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10.1
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Non-Survival
of Representations, Warranties and Covenants
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61
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10.2
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Amendment
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61
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10.3
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Reserved
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61
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10.4
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Expenses
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61
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10.5
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Waiver
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61
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10.6
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Entire
Agreement; Counterparts; Exchanges of Signatures
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62
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10.7
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Applicable
Law; Jurisdiction
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62
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10.8
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Attorneys’
Fees
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62
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10.9
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Assignability;
No Third Party Beneficiaries
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62
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10.10
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Notices
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63
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10.11
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Cooperation
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64
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10.12
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Severability
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64
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10.13
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Other
Remedies; Specific Performance
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64
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10.14
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Waiver
of Jury Trial
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65
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10.15
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Construction
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65
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iv
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(this “Agreement”)
is made and entered into as of August 17, 2010, by and among Avatech Solutions, Inc., a
Delaware corporation (“Avatech”);
ASRW Acquisition Sub,
Inc., a Delaware corporation and wholly owned subsidiary of Avatech
(“Merger
Sub”); Rand Worldwide,
Inc., a Delaware corporation (“Merger
Partner”); and RWWI
Holdings LLC, a
Delaware limited liability company and sole stockholder of Merger Partner (the
“Designator”),
with its principal office located in Massachusetts. Certain capitalized
terms used in this Agreement are defined in Exhibit A hereto.
A.
Avatech and Merger Partner intend to enter into a business
combination transaction pursuant to which Merger Sub will merge with and into
Merger Partner (the “Merger”)
in accordance with and subject to the terms of this Agreement and the DGCL, as a
result of which Merger Partner will become a wholly-owned subsidiary of
Avatech.
B.
Avatech and Merger Partner intend that the Merger qualify as a
tax-free reorganization within the meaning of Section 368 of the
Code.
C.
The Merger Shares will be issued by Avatech in reliance upon the
exemption from U.S. federal securities registration afforded by the provisions
of Regulation D as promulgated by the SEC under the Securities Act.
D.
The board of directors of Avatech (i) has determined that the
Merger is fair to, and in the best interests of, Avatech and its stockholders
and (ii) has approved this Agreement, the Merger, the issuance of shares of
Avatech Common Stock to the sole stockholder of Merger Partner pursuant to the
terms of this Agreement, and the other Contemplated Transactions.
E.
The board of directors of Merger Partner (i) has determined that
the Merger is advisable and fair to, and in the best interests of, Merger
Partner and its sole stockholder, (ii) has approved this Agreement, the Merger
and the other Contemplated Transactions and has deemed this Agreement advisable
and (iii) has approved and determined to recommend the adoption of this
Agreement to the sole stockholder of Merger Partner.
The
Parties to this Agreement, intending to be legally bound, agree as
follows:
1.
DESCRIPTION OF TRANSACTION
1.1
The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into Merger Partner, the separate existence of Merger Sub shall cease,
and Merger Partner shall continue as the surviving corporation in the Merger
(the “Surviving
Corporation”).
1.2
Effects of the
Merger. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Merger Partner and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Merger Partner and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.3
Closing; Effective
Time. Subject to the satisfaction or waiver of the conditions set
forth in Sections 5, 6 and 7 of this Agreement, the consummation of the Merger
(the “Closing”)
shall take place at the offices of Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP,
000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 contemporaneously with
the execution of this Agreement and the adoption of this Agreement by the
Designator, as the sole stockholder of Merger Partner, and Avatech, as the sole
stockholder of Merger Sub. The date on which the Closing actually takes
place is referred to as the “Closing
Date.” At the Closing, the Parties hereto shall cause the Merger to
be consummated by executing and filing with the Secretary of State of the State
of Delaware a Certificate of Merger with respect to the Merger, satisfying the
applicable requirements of the DGCL and in a form reasonably acceptable to
Avatech and Merger Partner. The Merger shall become effective at the time of the
filing of such Certificate of Merger with the Secretary of State of the State of
Delaware or at such later time as may be agreed upon by Avatech and Merger
Partner and specified in such Certificate of Merger (the time as of which the
Merger becomes effective being referred to as the “Effective
Time”).
1.4
Certificate of
Incorporation and Bylaws. At the Effective Time:
(a)
the Certificate of Incorporation of Merger
Partner shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by the DGCL and such Certificate of
Incorporation; and
(b)
the bylaws of Merger Partner shall be the
bylaws of the Surviving Corporation until thereafter amended, if at all, as
provided by the DGCL and such bylaws.
1.5
Conversion of Merger Partner Shares.
(a)
At the Effective Time, by virtue of the Merger
and without any further action on the part of Avatech, Merger Partner or the
sole stockholder of Merger Partner:
(i)
any shares of Merger Partner Common Stock held
as treasury stock or held or owned by Merger Partner immediately prior to the
Effective Time shall be canceled and shall cease to exist, and no consideration
shall be delivered in exchange therefor;
(ii)
subject to Section 1.5(b), each share of
Merger Partner Common Stock outstanding immediately prior to the Effective Time
(excluding shares to be canceled pursuant to Section 1.5(a)(i)) shall be
converted into the right to receive (A) 28,800,022 shares of Avatech Common
Stock (the “Initial Merger
Shares”) plus (B) that number of shares of Avatech Common Stock (the
“Escrowed
Shares”) equal to 150% of the shares of Avatech Common Stock into which
the outstanding shares of Avatech Series D Preferred Stock and Avatech Series E
Preferred Stock (collectively, the “Outstanding
Preferred Shares”) could be converted as
of immediately following the Effective Time after giving effect to the issuance
of the shares of Avatech Common Stock pursuant to (A) above (the Initial Merger
Shares and the Escrowed Shares are collectively referred to herein as the “Merger
Shares”).
2
(b)
No fractional shares of Avatech Common Stock
shall be issued in connection with the Merger, and no certificates or scrip for
any such fractional shares shall be issued. Any fractional share of Avatech
Common Stock that would otherwise be issued in connection with the Merger shall
be rounded up to a whole share.
(c)
Each share of Common Stock, $.01 par value per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $0.001 par value per share, of the
Surviving Corporation. Each outstanding stock certificate evidencing ownership
of shares of Common Stock of Merger Sub shall, as of the Effective Time,
evidence ownership of shares of Common Stock of the Surviving
Corporation.
1.6
Closing of Merger
Partner’s Transfer Books. At the Effective Time: (a) all shares of
Merger Partner Common Stock outstanding immediately prior to the Effective Time
shall automatically be canceled and shall cease to exist, and all holders of
certificates representing shares of Merger Partner Common Stock (a “Merger Partner
Stock Certificate”) that were outstanding immediately prior to the
Effective Time shall cease to have any rights as stockholders of Merger Partner
except as otherwise provided herein; and (b) the stock transfer books of Merger
Partner shall be closed with respect to all shares of Merger Partner Common
Stock outstanding immediately prior to the Effective Time. No further transfer
of any such shares of Merger Partner Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a Merger
Partner Stock Certificate is presented to the Surviving Corporation, such Merger
Partner Stock Certificate shall be canceled and no consideration shall be
payable therefor.
1.7
Surrender of
Certificates. At the Closing, the sole holder of Merger Partner
Common Stock shall deliver to Avatech a Merger Partner Stock Certificate
representing all of the outstanding shares of Merger Partner Common Stock in
exchange for (a) a certificate representing the Initial Merger Shares and (b) a
certificate representing the Escrowed Shares (the “Escrowed Shares
Certificate”); provided, however, that
custody of the Escrow Shares Certificate shall be retained by Avatech until the
date that is eighteen (18) months after the Closing Date (the “Escrow
Period”), at which time Avatech shall deliver to the Designator a stock
certificate evidencing that number of Escrowed Shares that have not been
surrendered pursuant to Section 5.6 hereof.
1.8
Further Action.
If, at any time after the Effective Time, any further action is
determined by the Surviving Corporation to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession of and to all rights and property of Merger
Partner, then the officers and directors of the Surviving Corporation shall be
fully authorized, and shall use their commercially reasonable efforts (in the
name of Merger Partner and otherwise) to take such action.
1.9
Tax Consequences.
For federal income tax purposes, the Merger is intended to constitute a
reorganization within the meaning of Section 368(a) of the Code. The Parties to
this Agreement adopt this Agreement as a “plan of reorganization” within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
3
Except as
Disclosed (as defined below), Merger Partner makes the following representations
and warranties to Avatech and Merger Sub, as of the date hereof and as of the
Closing Date. For purposes of this Agreement, the term “Disclosed”
means disclosed in the written information included in the written disclosure
schedule (a “Schedule”)
delivered or made available by a party to this Agreement to another party, which
describe in reasonable detail the matters contained therein. Each
disclosure made in a Schedule shall specifically reference each Section of this
Agreement under which such disclosure is made. Information required to be
disclosed in a Schedule with respect to one Section may be incorporated by
reference into another Schedule required by this Agreement. Merger
Partner’s Schedule is referred to herein as the “Merger Partner
Disclosure Schedule”.
(a)
Merger Partner is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the corporate power and authority to carry on its business as now
being conducted and as currently proposed to be conducted.
(b)
Except as Disclosed in Part 2.1(b) of the
Merger Partner Disclosure Schedule, Merger Partner has not conducted any
business under or otherwise used, for any purpose or in any jurisdiction, any
fictitious name, assumed name, trade name or other name, other than the name
“Rand Worldwide,
Inc.”
(c)
Merger Partner is not and has not been
required to be qualified, authorized, registered or licensed to do business as a
foreign corporation in any jurisdiction other than the jurisdictions Disclosed
in Part 2.1(c) of the Merger Partner Disclosure Schedule, except where the
failure to be so qualified, authorized, registered or licensed, individually or
in the aggregate, has not had, and would not reasonably be expected to have, a
Merger Partner Material Adverse Effect. Merger Partner is in good standing as a
foreign corporation in each of the jurisdictions Disclosed in Part 2.1(c) of the
Merger Partner Disclosure Schedule.
(d)
Part 2.1(d) of the Merger Partner Disclosure
Schedule accurately sets forth (i) the names of the members of the board of
directors of Merger Partner, (ii) the names of the members of each committee of
the board of directors of Merger Partner and (iii) the names and titles of
Merger Partner’s officers.
(e)
Merger Partner has no direct or indirect
ownership of any capital stock of, or other voting securities or equity
interests in, any Entity except for the Entities Disclosed in Part 2.1(e) of the
Merger Partner Disclosure Schedule. Neither Merger Partner nor any Merger
Partner Subsidiary has agreed or is obligated to make any future investment in
or capital contribution to any Entity. Except as Disclosed in Part 2.1(e)
of the Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has guaranteed or is responsible or liable for any obligation
of any of the Entities in which it owns or has owned any equity or other
financial interest.
4
(f)
Part 2.1(f) of the Merger Partner Disclosure
Schedule sets forth a true and complete list of each Merger Partner Subsidiary
and the jurisdiction of its organization. Each of the Merger Partner
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, with the power and authority to carry
on its business as now being conducted and as currently proposed to be
conducted. Part 2.1(f) of the Merger Partner Disclosure Schedule
identifies all jurisdictions in which each Merger Partner Subsidiary is
qualified, authorized, registered or licensed to do business as a foreign
Entity, except where the failure to be so qualified, authorized, registered or
licensed, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Merger Partner Material Adverse Effect, and
each Merger Subsidiary is in good standing in such jurisdictions, except where
the failure to be in good standing, individually or in the aggregate, has not
had, and would not reasonably be expected to have, a Merger Partner Material
Adverse Effect.
2.2
Certificate of
Incorporation and Bylaws; Records. Merger Partner has delivered or
made available to Avatech accurate and complete copies of: (a) Merger
Partner’s certificate of incorporation (as amended and restated, the “Merger Partner
Certificate of Incorporation”) and bylaws, including all amendments
thereto; (b) the stock records of Merger Partner; (c) the minutes and other
records of the meetings and other proceedings (including any actions taken by
written consent or otherwise without a meeting) of the stockholders of Merger
Partner, the board of directors of Merger Partner and all committees of the
board of directors of Merger Partner since November 1, 2007 and of Rand A
Technology Corporation from January 1, 2005 through November 1, 2007 (the items
described in (a) and (b) above, collectively, the “Merger Partner
Constituent Documents”); and (d) the governing documents of Rand A
Technology Corporation, Rand Worldwide U.S. Holdings, Inc., Rand Technologies of
Michigan and Rand Imaginit Technologies, Inc. and all amendments thereto (the
“Merger
Partner Subsidiary Constituent Documents”). Since November 1, 2007,
there have been no formal meetings or actions taken by written consent or
otherwise without a meeting of the stockholders of Merger Partner, the board of
directors of Merger Partner or any committee of the board of directors of Merger
Partner that are not fully reflected in the minutes and other records delivered
or made available to Avatech pursuant to clause (c) above. There has not been
any violation in any material respect of the Merger Partner Constituent
Documents or the Merger Partner Subsidiary Constituent Documents, and neither
Merger Partner nor any of the Merger Partner Subsidiaries has taken any action
that is inconsistent in any material respect with the Merger Partner Constituent
Documents or any Merger Partner Subsidiary Constituent Documents, respectively,
except, in the case of the Merger Partner Subsidiaries, for any actions,
individually or in the aggregate, that have not had and would not reasonably be
expected to have, a Merger Partner Material Adverse Effect. Except as
disclosed in Part 2.2 of the Merger Partner Disclosure Schedule, the books of
account, stock records, minute books and other records of Merger Partner and of
each Merger Partner Subsidiary are accurate, up to date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
(a)
The authorized capital stock of Merger Partner
consists of one hundred (100) shares of Merger Partner
Common Stock. Ten (10) shares of Merger Partner Common Stock are issued and
outstanding, and such shares represent all of the issued and outstanding shares
of capital stock of Merger Partner. All of the outstanding shares of
Merger Partner Common Stock have been duly authorized and validly issued, are
fully paid and non assessable, and are held, beneficially and of record, by the
Designator free and clear of all Encumbrances.
5
(b)
There is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of capital stock or other securities of Merger Partner; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of capital stock or other securities of
Merger Partner; (iii) Contract under which Merger Partner is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities of Merger Partner; or (iv) condition or circumstance that would
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of Merger Partner. Merger Partner has not
issued any debt securities which grant the holder thereof any right to vote on,
or veto, any action of Merger Partner.
(c)
All outstanding shares of Merger Partner
Common Stock have been issued and granted in compliance with (i) all applicable
federal and state securities laws and other applicable Legal Requirements, and
(ii) all requirements set forth in the Merger Partner Constituent Documents and
applicable Contracts.
(d)
All securities of Merger Partner Subsidiaries
have been issued and granted in compliance in all material respects with (i) all
applicable federal and state securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in the Merger Partner
Subsidiary Constituent Documents and applicable Contracts.
(a)
Merger Partner has delivered or made available
to Avatech the following financial statements and notes (collectively, the
“Merger
Partner Financial Statements”):
(i)
the audited balance sheet of Merger Partner
for each of the two years ended October 31, 2009 (the “Merger
Partner Audited
Balance
Sheet”) and the related audited statement of operations, statement of
stockholders’ equity and statement of cash flows of Merger Partner for the two
years ended October 31, 2009, together with the notes thereto and the report and
opinion of PricewaterhouseCoopers LLP relating thereto;
and
(ii)
the unaudited balance sheet of Merger Partner
as of April 30, 2010 (the “Merger
Partner
Balance
Sheet”) and the related unaudited statement of operations and statement
of cash flows of Merger Partner for the six (6) months then ended.
(b)
The Merger Partner Financial Statements are
accurate and complete in all material respects and present fairly the financial
position of Merger Partner as of the respective dates thereof and the
consolidated results of operations and cash flows of Merger Partner for the
periods covered thereby. Except as may be indicated in the notes to the Merger
Partner Financial Statements, the Merger Partner Financial Statements have been
prepared in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods covered (except that the
financial statements referred to in Section 2.4(a)(ii) do not contain footnotes
and are subject to normal and recurring year-end audit
adjustments).
(c)
Except as Disclosed in Part 2.4(c) of the
Merger Partner Disclosure Schedule, to the Knowledge of Merger Partner the
Merger Partner Financial Statements meet the requirements of the SEC’s
Regulation S-X in all material respects as if Merger Partner was subject
thereto. For purposes of this Section 2.4(c), the term “Knowledge” shall
be limited to the Knowledge of Xxxx Xxxxxx, Xxxx Xxxxxx and Xxxx
Xxxxxxxxx.
6
2.5
Absence of
Changes. Other than in connection with the LLC Merger, since the
date of the Merger Partner Balance Sheet:
(a)
there has not been any Merger Partner Material
Adverse Effect, and no event has occurred that will, or would reasonably be
expected to, cause a Merger Partner Material Adverse Effect;
(b)
there has not been any material loss, damage
or destruction to, or any material interruption in the use of, any of the
material assets of Merger Partner or any Merger Partner Subsidiary (whether or
not covered by insurance);
(c)
Merger Partner has not declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of its capital stock, and has not repurchased, redeemed or otherwise
reacquired any shares of its capital stock or other securities;
(d)
Merger Partner has not sold, issued, granted
or authorized the issuance of (i) any capital stock or other securities of
Merger Partner; (ii) any option, call or right to acquire any capital stock or
any other security of Merger Partner; (iii) any instrument convertible into or
exchangeable for any capital stock or other security of Merger Partner; or (iv)
reserved for issuance any additional grants or shares under the Merger Partner
Stock Option Plan;
(e)
Merger Partner has not amended or waived any
of its rights under, or permitted the acceleration of vesting under, the Merger
Partner Stock Option Plan, any Merger Partner Option or agreement evidencing or
relating to any outstanding stock option or warrant, any restricted stock
purchase agreement, or any other Contract evidencing or relating to any equity
award;
(f)
there has been no amendment to the certificate
of incorporation or bylaws of Merger Partner or any Merger Partner Subsidiary
and Merger Partner has not effected or been a party to any merger,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g)
Merger Partner has not formed any Subsidiary
of Merger Partner or acquired any equity interest or other interest in any other
Entity;
(h)
except as Disclosed in Part 2.5(h) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has made any capital expenditure which, when added to all
other capital expenditures made on behalf of Merger Partner or any Merger
Partner Subsidiary since the date of the Merger Partner Balance Sheet, exceeds
$75,000;
7
(i)
except as Disclosed in Part 2.5(i) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has (i) entered into or permitted any of the assets owned or
used by it to become bound by any Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $75,000 in the aggregate, other than in the Ordinary Course
of Business, or (B) the purchase or sale of any product, or performance of
services by or to Merger Partner or any Merger Partner Subsidiary having a value
in excess of $75,000 in the aggregate, other than in the Ordinary Course of
Business, or (ii) waived any right or remedy under any material Contract, or
amended or prematurely terminated any material Contract;
(j)
neither Merger Partner nor any Merger Partner
Subsidiary has (i) acquired, leased or licensed any material right or other
asset from any other Person, (ii) sold or otherwise disposed of, or leased or
licensed, any material right or other asset to any other Person, or (iii) waived
or relinquished any material right, except for rights or assets acquired,
leased, licensed or disposed of in the Ordinary Course of Business;
(k)
neither Merger Partner nor any Merger Partner
Subsidiary has written off as uncollectible, or established any extraordinary
reserve with respect to, any account receivable or other indebtedness, other
than in the Ordinary Course of Business;
(l)
except as Disclosed in Part 2.5(l) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the Ordinary Course of
Business;
(m)
except as Disclosed in Part 2.5(m) of the Merger
Partner Disclosure Schedule, neither Merger Partner nor any Merger Partner
Subsidiary has (i) lent money to any Person (other than pursuant to routine
travel advances made to employees in the Ordinary Course of Business),
(ii) incurred or guaranteed any indebtedness for borrowed money in the
aggregate in excess of $75,000 or (iii) issued or sold any debt securities or
options, warrants, calls or similar rights to acquire any debt securities of
Merger Partner or any Merger Partner Subsidiary;
(n)
except as Disclosed in Part 2.5(n) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has (i) established or adopted any employee benefit plan,
(ii) paid any bonus or made any profit sharing, incentive compensation or
similar payment to, or materially increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees with an annual salary in excess of
$100,000, or (iii) hired any new employee having an annual salary in excess of
$100,000;
(o)
neither Merger Partner nor any Merger Partner
Subsidiary has changed any of its personnel policies or other business policies,
or any of its methods of accounting or accounting practices in any material
respect;
(p)
neither Merger Partner nor any Merger Partner
Subsidiary has threatened, commenced or settled any material Legal
Proceeding;
(q)
neither Merger Partner nor any Merger Partner
Subsidiary has entered into any transaction or taken any other action outside
the Ordinary Course of Business, other than entering into this Agreement and the
Contemplated Transactions;
8
(r)
neither Merger Partner nor any Merger Partner
Subsidiary has paid, discharged or satisfied any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) other than
the payment, discharge or satisfaction of non-material amounts in the Ordinary
Course of Business or as required by any Merger Partner or Merger Partner
Subsidiary Contract or Legal Requirement; and
(s)
neither Merger Partner nor any Merger Partner
Subsidiary has agreed to take, or committed to take, any of the actions referred
to in clauses (c) through (r) of this Section 2.5.
2.6
Title to Assets.
Except as Disclosed in Part 2.6 of the Merger Partner Disclosure
Schedule, Merger Partner and each Merger Partner Subsidiary owns, and has good,
valid and marketable title to, all assets (tangible and intangible) purported to
be owned by it. All of such assets are owned by Merger Partner or the applicable
Merger Partner Subsidiary free and clear of any Encumbrances, except for (y) any
lien for current Taxes not yet due and payable, and (z) minor liens that have
arisen in the Ordinary Course of Business and that do not (individually or in
the aggregate) materially detract from the value of the assets subject thereto
or materially impair the operations of Merger Partner or the applicable Merger
Partner Subsidiary.
(a)
Part 2.7(a) of Merger Partner Disclosure
Schedule provides accurate information with respect to each account maintained
by or for the benefit of Merger Partner or any Merger Partner Subsidiary at any
bank or other financial institution, including the name of the bank or financial
institution, the account number, the balance as of May 31, 2010 and the names of
all individuals authorized to draw on or make withdrawals from such
accounts.
(b)
All existing accounts receivable of Merger
Partner or any Merger Partner Subsidiary (including those accounts receivable
reflected on the Merger Partner Balance Sheet that have not yet been collected
and those accounts receivable that have arisen since the date of the Merger
Partner Balance Sheet and have not yet been collected) (i) represent valid
obligations of customers of Merger Partner or any Merger Partner Subsidiary
arising from bona fide transactions entered into in the Ordinary Course of
Business, and (ii) are current and are expected to be collected in full when
due, without any counterclaim or set off, net of applicable reserves for bad
debts on the Merger Partner Balance Sheet.
(a)
All items of equipment and other tangible
assets owned by or leased to Merger Partner or any Merger Partner Subsidiary (i)
are adequate for the uses to which they are being put and (ii) are adequate for
the conduct of the businesses of Merger Partner and Merger Partner Subsidiaries
in the manner in which such businesses are currently being conducted and as they
are proposed to be conducted.
(b)
Neither Merger Partner nor any Merger Partner
Subsidiary owns any real property or any interest in real property, except for
the leasehold interest created under the real property leases Disclosed in Part
2.8(b) of the Merger Partner Disclosure Schedule. All premises leased or
subleased by Merger Partner or any Merger Partner Subsidiary are supplied with
utilities and other services necessary for the operation of their respective
businesses.
9
(a)
To the Knowledge of Merger Partner, Merger
Partner and/or Merger Partner Subsidiaries own Intellectual Property Rights, or
otherwise have the necessary rights or licenses under Intellectual Property
Rights owned by third parties, necessary for the conduct of the business of
Merger Partner and Merger Partner Subsidiaries as currently conducted and
expected to be conducted subsequent to the Contemplated Transactions.
