Agreement and Plan of Merger Among Novume Solutions, Inc., NeoSystems Holding, LLC, NeoSystems HoldCo, Inc., NeoSystems LLC, Michael Tinsley, in his personal capacity Robert W. Wilson, Jr., in his personal capacity and Michael Tinsley, as the...
Exhibit 2.1
_____________________________________________________________________________
Among
NeoSystems Holding, LLC,
NeoSystems HoldCo, Inc.,
NeoSystems LLC,
Xxxxxxx Xxxxxxx,
in his personal capacity
Xxxxxx X. Xxxxxx, Xx.,
in his personal capacity
and
Xxxxxxx Xxxxxxx,
as the Stockholders’ Agent
November 16, 2017
_____________________________________________________________________________
TABLE OF CONTENTS
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Page
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ARTICLE
I CERTAIN DEFINITION
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2
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ARTICLE
II THE MERGER
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14
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2.1
Conversion/Cancellation of Shares
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14
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2.2
Allocation of Merger Consideration
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16
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2.3 The
Closing
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17
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2.4
Effects of the Merger
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17
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2.5
Surrender of Certificates
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17
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2.6
Dissenting Shares
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18
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2.7
Remaining Funds
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18
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2.8 Tax
Withholding
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19
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2.9 Tax
Consequences
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19
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2.10
Legends; Stop-Transfer Notices; Removal
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19
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2.11
Further Assurances
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20
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ARTICLE
III REPRESENTATIONS AND WARRANTIES OF HOLDCO THE COMPANY AND EACH
KEY HOLDER
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20
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3.1
Organization and Good Standing
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20
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3.2
Subsidiaries
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20
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3.3
Power, Authorization and Validity
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20
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3.4
Capitalization
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22
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3.5
Consents; Conflict
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24
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3.6
Litigation
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24
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3.7
Taxes
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24
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3.8
Financial Statements; Books and Records
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26
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3.9
Title to Properties
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27
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3.10
Absence of Certain Changes
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28
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3.11
Contracts, Agreements, Arrangements, Commitments and
Undertakings
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30
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3.12 No
Default; No Restrictions
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32
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3.13
Intellectual Property
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32
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3.14
Compliance with Laws
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38
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3.15
Certain Transactions and Agreements
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38
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3.16
Employees, ERISA and Other Compliance
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39
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3.17
Merger Expenses
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43
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3.18
Insurance
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43
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3.19
Environmental Matters
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44
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3.20
Customers and Suppliers
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44
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3.21
Accounts Receivable
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45
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3.22
Inventory
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46
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3.23
Bank Account
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46
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3.24
Board Approval
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46
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3.25
Indebtedness.
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46
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3.26
General.
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46
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
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47
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4.1
Organization and Good Standing
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47
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i
4.2
Power, Authorization and Validity
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47
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4.3 No
Conflict
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48
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4.4
Interim Operations of Merger Sub
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48
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4.5
[reserved
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48
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4.6
Financial Capacity
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48
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4.7
Merger Consideration
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48
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4.8
Litigation
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49
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4.9
Reorganization
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49
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4.10
Capitalization of Parent
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49
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4.11
Board Approval
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50
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4.12
SEC Documents; Parent Financial Statements
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50
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4.13 No
Undisclosed Statements
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50
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4.14
Subsidiaries
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51
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4.15
General.
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51
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ARTICLE
V COMPANY COVENANTS
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51
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5.1
Advise of Changes
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51
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5.2
Maintenance of Business
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52
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5.3
Conduct of Business
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52
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5.4
Regulatory Approvals
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55
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5.5
Necessary Consents
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55
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5.6
Litigation
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55
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5.7 No
Other Negotiations
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55
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5.8
Access to Information
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56
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5.9
Satisfaction of Conditions Precedent
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56
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5.10
Notices to HoldCo Securityholders and Employees
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57
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5.11
280G Stockholder Approval.
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57
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ARTICLE
VI PARENT COVENANTS
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57
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6.1
Advise of Changes
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57
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6.2
Regulatory Approvals
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58
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6.3
Offerings.
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58
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6.4
Satisfaction of Conditions Precedent
|
58
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ARTICLE
VII ADDITIONAL AGREEMENTS
|
59
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7.1
Approval of the HoldCo Stockholders
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59
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7.2
Employees
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59
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7.3 Tax
Matters
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59
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7.4
Sale of Shares Pursuant to Regulation D
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61
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7.5
Blue Sky Laws
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61
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7.6
Release of Guarantees.
|
62
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7.7
Lock-Up.
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62
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ARTICLE
VIII CONDITIONS TO CLOSING OF MERGER
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62
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8.1
Conditions to Each Party’s Obligation to Effect the
Merger
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62
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8.2
Additional Conditions to Obligations of Parent and Merger
Sub
|
63
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8.3
Additional Conditions to Obligations of HoldCo
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64
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ARTICLE
IX TERMINATION OF AGREEMENT
|
65
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9.1
Termination by Mutual Consent
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65
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9.2
Unilateral Termination
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65
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9.3
Effect of Termination
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66
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ii
ARTICLE
X INDEMNIFICATION
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66
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10.1
Survival Periods
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66
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10.2
Indemnification
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67
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10.3
Limitations
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68
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10.4
Determination of the Closing Net Working Capital
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70
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10.5
Defense of Third Party Claims
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71
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10.6
Indemnification Claim Procedure
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72
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10.7
Exercise of Remedies Other Than by Parent
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73
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10.8
Certain Limitations
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73
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10.9
Stockholders’ Agent
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74
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10.10
Parent Indemnification
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75
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ARTICLE
XI MISCELLANEOUS
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75
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11.1
Governing Law
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75
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11.2
Assignment; Binding Upon Successors and Assigns
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75
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11.3
Severability
|
76
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11.4
Counterparts
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76
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11.5
Other Remedies
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76
|
11.6
Amendments and Waivers
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76
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11.7
Expenses
|
77
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11.8
Attorneys’ Fees
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77
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11.9
Notices
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77
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11.10
Interpretation; Rules of Construction
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78
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11.11
Third Party Beneficiary Rights
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78
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11.12
Public Announcement
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78
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11.13
Entire Agreement
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79
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11.14
Waiver of Jury Trial
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79
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iii
List of Exhibits
Exhibit
A-1
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List of
Signatories to Voting Agreement
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Exhibit
A-2
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Form of
Voting Agreement
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Exhibit
B
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List of
Signatories to Employment Agreements
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Exhibit
C
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Form of
Registration Rights Agreement
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Exhibit
D
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Investor
Representation Statement
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List of Schedules
Schedule
2.1(b)(ii)
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Optionholder
Conversion Calculations
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|
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iv
This
Agreement and Plan of Merger (this “Agreement”) is made and entered
into as of November 16, 2017 (the “Agreement Date”) by and among
Novume Solutions, Inc., a Delaware corporation (“Parent”), NeoSystems Holding, LLC,
a Delaware limited liability company and wholly owned subsidiary of
Parent (“Merger
Sub”), NeoSystems HoldCo, Inc., a Virginia corporation
(“HoldCo”),
NeoSystems LLC, a Virginia limited liability company and wholly
owned subsidiary of HoldCo (the “Company”), Xxxxxx X. Xxxxxx, Xx.,
in his personal capacity (“Xxxxxx”), Xxxxxxx Xxxxxxx, in his
personal capacity (“Xxxxxxx”, and together with
Xxxxxx, the “Key
Holders”), and Xxxxxxx Xxxxxxx, in his capacity as the
representative of each Participating Stockholder (the
“Stockholders’
Agent”).
RECITALS
A. On
November 8, 2017, HoldCo was formed as the one hundred percent
(100%) owner of the Company and on November 15, 2017, the Company
was converted into a limited liability company under the laws of
the Commonwealth of Virginia.
B. The
parties intend that, subject to the terms and conditions
hereinafter set forth, HoldCo shall merge with and into Merger Sub
(the “Merger”),
with Merger Sub to be the surviving entity in the Merger (the
“Surviving
Entity”), on the terms and subject to the conditions
of this Agreement and pursuant to the applicable provisions of the
laws of the State of Delaware and the Commonwealth of
Virginia.
C. The
Boards of Directors of Parent, Merger Sub, and HoldCo have
determined that the Merger is in the best interests of their
respective stockholders and/or members and have approved and
declared advisable this Agreement and the Merger.
D. Concurrently
with the execution and delivery of this Agreement, and as a
condition and inducement to Parent’s willingness to enter
into this Agreement, each HoldCo Stockholder listed on Exhibit A-1
is executing and delivering to Parent a Voting Agreement to approve
the Merger, in substantially the form attached hereto as Exhibit
A-2 (a “Voting
Agreement”).
E. Concurrently
with the execution and delivery of this Agreement, and as a
condition and inducement to Parent’s willingness to enter
into this Agreement, each of the employees of the Company under the
heading “Key Employees” listed on Exhibit B is
executing and delivering to Parent an executed employment agreement
(including the related Confidentiality and Assignment of Inventions
Agreement, the “Employment
Agreements”), which Employment Agreements shall become
effective only upon the Effective Time (as defined in Article
I).
F. Parent,
Merger Sub, HoldCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and to prescribe various conditions to the
Merger.
G. For
United States federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free transaction pursuant to Section
368 of the Internal Revenue Code of 1986, as
1
amended
(the “Code”),
and this Agreement is a “plan of reorganization” within
the meaning of Treasury Regulations Section
1.368-2(g).
Now,
therefore, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties
hereby agree as follows:
ARTICLE I
As used
in this Agreement, the following terms shall have the meanings set
forth below. Unless indicated otherwise, all mathematical
calculations contemplated hereby shall be made to the fifth decimal
place.
“280G Stockholder Approval” has the
meaning set forth in Section 5.11.
“409A Plan” has the meaning set
forth in Section 3.16(t).
“Accounting Arbitrator” has the
meaning set forth in Section 10.4(c).
“Accounts Receivable” has the
meaning set forth in Section 3.21.
“Affiliate” has the meaning set
forth in Rule 144 promulgated under the Securities
Act.
“Agreed Amount” has the meaning set
forth in Section 10.6(b).
“Agreement” has the meaning set
forth in the Preamble.
“Agreement Date” has the meaning
set forth in the Preamble.
“Alternative Transaction” means
(a) any acquisition or purchase of HoldCo Capital Stock by any
Person or “group” (as defined under Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder) of five percent (5%) or more in interest of the total
number of outstanding shares of HoldCo Capital Stock on such date
of acquisition (other than as provided for or permitted by this
Agreement), or any merger, consolidation, business combination or
similar transaction involving HoldCo or the Company; (b) any
sale, lease, exchange, transfer, license, acquisition or
disposition of a substantial portion of the assets of HoldCo or the
Company; or (c) any sale, lease, exchange, transfer, license
or disposition to a third party of the HoldCo
Business.
“Ancillary Agreements” means the
HoldCo Ancillary Agreements, the Company Ancillary Agreements, the
Parent Ancillary Agreements and the Merger Sub Ancillary
Agreements.
“Applicable Law” means, collectively, all xxxxxxx,
xxxxxxx, xxxxx, xxxxxxxxxx, xxxxxxxxxxx, local or municipal laws,
statutes, ordinances, regulations, rules, and all orders, writs,
injunctions, awards, judgments and decrees and other government and
regulatory requirements applicable to the assets, properties and
business (and any regulations promulgated thereunder) of the
applicable company or entity.
2
“Articles of
Incorporation” means the Articles of
Incorporation of HoldCo, filed with the Virginia Secretary of State
on November 7, 2017 and effective on November 8, 2017.
“Balance
Sheet Date” means December 31, 2016.
“Books and Records” means (a) all
product, business and marketing plans, sales and promotional
literature and artwork relating to the assets of a Person or its
Business, (b) all books, records, lists, ledgers, financial data,
files, reports, Returns and related work papers and letters from
accountants, budgets, pricing guidelines, journals, deeds, title
policies, minute books, stock certificates and books, stock
transfer ledgers, Contracts, product and design manuals, plans,
drawings, technical manuals and operating records of every kind
relating to the assets of a Person or its Business (including
records and lists of customers, distributors, suppliers and
personnel), computer files and programs (including data processing
files and records), retrieval programs, operating data and plans
and environmental studies and plans, and (c) all telephone and fax
numbers used in the business of a Person, and in each case
maintained in whatever format, including as hard copy or stored in
computer memory, and owned either such Person or any of its
Affiliates.
“Business Day” means a day other
than Saturday, Sunday or any day on which banks located in the
State of New York are authorized or obligated to
close.
“Certificate of Merger” means, as
applicable, the (i) certificate of merger to be filed with the
Office of the Secretary of State of the State of Delaware at the
time of Closing in such appropriate form as shall be required by
Delaware Law, and/or (ii) certificate of merger to be filed with
the Office of the Clerk of the State Corporation Commission of the
Commonwealth of Virginia at the time of Closing in such appropriate
form as shall be required by Virginia Law.
“Certificates” means each holder of
record (as of the Effective Time) of a certificate or certificates
which immediately prior to the Effective Time represented HoldCo
Common Stock (collectively, the “Certificates”).
“Claimed Amount” has the meaning
set forth in Section 10.6(a).
“Closing” means the closing of the
transactions necessary to consummate the Merger.
“Closing Date” means a time and
date on which the Closing shall occur to be specified by the
parties, which shall be no later than the second Business Day after
the satisfaction or waiver of the conditions set forth in Article
VIII, or at such other time, date and location as the parties
hereto agree in writing.
“COBRA” has the meaning set forth
in Section 3.16(l).
“Code” has the meaning set forth in
the Recitals.
“Company” has the meaning set forth
in the Preamble.
“Company Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
the Company by an officer or officers of the Company at the Closing
pursuant to
3
Article VIII and each agreement or document (other than this
Agreement) that the Company is to enter into as a party thereto
pursuant to this Agreement.
“Company Balance Sheet” means the
Company’s audited balance sheet as of the Balance Sheet Date
included in the Company Financial Statements.
“Company Benefit Arrangements” has
the meaning set forth in Section 3.16(d).
“Company Charter Documents” has the
meaning set forth in Section 3.8(d).
“Company Financial Statements”
means (a) the Company’s audited balance sheet dated
December 31, 2016 and audited balance sheet dated December 31,
2015, and the Company’s unaudited balance sheet as of
September 30, 2017 for the nine-month period then ended; and
(b) the Company’s audited statement of income and
statement of cash flows for the year ended December 31, 2016 and
audited statement of income and statement of cash flows for the
year ended December 31, 2015, and the Company’s
unaudited statement of income and statement of cash flows as of
September 30, 2017 for the nine-month period then
ended.
“Company IP Rights” has the meaning
set forth in Section 3.13(a).
“Company IP Rights Agreements” has
the meaning set forth in Section 3.13(b).
“Company-Licensed IP Rights” has
the meaning set forth in Section 3.13(a).
“Company-Owned IP Rights” has the
meaning set forth in Section 3.13(a).
“Company Product or Service” has
the meaning set forth in Section 3.13(c).
“Company Source Code” has the
meaning set forth in Section 3.13(j).
“Confidentiality Agreement” has the
meaning set forth in Section 5.8.
“Consideration Spreadsheet” has the
meaning set forth in Section 2.2.
“Contested Amount” has the meaning
set forth in Section 10.6(b).
“Continuing Option” has the meaning
set forth in Section 2.1(b)(ii).
“Contract” means any written or
oral legally binding contract, agreement, instrument, arrangement,
commitment, understanding or undertaking (including leases,
licenses, mortgages, notes, guarantees, sublicenses, subcontracts
and purchase orders).
“Damages” includes any loss,
damage, injury, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable out of pocket
attorneys’ fees), charge, cost (including reasonable costs of
investigation) or expense of any nature, including any incidental,
indirect, special, exemplary, punitive or consequential damages
(including lost revenues or profits), and including amounts paid or
payable to third parties in respect of any third-party claim for
which indemnification hereunder is otherwise required.
4
“Delaware Law” means the General
Corporation Law of the State of Delaware.
“Disagreement Notice” has the
meaning set forth in Section 10.4(b).
“Dispute Period” has the meaning
set forth in Section 10.6(b).
“Dissenting Shares” means any
shares of HoldCo Capital Stock that are issued and outstanding
immediately prior to the Effective Time and in respect of which
appraisal rights shall have been perfected prior to the taking of a
stockholder vote on the Merger at the HoldCo stockholder meeting in
accordance with Virginia Law in connection with the
Merger.
“Documentation” means,
collectively, programmers’ notes or logs, source code
annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs,
plans, drawings, documentation, materials, supplier lists, software
source code and object code, net lists, photographs, development
tools, blueprints, media, memoranda and records that are primarily
related to or otherwise necessary for the use and exploitation of
any products or any products in development of the Company, whether
in tangible or electronic form, whether owned by the Company or
held by the Company under any licenses or sublicenses (or similar
grants of rights).
“DOL” has the meaning set forth in
Section 3.16(g).
“Effective Time” means the time of the filing of
the Certificates of Merger (or such later time as may be mutually
agreed in writing by HoldCo and Parent and specified in each
Certificates of Merger); provided, that the Effective Time shall
occur on the Closing Date.
“Employment Agreements” has the
meaning set forth in the Recitals.
“Encumbrance” means, with respect
to any asset, any mortgage, deed of trust, lien, pledge, charge,
security interest, title retention device, collateral assignment,
adverse claim, restriction or other encumbrance of any kind in
respect of such asset (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). For purposes of clarification
only, an inability to sell a security without registering such
security for sale under the Securities Act or other federal
securities laws shall not represent an Encumbrance.
“Entity Representatives” has the
meaning set forth in the definition of “knowledge” in
this Article
I.
“Environmental Law” has the meaning
set forth in Section 3.19(b).
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any entity which is a member
of (a) a “controlled group of corporations,” as
defined in Section 414(b) of the Code; (b) a group of
entities under “common control,” as defined in Section
414(c) of the Code; or (c) an “affiliated service
group,” as defined
5
in
Section 414(m) of the Code, or treasury regulations
promulgated under Section 414(o) of the Code, any of which
includes the Company.
“Estimated Net Working Capital” has
the meaning set forth in Section 8.2(i).
“Estimated Working Capital
Statement” has the meaning set forth in Section
8.2(i).
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
“Exchange Agent” means Issuer
Direct.
“Exchange Ratio” has the meaning
set forth in Section 2.1(b)(ii).
“Final Closing Working Capital
Statement” has the meaning set forth in
Section 10.4(a).
“Fundamental Representations”
means: the representations and warranties set forth in Section
3.1 (Organization and Good Standing), Section 3.2
(Subsidiaries), Section 3.3 (Power, Authorization and
Validity), Section 3.4 (Capitalization) and Section
3.7 (Taxes).
“Fundamental Reps Indemnity Period”
has the meaning set forth in Section
10.1.
“GAAP” means United States
generally accepted accounting principles.
“Governmental Authority” means any
court or tribunal, governmental or regulatory body, administrative
agency, commission or other governmental authority.
“Governmental Permits” all permits,
licenses and approvals from, all material filings with, government
(and quasi-governmental) agencies and authorities, that are
necessary and/or legally required to be held by a Person to conduct
its business without any violation of Applicable Law.
“HoldCo” has the meaning set forth
in the Preamble.
“HoldCo Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
HoldCo by an officer or officers of HoldCo at the Closing pursuant
to Article VIII and each agreement or document (other
than this Agreement) that HoldCo is to enter into as a party
thereto pursuant to this Agreement.
“HoldCo Business” means the
business of HoldCo (including the Company) as presently
conducted.
“HoldCo Capital Stock” means the
HoldCo Common Stock and the HoldCo Preferred Stock.
“HoldCo Charter Documents” has the
meaning set forth in Section 3.8(d).
“HoldCo Common Stock” means the
Common Stock, par value $0.001 per share, of the
Company.
6
“HoldCo Merger Sub” has the meaning
set forth in Section 3.4(h).
“HoldCo Optionholders” means the
holders of HoldCo Options.
“HoldCo Options” means options to
purchase shares of HoldCo Common Stock issued pursuant to the
HoldCo Stock Plans or otherwise.
“HoldCo Preferred Stock” means the
Preferred Stock, par value $0.001 per share, of the
Company.
“HoldCo Representatives” has the
meaning set forth in Section 5.7.
“HoldCo Securityholders” means the
HoldCo Stockholders and HoldCo Optionholders,
collectively.
“HoldCo Stock Plans” means the
NeoSystems, Corp. 2016 Equity Incentive Plan, which is “the
successor to and continuation of the NeoSystems, Corp. 2005 Equity
Incentive Plan (the “Prior Plan”)” and is
currently known as the 2016 Equity Incentive Plan of HoldCo, as
amended from time to time.
“HoldCo Stockholders” means the
holders of shares of HoldCo Capital Stock immediately prior to the
Effective Time.
“Holder” has the meaning set forth
in the Section 2.10(b).
“Indebtedness” means, without
duplication, (a) all indebtedness of a Person for borrowed money,
(b) all obligations of a Person evidenced by notes, bonds,
debentures, letters of credit or similar instruments or pursuant to
any guarantees, (c) all obligations payable by a Person under
interest rate protection agreements, (d) all obligations of a
Person for the deferred purchase price of property, assets or
services, (e) all liabilities or obligations of a Person under
leases that are classified or that are required to be classified as
capitalized lease obligations in accordance with GAAP, (f) all
obligations secured by Encumbrances (other than NSC Permitted
Encumbrances) on property, and (g) all interest (accrued or
otherwise), premiums, penalties, and breakage fees on any of the
foregoing.
“Indemnitee” means the party
asserting a claim pursuant to Section 10.6, which, for avoidance of
doubt, shall be either the Parent Indemnitees or the Stockholder
Indemnitees, as applicable.
“Indemnity Period” has the meaning
set forth in Section 10.1.
“Indemnifying Party” means the
party against whom claims are asserted pursuant to Section 10.6,
which, for avoidance of doubt, shall be either the NSC Indemnifying
Parties or Parent, as applicable.
“Intellectual Property” means,
collectively, all worldwide industrial and intellectual property
rights, including (a) patents, industrial design patents,
patent applications, industrial design patent applications, patent
rights, (b) trademarks, trademark registrations and
applications
7
therefor,
trade dress rights, trade names, service marks, service xxxx
registrations and applications therefor, together with all common
law rights and goodwill related to the foregoing, (c) Internet
domain names, Internet and World Wide Web URLs or addresses, (d)
copyrights, copyright registrations and applications therefor, mask
work rights, mask work registrations and applications therefor,
moral rights, and other rights of authorship or exploitation,
(e) franchises and licenses, (f) inventions, trade secrets,
know-how, customer lists, supplier lists, proprietary processes and
formulae, technology, algorithms, net lists, architectures,
structures, screen displays, photographs, images, layouts,
development tools, designs, blueprints, specifications, technical
drawings (or similar information in electronic format), (g)
software source code and object code, and (h) all documentation and
media constituting, describing or relating to the foregoing,
including manuals, programmers’ notes, memoranda and
records.
“Investor Representation Statement”
has the meaning set forth in Section 7.4.