Except as Disclosed in Part 2.9(a) of the Merger Partner Disclosure Schedule,
neither the execution, delivery, or performance of this Agreement (or any of the
agreements contemplated by this Agreement) nor the consummation of any of the
Contemplated Transactions will, with or without notice or lapse of time, result
in, or give any other Person the right or option to cause or declare, (i) a loss
of, or Encumbrance on, any Merger Partner IP Rights or Merger Partner Licensed
IP; (ii) a breach by Merger Partner or any Merger Partner Subsidiary of any
Merger Partner IP Rights Agreement; (iii) a right to terminate a Merger Partner
IP Rights Agreement or result in the change of any material term or require the
payment of any additional fees under such a Merger Partner IP Rights Agreement;
(iv) the release, disclosure, or delivery of any source code of any Merger
Partner Software Products by or to any escrow agent or other Person; or (v) the
grant, assignment, or transfer to any other Person, or otherwise change the
ownership, status, effectiveness, validity and/or other disposition, of any
license or other right or interest under, to, or in any of Merger Partner IP
Rights and/or Merger Partner Licensed IP.
(b)
No infringement, misappropriation, or similar
claim or Legal Proceeding is pending or, to Merger Partner’s Knowledge,
threatened against Merger Partner or any Merger Partner Subsidiary or against
any other Person who may be entitled to be indemnified, defended, held harmless,
or reimbursed by Merger Partner or any Merger Partner Subsidiary with respect to
such claim or Legal Proceeding, and Merger Partner has no Knowledge of any set
of facts which should reasonably lead it to believe that any claim is likely or
threatened. To Merger Partner’s Knowledge, the operation of Merger
Partner’s and Merger Partner Subsidiaries’ businesses, as currently conducted,
does not infringe, misappropriate or otherwise violate any Intellectual Property
Rights of any Person. To Merger Partner’s Knowledge, no Person is
infringing, misappropriating, or violating the Merger Partner IP Rights.
Except as Disclosed in Part 2.9(b) of the Merger Partner Disclosure Schedule,
neither Merger Partner nor any Merger Partner Subsidiary has received since
November 1, 2007 any unresolved written claim challenging the scope, ownership,
validity, or enforceability of the Merger Partner IP Rights or of Merger
Partner’s or Merger Partner Subsidiaries’ rights under the Merger Partner
Licensed IP.
(c)
Merger Partner and/or Merger Partner
Subsidiaries hold all right, title and interest in and to the Merger Partner IP
Rights, free and clear of any Encumbrances. Except as Disclosed in Part
2.9(c) of the Merger Partner Disclosure Schedule, to the Knowledge of Merger
Partner no Person has any claim or interest in any Merger Partner IP Rights by
reason of such Person’s participation in the creation of such Merger Partner IP
Rights. Other than (i) the agreements that are Disclosed in Part 2.9(c) of
the Merger Partner Disclosure Schedule and (ii) non-exclusive licenses granted
to customers in the Ordinary Course of Business, Merger Partner and Merger
Partner Subsidiaries have not granted any Person any rights to or under the
Merger Partner IP Rights, Merger Partner Licensed IP, and Merger Partner
Software Products.
10
(d)
Part 2.9(d) of the Merger Partner Disclosure
Schedule contains, as of the date of this Agreement, a true and complete list of
all Merger Partner Registered IP. Merger Partner and Merger Partner
Subsidiaries have taken all actions necessary to maintain the Merger Partner
Registered IP, including as applicable payment of applicable maintenance fees,
filing of applicable statements of use, timely response to office actions, and
all assignments of the Merger Partner Registered IP have been duly recorded with
the appropriate Governmental Bodies (or, with respect to domain name
registrations, the applicable domain name registrar or agent). None of the
Merger Partner Registered IP has been adjudged invalid or unenforceable in whole
or part and, to the Knowledge of Merger Partner, all Merger Partner Registered
IP is valid and enforceable.
(e)
Part 2.9(e) of the Merger Partner Disclosure
Schedule contains a true and complete list of all licenses and other Contracts
pursuant to which Merger Partner and Merger Partner Subsidiaries have been
granted the Merger Partner Licensed IP, including with respect to any
embodiments of the Intellectual Property Rights underlying such Merger Partner
IP Licenses such as software, that is either (A) incorporated into or
distributed with any Merger Partner Software Product or necessary of the use or
distribution of such Merger Partner Software Product or (B) used or held for use
by Merger Partner for any other purpose (excluding, for purposes of clause (B)
only, any generally commercially available, non-customized software programs
non-exclusively licensed by Merger Partner on standard terms).
(f)
Merger Partner and Merger Partner
Subsidiaries have taken commercially reasonable steps to protect their trade
secret rights in the Merger Partner IP Rights and to protect any confidential
information provided to them by any other Person under obligation of
confidentiality. Without limitation of the foregoing, Merger Partner and
Merger Partner Subsidiaries have not, to Merger Partner’s Knowledge, made any of
their trade secrets or other confidential or proprietary information that they
intended to maintain as confidential (including source code with respect to
Merger Partner Software Products) available to any other Person except pursuant
to written agreements, or other legally binding obligations, requiring such
Person to maintain the confidentiality of such information or
materials.
(g)
Merger Partner and Merger Partner Subsidiaries
have obtained from all Persons who are or were involved in the creation or
development of any portion of any Merger Partner Software Product (other than
software licensed from third parties and distributed with or incorporated into
Merger Partner Software Products as listed on Parts 2.9(e) or 2.9(i) of the
Merger Partner Disclosure Schedule), or of any Merger Partner IP Rights, valid
and enforceable agreement containing an assignment of Intellectual Property
Rights to Merger Partner or a Merger Partner Subsidiary and confidentiality
provision protecting trade secrets and confidential information of Merger
Partner IP Rights, except where the failure to obtain such agreement,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Merger Partner Material Adverse Effect. Except as Disclosed in
Part 2.9(g) of the Merger Partner Disclosure Schedule, neither Merger Partner
nor any of Merger Partner Subsidiaries is obligated to provide any consideration
to any third party with respect to any exercise of rights by Merger Partner or
any of Merger Partner Subsidiaries, or any successor to Merger Partner or Merger
Party Subsidiaries, in any Merger Partner IP Rights, including with respect to
the distribution or license of the Merger Partner Software
Products.
11
(h)
Part 2.9(h) of the Merger Partner Disclosure
Schedule contains a true and complete list of all Merger Partner Software
Products.
(i)
Except as Disclosed in Part 2.9(i) of the
Merger Partner Disclosure Schedule, there are no pending disputes regarding (i)
the scope of any Contracts under which Merger Partner and/or Merger Partner
Subsidiaries (A) license Merger Partner Software Products or Merger Partner IP
Rights or (B) provide customization, configuration, maintenance, or
implementation services with respect to Merger Partner Software (collectively,
“Merger
Partner License and Service Agreements”), (ii) Merger Partner’s, Merger
Partner Subsidiaries’, or their agents’ performance under any Merger Partner
License and Service Agreements, or (iii) payment made or received under any
Merger Partner License and Service Agreements, except where such disputes have
not, individually or in the aggregate, had, and would not, individually or in
the aggregate, reasonably be expected to have, a Merger Partner Material Adverse
Effect. Except as would not, individually or in the aggregate, reasonably
be expected to have a Merger Partner Material Adverse Effect, no parties to the
Merger Partner License and Service Agreements are in material breach
thereof.
(a)
Part 2.10(a) of the Merger Partner Disclosure
Schedule identifies each of the following Merger Partner Contracts:
(i)
each Merger Partner Contract relating to the
employment of, or the performance of employment-related services by, any
employee at the vice president level or above, consultant or independent
contractor;
(ii)
each Merger Partner Contract relating to the
acquisition, transfer, use, development, sharing or license of any technology or
any Intellectual Property or Merger Partner IP Rights or Merger Partner Licensed
IP;
(iii)
each Merger Partner Contract imposing any restriction
on Merger Partner’s or any Merger Partner Subsidiary’s right or ability (A) to
compete with any other Person, (B) to acquire any product or other asset or any
services from any other Person, to sell any product or other asset to, or
perform any services for, any other Person or to transact business or deal in
any other manner with any other Person, or (C) to develop or distribute any
technology;
(iv)
each Merger Partner Contract creating or involving
any agency relationship, distribution arrangement or franchise
relationship;
(v)
each Merger Partner Contract relating to the creation
of any Encumbrance with respect to any asset of Merger Partner or any Merger
Partner Subsidiary;
12
(vi)
each Merger Partner Contract involving or that
contemplates or requires any guaranty, any pledge, any performance or completion
bond, any indemnity or any surety arrangement;
(vii)
each Merger Partner Contract creating or relating to any
collaboration or joint venture or any sharing of technology, revenues, profits,
losses, costs or liabilities, including Merger Partner Contracts involving
investments by Merger Partner in, or loans by Merger Partner to, any other
Entity;
(viii)
each Merger Partner Contract relating to the purchase or
sale of any product or other asset by or to, or the performance of any services
by or for, or otherwise involving as a counterparty, any Merger Partner Related
Party;
(ix)
each Merger Partner Contract relating to indebtedness
for borrowed money;
(x)
each Merger Partner Contract relating to the
acquisition or disposition by Merger Partner or any Merger Partner Subsidiary of
any operating business, material asset, capital stock or equity interest of
Merger Partner, any Merger Partner Subsidiary or any other Person that has not
been consummated or that has been consummated but
contains representations, covenants, guaranties, indemnities or other
obligations on the part of Merger Partner or any Merger Partner Subsidiary that
remain in effect;
(xi)
any other Merger Partner Contract pursuant to which
Merger Partner or any Merger Partner Subsidiary is required to actively perform
that contemplates or involves (A) the payment or delivery of cash or other
consideration in an amount or having a value in excess of $50,000 in the
aggregate, other than in the Ordinary Course of Business, (B) the purchase or
sale of any product, or performance of services by or to Merger Partner or any
Merger Partner Subsidiary having a value in excess of $50,000 in the aggregate,
other than in the Ordinary Course of Business, or (C) a term of more than sixty
(60) days and that may not be terminated by Merger Partner or the applicable
Merger Partner Subsidiary (without penalty) within sixty (60) days after the
delivery of a termination notice by Merger Partner or the applicable Merger
Partner Subsidiary, other than in the Ordinary Course of Business;
(xii)
each Merger Partner Contract with any Person, including
without limitation any financial advisor, broker, finder, investment banker or
other Person, providing advisory services to Merger Partner or any Merger
Partner Subsidiary in connection with the Contemplated
Transactions.
(b)
Merger Partner has delivered or made available
to Avatech accurate and complete (except for applicable redactions thereto)
copies of all written Merger Partner Contracts, including all amendments
thereto. There are no Merger Partner Contracts that are not in written form.
Each Merger Partner Contract is valid and in full force and effect, is
enforceable by Merger Partner or the applicable Merger Partner Subsidiary in
accordance with its terms, and after the Effective Time will continue to be
legal, valid, binding and enforceable on identical terms. Except as Disclosed in
Part 2.10(b) of the Merger Partner Disclosure Schedule, the consummation of the
Contemplated Transactions shall not (either alone or upon the occurrence of
additional acts or events) result in any payment or payments becoming due from
Merger Partner or any Merger Partner Subsidiary, the Surviving Corporation or
Avatech or any Avatech Subsidiary to any Person under any Merger Partner
Contract or give any Person the right to terminate or alter the provisions of
any Merger Partner Contract.
13
(c)
Except as Disclosed in Part 2.10(c) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has materially violated or breached, or committed any
material default under, any Merger Partner Contract, and, to the Knowledge of
Merger Partner, no other Person has violated or breached, or committed any
default under, any Merger Partner Contract.
(d)
No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, (i) result in a material violation or breach of any
of the provisions of any Merger Partner Contract, (ii) give any Person the right
to declare a default or exercise any remedy under any Merger Partner Contract,
(iii) give any Person the right to accelerate the maturity or performance of any
Merger Partner Contract, or (iv) give any Person the right to cancel, terminate
or modify any Merger Partner Contract.
(e)
Except as Disclosed in Part 2.10(e) of the
Merger Partner Disclosure Schedule, neither Merger Partner nor any Merger
Partner Subsidiary has received any written notice or other communication
regarding any actual or possible violation or breach of, or default under, any
Merger Partner Contract.
(f)
Neither Merger Partner nor any Merger Partner
Subsidiary has waived any material rights under any Merger Partner
Contract.
(g)
No Person is renegotiating, or has a right
pursuant to the terms of any Merger Partner Contract to renegotiate, any amount
paid or payable to Merger Partner or any Merger Partner Subsidiary under any
Merger Partner Contract or any other material term or provision of any Merger
Partner Contract.
(h)
There are no proposed Contracts that remain
under consideration by Merger Partner, except for a Contract entered into in the
Ordinary Course of Business, as to which any bid, offer, award, written
proposal, term sheet or similar document has been submitted or received by
Merger Partner or any Merger Partner Subsidiary (other than term sheets provided
by Merger Partner or a Merger Partner Subsidiary or to Merger Partner or a
Merger Partner Subsidiary by any third party related to the subject matter of
this transaction).
(i)
Part 2.10(i) of the Merger Partner Disclosure
Schedule provides an accurate and complete list of all Consents required under
any Merger Partner Contract to consummate the Merger and the other Contemplated
Transactions.
14
2.11
Liabilities; Fees, Costs
and Expenses. Neither Merger Partner nor any Merger Partner
Subsidiary has any accrued, contingent or other liabilities of any nature,
either matured or unmatured (whether or not required to be reflected in
financial statements in accordance with GAAP, and whether due or to become due),
except for: (i) liabilities identified in the “liabilities” column of the Merger
Partner Balance Sheet; (ii) accounts payable or accrued salaries that have been
incurred in the Ordinary Course of Business; (iii) liabilities under Merger
Partner Contracts Disclosed in Part 2.11 of the Merger Partner Disclosure
Schedule, to the extent the nature and magnitude of such liabilities can be
specifically ascertained by reference to the text of such Merger Partner
Contracts; (iv) liabilities that have arisen since the date of the Merger
Partner Balance Sheet in the Ordinary Course of Business; (v) contractual
and other liabilities incurred in the Ordinary Course of Business which are not
required by GAAP to be reflected on a balance sheet and (vi) liabilities which,
individually or in the aggregate, have not, and would not reasonably be expected
to, result in a Merger Partner Material Adverse Effect.
2.12 Compliance with Legal
Requirements. Merger Partner and each Merger Partner Subsidiary
are, and since November 1, 2007 have been, in compliance in all material
respects with all applicable Legal Requirements, except where any such
noncompliance, individually or in the aggregate, has not, and would not
reasonably be expected to, result in a Merger Partner Material Adverse Effect.
Except as Disclosed in Part 2.12 of the Merger Partner Disclosure Schedule,
Merger Partner has not received, since November 1, 2007, any written notice or
other communication from any Governmental Body or any other Person regarding
(a) any actual, alleged, possible or potential violation of, or failure to
comply with, any Legal Requirement, except as has not, and would not reasonably
be expected to, result in a Merger Partner Material Adverse Effect, or (b) any
actual, alleged, possible or potential obligation on the part of Merger Partner
or the applicable Merger Partner Subsidiary to undertake, or to bear all or any
portion of the cost of, any material cleanup or any material remedial,
corrective or responsive action of any nature. Merger Partner has delivered or
made available to Avatech an accurate and complete copy of each report, study,
survey or other document to which Merger Partner or any Merger Partner
Subsidiary has access that addresses or otherwise relates to the compliance of
Merger Partner and any Merger Partner Subsidiary with, or the applicability to
Merger Partner or any Merger Partner Subsidiary of, any Legal
Requirement.
(a)
Except as Disclosed Part 2.13(a) of the Merger
Partner Disclosure Schedule, All Tax Returns required to be filed by or on
behalf of Merger Partner or any Merger Partner Subsidiary with any Governmental
Body with respect to any taxable period ending on or after November 1, 2007 and
on or before the Closing Date (the “Merger Partner
Returns”) (i) have been or will be filed on or before the applicable due
date (including any permitted extensions of such due date), and (ii) have been,
or will be when filed, accurately and completely prepared in all material
respects. All Taxes due required to be paid by Merger Partner or any Merger
Partner Subsidiary on or before the Closing Date have been or will be paid on or
before the Closing Date. Merger Partner has delivered or made available to
Avatech accurate and complete copies of all Merger Partner Returns filed which
have been requested by Avatech. Merger Partner has established in its
books and records, in the Ordinary Course of Business, reserves adequate for the
payment of all unpaid Taxes by Merger Partner or any Merger Partner Subsidiary
for the period from October 31, 2009 through the Closing Date.
(b)
The Merger Partner Financial Statements fully
accrue all liabilities for unpaid Taxes with respect to all periods through the
dates thereof in accordance with GAAP.
15
(c)
Except as Disclosed in Part 2.13(c) of the
Merger Partner Disclosure Schedule, since November 1, 2007, no Merger Partner
Return has ever been examined or audited by any Governmental Body and no
examination or audit of any Merger Partner Return is currently in progress or,
to the Knowledge of Merger Partner, threatened or contemplated. Merger
Partner has delivered or made available to Avatech accurate and complete copies
of all audit reports, private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending ruling
requests and any similar documents submitted by, received by, or agreed to by or
on behalf of Merger Partner or any Merger Partner Subsidiary relating to Merger
Partner Returns since November 1, 2007. Since November 1, 2007, (i) no
extension or waiver of the limitation period applicable to any of the Merger
Partner Returns has been granted (by Merger Partner, any Merger Partner
Subsidiary or any other Person), and no such extension or waiver has been
requested from Merger Partner or any Merger Partner Subsidiary; (ii) all Taxes
that Merger Partner was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been properly paid to
the appropriate Governmental Body; and (iii) neither Merger Partner nor any
Merger Partner Subsidiary has executed or filed any power of attorney with any
taxing authority.
(d)
Since November 1, 2007, neither Merger Partner
nor any Merger Partner Subsidiary (i) has been a member of an affiliated group
(within the meaning of Section 1504(a) of the Code) filing a consolidated
federal income Tax Return (other than a group the common parent of which was
Merger Partner), (ii) has any liability for the Taxes of any person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise (other than a
group the common parent of which was Merger Partner), and (iii) has been a party
to any joint venture, collaboration, partnership or other agreement that could
be treated as a partnership for Tax purposes. Neither Merger Partner nor any
Merger Partner Subsidiary is or, since November 1, 2007 has been, a party to or
bound by any Tax indemnity agreement, Tax-sharing agreement, Tax allocation
agreement or similar Contract. Neither Merger Partner nor any Merger Partner
Subsidiary has been either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code (y) in the two (2) years prior to the
date of this Agreement or (z) which could otherwise constitute part of a “plan”
or “series of related transactions” (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
(e)
Except as Disclosed in Part 2.13(e) of the
Merger Partner Disclosure Schedule, no claim or Legal Proceeding is pending or,
to the Knowledge of Merger Partner, has been threatened against or with respect
to Merger Partner or any Merger Partner Subsidiary in respect of any Tax. Except
as Disclosed in Part 2.13(e) of the Merger Partner Disclosure Schedule, there
are no unsatisfied liabilities for Taxes with respect to any notice of
deficiency or similar document received by Merger Partner or any Merger Partner
Subsidiary with respect to any Tax (other than liabilities for Taxes asserted
under any such notice of deficiency or similar document which are being
contested in good faith by Merger Partner or the applicable Merger Partner
Subsidiary and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of Merger
Partner or any Merger Partner Subsidiary except liens for current Taxes not yet
due and payable. Neither Merger Partner nor any Merger Partner Subsidiary
has entered into or become bound by any agreement or consent pursuant to Section
341(f) of the Code. Merger Partner has not been, and Merger Partner will not be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing
Date.
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(f)
None of the assets of Merger Partner or any
Merger Partner Subsidiary (i) is property that is required to be treated as
being owned by any other Person pursuant to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is “tax-exempt
use property” within the meaning of Section 168(h) of the Code, (iii) directly
or indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code, or (iv) is subject to a lease under Section 7701(h) of the
Code or under any predecessor section.
(g)
Since November 1, 2007, neither Merger Partner
nor any Merger Partner Subsidiary has participated in an international boycott
as defined in Section 999 of the Code.
(h)
Neither Merger Partner nor any Merger Partner
Subsidiary will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any period (or any portion thereof)
ending after the Closing Date as a result of any (i) closing agreement as
described in Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign Tax law) executed on or prior to the
Closing Date, (ii) installment sale or other open transaction disposition made
on or prior to the Closing Date, or (iii) prepaid amount received on or prior to
the Closing Date.
(i)
Since November 1, 2007, neither Merger Partner
nor any Merger Partner Subsidiary has engaged in any “listed transaction” for
purposes of Treasury Regulation sections 1.6011-4(b)(2) or 301.6111-2(b)(2) or
any analogous provision of state or local law.
(j)
Neither Merger Partner nor any Merger Partner
Subsidiary has taken or agreed to take any action that would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code. Neither Merger Partner nor any Merger Partner Subsidiary is aware of
any agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(a)
Part 2.14(a) of the Merger Partner Disclosure
Schedule accurately sets forth, with respect to each employee of Merger Partner
or any Merger Partner Subsidiary (including any employee of Merger Partner or
any Merger Partner Subsidiary who is on a leave of absence) with an annual base
salary in excess of $100,000:
(i)
the name of such employee and the date as of
which such employee was originally hired by Merger Partner or any Merger Partner
Subsidiary;
(ii)
such employee’s title;
17
(iii)
the aggregate dollar amount of the wages, salary, and
bonuses received by such employee from Merger Partner or any Merger Partner
Subsidiary with respect to services performed in calendar year
2009;
(iv)
such employee’s annualized base salary as of the date
of this Agreement; and
(v)
such employee’s primary office
location.
(b)
Part 2.14(b) of the Merger Partner Disclosure
Schedule accurately identifies each former employee of Merger Partner or any
Merger Partner Subsidiary who is receiving or is scheduled to receive (or whose
spouse or other dependent is receiving or is scheduled to receive) any benefits
(from Merger Partner or any Merger Partner Subsidiary) relating to such former
employee’s employment with Merger Partner or any Merger Partner Subsidiary; and
Part 2.14(b) of the Merger Partner Disclosure Schedule accurately describes such
benefits.
(c)
To the Knowledge of Merger
Partner:
(i)
no Key Employee of Merger Partner or any
Merger Partner Subsidiary intends to terminate his employment with Merger
Partner or the applicable Merger Partner Subsidiary; and
(ii)
no employee of Merger Partner or any Merger
Partner Subsidiary is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other Contract (with any Person) that may have an
adverse effect on: (A) the performance by such employee of any of his duties or
responsibilities as an employee of Merger Partner or the applicable Merger
Partner Subsidiary; or (B) Merger Partner’s or any Merger Partner Subsidiary’s
business or operations.
(d)
Neither Merger Partner nor any Merger Partner
Subsidiary is a party to or bound by, and, since November 1, 2007, neither
Merger Partner nor any Merger Partner Subsidiary has ever been a party to or
bound by any union contract, collective bargaining agreement or similar Contract
in the United States.
(e)
Neither Merger Partner nor any Merger Partner
Subsidiary is engaged, and since November 1, 2007 neither Merger Partner nor any
Merger Partner Subsidiary has ever been engaged, in any unfair labor practice of
any nature. Since November 1, 2007, there has never been any slowdown, work
stoppage, labor dispute or union organizing activity, or any similar activity or
dispute, affecting Merger Partner or any Merger Partner Subsidiary. To
Merger Partner’s Knowledge, no event has occurred, and no condition or
circumstance exists, that might directly or indirectly give rise to the
commencement of any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute. Except as Disclosed in
Part 2.14(e) of the Merger Partner Disclosure Schedule, there are no actions,
suits, claims, labor disputes or grievances pending or, to the Knowledge of
Merger Partner, threatened or reasonably anticipated relating to any labor,
safety or discrimination matters involving any employee of Merger Partner or any
Merger Partner Subsidiary, including, without limitation, charges of unfair
labor practices or discrimination complaints. Merger Partner and each Merger
Partner Subsidiary has good labor relations, and no reason to believe that the
consummation of the Merger or any of the other Contemplated Transactions will
have a material adverse effect on Merger Partner’s or any Merger Partner
Subsidiary’s labor relations.
18
(f)
Part 2.14(f) of the Merger Partner
Disclosure Schedule identifies each Merger Partner Plan sponsored, maintained,
contributed to or required to be contributed to by Merger Partner or any Merger
Partner Subsidiary for the benefit of any employee of Merger Partner or any
Merger Partner Subsidiary in effect as of the date hereof. Except to the
extent required to comply with Legal Requirements, neither Merger Partner nor
any Merger Partner Subsidiary has committed to establish or enter into any new
Merger Partner Plan, or to modify any Merger Partner Plan.
(g)
Merger Partner has delivered or made available
to Avatech: (i) correct and complete copies of all documents setting forth the
terms of each Merger Partner Plan, including all amendments thereto, and all
related trust documents or funding vehicles and amendments thereto; (ii) the two
(2) most recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Merger Partner Plan; (iii) if required by ERISA, the two
most recent auditor’s reports for each Merger Partner Plan; (iv) the most recent
summary plan description together with the summaries of material modifications
thereto, if any, required under ERISA with respect to each Merger Partner Plan;
(v) all material written Contracts relating to each Merger Partner Plan,
including administrative service agreements and group insurance contracts; (vi)
all material written materials provided to any employee of Merger Partner or any
Merger Partner Subsidiary relating to any Merger Partner Plan and any proposed
Merger Partner Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events that would result in any liability to Merger
Partner or any Merger Partner Subsidiary; (vii) all material correspondence to
or from any Governmental Body relating to any Plan; (viii) the form of all COBRA
forms and related notices; (ix) all insurance policies in the possession of
Merger Partner or any Merger Partner Subsidiary pertaining to fiduciary
liability insurance covering the fiduciaries for each Merger Partner Plan; (x)
all discrimination tests required under the Code for each Merger Partner Plan
intended to be qualified under Section 401(a) of the Code for the three (3) most
recent plan years; and (xi) the most recent Internal Revenue Service
determination or opinion letter issued with respect to each Merger Partner Plan
intended to be qualified under Section 401(a) of the Code.
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(h)
Merger Partner and each Merger Partner
Subsidiary has performed all material obligations required to be performed by it
under each Merger Partner Plan and is not in default under or violation of, and
Merger Partner has no Knowledge of any default under or violation by any other
party of, the terms of any Merger Partner Plan. Each Merger Partner Plan has
been established and maintained substantially in accordance with its terms and
in substantial compliance with all applicable Legal Requirements, including
ERISA and the Code. Any Merger Partner Plan intended to be qualified under
Section 401(a) of the Code has obtained a favorable determination letter (or
opinion letter, if applicable) as to its qualified status under the Code or has
remaining a period of time under applicable Treasury regulations or Internal
Revenue Service pronouncements in which to apply for such a letter and make any
amendments necessary to obtain a favorable determination as to the qualified
status of that Merger Partner Plan. No “prohibited transaction,” within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Merger Partner Plan subject to ERISA or Section 4975 of the Code. There are no
claims or Legal Proceedings pending, or, to the Knowledge of Merger Partner,
threatened or reasonably anticipated (other than routine claims for benefits),
against any Merger Partner Plan or against the assets of any Merger Partner
Plan. There are no audits, inquiries or Legal Proceedings pending or, to the
Knowledge of Merger Partner, threatened by any Governmental Body with respect to
any Merger Partner Plan. Since November 1, 2007, neither Merger Partner
nor any Merger Partner Subsidiary has ever incurred any penalty or tax with
respect to any Merger Partner Plan under Section 502(i) of ERISA or Sections
4975 through 4980 of the Code that remains unsatisfied, and all penalties and/or
taxes so satisfied since November 1, 2007 are Disclosed in Part 2.14(h) of the
Merger Partner Disclosure Schedule. Merger Partner and each Merger Partner
Subsidiary have made all contributions and other payments required by and due
under the terms of each Merger Partner Plan.
(i)
Since November 1, 2007, neither Merger Partner
nor any Merger Partner Subsidiary has (i) maintained, established, sponsored,
participated in, or contributed to any: (A) employee benefit pension plan (as
defined in Section 3(2) of ERISA) (“Pension
Plan”) subject to Title IV of ERISA; (B) “multiemployer plan” within the
meaning of Section (3)(37) of ERISA; or (C) “multiple employer welfare
arrangement” (within the meaning of Section 3(40) of ERISA); (ii) maintained,
established, sponsored, participated in or contributed to, any Pension Plan in
which stock of Merger Partner or any Merger Partner Subsidiary is or was held as
a plan asset; or (iii) maintained a Pension Plan or multiemployer plan, or the
equivalent thereof, in a foreign jurisdiction (a “Merger Partner
Foreign Plan”).
(j)
Except as Disclosed in Part 2.14(j) of the
Merger Partner Disclosure Schedule, no Merger Partner Plan provides (except at
no cost to Merger Partner or any Merger Partner Subsidiary), or reflects or
represents any liability of Merger Partner or any Merger Partner Subsidiary to
provide, life insurance, health benefits or other employee welfare benefits to
any Person for any reason after termination of employment with the Merger
Partner or any Merger Partner Subsidiary, or the spouses or dependents of any
such Person, except as may be required by COBRA or other applicable Legal
Requirements. Other than commitments made that involve no future costs to Merger
Partner or any Merger Partner Subsidiary, neither Merger Partner nor any Merger
Partner Subsidiary has any obligation (whether oral or written) to any employee
of Merger Partner or any Merger Partner Subsidiary (either individually or as a
group) or any other Person to provide such employee(s) or other Person with life
insurance, health benefits or other employee welfare benefits after terminating
employment with the Merger Partner or any Merger Partner Subsidiary, except to
the extent required by applicable Legal Requirements.
(k)
Except as Disclosed in Part 2.14(k) of the
Merger Partner Disclosure Schedule, neither the execution of this Agreement nor
the consummation of the Contemplated Transactions will (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Merger Partner Plan, Merger Partner Contract, trust or loan that will or may
result (either alone or in connection with any other circumstance or event) in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employees of Merger Partner or any Merger
Partner Subsidiary.
20
(l)
Merger Partner and Merger Partner
Subsidiaries: (i) are, and at all times since November 1, 2007 have been,
in substantial compliance with all applicable Legal Requirements respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to their employees, including the health
care continuation requirements of COBRA, the requirements of FMLA, the
requirements of HIPAA and any similar provisions of state law; (ii) have
withheld and reported all amounts required by applicable Legal Requirements or
by Contract to be withheld and reported with respect to wages, salaries and
other payments to their employees; (iii) are not liable for any arrears of wages
or any taxes or any penalty for failure to comply with the Legal Requirements
applicable to the foregoing; and (iv) are not liable for any payment to any
trust or other fund governed by or maintained by or on behalf of any
Governmental Body with respect to unemployment compensation benefits, social
security or other benefits or obligations for their employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the Knowledge of Merger Partner,
threatened or reasonably anticipated claims or Legal Proceedings against Merger
Partner or any Merger Partner Subsidiary under any worker’s compensation policy
or long-term disability policy.
(m)
Neither Merger Partner nor any Merger Partner
Subsidiary is required to be, and, has not since November 1, 2007 ever been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
Neither Merger Partner nor any Merger Partner Subsidiary has since November 1,
2007 ever made a complete or partial withdrawal from a multiemployer plan, as
such term is defined in Section 3(37) of ERISA, resulting in “withdrawal
liability,” as such term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA).
(n)
To the Knowledge of Merger Partner, no officer
of Merger Partner or any Merger Partner Subsidiary is subject to any injunction,
writ, judgment, decree, or order of any court or other Governmental Body that
would interfere with such officer’s efforts to promote the interests of Merger
Partner or any Merger Partner Subsidiary, or that would interfere with the
business of Merger Partner or any Merger Partner Subsidiary. Neither the
execution nor the delivery of this Agreement, nor the carrying on of the
business of Merger Partner or any Merger Partner Subsidiary as presently
conducted will, to the Knowledge of Merger Partner, conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any Contract under which any employee of Merger Partner or any Merger Partner
Subsidiary may be bound.
(o)
There is no agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of Merger Partner or any Merger Partner
Subsidiary that, considered individually or considered collectively with any
other such Contracts and/or other events, will, or could reasonably be expected
to, give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G or Section 162 of the Code. Neither
Merger Partner nor any Merger Partner Subsidiary is a party to any Contract, nor
does Merger Partner or any Merger Partner Subsidiary have any obligation
(current or contingent), to compensate any individual for excise taxes paid
pursuant to Section 4999 of the Code.
21
(p)
No holder of shares of Merger Partner Common
Stock holds shares of Merger Partner Common Stock that are non-transferable and
subject to a substantial risk of forfeiture within the meaning of Section 83 of
the Code with respect to which a valid election under Section 83(b) of the Code
has not been made unless such shares were acquired on the exercise of an
incentive stock option as defined in Section 422 of the Code.
(q)
Every Merger Partner employee plan or
arrangement, which includes any and all salary, bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance pay, termination
pay, hospitalization, medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension or retirement plan, program or
agreement (collectively, the “Merger Partner
Plans”, and each individually a “Merger Partner
Plan”) sponsored, maintained, contributed to or required to be
contributed to by Merger Partner or any Merger Partner Subsidiary for the
benefit of any employee of Merger Partner or any Merger Partner Subsidiary and
which is a “nonqualified deferred compensation plan” (as defined in Section
409A(d)(1) of the Code) has been since November 1, 2007, and is in
operational and document compliance with Code Section 409A and applicable
regulations and guidance issued thereunder, so that the additional tax described
in Code Section 409A(a)(1)(B) will not be assessed against the individuals
participating in any such non-qualified deferred compensation plan.
(r)
Part 2.14(r) of the Merger Partner Disclosure
Schedule sets forth each material employee benefit service provider Contract
with Merger Partner or any Merger Partner Subsidiary (i) that may not be
canceled with advance notice of sixty (60) days or less or (ii) under which
Merger Partner or any Merger Partner Subsidiary will be assessed a material
surrender charge or penalty upon cancellation.
(s)
No Merger Partner Plan is invested in any
“stable value fund” (or similar arrangement) which assesses any back-end load or
market value adjustment upon termination of such investment.
(t)
For purposes of each Merger Partner Plan,
Merger Partner and each Merger Partner Subsidiary have correctly determined the
status for each service provider to the Merger Partner and any Merger Partner
Subsidiary as an employee, a leased employee or an independent contractor, as
applicable.
2.15
Environmental
Matters. Merger Partner and each Merger Partner Subsidiary is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by Merger Partner and each Merger
Partner Subsidiary of all permits and other Governmental Authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Neither Merger Partner nor any Merger Partner
Subsidiary has received since November 1, 2007 any written notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that Merger Partner or any
Merger Partner Subsidiary is not in compliance with any Environmental Law, and,
to the Knowledge of Merger Partner, there are no circumstances that may prevent
or interfere with Merger Partner’s or any Merger Partner Subsidiary’s compliance
with any Environmental Law in the future. To the Knowledge of Merger Partner it
has no material liability under any Environmental Laws. There are no
Governmental Authorizations currently held by Merger Partner or any Merger
Partner Subsidiary pursuant to Environmental Laws.
22
(a)
Except as Disclosed in Part 2.16 of the Merger
Partner Disclosure Schedule, there is no pending Legal Proceeding, and to the
Knowledge of Merger Partner, no Person has threatened to commence any Legal
Proceeding, that involves Merger Partner or any Merger Partner Subsidiary or any
assets owned or used by Merger Partner or any Merger Partner Subsidiary or any
Person whose liability Merger Partner or any Merger Partner Subsidiary has or
may have retained or assumed, either contractually or by operation of law
(i) claiming damages in an amount in excess of $50,000; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other Contemplated
Transactions. Except as Disclosed in Part 2.16 of the Merger Partner
Disclosure Schedule, to the Knowledge of Merger Partner, no event has occurred,
and no claim, dispute or other condition or circumstance exists, that will, or
that would reasonable be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
(b)
There is no order, writ, injunction, judgment
or decree to which Merger Partner or any Merger Partner Subsidiary, or any of
the assets owned or used by Merger Partner or any Merger Partner Subsidiary, is
subject. To the Knowledge of Merger Partner, none of its Related Parties is
subject to any order, writ, injunction, judgment or decree that relates to
Merger Partner’s or any Merger Partner Subsidiary’s business or to any assets
owned or used by Merger Partner or any Merger Partner Subsidiary.
2.17
Non-Contravention;
Consents. Subject to obtaining the Required Merger Partner
Stockholder Vote for the applicable Contemplated Transactions and the filing of
a Certificate of Merger as required by the DGCL, neither (a) the execution,
delivery or performance of this Agreement or any of the Related Agreements, nor
(b) the consummation of the Merger or any of the other Contemplated
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a)
contravene, conflict with or result in a
violation of any of the provisions of the Merger Partner Constituent
Documents;
(b)
contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which Merger Partner or any Merger Partner Subsidiary, or
any of the assets owned or used by Merger Partner or any Merger Partner
Subsidiary, is subject;
23
(c)
except as Disclosed in Part 2.17(c) of the
Merger Partner Disclosure Schedule, result in a material conflict, violation or
breach of, or result in a material default under, any provision of any Merger
Partner Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such Merger Partner Contract, (ii) accelerate the
maturity or performance of any such Merger Partner Contract, or (iii) cancel,
terminate or modify any such Merger Partner Contract; or
(d)
result in the imposition or creation of any
Encumbrance upon or with respect to any material asset owned or used by Merger
Partner or any Merger Partner Subsidiary (except for minor liens that will not,
in any case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Merger Partner or any
Merger Partner Subsidiary).
Except
for those filings, notices or Consents disclosed in Part 2.17 of the Merger
Partner Disclosure Schedule, no filing with, notice to or Consent from any
Person is required in connection with (y) the execution, delivery or performance
of this Agreement or any of the Related Agreements, or (z) the consummation of
the Merger or any of the other Contemplated Transactions.
2.18
Vote Required.
The affirmative vote of the holders of a majority of the shares of Merger
Partner Common Stock outstanding (the “Required Merger
Partner Stockholder Vote”) is the only vote of the holders of any class
or series of Merger Partner capital stock necessary to adopt this
Agreement.
2.19
No Broker.
Merger Partner has not, directly or indirectly, engaged any broker,
finder, investment banker or other intermediary in connection with the Merger or
any of the other Contemplated Transactions, and no action by Merger Partner will
cause or support any claim to be asserted against Merger Partner, the Surviving
Corporation or Avatech by any broker, finder, investment banker or other
intermediary in connection with any of the Contemplated
Transactions.
2.20
Authority; Binding
Nature of Agreement. Merger Partner has the absolute and
unrestricted right, power and authority to enter into and perform its
obligations under this Agreement; and the execution, delivery and performance by
Merger Partner of this Agreement has been duly authorized by all necessary
action on the part of Merger Partner and the board of directors of Merger
Partner, subject only to obtaining the Required Merger Partner Stockholder Vote
(which shall be obtained contemporaneously with the execution of this Agreement)
and the filing and recordation of the Certificate of Merger pursuant to the
DGCL. This Agreement has been duly executed and delivered by Merger Partner, and
assuming due authorization, execution and delivery by the other Parties thereto,
constitutes the legal, valid and binding obligation of Merger Partner,
enforceable against Merger Partner in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors’ rights and the exercise of judicial
discretion in accordance with general principles of equity.
2.21
Anti-Takeover Law.
The board of directors of Merger Partner has taken all actions necessary
to ensure that execution of this Agreement and the consummation of the Merger
and the other Contemplated Transactions will be exempt from any anti-takeover or
similar provisions of Merger Partner Constituent Documents, any Merger Partner
Contract, and any applicable “moratorium”, “control share”, “fair price”,
“interested stockholder” or other anti-takeover laws and regulations of any
jurisdiction.
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2.22
Insurance.
Merger Partner maintains insurance policies with reputable insurance
carriers against all risks of a character as usually insured against, and in
such coverage amounts as are usually maintained, by similarly situated companies
in the same or similar businesses. Each such insurance policy is in full force
and effect. Since November 1, 2007, Merger Partner has not received any written
notice or other communication regarding any actual or possible (a) cancellation
or invalidation of any material insurance policy, (b) refusal of any coverage or
rejection of any claim under any material insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any material
insurance policy.
(a)
Except as Disclosed in Part 2.23(a) of the
Merger Partner Disclosure Schedule, no Merger Partner Related Party has, and no
Merger Partner Related Party has at any time since November 1, 2007 had, any
direct or indirect interest in any material asset used in or otherwise relating
to the business of Merger Partner or any Merger Partner Subsidiary.
(b)
Except as Disclosed in Part 2.23(a) of the
Merger Partner Disclosure Schedule, no Merger Partner Related Party is, or since
November 1, 2007 has been, indebted to Merger Partner or any Merger Partner
Subsidiary.
(c)
Except as Disclosed in Part 2.23(a) of the
Merger Partner Disclosure Schedule, since November 1, 2007, no Merger Partner
Related Party has entered into, or has had any direct or indirect financial
interest in, any Merger Partner Contract, transaction or business dealing
involving Merger Partner or any Merger Partner Subsidiary.
(d)
No Merger Partner Related Party is competing,
or has at any time since January 1, 2007 competed, directly or indirectly, with
Merger Partner or any Merger Partner Subsidiary.
(e)
Except as Disclosed in Part 2.23(e) of the
Merger Partner Disclosure Schedule, no Merger Partner Related Party has any
claim or right against Merger Partner or any Merger Partner Subsidiary (other
than rights under capital stock of Merger Partner and rights to receive
compensation for services performed as an employee of Merger Partner or any
Merger Partner Subsidiary).
2.24
Merger
Partner Action. The board of directors of Merger Partner (at a
meeting duly called and held in accordance with Merger Partner Constituent
Documents) has (a) unanimously determined that the Merger is advisable and in
the best interests of Merger Partner and its sole stockholder and (b)
unanimously recommended adoption of this Agreement by the sole stockholder of
Merger Partner and directed that this Agreement be submitted to the sole
stockholder of Merger Partner for adoption.
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2.25
Controls and
Procedures. Except as Disclosed in Part 2.25 of the Merger Partner
Disclosure Schedule, since November 1, 2007, none of Xxxx Xxxxxx, Xxxx Xxxxxx,
Xxxx Xxxxxxxxx or any director of Merger Partner has, and to their Knowledge
neither Merger Partner nor its independent registered public accounting firm
has, identified or been made aware of (i) any facts or circumstances regarding
Merger Partner, its business or the Merger Partner Financial Statements that
indicates any significant deficiency or material weakness in, or material
concern regarding the integrity of, the system of internal control over
financial reporting utilized by Merger Partner and Merger Partner Subsidiaries,
in each case which has not been substantially remediated (it being understood
and acknowledged by the parties that Merger Partner is not subject to and does
not comply with the federal Xxxxxxxx-Xxxxx Act of 2002), or (ii) any fraud which
involves Merger Partner’s or Merger Partner Subsidiaries’ management or other
employees who have a role in the preparation of financial statements or the
internal control over financial reporting utilized by Merger Partner and Merger
Partner Subsidiaries.
2.26
Objections to the
Merger. Neither any member of the board of directors of Merger
Partner nor any executive officer of Merger Partner, nor any of their respective
Representatives, has received any written or oral indication from the “group” of
stockholders named in the Schedule 13D initially filed with the SEC on March 5,
2010 (the “Dissident
Stockholders”) or from any Representative of the Dissident Stockholders
that any of the Dissident Stockholders intends to object to or otherwise contest
the Merger.
Except as
Disclosed, Avatech and Merger Sub make the following representations and
warranties to Merger Partner, as of the date hereof and as of the Closing
Date. The Schedule of Avatech and Merger Sub are collectively referred to
herein as the “Avatech
Disclosure Schedule”.
(a)
Avatech and Merger Sub are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the corporate power and authority to carry on their business as
now being conducted and as currently proposed to be conducted.
(b)
Except as Disclosed in Part 3.1(b), Avatech
has not conducted any business under or otherwise used, for any purpose or in
any jurisdiction, any fictitious name, assumed name, trade name or other name,
other than the name “Avatech
Solutions, Inc.”
(c)
Avatech and Merger Sub are not and have not
been required to be qualified, authorized, registered or licensed to do business
as a foreign corporation in any jurisdiction other than the jurisdictions
identified in Part 3.1(c) of the Avatech Disclosure Schedule, except where the
failure to be so qualified, authorized, registered or licensed, individually or
in the aggregate, has not had, and would not reasonably be expected to have, an
Avatech Material Adverse Effect. Avatech and Avatech Subsidiaries are each in
good standing as a foreign corporation in each of the jurisdictions Disclosed in
Part 3.1(c) of the Avatech Disclosure Schedule.
(d)
Part 3.1(d) of the Avatech Disclosure Schedule
accurately sets forth (i) the names of the members of the board of directors of
Avatech, (ii) the names of the members of each committee of the board of
directors of Avatech and (iii) the names and titles of Avatech’s
officers.
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(e)
Avatech has no direct or indirect ownership of
any capital stock of, or other voting securities or equity interests in, any
Entity (other than Merger Sub) except for the Entities Disclosed in Part 3.1(e)
of the Avatech Disclosure Schedule. Neither Avatech nor any Avatech
Subsidiary has agreed or is obligated to make any future investment in or
capital contribution to any Entity. Except as Disclosed in Part 3.1(e) of
the Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has
guaranteed or is responsible or liable for any obligation of any of the Entities
in which it owns or has owned any equity or other financial
interest.
(f)
Part 3.1(f) of the Avatech Disclosure Schedule
sets forth a true and complete list of each Avatech Subsidiary and identifies
the jurisdiction of its organization. Each of such Avatech Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, with the power and authority to carry on its
business as now being conducted and as currently proposed to be conducted.
Part 3.1(f) of the Avatech Disclosure Schedule identifies all jurisdictions in
which each Avatech Subsidiary is qualified, authorized, registered or licensed
to do business as a foreign Entity, except where the failure to be so qualified,
authorized, registered or licensed, individually or in the aggregate, has not
had, and would not reasonably be expected to have, an Avatech Material Adverse
Effect, and each such Avatech Subsidiary is in good standing in such
jurisdictions.
3.2
Certificate of
Incorporation and Bylaws; Records. Avatech and Merger Sub have
delivered or made available to Merger Partner accurate and complete copies
of: (a) Avatech’s certificate of incorporation and bylaws, including all
amendments thereto, and the certificate of incorporation and bylaws of Merger
Sub; (b) the stock records of Avatech and Merger Sub; and (c) except as
Disclosed in Part 3.2(c) of the Avatech Disclosure Schedule, the minutes and
other records of the meetings and other proceedings (including any actions taken
by written consent or otherwise without a meeting) of the stockholders of
Avatech and Merger Sub, the board of directors of Avatech and Merger Sub and all
committees of the board of directors of Avatech and Merger Sub since January 1,
2005 (the items described in (a) and (b) above, collectively, the “Avatech
Constituent Documents”). Since November 1, 2007, there have been no
formal meetings or actions taken by written consent or otherwise without a
meeting of the stockholders of Avatech or Merger Sub, the board of directors of
Avatech or Merger Sub or any committee of the board of directors of Avatech or
Merger Sub that are not fully reflected in the minutes and other records
delivered or made available to Merger Partner pursuant to clause (c) above.