“IRS” has the meaning set forth in
Section 3.7(b).
“Key Holders” has the meaning set
forth in the Preamble.
“knowledge” means the knowledge of
a particular fact, circumstance, event or other matter in question
of the executive officers of an entity (collectively, the
“Entity
Representatives”); provided, however, that such Entity
Representative as to HoldCo and/or the Company shall include each
Key Holder. Any such Entity Representative will be deemed to have
knowledge of a particular fact, circumstance, event or other matter
if (a) such Entity Representative has actual knowledge of the fact,
circumstance or event or (b) knowledge of such fact, circumstance
or event would be obtained by reasonable inquiry of his direct
reports. With respect to Intellectual Property,
“knowledge” or its variants (i.e., “know,”
“known”, etc.) does not require any Person to conduct,
have conducted, obtain, or have obtained any freedom-to-operate
opinions or similar opinions of counsel or any patent, trademark or
other Intellectual Property rights clearance searches.
“Legal Proceeding” means 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 Authority or any
arbitrator or arbitration panel.
“Letter of Transmittal” has the
meaning set forth in Section 2.5.
“Liabilities” means debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured, determined or determinable, known or unknown,
including those arising under any Applicable Law, action or
governmental order and those arising under any
Contract.
“Lock-up” has the meaning set forth
in Section 7.7.
“Material Adverse Change” and
“Material Adverse
Effect” when used in connection with an entity means
any change, event, circumstance, condition or effect that is or is
reasonably likely to be, individually or in the aggregate,
materially adverse in relation to the condition (financial or
otherwise), capitalization, properties, products, assets (including
intangible assets) and liabilities, taken as a whole, Intellectual
Property, business, operations or results of
operations
8
of such
entity and its Subsidiaries, taken as a whole, except to the extent
that any such change, event, condition or effect directly results
from (a) the direct effect of actions by the Company taken at
the direction or request of Parent pursuant to this Agreement,
(b) changes affecting any of the industries in which such
entity operates generally or the United States or worldwide economy
generally (which changes in each case do not disproportionately
affect such entity in any material respect), (c) any change in any
Applicable Law, or any interpretation thereof, (d) any change in
GAAP or other accounting standards, (e) the announcement or
expected completion of the transactions contemplated by this
Agreement or (f) changes caused by acts of terrorism or war
(whether or not declared), sabotage, natural disasters or other
calamity, crisis or geopolitical event occurring after the date
hereof, or (g) the failure, in and of itself, of the Company to
meet any financial forecast, projection, estimate, prediction or
models, whether internal to the Company or otherwise.
“Materials of Environmental
Concern” has the meaning set forth in Section
3.19(b).
“Merger” has the meaning set forth
in the Recitals.
“Merger Consideration” means the
total consideration the Participating Stockholders are entitled to
receive in the aggregate, equal to (a) $5,000,000 in cash, and (b)
an amount of shares of Parent Common Stock equal to the aggregate
amount of $10,000,000 minus $1,982,514 (representing the value of
the spread of the options assumed under Section 2.1(b)(ii))
determined by dividing such amount by the price per share to the
public of such Parent Common Stock sold in the Qualifying
Offering.
“Merger Expenses” means any fees
and expenses of legal counsel, financial advisors, investment
bankers and accountants as set forth on Section 3.17 of the NSC
Disclosure Schedule, which shall not exceed in the aggregate
$450,000.
“Merger Securities” has the meaning
set forth in the Section 2.10(b).
“Merger Sub” has the meaning set
forth in the Preamble.
“Merger Sub Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
Merger Sub by an officer or officers of Merger Sub at the Closing
pursuant to Article VIII and each agreement or
document (other than this Agreement) that Merger Sub is to enter
into as a party thereto pursuant to this Agreement.
“National Exchange” means the
NASDAQ Stock Market or the New York Stock Exchange.
“Net Working Capital” means the sum
of the Company’s cash and cash equivalents as of the
Effective Time plus (i) Accounts Receivable and the inventory
amount, and minus (ii) accrued payroll and sales commissions and
other current expenses, Indebtedness of the Company, and accounts
payable, but not including Tax and deferred revenue of the Company.
The Company’s Net Working Capital shall be calculated using
the same accounting methods, policies, principles, practices and
procedures, with consistent classifications, judgments and
estimation methodologies that were used in the preparation of the
Company Financial Statements.
9
“Notice
of Claim” has the meaning set forth in Section
10.6(a).
“NSC Disclosure Schedule” means the
disclosure schedule attached hereto and dated as of the Agreement
Date and delivered by HoldCo to Parent on the Agreement Date
listing any exceptions to the representations and warranties of
HoldCo and the Company herein (each of which exceptions, in order
to be effective, shall clearly indicate the section and, if
applicable, the subsection of Article III to which it relates,
unless it is reasonably apparent on its face that such information
qualifies another representation and warranty of HoldCo or the
Company).
“NSC Indemnifying Party” refers to each
Key Holder.
“NSC Material Contract” means any
Contract involving more than $20,000 in revenue or expense in 2017,
year-to-date, and required to be listed on the NSC Disclosure
Schedule pursuant to Section 3.11.
“NSC Permitted Encumbrances” means
(a) statutory liens for taxes that are not yet due and payable
(and for which adequate accruals or reserves have been established
on the Company Financial Statements); (b) statutory liens to
secure obligations to landlords, lessors or renters under leases or
rental agreements; (c) deposits or pledges made in connection
with, or to secure payment of, workers’ compensation,
unemployment insurance or similar programs mandated by Applicable
Law; (d) statutory liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or
supplies and other like liens; (e) Encumbrances disclosed on
Section 1.1 of the NSC Disclosure Schedule; (f)
materialmen’s, mechanics’, carriers’,
workmen’s and repairmen’s Encumbrances and other
similar Encumbrances arising in the ordinary course of business
securing obligations; and (g) any minor imperfection of title or
similar liens, charges or encumbrances which individually or in the
aggregate with other such liens, charges and encumbrances does not
impair the value of the property subject to such lien, charge or
encumbrance or the use of such property in the conduct of the
HoldCo Business.
“Parent” has the meaning set forth
in the Preamble.
“Parent Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
Parent by an officer or officers of Parent at the Closing pursuant
to Article VIII and each agreement or document (other than this
Agreement) that Parent is to enter into as a party thereto pursuant
to this Agreement.
“Parent Capital Stock” means the
Parent Common Stock and the Parent Preferred Stock.
“Parent Common Stock” means Parent’s common stock,
par value $0.0001 per share.
“Parent Disclosure Schedule” means
such disclosure schedule dated as of the Agreement Date that Parent
may provide to HoldCo on the Agreement Date listing any exceptions
to the representations and warranties of Parent and Merger Sub
herein as may be updated or modified from time to time (each of
which exceptions, in order to be effective, shall clearly indicate
the section and, if applicable, the subsection of Article IV to
which it relates, unless it is reasonably apparent on its face that
such information qualifies another representation and warranty of
Parent and Merger Sub).
10
“Parent Financial Statements” has
the meaning set forth in Section 4.12.
“Parent Indemnitees” means the
following Persons: Parent and its subsidiaries (including Merger
Sub and, following the Effective Time, the Surviving Entity) and
their respective directors, officers and attorneys.
“Parent Options” means options to
purchase shares of Parent Common Stock issued pursuant to the
Parent Stock Plan or otherwise.
“Parent Permitted Encumbrances”
means (a) statutory liens for taxes that are not yet due and
payable or being contested in good faith (and for which adequate
accruals or reserves have been established on the Parent Financial
Statements); (b) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements;
(c) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance or
similar programs mandated by Applicable Law; (d) statutory liens in
favor of carriers, warehousemen, mechanics and materialmen, to
secure claims for labor, materials or supplies and other like
liens; (e) Encumbrances disclosed on the Parent Financial
Statements; (f) Encumbrances securing Parent’s and its
Subsidiaries obligations under the credit facility disclosed in the
Parent Financial Statements; (g) materialmen’s,
mechanics’, carriers’, workmen’s and
repairmen’s Encumbrances and other similar Encumbrances
arising in the ordinary course of business securing obligations;
(h) Encumbrances which do not materially detract from the value or
materially interfere with any present or intended use of such
property or assets; or (i) any minor imperfection of title or
similar liens, charges or encumbrances which individually or in the
aggregate with other such liens, charges and encumbrances does not
impair the value of the property subject to such lien, charge or
encumbrance or the use of such property in the conduct of the
business of Parent and its Subsidiaries.
“Parent Preferred Stock” means
Parent’s preferred stock, par value $0.0001 per
share.
“Parent Stock Plan” means the 2017
Equity Award Plan, as amended from time to time.
“Participating Stockholders” means
(a) those HoldCo Stockholders immediately prior to the Effective
Time, other than the holders of Dissenting Shares, and (b)
following the Effective Time, those former HoldCo Stockholders who
are not Participating Stockholders immediately prior to the
Effective Time but who fail to perfect, effectively withdraw or
otherwise lose their appraisal rights under Virginia Law following
the Effective Time.
“Payment Type” means Parent Common
Stock unless a Person is not an “accredited investor”
as defined in Rule 501 of Regulation D of the Securities Act, in
which case the amount to be paid to such Person shall be paid in
cash.
“Permitted Transferees” means the
partners, members, retired partners, retired members, stockholders,
and Affiliates of a Holder, or the estates and immediate family
members of any such partners, retired partners, members, and
retired members and any trusts for the benefit of any of the
foregoing persons, whom, collectively and together with the Holder,
own less than 1% of the outstanding Parent Common
Stock.
11
“Person” means any individual,
corporation, company, limited liability company, partnership,
limited liability partnership, trust, estate, proprietorship, joint
venture, association, organization, entity or Governmental
Authority.
“Post-Closing Tax Period” means any
Tax period beginning after the Closing Date; and, with respect to a
Straddle Period, the portion of such Tax period beginning after the
Closing Date.
“Pre-Closing Tax Period” has the
meaning set forth in Section 7.3(a)(i).
“Pre-Closing Taxes” means
(i) all Taxes (or the non-payment thereof) of or imposed on
HoldCo or the Company for a Pre-Closing Tax Period and the portion
through the end of the Closing Date for any Straddle Period,
(ii) all Taxes of any member of an affiliated, consolidated,
combined or unitary group of which HoldCo or the Company (or any
predecessor of any of the foregoing) is or was a member on or prior
to the Closing Date, including pursuant to Treasury Regulations
Section 1.1502-6 or any analogous or similar U.S. state or
local, or non-U.S. Applicable Law, (iii) all Taxes imposed
upon any a Participating Stockholder whether arising from this
transaction or otherwise, and (iv) any and all Taxes of any
Person (other than HoldCo or the Company) imposed on HoldCo or the
Company as a transferee or successor, by Contract or pursuant to
any Law, which Taxes relate to an event or transaction occurring
before the Closing.
“Prohibited Payments” mean any
offer, gift, payment, promise to pay or authorization to pay money
or anything of value to or for the use or benefit of any government
official (including employees and directors of government-owned
companies and other state enterprises), political party, party
official, candidate for public office or employee of a public
international organization in an effort to win or retain business
or secure any improper advantage, except that the term does not
include any payment to a government official, political party,
party official or political candidate that is expressly permitted
under the written laws of the country involved, or any facilitating
payment that is made solely to secure the provision of routine
governmental services.
“Public Software” has the meaning
set forth in Section 3.13(q).
“Qualifying Offering” means the
first firm commitment underwritten public offering of Parent for an
aggregate price to the public of at least $10,000,000, which
results in Parent’s successful listing of Parent Common Stock
on a National Exchange.
“Released Parties” has the meaning
set forth in Section 10.3(k).
“Resolution
Period” has the meaning set forth in Section
10.4(c).
“Response Notice” has the meaning
set forth in Section 10.6(b).
“Returns” has the meaning set forth
in Section 3.7(a).
“SEC” means the Securities and Exchange
Commission.
“SEC
Documents” means, with
respect to any Person, each report,
schedule, form, statement or other document filed or required to be
filed with the SEC by such
Person pursuant to
Section 13(a) of the Exchange Act.
12
“Section 409A” has the meaning set
forth in Section 3.16(t).
“Securities Act” means the
Securities Act of 1933, as amended.
“Significant Customer” has the
meaning set forth in Section 3.20(a).
“Significant Supplier” has the
meaning set forth in Section 3.20(b).
“Spreadsheet” means the spreadsheet
delivered to Parent pursuant to Section 8.2(j), which spreadsheet
shall be dated as of the Closing Date and shall set forth, as of
the Closing Date and immediately prior to the Effective Time, the
following factual information relating to the HoldCo
Securityholders: (a) the names of all the HoldCo
Securityholders and, to the knowledge of HoldCo, their respective
last known addresses and (where available) taxpayer identification
numbers and email addresses; (b) the number and type of shares
of HoldCo Capital Stock held by, or subject to the HoldCo Options
held by, such Persons, and in the case of outstanding shares, the
respective certificate numbers; (c) the exercise price per
share in effect for each HoldCo Option; and (d) the pro-rata share
of the Merger Consideration each HoldCo Stockholder is entitled
to.
“Stipulated Amount” has the meaning
set forth in Section 10.6(e).
“Stockholders’ Agent” has the
meaning set forth in the Preamble.
“Stockholder Approval” has the
meaning set forth in Section 3.4(e).
“Stockholder Indemnitees” has the
meaning set forth in Section 10.10.
“Straddle Period” means any taxable
period beginning on or before and ending after the Closing
Date.
“Straddle Period Tax Returns” has
the meaning set forth in Section
7.3(a)(ii).
“Subsidiary” means a corporation or
other business entity in which the Company or Parent owns, directly
or indirectly, at least a 50% interest or that is otherwise,
directly or indirectly, controlled by such entity.
“Superior Proposal” has the meaning
set forth in Section 5.7(a).
“Surviving Entity” has the meaning
set forth in the Recitals.
“Target Net Working Capital Amount”
is equal to $480,000.
“Tax” (and, with correlative
meaning, “Taxes”) means any net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, goods and services, harmonized sales, capital,
unemployed occupation, workers’ compensation, value added, ad
valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or
other tax, governmental fee or other like assessment or charge of
any kind whatsoever, including an escheat obligation, together with
any interest or any penalty, addition to tax or additional amount
imposed
13
by any
Governmental Authority responsible for the imposition of any such
tax (domestic or foreign).
“Tax Asset” means any net operating
loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other credit or tax attribute that
could be carried forward or back to reduce Taxes (including
deductions and credits related to alternative minimum
Taxes).
“Tax
Contest” has the meaning set forth in Section
7.3(d).
“Threshold” has the meaning set
forth in Section 10.3(a).
“Xxxxxxx”
has the meaning set forth in the Preamble.
“Virginia Law” means the Virginia
Stock Corporation Act of the Commonwealth of Virginia.
“Voting
Agreement” has the meaning set forth in the
Recitals.
“VWAP”
means, for any security as of any date, the dollar volume-weighted
average price for such security on the National Exchange (or, if
the National Exchange is not the principal trading market for such
security, then on the principal securities exchange or securities
market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its
“AQR” function or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such
security during the period beginning at 9:30:01 a.m., New York
time, and ending at 4:00:00 p.m., New York time, as reported by
Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price
of any of the market makers for such security as reported in the
“pink sheets” by OTC Markets Group Inc. (formerly Pink
Sheets LLC). All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination,
recapitalization or other similar transaction during such
period.
“WARN Act” has the meaning set
forth in Section 3.16(p).
“Xxxxxx” has the meaning set forth
in the Preamble.
ARTICLE II
THE MERGER
(a) Conversion
of Merger Sub Membership Interests. At the Effective Time,
the membership interests of Merger Sub issued and outstanding
immediately prior to the Effective Time shall remain outstanding as
the membership interests of the Surviving Entity.
14
(i) HoldCo
Capital Stock. On the terms and subject to the conditions of
this Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of Parent, HoldCo or any HoldCo
Stockholder, the following shall occur:
A. Conversion
of HoldCo Common Stock. Each share of HoldCo Common Stock
outstanding immediately prior to the Effective Time will be
cancelled and extinguished, and each share of HoldCo Common Stock
(other than any shares that either then are or remain then eligible
to become Dissenting Shares (as provided in
Section 2.6)) shall be automatically converted
into the right to receive the Merger Consideration, in the form of
cash and/or Parent Common Stock, pursuant to such Participating
Stockholder’s Payment Type, in the amount calculated in
accordance with the Consideration Spreadsheet (as defined
below).
B. HoldCo
Preferred Stock. All obligations related to the HoldCo
Preferred Stock, including any redemption obligation, shall be
satisfied by Parent at Closing. Any sums paid by Parent on account
of HoldCo Preferred Stock in excess of $2,250,000 shall be deducted
from the cash portion of Merger Consideration.
(ii) HoldCo
Options.
A. At
the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, HoldCo or the HoldCo
Optionholders, (i) each HoldCo Option outstanding immediately prior
to the Effective Time that is held by a HoldCo Optionholder that
continues in the employment, or service as a consultant or
director, of the Company as of the Effective Time (a
“Continuing
Option”) and (ii) the HoldCo Stock Plans under which
the Continuing Options were issued, will be assumed by
Parent. Each Continuing Option assumed by Parent will
continue to have, and be subject to, the same terms and conditions
of such option immediately prior to the Effective Time, except for
administrative changes that are not adverse to the holder of the
Continuing Option or to which the holder consents and except that
(W) each Continuing Option will be one hundred percent (100%)
vested and exercisable as of such date that is one hundred and
eighty (180) days after the Effective Time, (X) each Continuing
Option will be exercisable for a number of validly issued, fully
paid and non-assessable shares of Parent Common Stock equal to the
product of the number of shares of HoldCo Common Stock that would
be issuable upon exercise of the Continuing Option outstanding
immediately prior to the Effective Time multiplied by the Exchange
Ratio (as defined below), rounded down to the nearest whole number
of shares of Parent Common Stock, (Y) the per share exercise
price for the Parent Common Stock issuable upon exercise of such
assumed Continuing Option will be equal to the quotient determined
by dividing the per share exercise price for such Continuing Option
outstanding immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent, and (Z) all
references to the “Company” in the applicable HoldCo
Stock Plans and the stock option agreements will be references to
Parent. The “Exchange
Ratio” shall be determined pursuant to the methodology
described in Schedule 2.1(b)(ii). It is the intention of the
parties that each HoldCo Option so assumed by Parent shall qualify
following the Effective Time as an incentive stock option as
defined in Section 422 of the Code to the extent permitted
under Section 422 of the Code and to the extent such HoldCo
Option qualified as an incentive stock option immediately prior to
the Effective Time.
15
B. Each
HoldCo Option that is not a Continuing Option shall be canceled at
the Effective Time, without payment of any consideration to the
respective HoldCo Optionholder.
C. Prior
to the Effective Time, HoldCo shall provide notice (in a form
reasonably satisfactory to Parent) to each HoldCo Optionholder with
an outstanding HoldCo Option describing the treatment of such
HoldCo Option in accordance with this
Section 2.1(b)(ii).
D. No
additional awards will be issued under the assumed HoldCo Stock
Plans after the Agreement Date and the HoldCo Stock Plans shall be
frozen as of the Agreement Date.
E. Parent
shall take such actions as are necessary for the assumption of the
HoldCo Options and HoldCo Stock Plans under which they were issued,
including the reservation, issuance and listing of Parent Common
Stock, as is necessary to effectuate the transactions contemplated
by this Section 2.1(b)(ii). Parent shall prepare and file with
the SEC a registration statement on Form S-8 with respect to the
Parent Common Stock subject to such Continuing Options and shall
use its reasonable best efforts to have such registration statement
declared effective as soon as reasonably practicable (and in no
event later than thirty (30) days) following the Closing Date.
It is intended that the assumption of the Continuing Options
assumed by Parent shall comply with Sections 409A and 424 of
the Code and this Section 2.1(b)(ii) shall be construed
consistent with such intent.
(c) Adjustments.
In the event of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities
convertible into capital stock), reorganization, reclassification,
combination, recapitalization or other like change with respect to
the HoldCo Capital Stock occurring after the Agreement Date and
prior to the Effective Time, all references in this Agreement to
specified numbers of shares of any class or series affected
thereby, and all calculations provided for that are based upon
numbers of shares of any class or series (or trading prices
therefor) affected thereby, shall be equitably adjusted to the
extent necessary to provide the parties the same economic effect as
contemplated by this Agreement prior to such stock split, reverse
stock split, stock dividend, reorganization, reclassification,
combination, recapitalization or other like change.
(d) Fractional
Shares. No fraction of a share of Parent Common Stock shall
be issued by virtue of the Merger, but in lieu thereof: each holder
of HoldCo Capital Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
shares of Parent Common Stock that otherwise would be received by
such holder) shall, upon surrender of such holder’s
Certificate or Certificates (as defined in Section
2.5. receive from the
Exchange Agent (on behalf of Parent) an amount of cash (rounded to
the nearest whole cent), without interest, equal to the applicable
fractional share interest (after aggregating all shares of Parent
Common Stock that would otherwise be received by such
holder).
2.2 Allocation
of Merger Consideration. At the Closing,
HoldCo shall deliver to Parent a spreadsheet setting forth the
final calculation of the portions of the Merger Consideration
that
16
are
payable to the Participating Stockholders upon the consummation of
the Merger pursuant to Section 2.1 (the
“Consideration
Spreadsheet”).
2.3 The
Closing. Subject to
termination of this Agreement as provided in Article IX, the Closing shall take place
at the offices of Xxxxxxx & Xxxxxx LLP at 0000 Xxxxxxxxxxxx
Xxxxxx, XX, Xxxxxxxxxx, XX 00000, on the Closing Date. Concurrently
with the Closing or at such date and time as may be mutually agreed in writing by HoldCo
and Parent, the applicable Certificate of Merger shall be filed
with the Office of the Secretary of State of the State of Delaware
in accordance with Delaware Law, and the applicable Certificate of
Merger shall be filed with the Office of the Clerk of the State
Corporation Commission of the Commonwealth of Virginia in
accordance with Virginia Law.
2.4 Effects
of the Merger. At and upon the
Effective Time:
(a) the
separate existence of HoldCo shall cease and HoldCo shall be merged
with and into Merger Sub, and Merger Sub shall be the Surviving
Entity of the Merger pursuant to the terms of this Agreement and
the Certificates of Merger;
(b) the
Certificate of Formation of the Merger Sub shall continue unchanged
and be the Certificate of Formation of the Surviving
Entity;
(c) the
Operating Agreement of Merger Sub shall continue unchanged and be
the Operating Agreement of the Surviving Entity; and
(d) the
officers of Merger Sub immediately prior to the Effective Time
shall remain the officers of the Surviving Entity immediately after
the Effective Time until their respective successors are duly
appointed.
2.5 Surrender
of Certificates. Within five (5) Business Days after the
Effective Time, Parent shall cause the Exchange Agent to mail to
each Participating Stockholder a letter of transmittal (the
“Letter of
Transmittal”) in customary form (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall contain such other customary
provisions as Parent may reasonably specify). Upon receipt by the
Exchange Agent of the Certificates for cancellation, together with
a duly completed and validly executed Letter of Transmittal and any
other documents as Parent shall reasonably require, Parent shall
cause the Exchange Agent to promptly deliver or pay depending upon
the Payment Type to such HoldCo Stockholder that portion of the
Merger Consideration which such HoldCo Stockholder has the right to
receive pursuant to Section 2.1(b) and any other
amount which such HoldCo Stockholder has the right to receive
pursuant to Section 2.1(d). In the event any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, Parent shall cause the
Exchange Agent, as promptly as practicable following the receipt by
the Exchange Agent and Parent of the foregoing documents, to pay in
exchange for such lost, stolen or destroyed Certificate that
portion of the Merger Consideration that such HoldCo Stockholder
has the right to receive pursuant to
Section 2.1(b) and any other amount payable
pursuant to Section 2.1(d) represented by the lost,
stolen or destroyed Certificate in exchange therefor which the
HoldCo Stockholder has the right to receive. The Board of Directors
of Parent may in its
17
discretion
and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificate to provide to
Parent an indemnity agreement or bond (not to exceed $100) against
any claim that may be made against Parent with respect to the
Certificate alleged to have been lost, stolen or destroyed. From
and after the Effective Time, no shares of HoldCo Capital Stock
will be deemed to be outstanding, and holders of Certificates
formerly representing such HoldCo Capital Stock shall cease to have
any rights with respect thereto except as provided herein or by
Applicable Law. At the Effective Time, the stock transfer books of
HoldCo shall be closed and no transfer of HoldCo Capital Stock
shall thereafter be made. If, after the Effective Time,
Certificates formerly representing shares of HoldCo Capital Stock
are presented to Parent or the Surviving Entity, they shall be
cancelled and exchanged for that portion of the Merger
Consideration payable with respect to such HoldCo Capital Stock in
accordance with Section 2.1(b).
2.6 Dissenting
Shares. If, in connection with the Merger, holders of HoldCo
Capital Stock shall have demanded and perfected appraisal rights,
none of such Dissenting Shares shall be converted into a right to
receive a portion of the Merger Consideration with respect to such
HoldCo Capital Stock in accordance with Section
2.1(b), but shall be converted into the right to
receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to Virginia Law. Each
holder of Dissenting Shares who, pursuant to the provisions of
Virginia Law becomes entitled to payment of the fair value of such
shares shall receive payment therefor in accordance with Virginia
Law (but only after the value therefor shall have been agreed upon
or finally determined pursuant to Virginia Law). In the event that
any holder of HoldCo Capital Stock fails to make an effective
demand for payment or fails to perfect its appraisal rights as to
its shares of HoldCo Capital Stock or any Dissenting Shares shall
otherwise lose their status as Dissenting Shares, then any such
shares shall immediately be converted into the right to receive the
consideration issuable pursuant to this Article II in
respect of such shares as if such shares never been Dissenting
Shares, and Parent shall issue and deliver to the holder thereof,
at (or as promptly as reasonably practicable after) the applicable
time or times specified in Section 2.5, following the
satisfaction of the applicable conditions set forth in Section
2.5, the portion of the Merger Consideration, to which
such HoldCo Stockholder would have been entitled under Section
2.1(b) and Section 2.1(d) with respect to such shares.
HoldCo shall give Parent (i) prompt notice of any demand received
by HoldCo for appraisal of HoldCo Capital Stock in accordance with
Virginia Law and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal rights under
such law. HoldCo agrees that, except with Parent’s prior
written consent, it shall not voluntarily make any payment or offer
to make any payment with respect to, or settle or offer to settle,
any such demand for appraisal rights.
2.7 Remaining
Funds. At any time
following six (6) months after the Effective Time, the Surviving
Entity shall be entitled to require the Exchange Agent to deliver
to it any funds (including any interest received with respect
thereto) which had been made available to the Exchange Agent and
which have not been disbursed to holders of Certificates.
Thereafter, such holders shall be entitled to look to the Surviving
Entity (subject to abandoned property, escheat or other Applicable
Laws) only as a general creditor thereof with respect to the Merger
Consideration payable upon surrender of their Certificates, without
any interest thereon. Neither the Surviving Entity nor the Exchange
Agent shall be liable to any holder of any portion of the Merger
Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
18
2.8 Tax
Withholding. After providing
notice and working with HoldCo in good faith to minimize any
withholdings, Parent or Parent’s agent shall be entitled to
deduct and withhold from the Merger Consideration or other payment
otherwise payable pursuant to this Agreement to any HoldCo
Securityholder, the amounts required to be deducted and withheld
under the Code, or any provision of state, local or foreign tax
law, with respect to the making of such payment. To the extent that
amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the HoldCo
Securityholder in respect of whom such deduction and withholding
was made.
2.9 Tax
Consequences. It is intended by
the parties hereto that the Merger shall constitute a tax-free
“reorganization” within the meaning of Section 368 of
the Code and this Agreement shall constitute a “plan of
reorganization.” Notwithstanding the foregoing, none of
Parent, Merger Sub, HoldCo or the Company makes any representation
or warranty with respect to any tax consequences to Parent, Merger
Sub, HoldCo, the Company or any HoldCo Stockholders arising under
this Agreement or the transactions contemplated hereby, and each
party hereto and the HoldCo Stockholders shall rely on their own
tax advisors as to the tax consequences to them of such
transaction.
(a) Legends.
Legends reading substantially as follows shall be placed on each
stock certificate representing Parent Common Stock issued pursuant
to the Merger:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE
SECURITIES ACT AND AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO NOVUME SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) Stop-Transfer
Notice. Each holder (“Holder”, and such definition shall
include any Permitted Transferees to whom shares of Parent Common
Stock have been transferred) of Parent Common Stock issued in the
Merger (the “Merger
Securities”) agrees that, in order to ensure
compliance with the restrictions referred to herein, Parent may
issue appropriate “stop transfer” instructions to its
transfer agent.
(c) Removal
of Legend. The Parent Common Stock issued pursuant to the
Merger will no longer be subject to the legend referred to in
Section 2.10(a) upon the registration of the Parent
Common Stock under a registration statement in accordance with the
Registration Rights Agreement, in substantially the form attached
hereto as Exhibit C. After such time, Parent shall issue a blanket
instruction to its transfer agent to issue new certificates (or
uncertificated shares), upon exchange from the Holders of such
legended certificates, representing such Parent Common Stock
without the legend referred to in
Section 2.10(a).
19
(d) Transfers
to Permitted Transferees. Notwithstanding anything to the
contrary herein, a Holder shall be permitted to transfer, at its
sole discretion, its shares of Parent Common Stock to any Permitted
Transferee.
2.11 Further
Assurances. If, at any time
before or after the Effective Time, any of the parties hereto
reasonably believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary to
consummate the Merger or to carry out the purposes and intent of
this Agreement at or after the Effective Time, then HoldCo, the
Company, Parent, the Surviving Entity and their respective officers
and directors shall execute and deliver all such proper deeds,
assignments, instruments and assurances and do all other things
reasonably necessary to consummate the Merger and to carry out the
purposes and intent of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDCO THE COMPANY AND EACH KEY
HOLDER
Subject
to the exceptions set forth in a numbered or lettered section of
the NSC Disclosure Schedule and other sections of the NSC
Disclosure Schedule to the extent (a) such information is
cross-referenced in another part of the NSC Disclosure Schedule, or
(b) it is reasonably apparent on the face of the disclosure that
such information qualifies another representation and warranty of
HoldCo or the Company in the Agreement, HoldCo, the Company and
each Key Holder, jointly and severally, represent and warrant to
Parent that the statements contained in this Article
III are true and
correct on and as of the date of this Agreement:
3.1 Organization
and Good Standing. HoldCo is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Virginia. The Company is a limited liability
company duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia. Each of HoldCo and the
Company (i) has the requisite power and authority to own, operate
and lease its properties and to carry on the HoldCo Business in all
material respects; and (ii) is duly qualified or licensed in all
material respects to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary; without limiting the
foregoing, HoldCo and the Company are so qualified or licensed in
each jurisdiction listed on Section 3.1 of the NSC
Disclosure Schedule.
3.2 Subsidiaries.
Other than the Company in the case of HoldCo neither HoldCo nor the
Company owns any capital stock of, or other equity or voting
interests of any nature in, or any interest convertible,
exchangeable or exercisable for, capital stock of, or other equity
or voting interests of any nature in, any other
Person.
(a) Power
and Authority. Other than the Stockholder Approval, HoldCo
has all requisite corporate power and corporate authority to enter
into, execute, deliver and perform its obligations under this
Agreement and each of the HoldCo Ancillary Agreements and to
consummate the Merger. The Merger and the execution, delivery and
performance by HoldCo of this Agreement, each of the HoldCo
Ancillary Agreements and all other agreements,
20
transactions
and actions contemplated hereby or thereby, have been duly and
validly approved and authorized by all requisite corporate action
on the part of HoldCo (other than the Stockholder Approval) and no
other corporate proceedings on the part of HoldCo are necessary to
approve this Agreement and each of the HoldCo Ancillary Agreements
or to authorize or consummate the transactions contemplated hereby
or thereby. The Company has all requisite limited liability company
power and authority to enter into, execute, deliver and perform its
obligations under this Agreement and each of the Company Ancillary
Agreements and to consummate the Merger. The Merger and the
execution, delivery and performance by the Company of this
Agreement, each of the Company Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby or
thereby, have been duly and validly approved and authorized by all
requisite limited liability company action on the part of the
Company and no other actions or proceedings on the part of the
Company are necessary to approve this Agreement and each of the
Company Ancillary Agreements or to authorize or consummate the
transactions contemplated hereby or thereby.
(b) Enforceability.
This Agreement has been duly executed and delivered by HoldCo. This
Agreement and each of the HoldCo Ancillary Agreements are, or when
executed by HoldCo shall be, assuming the due authorization,
execution and delivery by each other party hereto, valid and
binding obligations of HoldCo, enforceable against HoldCo in
accordance with their respective terms, subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other
equitable remedies. This Agreement has been duly executed and
delivered by the Company. This Agreement and each of the Company
Ancillary Agreements are, or when executed by the Company shall be,
assuming the due authorization, execution and delivery by each
other party hereto, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors generally and
(ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
(c) Key
Holders. Each Key Holder possesses full legal right and all
requisite power and authority, and has taken all actions necessary,
to authorize, execute, deliver and perform this Agreement and each
Ancillary Agreement to which it is or will be a party and to
consummate the Merger, in accordance with the terms of this
Agreement and the Ancillary Agreements, as applicable; and other
than the Stockholder Approval, no other action on the part of
HoldCo is necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements by
HoldCo and the Company or the consummation of the Merger. This
Agreement and each Ancillary Agreement to which each Key Holder is
or will be a party has been, or upon its execution and delivery to
Parent, will be duly and validly executed and delivered by each Key
Holder and constitutes, or upon its execution and delivery will
constitute, a valid and legally binding obligation of each Key
Holder, enforceable against HoldCo and each Key Holder, in
accordance with its terms and conditions, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
Applicable Laws affecting creditors’ rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity).
21
(a) Authorized
and Outstanding Capital Stock of HoldCo. The authorized
capital stock of HoldCo consists of 7,000,000 shares of HoldCo
Common Stock, of which 3,516,569 shares of HoldCo Common Stock are
issued and outstanding as of the Agreement Date, and 778,432 shares
of HoldCo Preferred Stock, consisting of 521,962 shares designated
Series A Preferred Stock, all of which are issued and outstanding
as of the Agreement Date. The number of issued and outstanding
shares of HoldCo Capital Stock held by each stockholder as of the
Agreement Date are set forth on Section 3.4 of the NSC Disclosure
Schedule, and no shares of HoldCo Capital Stock are issued or
outstanding as of the Agreement Date that are not set forth
therein, and no such shares shall be issued or outstanding as of
the Closing Date that are not set forth therein. HoldCo holds no
treasury shares. All issued and outstanding shares of HoldCo
Capital Stock have been duly authorized and validly issued, are
fully paid and nonassessable, were not issued in violation of and,
except under the agreements to be terminated pursuant to
Section 8.2(g) hereof, are not subject to any right of
rescission, right of first refusal or preemptive right, and have
been offered, issued, sold and delivered by HoldCo in compliance
with all requirements of Applicable Law and all requirements set
forth in applicable Contracts. There is no Liability for dividends
accrued and unpaid by HoldCo.
(b) Membership
Interests of the Company. All of the issued and outstanding
membership interests of the Company are owned beneficially and of
record by HoldCo. The membership interests of the Company have been
duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of and, are not subject
to any right of rescission, right of first refusal or preemptive
right, and have been offered, issued, sold and delivered by the
Company in compliance with all requirements of Applicable Law and
all requirements set forth in applicable Contracts. From and after
the Closing, the Surviving Entity will continue to hold good and
valid title to all membership interests of the Company, free and
clear of all Encumbrances.
(c) Options.
HoldCo has reserved an aggregate of 1,768,865 shares of HoldCo
Common Stock for issuance pursuant to the HoldCo Stock Plans
(including shares subject to outstanding HoldCo Options). A total
of 1,727,209 shares of HoldCo Common Stock are subject to
outstanding HoldCo Options as of the Agreement Date and as of the
Closing Date, except for HoldCo Options outstanding as of the
Agreement Date that are exercised in accordance with their terms
prior to the Closing Date. Section 3.4(c) of the NSC
Disclosure Schedule sets forth, as of the Agreement Date, for each
HoldCo Option, (i) the name of the holder of such HoldCo Option,
(ii) the exercise price per share of such HoldCo Option, (iii) the
number of shares covered by such HoldCo Option, (iv) the vesting
schedule for such HoldCo Option, (v) the extent such HoldCo Option
is vested as of the Agreement Date, (vi) whether such HoldCo Option
is an incentive stock option or non-statutory stock option under
the Code, (vii) the date of grant of such HoldCo Option and the
name of the entity originally granting such HoldCo Option, and
(viii) whether such HoldCo Option was granted under the HoldCo
Stock Plans. The holders of the requisite number of shares of
HoldCo Capital Stock have approved each HoldCo Stock Plan in
accordance with Applicable Law. True and correct copies of the
HoldCo Stock Plans, the standard agreements under the HoldCo Stock
Plans and each agreement for each HoldCo Option that does not
conform to the standard agreement under the HoldCo Stock Plans have
been delivered by
22
HoldCo
to Parent. All HoldCo Options have been issued and granted in
compliance with Applicable Law and all requirements set forth in
applicable Contracts.
(d) No
Other Rights. Except for HoldCo Options and HoldCo Preferred
Stock, there are no stock appreciation rights, options, warrants,
calls, rights, commitments, conversion privileges or preemptive or
other rights or Contracts outstanding to purchase or otherwise
acquire any shares of HoldCo Capital Stock, any limited liability
interests of the Company, or any securities or debt convertible
into or exchangeable for HoldCo Capital Stock or limited liability
interests of the Company, or obligating HoldCo or the Company to
grant, extend or enter into any such option, warrant, call, right,
commitment, conversion privilege or preemptive or other right or
Contract. Except under the agreements to be terminated pursuant to
Section 8.2(g) hereof, there are no voting agreements, registration
rights, rights of first refusal, preemptive rights, co-sale rights
or other restrictions applicable to any outstanding securities of
HoldCo. There are no voting agreements, registration rights, rights
of first refusal, preemptive rights, co-sale rights or other
restrictions applicable to any outstanding securities of Holdco or
any of the interests of the Company.
(e) Required
Vote of Stockholders. The affirmative vote or consent of the
holders of at least two thirds (2/3) of the outstanding HoldCo
Capital Stock, voting together as a single class on an as-converted
to HoldCo Common Stock (the “Stockholder Approval”), are the
only votes or consents of the holders of any class or series of the
HoldCo Capital Stock necessary to adopt this Agreement and to
effect the Merger. The total aggregated amount of outstanding
HoldCo Capital Stock held by the Key Holders represents more than
two thirds (2/3) of the outstanding HoldCo Capital
Stock.
(f) Spreadsheet.
The information set forth on the Spreadsheet is true, complete and
accurate as of the Closing Date and immediately prior to the
Effective Time.
(g) Key
Holders. Each Key Holder owns of record and beneficially the
HoldCo Common Stock set forth next to such Key Holder’s name
in the Spreadsheet; and at the Closing, each Key Holder will
deliver to the Company (pursuant to Section 2.1(b)) good and valid
title to such HoldCo Common Stock, free and clear of all
Encumbrances.
(h) Reorganization. Pursuant
to a plan of reorganization, the Company formed HoldCo as a wholly
owned subsidiary on November 8, 2017 and HoldCo formed NeoSystems
Merger Sub, Inc., a wholly owned subsidiary of HoldCo on November
8, 2017 (“HoldCo
Merger Sub”). HoldCo
caused HoldCo Merger Sub to merge with and into the Company on
November 14, 2017, with the Company surviving the merger. Further,
in such merger, the Company’s shareholders were issued
capital stock of HoldCo in exchange for their shares of capital
stock of the Company. As a result of such merger, HoldCo was issued
100% of the capital stock of the Company in exchange for all of
HoldCo’ s interests in HoldCo Merger Sub, resulting in the
Company becoming the sole and direct wholly owned subsidiary of
HoldCo. On November 15, 2017 HoldCo caused the Company to convert
to a Virginia limited liability company. For tax purposes, the
foregoing actions are treated as a tax-free reorganization under
Section 368(a)(1)(F) of the Code. Section 3.4(h) of the NSC
Disclosure Schedule includes true, correct and complete copies of
the documents and certificates effecting such plan of
reorganization, including the certificates of formation and/or
incorporation of HoldCo and HoldCo
23
Merger
Sub, the filed and approved certificate effecting such merger, and
the filed and approved certificate of conversion of the Company
effecting its conversion into a limited liability
company.
3.5 Consents;
Conflict.
(a) No
Consents. Except for the filings of the applicable
Certificates of Merger and those consents, approvals and notices
set forth on Section 3.5(a) of the NSC Disclosure
Schedule, no material consents or material approvals of or material
notices to or filings, declarations or registrations with any
Governmental Authority, any other governmental Person, or any other
Person are necessary in connection with (i) the execution and
delivery by HoldCo, the Company and each Key Holder of this
Agreement or any of the Ancillary Agreements or (ii) the
consummation by HoldCo, the Company and each Key Holder of the
Merger or the other transactions contemplated hereby or thereby so
as to permit the Surviving Entity to continue the HoldCo Business
after the Closing Date (including the consent of any Person
required to be obtained in order to keep any NSC Material Contract
between such Person and the Company in effect following the Merger
or to provide that the Company is not in breach or violation of any
such NSC Material Contract following the Merger).
(b) No
Conflict. Neither the execution and delivery of this
Agreement or any of the Ancillary Agreements, as applicable, by
HoldCo, the Company and each Key Holder, nor the consummation of
the Merger or any other transaction contemplated hereby or thereby,
shall conflict in any material respect with, result in a
termination or material breach, impairment or violation of (with or
without notice or lapse of time, or both), or constitute a default,
or require the consent, release, waiver or approval of any third
party, under: (a) any provision of the HoldCo Charter
Documents or the Company Charter Documents, each as currently in
effect; (b) any Applicable Law applicable to HoldCo or the Company,
including any of their assets or properties, or any Key Holder; (c)
except as set forth on Section 3.5(a) of the NSC Disclosure
Schedule, any NSC Material Contract; (d) any privacy policy of
HoldCo or the Company, or (e) any Contract to which any Key Holder
is a party or to which any Key Holder is bound.
3.6 Litigation.
As of the date of this Agreement, there is no action, suit,
arbitration, mediation, proceeding, claim or, to its knowledge,
investigation pending against HoldCo or the Company (or, to
HoldCo’ s knowledge, against any officer, director, employee
or agent of HoldCo or the Company, in their capacity as such or
relating to their employment, services or relationship with HoldCo
or the Company) or any Key Holder before any Governmental
Authority, arbitrator or mediator; nor, to HoldCo’s
knowledge, has any such action, suit, arbitration, mediation,
proceeding, claim or investigation been threatened in writing.
There is no judgment, decree, injunction, rule or order of any
Governmental Authority, arbitrator or mediator outstanding against
HoldCo, the Company or any Key Holder. None of HoldCo, the Company,
or any Key Holder has an action, suit, arbitration, mediation,
proceeding, claim or investigation pending against any Governmental
Authority or other Person.
3.7 Taxes.
For purposes of this Section 3.7, all references to the
“Company” shall also include its
predecessors.
(a) HoldCo
and the Company, (i) have properly completed and timely filed
all U.S. federal and state income and all other material foreign,
state, provincial, local and
24
municipal
tax and information returns, including all schedules thereto (the
“Returns”)
required to be filed by them, and all such Returns are true and
accurate in all material respects, (ii) have timely paid all Taxes
required to be paid by them for which payment was due, (iii) have
established an adequate accrual or reserve for the payment of all
Taxes payable in respect of the periods or portions thereof prior
to the Balance Sheet Date (which accrual or reserve as of the
Balance Sheet Date is fully reflected on the Company Balance Sheet)
for which payment has not yet been made and will establish an
adequate accrual or reserve for the payment of all Taxes payable by
HoldCo in respect of the periods or portion thereof through the
Closing Date, and (iv) have timely made (or will make on a timely
basis) all estimated Tax payments required to be made.
(b) HoldCo
and the Company are not delinquent in the payment of any Tax or in
the filing of any Returns, and no deficiencies for any Tax have
been proposed in writing or assessed against HoldCo or the Company.
HoldCo and the Company have not received any written notification
from the Internal Revenue Service (“IRS”) or any other taxing
authority regarding any issues that (i) are currently pending
before the IRS or any other taxing agency or authority (including
any sales or use taxing authority) regarding HoldCo or the Company,
or (ii) have been raised by the IRS or other taxing agency or
authority and not yet finally resolved. No Return of HoldCo or the
Company is under audit by the IRS or any other taxing agency or
authority and past audits (if any) have been completed and fully
resolved.
(c) There
is not in effect any waiver by HoldCo or the Company of any statute
of limitations with respect to any Taxes nor has HoldCo or the
Company agreed to any extension of time for filing any Return that
has not yet been filed. HoldCo and the Company have not consented
to extend the period in which any Tax may be assessed or collected
by any taxing agency or authority.
(d) HoldCo
and the Company have complied (and until the Closing Date will
comply) with all Applicable Law relating to the payment and
withholding of Taxes, and has, within the time and in the manner
prescribed by Applicable Law, withheld from employee wages and paid
over to the proper taxing agencies and authorities all amounts
required to be so withheld and paid over under all Applicable Law
(including Federal Insurance Contribution Act, Medicare, Federal
Unemployment Tax Act and relevant state income and employment tax
withholding laws), including federal and state income Taxes, and
has timely filed all withholding tax Returns.
(e) Neither
HoldCo nor the Company is a party to or bound by any tax sharing,
tax indemnity, or tax allocation agreement other than commercial
agreements entered into in the ordinary course of business and the
primary subject matter of which is not Taxes.