There has not been any violation in any material respect of the Avatech
Constituent Documents, and Avatech has not taken any action that is inconsistent
in any material respect with the Avatech Constituent Documents. The books of
account, stock records, minute books and other records of Avatech are accurate,
up to date and complete in all material respects, and have been maintained in
accordance with prudent business practices.
27
(a)
The authorized capital stock of Avatech
consists of 100,000,000 shares, of which 80,000,000 shares are classified as
shares of Avatech Common Stock and 20,000,000 shares are classified as shares of
Preferred Stock, par value $.01 per share. As of the date hereof, 17,168,162
shares of Avatech Common Stock are outstanding. The authorized shares of
Avatech Preferred Stock are classified as (i) 1,297,537 shares of Series D
Preferred Stock, of which 1,089,213 shares are outstanding and, as of the date
hereof, are convertible into 2,180,244 shares of Avatech Stock, (ii) 1,200
shares of Series E Preferred Stock, of which 937 shares are outstanding and, as
of the date hereof, are convertible into 1,441,539 shares of Avatech Common
Stock, and (iii) 5,500 shares of Series F Preferred Stock, of which no shares
are outstanding. All outstanding shares of capital stock of Avatech have
been duly authorized and validly issued, and are fully paid and non assessable.
Avatech has no authorized shares of capital stock other than as set forth in
this Section 3.3(a) and there are no issued and outstanding shares of Avatech’s
capital stock other than as set forth in this Section 3.3(a). Avatech
has made available to Merger Partner copies of all outstanding warrants to
purchase capital stock of Avatech and all documents related thereto. The
total number of shares of Avatech Common Stock outstanding on a Fully Diluted
Basis, excluding the shares of Avatech Common Stock issuable upon exercise of
the Avatech Excluded Warrants, is 22,396,997.
(b)
As of August 17, 2010: (i) Avatech has
reserved 3,100,000 shares of Avatech Common Stock for issuance under its 2002
Stock Option Plan, options to purchase 1,607,052 shares of Avatech Common Stock
are outstanding thereunder, and 214,390 shares of Avatech Common Stock remain
available for new grants thereunder; (ii) Avatech has reserved 2,000,000 shares
of Avatech Common Stock for issuance under its Employee Stock Purchase Plan, no
rights to purchase shares of Avatech Common Stock are outstanding thereunder,
and 797,494 shares remain available for new grants thereunder; and (iii) Avatech
has reserved 1,000,000 shares of Avatech Common Stock for issuance under its
Amended and Restated Restricted Stock Award Plan, no restricted shares of
Avatech Common Stock are outstanding thereunder, and 193,921 shares remain
available for new awards thereunder. Except as set forth in this Section
3.3(b) or Disclosed in Part 3.3(b) of the Avatech Disclosure Schedule, other
than the Excluded Warrants and the Designator’s right to receive Merger Shares
hereunder, there is no: (A) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Avatech; (B) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of capital stock or other securities of Avatech; (C) Contract
under which Avatech is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities of Avatech; or (D) condition
or circumstance that would give rise to or provide a basis for the assertion of
a claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of Avatech. Avatech has
not issued any debt securities which grant the holder thereof any right to vote
on, or veto, any action of Avatech.
(c)
All outstanding shares of Avatech Common Stock
(including Avatech Restricted Shares), and all outstanding Avatech Options, have
been issued and granted in compliance with (i) all applicable federal and state
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in Avatech Constituent Documents and applicable
Contracts. All securities of Avatech Subsidiaries have been issued and
granted in compliance in all material respects with (x) all applicable federal
and state securities laws and other applicable Legal Requirements, and (y) all
requirements set forth in the Avatech Subsidiary Constituent Documents and
applicable Contracts. All shares of Avatech Common Stock reserved for
issuance under the Avatech 2002 Stock Option Plan, the Avatech Employee Stock
Purchase Plan, and the Avatech Amended and Restated Restricted Stock Award Plan
have been registered on a Form S-8 filed with the SEC.
28
(a)
Except as Disclosed in Part 3.4(a) of the
Avatech Disclosure Schedule, a true, complete and correct copy of each final
registration statement, prospectus, report, schedule and definitive proxy
statement filed or furnished, or required to be filed or furnished, prior to the
date hereof and since November 1, 2007 by Avatech with the SEC pursuant to the
Securities Act or the Exchange Act (“Avatech SEC
Documents”) is available to Merger Partner on the SEC’s Electronic Data
Gathering, Analysis and Retrieval (“XXXXX”)
database, or, if not so available, has been provided to Merger Partner. As
of their respective dates, or, if amended, as of the date of the last such
amendment, each of the Avatech SEC Documents complied in all material respects
with all applicable SEC requirements, as in effect as of the time such Avatech
SEC Document was filed, and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. All Avatech SEC Documents have been timely
filed with the SEC. Avatech has not received notice from any Governmental
Entity challenging or questioning the accuracy, completeness, form or manner of
any of the Avatech SEC Documents, including, without limitation, any
certification required of any executive officer under Section 302 or 906 of the
Xxxxxxxx-Xxxxx Act. Except for (i) requests to extend the duration of
confidential treatment of redacted portions of exhibits filed with the SEC, (ii)
correspondence relating to SEC reviews and comments as to which no comments
remain outstanding, and (iii) as are available on the XXXXX database, Avatech
has provided to Merger Partner copies of all correspondence sent to or received
from the SEC by or on behalf of Avatech and Avatech Subsidiaries since November
1, 2007. There are no outstanding comments from or unresolved issues
raised by the SEC with respect to any of the Avatech SEC Documents. None
of the Avatech Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b)
The consolidated financial statements
contained in the Avatech SEC Documents (including, in each case, any related
notes thereto) (the “Avatech Financial
Statements”): (i) complied as to form in all material respects with
the published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered, except as may be indicated in the notes to such consolidated
financial statements and except that the unaudited interim consolidated
financial statements contained in the Avatech SEC Documents do not contain
information and footnotes required for annual financial statements; and (iii)
fairly present in all material respects the consolidated financial position of
Avatech as of the respective dates thereof and the consolidated results of
operations and cash flows of Avatech for the periods covered thereby, except
that the unaudited interim consolidated financial statements contained in the
Avatech SEC Documents were or are subject to normal year-end audit
adjustments.
29
(c)
To the Knowledge of Avatech, Xxxxxxx &
Company, Avatech’s independent registered public accounting firm, is, and has
been at all times during its engagement by Avatech, (i) “independent” with
respect to Avatech within the meaning of the SEC’s Regulation S-X and (ii) in
compliance with Section 10A of the Exchange Act (to the extent applicable) and
the related rules of the SEC and the Public Company Accounting Oversight Board,
in each case as such subsections and rules apply to Xxxxxxx & Company’s
engagement by Avatech.
3.5
Absence of
Changes. Other than in connection with the Contemplated
Transactions and except as Disclosed in Part 3.5 of the Avatech Disclosure
Schedule, since March 31, 2010:
(a)
there has not been any Avatech Material
Adverse Effect, and no event has occurred that will, or would reasonably be
expected to, cause a Avatech Material Adverse Effect;
(b)
there has not been any material loss, damage
or destruction to, or any material interruption in the use of, any of the
material assets of Avatech or any Avatech Subsidiary (whether or not covered by
insurance);
(c)
Avatech has not declared, accrued, set aside
or paid any dividend or made any other distribution in respect of any shares of
its capital stock, and has not repurchased, redeemed or otherwise reacquired any
shares of its capital stock or other securities;
(d)
Avatech has not sold, issued, granted or
authorized the issuance of (i) any capital stock or other securities of Avatech;
(ii) any option, call or right to acquire any capital stock or any other
security of Avatech; (iii) any instrument convertible into or exchangeable for
any capital stock or other security of Avatech; or (iv) reserved for issuance
any additional grants or shares under the Avatech 2002 Stock Option Plan, the
Avatech Employee Stock Purchase Plan or the Avatech Amended and Restated
Restricted Stock Award Plan;
(e)
Avatech has not amended or waived any of its
rights under, or permitted the acceleration of vesting under, the Avatech 2002
Stock Option Plan, the Avatech Employee Stock Purchase Plan, the Avatech Amended
and Restated Restricted Stock Award Plan, any Avatech Option, Avatech Restricted
Shares or agreement evidencing or relating to any outstanding stock option or
warrant, any restricted stock purchase agreement, or any other Contract
evidencing or relating to any equity award;
(f)
there has been no amendment to the
certificate of incorporation or bylaws of Avatech or any Avatech Subsidiary and
Avatech has not effected or been a party to any merger, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(g)
Avatech has not acquired any equity interest
or other interest in any Entity;
(h)
neither Avatech nor any Avatech Subsidiary has
made any capital expenditure which, when added to all other capital expenditures
made on behalf of Avatech or any Avatech Subsidiary since March 31, 2010,
exceeds $75,000;
30
(i)
neither Avatech nor any Avatech Subsidiary
has (i) entered into or permitted any of the material assets owned or used by it
to become bound by any Contract that contemplates or involves (A) the payment or
delivery of cash or other consideration in an amount or having a value in excess
of $75,000 in the aggregate, other than in the Ordinary Course of Business, or
(B) the purchase or sale of any product, or performance of services by or to
Avatech or any Avatech Subsidiary having a value in excess of $75,000 in the
aggregate, other than in the Ordinary Course of Business, or (ii) waived any
right or remedy under any material Contract other than in the Ordinary Course of
Business, or amended or prematurely terminated any material
Contract;
(j)
neither Avatech nor any Avatech Subsidiary
has (i) acquired, leased or licensed any material right or other asset from any
other Person, (ii) sold or otherwise disposed of, or leased or licensed, any
material right or other asset to any other Person, or (iii) waived or
relinquished any material right, except for rights or assets acquired, leased,
licensed or disposed of in the Ordinary Course of Business;
(k)
neither Avatech nor any Avatech Subsidiary has
written off as uncollectible, or established any extraordinary reserve with
respect to, any account receivable or other indebtedness, other than in the
Ordinary Course of Business;
(l)
neither Avatech nor any Avatech Subsidiary has
made any pledge of any of its assets or otherwise permitted any of its assets to
become subject to any Encumbrance, except for pledges of immaterial assets made
in the Ordinary Course of Business;
(m)
neither Avatech nor any Avatech Subsidiary has
(i) lent money to any Person (other than pursuant to routine travel advances
made to employees in the Ordinary Course of Business), (ii) incurred or
guaranteed any indebtedness for borrowed money in the aggregate in excess of
$75,000 or (iii) issued or sold any debt securities or options, warrants, calls
or similar rights to acquire any debt securities of Avatech or any Avatech
Subsidiary;
(n)
neither Avatech nor any Avatech Subsidiary has
(i) established or adopted any employee benefit plan, (ii) paid any bonus or
made any profit sharing, incentive compensation or similar payment to, or
materially increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees with an annual salary in excess of $100,000, or (iii)
hired any new employee having an annual salary in excess of
$100,000;
(o)
neither Avatech nor any Avatech Subsidiary has
changed any of its personnel policies or other business policies, or any of its
methods of accounting or accounting practices in any material
respect;
(p)
neither Avatech nor any Avatech Subsidiary has
threatened, commenced or settled any material Legal Proceeding;
(q)
neither Avatech nor any Avatech Subsidiary has
entered into any transaction or taken any other action outside the Ordinary
Course of Business, other than entering into this Agreement and the Contemplated
Transactions;
31
(r)
neither Avatech nor any Avatech Subsidiary
has paid, discharged or satisfied any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise) other than the
payment, discharge or satisfaction of non-material amounts in the Ordinary
Course of Business or as required by any Avatech or Avatech Subsidiary Contract
or Legal Requirement; and
(s)
neither Avatech nor any Avatech Subsidiary has
agreed to take, or committed to take, any of the actions referred to in clauses
(c) through (r) of this Section 3.5.
3.6
Title to Assets.
Except as Disclosed in Part 3.6 of the Avatech Disclosure Schedule,
Avatech and each Avatech Subsidiary owns, and has good, valid and marketable
title to, all assets (tangible and intangible) purported to be owned by it. All
of such assets are owned by Avatech or the applicable Avatech Subsidiary free
and clear of any Encumbrances, except for (y) any lien for current Taxes not yet
due and payable, and (z) minor liens that have arisen in the Ordinary Course of
Business and that do not (individually or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Avatech or the applicable Avatech Subsidiary.
(a)
Part 3.7(a) of the Avatech Disclosure Schedule
provides accurate information with respect to each account maintained by or for
the benefit of Avatech or any Avatech Subsidiary at any bank or other financial
institution, including the name of the bank or financial institution, the
account number, the balance as of May 31, 2010 and the names of all individuals
authorized to draw on or make withdrawals from such accounts.
(b)
All existing accounts receivable of Avatech or
any Avatech Subsidiary (including those accounts receivable reflected on the
Avatech Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since the date of the Avatech Balance Sheet and have
not yet been collected) (i) represent valid obligations of customers of Avatech
or any Avatech Subsidiary arising from bona fide transactions entered into in
the Ordinary Course of Business, and (ii) are current and are expected to be
collected in full when due, without any counterclaim or set off, net of
applicable reserves for bad debts on the unaudited interim consolidated balance
sheet for Avatech as of March 31, 2010 delivered or made available to Merger
Partner prior to the date of this Agreement.
(a)
All items of equipment and other tangible
assets owned by or leased to Avatech or any Avatech Subsidiary (i) are adequate
for the uses to which they are being put and (ii) are adequate for the conduct
of Avatech’s business in the manner in which such business is currently being
conducted and as it is proposed to be conducted.
(b)
Neither Avatech nor any Avatech Subsidiary
owns any real property or any interest in real property, except for the
leasehold interest created under the real property leases Disclosed in Part
3.8(b) of the Avatech Disclosure Schedule. All premises leased or subleased by
Avatech or any Avatech Subsidiary are supplied with utilities and other services
necessary for the operation of their respective businesses.
32
(a)
To the Knowledge of Avatech, Avatech and/or
Avatech Subsidiaries own Intellectual Property Rights, or otherwise have the
necessary rights or licenses under Intellectual Property Rights owned by third
parties, necessary for the conduct of the business of Avatech and Avatech
Subsidiaries as currently conducted and expected to be conducted subsequent to
the Contemplated Transactions. Neither the execution, delivery, or
performance of this Agreement (or any of the agreements contemplated by this
Agreement) nor the consummation of any of the Contemplated Transactions will,
with or without notice or lapse of time, result in, or give any other Person the
right or option to cause or declare, (i) a loss of, or Encumbrance on, any
Avatech IP Rights or Avatech Licensed IP; (ii) a breach by Avatech or any
Avatech Subsidiary of any Avatech IP Rights Agreement; (iii) a right to
terminate an Avatech IP Rights Agreement or result in the change of any material
term or require the payment of any additional fees under such an Avatech IP
Rights Agreement; (iv) the release, disclosure, or delivery of any source code
of any Avatech Software Products by or to any escrow agent or other Person; or
(v) the grant, assignment, or transfer to any other Person, or otherwise change
the ownership, status, effectiveness, validity and/or other disposition, of any
license or other right or interest under, to, or in any of Avatech IP Rights or
Avatech Licensed IP.
(b)
No infringement, misappropriation, or similar
claim or Legal Proceeding is pending or, to Avatech’s Knowledge, threatened
against Avatech or any Avatech Subsidiary or against any other Person who may be
entitled to be indemnified, defended, held harmless, or reimbursed by Avatech or
any Avatech Subsidiary with respect to such claim or Legal Proceeding, and
Avatech has no Knowledge of any set of facts which should reasonably lead it to
believe that any claim is likely or threatened. To Avatech’s Knowledge,
the operation of Avatech’s and the Avatech Subsidiaries’ businesses, as
currently conducted, does not infringe, misappropriate or otherwise violate any
Intellectual Property Rights of any Person. To Avatech’s Knowledge, no
Person is infringing, misappropriating, or violating the Avatech IP
Rights. Avatech has not received within the last five (5) years any
unresolved written claim challenging the scope, ownership, validity, or
enforceability of the Avatech IP Rights or of Avatech’s or Avatech Subsidiaries’
rights under the Avatech Licensed IP.
(c)
Avatech and/or its Subsidiaries hold all
right, title and interest in and to the Avatech IP Rights, free and clear of any
Encumbrances. To the Knowledge of Avatech, no Person has any claim or
interest in any Avatech IP Rights by reason of such Person’s participation in
the creation of such Avatech IP Rights. Other than the agreements (i) that
are Disclosed in Part 3.9(c) of the Avatech Disclosure Schedule and (ii)
Non-Exclusive Internal Use Licenses granted to customers in the Ordinary Course
of Business, Avatech and Avatech Subsidiaries have not granted any Person any
rights to or under the Avatech IP Rights, Merger Partner Licensed IP, and Merger
Partner Software Products.
(d)
Part 3.9(d) of the Avatech Disclosure Schedule
contains, as of the date of this Agreement, a true and complete list of all
Avatech Registered IP. Avatech and Avatech Subsidiaries have taken all
actions necessary to maintain the Avatech Registered IP, including as applicable
payment of applicable maintenance fees, filing of applicable statements of use,
timely response to office actions, and all assignments of the Avatech Registered
IP have been duly recorded with the appropriate Governmental Bodies (or, with
respect to domain name registrations, the applicable domain name registrar or
agent). None of the Avatech Registered IP has been adjudged invalid or
unenforceable in whole or part and, to the Knowledge of Avatech, all Avatech
Registered IP is valid and enforceable.
33
(e)
There are no licenses or other Contracts
pursuant to which Avatech and Avatech Subsidiaries have been granted the Avatech
Licensed IP, including with respect to any embodiments of the Intellectual
Property Rights underlying such Avatech IP Licenses such as software, that is
either (i) incorporated into or distributed with any Avatech Software Product or
necessary of the use or distribution of such Avatech Software Product or (ii)
used or held for use by Avatech for any other purpose (excluding, for purposes
of clause (ii) only, any generally commercially available, non-customized
software programs non-exclusively licensed by Avatech on standard
terms).
(f)
Avatech and Avatech Subsidiaries have taken
commercially reasonable steps to protect their respective trade secret rights in
the Avatech IP Rights and to protect any confidential information provided to
them by any other Person under obligation of confidentiality. Without
limitation of the foregoing, Avatech and Avatech Subsidiaries have not, to
Avatech’s Knowledge, made any of their trade secrets or other confidential or
proprietary information that they intended to maintain as confidential
(including source code with respect to Avatech Software Products) available to
any other Person except pursuant to written agreements, or other legally binding
obligations, requiring such Person to maintain the confidentiality of such
information or materials.
(g)
Avatech and Avatech Subsidiaries have obtained
from all Persons who are or were involved in the creation or development of any
portion of any Avatech Software Product (other than software licensed from third
parties and distributed with or incorporated into Avatech Software Products as
listed on Part 3.9(i) of the Avatech Disclosure Schedule), or of any Avatech IP
Rights, valid and enforceable agreement containing an assignment of Intellectual
Property Rights to Avatech or an Avatech Subsidiary and confidentiality
provision protecting trade secrets and confidential information of Avatech IP
Rights, except where the failure to obtain such agreement, individually or in
the aggregate, has not had, and would not reasonably be expected to have, an
Avatech Material Adverse Effect. Neither Avatech nor any
of the Avatech Subsidiaries is obligated to provide any consideration to any
third party with respect to any exercise of rights by Avatech or any of the
Avatech Subsidiaries, or any successor to Avatech or the Avatech Subsidiaries,
in any Avatech IP Rights, including with respect to the distribution or license
of the Avatech Software Products.
(h)
Part 3.9(h) of the Avatech Disclosure Schedule
contains a true and complete list of all Avatech Software Products.
(i)
Except as Disclosed in Part 3.9(i) of the
Avatech Disclosure Schedule, there are no pending disputes regarding (i) the
scope of any Contracts under which Avatech and/or Avatech Subsidiaries (A)
license Avatech Software Products or Avatech IP Rights or (B) provide
customization, configuration, maintenance, or implementation services with
respect to Avatech Software (collectively, “Avatech License
and Service Agreements”), (ii) Avatech’s, Avatech Subsidiaries’, or their
agents’ performance under any Avatech License and Service Agreements, or (iii)
payment made or received under any Avatech License and Service Agreements,
except where such disputes have not, individually or in the aggregate, had, and
would not, individually or in the aggregate, reasonably be expected to have, a
Avatech Material Adverse Effect. Except as would not, individually or in
the aggregate, reasonably be expected to have a Avatech Material Adverse Effect,
no parties to the Avatech License and Service Agreements are in material breach
thereof.
34
(a)
Part 3.10(a) of the Avatech Disclosure
Schedule identifies each of the following Avatech Contracts:
(i)
each Avatech Contract relating to the
employment of, or the performance of employment-related services by, any
employee at the vice president level or above, consultant or independent
contractor;
(ii)
each Avatech Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Intellectual Property or Avatech IP Rights or Avatech Licensed IP;
(iii)
each Avatech Contract imposing any restriction on
Avatech’s or any Avatech Subsidiary’s right or ability (A) to compete with any
other Person, (B) to acquire any product or other asset or any services from any
other Person, to sell any product or other asset to, or perform any services
for, any other Person or to transact business or deal in any other manner with
any other Person, or (C) to develop or distribute any technology;
(iv)
each Avatech Contract creating or involving any
agency relationship, distribution arrangement or franchise
relationship;
(v)
each Avatech Contract relating to the creation of any
Encumbrance with respect to any asset of Avatech or any Avatech
Subsidiary;
(vi)
each Avatech Contract involving or that contemplates
or requires any guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(vii)
each Avatech Contract creating or relating to any
collaboration or joint venture or any sharing of technology, revenues, profits,
losses, costs or liabilities, including Avatech Contracts involving investments
by Avatech in, or loans by Avatech to, any other Entity;
(viii)
each Avatech Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by or for,
or otherwise involving as a counterparty, any Avatech Related
Party;
(ix)
each Avatech Contract relating to indebtedness for
borrowed money;
35
(x)
each Avatech Contract relating to the acquisition or
disposition by Avatech or any Avatech Subsidiary of any operating business,
material asset, capital stock or equity interest of Avatech, any Avatech
Subsidiary or any other Person that has not been consummated or that has been
consummated but contains representations, covenants, guaranties, indemnities or
other obligations on the part of Avatech or any Avatech Subsidiary that remain
in effect;
(xi)
any other Avatech Contract pursuant to which Avatech
or any Avatech Subsidiary is required to actively perform that contemplates or
involves (A) the payment or delivery of cash or other consideration in an amount
or having a value in excess of $50,000 in the aggregate, other than in the
Ordinary Course of Business, (B) the purchase or sale of any product, or
performance of services by or to Avatech or any Avatech Subsidiary having a
value in excess of $50,000 in the aggregate, other than in the Ordinary Course
of Business or (C) a term of more than sixty (60) days and that may not be
terminated by Avatech or the applicable Avatech Subsidiary (without penalty)
within sixty (60) days after the delivery of a termination notice by Avatech or
the applicable Avatech Subsidiary, other than in the Ordinary Course of
Business;
(xii)
each Avatech Contract with any Person, including without
limitation any financial advisor, broker, finder, investment banker or other
Person, providing advisory services to Avatech or any Avatech Subsidiary in
connection with the Contemplated Transactions.