(f) HoldCo
and the Company have not participated in, and HoldCo and the
Company are not currently participating in, a “Listed
Transaction” within the meaning of Treasury Regulation
Section 1.6011-4(b), or any transaction requiring disclosure
under a corresponding or similar provision of state, local, or
foreign Tax law.
(g) Neither
HoldCo nor the Company has any liability for the Taxes of any
Person (other than HoldCo or the Company) as a transferee or
successor, or under
25
Section 1.1502-6
of the Treasury Regulations (or any similar provision of state,
local or foreign law), by contract or otherwise.
(h) Neither
HoldCo nor the Company is required to include any item of income
in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date
as a result of any: (i) change in method of accounting made
prior to the Closing Date, including under Section 481 of the Code
(or any similar provision of applicable Tax law), made prior to the
Closing Date; (ii) closing agreement as described in
Section 7121 (or any similar provision of state, local, or
foreign Tax law) executed prior to the Closing Date;
(iii) installment sale or open transaction disposition
made prior to the Closing Date; (iv) prepaid amount received
prior to the Closing Date; of (v) election under Section 108(i) of
the Code (or any similar provision of Applicable Law) made prior to
the Closing Date.
(i) Neither
HoldCo nor the Company has constituted 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.
(j) Neither
HoldCo nor the Company has a permanent establishment or foreign
branch outside of its country of incorporation.
(k) There
are no liens or encumbrances for Taxes on any of the assets of
HoldCo or the Company (other than for current Taxes not yet due and
payable).
No
representations or warranties are made with respect to the amount,
availability or sufficiency of any Tax Asset for any Pre-Closing
Tax Period that may be available to offset, reduce or eliminate
income or Taxes of the Company, the Parent or their respective
Affiliates for Post-Closing Tax Periods. In addition,
except for any Taxes resulting from a breach of Section 3.7(h),
neither Holdco, the Company nor any of the Participating
Shareholders shall have any liability or other responsibility,
directly or indirectly, for Taxes imposed on the Company or Holdco
with respect to a Post-Closing Tax Period.
3.8 Financial
Statements; Books and Records.
(a) Financial
Statements. Section 3.8(a) of the NSC
Disclosure Schedule includes the Company Financial Statements. The
Company Financial Statements: (i) are derived from and are in
accordance with the Books and Records of the Company;
(ii) fairly present, in all material respects, the financial
condition of the Company at the dates therein indicated and the
results of operations and cash flows of the Company for the periods
therein specified; and (iii) have been prepared in accordance
with GAAP consistently applied in accordance with the
Company’s practices throughout the periods indicated and with
each other,
except for the absence of footnotes. The Company has no material
Liabilities of a type required to be reflected on a balance sheet
prepared in accordance with GAAP, except for (w) those shown
on the Company Balance Sheet or in the notes thereto, (x) those
incurred after the Balance Sheet Date in the ordinary course of the
Company’s business consistent with its past practices,
(y) Liabilities set forth on Section 3.8(a)
of the NSC Disclosure Schedule (including the calculation of Merger
Expenses); and (z) liabilities directly incurred under the terms of
this Agreement.
26
(b) Internal
Controls; Disclosure Controls. To HoldCo’ s knowledge,
the Company maintains a system of internal controls designed to
provide reasonable assurance that (i) transactions are executed
with management’s authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements
in accordance with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with
management’s authorization, and (iv) the recorded amount for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. To
HoldCo’s knowledge, there are no significant deficiencies or
material weaknesses in the design or operation of the
Company’s internal controls which would reasonably be
expected to adversely affect the Company’s ability to record,
process, summarize and report financial data. There is no fraud in
connection with the Company Financial Statements, whether or not
material, that involves (x) management or (y) other employees who
have a significant role in the Company’s internal
controls.
(c) All
Accounts Recorded. Neither HoldCo nor the Company has
engaged in any transaction, maintained any bank account or used any
corporate funds except for transactions, bank accounts or funds
which have been and are reflected in the Books and Records of
HoldCo or the Company.
(d) Corporate
Records. The stock records and minute books of HoldCo and
the Company that have been made available to Parent materially
reflect all minutes of meetings, resolutions and other material
actions and proceedings of the HoldCo Stockholders, HoldCo (as the
Company’s sole member), and board of directors and all
committees thereof, all issuances, transfers and redemptions of
capital stock of HoldCo and membership interests in the Company and
contain true, correct and complete copies of the HoldCo’s
Articles of Incorporation and Bylaws, each as
amended to date (collectively, the “HoldCo Charter Documents”) and the
Company’s Articles of Organization and Operating Agreement,
each as amended to date (collectively, “Company Charter Documents”), and
each such instrument is in full force and effect. HoldCo is not in
violation of any of the provisions of the HoldCo Charter Documents
and the Company is not in violation of its respective Company
Charter Documents. Section
3.8(d) of the NSC Disclosure Schedule contains a true,
correct and complete copy of the HoldCo Charter Documents and the
Company Charter Documents.
3.9 Title
to Properties. Except as otherwise provided for in Section
3.9 of the NSC Disclosure Schedule, HoldCo and the Company have
good and marketable title to all of its assets and properties
(including those shown on the Company Balance Sheet) free and clear
of all Encumbrances, other than NSC Permitted Encumbrances. Such
assets are sufficient for the continued operation of the HoldCo
Business. All properties used in the operations of the HoldCo
Business are reflected on the Company Balance Sheet. All machinery,
vehicles, equipment and other tangible personal property owned or
leased by the Company or used in the HoldCo Business are in good
condition and repair, normal wear and tear excepted. All leases of
real or personal property to which the Company is a party afford
the Company a valid leasehold possession of the real or personal
property that is the subject of the lease. The Company has complied
with the terms of all leases to which it is a party and under which
it is in occupancy. The Company enjoys peaceful and undisturbed
possession under all leases of real property. Neither HoldCo nor
the Company owns or has any other interest in any real property.
Section 3.9 of the NSC Disclosure Schedule sets forth a
complete and accurate list and a brief description of all personal
property
27
owned
by the Company with an original purchase price of Ten Thousand
Dollars ($10,000) or greater.
3.10 Absence
of Certain Changes. Since December
31, 2016 and other than in the ordinary course of business
consistent with past practice, there has not been, with respect to
HoldCo or the Company, any:
(a) Material
Adverse Change or any change, event, circumstance, condition or
effect that would reasonably be expected to result in a Material
Adverse Change;
(b) failure
to operate the HoldCo Business in the ordinary course;
(c) amendment
or change in the HoldCo Charter Documents or Company Charter
Documents;
(d) except
as otherwise provided for in Section 3.10(d) of the NSC Disclosure
Schedule, incurrence, creation or assumption of (i) any Encumbrance
on any of its assets or properties (other than NSC Permitted
Encumbrances), (ii) any Liability for borrowed money, or
(iii) any Liability as a guarantor or surety with respect to
the obligations of others;
(e) acceleration
or release of any vesting condition to the right to exercise any
option, warrant or other right to purchase or otherwise acquire any
shares of its capital stock, or any acceleration or release of any
right to repurchase shares of its capital stock upon the
stockholder’s termination of employment or services with it
or pursuant to any right of first refusal, in each case except
pursuant to the transactions contemplated under this
Agreement;
(f) payment
or discharge of any Encumbrance on any of its assets or properties,
or payment or discharge of any of its Liabilities, in each case
that was not either shown on the Company Balance Sheet or incurred
in the ordinary course of its business consistent with its past
practices after the Balance Sheet Date in an amount not in excess
of Twenty Five Thousand Dollars ($25,000) for any single Liability
to a particular creditor;
(g) failure
to pay any of its material obligations when due;
(h) purchase,
license, sale, grant, assignment or other disposition or transfer,
or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer, of any of its
assets (including Company IP Rights (as defined in Section 3.13(a)) and other
intangible assets) other than the sale or non-exclusive license of
its products or services to its customers excluding non-disclosure,
confidentiality, employee, contractor and consultant
Contracts;
(i) damage,
destruction or loss of any material property or material asset,
whether or not covered by insurance;
(j) declaration,
setting aside or payment of any dividend on, or the making of any
other distribution in respect of, its capital stock, or any split,
combination or recapitalization of its capital stock or any direct
or indirect redemption, purchase or other acquisition of any of its
capital stock or any change in any rights, preferences, privileges
or
28
restrictions
of any of its outstanding securities (other than repurchases of
stock in accordance with the HoldCo Stock Plans or applicable
Contracts in connection with the termination of service of
employees or other service providers);
(k) except
as set forth on Section 3.10(k) of the NSC Disclosure Schedule,
change or increase in the cash or equity compensation payable or to
become payable to any of its officers, directors, employees or
agents, including with respect to any bonus, severance, retention,
or stock awards, stock option grants, stock appreciation rights or
stock option grants made to or with any of such officers,
directors, employees or agents;
(l) change
with respect to its management, supervisory or other key personnel,
any termination of employment of a material number of employees, or
any labor dispute or claim of unfair labor practices;
(m) except
as otherwise provided for in Section 3.10(m) the NSC Disclosure
Schedule, Liability incurred by it to any of its officers,
directors or stockholders, except for normal and customary
compensation and expense allowances payable to officers in the
ordinary course of its business consistent with its past
practices;
(n) making
by it of any material loan, advance or capital contribution to, or
any investment in, any of its officers, directors or stockholders
or any firm or business enterprise in which any such person had a
direct or indirect material interest at the time of such loan,
advance, capital contribution or investment;
(o) cancellation
of any indebtedness or waiver of any rights of substantial value to
it, other than in the ordinary course of its business consistent
with its past practices;
(p) entering
into, amendment of, relinquishment, termination or nonrenewal by it
of any NSC Material Contract (or any other right or obligation)
other than in the ordinary course of its business consistent with
its past practices, any default by it under such Contract (or other
right or obligation), or any written indication or assertion by the
other party thereto of any material problems with its services or
performance under such NSC Material Contract (or other right or
obligation) or such other party’s desire to so amend,
relinquish, terminate or not renew any such NSC Material Contract
(or other right or obligation);
(q) material
change in the manner in which it extends discounts, credits or
warranties to customers or otherwise deals with its
customers;
(r) entering
into any Contract that by its terms requires or contemplates a
current and/or future financial commitment, expense (inclusive of
overhead expense) or obligation on its part that involves in excess
of Fifty Thousand Dollars ($50,000) or that is not entered into in
the ordinary course of its business consistent with its past
practices;
(s) making
or entering into any Contract with respect to any acquisition, sale
or transfer of any material asset of the Company;
29
(t) any
change in accounting methods or practices (including any change in
depreciation or amortization policies or rates or revenue
recognition policies) or any revaluation of any of its
assets;
(u) any
deferral of the payment of any accounts payable other than in the
ordinary course of business, consistent with past practices, or any
discount, accommodation or other concession made other than in the
ordinary course of business, consistent with past practices, in
order to accelerate or induce the collection of any receivable;
or
(v) announcement
of, any negotiation by or any entry into any Contract to do any of
the things described in the preceding clauses (a) through (u)
(other than negotiations and agreements with Parent and its
representatives regarding the transactions contemplated by this
Agreement).
3.11 Contracts,
Agreements, Arrangements, Commitments and Undertakings.
Sections 3.11(a)-(n) of the NSC Disclosure
Schedule set forth a list of each of the following Contracts, as of
the date hereof, to which HoldCo or the Company is a party or to
which HoldCo, the Company or any of their assets or properties is
bound (other than with respect to the plans set forth on Section
3.16(d) of the NSC Disclosure Schedule):
(a) any
Contract providing for payments (whether fixed, contingent or
otherwise) by or to it (directly or indirectly) in an aggregate
amount of Fifty Thousand Dollars ($50,000) or more;
(b) any
dealer, distributor, OEM (original equipment manufacturer), VAR
(value added reseller), sales representative or similar Contract
under which any third party is authorized to sell, sublicense,
lease, distribute, market or take orders for any of its products,
services or technology;
(c) any
Contract providing for the development of any software, content
(including textual content and visual, photographic or graphics
content), technology or Intellectual Property for (or for the
benefit or use of) it, or providing for the purchase by or license
to (or for the benefit or use of) it of any software, content
(including textual content and visual, photographic or graphics
content), technology or Intellectual Property, which software,
content, technology or Intellectual Property is material in any
manner to HoldCo’s Business and used or incorporated (or is
contemplated by it to be used or incorporated) in connection with
any aspect or element of any product, service or technology of
it;
(d) any
joint venture or partnership Contract;
(e) any
Contract for or relating to the employment by it of any director,
officer, employee or consultant or any other type of Contract with
any of its officers, employees or consultants that is not
immediately terminable by it without cost or other Liability,
including any contract requiring it to make a payment to any
director, officer, employee or consultant on account of the Merger,
any other transaction contemplated by this Agreement or any
Contract that is entered into in connection with this
Agreement;
30
(f) any
indenture, mortgage, trust deed, promissory note, loan agreement,
security agreement, guarantee or other Contract for or with respect
to the borrowing of money, a line of credit, any currency exchange,
commodities or other hedging arrangement, or a leasing transaction
of a type required to be capitalized in accordance with
GAAP;
(g) any
Contract that restricts it from (1) engaging in any aspect of its
business, (2) participating or competing in any line of business,
market or geographic area, (3) freely setting prices for its
products, services or technologies (including most favored customer
pricing provisions), or (4) soliciting potential employees,
consultants, contractors or other suppliers or
customers;
(h) any
Contract that grants any exclusive rights, rights of refusal,
rights of first negotiation or similar rights to any
Person;
(i) any
Contract relating to the sale, issuance, grant, exercise, award,
purchase, repurchase or redemption of any shares of HoldCo Capital
Stock, limited liability interests of the Company, or other
securities or any options, warrants or other rights to purchase or
otherwise acquire any such shares of HoldCo Capital Stock or
limited liability interests of the Company, other securities or
options, warrants or other rights therefor, except for those
Contracts to be terminated pursuant to Section 8.2(g)
hereof;
(j) any
Contract with any labor union or any collective bargaining
agreement or similar Contract with its employees;
(k) any
Contract of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other Person other than those
made in the ordinary course of its business;
(l) any
Contract in which its officers, directors or any member of their
immediate families, is directly or indirectly interested (whether
as a party or otherwise);
(m) any
Contract pursuant to which it has acquired a business or entity, or
substantially all of the assets of a business or entity, whether by
way of merger, consolidation, purchase of stock, purchase of assets
or otherwise; or
(n) any
other Contract that is material to it or its business, operations,
financial condition, properties or assets.
A true
and complete copy of each agreement or document, including any
amendments thereto, required by these subsections (a)-(n) of this
Section 3.11 to be listed on Section
3.11 of the NSC Disclosure Schedule has been delivered
to Parent. As of the Agreement Date, each of the NSC Material
Contracts is a legal, valid and binding obligation of HoldCo or the
Company (assuming the due authorization, execution and delivery by
the other parties thereto) and is in full force and effect and
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar Applicable Laws relating to
or affecting creditors generally and by the availability of
equitable remedies (whether in proceedings at law or in
equity).
31
3.12 No
Default; No Restrictions.
(a) HoldCo
and the Company have performed all material obligations required to
be performed by them to date under the NSC Material Contracts, and
there exists no default or event of default or event, occurrence,
condition or act, with respect to HoldCo or the Company, or to
HoldCo’s knowledge, with respect to any other contracting
party, which, with the giving of notice, the lapse of time or the
happening of any other event or conditions, would reasonably be
expected to (i) become a default or event of default under any NSC
Material Contract or (ii) give any third party (1) the right
to declare a default or exercise any remedy under any NSC Material
Contract, (2) the right to any material rebate, chargeback,
refund, credit, penalty or change in delivery schedule under any
NSC Material Contract, (3) the right to accelerate the
maturity or performance of any obligation of HoldCo or the Company
under any NSC Material Contract, or (4) the right to cancel,
terminate or modify any NSC Material Contract. Neither HoldCo nor
the Company has received any written notice or other communication
regarding any actual or possible violation or breach of or default
under, or intention to cancel, call a default under, or modify, any
NSC Material Contract.
(b) Except
as listed in Section 3.12(b) of the NSC Disclosure
Schedule, neither HoldCo nor the Company is a party to, and no
asset or property of HoldCo or the Company is bound or affected by,
any judgment, injunction, order or decree, that restricts or
prohibits HoldCo or the Company or, following the Effective Time,
will restrict or prohibit the Surviving Entity, the Company, Parent
or any of its Subsidiaries, from freely engaging in the HoldCo
Business or from competing anywhere in the world (including any
judgments, injunctions, orders or decrees, restricting the
geographic area in which the Company may sell, license, market,
distribute or support any products or technology or provide
services or restricting the markets, customers or industries that
the Company may address in operating the HoldCo Business or
restricting the prices which the Company may charge for its
products, technology or services (including most favored customer
pricing provisions)), or includes any grants by the Company of
exclusive rights or licenses, rights of refusal, rights of first
negotiation or similar rights.
3.13 Intellectual
Property.
(a) To
HoldCo’s knowledge, the Company owns or has a right or
license to all Intellectual Property used in any Company Product or
Service (as defined in Section 3.13(c)) or
otherwise sufficient for the conduct of the HoldCo Business (such
Intellectual Property being hereinafter collectively referred to as
the “Company IP
Rights”). Such Company IP Rights are sufficient for
the conduct of the HoldCo Business. As used in this Agreement,
“Company-Owned IP
Rights” means Company IP Rights that are owned by the
Company; and “Company-Licensed IP Rights” means
Company IP Rights that are licensed to the Company by a third
party. The representations of this Section 3.13(a) do
not constitute Intellectual Property non-infringement
representations, which are covered by Section 3.13(c)
below.
(b) To
HoldCo’s Knowledge, neither the execution, delivery or
performance of this Agreement, the HoldCo Ancillary Agreements, the
Company Ancillary Agreements nor the consummation of the Merger and
the other transactions contemplated by this Agreement shall, in
accordance with their terms: (i) constitute a material breach of or
default under any instrument, license or other Contract of the
Company governing any Company IP Right
32
(collectively,
the “Company IP Rights
Agreements”); (ii) cause the forfeiture or termination
of, or give rise to a right of forfeiture or termination of, any
Company-Owned IP Right or Company-Licensed IP Right that is
necessary to the operation of the HoldCo Business; or (iii)
materially impair the right of the Company or the Surviving Entity
to use, make, market, license, sell, copy, distribute or dispose of
any Company-Owned IP Right or Company-Licensed IP Right that is
necessary to the operation of the HoldCo Business or portion
thereof. Except as set forth in Section 3.13(b)
of the NSC Disclosure Schedule, there are no royalties, honoraria,
fees or other payments payable by the Company to any third person
(other than salaries payable to employees and independent
contractors not contingent on or related to use of their work
product and for fees due to the US PTO or other Intellectual
Property offices) as a result of the ownership, use, manufacture,
marketing, license-in, sale, copying, distribution, or disposition
of any Company-Owned IP Rights or Company-Licensed IP Right that is
necessary to the operation of the HoldCo Business by the Company,
and none shall become payable as a result of the consummation of
the transactions contemplated by this Agreement.
(c) Section
3.13(c) of the NSC Disclosure Schedule sets forth a
list (by name and version number), as of the date hereof, of each
of the current commercial products and services designed,
developed, produced, manufactured, assembled, sold, leased,
licensed, marketed, distributed or otherwise made commercially
available by the Company as of the Agreement Date that are material
to the HoldCo Business and each product and service currently under
development material to the HoldCo Business (each
a “Company Product or
Service”). The Company has the valid right or license
to the Company-Licensed IP Rights used in any Company Product or
Services or otherwise in the conduct of the HoldCo Business.
Neither the operation of the HoldCo Business nor the use,
development, manufacture, marketing, license, sale, distribution or
furnishing of any Company Product or Service currently used
infringes or misappropriates any Intellectual Property right of any
other party. To the knowledge of HoldCo, the use, development,
manufacture, marketing, license, sale distribution or furnishing of
any Company Product or Service currently under development by the
Company, does not infringe or misappropriate any Intellectual
Property rights of any other party. There is no pending, or, to the
knowledge of HoldCo, threatened, claim or litigation contesting the
validity, ownership or right of the Company to use, develop, make,
market, license, sell, distribute or furnish any Company Product or
Service, nor has HoldCo or the Company received any written notice
asserting that any Company Product or Service or the use,
development, manufacture, marketing, licensing, sale, distribution,
furnishing or disposition thereof conflicts with or infringes the
rights of any other party. Neither HoldCo nor the Company has
received any written notice from any third party alleging it is
infringing, or requesting on an unsolicited basis that it enter
into a license under, any third party patents. None of the
Company-Owned IP Rights or Company Products or Services of the
Company is subject to any proceeding or outstanding order or
stipulation (i) restricting in any material manner the use,
development, manufacture, marketing, licensing, sale, distribution,
furnishing or disposition by the Company of any Company-Owned IP
Rights, any Company Product or Service, or which is reasonably
expected to affect the validity, use or enforceability of any such
Company-Owned IP Rights or Company Product or Service. The
foregoing does not apply to office actions in the ordinary course
of prosecution by the US PTO or any other Intellectual Property
office, domestic or foreign.
(d) To
HoldCo’s knowledge, neither HoldCo nor the Company has taken
an action or failed to take an action that operates in such a way
that would give reasonably
33
be
expected to rise to a laches or equitable estoppel claim by any
Person which would result in the avoidance of a claim of
infringement by the Company against any such Person.
(e) To
HoldCo’s knowledge, no current or former employee, consultant
or independent contractor of the Company: (i) is in material
violation of any term or covenant of any employment contract,
patent disclosure agreement, invention assignment agreement,
nondisclosure agreement, noncompetition agreement or any other
Contract with any other party by virtue of such employee’s,
consultant’s or independent contractor’s being employed
by, or performing services for, the Company or using trade secrets
or proprietary information of others without permission; or
(ii) has developed any technology, software or other
copyrightable, patentable or otherwise proprietary work for the
Company that is subject to any Contract under which such employee,
consultant or independent contractor has assigned or otherwise
granted to any third party any rights (including Intellectual
Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work. To
HoldCo’s knowledge, neither the employment of any employee of
the Company, nor the use by the Company of the services of any
consultant or independent contractor subjects HoldCo or the Company
to any Liability to any third party for improperly soliciting such
employee, consultant or independent contractor to work for the
Company.
(f) The
Company has taken steps reasonable under the circumstances to
protect, preserve and maintain the secrecy and confidentiality of
the Company-Owned IP Rights with respect to which the Company
wishes to maintain as confidential and that is not otherwise
disclosed by the Company’s published patents, patent
applications or copyrights and to preserve and maintain all the
Company’s interests, proprietary rights and trade secrets in
such Company-Owned IP Rights. The Company has a policy requiring
that all current and former officers, employees, consultants and
independent contractors of the Company, and, to its knowledge, each
of its and their predecessors having access to proprietary
information of the Company, to have executed and delivered an
agreement regarding the protection of such proprietary information
and the assignment of inventions to the Company or its predecessor;
and copies of the form of all such agreements have been made
available to Parent or its counsel. The Company has secured
assignments from all of their current and former consultants,
independent contractors and employees who were involved in the
creation or development of any Company-Owned IP Rights material to
the Company, of the rights that otherwise would have been owned by
such persons or that the Company and each of its predecessors did
not or does not already own by operation of law, subject to
statutory reversionary rights, and waivers of any moral rights. No
current or former employee, officer, director, consultant or
independent contractor of the Company or, to its knowledge, any of
its or their predecessors, has any right, license, claim or
interest whatsoever in or with respect to any Company-Owned IP
Rights, subject to statutory reversionary rights and waivers of any
moral rights.
(g) Section
3.13(g) of the NSC Disclosure Schedule contains a true
and complete list, as of the Agreement Date, of (i) all worldwide
registrations made by or on behalf of the Company of any patents,
industrial design patents, copyrights, mask works, trademarks,
service marks, Internet domain names or Internet or World Wide Web
URLs or addresses with any Governmental Authority or
quasi-governmental authority, including Internet domain name
registries, and (ii) all applications, registrations, and filings
by the Company to register the Company-Owned IP Rights, including
all patent applications, industrial design patent
applications,
34
copyright
registration applications, mask work applications and applications
for registration of trademarks and service marks, and where
applicable the jurisdiction in which each of the items of the
Company-Owned IP Rights has been applied for, filed, issued or
registered. All registered patents, industrial design patents,
trademarks, service marks, copyrights and mask work rights that are
Company-Owned IP Rights are presumed valid and subsisting (or, in
the case of applications, applied for), and the Company is the
record owner thereof. All registered patents, industrial design
patents, trademarks and service marks are currently in compliance
with all legal requirements other than any requirement, that if not
satisfied, with respect to a patent or industrial design patent,
would not reasonably be expected to result in a revocation or lapse
or otherwise adversely affect its enforceability, and, with regard
to a trademark or service xxxx, would not reasonably be expected to
result in a cancellation of such registration or otherwise
adversely affect the use, priority or enforceability of the
trademark or service xxxx. The Company owns exclusively, and has
good title to, all copyrighted works that Company purports to
own.
(h) HoldCo
and the Company own all right, title and interest in and to all
Company-Owned IP Rights free and clear of all Encumbrances (other
than NSC Permitted Encumbrances) and licenses (other than licenses
and rights granted in the ordinary course).
(i) Section 3.13(i)-1
of the NSC Disclosure Schedule lists all licenses, sublicenses and
other Contracts as to which the Company is a party and pursuant to
which any Person is authorized to use any Company-Owned IP Rights,
unless such Contracts are in the form of standard customer
agreements, the forms of which are included in Section
3.11 of the NSC Disclosure Schedule and also excluding
non-disclosure, confidentiality, employee, contractor and
consultant Contracts. Except as set forth on
Section 3.13(i)-2 of the NSC Disclosure Schedule,
none of the licenses or other Contracts listed in
Section 3.13(i)-1 of the NSC Disclosure Schedule
grants any third party exclusive rights to or under any
Company-Owned IP Rights or grants any third party the right to
sublicense any of such Company-Owned IP Rights. The Company has not
agreed to transfer ownership of any Intellectual Property that is
owned by the Company to any third party, or knowingly permitted the
Company’s rights in such Intellectual Property to enter the
public domain (other than through the expiration of registered
Intellectual Property at the end of its statutory
term).
(j) Neither
HoldCo nor the Company, nor any other party authorized to act on
any of their behalves, has disclosed or delivered to any party, or
permitted the disclosure or delivery to any escrow agent of, any
Company Source Code (as defined below), except for disclosures to
employees, contractors or consultants under binding written
agreements that prohibit use or disclosure except in the
performances of services to the Company, escrows in the ordinary
course, and source code open source detection scans in connection
with the transaction contemplated by this Agreement. To the
knowledge of HoldCo, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time, or
both) shall, or would reasonably be expected to, result in the
disclosure or delivery by HoldCo or the Company or any other party
authorized to act on any of their behalves to any party of any
Company Source Code, except for disclosures to employees,
contractors or consultants under binding written agreements that
prohibit use or disclosure except in the performances of services
to the Company, escrows in the ordinary course, and source code
open source detection scans in connection with the transaction
contemplated by this Agreement. Section 3.13(j) of the NSC
Disclosure Schedule identifies, as of the Agreement Date, each
Contract pursuant to which the Company has deposited,
35
or is
or may be required to deposit, with an escrow agent or other
similar party, any Company Source Code. As used in this
Section 3.13(g), “Company Source Code” means,
collectively, the source code of any software or program (i.e.,
software code in its original, human readable, un-compiled, form),
or any material proprietary information or algorithm contained in
or relating to any software source code, owned by the Company. This
paragraph does not apply to any Public Software (as defined
below).
(k) To
the knowledge of HoldCo, there is no unauthorized use, disclosure,
infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of the
Company.
(l) All
Company Products or Services (excluding those in development)
conform in all material respects to their applicable published
product specifications and product Documentation, and neither
HoldCo nor the Company has any material Liability (and, to the
knowledge of HoldCo, there is no particular basis to expect any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against HoldCo or the Company
giving rise to any material Liability relating to the foregoing).
The Company has made available to Parent the opportunity to review
all Documentation relating to the testing of the Company Products
or Services and plans and specifications for Company Products or
Services currently under development by the Company. The Company
has a policy and procedure for tracking material bugs, errors and
defects of which it becomes aware in any Company Products or
Services, and maintains a database covering the foregoing. For all
software used by the Company in providing Company Products or
Services, or in developing or making available any of the Company
Products or Services, the Company has generally implemented any and
all material security patches or upgrades that to the knowledge of
HoldCo are generally available for that software.
(m) Except
with respect to demonstration or trial copies, to HoldCo’s
knowledge, no Company Product or Services made available by the
Company to any Person contains any “back door,”
“time bomb,” “Trojan horse,”
“worm,” “drop dead device,”
“virus” or other malicious software routines or
hardware components designed to permit unauthorized access or to
disable or erase software, hardware or data without the consent of
the user and the Company’s employees and contractors have not
placed any of the foregoing in any Company Product or Service. The
representations of this paragraph do not apply to any license keys,
time-out devices or similar self-help mechanisms.
(n) To
HoldCo’s knowledge, the HoldCo Business as currently
conducted complies in all respects with all Applicable Laws whether
U.S. or otherwise, regarding encryption technology, including,
without limitation, the import and export thereof.
(o) HoldCo
or the Company is not nor has it or they been in the past two years
a member of, or a contributor to or made any commitments or
agreements regarding any patent pool, standards body, standard
setting organization, or similar organization, in each case that
requires or obligates HoldCo or the Company to grant or offer to
any other Person any license or right to any Company IP
Rights, including without limitation any
future Intellectual Property developed, conceived,
made or reduced to practice by the Company or any Affiliate of the
Company after the date of this Agreement.
36
(p) No
government funding, or facilities or personnel of any university,
college, other education institution or research center, or funding
from third parties (other than funds received in consideration for
HoldCo Common Stock or pursuant to instruments of indebtedness for
borrowed money) were used in the development, in whole or in part,
of the Company-Owned IP Rights. To the knowledge of HoldCo, no
current or former employee, consultant or independent contractor of
the Company who was involved in, or who contributed to, the
creation or development of any material Company-Owned IP Rights
performed services for any Governmental Authority, for a
university, college or other education institution or for a
research center during a period of time during which such employee,
consultant or independent contractor was also performing services
for the Company.
(q) Except
as provided in of Section 3.13(q) the NSC Disclosure
Schedule, the Company has not taken and will not take any actions
that (i) incorporate any Public Software, in whole or in part, into
any Company-Owned IP Right or any Company Product or Service or any
portion thereof; (ii) use Public Software, in whole or in
part, in the development of any part of any Company-Owned IP Right
or any Company Product or Service or any portion thereof in a
manner that would subject any Company-Owned IP Right or Company
Product or Service, in whole or in part, to all or part of the
license obligations of any Public Software; or (iii) statically
combine or distribute any Company-Owned IP Right as integrated with
Public Software. As used herein, “Public Software” means software
licensed pursuant to terms (1) that grant, or purport to grant, to
any third party any rights or immunities under patents that are
part of the Company-Owned IP Rights or (2) that requires as a
condition of use or distribution of such software on the
disclosure, licensing, or distribution of any Company-owned
proprietary source code for any Company Products and Service
incorporated into, derived from or distributed with such software
and requires that the Company-owned proprietary source code be
disclosed or distributed in source code form, licensed for the
purpose of making derivative works, and redistributable at no
charge and by way of example, shall include, without limitation,
software licensed under GNU’s General Public License (GPL) or
Lesser/Library GPL, the Mozilla Public License, the Netscape Public
License, the Sun Community Source License, the Sun Industry
Standards License, the BSD License, the Artistic License (e.g.,
PERL) and the Apache License.
(r) To
the knowledge of HoldCo, in the two years prior to the Agreement
Date there has been no failure, breakdown, loss or impairment of,
or unauthorized access to or unauthorized use of, any core
information technology systems of the Company that has resulted in
a material disruption or material interruption in the operation of
the business of the Company, the cause of which has not been
repaired or remedied. The Company has in place commercially
reasonable disaster recovery and business continuity plans and
procedures. To the knowledge of HoldCo, in the two years prior to
the Agreement Date, there has been no unauthorized access to or
unauthorized use of any information technology systems of the
Company that has resulted in unauthorized disclosure of any
material confidential information of the Company to any other
Person. HoldCo is not aware of and has not been notified in writing
of: (i) any actual, attempted or suspected unauthorized access to
or use of any data of the Company, or any other occurrence which
may compromise the availability, security, integrity or
confidentiality of such data; or (ii) any disclosure, intended,
accidental or otherwise, wherein such data actually is, or may
reasonably be expected to potentially be, acquired by an
unauthorized person or accessed or used in an unauthorized manner;
but in each case always excluding: (a) unsuccessful attempts to
penetrate computer networks or servers maintained by or for the
Company; and (b) immaterial
37
incidents
that occur on a routine basis, such as general
“pinging” or “denial of service” attacks.
Instances of good faith access or use of data by an employee or
contractor of Company also are excluded; provided, that the data is not used for a
purpose unrelated to work performed for Company and is not subject
to further unlawful or unauthorized use.
3.14 Compliance
with Laws.
(a) HoldCo,
the Company and each of its and their predecessors is in material
compliance with all Applicable Law.
(b) To
HoldCo’s knowledge, HoldCo, the Company and each of its and
their predecessors holds all Governmental Permits, and all such
Governmental Permits are valid and in full force and effect.
HoldCo, the Company and each of its and their predecessors has
complied with each Governmental Permit to which it is subject.
Neither HoldCo nor the Company has received any written notice or
other written communication from any Governmental Authority
regarding (i) any actual or possible violation of law or any
Governmental Permit or any failure to comply with any term or
requirement of any Governmental Permit or (ii) any actual or
possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Permit. HoldCo has
no knowledge of any outstanding violation of any Governmental
Permit. Section 3.14(b) of the NSC Disclosure Schedule
sets forth a true and complete list of all Governmental Permits
held by HoldCo and the Company as of the Agreement
Date.
(c) No
Governmental Authority has provided written notice to HoldCo of any
threatened proceeding or investigation into the business or
operations of the Company, any of its or their predecessors and, to
the knowledge of HoldCo, no such proceedings or investigations are
contemplated or have been initiated. There is no unresolved
deficiency, violation or exception claimed or asserted by any
Governmental Authority with respect to any examination of HoldCo or
the Company.
(d) Neither
HoldCo nor the Company, its or their predecessors, directors,
officers, agents or employees has, for or on behalf of HoldCo or
the Company or such predecessor, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended,
(iii) made any Prohibited Payments, (iv) received any payments,
services or gratuities that were not legal to receive, (v) engaged
in any transactions or made or received payments that were not
properly recorded on the accounting books and records of HoldCo or
the Company or properly disclosed on their respective financial
statements, (vi) has maintained any off-book bank or cash account,
or (vii) violated or operated in noncompliance with any money
laundering law, anti-terrorism law or regulation, anti-boycott
regulations or embargo regulations.
3.15 Certain
Transactions and Agreements. To HoldCo’s
knowledge, none of the officers and directors of HoldCo or the
Company, and, to the knowledge of HoldCo, no stockholder of HoldCo,
nor any immediate family member of an officer or director of
HoldCo, has a direct ownership interest of more than 2% of the
equity ownership of any firm or corporation that
38
competes
with, or does business with, or has any contractual arrangement
with, HoldCo or the Company. Except as otherwise provided for in
Section 3.15 of the NSC Disclosure Schedules, none of the officers,
directors, stockholders of HoldCo or any immediate family members
thereof, is a party to, or otherwise directly or indirectly
interested in any NSC Material Contract.
3.16 Employees,
ERISA and Other Compliance.
(a) Except
as otherwise provided for in Section 3.16(a)(i) of the NSC
Disclosure Schedules, the Company has always been and currently is
in compliance in all material respects with all Applicable Law and
Contracts relating to employment, employment practices,
immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation and employee
benefits matters, and has correctly classified employees as exempt
employees and nonexempt employees under the Fair Labor Standards
Act or any other Applicable Laws. A complete list as of the
Agreement Date of all employees, officers and consultants of the
Company and their current title and/or job description and
compensation (base compensation and bonuses) is set forth on
Section 3.16(a)(ii) of the NSC Disclosure Schedule. To the
knowledge of HoldCo, all employees of the Company are legally
permitted to be employed by the Company in the jurisdiction in
which such employee is employed in their current job capacities for
the maximum period allowed under Applicable Law. All independent
contractors providing services to the Company have been properly
classified as independent contractors for purposes of federal and
applicable state tax laws, laws applicable to employee benefits and
other Applicable Law. Except as otherwise provided for in Section
3.16(a)(iii) of the NSC Disclosure Schedules, the Company does not
have any employment or consulting Contracts with personnel
providing services in the United States currently in effect that
are not terminable at will (other than agreements with the sole
purpose of providing for the confidentiality of proprietary
information or assignment of inventions), and outside of the United
States, termination of employment or consulting arrangements may
occur upon such notice as may be required under Applicable Law or
the employees’ Contract of employment or consulting services.
No key employees, key consultants or group of employees or
consultants of the Company have given written notice to the Company
of an intention to terminate his or her employment or relationship
with the Company.
(b) To
the knowledge of HoldCo, the Company is not now, nor has ever been,
subject to a union organizing effort. The Company is not subject to
any collective bargaining agreement with respect to any of its
employees, subject to any other Contract with any trade or labor
union, employees’ association or similar organization, and
subject to any current labor disputes. The Company has good labor
relations, and HoldCo has no knowledge of any facts indicating that
the consummation of the Merger or any of the other transactions
contemplated hereby shall have an adverse effect on such labor
relations, and has no knowledge that any key employee material to
the HoldCo Business intends to leave its employ.
(c) Neither
the Company nor any ERISA Affiliate has, within the past six (6)
years, participated in or had any obligation to contribute to a
pension plan which constitutes, or has since the enactment of
ERISA, constituted, a “multiemployer plan” as defined
in Section 3(37) of ERISA or a “multiple employer plan”
as defined in Section 413(c) of the Code.
(d) Section
3.16(d) of the NSC Disclosure Schedule lists as of the
Agreement Date each employment, consulting, severance or other
similar Contract (other than
39
with
respect to Contracts based on form agreements that have been made
available to Parent; provided, that such Contracts do not
materially differ from the forms upon which they are based), each
“employee benefit plan” as defined in Section 3(3) of
ERISA and each plan, program or arrangement (whether formal or
informal, and written or oral) providing for insurance coverage
(including any self-insured arrangements), life and health benefits
(including medical, mental health, dental, vision and
hospitalization), workers’ compensation benefits, vacation
benefits, severance benefits, supplemental unemployment benefits,
material fringe benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, tax equalization, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other
forms of incentive compensation in any form (including any plan,
program or arrangement which references the capital stock of
HoldCo) or post-retirement insurance, compensation or benefits for
employees, consultants or directors that is entered into,
sponsored, maintained or contributed to by HoldCo or the Company
and covers any employee or former employee of the Company, its
predecessors, any of its ERISA Affiliates or HoldCo. Such
Contracts, plans and arrangements as are described in this
Section 3.16(d) are hereinafter collectively
referred to as “Company
Benefit Arrangements.”
(e) Each
Company Benefit Arrangement has been maintained and amended,
including its form, in compliance in all material respects with its
terms and with the requirements prescribed by any and all
Applicable Law that is applicable to such Company Benefit
Arrangement. No such Company Benefit Arrangement and no employee
benefit plan of an ERISA Affiliate maintained within the past six
(6) years is an “employee pension benefit plan” as
defined in Section 3(2) of ERISA that is subject to Title IV of
ERISA. The Company has the right under the terms of each applicable
Company Benefit Arrangement and under Applicable Law to amend or
terminate such Company Benefit Arrangement in accordance with its
terms (or terminate the participation in such Company Benefit
Arrangement by the Company) without material Liability to the
Company or any ERISA Affiliate and subject to Applicable Law and to
the Company’s or its ERISA Affiliate’s statutory and
contractual obligations to pay any earned and vested benefits
thereunder.
(f) Each
Company Benefit Arrangement that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to Section
501(a) of the Code. The Company and each ERISA Affiliate has
furnished to Parent copies of the most recent IRS determination or
opinion letters with respect to each such plan, and no action or
event has occurred since the date of the most recent determination
or opinion letter relating to any such Company Benefit Arrangement
that would be reasonably expected to adversely affect the
tax-qualified status of any such plan or related
trust.
(g) No
suit, administrative proceeding, action or other litigation is
pending, or to HoldCo’s knowledge, is threatened in writing
against or with respect to any Company Benefit Arrangement (other
than routine claims for benefits under such Company Benefit
Arrangement and administrative appeals of such claims), including
any audit or inquiry by the IRS or the Department of Labor
(“DOL”). Except
as otherwise provided for in Section 3.16(g) of the NSC Disclosure
Schedule, no “prohibited transaction” (as defined in
Section 4975 of the Code or Section 406 of ERISA) has
occurred with respect to any Company Benefit Arrangements and no
set of facts has occurred that is reasonably likely to subject
Company, any of its ERISA
40
Affiliates,
or any of their employees to a tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or sanctions
imposed under Title I of ERISA or any other Applicable Law in
connection a Company Benefit Arrangement, and all such Company
Benefit Arrangements have been operated in full compliance with the
fiduciary duty requirements of Title I of ERISA.
(h) All
contributions and payments due from the Company with respect to any
of the Company Benefit Arrangements, determined in accordance with
prior funding and accrual practices, have been made or have been
accrued on the Company’s financial statements (including the
Company Financial Statements) in accordance with and to the extent
required by GAAP.
(i) All
individuals who, pursuant to the terms of any Company Benefit
Arrangement, are currently entitled to participate in any Company
Benefit Arrangement, are currently participating in such Company
Benefit Arrangement or have been offered an opportunity to do so
and have declined.
(j) The
Company shall not have any material Liability to any employee or to
any organization or any other entity as a result of the termination
of any employee leasing arrangement.
(k) There
has been no interpretation or announcement (whether or not written,
formal or informal) not reasonably consistent with the language of
the plan but nonetheless legally binding, by HoldCo or the Company
relating to any Company Benefit Arrangement that would materially
increase the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect
thereof during the fiscal year ended prior to the date hereof
(other than increased insurance premiums and otherwise as required
by law). Except as set forth on Section 3.16(k) of the NSC
Disclosure Schedule, the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement
will not (either alone or in connection with the termination of
employment or change of position of any employee following or in
connection with the consummation of the Merger) constitute an event
under any Company Benefit Arrangement that will or may result in
any material payment (whether severance pay or otherwise),
acceleration of payment, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any employee.
(l) Each
Company Benefit Arrangement, to the extent applicable, is in
compliance, in all material respects, with the continuation
coverage requirements of Section 4980B of the Code, Sections
601 through 608 of ERISA, the Americans with Disabilities Act of
1990, as amended, and the regulations thereunder, the Health
Insurance Portability and Accountability Act of 1996, as amended,
and the regulations thereunder, the Women’s Health and Cancer
Rights Act of 1998, the Family Medical Leave Act of 1993, as
amended, the Mental Health Parity and Addiction Equity Act of 2008,
and the Patient Protection and Affordable Care Act of 2010, as
amended, and the regulations thereunder, and any other Applicable
Law as such requirements affect HoldCo, the Company, any ERISA
Affiliate, and their employees. There are no outstanding,
uncorrected violations under the Consolidation Omnibus Budget
Reconciliation Act of 1985, as amended, (“COBRA”), with respect to any of
the Company Benefit Arrangements, covered employees or qualified
beneficiaries that would be reasonably likely to result in a
Material Adverse Effect on HoldCo, the Company or
Parent.
41
(m) Except
as otherwise provided for in Section 3.16(m) of the NSC Disclosure
Schedules, no benefit payable or that may become payable by HoldCo
or the Company pursuant to any Company Benefit Arrangement or as a
result of, in connection with or arising under this Agreement or
the Certificates of Merger shall constitute a “parachute
payment” (as defined in Section 280G(b)(2) of the Code) that
is subject to the imposition of an excise tax under Section 4999 of
the Code or that would not be deductible by reason of Section 280G
of the Code. Unless otherwise indicated in Section
3.16(m) of the NSC Disclosure Schedule, the Company is
not a party to any: (i) Contract with any executive officer or
other key employee thereof (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company in the nature of
the Merger or any of the other transactions contemplated by this
Agreement, any HoldCo Ancillary Agreement or any Company Ancillary
Agreement, (B) providing any term of employment or compensation
guarantee, or (C) providing severance benefits or other benefits
after the termination of employment of such employee regardless of
the reason for such termination of employment other than as
required by COBRA (or other Applicable Law), vacation pay cash-outs
or other arrangements governed by ERISA; or (ii) Contract or plan,
including any stock option plan, stock appreciation rights plan or
stock purchase plan (or any other such plan which benefits are
referenced to the fair market value of the HoldCo Common Stock),
any of the benefits of which shall be increased, or the vesting of
benefits of which shall be accelerated, by the occurrence of the
Merger or any of the other transactions contemplated by this
Agreement, or any event subsequent to the Merger such as the
termination of employment of any person, or the value of any of the
benefits of which shall be calculated on the basis of any of the
transactions contemplated by this Agreement. Except as disclosed in
Section 3.16(m) of the NSC Disclosure Schedule, the Company has no
obligation to pay any material amount or provide any material
benefit to any former employee or officer, other than obligations
(i) for which the Company has established a reserve for such amount
on the Company Balance Sheet and (ii) pursuant to Contracts entered
into after the Balance Sheet Date and disclosed on
Section 3.16(m) of the NSC Disclosure
Schedule.