(b)
Avatech has delivered or made available to
Merger Partner accurate and complete (except for applicable redactions thereto)
copies of all written Avatech Contracts, including all amendments thereto. There
are no Avatech Contracts that are not in written form. Each Avatech Contract is
valid and in full force and effect, is enforceable by Avatech or the applicable
Avatech Subsidiary in accordance with its terms, and after the Effective Time
will continue to be legal, valid, binding and enforceable on identical terms.
The consummation of the Contemplated Transactions hereby shall not (either alone
or upon the occurrence of additional acts or events) result in any payment or
payments becoming due from Avatech or any Avatech Subsidiary, the Surviving
Corporation or Merger Partner or any Merger Partner Subsidiary to any Person
under any Avatech Contract or give any Person the right to terminate or alter
the provisions of any Avatech Contract.
(c)
Except as Disclosed in Part 3.10(c) of the
Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has
materially violated or breached, or committed any material default under, any
Avatech Contract, and, to the Knowledge of Avatech, no other Person has violated
or breached, or committed any default under, any Avatech Contract.
(d)
Except as Disclosed in Part 3.10(d) of the
Avatech Disclosure Schedule, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, (i) result in a material violation or breach of any
of the provisions of any Avatech Contract, (ii) give any Person the right to
declare a default or exercise any remedy under any Avatech Contract, (iii) give
any Person the right to accelerate the maturity or performance of any Avatech
Contract, or (iv) give any Person the right to cancel, terminate or modify any
Avatech Contract.
36
(e)
Except as Disclosed in Part 3.10(e) of the
Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary has
received any written notice or other communication regarding any actual or
possible violation or breach of, or default under, any Avatech
Contract.
(f)
Neither Avatech nor any Avatech Subsidiary has
waived any material rights under any Avatech Contract.
(g)
Except as Disclosed in Part 3.10(g) of the
Avatech Disclosure Schedule, no Person is renegotiating, or has a right pursuant
to the terms of any Avatech Contract to renegotiate, any amount paid or payable
to Avatech or any Avatech Subsidiary under any Avatech Contract or any other
material term or provision of any Avatech Contract.
(h)
There are no proposed Contracts that remains
under consideration by Avatech, except for a Contract entered into in the
Ordinary Course of Business, as to which any bid, offer, award, written
proposal, term sheet or similar document has been submitted or received by
Avatech (other than term sheets provided by Avatech or to Avatech by any third
party related to the subject matter of this transaction).
(i)
Part 3.10(i) of the Avatech Disclosure
Schedule provides an accurate and complete list of all Consents required under
any Avatech Contract to consummate the Merger and the other Contemplated
Transactions.
(a)
Neither Avatech nor any Avatech Subsidiary has
any accrued, contingent or other liabilities of any nature, either matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with GAAP, and whether due or to become due), except for: (i)
liabilities identified in Avatech’s balance sheet included in its Form 10-Q for
the quarter ended March 31, 2010 (the “Avatech Balance
Sheet”), or otherwise described in Avatech’s Form 10-Q for the quarter
ended March 31, 2010; (ii) liabilities that have been incurred since March 31,
2010 in the Ordinary Course of Business; (iii) liabilities which have arisen
since March 31, 2010 in the Ordinary Course of Business; (iv) contractual and
other liabilities incurred in the Ordinary Course of Business which are not
required by GAAP to be reflected on a balance sheet and (vi) liabilities which,
individually or in the aggregate, have not, and would not reasonably be expected
to, result in an Avatech Material Adverse Effect.
3.12
Compliance with Legal
Requirements. Avatech and each Avatech Subsidiary are, and since
November 1, 2007 have been, in compliance in all material respects with all
applicable Legal Requirements, except where any such noncompliance, individually
or in the aggregate, has not, and would not reasonably be expected to, result in
an Avatech Material Adverse Effect. Avatech has not received, since
November 1, 2007, any written notice or other communication from any
Governmental Body or any other Person regarding (a) any actual, alleged,
possible or potential violation of, or failure to comply with, any Legal
Requirement, except as has not, and would not reasonably be expected to, result
in an Avatech Material Adverse Effect, or (b) any actual, alleged, possible or
potential obligation on the part of Avatech or the applicable Avatech Subsidiary
to undertake, or to bear all or any portion of the cost of, any material cleanup
or any material remedial, corrective or responsive action of any nature.
Avatech has delivered or made available to Merger Partner an accurate and
complete copy of each report, study, survey or other document to which Avatech
or any Avatech Subsidiary has access that addresses or otherwise relates to the
compliance of Avatech and any Avatech Subsidiary with, or the applicability to
Avatech or any Avatech Subsidiary of, any Legal Requirement.
37
(a)
All Tax Returns required to be filed by or on
behalf of Avatech or any Avatech Subsidiary with any Governmental Body with
respect to any taxable period ending on or after November 1, 2007 and on or
before the Closing Date (the “Avatech
Returns”) (i) have been or will be filed on or before the applicable due
date (including any permitted extensions of such due date), and (ii) have been,
or will be when filed, accurately and completely prepared in all material
respects. All Taxes due required to be paid by Avatech or any Avatech Subsidiary
on or before the Closing Date have been or will be paid on or before the Closing
Date. Avatech has delivered or made available to Merger Partner accurate and
complete copies of all Avatech Returns filed which have been requested by Merger
Partner. Avatech had established in its books and records, in the Ordinary
Course of Business, reserves adequate for the payment of all unpaid Taxes by
Avatech or any Avatech Subsidiary for the period from June 30, 2009 through the
Closing Date.
(b)
The Avatech Financial Statements fully accrue
all liabilities for unpaid Taxes with respect to all periods through the dates
thereof in accordance with GAAP.
(c)
Since November 1, 2007, no Avatech Return has
ever been examined or audited by any Governmental Body and no examination or
audit of any Avatech Return is currently in progress or, to the Knowledge of
Avatech, threatened or contemplated. Avatech has delivered or made available to
Merger Partner accurate and complete copies of all audit reports, private letter
rulings, revenue agent reports, information document requests, notices of
proposed deficiencies, deficiency notices, protests, petitions, closing
agreements, settlement agreements, pending ruling requests and any similar
documents submitted by, received by, or agreed to by or on behalf of Avatech or
any Avatech Subsidiary relating to Avatech Returns since November 1, 2007. Since
November 1, 2007, (i) no extension or waiver of the limitation period applicable
to any of the Avatech Returns has been granted (by Avatech, any Avatech
Subsidiary or any other Person), and no such extension or waiver has been
requested from Avatech or any Avatech Subsidiary; (ii) all Taxes that Avatech
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been properly paid to the appropriate
Governmental Body; and (iii) neither Avatech nor any Avatech Subsidiary has
executed or filed any power of attorney with any taxing authority.
38
(d)
Since November 1, 2007, neither Avatech nor
any Avatech Subsidiary (i) has been a member of an affiliated group (within the
meaning of Section 1504(a) of the Code) filing a consolidated federal income Tax
Return (other than a group of which only Avatech and Avatech Subsidiaries were
members), (ii) has any liability for the Taxes of any person under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, or otherwise, and (iii) has been
a party to any joint venture, collaboration, partnership or other agreement that
could be treated as a partnership for Tax purposes. Neither Avatech nor any
Avatech Subsidiary is or, since November 1, 2007 has been, a party to or bound
by any Tax indemnity agreement, Tax-sharing agreement, Tax allocation agreement
or similar Contract. Neither Avatech nor any Avatech Subsidiary has been either
a “distributing corporation” or a “controlled corporation” in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code
(y) in the two (2) years prior to the date of this Agreement or (z) which could
otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(e)
No claim or Legal Proceeding is pending or, to
the Knowledge of Avatech, has been threatened against or with respect to Avatech
or any Avatech Subsidiary in respect of any Tax. There are no unsatisfied
liabilities for Taxes with respect to any notice of deficiency or similar
document received by Avatech or any Avatech Subsidiary with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document which are being contested in good faith by Avatech or the
applicable Avatech Subsidiary and with respect to which adequate reserves for
payment have been established). There are no liens for Taxes upon any of the
assets of Avatech or any Avatech Subsidiary except liens for current Taxes not
yet due and payable. Neither Avatech nor any Avatech Subsidiary has entered into
or become bound by any agreement or consent pursuant to Section 341(f) of the
Code. Avatech has not been, and Avatech will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing Date.
(f)
None of the assets of Avatech or any Avatech
Subsidiary (i) is property that is required to be treated as being owned by any
other Person pursuant to the provisions of former Section 168(f)(8) of the
Internal Revenue Code of 1954, (ii) is “tax-exempt use property” within the
meaning of Section 168(h) of the Code, (iii) directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the Code, or
(iv) is subject to a lease under Section 7701(h) of the Code or under any
predecessor section.
(g)
Since November 1, 2007, neither Avatech nor any
Avatech Subsidiary has participated in an international boycott as defined in
Section 999 of the Code.
(h)
Neither Avatech nor any Avatech Subsidiary will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any period (or any portion thereof) ending after the
Closing Date as a result of any (i) closing agreement as described in Section
7121 of the Code (or any corresponding or similar provision of state, local or
foreign Tax law) executed on or prior to the Closing Date, (ii) installment sale
or other open transaction disposition made on or prior to the Closing Date, or
(iii) prepaid amount received on or prior to the Closing Date.
(i)
Since November 1, 2007, neither Avatech nor
any Avatech Subsidiary has engaged in any “listed transaction” for purposes of
Treasury Regulation sections 1.6011-4(b)(2) or 301.6111-2(b)(2) or any analogous
provision of state or local law.
39
(j)
Neither Avatech nor any Avatech Subsidiary has
taken or agreed to take any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
Neither Avatech nor any Avatech Subsidiary is aware of any agreement, plan or
other circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(a)
Part 3.14(a) of the Avatech Disclosure Schedule
accurately sets forth, with respect to each employee of Avatech or any Avatech
Subsidiary (including any employee of Avatech or any Avatech Subsidiary who is
on a leave of absence) with an annual base salary in excess of
$100,000:
(i)
the name of such employee and the date as of
which such employee was originally hired by Avatech or any Avatech
Subsidiary;
(ii)
such employee’s title;
(iii)
the aggregate dollar amount of the wages, salary, and
bonuses received by such employee from Avatech or any Avatech Subsidiary with
respect to services performed in calendar year 2009;
(iv)
such employee’s annualized base salary as of the date
of this Agreement; and
(v)
such employee’s primary office
location.
(b)
There is no former employee of Avatech or any
Avatech Subsidiary who is receiving or is scheduled to receive (or whose spouse
or other dependent is receiving or is scheduled to receive) any benefits (from
Avatech or any Avatech Subsidiary) relating to such former employee’s employment
with Avatech or any Avatech Subsidiary.
(c)
To the Knowledge of Avatech:
(i)
no Key Employee of Avatech or any Avatech
Subsidiary intends to terminate his employment with Avatech or the applicable
Avatech Subsidiary; and
(ii)
no employee of Avatech or any Avatech
Subsidiary is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other Contract (with any Person) that may have an
adverse effect on: (A) the performance by such employee of any of his
duties or responsibilities as an employee of Avatech or the applicable Avatech
Subsidiary; or (B) Avatech’s or any Avatech Subsidiary’s business or
operations.
(d)
Neither Avatech nor any Avatech Subsidiary is a
party to or bound by, and, since November 1, 2007, neither Avatech nor any
Avatech Subsidiary has ever been a party to or bound by any union contract,
collective bargaining agreement or similar Contract in the United
States.
40
(e)
Neither Avatech nor any Avatech Subsidiary is
engaged, and since November 1, 2007 neither Avatech nor any Avatech Subsidiary
has ever been engaged, in any unfair labor practice of any nature. Since
November 1, 2007, there has never been any slowdown, work stoppage, labor
dispute or union organizing activity, or any similar activity or dispute,
affecting Avatech or any Avatech Subsidiary. To Avatech’s Knowledge, no event
has occurred, and no condition or circumstance exists, that might directly or
indirectly give rise to the commencement of any such slowdown, work stoppage,
labor dispute or union organizing activity or any similar activity or
dispute. Except as Disclosed in Part 3.14(e) of the Avatech Disclosure
Schedule, there are no actions, suits, claims, labor disputes or grievances
pending or, to the Knowledge of Avatech, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any employee
of Avatech or any Avatech Subsidiary, including, without limitation, charges of
unfair labor practices or discrimination complaints. Avatech and each
Avatech Subsidiary has good labor relations, and no reason to believe that the
consummation of the Merger or any of the other Contemplated Transactions will
have a material adverse effect on Avatech or any Avatech Subsidiary’s labor
relations.
(f)
Part 3.14(f) of the Avatech Disclosure
Schedule identifies each Avatech Plan sponsored, maintained, contributed to or
required to be contributed to by Avatech or any Avatech Subsidiary for the
benefit of any employee of Avatech or any Avatech Subsidiary in effect as of the
date hereof. Except to the extent required to comply with Legal
Requirements, neither Avatech nor any Avatech Subsidiary intends or has
committed to establish or enter into any new Avatech Plan, or to modify any
Avatech Plan.
(g)
Avatech has delivered or made available to
Merger Partner: (i) correct and complete copies of all documents setting
forth the terms of each Avatech Plan, including all amendments thereto, and all
related trust documents or funding vehicles and amendments thereto; (ii) the two
(2) most recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Avatech Plan; (iii) if required by ERISA, the two (2) most
recent auditor’s reports for each Avatech Plan; (iv) the most recent summary
plan description together with the summaries of material modifications thereto,
if any, required under ERISA with respect to each Avatech Plan; (v) all material
written Contracts relating to each Avatech Plan, including administrative
service agreements and group insurance contracts; (vi) all material written
materials provided to any employee of Avatech or any Avatech Subsidiary relating
to any Avatech Plan and any proposed Avatech Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events that
would result in any liability to Avatech or any Avatech Subsidiary; (vii) all
material correspondence to or from any Governmental Body relating to any Plan;
(viii) the form of all COBRA forms and related notices; (ix) all insurance
policies in the possession of Avatech or any Avatech Subsidiary pertaining to
fiduciary liability insurance covering the fiduciaries for each Avatech Plan;
(x) all discrimination tests required under the Code for each Avatech Plan
intended to be qualified under Section 401(a) of the Code for the three (3) most
recent plan years; and (xi) the most recent Internal Revenue Service
determination or opinion letter issued with respect to each Avatech Plan
intended to be qualified under Section 401(a) of the Code.
41
(h)
Avatech and each Avatech Subsidiary has
performed all material obligations required to be performed by it under each
Avatech Plan and is not in default under or violation of, and Avatech has no
Knowledge of any default under or violation by any other party of, the terms of
any Avatech Plan. Each Avatech Plan has been established and maintained
substantially in accordance with its terms and in substantial compliance with
all applicable Legal Requirements, including ERISA and the Code. Any
Avatech Plan intended to be qualified under Section 401(a) of the Code has
obtained a favorable determination letter (or opinion letter, if applicable) as
to its qualified status under the Code or has remaining a period of time under
applicable Treasury regulations or Internal Revenue Service pronouncements in
which to apply for such a letter and make any amendments necessary to obtain a
favorable determination as to the qualified status of that Avatech Plan.
No “prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Avatech Plan subject to ERISA or Section
4975 of the Code. There are no claims or Legal Proceedings pending, or, to
the Knowledge of Avatech, threatened or reasonably anticipated (other than
routine claims for benefits), against any Avatech Plan or against the assets of
any Avatech Plan. There are no audits, inquiries or Legal Proceedings
pending or, to the Knowledge of Avatech, threatened by any Governmental Body
with respect to any Avatech Plan. Since November 1, 2007, neither Avatech
nor any Avatech Subsidiary has ever incurred any penalty or tax with respect to
any Avatech Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of
the Code that remains unsatisfied. Avatech and each Avatech Subsidiary
have made all contributions and other payments required by and due under the
terms of each Avatech Plan.
(i)
Since November 1, 2007, neither Avatech nor
any Avatech Subsidiary has (i) maintained, established, sponsored, participated
in, or contributed to any: (A) employee benefit pension plan (as defined in
Section 3(2) of ERISA) (“Pension
Plan”) subject to Title IV of ERISA; (B) “multiemployer plan” within the
meaning of Section (3)(37) of ERISA; or (C) “multiple employer welfare
arrangement” (within the meaning of Section 3(40) of ERISA); (ii) maintained,
established, sponsored, participated in or contributed to, any Pension Plan in
which stock of Avatech or any Avatech Subsidiary is or was held as a plan asset;
or (iii) maintained a Pension Plan or multiemployer plan, or the equivalent
thereof, in a foreign jurisdiction (a “Avatech Foreign
Plan).
(j)
Except as Disclosed in Part 3.14(j) of the
Avatech Disclosure Schedule, no Avatech Plan provides (except at no cost to
Avatech or any Avatech Subsidiary), or reflects or represents any liability of
Avatech or any Avatech Subsidiary to provide, life insurance, health benefits or
other employee welfare benefits to any Person for any reason after termination
of employment with the Avatech or any Avatech Subsidiary, or the spouses or
dependents of any such Person, except as may be required by COBRA or other
applicable Legal Requirements. Other than commitments made that involve no
future costs to Avatech or any Avatech Subsidiary, neither Avatech nor any
Avatech Subsidiary has any obligation (whether oral or written) to any employee
of Avatech or any Avatech Subsidiary (either individually or as a group) or any
other Person to provide such employee(s) or other Person with life insurance,
health benefits or other employee welfare benefits after terminating employment
with the Avatech or any Avatech Subsidiary, except to the extent required by
applicable Legal Requirements.
42
(k)
Neither the execution of this Agreement nor
the consummation of the Contemplated Transactions will (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Avatech Plan, Avatech Contract, trust or loan that will or may result (either
alone or in connection with any other circumstance or event) in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employees of Avatech or any Avatech
Subsidiary.
(l)
Avatech and Avatech Subsidiaries: (i)
are, and at all times since November 1, 2007 have been, in substantial
compliance with all applicable Legal Requirements respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to their employees, including the health care
continuation requirements of COBRA, the requirements of FMLA, the requirements
of HIPAA and any similar provisions of state law; (ii) have withheld and
reported all amounts required by applicable Legal Requirements or by Contract to
be withheld and reported with respect to wages, salaries and other payments to
their employees; (iii) are not liable for any arrears of wages or any taxes or
any penalty for failure to comply with the Legal Requirements applicable to the
foregoing; and (iv) are not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any Governmental Body with respect
to unemployment compensation benefits, social security or other benefits or
obligations for their employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending or, to the Knowledge of Avatech, threatened or reasonably anticipated
claims or Legal Proceedings against Avatech or any Avatech Subsidiary under any
worker’s compensation policy or long-term disability policy.
(m)
Except as Disclosed on Part 3.14(m) of the
Avatech Disclosure Schedule, neither Avatech nor any Avatech Subsidiary is
required to be, and, has not since November 1, 2007 ever been required to be,
treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code. Neither Avatech nor
any Avatech Subsidiary has since November 1, 2007 ever made a complete or
partial withdrawal from a multiemployer plan, as such term is defined in Section
3(37) of ERISA, resulting in “withdrawal liability,” as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(n)
To the Knowledge of Avatech, no officer of
Avatech or any Avatech Subsidiary is subject to any injunction, writ, judgment,
decree, or order of any court or other Governmental Body that would interfere
with such officer’s efforts to promote the interests of Avatech or any Avatech
Subsidiary, or that would interfere with the business of Avatech or any Avatech
Subsidiary. Neither the execution nor the delivery of this Agreement, nor the
carrying on of the business of Avatech or any Avatech Subsidiary as presently
conducted will, to the Knowledge of Avatech, conflict with, result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
Contract under which any employee of Avatech or any Avatech Subsidiary may be
bound.
(o)
There is no agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of Avatech or any Avatech Subsidiary that,
considered individually or considered collectively with any other such Contracts
and/or other events, will, or could reasonably be expected to, give rise
directly or indirectly to the payment of any amount that would not be deductible
pursuant to Section 280G or Section 162 of the Code. Neither Avatech nor any
Avatech Subsidiary is a party to any Contract, nor does Avatech or any Avatech
Subsidiary have any obligation (current or contingent), to compensate any
individual for excise taxes paid pursuant to Section 4999 of the
Code.
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(p)
No holder of shares of Avatech Common Stock
holds shares of Avatech Common Stock that are non-transferable and subject to a
substantial risk of forfeiture within the meaning of Section 83 of the Code with
respect to which a valid election under Section 83(b) of the Code has not been
made unless such shares were acquired on the exercise of an incentive stock
option as defined in Section 422 of the Code.
(q)
Except as Disclosed in Part 3.14(q) of the
Avatech Disclosure Schedule, every Avatech employee plan or arrangement, which
includes any and all salary, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, termination pay,
hospitalization, medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension or retirement plan, program or agreement
(collectively, the “Avatech
Plans”, and each individually a “Avatech
Plan”) sponsored, maintained, contributed to or required to be
contributed to by Avatech or any Avatech Subsidiary for the benefit of any
employee of Avatech or any Avatech Subsidiary and which is a “nonqualified
deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has
been since November 1, 2007, and is in operational and document compliance with
Code Section 409A and applicable regulations and guidance issued thereunder, so
that the additional tax described in Code Section 409A(a)(1)(B) will not be
assessed against the individuals participating in any such non-qualified
deferred compensation plan.
(r)
There is no service provider Contract with
Avatech or any Avatech Subsidiary (i) that may not be canceled with advance
notice of sixty (60) days or less or (ii) under which Merger Partner or any
Merger Partner Subsidiary will be assessed a surrender charge or penalty upon
cancellation.
(s)
Except as Disclosed on Part 3.14(s) of the
Avatech Disclosure Schedule, no Avatech Plan is invested in any “stable value
fund” (or similar arrangement) which assesses any back-end load or market value
adjustment upon termination of such investment.
(t)
For purposes of each Avatech Plan, Avatech and
each Avatech Subsidiary have correctly determined the status for each service
provider to the Avatech and any Avatech Subsidiary as an employee, a leased
employee or an independent contractor, as applicable.
3.15
Environmental
Matters. Avatech and each Avatech Subsidiary is in compliance in
all material respects with all applicable Environmental Laws, which compliance
includes the possession by Avatech and each Avatech Subsidiary of all permits
and other Governmental Authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof. Neither Avatech nor
any Avatech Subsidiary has received since November 1, 2007 any written notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that Avatech or any Avatech
Subsidiary is not in compliance with any Environmental Law, and, to the
Knowledge of Avatech, there are no circumstances that may prevent or interfere
with Avatech’s or any Avatech Subsidiary’s compliance with any Environmental Law
in the future. To the Knowledge of Avatech it has no material liability under
any Environmental Laws. There are no Governmental Authorizations currently held
by Avatech or any Avatech Subsidiary pursuant to Environmental
Laws.
44
(a)
Except as Disclosed in Part 3.16(a) of the
Avatech Disclosure Schedule, there is no pending Legal Proceeding, and to the
Knowledge of Avatech, no Person has threatened to commence any Legal Proceeding,
that involves Avatech or any Avatech Subsidiary or any assets owned or used by
Avatech or any Avatech Subsidiary or any Person whose liability Avatech or any
Avatech Subsidiary has or may have retained or assumed, either contractually or
by operation of law (i) claiming damages in an amount in excess of
$50,000; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other Contemplated
Transactions. To the Knowledge of Avatech, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that will, or that would
reasonable be expected to, give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
(b)
There is no order, writ, injunction, judgment
or decree to which Avatech or any Avatech Subsidiary, or any of the assets owned
or used by Avatech or any Avatech Subsidiary, is subject. To the Knowledge of
Avatech, no officer or other employee of Avatech or any Avatech Subsidiary is
subject to any order, writ, injunction, judgment or decree that relates to
Avatech’s or any Avatech Subsidiary’s business or to any assets owned or used by
Avatech or any Avatech Subsidiary.