(n) To
HoldCo’s knowledge, no employee or consultant of the Company
is in material violation of (i) any term of any employment or
consulting Contract or (ii) any term of any other Contract or any
restrictive covenant relating to the right of any such employee or
consultant to be employed by the Company or to use trade secrets or
proprietary information of others. To HoldCo’s knowledge, the
employment of any employee or consultant by the Company does not
subject it to any Liability to any third party other than
Liabilities with respect to employer payroll tax and employee tax
withholding and contributions, premiums and administrative costs
under Company Benefit Arrangements.
(o) HoldCo
and the Company have not established any compensation and benefit
plan that is maintained or is required to be maintained or
contributed to by the law or applicable custom or rule of the
relevant jurisdiction, outside of the United States.
(p) In
the past two years, there has been no “mass
termination,” “mass layoff,” “employment
loss,” or “plant closing” as defined by the
Workers Adjustment and Retraining Notification Act (the
“WARN Act”) or
other Applicable Law in respect of the Company.
42
(q) All
filings and reports as to each Company Benefit Arrangement
(including Form 5500 annual reports, summary annual reports,
summary plan descriptions and summaries of material modifications)
have been timely submitted to the IRS, the DOL or other
governmental body and/or have been distributed as
required.
(r) All
unfunded Liabilities under all Company Benefit Arrangements
(including paid time off accruals) are fully reflected as
liabilities on the Balance Sheet and will be fully reflected on the
books and records of the Company as of the Closing Date in
accordance with and to the extent required by GAAP.
(s) No
tax under Section 4980B or 4980D of the Code has been incurred in
respect of any Company Benefit Arrangement that is a group health
plan, as defined in Section 5000(b)(1) of the Code. With respect to
the employees and former employees of the Company, there are no
employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code, or any other
post-retirement welfare benefit programs.
(t) Any
“non-qualified deferred compensation plan” (as such
term is defined under Section 409A(d)(1) of the Code and the
guidance issued thereunder) of the Company (to the extent
applicable to any Company employee) under which the Company makes,
is obligated to make, or promises to make any payments or other
awards (each, a “409A
Plan”), has, if subject to Section 409A (or any state
law equivalent) and the regulations and guidance thereunder
(collectively, “Section
409A”), been since January 1, 2006 maintained and
operated in good faith compliance with Section 409A and since
January 1, 2010, each such 409A Plan has been in documentary
compliance with Section 409A. No assets have been set aside
(directly or indirectly) outside of the United States for purposes
of paying deferred compensation as described in Code section
409A(b)(1). No 409A Plan that was originally exempt from
application of Section 409A has been “materially
modified” at any time after October 3, 2005. There is no
Contract to which the Company is a party covering any employee,
consultant, or other service provider to the Company, which
individually or collectively requires the Company to pay a Tax
gross-up payment to, or otherwise indemnify or reimburse, any
employee for Tax-related payments under Section 409A.
3.17 Merger
Expenses. (a) Neither HoldCo nor any Affiliate of HoldCo is
obligated for the payment of any brokerage, finder’s or other
similar fees or expenses of any investment banker, broker, finder
or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any
other transaction contemplated by this Agreement. (b) The legal and
accounting advisors, and any other persons, to whom HoldCo and the
Company currently expects to owe fees and expenses that will
constitute Merger Expenses are set forth on Section
3.17 of the NSC Disclosure Schedule, and other than
the Merger Expenses that will be due to the entities set forth on
Section 3.17 (including all amounts due thereunder) of
the NSC Disclosure Schedule, there are no Merger
Expenses.
3.18 Insurance.
HoldCo and the Company maintains as of the Agreement Date the
policies of insurance and bonds set forth in Section 3.18 of the
NSC Disclosure Schedule. Section 3.18 of the NSC Disclosure
Schedule sets forth the name of the insurer under each such policy
and bond, the type of policy or bond, and the coverage amount and
any applicable deductible. There is no material claim pending under
any of such policies or bonds as to which coverage has
been
43
questioned,
denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have
been timely paid, and HoldCo and the Company are otherwise in
compliance with the terms of such policies and bonds. HoldCo has no
knowledge of any written threatened termination of, or material
premium increase with respect to, any of such policies or bonds.
Neither HoldCo nor the Company has been refused any insurance with
respect to any aspect of the operations of its business, nor has
its coverage been limited by any insurance carrier to which it has
applied for insurance or with which it has carried insurance. The
activities and operations of HoldCo and the Company have been
conducted in a manner so as to materially conform to all applicable
provisions of such policies and bonds. HoldCo has delivered to
Parent correct and complete copies of all such policies of
insurance and bonds issued at the request or for the benefit of
HoldCo or the Company.
(a) HoldCo,
the Company and its predecessors and Affiliates are in material
compliance with all Environmental Laws (as defined below), which
compliance includes the possession by HoldCo and the Company of all
material permits and other governmental authorizations required
under Environmental Laws and compliance with the terms and
conditions thereof. HoldCo and the Company has not received any
written notice or other written communication, whether from a
Governmental Authority, citizens groups, employee or otherwise,
that alleges that HoldCo or the Company is not in compliance with
any Environmental Law, and to the knowledge of HoldCo, there are no
circumstances that may prevent or interfere with the compliance by
HoldCo or the Company with any current Environmental Law in the
future. All Governmental Permits held by HoldCo or the Company as
of the Agreement Date pursuant to any Environmental Law (if any)
are identified in Section 3.19 of the NSC
Disclosure Schedule.
(b) For
purposes of this Section 3.19: (i)
“Environmental
Law” means any federal, state or local statute, law,
regulation or other 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; and
(ii) “Materials of
Environmental Concern” include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum
products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
3.20 Customers
and Suppliers.
(a) Except
as otherwise provided for in Section 3.20 of the NSC Disclosure
Schedules, the Company has no outstanding material disputes
concerning its products and/or services with any customer or
distributor who was one of the 10 largest sources of revenues for
the Company, based on amounts paid or payable in the year ended
December 31, 2016, or to the extent different, (i) the 10
largest sources of revenues for the Company, based on amounts paid
or payable in the year ended December 31, 2015, or (ii) the 10
largest sources of revenues for the Company, based on amounts paid
or payable in the nine month period ended on September 30, 2017
(each, a “Significant
Customer”). Each Significant Customer, together with
the amount of
44
revenues
paid or payable by such Significant Customer to the Company in (x)
the years ended December 31, 2016 or December 31, 2015 or (y) the
nine month period ended on September 30, 2017, is listed on Section
3.20(a) of the NSC Disclosure Schedule. Since January
1, 2017 through to the date of this Agreement, the Company has not
received any written notice from any Significant Customer that such
customer shall not continue as a customer of the Company or that
such customer intends to terminate or materially and in a manner
detrimental to the Company modify existing Contracts with the
Company (or the Surviving Entity, Parent or any of its
Subsidiaries) or that such customer refuses to make payments for
products delivered or services rendered. The Company has not had
any of its products returned by a Significant Customer thereof
except for normal warranty returns consistent with past history and
those returns that would not result in a reversal of any material
amount of revenue by the Company.
(b) The
Company has no outstanding material dispute concerning products
and/or services provided by any supplier who, in the year ended
December 31, 2016 was one of the 10 largest suppliers of
products and/or services to the Company, or to the extent
different, (i) in the year ended December 31, 2015 was one of the
10 largest suppliers of products and/or services or (ii) in
the nine month period ended on September 30, 2017 was one of the 10
largest supplier of products and/or services, in either case based
on amounts paid or payable (each, a “Significant Supplier”). Each
Significant Supplier, together with the amounts paid or payable by
the Company to such Significant Supplier during (x) the years ended
December 31, 2016 or December 31, 2015 or (y) the nine month period
ended on September 30, 2017, is listed on Section
3.20(b) of the NSC Disclosure Schedule. Since January
1, 2017 through to the date of this Agreement, the Company has not
received any written notice from any Significant Supplier that such
supplier shall not continue as a supplier to the Company or that
such supplier intends to terminate or materially and in a manner
detrimental to the Company modify existing Contracts with the
Company (or the Surviving Entity, Parent or any of its
Subsidiaries). The Company has access, on commercially reasonable
terms, to all products and services reasonably necessary to carry
on the HoldCo Businesses, and HoldCo has no knowledge of any reason
why it will not continue to have such access on commercially
reasonable terms.
3.21 Accounts
Receivable. Section 3.21 of the NSC Disclosure Schedule sets
forth a true, correct and complete itemization of the accounts
receivable (including aging) of HoldCo and the Company as of the
Agreement Date (the “Accounts
Receivable”). Section 3.21 of the NSC Disclosure
Schedule sets forth such amounts of accounts receivable as of the
Agreement Date which are subject to asserted claims by customers
and reasonably detailed information regarding asserted claims made
within the last year, including the type and amounts of such
claims. The Accounts Receivable represent bona fide claims against debtors for
sales, services performed or other charges arising on or before the
respective dates of recording thereof, and all of the goods
delivered and services performed which gave rise to the Accounts
Receivable were delivered or performed in accordance with
applicable orders, Contracts or customer requirements. Except as
set forth on Section 3.21 of the NSC Disclosure Schedule, the
Accounts Receivable constitute only valid, undisputed claims of the
Company not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts accrued in the
ordinary course of business consistent with past practices, and are
collectible in full within 90 days following the Closing. The
Company and HoldCo have good and marketable title to the Accounts
Receivable free and clear of all Encumbrances (other than NSC
Permitted Encumbrances). All Accounts Receivable have been billed
in accordance with the past practice of the Company consistently
applied.
45
3.22 Inventory.
All inventory of HoldCo and the Company (which includes all raw
materials, work in progress (WIP) and finished products), whether
or not reflected in the Company Balance Sheet consists of a quality
and quantity usable and salable in the ordinary course of business
of the Company, except for obsolete items and items of
below-standard quality, all of which have been written off or
written down to net realizable value in the Company Balance Sheet.
The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Company. The Company
has good and marketable title to the inventories free and clear of
all Encumbrances (other than NSC Permitted Encumbrances). The
inventories do not include any material amount of inventory that is
slow-moving, obsolete, excess, damaged or otherwise not
merchantable or returnable by vendors for full credit.
3.23 Bank
Account. Section 3.23 of the NSC Disclosure Schedule
sets forth the account number and names of authorised signatories
with respect to each account maintained by or for the benefit of
the Company, HoldCo or in connection with its business at any bank
or other financial institution.
3.24 Board
Approval. The Board of
Directors of HoldCo has, as of the date of this Agreement, (i)
determined that the Merger is fair to, advisable and in the best
interests of HoldCo and its stockholders and the Company, (ii) duly
approved this Agreement, the Merger and the other transactions
contemplated by this Agreement, and (iii) determined to recommend
that the stockholders of HoldCo approve and adopt this Agreement
and approve the Merger.
3.25 Indebtedness.
Except for
Indebtedness of the Company set forth on Section 3.25 of the NSC
Disclosure Schedule, neither HoldCo nor the Company has
(i) incurred any Indebtedness, (ii) made any loans or
advances to any Person, or (iii) provided any guarantee or
indemnity of any Indebtedness of any other Person.
Section 3.25 of the NSC Disclosure Schedule sets forth
complete, current and accurate information regarding the written
arrangement governing each such Indebtedness of the Company, the
total amount of Indebtedness currently due under each such
arrangement, and the identity of each counterparty to such
arrangement. HoldCo has provided to Parent complete, current and
accurate documentation related to each Indebtedness of the Company
or HoldCo.
3.26 General.
No
representation or warranty by any Key Holder in this Agreement and
no statement contained in the NSC Disclosure Schedules or any
certificate or other document furnished or to be furnished to
Parent or HoldCo or the Company pursuant to this Agreement contains
any untrue statement of material fact, or omits to state a material
fact necessary to make the statements contained therein, in light
of the circumstances in which they are made, not misleading. The
rights of Parent to indemnification or any other remedy under this
Agreement shall not be impacted or limited by any knowledge that
Parent may have acquired, or could have acquired, whether before or
after the Closing Date, nor by any investigation or diligence by
Parent. HoldCo, the Company and each Key Holder hereby acknowledges
that, regardless of any investigation made (or not made) by or on
behalf of Parent, and regardless of the results of any such
investigation, Parent has entered into this transaction in express
reliance upon the representations and warranties of HoldCo, the
Company and each Key Holder made in this Agreement.
46
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB
Subject
to the exceptions set forth in a numbered or lettered section of
the Parent Disclosure Schedule and other sections of the Parent
Disclosure Schedule to the extent (a) such information is
cross-referenced in another part of the Parent Disclosure Schedule,
or (b) it is reasonably apparent on the face of the disclosure that
such information qualifies another representation and warranty of
Parent and Merger Sub in the Agreement, Parent and Merger Sub
represent and warrant to HoldCo and the Key Holders that the
statements contained in this Article IV are true and correct on and as
of the date of this Agreement:
4.1 Organization
and Good Standing. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power
and authority to own, operate and lease its properties and to carry
on its business as now conducted and as presently proposed to be
conducted. Merger Sub is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of Delaware. Each of Parent and Merger Sub is duly
qualified or licensed to do business, and is in good standing, in
each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed would not individually or in the
aggregate be material to Parent’s or Merger Sub’s
ability to consummate the Merger or to perform their respective
obligations under this Agreement, the Parent Ancillary Agreements
and the Merger Sub Ancillary Agreements. Neither Parent nor Merger
Sub is in violation of its respective certificate of incorporation,
bylaws, certificate of formation or operating agreement, as
applicable, and each as amended to date.
4.2 Power,
Authorization and Validity.
(a) Power
and Authority. Parent has all requisite corporate power and
corporate authority to enter into, execute, deliver and perform its
obligations under this Agreement and each of the Parent Ancillary
Agreements and to consummate the Merger. The Merger and the
execution, delivery and performance by Parent of this Agreement,
each of the Parent Ancillary Agreements and all other agreements,
transactions and actions contemplated hereby or thereby have been
duly and validly approved and authorized by all requisite corporate
action on the part of Parent. Merger Sub has all requisite power
and authority to enter into, execute, deliver and perform its
obligations under this Agreement and each of the Merger Sub
Ancillary Agreements and to consummate the Merger. The Merger and
the execution, delivery and performance by Merger Sub of this
Agreement, each of the Merger Sub Ancillary Agreements and all
other agreements, transactions and actions contemplated hereby or
thereby have been duly and validly approved and authorized by all
requisite corporate action on the part of Merger Sub.
(b) No
Consents. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental
Authority, or any other Person, governmental or otherwise (except
for the
requirements of the Securities Act and the
Exchange Act
and the
rules and regulations of the SEC thereunder), is
necessary or required to be made or obtained by Parent or Merger
Sub to enable Parent and Merger Sub to lawfully execute and
deliver, enter into, and perform its obligations under this
Agreement, each of the Parent Ancillary Agreements and each of the
Merger Sub Ancillary Agreements or to consummate the
Merger,
47
except
where the breach or violation or the lack of consent, approval or
notice would not, individually or in the aggregate, have a Material
Adverse Effect.
(c) Enforceability.
This Agreement has been duly executed and delivered by Parent and
Merger Sub. This Agreement and each of the Parent Ancillary
Agreements are, or when executed by Parent shall be, assuming the
due authorization, execution and delivery by each other party
thereto, valid and binding obligations of Parent, enforceable
against Parent in accordance with their respective terms, subject
to the effect of (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to rights of creditors generally and
(ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies. This Agreement and
each of the Merger Sub Ancillary Agreements are, or when executed
by Merger Sub shall be, assuming the due authorization, execution
and delivery by each other party thereto, valid and binding
obligations of Merger Sub, enforceable against Merger Sub in
accordance with their respective terms, subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of
law and equity governing specific performance, injunctive relief
and other equitable remedies.
4.3 No
Conflict. Neither the
execution and delivery of this Agreement, any of the Parent
Ancillary Agreements or any of the Merger Sub Ancillary Agreements
by Parent or Merger Sub, nor the consummation of the Merger or any
other transaction contemplated hereby or thereby, shall conflict
with, or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment or violation of, or constitute
a default under: (a) any provision of the certificate of
incorporation or bylaws of Parent or any provision of the
certificate of formation or operating agreement of Merger Sub, each
as currently in effect; (b) any Applicable Law applicable to
Parent, Merger Sub or any of their respective material assets or
properties; or (c) any Contract to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective
material assets or properties are bound, except in each case, where
such conflict, termination, breach, impairment, violation, default,
consent, or lack of consent, release, waiver or approval would not,
individually or in the aggregate, have a Material Adverse
Effect.
4.4 Interim
Operations of Merger Sub. Merger Sub was
formed by Parent solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as
contemplated by this Agreement. Merger Sub has no liabilities and,
except for its operating agreement pursuant to which all of its
limited liability interests were issued to Parent, is not a party
to any agreement other than this Agreement and agreements with
respect to the appointment of registered agents and similar
matters.
4.5 [reserved].
4.6 Financial
Capacity. Parent will have
sufficient cash funds on hand or available to it to pay the Merger
Consideration.
4.7 Merger
Consideration. Parent has
reserved a sufficient number of authorized but unissued shares of
Parent Common Stock for issuance in connection with the Merger. All
shares of Parent Common Stock which may be issued as contemplated
or permitted by this Agreement
48
will
be, when issued, duly authorized and validly issued, are fully paid
and nonassessable, and will not be subject to any right of
rescission, right of first refusal or preemptive right, and will be
offered, issued, sold and delivered by Parent in compliance with
all requirements of Applicable Law.
4.8 Litigation.
There is no material action, suit, arbitration, mediation,
proceeding, claim or investigation pending against Parent or Merger
Sub (or, to Parent’s knowledge, against any officer,
director, employee or agent of Parent or Merger Sub in their
capacity as such or relating to their employment, services or
relationship with Parent or Merger Sub) before any Governmental
Authority, arbitrator or mediator, nor, to the knowledge of Parent,
has any such action, suit, arbitration, mediation, proceeding,
claim or investigation been threatened in writing. There is no
judgment, decree, injunction, rule or order of any Governmental
Authority, arbitrator or mediator outstanding against Parent or
Merger Sub. Neither Parent nor Merger Sub has an action, suit,
arbitration, mediation, proceeding, claim or investigation pending
against any Governmental Authority or other Person.
4.9 Reorganization.
None of Parent, any of its Subsidiaries (including each Merger Sub)
nor, to the knowledge of Parent, any of Parent’s Affiliates
has taken or agreed to take any action that would prevent the
Merger from qualifying as a tax-free transaction pursuant to
Section 368 of the Code and Parent is not aware of any agreement,
plan or other circumstance that would prevent the Merger from
qualifying as a tax-free transaction pursuant to Section 368 of the
Code.
4.10 Capitalization
of Parent.
(a) Authorized
and Outstanding Capital Stock of Parent. The authorized
capital stock of Parent is as described in the SEC Documents filed
by Parent. As stated therein, the number of shares of Parent Common
Stock outstanding as of October 1, 2017 was 14,309,018 shares, and
Parent does not hold any shares of treasury stock. As stated in the
Certificate of Designations for Series A Cumulative
Convertible Preferred Stock, the number of shares of Series A
Preferred Stock authorized is 505,000 shares, and the number of
Series A Preferred Stock outstanding as of the Agreement Date
is 502,327 shares. As stated in the Certificate of Designations for
Series B Cumulative Convertible Preferred Stock, the number of
shares of Series B Preferred Stock authorized is 240,861
shares, and the number of Series B Preferred Stock outstanding
as of the Agreement Date is 240,861 shares. All issued and
outstanding shares of capital stock of Parent, whether issued and
outstanding immediately prior to the Merger or pursuant to the
Merger, at the Closing, are duly authorized, and are, or will be,
validly issued, fully paid and nonassessable, not issued in
violation of and not subject to any right of rescission, right of
first refusal or preemptive right, and have been or will be
offered, issued, sold and delivered by Parent in compliance with
all requirements of Applicable Law and all requirement set forth in
applicable Contracts. Except for the regular quarterly dividends
payable on the Series A Preferred Stock and the Series B Preferred
Stock of Parent, there is no Liability for dividends accrued and
unpaid by Parent.
(b) Options.
Parent has reserved an aggregate of 3,000,000 shares of Parent
Common Stock for issuance pursuant to the Parent Stock Plans
(including shares subject to outstanding Parent Options). The
holders of the requisite number of shares of Parent Common Stock
have approved the Parent Stock Plan in accordance with Applicable
Law. Upon the issuance
49
of any
shares of Parent Common Stock in accordance with the terms of the
Parent Stock Plans, such shares will be duly and validly issued and
fully paid and nonassessable.
(c) No
Other Rights. Except as described in the SEC Documents filed
by Parent, there are no stock appreciation rights, options,
warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or Contracts outstanding to purchase or
otherwise acquire any shares of Parent Capital Stock or any
securities or debt convertible into or exchangeable for Parent
Capital Stock or obligating Parent to grant, extend or enter into
any such option, warrant, call, right, commitment, conversion
privilege or preemptive or other right or Contract. Except as
described in the SEC Documents filed by Parent, there are no voting
agreements, registration rights, rights of first refusal,
preemptive rights, co-sale rights or other restrictions applicable
to any outstanding securities of Parent.
4.11 Board
Approval. Each of the
Boards of Directors
of
Parent and Merger Sub have, as of the
Agreement
Date, (i) determined that
the Merger
is fair to,
advisable and in the best interests of Parent and the
Merger
Sub,
respectively, and their respective stockholders,
(ii) duly
approved this Agreement, the
Merger and the other
transactions contemplated by this Agreement, and
(iii) determined to recommend
that the stockholder of the Merger Sub approve and adopt
this Agreement and approve the
Merger.
4.12 SEC
Documents; Parent Financial Statements. Parent has furnished or made available
to HoldCo and Key Holders true and complete copies of all SEC
Documents filed by it or its predecessors with the SEC, all in the
form so filed. As of their respective filing dates, such SEC
Documents filed by Parent and all SEC Documents filed after the
date hereof but before the Closing complied or, if filed after the
date hereof, will comply in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder, as the case may be,
and none of the SEC Documents contained or will contain any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were
made, not misleading, except to the extent such SEC Documents have
been corrected, updated or superseded by a document subsequently
filed with the SEC. The financial statements of Parent, including
the notes thereto (the “Parent Financial
Statements”)
comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared
in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and present fairly the consolidated
financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the
periods then ended, it being understood that such financial
statements may be required to be restated from time to
time.
4.13 No
Undisclosed Statements. Neither Parent
nor any of its Subsidiaries has any liabilities or obligations of a
nature, whether accrued, absolute, contingent or otherwise, that
would be required by GAAP to be reflected on a consolidated balance
sheet of Parent, except for liabilities or obligations (a) those
shown on the Parent Financial Statements or in the notes thereto,
(b) those incurred after June 30, 2017 in the ordinary course of
Parent’s business consistent with its past practices, (c)
other undisclosed liabilities which, individually or in the
aggregate, are not material to Parent and their Subsidiaries, taken
as a whole; (d) liabilities disclosed on SEC Documents filed prior
to the date
50
of this
Agreement or otherwise relating to items disclosed therein; and (e)
liabilities directly incurred under the terms of this Agreement or
necessary for providing the financing sufficient to enable
Parent’s performance hereof.
4.14 Subsidiaries.
(a) All the outstanding shares of capital stock of, or other equity
or voting interests in, each Subsidiary of Parent and (b) all the
shares of capital stock of, or other equity or voting interest held
by Parent in each Person in which Parent owns any capital stock of,
or other equity or voting interests of any nature in, or any
interest convertible, exchangeable or exercisable for, capital
stock of, or other equity or voting interests of any nature, each
as disclosed in the SEC Documents filed by Parent, are duly
authorized, have been validly issued and are fully paid and
nonassessable and are owned by Parent, a wholly owned Subsidiary of
Parent, or Parent and another wholly owned Subsidiary of Parent,
free and clear of all material Encumbrances of any kind or nature
whatsoever, other than Parent Permitted Encumbrances, except for
restrictions imposed by applicable securities laws.
4.15 General.
No
representation or warranty by Parent or Merger Sub in this
Agreement and no statement contained in the Parent Disclosure
Schedules or any certificate or other document furnished or to be
furnished to HoldCo and the Key Holders pursuant to this Agreement
contains any untrue statement of material fact, or omits to state a
material fact necessary to make the statements contained therein,
in light of the circumstances in which they are made, not
misleading. The rights of HoldCo and the Key Holders to
indemnification or any other remedy under this Agreement shall not
be impacted or limited by any knowledge that HoldCo and the Key
Holders may have acquired, or could have acquired, whether before
or after the Closing Date, nor by any investigation or diligence by
HoldCo or the Key Holders. Parent hereby acknowledges that,
regardless of any investigation made (or not made) by or on behalf
of HoldCo and the Key Holders, and regardless of the results of any
such investigation, Holdco, the Company and each Key Holder has
entered into this transaction in express reliance upon the
representations and warranties of Parent made in this
Agreement.
ARTICLE V
COMPANY COVENANTS
During
the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this
Agreement in accordance with the provisions of Article IX, HoldCo,
each Key Holder and the Company covenant and agree with Parent as
follows:
5.1 Advise
of Changes. HoldCo shall promptly advise Parent in writing
of (a) any event occurring subsequent to the Agreement Date
that would render any representation or warranty of HoldCo or the
Company contained in Article III untrue or inaccurate such that the
conditions set forth in Sections 8.1 and 8.2 would not be
satisfied, (b) any breach of any covenant or obligation of HoldCo
or the Company pursuant to this Agreement or any HoldCo Ancillary
Agreement or Company Ancillary Agreement such that the conditions
set forth in Sections 8.1 and 8.2 would not be satisfied, (c)
any Material Adverse Change in HoldCo or the Company, or (d) any
change, event, circumstance, condition or effect that would
reasonably be expected to result in a Material Adverse Effect on
HoldCo or the Company or cause any of the conditions set forth in
Sections 8.1 and 8.2 not to be satisfied; provided, however, that
the delivery of any notice pursuant to this Sections 8.1 shall not
be deemed to amend or supplement the NSC Disclosure
Schedule.
5.2 Maintenance
of Business.
(a) HoldCo
and the Company shall use their commercially reasonable efforts to
carry on and preserve the HoldCo Business and the Company’s
business relationships with customers, advertisers, suppliers,
employees and others with whom the Company has contractual
relations. If HoldCo or the Company becomes aware of any material
deterioration in the relationship with any customer, key
advertiser, key supplier or employee, it shall promptly bring such
information to Parent’s attention in writing and, if
requested by Parent, shall exert commercially reasonable efforts to
promptly restore the relationship.
(b) HoldCo
and the Company shall (i) pay all of their debts and Taxes when
due, subject to good faith disputes over such debts or Taxes and
(ii) pay or perform their other Liabilities when due.
(c) HoldCo
and the Company shall use their commercially reasonable efforts to
assure that each of the Company’s Contracts entered into
after the Agreement Date will not require the procurement of any
consent, waiver or novation or provide for any material change in
the obligations of any party in connection with, or terminate as a
result of the consummation of, the Merger.
5.3 Conduct
of Business. HoldCo shall
continue to conduct, and shall cause the Company to
conduct, the HoldCo Business in the ordinary and usual course
consistent with its and their past practices, and the Company shall
not, without Parent’s prior written consent (which consent
may not be unreasonably withheld, conditioned or
delayed):
(a) incur
any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt securities
or guarantee any debt securities of another Person other than in
the ordinary course of business consistent with past
practices;
(b) (i)
lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary
course of business consistent with its past practices, (ii) make
any investments in or capital contributions to, any Person,
(iii) forgive or discharge in whole or in part any outstanding
loans or advances, or (iv) prepay any indebtedness;
(c) enter
into any NSC Material Contract, violate, terminate, amend or
otherwise modify or waive any of the material terms of any NSC
Material Contract, or enter into any material transaction or take
any other action, in each case not in the ordinary course of
business consistent with its past practices;
(d) place
or allow the creation of any Encumbrance (other than a NSC
Permitted Encumbrance) on any of its assets or
properties;
51
(e) sell,
lease, license, transfer or dispose of any assets material to the
HoldCo Business (except for sales or licenses of products in the
ordinary course of business consistent with its past
practices);
(f) except
as required by Applicable Law, by any Contract in effect of the
date hereof or contemplated by this Agreement, (i) pay any special
bonus, increased salary, severance or special remuneration to any
officer, director, employee or consultant, (ii) amend or enter into
any employment or consulting Contract with any such person, or
(iii) adopt or amend any employee or compensation benefit plan,
including any stock purchase, stock issuance or stock option plan,
or amend any compensation, benefit, entitlement, grant or award
provided or made under any such plan (except in each case as
required under ERISA or as necessary to maintain the qualified
status of such plan under the Code);
(g) change
any of its accounting methods;
(h) declare,
set aside or pay any cash or stock dividend or other distribution
(whether in cash, stock or property) in respect of its capital
stock, or redeem, repurchase or otherwise acquire any of its
capital stock or other securities (except for the repurchase of
stock from its employees, directors, consultants or contractors in
connection with the termination of their services at the original
purchase price of such stock), or pay or distribute any cash or
property to any of its stockholders or securityholders or make any
other cash payment to any of its stockholders or
securityholders;
(i) terminate,
waive or release any material right or claim;
(j) issue,
sell, create or authorize any shares of its capital stock of any
class or series or any other of its securities, or issue, grant or
create any warrants, obligations, subscriptions, options,
convertible securities, or other commitments to issue shares of its
capital stock or any securities that are potentially exchangeable
for, or convertible into, shares of its capital stock, other than
the issuance of shares of HoldCo Capital Stock pursuant to the
exercise of HoldCo Options on or prior to the Closing
Date;
(k) subdivide,
split, combine or reverse split the outstanding shares of its
capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its
capital stock of any class or series or affecting any other of its
securities;
(l) merge,
consolidate or reorganize with, acquire, or enter into any other
business combination with any corporation, partnership, limited
liability company or any other entity (other than Parent or Merger
Sub), acquire a substantial portion of the assets of any such
entity, or enter into any negotiations, discussions or agreement
for such purpose;
(m) amend
any HoldCo Charter Document or any Company Charter
Document;
(n) license
any of its technology or Intellectual Property (except for licenses
under its standard customer agreement made in the ordinary course
of business consistent with its past practices, provided, that under no circumstances
shall the Company enter into any software escrow or similar
agreement or arrangement), or acquire any Intellectual Property
(or any
52
license
thereto) from any third party (other than shrink wrap and other
licenses of software generally available to the public at a per
copy license fee of less than One Thousand Dollars ($1,000) per
copy);
(o) materially
change any insurance coverage (other than as contemplated in this
Agreement);
(p) (i)
agree to any audit assessment by any taxing authority, (ii) file
any material Return or amendment to any Return unless copies of
such Return or amendment have first been delivered to Parent for
its review at a reasonable time prior to filing, (iii) except as
required by Applicable Law, make or change any election in respect
of Taxes or adopt or change any accounting method in respect of
Taxes, or (iv) enter into any closing agreement, settle any claim
or assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect of Taxes, that would, in the case of (i)
through (iv), reasonably be expected to have an adverse effect on
Parent or any of its Affiliates in a tax period ending after the
Closing Date;
(q) except
as is necessary to comply with its obligations pursuant to
Section 5.7 below, modify or change the exercise
or conversion rights or exercise or purchase prices of any of its
capital stock, any of its stock options, warrants or other
securities, or accelerate or otherwise modify (i) the right to
exercise any option, warrant or other right to purchase any of its
capital stock or other securities or (ii) the vesting or release of
any shares of its capital stock or other securities from any
repurchase options or rights of refusal held by it or any other
party or any other restrictions;
(r) (i)
initiate any litigation, action, suit, proceeding, claim or
arbitration or (ii) settle or agree to settle any litigation,
action, suit, proceeding, claim or arbitration;
(s) (i)
pay, discharge or satisfy, in an amount in excess of Ten Thousand
Dollars ($10,000) in any one case or Thirty Thousand ($30,000) in
the aggregate, any Liability arising otherwise than in the ordinary
course of business, other than (1) the payment, discharge or
satisfaction of Liabilities reflected or reserved against in the
Company Balance Sheet and (2) the payment, discharge or
satisfaction of Merger Expenses, or (ii) make any capital
expenditures, capital additions or capital
improvements;
(t) materially
change the manner in which it extends warranties, discounts or
credits to customers; or
(u) (i)
agree to do any of the things described in the preceding clauses
(a)-(u), (ii) take or agree to take any action which would
reasonably be expected to make any of HoldCo’s, any Key
Holder’s or the Company’s representations or warranties
contained in this Agreement or in any HoldCo Ancillary Agreement or
any Company Ancillary Agreement untrue or incorrect, or (iii) take
or agree to take any action which would reasonably be expected to
prevent HoldCo, any Key Holder or the Company from performing or
cause HoldCo, any Key Holder or the Company not to perform one or
more covenants required hereunder to be performed by HoldCo, any
Key Holder or the Company;
53
For
purposes of this Section 5.3, “NSC Material Contract” includes
any Contract arising subsequent to the date of this Agreement that
would have been required to be listed on the NSC Disclosure
Schedule pursuant to Section 3.11 had such Contract
been in effect on the date of this Agreement.
5.4 Regulatory
Approvals. HoldCo shall
promptly execute and file, or join in the execution and filing of,
any application, notification or other document that may be
necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether federal, state, local or
foreign, which may be required in connection with the consummation
of the Merger and the other transactions contemplated by this
Agreement any HoldCo Ancillary Agreement or any Company Ancillary
Agreement. HoldCo and the Company shall use commercially reasonable
efforts to obtain, and to cooperate with Parent to promptly obtain,
all such authorizations, approvals and consents and shall pay any
associated filing fees payable by HoldCo or the Company with
respect to such authorizations, approvals and consents. HoldCo
shall promptly inform Parent of any material communication between
HoldCo or the Company and any Governmental Authority regarding any
of the transactions contemplated hereby. If HoldCo or any Affiliate
of HoldCo receives any formal or informal request for supplemental
information or documentary material from any Governmental Authority
with respect to the transactions contemplated hereby, then HoldCo
shall make, or cause to be made, as soon as reasonably practicable,
a response in compliance with such request following consultation with
Parent.
5.5 Necessary
Consents. Each of HoldCo
and the Company shall use its commercially reasonable efforts to
obtain prior to Closing such written consents and authorizations of
third parties, give notices to third parties and take such other
actions as may be necessary or appropriate in order to effect the
consummation of the Merger and the other transactions contemplated
by this Agreement, to enable the Surviving Entity (or Parent) to
carry on the HoldCo Business immediately after the Effective Time
and to keep in effect and avoid the breach, violation of,
termination of, or adverse change to, any NSC Material
Contract.
5.6 Litigation.
HoldCo shall notify Parent in writing promptly after learning of
any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration
panel, board or governmental agency, initiated by or against it, or
known by HoldCo to be threatened against HoldCo or the Company or
any of its officers, directors, employees or stockholders in their
capacity as such.
(a) HoldCo
and the Company shall not, and shall not authorize, encourage or
permit any of its officers, directors, employees, Affiliates,
agents, advisors (including any attorneys, financial advisors,
investment bankers or accountants) or other representatives
(collectively, “HoldCo
Representatives”) to, directly or indirectly:
(a) solicit, initiate, or knowingly encourage, facilitate or
induce the making, submission or announcement of any inquiry, offer
or proposal from any Person (other than Parent) concerning any
Alternative Transaction; (b) furnish any nonpublic or confidential
information regarding HoldCo or the Company to any Person (other
than Parent and its agents and advisors) in connection with or in
response to any inquiry, offer or proposal for or regarding any
Alternative Transaction (other than to respond to such
54
inquiry,
offer or proposal by indicating that HoldCo is subject to this
Section 5.7); (c) enter into, participate in,
maintain or continue any discussions or negotiations with any
Person (other than Parent and its agents and advisors) with respect
to any Alternative Transaction (other than to respond to such
inquiry, offer or proposal by indicating that HoldCo is subject to
this Section 5.7); (d) otherwise cooperate with,
facilitate or encourage any effort or attempt by any Person (other
than Parent and its agents and advisors) to effect any Alternative
Transaction; or (e) execute, enter into or become bound by any
letter of intent, memorandum of understanding, other Contract or
understanding between HoldCo and any Person (other than Parent)
that is related to, provides for or concerns any Alternative
Transaction, provided, however, that in the event HoldCo receives
an unsolicited proposal with respect to such a transaction, prior
to the Stockholder Approval, from any Person (other than Parent and
its designees), HoldCo may, to the extent it is required to do so
by applicable fiduciary duties confirmed by advice of counsel to
that effect, (a “Superior
Proposal”) enter into discussion or transactions with
or provide information to such Person. If any HoldCo
Representative, whether in his or her capacity as such or in any
other capacity, takes any action that HoldCo is obligated pursuant
to this Section 5.7(a) to cause such HoldCo
Representative not to take, then HoldCo shall be deemed for all
purposes of this Agreement to have breached this
Section 5.7(a).
(b) HoldCo
shall notify Parent within 24 hours after receipt by HoldCo (or, to
HoldCo’s knowledge, by any of the HoldCo Representatives) of
any inquiry, offer or proposal that constitutes an Alternative
Transaction, or any other notice that any Person is considering
making an Alternative Transaction, or any request for nonpublic
information relating to HoldCo or the Company or for access to any
of the properties, books or records of HoldCo or the Company by any
Person or Persons other than Parent (which notice shall identify
the Person or Persons making, or considering making, such inquiry,
offer or proposal) in connection with a potential Alternative
Transaction and shall keep Parent fully informed of the status and
details of any such inquiry, offer or proposal and any
correspondence or communications related thereto and shall provide
to Parent a correct and complete copy of such inquiry, offer or
proposal and any amendments, correspondence and communications
related thereto, if it is in writing, or a written summary of the
material terms thereof, if it is not in writing. HoldCo shall
provide Parent with 48 hours prior notice (or such lesser prior
notice as is provided to the members of the Board of Directors of
HoldCo) of any meeting of the Board of Directors of HoldCo at which
the Board of Directors of HoldCo is reasonably expected to consider
any Alternative Transaction. HoldCo shall immediately cease and
cause to be terminated any and all existing activities, discussions
and negotiations with any Persons conducted heretofore with respect
to an Alternative Transaction.
5.8 Access
to Information. HoldCo shall
allow Parent and its agents and advisors (which shall include
Parent’s financing sources and their advisors) access at
reasonable times to the files, books, records, technology,
Contracts, personnel and offices of HoldCo and the Company,
including any and all information relating to HoldCo’s and
the Company’s taxes, Contracts, Liabilities, financial
condition and real, personal and intangible property, subject to
the terms of the Confidentiality Agreement between HoldCo or the
Company and Parent (the “Confidentiality Agreement”).
HoldCo shall cause its and the Company’s accountants to
cooperate with Parent and Parent’s agents and advisors in
making available all financial information reasonably requested by
Parent and its agents and advisors, including the right to examine
all working papers pertaining to all financial statements prepared
by such accountants.
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5.9 Satisfaction
of Conditions Precedent. HoldCo, the Company and each Key
Holder shall use commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent set forth in
Sections 8.1 and 8.2, and HoldCo shall use
commercially reasonable efforts to cause the Merger and the other
transactions contemplated by this Agreement, HoldCo Ancillary
Agreements and the Company Ancillary Agreements to be consummated
in accordance with the terms hereof and thereof.
5.10 Notices
to HoldCo Securityholders and Employees.
(a) HoldCo
shall timely provide to holders of HoldCo Capital Stock, HoldCo
Options and creditors of the Company all advance notices required
to be given to such Persons in connection with this Agreement, the
Certificates of Merger, the Merger and the transactions
contemplated by this Agreement, the Articles of Incorporation,
under the HoldCo Stock Plans or other applicable Contracts and
under Applicable Law.
(b) The
Company shall give all notices and other information required to be
given by the Company to the employees of the Company, any
collective bargaining unit representing any group of employees of
the Company, and any applicable Governmental Authority under the
WARN Act, the National Labor Relations Act, as amended, the Code,
COBRA and other Applicable Law in connection with the transactions
contemplated by this Agreement or other applicable
Contracts.
5.11 280G
Stockholder Approval. To the extent any payments made with
respect to, or which arise as a result of, this Agreement, could be
characterized as an “excess parachute payment” within
the meaning of Section 280G(b)(1) of the Code, HoldCo shall (i)
within twenty (20) Business Days following the date of this
Agreement (and in any event prior to obtaining the consent of any
recipient of such payment in accordance with (ii) below), disclose
its calculations with respect to the excess parachute payments to
Parent, along with the assumptions used to make the calculations
and the data necessary for Parent to confirm the accuracy of the
calculations, (ii) to the extent not already obtained, promptly
obtain the consent of the recipient of any such payment that would
otherwise be due and owing that such payment shall not be due and
owing, paid or retained, absent 280G Stockholder Approval (as
defined below) of such payment, and (iii) promptly (and in any case
prior to the Closing Date) cause all such payments to be adequately
disclosed to, and submit such payments for approval by a vote of,
the stockholders of HoldCo in a manner meeting the requirements of
Section 280G(b)(5)(B) of the Code and the Treasury Regulations
Section 1.280G-1 Q&A-7 (“280G Stockholder Approval”), and
in a manner reasonably satisfactory to Parent. Parent shall
have the right to review and approve (which approval will not be
unreasonably withheld or delayed) any consent required by clause
(ii) and any disclosure required by clause (iii) before such
consent is sought or disclosure is made, as
applicable.
ARTICLE VI PARENT COVENANTS
During
the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this
Agreement in accordance with the provisions of Article IX, Parent
covenants and agrees with HoldCo as follows:
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6.1 Advise
of Changes. Parent shall promptly advise HoldCo in writing
of (a) any event occurring subsequent to the Agreement Date
that would render any representation or warranty of Parent or
Merger Sub contained in Article IV untrue or inaccurate such that
the condition set forth in Section 8.3 would not be satisfied, (b)
any breach of any covenant or obligation of Parent or Merger Sub
pursuant to this Agreement, any Parent Ancillary Agreement or any
Merger Sub Ancillary Agreement such that the condition set forth in
Sections 8.1 and 8.3 would not be satisfied, (c)
any Material Adverse Change in Parent or its Subsidiaries, or (d)
any change, event, circumstance, condition or effect that would
reasonably be expected to result in a Material Adverse Effect on
Parent or its Subsidiaries or cause any of the conditions set forth
in Sections 8.1 and 8.3 not to be satisfied; provided, however, that the delivery of
any notice pursuant to this Section 5.1 shall not be deemed to
amend or supplement the Parent Disclosure Schedule.
6.2 Regulatory
Approvals. Parent shall
promptly execute and file, or join in the execution and filing of,
any application, notification or other document that may be
necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether foreign, federal, state,
local or municipal, which may be required in connection with the
consummation of the Merger and the other transactions contemplated
by this Agreement, any Parent Ancillary Agreement or any Merger Sub
Ancillary Agreement (other than the Qualifying Offering). Parent
shall use commercially reasonable efforts to obtain all such
authorizations, approvals and consents and shall pay any associated
filing fees payable by Parent with respect to such authorizations,
approvals and consents. Parent shall promptly inform HoldCo of any
material communication between Parent and any Governmental
Authority regarding any of the transactions contemplated hereby. If
Parent or any Affiliate of Parent receives any formal or informal
request for supplemental information or documentary material from
any Governmental Authority with respect to the transactions
contemplated hereby, then Parent shall make, or cause to be made,
as soon as reasonably practicable, a response in compliance with
such request following consultation with HoldCo. Notwithstanding
anything in this Agreement to the contrary, if any administrative
or judicial action or proceeding is instituted (or threatened in
writing to be instituted) challenging any transaction contemplated
by this Agreement as violative of any Applicable Law, it is
expressly understood and agreed that neither Parent nor any of its
Subsidiaries or Affiliates shall be under any obligation to:
(a) litigate or contest any administrative or judicial action
or proceeding or any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent; or (b) make
proposals, execute or carry out agreements or submit to orders
providing for (i) the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets
or categories of assets of Parent, any of its Subsidiaries or
Affiliates or HoldCo, or the holding separately of the shares of
HoldCo Common Stock or (ii) the imposition of any limitation on the
ability of Parent or any of its Subsidiaries or Affiliates to
freely conduct their business or own such assets or to acquire,
hold or exercise full rights of ownership of the shares of HoldCo
Common Stock.
6.3 Offerings.
Parent shall not consummate a public offering of Parent Capital
Stock before the Closing other than the Qualified
Offering.
6.4 Satisfaction
of Conditions Precedent. Parent shall use its commercially
reasonable efforts to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Sections
8.1 and 8.3, and Parent shall use its commercially
reasonable efforts to cause the Merger and the other transactions
contemplated by this Agreement, the Merger Sub Ancillary Agreements
and the
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Parent
Ancillary Agreements to be consummated in accordance with the terms
of this Agreement as soon as reasonably practical.
ARTICLE VII ADDITIONAL AGREEMENTS
7.1 Approval
of the HoldCo Stockholders. HoldCo, the
Company and each Key Holder shall promptly after the date hereof
take all action necessary in accordance with Virginia Law and the
HoldCo Charter Documents to obtain the Stockholder Approval
approving the Merger as soon as practicable and no later than
December 31, 2017.
7.2 Employees.
(a) Section
7.2 of the NSC Disclosure Schedule sets forth a list of each
employee of the Company or any of its Subsidiaries, including each
employee’s title, location, base compensation, bonus
compensation, start date, and accrued PTO. The Company and HoldCo
prior to the Closing, and Surviving Entity immediately after the
Effective Time and for such period of time as Surviving Entity
determines in its sole and absolute discretion, shall continue the
at-will employment or other arrangement of the employees of HoldCo,
the Company and its Subsidiaries; provided, however, that the Surviving
Entity shall be under no obligation to provide continued employment
or other work opportunities to any at-will employee or independent
contractor following the Closing, and shall be under no obligation
to provide any payment or benefits (including, but not limited to
base salary, bonus, and any pension or welfare benefits) to any
at-will company employee or independent contractor in any form, or
at any level, other than as determined by the Surviving Entity in
its sole and absolute discretion. HoldCo, the Company and each Key
Holder shall use all reasonable efforts to retain existing
employees and consultants of HoldCo and/or the Company through the
Effective Time (except to the extent that such retention would be
outside the normal course of business of the Company), subject to
compliance with the covenants of HoldCo and/or the Company
hereunder and except that HoldCo and the Company shall have no
obligation to take any action that would breach any representation
and warranty of HoldCo or the Company hereunder.