3.17
Non-Contravention;
Consents. Subject to adoption of this Agreement by Avatech as the
sole stockholder of Merger Sub and the filing of a Certificate of Merger as
required by the DGCL, neither (a) the execution, delivery or performance of this
Agreement or any of the Related Agreements, nor (b) the consummation of the
Merger or any of the other Contemplated Transactions, will directly or
indirectly (with or without notice or lapse of time):
(a)
contravene, conflict with or result in a
violation of any of the provisions of the Avatech Constituent
Documents;
(b)
contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which Avatech or any Avatech Subsidiary, or any of the
assets owned or used by Avatech or any Avatech Subsidiary, is
subject;
(c)
result in a material conflict, violation or
breach of, or result in a material default under, any provision of any Avatech
Contract, or give any Person the right to (i) declare a default or exercise any
remedy under any such Avatech Contract, (ii) accelerate the maturity or
performance of any such Avatech Contract, or (iii) cancel, terminate or modify
any such Avatech Contract; or
45
(d)
result in the imposition or creation of any
Encumbrance upon or with respect to any material asset owned or used by Avatech
or any Avatech Subsidiary (except for minor liens that will not, in any case or
in the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of Avatech or any Avatech
Subsidiary).
Except for those filings, notices or
Consents Disclosed in Part 3.17 of the Avatech Disclosure Schedule, no filing
with, notice to or Consent from any Person is required in connection with
(y) the execution, delivery or performance of this Agreement or any of the
Related Agreements, or (z) the consummation of the Merger or any of the other
Contemplated Transactions.
3.18
No Vote Required.
No vote of the holders of Avatech’s capital stock is necessary to approve
the issuance of the Merger Shares in connection with the Merger or any of the
other Contemplated Transactions.
3.19
No Broker.
Except for and with respect to Duff & Xxxxxx Securities, LLC and Duff
& Xxxxxx, LLC, the compensation of which shall be payable by Avatech, (a)
neither Avatech nor Merger Sub has, directly or indirectly, engaged any broker,
finder, investment banker or other intermediary in connection with the Merger or
any of the other Contemplated Transactions, and (b) no action by Avatech or
Merger Sub will cause or support any claim to be asserted against Merger
Partner, the Surviving Corporation, or Avatech by any broker, finder, investment
banker or other intermediary in connection with the Merger or any of the
Contemplated Transactions.
3.20
Authority; Binding Nature
of Agreement. Avatech and Merger Sub have the absolute and
unrestricted right, power and authority to enter into and perform their
obligations under this Agreement and the Related Agreements to which Avatech is
a party; and the execution, delivery and performance by Avatech and Merger Sub
of this Agreement (including the contemplated issuance of the Merger Shares
pursuant to the Merger in accordance with this Agreement) have been duly
authorized by all necessary action on the part of Avatech and Merger Sub and
their respective boards of directors, subject only to the adoption of this
Agreement by Avatech as the sole stockholder of Merger Sub and the filing and
recordation of the Certificate of Merger pursuant to the DGCL. This Agreement
and each of the Related Agreements to which Avatech is a party have been duly
executed and delivered by Avatech and Merger Sub, and, assuming due
authorization, execution and delivery by the other Parties hereto, constitutes
the legal, valid and binding obligation of Avatech and Merger Sub, enforceable
against them in accordance with its terms, except as enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors’ rights and the exercise of judicial discretion in accordance with
general principles of equity.
3.21
Anti-Takeover Law; Rights
Agreement. The boards of directors of Avatech and Merger Sub have
taken all actions necessary to ensure that the execution of this Agreement and
the consummation of the Merger and the other Contemplated Transactions will be
exempt from any anti-takeover or similar provisions of Avatech Constituent
Documents, any Avatech Contract, and any applicable “moratorium”, “control
share”, “fair price”, “interested stockholder” or other anti-takeover laws and
regulations of any jurisdiction. The Rights Agreement dated as of March
11, 2002 between Avatech and Xxxxx Fargo Bank Minnesota, National Association
has been terminated.
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3.22
Insurance.
Avatech maintains insurance policies with reputable insurance carriers
against all risks of a character as usually insured against, and in such
coverage amounts as are usually maintained, by similarly situated companies in
the same or similar businesses. Each such insurance policy is in full force and
effect. Since November 1, 2007, Avatech has not received any written
notice or other communication regarding any actual or possible (a) cancellation
or invalidation of any material insurance policy, (b) refusal of any coverage or
rejection of any claim under any material insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any material
insurance policy.
(a)
No Avatech Related Party has, and no Avatech
Related Party has at any time since November 1, 2007 had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
Avatech or any Avatech Subsidiary.
(b)
No Avatech Related Party is, or since November
1, 2007 has been, indebted to Avatech or any Avatech Subsidiary.
(c)
Except as Disclosed in Schedule 3.23(c) of the
Avatech Disclosure Schedule, since November 1, 2007, no Avatech Related Party
has entered into, or has had any direct or indirect financial interest in, any
Avatech Contract, transaction or business dealing involving Avatech or any
Avatech Subsidiary.
(d)
No Avatech Related Party is competing, or has
at any time since November 1, 2007 competed, directly or indirectly, with
Avatech or any Avatech Subsidiary.
(e)
No Avatech Related Party has any claim or
right against Avatech or any Avatech Subsidiary (other than rights under capital
stock of Avatech and rights to receive compensation for services performed as an
employee of Avatech or any Avatech Subsidiary).
3.24
Valid Issuance.
The Merger Shares to be issued pursuant to the Merger will, when issued
in accordance with the provisions of this Agreement, be validly issued, fully
paid and nonassessable.
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(a)
Avatech has established and maintains
disclosure controls and procedures and internal control over financial reporting
(as such terms are defined in paragraphs (e) and (f), respectively, of Rule
13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange
Act. Avatech’s disclosure controls and procedures are designed to ensure
that all material information required to be disclosed by Avatech in the reports
that it files or furnishes under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC, and that all such material information is accumulated and
communicated to Avatech’s management as appropriate to allow timely decisions
regarding required disclosure and to make the certifications required pursuant
to Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act. Avatech’s management
has evaluated, with the participation of its principal executive and principal
financial officers, the effectiveness of Avatech’s disclosure controls and
procedures as of the end of its most recent fiscal quarter, and such assessment
concluded that such controls were effective at the reasonable assurance
level. Avatech’s management has completed an assessment of the
effectiveness of Avatech’s internal control over financial reporting in
compliance with the requirements of Section 404 of the Xxxxxxxx-Xxxxx Act for
the year ended June 30, 2009, and such assessment concluded that such controls
were effective. To the Knowledge of Avatech, there is no reason to believe
that Avatech, its independent registered public accounting firm, and its
principal executive officer and principal financial officer, as the case may be,
will not be able to provide the reports, certifications or attestations required
pursuant to the rules and regulations applicable to Avatech adopted pursuant to
Section 302 or Section 404 of the Xxxxxxxx-Xxxxx Act or Items 307 or 308 of
Regulation S-K when Avatech next files an Annual Report on Form 10-K and a
Quarterly Report on Form 10-Q under the Exchange Act, without limitation as to
the effectiveness of Avatech’s internal control over financial reporting or
disclosure controls and procedures. Neither Avatech nor, to the Knowledge
of Avatech, its independent registered public accounting firm, has identified or
been made aware of (i) any significant deficiency or material weakness in the
system of internal control over financial reporting utilized by Avatech and
Avatech Subsidiaries, in each case which has not been substantially remediated,
or (ii) any fraud which involves Avatech’s management or other employees who
have a role in the preparation of financial statements or the internal control
over financial reporting utilized by Avatech and Avatech Subsidiaries.
Since June 30, 2008, any material change in the internal control over financial
reporting or failure or inadequacy of disclosure controls required to be
disclosed in any Avatech SEC Document has been so disclosed.
(b)
Neither Avatech nor any of its officers has
received notice from any Governmental Entity questioning or challenging the
accuracy, completeness or manner of filing or submission of any filing with the
SEC, including without limitation any certifications required by Section 906 of
the Xxxxxxxx-Xxxxx Act.
(c)
To the Knowledge of Avatech, Avatech has not,
since July 30, 2002, extended or maintained credit, arranged for the extension
of credit, modified or renewed an extension of credit, in the form of a personal
loan or otherwise, to or for any director or executive officer of
Avatech.
3.26
Objections to the
Merger. Neither any member of the board of directors of Avatech nor
any executive officer of Avatech, nor any of their respective Representatives,
has received any written or oral indication from the Dissident Stockholders or
from any Representative of the Dissident Stockholders that any of the Dissident
Stockholders intends to object to or otherwise contest the Merger.
Except as
Disclosed, the Designator makes the following representations and warranties to
Avatech and Merger Sub, as of the date hereof and as of the Closing Date.
The Schedule of the Designator is referred to herein as the “Designator
Disclosure Schedule”.
48
4.1
Representations. The
Designator makes the representations and warranties set forth below to Avatech
and Merger Sub in respect of its acquisition of the Merger Shares pursuant to
the terms of this Agreement, as of the date hereof and as of the Closing
Date. For the avoidance of doubt, the representations, warranties and
covenants set forth in this Article 4: (i) are the only representations,
warranties and covenants made by the Designator in this Agreement; (ii) are
included in this Agreement solely for the purpose of supporting the exemption
from registration under the federal securities laws in connection with the
issuance and sale of the Merger Shares, and (iii) do not in any way qualify
or otherwise modify the representations and warranties of Avatech or Merger Sub
contained in this Agreement.
(a)
The Designator understands and acknowledges that
Avatech is relying on the accuracy and completeness of the representations and
warranties made in this Section 4 in complying with applicable federal and state
securities laws. The Designator has its principal office in the state
listed in the Preamble to this Agreement, and has no present intention of
changing such principal office.
(b)
The Designator has received from Avatech the
following documents: (i) Avatech’s annual report to stockholders for the
year ended June 30, 2009; (ii) Avatech’s Annual Report on Form 10-K for the year
ended June 30, 2009; (iii) Avatech’s definitive proxy statement on Schedule 14A
for the annual meeting held on November 5, 2009; (iv) Avatech’s Quarterly
Reports on Form 10-Q for the quarters ended September 30, 2009, December 31,
2009, and March 31, 2010; and (v) Avatech’s Current Reports on Form 8-K filed on
August 13, 2009, October 16, 2009, December 30, 2009, January 15, 2010, June 29,
2010 (as amended on June 29, 2009).
(c)
The Designator is acquiring the Merger Shares solely
for investment, solely for the Designator’s own account, not for the account of
any other person, and not for distribution, assignment or resale to others
except in compliance with federal and applicable state securities
laws.
(d)
The Designator has carefully read this Agreement
and, to the extent the Designator believes necessary, has discussed with the
Designator’s professional and tax advisors with respect to the financial and tax
consequences of an investment in Avatech, as well as the suitability of its
acquisition of the Merger Shares, based on the Designator’s
circumstances.
(e)
The Designator has had a reasonable opportunity, at
a reasonable time prior to the Designator’s investment in Avatech, to ask
questions of and receive answers from Avatech or other representative of Avatech
concerning the terms and conditions of the offering of the Merger Shares, and
Avatech and its operations.
(f)
No oral representations have been made to the
Designator in connection with the offering of the Merger Shares which are in any
manner inconsistent with the materials that have been disclosed to the
Designator.
(g)
The Designator has neither relied upon nor seen any
form of advertising or general or public solicitation, including communications
published in or broadcasted by any print or electronic medium and mass mailings,
in connection with the offering of the Merger Shares, and is aware of no such
solicitation or advertisement received by others.
49
(h)
The Designator (i) acknowledges that an investment
in Avatech involves a high degree of risk, that there is a limited market for
the Merger Shares, that no significant market for the Merger Shares may develop,
that limited rights exist to transfer the Merger Shares, and, therefore, that
the Designator may be required to hold the Merger Shares indefinitely and may
not realize any liquidity from any sale of the Merger Shares; (ii) has the
financial means to make an investment in Avatech; and (iii) is able to bear the
economic risk of an investment in Avatech.
(i)
The Designator is not (i) an employee benefit
plan subject to ERISA or Section 4975 of the Code or (ii) an entity whose assets
are deemed to be assets of such an employee benefit plan.
(j)
As of the date of the Designator’s acquisition
of the Merger Shares, (i) the value of all securities owned by the Designator of
all issuers that are or would be, but for the exemption set forth in Section
3(c)(1)(A) of the Investment Company Act of 1940, as amended, excluded from the
definition of “investment company” under such Act solely by reason of Section
3(c)(1) thereof, will not exceed 10% of the value of the Designator’s total
assets, and (ii) the Designator is not relying on Section 3(c)(1) of such Act as
an exemption from classification as an investment company.
(k)
The Designator acknowledges that (i) the Merger
Shares have not been registered under the Securities Act or any applicable state
securities or “Blue Sky” laws (the “State
Acts”), and are being offered and sold pursuant to exemptions from
registration under the Securities Act by virtue of Section 4(2) of the Act
and/or the provisions of Regulation D promulgated under Section 3(b) of the
Securities Act, and such exemptions depend in part upon the accuracy of the
statements, representations and agreements made by the Designator in Section 4
of this Agreement, and (ii) the Designator understands that the merits of
investment in the Merger Shares have not been reviewed by, passed on, or
submitted for review to any federal or state agency or other regulatory
organization.
(l)
The Designator has the absolute and
unrestricted right, power and authority to enter into this Agreement; and the
execution and delivery of this Agreement by the Designator have been duly
authorized by all necessary action on the part of the Designator. This Agreement
has been duly executed and delivered by the Designator, and, assuming due
authorization, execution and delivery by the other Parties hereto, constitutes
the legal, valid and binding obligation of the Designator, enforceable against
the Designator in accordance with its terms, except as enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors’ rights and the exercise of judicial discretion in accordance with
general principles of equity.
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4.2
Covenants.
(a)
The Designator agrees that the Designator will not
take, or cause to be taken any action with respect to the Merger Shares that
would cause the Designator to be deemed an “underwriter” with respect to the
Merger Shares, as defined in Section 2(11) of the Securities Act.
(b)
Subject to Section 5.6(c) hereof, the Designator
agrees to not sell, pledge, hypothecate, donate or otherwise transfer (whether
or not for consideration) the Merger Shares except (i) pursuant to an effective
registration statement under the Securities Act and all applicable State Acts,
(ii) to Avatech, or (iii) pursuant to an exemption from registration under the
Securities Act and the State Acts, subject to the right of Avatech, prior to any
such offer, sale or transfer, to require the delivery of an opinion of counsel
satisfactory to Avatech that such registration is not required.
(a)
From the Effective Time through the sixth
(6th)
anniversary of the date on which the Effective Time occurs, each of Avatech and
the Surviving Corporation shall, jointly and severally, indemnify and hold
harmless each person who is now, or has been at any time since November 1, 2007,
or who becomes prior to the Effective Time, a director or officer of Avatech or
Merger Partner, or any of their respective Subsidiaries (the “D&O
Indemnified Parties”), against all claims, losses, liabilities, damages,
judgments, fines and reasonable fees, costs and expenses, including attorneys’
fees and disbursements (collectively, “Costs”),
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the fact that the D&O Indemnified Party is or was a
director or officer of Avatech or Merger Partner, whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent permitted under
the DGCL for directors or officers of Delaware corporations. Each D&O
Indemnified Party will be entitled to advancement of expenses incurred in the
defense of any such claim, action, suit, proceeding or investigation from each
of Avatech and the Surviving Corporation, jointly and severally, upon receipt by
Avatech or the Surviving Corporation from the D&O Indemnified Party of a
request therefor; provided that any person to whom expenses are advanced
provides an undertaking, to the extent then required by the DGCL, to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification.
(b)
For six (6) years after the Closing Date,
except as otherwise required by a Legal Requirement, (i) the board of directors
of Avatech shall not take any action that will cause the certificate of
incorporation and bylaws of Avatech to contain provisions less favorable with
respect to indemnification, advancement of expenses and exculpation of present
and former directors and officers of Avatech than are presently set forth in
such certificate of incorporation and bylaws; and (ii) the board of directors of
the Surviving Corporation shall not take any action that will cause the
certificate of incorporation and bylaws of the Surviving Corporation to contain
provisions less favorable with respect to indemnification, advancement of
expenses and exculpation of present and former directors and officers of the
Merger Partner or Surviving Corporation than are presently set forth in the
certificate of incorporation and bylaws of Surviving Corporation.
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(c)
Surviving Corporation shall purchase an
insurance policy, with an effective date as of the Closing Date, which, to the
extent not otherwise provided for in Merger Partner’s current policy, to the
extent such policy remains in effect following the Closing, maintains in effect
for six (6) years from the Closing Date the current directors’ and officers’
liability insurance policies maintained by Merger Partner (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions that are not materially less favorable)
with respect to matters occurring prior to the Effective Time; provided, however, that in no
event shall Surviving Corporation be required to expend pursuant to this Section
5.1(c) more than an amount equal to 200% of current annual premiums paid by
Merger Partner for such insurance.
(d)
Avatech shall purchase an insurance policy,
with an effective date as of the Closing Date, which, to the extent not
otherwise provided for in Avatech’s current policy, to the extent such policy
remains in effect following the Closing, maintains in effect for six (6) years
from the Closing Date the current directors’ and officers’ liability insurance
policies maintained by Avatech (provided that Avatech may substitute therefor
policies of at least the same coverage containing terms and conditions that are
not materially less favorable) with respect to matters occurring prior to the
Effective Time; provided,
however, that in no event shall Avatech be required to expend pursuant to
this Section 5.1(d) more than an amount equal to 200% of current annual premiums
paid by Avatech for such insurance.
(e)
Avatech shall maintain a policy of directors’
and officers’ liability insurance, with an effective date as of the Closing
Date, on commercially available terms and conditions and with coverage limits
customary for U.S. public companies similarly situated to Avatech, provided,
however, that such coverage limits shall not be less than those of Merger
Partner’s current policy of directors’ and officers’ liability
insurance.
(f)
Avatech and the Surviving Corporation, as
applicable, shall pay all expenses, including reasonable attorneys’ fees, that
may be incurred by the Persons referred to in this Section 5.1 in connection
with their enforcement of their rights provided in this Section
5.1.
(g)
The provisions of this Section 5.1 are
intended to be in addition to the rights otherwise available to the current and
former officers and directors of Avatech, Merger Partner and the Surviving
Corporation by law, charter, statute, bylaw or agreement, and shall operate for
the benefit of, and shall be enforceable by, each of such current and former
officers and directors, their heirs and their representatives.
(h)
In the event Avatech or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Avatech or the Surviving Corporation, as the case may
be, shall succeed to the obligations set forth in this Section 5.1.
52
(i)
Avatech shall take all actions necessary to
cause the Surviving Corporation to perform its obligations under this Section
5.1.
(a)
Subject to Section 5.2(b), the Parties shall
use commercially reasonable efforts to cause to be taken all actions necessary
to consummate the Merger and make effective the other Contemplated Transactions.
Without limiting the generality of the foregoing, but subject to Section 5.2(b),
each Party to this Agreement: (i) shall make all filings and other
submissions (if any) and give all notices (if any) required to be made and given
by such Party in connection with the Merger and the other Contemplated
Transactions; (ii) shall use commercially reasonable efforts to obtain each
Consent (if any) reasonably required to be obtained (pursuant to any applicable
Legal Requirement or Contract, or otherwise) by such Party in connection with
the Merger or any of the other Contemplated Transactions or for such Contract to
remain in full force and effect, (iii) shall use commercially reasonable efforts
to lift any injunction prohibiting, or any other legal bar to, the Merger or any
of the other Contemplated Transactions and (iv) shall use commercially
reasonable efforts to satisfy the conditions precedent to the consummation of
this Agreement.
(b)
Notwithstanding anything to the contrary
contained in this Agreement, no Party shall have any obligation under this
Agreement: (i) to dispose of or transfer or cause any of its Subsidiaries to
dispose of or transfer any assets; (ii) to discontinue or cause any of its
Subsidiaries to discontinue offering any product or service; (iii) to license or
otherwise make available, or cause any of its Subsidiaries to license or
otherwise make available to any Person any Intellectual Property; (iv) to hold
separate or cause any of its Subsidiaries to hold separate any assets or
operations; (v) to make or cause any of its Subsidiaries to make any commitment
(to any Governmental Body or otherwise) regarding its future operations; or (vi)
to contest any Legal Proceeding or any order, writ, injunction or decree
relating to the Merger or any of the other Contemplated Transactions if such
Party determines in good faith that contesting such Legal Proceeding or order,
writ, injunction or decree might not be advisable.
5.3
Disclosure.
Without limiting any Party’s obligations under the Confidentiality
Agreement or the Letter of Intent, dated as of May 24, 2010, by and between
Avatech and Merger Partner, neither Avatech nor Merger Party shall, and neither
shall permit any of its Subsidiaries or Representatives to, issue any press
release, except with respect to the content set forth in Exhibit B hereto, or make
any other disclosure (to its customers or employees, to the public or otherwise)
regarding the Merger or any of the other Contemplated Transactions unless: (a)
the non-disclosing Party shall have approved such press release or disclosure in
writing; or (b) such disclosing Party shall have determined in good faith, upon
the advice of outside legal counsel, that such disclosure is required by
applicable Legal Requirements and, to the extent practicable, before such press
release or disclosure is issued or made, the disclosing Party provides the
non-disclosing Party with at least two (2) Business Days’ prior written notice
along with a copy of such press release or other disclosure, and consults with
the non-disclosing Party regarding the text of such press release or disclosure.
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(a)
Prior to the Effective Time, Avatech shall
take all action necessary (i) to cause the number of members of the board of
directors of Avatech to be fixed at six (6) and the persons identified on
Schedule 5.4(a)(i), concurrently with the Effective Time, to constitute the
board of directors of Avatech, which action will be effective concurrently with
the Effective Time, (ii) to cause the persons identified on Schedule 5.4(a)(ii),
concurrently with the Effective Time, to be appointed as executive officers of
Avatech, which action will be effective concurrently with the Effective Time,
and (iii) to obtain the resignations of the directors identified on Schedule
5.4(a)(iii), which resignation will be effective concurrently with the
effectiveness of the elections referred to in clause (i). If any person so
designated to be a director shall prior to the Effective Time be unable or
unwilling to hold office beginning concurrently with the Effective Time, a
majority of the directors of Avatech (if such person is an Affiliate of Avatech)
or a majority of the directors of Merger Partner (if such person is an Affiliate
of Merger Partner) shall designate another to be appointed or nominated for
election as a director in his or her place.
(b)
For so long as the Designator continues to own
at least twenty-five percent (25%) of the Merger Shares, (i) Avatech shall
maintain a board of directors consisting of no more than six (6) individuals and
(ii) the board of directors of Avatech shall nominate three (3) individuals
designated by the Designator to serve on the board of directors of Avatech (the
“Merger
Partner Nominees”) and recommend that the Avatech stockholders vote to
elect such Merger Partner Nominees as directors of Avatech and shall fill any
vacancy that may arise upon the resignation of any of the Merger Partner
Nominees with a new director designated by the Designator. The rights and
obligations set forth in this Section 5.4(b) shall be set forth in a
stockholders agreement between Avatech, the Designator and the directors and
executive officers of Avatech in the form attached as Exhibit C hereto (the “Stockholders
Agreement”).
(c)
At Avatech’s first Annual Meeting of
Stockholders following the Closing, the board of directors of Avatech shall (i)
nominate two (2) individuals to serve on the board of directors of Avatech, each
of which must have been serving on the board of directors of Avatech immediately
prior to the Effective Time (the “Avatech
Nominees”), and recommend that the Avatech stockholders vote to elect
such Avatech Nominees as directors of Avatech, and (ii) until the earlier of the
date immediately preceding the date of the second Annual Meeting of Stockholders
of Avatech after the Closing Date and the date on which the Designator no longer
owns at least twenty-five percent (25%) of the Merger Shares (the “Continuing
Director Period”), fill any vacancy that may arise upon the resignation
of any of the Avatech Nominees with a new director who is an individual who was
serving on the board of directors of Avatech immediately prior to the Effective
Time. In the case of either items (i) or (ii) of the preceding sentence,
in event that no individual who was serving on the board of directors of Avatech
immediately prior to the Effective Time is available or willing to serve as a
director of Avatech, then the identity of the nominee or new director, as the
case may be, shall be at the discretion of the board of directors of Avatech
provided that any such nominee or new director shall not be an “affiliate” of
the Designator or Merger Partner as that term is defined in Securities Act Rule
405. Notwithstanding the foregoing, in no event shall the rights and
obligations under this Section 5.4(c) apply to the nomination, election or
appointment of any director for any term, or in the case of an appointment to
fill a vacancy in the board, any remaining portion of a term, that extends
beyond the expiration of the Continuing Director Period. The rights and
obligations set forth in this Section 5.4(c) shall be set forth in the
Stockholders Agreement.
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(d)
At the Effective Time, Avatech and the
Surviving Corporation shall take all action necessary (i) to cause the number of
members of the Surviving Corporation’s board of directors to be fixed at two (2)
and Xxxx X. Xxxxxx and Xxxxxxxx Xxxxxxx to be elected to the Surviving
Corporation’s board of directors, which action will be effective concurrently
with the Effective Time, and (ii) effective concurrently with such appointment,
to obtain the resignations, or to cause the removal without cause, of the
directors identified on Schedule 5.4(d)(ii). If any person so designated
to be a director shall prior to the Effective Time be unable or willing to hold
office beginning concurrently with the Effective Time, Merger Partner (if such
person is an Affiliate of Merger Partner) shall designate another person to be
appointed as a director to his or her place.
(e)
The board of directors of Avatech effective as
of the Effective Time, shall appoint the following Persons as officers of
Avatech, to serve in the capacity indicated: Xxxxxxx X. Xxxxxxx, Chairman
of Avatech; Xxxx X. Xxxxxx, CEO of Avatech; and Xxxxxxxx Xxxxxxx, President and
Chief Financial Officer of Avatech.
(a)
Avatech, Merger Sub and Merger Partner each
agree to use their respective commercially reasonable efforts to cause the
Merger to qualify, and will not take any actions or fail to take any actions,
which could reasonably be expected to prevent the Merger from qualifying, as a
“reorganization” under Section 368(a) of the Code. Avatech, Merger Sub and
Merger Partner shall report, to the extent required by the Code or the
regulations thereunder, the Merger for United States federal income tax purposes
as a reorganization within the meaning of Section of 368(a) of the
Code.
(b)
This Agreement is intended to constitute, and
the Parties hereto hereby adopt this Agreement as, a “plan or reorganization”
within the meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).
Avatech, Merger Sub and Merger Partner shall report the Merger as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required pursuant to a “determination” within the meaning of Section
1313(a) of the Code.
(c)
On or prior to the Closing, Merger Partner
shall deliver to Avatech a notice that the Merger Partner Common Stock is not
“U.S. real property interests” in accordance with Treasury Regulations under
Sections 897 and 1445 of the Code, together with evidence reasonably
satisfactory to Avatech that Merger Partner delivered or made available notice
to the Internal Revenue Service in accordance with the provisions of Section
1.897-2(h)(2) of the Treasury Regulations.
(a)
If at any time during the Escrow Period
Avatech redeems or repurchases any of the Outstanding Preferred Shares, then the
Designator shall surrender to Avatech that number of Escrowed Shares equal to
150% of the shares of Avatech Common Stock into which such redeemed Outstanding
Preferred Shares could have been converted immediately following the Effective
Time after giving effect to the issuance of the Initial Merger Shares. Any
Escrowed Shares so surrendered shall be canceled and shall constitute authorized
but unissued shares of Avatech Common Stock.
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(b)
The Designator shall execute and deliver to
Avatech at the Closing a stock power in the form attached hereto as Exhibit D, endorsed in blank,
with respect to the Escrowed Shares (the “Stock
Power”). Avatech shall use the stock power to cancel any Escrowed
Shares that are surrendered pursuant to Section 5.6(a) hereof. Upon the
expiration of the Escrow Period, subject to Section 5.6(a), Avatech shall return
the stock power to the Designator and deliver to the Designator the stock
certificate required under Section 1.7.
(c)
During the Escrow Period, (i) the Escrowed
Shares may not be transferred or otherwise disposed of by the Designator,
including by way of sale, assignment, transfer, pledge, hypothecation or
otherwise, (ii) subject to the foregoing limitation on transfer, the Designator
shall have all of the rights and liabilities of a stockholder with respect to
the Escrowed Shares which have not been surrendered pursuant to Section 5.6(a),
including, without limitation, the right to vote such Escrowed Shares and the
right to receive dividends and other distributions thereon, and (iii) Avatech
shall take such actions as may be necessary or proper to ensure that the
Designator may enjoy and exercise such stockholder rights. No purported
sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift,
transfer in trust (voting or other) or other disposition of, or creation of a
security interest in or lien on, any of the Escrowed Shares by the Designator in
violation of item (i) of this Section 5.6(c) shall be valid, and Avatech will
not transfer any of said Escrowed Shares on its books.
The
obligations of each Party to consummate the Contemplated Transactions at the
Closing are subject to the satisfaction or, to the extent permitted by
applicable law, the written waiver by each of the Parties, at or prior to the
Closing, of each of the following conditions:
6.1
No Restraints.
No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Contemplated Transactions shall
have been issued by any court of competent jurisdiction or other Governmental
Body and remain in effect, and there shall not be any Legal Requirement which
has the effect of making the consummation of the Merger or any of the
Contemplated Transactions illegal.
6.2
Stockholder
Approval. This Agreement shall have been duly adopted by the
Required Merger Partner Stockholder Vote.
6.3
Governmental
Authorization. Every Governmental Authorization required to be
obtained by the Parties in respect of the Contemplated Transactions shall have
been obtained and shall be in full force and effect, and all waiting periods
required by such Government Authorization and/or applicable law to pass shall
have passed or been waived.
6.4
Fairness Opinion.
Avatech’s board of directors shall have received an opinion from a
nationally-recognized investment banking firm, in form reasonably satisfactory
to such board of directors, to the effect that the Merger is fair and reasonable
to the holders of Avatech’s capital stock.
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6.5
Third Party
Consents. Merger Partner and Merger Partner Subsidiaries and
Avatech and Avatech Subsidiaries shall have made or obtained all material
filings, notices or Consents (other than the filing of any required Certificate
of Merger required in connection with the Merger) set forth in Part 2.17 of the
Merger Partner Disclosure Schedule and Part 3.17 of the Avatech Disclosure
Schedule, respectively, that are required to be made or obtained by them to
execute and deliver this Agreement and the agreements required hereby and to
consummate the Contemplated Transactions.
6.6
No Adverse
Litigation. As of the Closing, no action, suit, or proceeding shall
be pending against any Party which might materially and adversely affect the
Contemplated Transactions, including, without limitation, any suit by the
Dissident Stockholders to prevent, enjoin or restrain the Merger.
The
obligations of Avatech and Merger Sub to effect the Merger and otherwise
consummate the transactions to be consummated at the Closing are subject to the
satisfaction or the written waiver by Avatech, at or prior to the Closing, of
each of the following conditions:
7.1
Accuracy of Merger
Partner Representations. The representations and warranties of
Merger Partner contained in this Agreement shall have been true and correct as
of the date of this Agreement and shall be true and correct on and as of the
Closing Date with the same force and effect as if made on the Closing Date
except (a) in each case, or in the aggregate, where the failure to be true and
correct would not reasonably be expected to have a Merger Partner Material
Adverse Effect, or (b) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct, subject to the qualifications as set forth in the preceding clause
(a), as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, all “Merger
Partner Material Adverse Effect” qualifications and other qualifications based
on the word “material” contained in such representations and warranties shall be
disregarded); provided,
however, that the representations and warranties set forth in Sections
2.1(a), 2.3(a) and (b), 2.18, and 2.19 shall be true and correct in all
respects.
7.2
Accuracy of Designator
Representations. The representations and warranties of the
Designator contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement and shall be true and correct
in all material respects as of the Closing Date with the same force and effect
as if made on the Closing Date except for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct in all material respects as of such
date).
7.3
Performance of
Covenants. Merger Partner shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by it prior to or on the Closing.
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7.4
Merger Partner
Obligations Triggered by Contemplated Transactions. All legal
obligations of Merger Partner and Merger Partner Subsidiaries that would be
triggered by the Contemplated Transactions, including, but not limited to,
obligations of Merger Partner or Merger Partner Subsidiaries resulting from any
“change of control” provisions, shall have been removed or otherwise resolved to
the reasonable satisfaction of Avatech.
7.5
Agreements and Other
Documents. Avatech shall have received the following
documents:
(a)
a registration rights agreement in the form of
Exhibit E hereto,
providing certain registration rights to the Designator (the “Registration
Rights Agreement”), executed by the Designator;
(b)
the Stockholders Agreement, executed by the
Designator;
(c)
a certificate executed by the chief executive
officer or chief financial officer of Merger Partner, dated as of the Closing
Date, confirming that the conditions set forth in Sections 7.1 and 7.3 have been
duly satisfied;
(d)
the notice contemplated by Section
5.5(c);
(e)
certificates of good standing (or equivalent
documentation) issued in respect of Merger Partner and the Designator by the
Delaware Secretary of State;
(f)
a copy of the Merger Partner Certificate of
Incorporation certified by the Delaware Secretary of State of
Delaware;
(g)
certificates executed by the secretary of
Merger Partner as to (i) the incumbency of Merger Partner’s officers, and (ii)
the adoption of resolutions of the board of directors of Merger Partner
approving and authorizing this Agreement and declaring it advisable, authorizing
the consummation by Merger Partner of the Contemplated Transactions to be
performed by Merger Partner, and directing that the Agreement and the
consummation of the Merger by Merger Partner be submitted to the sole
stockholder of Merger Partner for consideration at a regular or special meeting
thereof;
(h)
a certificate as to the adoption of
resolutions of the sole stockholder of Merger Partner authorizing and approving
the Merger on the terms set forth in this Agreement (or, alternatively, a copy
of the written consent of sole stockholder approving the consummation by Merger
Partner of the Contemplated Transactions);
(i)
a certificate representing all of the
outstanding shares of Merger Partner Common Stock;
(j)
a copy of the executed agreement and plan of
merger relating to the LLC Merger, including all exhibits and schedules thereto;
and
(k)
the Stock Power, duly executed by the
Designator.
7.6
No Merger Partner
Material Adverse Effect. Since the date of the Merger Partner
Balance Sheet, there has not been a Merger Partner Material Adverse
Effect.
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The
obligations of Merger Partner to effect the Merger and otherwise consummate the
transactions to be consummated at the Closing are subject to the satisfaction or
the written waiver by Merger Partner, at or prior to the Closing, of each of the
following conditions:
8.1
Accuracy of Avatech and
Merger Sub Representations. The representations and warranties of
Avatech and Merger Sub contained in this Agreement shall have been true and
correct as of the date of this Agreement and shall be true and correct on and as
of the Closing Date with the same force and effect as if made on the Closing
Date except (a) in each case, or in the aggregate, where the failure to be true
and correct would not reasonably be expected to have a Avatech Material Adverse
Effect, or (b) for those representations and warranties which address matters
only as of a particular date (which representations shall have been true and
correct, subject to the qualifications as set forth in the preceding clause (a),
as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, all “Avatech
Material Adverse Effect” qualifications and other qualifications based on the
word “material” contained in such representations and warranties shall be
disregarded); provided,
however, that the representations and warranties set forth in
Sections 3.1(a), 3.3(a) and (b), 3.17, 3.18, and 3.19 shall be true and
correct in all respects.
8.2
Performance of
Covenants. Avatech and Merger Sub shall have performed and complied
in all material respects with all obligations and agreements required by this
Agreement to be performed or complied with by them prior to or on the
Closing.
8.3
Avatech Obligations
Triggered by Merger. All legal obligations of Avatech that would be
triggered by the Merger or the execution of this Agreement, including, but not
limited to, Avatech obligations stemming from any “change of control”
provisions, anti-dilution provisions, participation or pre-emptive rights and
any shareholder rights plan, shall have been removed or otherwise resolved to
the reasonable satisfaction of Merger Partner.
8.4
Agreements and Other
Documents. Merger Partner shall have received the following
documents:
(a)
a certificate executed by the chief executive officer
or chief financial officer of Avatech, dated as of the Closing Date, confirming
that the conditions set forth in Sections 8.1 and 8.2 have been duly
satisfied;
(b)
certificates of good standing (or equivalent
documentation) issued in respect of Avatech and Merger Sub by the Delaware
Secretary of State;
(c)
a certificate executed by the secretary of Avatech as
to (i) the incumbency of Avatech’s officers, and (ii) the adoption of
resolutions of the board of directors of Avatech approving and authorizing the
execution of this Agreement and the consummation of the Contemplated
Transactions by Avatech and Merger Sub;
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(d)
a certificate executed by the secretary of Merger Sub
as to (i) the incumbency of Merger Sub’s officers, and (ii) the adoption of
resolutions of the board of directors of Merger Sub approving and authorizing
this Agreement and declaring it advisable, authorizing the consummation by
Merger Sub of the Contemplated Transactions, and directing that the Agreement
and the consummation of the Merger by Merger Sub be submitted to the sole
stockholder of Merger Sub for consideration at a regular or special meeting
thereof;
(e)
a certificate as to the adoption of resolutions of
the sole stockholder of Merger Sub authorizing and approving the Merger on the
terms set forth in this Agreement (or, alternatively, a copy of the written
consent of sole stockholder approving the consummation by Merger Sub of the
Contemplated Transactions); and
8.5
No Avatech Material
Adverse Effect. Since March 30, 2010, there has not been an Avatech
Material Adverse Effect.
8.6
Designator Closing
Deliverables. The Designator shall have received the documents set
forth in Section 9.3.
The
obligations of the Designator to consummate the transactions to be consummated
by it at the Closing are subject to the satisfaction or the written waiver by
the Designator, at or prior to the Closing, of each of the following
conditions:
9.1
Accuracy of
Representations. The representations and warranties of Avatech,
Merger Sub and Merger Partner contained in this Agreement shall have been true
and correct as of the date of this Agreement and shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date except (a) in each case, or in the aggregate, where the failure to
be true and correct would not reasonably be expected to have a Avatech Material
Adverse Effect or a Merger Partner Material Adverse Effect, respectively, or (b)
for those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct, subject
to the qualifications as set forth in the preceding clause (a), as of such
particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, all “Avatech Material Adverse
Effect” qualifications, all “Merger Partner Material Adverse Effect”
qualifications, and all other qualifications based on the word “material”
contained in such representations and warranties shall be disregarded); provided, however, that the
representations and warranties set forth in Sections 2.1(a), 2.3(a) and (b),
2.18, 2.19, 3.1(a), 3.3(a) and (b), 3.17, 3.18, and 3.19 shall be true and
correct in all respects.
9.2
Performance of
Covenants. Avatech, Merger Sub and Merger Partner shall have
performed and complied in all material respects with all obligations and
agreements required by this Agreement to be performed or complied with by them
prior to or on the Closing.
9.3
Agreements and Other
Documents. The Designator shall have received the following
documents:
(a)
the Registration Rights Agreement, executed by
Avatech;
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(b)
the Stockholders Agreement, executed by
Avatech and the directors and executive officers of Avatech and all investment
funds affiliated with such directors;
(c)
a certificate representing the Initial Merger
Shares; and
(d)
evidence that the Escrowed Shares Certificate
has been issued.
10.1
Non-Survival of
Representations, Warranties and Covenants. The representations,
warranties and covenants of Merger Partner, Merger Sub, Avatech and the
Designator contained in this Agreement or any certificate or instrument
delivered pursuant to this Agreement shall terminate at the Effective Time;
provided, however, that
the covenants set forth in Sections 4.2, 5.1, 5.2, 5.3 (with respect to the
initial public disclosure regarding the consummation of the transactions
contemplated by this Agreement), 5.4, 5.5 and 5.6 shall survive the Effective
Time in accordance with their terms.
10.2
Amendment.
This Agreement may be amended with the approval of the respective boards
of directors of Merger Partner and Avatech at any time (whether before or after
the adoption of this Agreement by the stockholders of Merger Partner or Merger
Sub); provided,
however, that after any such adoption of this Agreement by the
stockholders of Merger Partner or Merger Sub, no amendment shall be made which
by law requires further approval of the stockholders of Merger Partner or Merger
Sub without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of Merger
Partner, Avatech and Merger Sub.
10.4
Expenses.
Subject to Section 10.8 and Section
10.13, all fees and expenses incurred in connection with this Agreement and the
Contemplated Transactions shall be paid by the Party incurring such expenses,
whether or not the Merger is consummated; provided, however, that all
fees incurred in connection with the Registration Rights Agreement shall be paid
in accordance with the terms thereof.
(a)
No failure on the part of any Party to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of any Party in exercising any power, right, privilege or
remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.
(b)
No Party shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is
given.
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10.6
Entire Agreement;
Counterparts; Exchanges of Signatures. This Agreement and the other
agreements referred to in this Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
or between any of the Parties with respect to the subject matter hereof and
thereof; provided,
however, that the Confidentiality Agreement and the confidentiality
provisions set forth in the Letter of Intent, dated as of May 24, 2010, by and
between Avatech and Merger Partner shall not be superseded and shall remain in
full force and effect in accordance with their terms. This Agreement may be
executed in several counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument. The exchange of a
fully executed Agreement (in counterparts or otherwise) by all Parties by
facsimile or electronic transmission shall be sufficient to bind the Parties to
the terms and conditions of this Agreement.
10.7
Applicable Law;
Jurisdiction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws. Each of
the Parties to this Agreement (a) consents to submit itself to the personal
jurisdiction of the Court of Chancery of the State of Delaware in any action or
proceeding arising out of or relating to this Agreement or any of the
Contemplated Transactions, (b) agrees that all claims in respect of such
action or proceeding may be heard and determined in any such court, (c) agrees
that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (d) agrees not to bring
any action or proceeding (including counter-claims) arising out of or relating
to this Agreement or any of the Contemplated Transactions in any other court.
Each of the Parties hereto waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other Party with respect
thereto. Any Party hereto may make service on another Party by sending or
delivering a copy of the process to the Party to be served at the address and in
the manner provided for the giving of notices in Section 10.9. Nothing in
this Section 10.7, however, shall affect the right of any Party to serve legal
process in any other manner permitted by law.
10.8
Attorneys’ Fees.
In any action at law or suit in equity to enforce this Agreement or the
rights of any of the Parties under this Agreement, the prevailing Party in such
action or suit shall be entitled to receive a reasonable sum for its attorneys’
fees and all other reasonable costs and expenses incurred in such action or
suit.
10.9
Assignability; No Third
Party Beneficiaries. This Agreement shall be binding upon, and
shall be enforceable by and inure solely to the benefit of, the Parties hereto
and their respective successors and assigns; provided, however, that
neither this Agreement nor any of a Party’s rights or obligations hereunder may
be assigned or delegated by such Party without the prior written consent of the
other Party, and any attempted assignment or delegation of this Agreement or any
of such rights or obligations by such Party without the other Party’s prior
written consent shall be void and of no effect. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person (other than:
(a) the Parties hereto; (b) rights pursuant to Section 1, and (c) rights
contemplated by Section 5.1 and Section 5.4) any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
62
10.10 Notices. Any notice or
other communication required or permitted to be delivered to any Party under
this Agreement shall be in writing and shall be deemed properly delivered, given
and received when delivered by hand, by registered mail, by courier or express
delivery service or by facsimile to the address or facsimile telephone number
set forth beneath the name of such Party below (or to such other address or
facsimile telephone number as such Party shall have specified in a written
notice given to the other Parties hereto):
if to
Avatech or Merger Sub:
Avatech
Solutions, Inc.
00000 Xxx
Xxx Xxxxxxxxx, Xxxxx 000
Xxxxxx
Xxxxx, XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxxx Xxxxxxx, President/CFO
With a
copy to:
Xxxxxx,
Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC
The
Xxxxxxx Building
000 Xxxx
Xxxxxxx Xxxxxx
Xxxxxxxxx,
XX 00000-0000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Abba
Xxxxx Xxxxxxxxx, Esq.
if to
Merger Partner:
Rand
Worldwide, Inc.
000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxx X. Xxxxxx
With a
copy to:
Xxxxxxx
Xxxxxx Xxxxxx & Dodge LLP
000
Xxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx
X. Xxxxxxxx, Esq.
63
if to the
Designator:
RWWI
Holdings LLC
c/o
Ampersand Ventures
00
Xxxxxxx Xx., Xxx. 000
Xxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
J. Xxxxx Xxxxxx, Esq.
With a
copy to:
Xxxxxxx
Xxxxxx Xxxxxx & Dodge LLP
000
Xxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx
X. Xxxxxxxx, Esq.
10.11 Cooperation. Each Party
agrees to cooperate fully with the other Party and to execute and deliver such
further documents, certificates, agreements and instruments and to take such
other actions as may be reasonably requested by the other Party to evidence or
reflect the Contemplated Transactions and to carry out the intent and purposes
of this Agreement.
10.12 Severability. Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions of this Agreement or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If a final judgment of a court of competent jurisdiction
declares that any term or provision of this Agreement is invalid or
unenforceable, the Parties hereto agree that the court making such determination
shall have the power to limit such term or provision, to delete specific words
or phrases or to replace such term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be valid
and enforceable as so modified. In the event such court does not exercise the
power granted to it in the prior sentence, the Parties hereto agree to replace
such invalid or unenforceable term or provision with a valid and enforceable
term or provision that will achieve, to the extent possible, the economic,
business and other purposes of such invalid or unenforceable term or
provision.
10.13 Other Remedies; Specific
Performance. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a Party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such Party, and the exercise by a Party of any one remedy will not preclude the
exercise of any other remedy. The Parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being the addition to any other remedy to which they
are entitled at law or in equity.
64
10.14 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT SUCH PARTY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS. FURTHER,
EACH OF THE PARTIES HERETO HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
ANY OTHER PARTY OR ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY OR PERSON WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH OF THE PARTIES
HERETO HEREBY ACKNOWLEDGES THAT THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY THIS SECTION 10.14.
(a)
For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b)
The Parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting Party shall not be applied in the construction or interpretation of
this Agreement.
(c)
As used in this Agreement, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words “without
limitation.”
(d)
Except as otherwise indicated, all references in this
Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to
Sections of this Agreement and Exhibits and Schedules to this
Agreement.
(e)
The bold-faced headings contained in this Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
[Remainder
of page intentionally left blank]
65
IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed as of the date first above
written.
|
AVATECH
SOLUTIONS, INC.
|
|
|
By:
|
/s/ Xxxxxxxx Xxxxxxx
|
|
Name:
|
Xxxxxxxx
Xxxxxxx
|
|
Title:
|
President
and Chief Financial Officer
|
|
ASRW
ACQUISITION SUB, INC.
|
|
|
By:
|
/s/ Xxxxxxxx Xxxxxxx
|
|
Name:
|
Xxxxxxxx
Xxxxxxx
|
|
Title:
|
President
and Chief Financial Officer
|
|
RAND
WORLDWIDE, INC.
|
|
|
By:
|
/s/ Xxxx X. Xxxxxx
|
|
Name:
|
Xxxx
X. Xxxxxx
|
|
Title:
|
President
and Chief Executive Officer
|
|
RWWI
HOLDINGS LLC
|
|
|
By:
|
AMP-06
Management Company
|
|
Limited
Partnership, its General Partner
|
|
|
By:
|
AMP-06
MC LLC, its General Partner
|
|
By:
|
/s/ Xxxxxxx X. Xxxxxxx
|
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
Title:
|
Principal
Managing Member
|
SIGNATURE
PAGE TO AGREEMENT AND PLAN OF MERGER
EXHIBITS
AND SCHEDULES
Exhibits
Exhibit
A Definitions
Exhibit
B Joint Press Release*
Exhibit
C Form of Stockholders
Agreement*
Exhibit
D Form of Stock Power*
Exhibit
E Form of Registration
Rights Agreement*
Schedules
Merger
Partner Disclosure Schedule*
Avatech
Disclosure Schedule*
Designator
Disclosure Schedule*
Schedule
5.4(a)(i) Directors of
Avatech*
Schedule
5.4(a)(ii) Executive Officers of
Avatech*
Schedule
5.4(a)(iii) Directors to Resign
from Board of Directors of Avatech*
Schedule
5.4(b)(ii) Directors to Resign
from Board of Directors of Surviving Corporation*
* All Exhibits other
than Exhibit A and all schedules to the Agreement have been omitted pursuant to
Item 601(b)(2) of Regulation S-K. The Company hereby agrees to furnish
supplementally a copy of any omitted schedule to the Securities and Exchange
Commission upon request.
EXHIBIT
A
DEFINITIONS
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit A):
Affiliate. “Affiliate”
shall mean any Person under common control with such Party within the meaning of
Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued
thereunder.
Agreement. “Agreement”
shall mean the Agreement and Plan of Merger to which this Exhibit A is attached, as it
may be amended from time to time.
Avatech
Common Stock.
“Avatech Common
Stock” shall mean the Common Stock, $0.01 par value per share, of
Avatech.
Avatech
Contract.
“Avatech
Contract” shall mean any material Contract: (a) to which Avatech or
any of its Subsidiaries is a party; (b) by which Avatech, any of its
Subsidiaries or any Avatech IP Rights, Avatech Licensed IP or any other asset of
Avatech or its Subsidiaries is or may become bound or under which Avatech or any
of its Subsidiaries has, or may become subject to, any obligation; or (c) under
which Avatech or any of its Subsidiaries has or may acquire any right or
interest.
Avatech
Excluded Warrants.
“Avatech Excluded
Warrants” shall mean the warrants to purchase an aggregate of 726,102
shares of Avatech Common Stock held by Sigma Opportunity Fund, LLC, Xxxx Xxxxx,
Xxxxxx Xxxx, Xxxxxx Xxxxx, Sigma Capital Advisors, LLC.
Avatech
IP Rights.
“Avatech IP
Rights” shall mean all Intellectual Property Rights which Avatech or any
of its Subsidiaries have or purport to have an ownership interest of any nature
(whether exclusively, jointly with another Person, or otherwise).
Avatech
IP Rights Agreement. “Avatech IP Rights
Agreement” shall mean any instrument or agreement governing any Avatech
IP Rights or Avatech Licensed IP to which Avatech or any of its Subsidiaries are
a party.
Avatech
Licensed IP. “Avatech Licensed
IP” means all Intellectual Property Rights licensed to Avatech or any of
its Subsidiaries (regardless whether licensed exclusively or nonexclusively),
including but not limited to any licenses to use, distribute, resell, or access
third party software or databases.
Avatech
IP Rights Agreement. “Avatech IP Rights
Agreement” shall mean any instrument or agreement governing any Avatech
IP Rights.
Avatech
Options.
“Avatech
Options” shall mean options to purchase shares of Avatech Common Stock
issued by Avatech.
Avatech
Material Adverse Effect. “Avatech Material
Adverse Effect” shall mean any effect, change, event, circumstance or
development (each such item, an “Effect”)
that, considered together with all other Effects that had occurred prior to the
date of determination of the occurrence of the Avatech Material Adverse Effect,
is or would reasonably be expected to be or to become materially adverse to, or
has or would reasonably be expected to have or result in a material adverse
effect on: (a) the business, financial condition, capitalization, assets
(including Intellectual Property Rights), operations or financial performance or
prospects of Avatech and its Subsidiaries taken as a whole; or (b) the ability
of Avatech to consummate the Merger or any of the other Contemplated
Transactions or to perform any of its covenants or obligations under the
Agreement; provided,
however, that none of the following shall be deemed in themselves, either
alone or in combination, to constitute, and none of the following shall be taken
into account in determining whether there has been or will be a Avatech Material
Adverse Effect: (i) any change in the business, financial condition,
capitalization, assets, operations or financial performance or prospects of
Avatech and the Avatech Subsidiaries taken as a whole caused by, related to or
resulting from, directly or indirectly, the Contemplated Transactions or the
announcement thereof, (ii) any adverse change, effect or occurrence attributable
to the United States economy as a whole or the industries in which Avatech
competes, (iii) any act or threat of terrorism or war anywhere in the world,
(iv) any change in accounting requirements or principles or any change in
applicable laws, rules or regulations or the interpretation thereof (provided, that in the case of
the foregoing clauses (ii), (iii) and (iv), to the extent such changes or
developments referred to therein have a materially disproportionate impact on
Avatech and its Subsidiaries, taken as a whole, relative to other companies in
the industries and in the geographic markets in which Avatech and its
Subsidiaries operate), (v) any Effect resulting from the announcement of the
Merger, and (vi) any change in the stock price or trading volume of Avatech
independent of any other event that would be deemed to have an Avatech Material
Adverse Effect (provided that the exception
in this clause (vi) shall not prevent or otherwise affect a determination that
any fact, circumstance, event, condition, occurrence or change underlying such
change has resulted in, or contributed to, an Avatech Material Adverse
Effect).
Avatech
Preferred Stock.
“Avatech Preferred
Stock” shall mean the preferred stock, $0.01 par value per share, of
Avatech authorized under its Certificate of Incorporation.
Avatech
Registered IP.
“Avatech
Registered IP” shall mean all Avatech IP Rights that are registered,
filed or issued under the authority of, with or by any Governmental Body (or,
with respect to domain names, a domain name registrar or agent), including all
patents, registered copyrights, registered trademarks, domain name
registrations, and all applications for any of the foregoing.
Avatech
Related Party.
“Avatech
Related
Party” shall mean any affiliate, as defined in Rule 12b-2 under the
Securities Act.
Avatech
Restricted Shares.
“Avatech
Restricted Shares” shall mean restricted shares
of Avatech Common Stock.
Avatech
Series D Preferred Stock. “Avatech Series D
Preferred Stock” shall mean the Series D Convertible Preferred Stock,
$0.01 par value per share, of Avatech.
Avatech
Series E Preferred Stock. “Avatech Series E
Preferred Stock” shall mean the Series E Convertible Preferred Stock,
$0.01 par value per share, of Avatech.
Avatech
Series F Preferred Stock. “Avatech Series F
Preferred Stock” shall mean the Series F 10% Cumulative Convertible
Preferred Stock, $0.01 par value per share, of Avatech.
Avatech
Software Products. “Avatech Software
Products” means all software products licensed, distributed, sold or
offered, including but not limited to as software as a service, by Avatech or
any of its Subsidiaries as of, or within the two (2) years before, the date of
this Agreement.
Avatech
Subsidiary. “Avatech
Subsidiary” means a Subsidiary of Avatech.
Business
Day. “Business
Day” shall mean any day other than a day on which banks in the
Commonwealth of Massachusetts are authorized or obligated to be
closed.
COBRA. “COBRA”
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
Code. “Code”
shall mean the Internal Revenue Code of 1986, as amended.
Confidentiality
Agreement.
“Confidentiality
Agreement” shall mean the Confidentiality Agreement executed in 2008,
between Merger Partner and Avatech.
Consent. “Consent”
shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Contemplated
Transactions.
“Contemplated
Transactions” shall mean the Merger and the other transactions and
actions contemplated by the Agreement.
Contract. “Contract”
shall, with respect to any Person, mean any written, oral or other agreement,
contract, subcontract, lease (whether real or personal property), mortgage,
understanding, arrangement, instrument, note, option, warranty, purchase order,
license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature to which such Person is a party or by
which such Person or any of its assets are bound or affected under applicable
law.
DGCL. “DGCL”
shall mean the General Corporation Law of the State of Delaware.
Effect. “Effect”
has the meaning given such term in the definition of “Avatech Material Adverse
Effect” above.
Encumbrance. “Encumbrance”
shall mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset) other than (a) mechanic’s, materialmen’s and similar
liens, (b) liens arising under worker’s compensation, unemployment insurance and
similar legislation, and (c) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business.
Entity. “Entity”
shall mean any corporation (including any non-profit corporation), partnership
(including any general partnership, limited partnership or limited liability
partnership), joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
Environmental
Law. “Environmental
Law” means any federal, state, local or foreign Legal Requirement
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern.
ERISA. “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
Exchange
Act. “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.
FMLA. “FMLA”
shall mean the Family Medical Leave Act of 1993, as amended.
Fully
Diluted Basis.
“Fully Diluted
Basis” shall mean, at any time, the sum of (x) the number of issued
and outstanding shares of Avatech Common Stock (including Avatech Restricted
Shares) at such time plus
(y) the total number of shares of Avatech Common Stock issuable upon
the exercise, exchange or conversion of all securities or obligations issued and
outstanding at such time that are exercisable for, convertible into, or
exchangeable for shares of Avatech Common Stock, including Avatech Stock Options
and any other options, restricted stock units, Avatech stock-based awards,
warrants or other rights to subscribe for or purchase Avatech Common Stock or to
purchase other equity securities or obligations of Avatech that are, directly or
indirectly, exercisable for, convertible into or exchangeable for Avatech Common
Stock, in each case, whether or not then vested, exercisable, convertible or
exchangeable.
Governmental
Authorization.
“Governmental
Authorization” shall mean any: (a) permit, license, certificate,
franchise, permission, variance, exceptions, orders, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental
Body.
“Governmental
Body” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, ministry, fund, foundation, center, organization, unit, body or Entity
and any court or other tribunal, and for the avoidance of doubt, any Taxing
authority); or (d) self-regulatory organization.
HIPAA. “HIPAA”
shall mean the Health Insurance Portability and Accountability Act of 1996, as
amended.
Intellectual
Property Rights.
“Intellectual
Property Rights” shall mean all United States, foreign and international
(i) patents and patent applications, including provisional applications,
statutory invention registrations, invention disclosures, (ii) inventions,
whether or not patentable, (iii) trademarks, service marks, trade dress,
trade names, logos and other source identifies, whether or not registered, and
all goodwill associated therewith, (iv) Internet domain name registrations, (v)
rights of publicity and other rights to use the names and likeness of
individuals, (vi) copyrights, rights in databases and related rights, and mask
works, whether or not registered, (vii) trade secrets, confidential information
and know-how, (viii) all registrations and applications for registration of the
foregoing, (ix) all other intellectual property or proprietary
rights.
Internal
Revenue Service.
“Internal Revenue
Service” shall mean the United States Internal Revenue
Service.
Key
Employee.
“Key
Employee” shall mean an executive officer of Merger Partner or Avatech,
as applicable, or any employee that reports directly to the board of directors
or chief executive officer of Merger Partner or Avatech, as
applicable.
Knowledge. “Knowledge”
means (a) in the case of a Person who is an individual, matters actually known
to that individual, and (b) in the case of a Person that is an Entity, matters
actually known to the directors and executive officers of such Entity and such
Entity’s Subsidiaries, and with respect to (a) and (b), matters that any such
Person, and with respect to Persons that are entities, the directors and
executive officers of such entities, would reasonably be expected to know in the
ordinary course of the performance of the individual’s duties and fulfillment of
his or her responsibilities.
Legal
Proceeding.
“Legal
Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Body or any arbitrator or arbitration
panel.
Legal
Requirement.
“Legal
Requirement” shall mean any federal, state, foreign, material local or
municipal or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body, including,
without limitation, the Foreign Corrupt Practices Act of 1977, the Trading with
the Enemy Act, the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, any regulation,
rule or order promulgated by the United States Department of the Treasury,
including its Office of Foreign Assets Control.
LLC
Merger.
“LLC
Merger” shall mean the merger of Merger Partner with RWWI Merger
Corporation pursuant to the Agreement and Plan of Merger dated as of the date
hereof by and among Merger Partner, RWWI Merger Corporation and RWWI Holdings
LLC, under which Merger Partner, as the surviving corporation, became a
wholly-owned subsidiary of RWWI Holdings LLC, effective on the date hereof prior
to the execution of this Agreement.
Merger
Partner Common Stock. “Merger Partner
Common Stock” shall mean the Common Stock, $0.001 par value per share, of
Merger Partner.
Merger
Partner Contract.
“Merger Partner
Contract” shall mean any material Contract: (a) to which Merger
Partner and/or any of Merger Partner Subsidiaries is a Party; (b) by which
Merger Partner, any of Merger Partner Subsidiaries and/or any Merger Partner IP
Rights, Merger Partner Licensed IP, and/or any other asset of Merger Partner
and/or Merger Partner Subsidiaries is or may become bound or under which Merger
Partner or any Merger Partner Subsidiaries has, or may become subject to, any
obligation; or (c) under which Merger Partner or any of Merger Partner
Subsidiaries has or may acquire any right or interest.
Merger
Partner IP Rights.
“Merger Partner IP
Rights” shall mean all Intellectual Property Rights in which Merger
Partner and/or Merger Partner Subsidiaries have or purport to have a direct or
indirect ownership interest of any nature (whether exclusively, jointly with
another Person, or otherwise).
Merger
Partner IP Rights Agreement. “Merger Partner IP
Rights Agreement” shall mean any Contract governing, related or
pertaining to any Merger Partner IP Rights and/or Merger Partner Licensed IP to
which Merger Partner and/or any Merger Partner Subsidiary is a
party.
Merger
Partner Licensed IP. “Merger Partner
Licensed IP” means all Intellectual Property Rights licensed to Merger
Partner and/or any Merger Partner Subsidiary (regardless whether licensed
exclusively or nonexclusively), including but not limited to any licenses to
use, distribute, resell, or access third party software or
databases.
Merger
Partner Material Adverse Effect. “Merger Partner
Material Adverse Effect” shall mean any Effect that, considered together
with all other Effects that had occurred prior to the date of determination of
the occurrence of the Merger Partner Material Adverse Effect, is or would
reasonably be expected to be or to become materially adverse to, or has or would
reasonably be expected to have or result in a material adverse effect on: (a)
the business, financial condition, capitalization, assets (including
Intellectual Property Rights), operations or financial performance or prospects
of Merger Partner and Merger Partner Subsidiaries, taken as a whole; or (b) the
ability of Merger Partner to consummate the Merger or any of the other
Contemplated Transactions or to perform any of its covenants or obligations
under the Agreement; provided,
however, that none of the following shall be deemed in themselves, either
alone or in combination, to constitute, and none of the following shall be taken
into account in determining whether there has been or will be a Merger Partner
Material Adverse Effect: (i) any change in the business, financial condition,
capitalization, assets, operations or financial performance or prospects of
Merger Partner and Merger Partner Subsidiaries taken as a whole caused by,
related to or resulting from, directly or indirectly, the Contemplated
Transactions or the announcement thereof, (ii) any adverse change, effect or
occurrence attributable to the United States economy as a whole or the
industries in which Merger Partner competes, (iii) any act or threat of
terrorism or war anywhere in the world, (iv) any change in accounting
requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof (provided, that in the case of
the foregoing clauses (ii), (iii) and (iv), to the extent such changes or
developments referred to therein have a materially disproportionate impact on
Merger Sub and its Subsidiaries, taken as a whole, relative to other companies
in the industries and in the geographic markets in which Avatech and its
Subsidiaries operate) and (v) any Effect resulting from the announcement of the
Merger.
Merger
Partner Related
Party. “Merger
Partner Related
Party” shall mean (i) each of the Persons listed on Schedule 1 hereto;
(ii) each individual who is, or who has at any time been, an officer or director
of Merger Partner; (iii) each member of the immediate family of each of the
individuals referred to in clause (i) and (ii) above; and (iv) any trust or
other Entity (other than Merger Partner) in which any one of the Persons
referred to in clauses (i), (ii) or (iii) above holds (or in which more than one
of such Persons collectively hold), beneficially or otherwise, a material
voting, proprietary, equity or other financial interest.
Merger
Partner Registered IP. “Merger Partner
Registered IP” shall mean all Merger Partner IP Rights that are
registered, pending, filed or issued under the authority of, with or by any
Governmental Body (or, with respect to domain names, a domain name registrar or
agent), including all patents, registered copyrights, registered trademarks,
domain name registrations, and all applications for any of the
foregoing.
Merger
Partner Software Products. “Merger Partner
Software Products” means all software products licensed, distributed,
sold or offered, including but not limited to as software as a service, by
Merger Partner and Merger Partner Subsidiaries as of, or within the two (2)
years before, the date of this Agreement.
Merger
Partner Stock Option Plan. “Merger Partner
Stock Option Plan” shall mean the RAND Worldwide, Inc. Amended and
Restated 2007 Equity Incentive Plan.
Merger
Partner Subsidiary. “Merger Partner
Subsidiary” means a Subsidiary of Merger Partner.
Ordinary
Course of Business. “Ordinary Course
of Business” shall mean, in the case of each of Merger Partner, Avatech
and each of their respective Subsidiaries, such reasonable and prudent actions
taken in the ordinary course of its normal operations and consistent with its
past practices.
Party. “Party” or
“Parties”
shall mean Merger Partner, Merger Sub and Avatech.
Person. “Person”
shall mean any individual, Entity or Governmental Body.
Personal
Information.
“Personal
Information” shall mean any information related to an identified or
identifiable natural person and does not meet the definition of de-identified as
defined by the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”) section 164.514 (b)(2).
Privacy
Laws. “Privacy
Laws” shall mean any laws, statutes, rules, regulations, codes, orders,
decrees, and rulings thereunder of any federal, state, regional, county, city,
municipal or local government of the United States or any other country having
applicable jurisdiction or any department, agency, bureau or other
administrative or regulatory body obtaining authority from any of the foregoing
that relate to privacy, data protection or data transfer issues, including all
implementing laws and regulations and all applicable state privacy, security,
data protection and destruction, and data breach notification laws and
regulations.
Related
Agreements.
“Related
Agreements” shall mean the Stockholders Agreement, Registration Rights
Agreement and any other documents or agreements executed in connection with this
Agreement or the Contemplated Transactions.
Representatives. “Representatives”
shall mean directors, officers, other employees, agents, attorneys, accountants,
advisors and representatives.
Xxxxxxxx-Xxxxx
Act. “Xxxxxxxx-Xxxxx
Act” shall mean the Xxxxxxxx-Xxxxx Act of 2002, as it may be amended from
time to time.
SEC. “SEC” shall
mean the United States Securities and Exchange Commission.
Securities
Act. “Securities
Act” shall mean the Securities Act of 1933, as amended.
Subsidiary. An entity shall be deemed to
be a “Subsidiary”
of another Person if such Person directly or indirectly owns or purports to own,
beneficially or of record, (a) an amount of voting securities of other interests
in such entity that is sufficient to enable such Person to elect at least a
majority of the members of such entity’s board of directors or other governing
body, or (b) at least 50% of the outstanding equity, voting, beneficial or
financial interests in such Entity.
Tax. “Tax” shall
mean any federal, state, local, foreign or other taxes, levies, charges and fees
or other similar assessments or liabilities in the nature of a tax, including,
without limitation, any income tax, franchise tax, capital gains tax, gross
receipts tax, value-added tax, surtax, estimated tax, unemployment tax, national
health insurance tax, excise tax, ad valorem tax, transfer tax, stamp tax, sales
tax, use tax, property tax, business tax, withholding tax, payroll tax, customs
duty, alternative or add-on minimum or other tax of any kind whatsoever, and
including any fine, penalty, assessment, addition to tax or interest, whether
disputed or not.
Tax
Return.
“Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information, and any amendment,
schedule, exhibit or supplement to any of the foregoing, filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
Each of
the following definitions is set forth in the section of the Agreement indicated
below:
|
Definition
|
Section
|
|
|
Agreement
|
Preamble
|
|
|
Avatech
|
Preamble
|
|
|
Avatech
Balance Sheet
|
3.11(a)
|
|
|
Avatech
Constituent Documents
|
3.2
|
|
|
Avatech
Disclosure Schedule
|
3
|
|
|
Avatech
Financial Statements
|
3.4(b)
|
|
|
Avatech
Foreign Plan
|
3.14(i)
|
|
|
Avatech
License and Service Agreements
|
3.9(i)
|
|
|
Avatech
Nominees
|
5.4(c)
|
|
|
Avatech
Plan
|
3.14(q)
|
|
|
Avatech
Returns
|
3.13(a)
|
|
|
Avatech
SEC Documents
|
3.4(a)
|
|
|
Closing
|
1.3
|
|
|
Closing
Date
|
1.3
|
|
|
Designator
|
Preamble
|
|
|
Disclosed
|
2
|
|
|
Dissident
Stockholders
|
2.26
|
|
|
XXXXX
|
3.4(a)
|
|
|
Effective
Time
|
1.3
|
|
|
Escrow
Period
|
1.7
|
|
|
Escrowed
Shares
|
1.5(a)(ii)
|
|
|
Escrowed
Shares Certificate
|
1.7
|
|
|
GAAP
|
2.4(b)
|
|
|
Initial
Merger Shares
|
1.5(a)(ii)
|
|
|
Merger
|
Recitals
|
|
|
Merger
Partner
|
Recitals
|
|
|
Merger
Partner Audited Balance Sheet
|
2.4(a)(i)
|
|
|
Merger
Partner Balance Sheet
|
2.4(a)(ii)
|
|
|
Merger
Partner Certificate of Incorporation
|
2.2
|
|
|
Merger
Partner Constituent Documents
|
2.2
|
|
|
Merger
Partner Disclosure Schedule
|
2
|
|
|
Merger
Partner Financial Statements
|
2.4(a)
|
|
|
Merger
Partner Foreign Plan
|
2.14(i)
|
|
|
Merger
Partner License and Service Agreements
|
2.9(i)
|
|
|
Merger
Partner Nominees
|
5.4(b)
|
|
|
Merger
Partner Plan
|
2.14(q)
|
|
|
Merger
Partner Returns
|
2.13(a)
|
|
|
Merger
Partner Stock Certificate
|
1.6
|
|
|
Merger
Partner Subsidiary Constituent Documents
|
2.2
|
|
|
Merger
Shares
|
1.5(a)(ii)
|
|
|
Merger
Sub
|
Preamble
|
|
|
Outstanding
Preferred Shares
|
1.5(a)(ii)
|
|
|
Pension
Plan
|
2.14(i)
|
|
|
Registration
Rights Agreement
|
7.5(a)
|
|
|
Required
Merger Partner Stockholder Vote
|
2.18
|
|
|
Schedule
|
2
|
|
|
State
Acts
|
4.1(k)
|
|
|
Stockholders
Agreement
|
5.4(b)
|
|
|
Stock
Power
|
5.6(b)
|
|
|
Surviving
Corporation
|
|
1.1
|