(b) HoldCo
and the Company shall use commercially reasonable efforts to take
all required corporate action to maintain Company’s 401(k)
plan. HoldCo and the Company shall use commercially reasonable
efforts to take all required corporate action to maintain all other
Company Benefit Arrangements.
(c) Such
employees of the Company who are employed after the Effective Time
by Parent or its Subsidiaries shall: (i) receive credit for service
with the Company (including credit with predecessors recognized by
the Company) for purposes of all employee benefit plans and
programs offered by Parent, including but not limited to paid time
off, if any; and may be entitled to participate in Parent’s
2017 Equity Award Plan at the sole discretion of Parent and
pursuant to the terms and conditions set forth
therein.
7.3 Tax
Matters.
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(a) Tax
Returns.
(i) The
Stockholders’ Agent shall be responsible for preparing, and
Parent shall be responsible for filing when due, all Returns
required to be filed by HoldCo or the Company for any Tax period
ending on or prior to the Closing Date (a “Pre-Closing Tax Period”)
(including, without limitation, all income tax Returns for the
taxable year ending on the Closing Date). Returns prepared by the
Stockholder’s Agent pursuant to this Section
7.3(a)(i) shall be prepared in a manner consistent
with past practices of HoldCo or the Company unless otherwise
required by Applicable Law. The Stockholders’ Agent shall
provide Parent with a copy of such Returns (and supporting
schedules) at least twenty-five (25) days in advance of the due
date for such Returns. If the due date for filing any such Return
is within twenty-five (25) days of the Closing Date, the
Stockholders’ Agent shall provide Parent with a copy of such
Return (and supporting schedules) within a reasonable period of
time prior to the due date. The Stockholders’ Agent shall
make any changes and revisions to such Returns as are reasonably
requested by Parent. The Stockholders’ Agent shall cause to
be paid to Parent, within a reasonable time after having received a
written request therefore from Parent, an amount equal to any Taxes
to be paid for such Pre-Closing Tax Period, and Parent shall then
pay or cause to be paid when due all Taxes with respect to any such
Returns.
(ii) Parent
shall be responsible for preparing and filing when due all Returns
of HoldCo or the Company for any Tax period ending after the
Closing Date and shall pay or cause to be paid when due all Taxes
with respect to any such Returns. Returns prepared and filed by
Parent for a Straddle Period (“Straddle Period Tax Returns”)
shall be prepared in a manner consistent with past practices of the
Company unless otherwise required by Applicable Law. Parent shall
provide the Stockholders’ Agent with a copy of such Straddle
Period Tax Returns (and supporting schedules) at least twenty-five
(25) days in advance of the due date for such Returns. If the due
date for filing any Straddle Period Tax Return is within
twenty-five (25) days of the Closing Date, Parent shall provide the
Stockholders’ Agent with a copy of such Return (and
supporting schedules) within a reasonable period of time prior to
the due date. Parent shall make any changes to such Straddle Period
Tax Returns as are reasonably requested by the Stockholders’
Agent. The Stockholders’ Agent shall cause to be paid to
Parent, within a reasonable time after having received a written
request therefore from Parent, an amount equal to any Taxes
relating to the portion of a Straddle Period ending on the Closing
Date, as determined in accordance with Section 7.3(c).
(b) Cooperation;
Audits. In connection with the preparation and filing of
Returns, audit examinations, and any administrative or judicial
proceedings relating to any Tax liabilities imposed on HoldCo, the
Company, Parent and the Stockholders’ Agent shall cooperate
fully with each other, including, without limitation, the
furnishing or making available during normal business hours of
records, personnel (as reasonably required), books of account,
powers of attorney or other materials necessary or helpful for the
preparation and filing of such Returns, the conduct of audit
examinations or the defense of claims by taxing authorities as to
the imposition of Taxes.
(c) Apportionment
of Taxes. In order to apportion appropriately any Taxes
relating to the portion of a Straddle Period ending on the Closing
Date, the portion of any Taxes that are allocable to such period
shall be: (A) in the case of Taxes other than income,
sales
59
and
use, value added, employment and withholding Taxes, deemed to be
the amount of such Taxes for the entire Straddle Period multiplied
by a fraction the numerator of which is the number of calendar days
in the Straddle Period ending on (and including) the Closing Date
and the denominator of which is the number of calendar days in the
entire relevant Straddle Period, and (B) in the case of income,
sales and use, withholding, value added and employment Taxes,
deemed equal to the amount that would be payable if the taxable
year or period ended and the books closed at the close of the
Closing Date.
(d) Tax
Contests. After the Closing, each of Parent and the
Stockholders’ Agent shall promptly notify the other in
writing of the proposed assessment or the commencement of any Tax
audit or administrative or judicial proceeding or of any demand or
claim, of which such party has been informed in writing by any
Taxing Authority, with respect to the Company which, if determined
adversely to the taxpayer or after the lapse of time, could (x) be
grounds for indemnification pursuant to Section 10.2
of this Agreement or (y) otherwise result in a Tax liability
or with respect to a tax period beginning before Closing;
provided, that
failure to so notify shall not diminish such obligation to
indemnify except to the extent of material prejudice. In the
case of a Tax audit or administrative or judicial proceeding (a
“Tax Contest”)
that relates solely to Pre-Closing Tax Periods, the
Stockholders’ Agent shall have the sole right, at its expense
(on behalf of the Participating Stockholders), to control the
conduct of such Tax Contest; provided, that (i) the
Stockholders’ Agent shall not settle, discharge or otherwise
dispose of any such Tax Contest without the prior written consent
of Parent, which shall not be unreasonably withheld, conditioned or
delayed, and (ii) Parent shall have the right to fully participate
in any such Tax Contest at its own expense. Parent shall control
and shall have the right to discharge, settle or otherwise dispose
of all other Tax Contests.
(e) Parent
shall not amend any Return applicable to a Pre-Closing Tax Period
without the consent of the Stockholders’ Agent, which consent
shall not be unreasonably withheld, conditioned, or delayed. The
Participating Stockholders shall be entitled to all Tax refunds of
the Company for any Pre-Closing Tax Period. If Parent or Company
receives any Tax refund to which Stockholders’ Agent is
entitled pursuant to this Section 7.3(e), Parent will
promptly pay (or cause Company to pay) the amount of such Tax
refund to Participating Stockholders. In the event that any such
Tax refund is subsequently disallowed in whole or part by any tax
authority, the Participating Stockholders shall promptly return any
such amounts (plus any interest or penalties, if applicable) to
Parent or the Company, as applicable.
7.4 Sale
of Shares Pursuant to Regulation D. The parties hereto
acknowledge and agree that the shares of Parent Common Stock
issuable to the Holders pursuant to Section 2.1 hereof
shall constitute “restricted securities” under the
Securities Act. All such Holders shall be accredited investors. The
certificates of Parent Common Stock shall bear the legend set forth
in Section 2.10. It is acknowledged and understood
that Parent is relying on certain written representations made by
each of the Holders. HoldCo will use its commercially reasonable
efforts to cause each Holder to execute and deliver to Parent an
Investor Representation Statement in the form attached hereto as
Exhibit D (the “Investor
Representation Statement”) prior to the Closing
Date.
7.5 Blue
Sky Laws. Parent shall take
such steps as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable to the
issuance of the
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Parent
Common Stock in connection with the Merger. HoldCo shall take such
steps as may be necessary to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent
Common Stock in connection with the Merger.
7.6 Release
of Guarantees. Parent shall have the HoldCo Stockholders
released at Closing from such personal guarantees set forth on
Section 7.6 of the NSC Disclosure Schedule. To the extent any
personal guarantees set forth on Section 7.6 of the NSC Disclosure
Schedule is not released at or prior to the Closing and is enforced
against any HoldCo Stockholder after Closing, Parent hereby agrees
to indemnify, defend, and hold harmless such HoldCo Stockholder
from any amounts that such HoldCo Stockholder is required to pay in
connection with the enforcement of any obligations under such
personal guarantees after the Closing Date, including reasonable
attorneys’ fees and expenses incurred in connection
therewith.
7.7 Lock-Up.
After the Closing, as consideration for the right to receive the
Merger Consideration, each Participating Stockholder shall not,
directly or indirectly, sell, offer to sell, contract to sell, or
grant any option for the sale (including without limitation any
short sale), grant any security interest in, pledge, hypothecate,
hedge, establish an open “put equivalent position”
within the meaning of Rule 16a-1(h)of the Exchange Act, or
otherwise dispose of or enter into any transaction which is
designed to, or could be expected to, result in the disposition of
(whether by actual disposition or effective economic disposition
due to cash settlement or otherwise) the Parent Common Stock
received pursuant to Section 2.1(b)(i)(A) of this Agreement for a
period commencing on the Closing Date and continuing through the
date that is 180 calendar days after the Qualifying Offering (the
“Lock-up”);
provided, however, that the Participating Stockholder may (i)
complete one or more gift transfers of Parent Common Stock to
immediate family member(s) (as defined in Item 404(a) of Regulation
S-K under the Exchange Act) who agree in writing to be similarly
bound for the remainder of the Lock-up; (ii) transfer Parent Common
Stock by will or the laws of descent and distribution or to one or
more trusts for bona fide estate planning purposes, or (iii)
transfer Parent Common Stock as may be required under any benefit
plan of Parent, in each case without prior written consent and upon
three (3) business days’ written notice to Parent. Parent may
enter stop transfer instructions with Parent’s duly appointed
transfer agent against the registration or transfer of the any of
the Participating Stockholder’s Parent Common Stock except in
compliance with this Section 7.7.
ARTICLE VIII
CONDITIONS TO CLOSING OF MERGER
8.1 Conditions
to Each Party’s Obligation to Effect the
Merger. The respective
obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of
the following conditions:
(a) Governmental
Approvals. Other than the filing of the Certificates of
Merger in accordance with the terms of Section 2.3,
all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Authority shall have been filed,
occurred or been obtained pursuant to Applicable Law.
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(b) No
Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal
or regulatory restraint or prohibition preventing the consummation
of the Merger or limiting or restricting the conduct or operation
of the business of the Company by Parent after the Merger shall
have been issued, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic Governmental
Authority, seeking any of the foregoing be pending; nor shall there
be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger which
makes the consummation of the Merger illegal.
(c) Completion
of Qualifying Offering. Parent shall have completed a
Qualifying Offering at least fourteen (14) days prior to the
Closing Date.
8.2 Additional
Conditions to Obligations of Parent and Merger
Sub. The obligations
of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may
be waived in writing exclusively by Parent and Merger
Sub:
(a) Representations
and Warranties. The representations and warranties of
HoldCo, the Company and/or each Key Holder set forth in this
Agreement (without modification by any update or modification to
the NSC Disclosure Schedules) that are qualified by materiality
shall be true and correct, and the representation and warranties of
HoldCo and the Company set forth in this Agreement (without
modification by any update or modification to the NSC Disclosure
Schedules) that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except for changes
contemplated by this Agreement; and Parent shall have received a
certificate signed on behalf of HoldCo by the Chief Executive
Officer of HoldCo to such effect.
(b) Performance
of Obligations. HoldCo, each Key Holder and the Company
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date; and Parent shall have received a certificate
signed on behalf of HoldCo by the Chief Executive Officer of HoldCo
to such effect.
(c) Government
Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have
been taken all such other actions by any Governmental Authority or
other regulatory authority having jurisdiction over the parties and
the actions herein proposed to be taken, as may be required to
consummate the Merger.
(d) Dissenting
Stockholders. Holders of not more than five percent (5%) of
the issued and outstanding HoldCo Capital Stock (on an as converted
basis) as of the Closing shall have elected to, or continue to have
contingent rights to, exercise appraisal rights under Virginia Law
as to such shares.
(e) Consents.
Parent shall have received duly executed copies of all third party
consents, approvals, assignments, notices, waivers, authorizations
or other certificates set forth in Section 3.5(a) of the NSC
Disclosure Schedule.
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(f) Employment
Matters. The executed Employment Agreement of each of the
persons identified under the heading “Key Employees” on
Exhibit B shall continue to be in full force and
effect.
(g) Termination,
Modification or Satisfaction of HoldCo Stockholder Documents and
Rights. Each of the agreements identified on Section 8.2(g)
of the NSC Disclosure Schedule shall have been terminated,
effective as of the Closing, in accordance with their respective
terms, and the parties to the agreements identified on
Section 8.2(g) of the NSC Disclosure Schedule shall have
waived all of their respective rights thereunder, effective as of,
and contingent upon, the Closing.
(h) Resignations
of Directors and Officers. The persons holding the positions
of a director or officer of HoldCo and the Company, in office
immediately prior to the Effective Time, shall have resigned from
such positions in writing effective as of the Effective
Time.
(i) Estimated
Net Working Capital. The Company shall deliver the net
working capital on its balance sheet equal to the estimated Net
Working Capital as of Closing (the “Estimated Net Working Capital”)
set forth on the Estimated Working Capital Statement. Prior to the
Closing, HoldCo will provide Parent with a written statement
setting forth the Estimated Net Working Capital and its components
(the “Estimated Working
Capital Statement”).
(j) Spreadsheet.
Parent shall have received the Spreadsheet accompanied by a
certificate signed on behalf of the Company by the Chief Executive
Officer of HoldCo certifying that the Spreadsheet is true, complete
and accurate as of the Closing Date and immediately prior to the
Effective Time; provided, however, that such receipt
shall not be deemed to be an agreement by Parent that the
Spreadsheet is accurate and shall not diminish Parent’s
remedies hereunder if the Spreadsheet is not accurate.
(k) Good
Standing Certificates. Parent shall have received a
certificate from the Office of the Clerk of the State Corporation
Commission of the Commonwealth of Virginia and each other State in
which HoldCo and/or the Company is qualified to do business as a
foreign corporation certifying that HoldCo and/or the Company is in
good standing and that all applicable fees of HoldCo and/or the
Company through and including the Closing Date have been
paid.
(l) FIRPTA.
Parent shall have received from HoldCo a properly completed and
signed statement under Treasury Regulation Section
1.1445-2(b)(2).
(m)
Material Adverse
Effect. Since the Agreement Date, there shall not have
occurred and be continuing a Material Adverse Effect on
HoldCo.
(n)
Investor Representation
Statement. Parent shall receive an Investor Representation
Statement from each Holder in form reasonably satisfactory to
Parent.
(o)
HoldCo Stockholder
Approval. The Merger and this Agreement shall have been duly
and validly approved and adopted, as required by Applicable Law and
the
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HoldCo
Charter Documents, each as in effect on the date of such approval
and adoption, by the requisite vote of the holders of HoldCo
Capital Stock.
8.3 Additional
Conditions to Obligations of HoldCo. The obligation of
HoldCo and the Company to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may
be waived, in writing, exclusively by HoldCo:
(a) Representations
and Warranties. The representations and warranties of Parent
and Merger Sub set forth in this Agreement that are qualified by
materiality shall be true and correct, and the representation and
warranties of Parent and Merger Sub set forth in this Agreement
that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and (except
to the extent such representations speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date;
and HoldCo shall have received a certificate signed on behalf of
Parent by an authorized officer of Parent to such
effect.
(b) Performance
of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior
to the Closing Date; and HoldCo shall have received a certificate
signed on behalf of Parent by an authorized officer of Parent to
such effect.
(c) Material
Adverse Effect. Since the Agreement Date, there shall not
have occurred a Material Adverse Effect on Parent.
(d) Registration
Rights Agreement. Each Key Holder shall have received a
Registration Rights Agreement executed by Parent as of the Closing
Date in substantially the form attached hereto as Exhibit C.
ARTICLE IX TERMINATION OF AGREEMENT
9.1 Termination
by Mutual Consent. This Agreement
may be terminated at any time prior to the Effective Time by the
mutual written consent of Parent and HoldCo.
(a) Either
Parent or HoldCo, by giving written notice to the other, may
terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger or any other material transaction
contemplated by this Agreement.
(b) Either
Parent or HoldCo, by giving written notice to the other, may
terminate this Agreement if Parent shall not have completed a
Qualifying Offering by February 28, 2018; provided, that, in the event of a
termination of this Agreement under this Section 9.2(b), Parent
shall promptly pay to HoldCo, in immediately available funds, an
amount equal to the Merger Expenses.
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(c) Either
Parent or HoldCo, by giving written notice to the other, may
terminate this Agreement if the Merger shall not have been
consummated by March 21, 2018; provided, however, that the right to
terminate this Agreement pursuant to this Section 9.2(c) shall
not be available to any party whose breach of a representation or
warranty or covenant made under this Agreement by such party
results in the failure of any condition set forth in Articvle VII
to be fulfilled or satisfied on or before such date. Parent shall
promptly pay to HoldCo, in immediately available funds, an amount
equal to the Merger Expenses in the event Parent terminates this
Agreement pursuant to this Section 9.2(c).
(d) Either
Parent or HoldCo, by giving written notice to the other, may
terminate this Agreement at any time prior to the Effective Time if
the other has committed a breach of (i) any of its representations
and warranties under Article III or Article IV, as applicable, or
(ii) any of its covenants under Article V or Article VI, as
applicable, and has not cured such breach within ten (10) Business
Days after the party seeking to terminate this Agreement has given
the other party written notice of such breach and its intention to
terminate this Agreement pursuant to this Section 9.2(d)
(provided, however, that no such cure period shall be available or
applicable to any such breach which by its nature cannot be cured)
and if not cured on or prior to the Closing Date, such breach would
result in the failure of any of the conditions set forth in Article
Viii, as applicable, to be fulfilled or satisfied; provided,
however, that the right to terminate this Agreement under this
Section 9.2(d) shall not be available to a party if the party
is at that time in material breach of this Agreement. In the event
HoldCo terminates this Agreement pursuant to this
Section 9.2(d), Parent shall promptly pay to HoldCo, in
immediately available funds, an amount equal to the Merger
Expenses.
(e) Parent,
by giving written notice to HoldCo, may terminate this Agreement if
(i) HoldCo’s Board of Directors shall have for any
reason recommended, endorsed, accepted or agreed to an Alternative
Transaction or shall have resolved to do any of the foregoing, or
(ii) if an inquiry, offer or proposal for an Alternative
Transaction shall have been made and HoldCo’s Board of
Directors in connection therewith does not within five (5) Business
Days of Parent’s request to do so reconfirm its approval and
recommendation of this Agreement and the transactions contemplated
hereby and reject such Alternative Transaction.
(f) HoldCo,
by giving written notice to Parent, may terminate this Agreement
(at any time prior to the approval and adoption of this Agreement
by the required vote of the stockholders of HoldCo) if HoldCo has
received a Superior Proposal (prior to the Stockholder Approval)
and the Board of Directors of HoldCo determines in its good faith
judgment, confirmed by advice of outside legal counsel, that it is
required to recommend or accept such Superior Proposal;
provided,
that HoldCo has
complied in all material respects with the provisions of
Section 5.7.
9.3 Effect
of Termination. In the event of termination of this
Agreement as provided in Section 9.2, this
Agreement shall forthwith become void and, except as otherwise
provided in Section 9.2(b), 9.2(c), and 9.2(d) there shall be no
liability or obligation on the part of Parent, Merger Sub, HoldCo
or the Company or their respective officers, directors,
stockholders or Affiliates; provided, however, that (i) the
provisions of this Section 9.3 (Effect of
Termination) and Article XI (Miscellaneous) shall
remain in full force and effect and survive any termination of this
Agreement and (ii) nothing herein shall relieve any party hereto
from liability in connection
65
with
any material breach of any of such party’s representations,
warranties or covenants contained herein.
ARTICLE X
INDEMNIFICATION
10.1
Survival Periods.
If the Merger is consummated, the representations and warranties of
the parties contained in this Agreement and the representations and
warranties set forth in HoldCo’s closing certificate
referenced in Section 8.2, respectively, shall survive the
Effective Time, regardless of any investigation or disclosure made
by or on behalf of any of the parties to this Agreement for a
period of eighteen (18) months following the Closing (the
“Indemnity
Period”), except that the representations and
warranties set forth in the Fundamental Representations shall
survive the Effective Time, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this
Agreement for a period of thirty-six (36) months following the
Closing (the “Fundamental
Reps Indemnity Period”); provided, however, that (a) no right to
indemnification pursuant to this Aricle X in respect of any claim
based upon any breach of any representation or warranty that is not
a Fundamental Representation that is set forth in a Notice of Claim
delivered prior to the expiration of the Indemnity Period shall be
affectedby the expiration of such Indemnity Period, and (b) no
right to indemnification pursuant to this Article X in respect of
any claim based upon any breach of any Fundamental Representation
that is set forth in a Notice of Claim delivered prior to the
expiration of the Fundamental Reps Indemnity Period shall be
affected by the expiration of such Fundamental Reps Indemnity
Period. If the Merger is consummated, all covenants of the parties
(including the covenants set forth in Article V, Article VI and
Article VII) shall expire and be of no further force or effect as
of the Effective Time, except to the extent such covenants provide
that they are to be performed, in whole or in part, after the
Effective Time, in which case such covenants shall survive until
fully performed or observed in accordance with their terms. The
right to indemnification pursuant to this Article X based on any
breach or inaccuracy of such representations and warranties will
not be affected by any investigation conducted with respect to,
orany knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation or
warranty; provided,
however, that the
representations and warranties of HoldCo or the Company shall be
deemed to be limited by the disclosures set forth in the NSC
Disclosure Schedules. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance
of or compliance with any covenant, will not affect any right to
indemnification that may otherwise exist based on any breach or
inaccuracy of such representations, warranties and covenants. No
claim for indemnification may be asserted after the expiration of
the Indemnity Period (except in the case of fraud). Nothing in this
Section 10.1 shall limit the application of Section
10.3(d).
10.2 Indemnification.
From and after the Effective Time (but subject to
Section 10.3(a)), each NSC Indemnifying Party
shall, jointly and severally, subject to each Key Holder’s
pro rata share of Merger Consideration, indemnify each Parent
Indemnitee from and against any Damages that are directly or
indirectly suffered or incurred by any of the Parent Indemnitees to
the extent that such Damages are the result of or arise out
of:
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(a) any
inaccuracy in or breach of any representation or warranty made by
HoldCo, the Company or either Key Holder in this Agreement as of
the date of this Agreement;
(b) any
inaccuracy in or breach of any representation or warranty made by
HoldCo, the Company or either Key Holder: (i) in this Agreement as
if such representation or warranty was made on and as of the
Closing; or (ii) in the HoldCo closing certificate;
(c) any
breach of any covenant or obligation of HoldCo, the Company, either
Key Holder, or the Stockholders’ Agent in this
Agreement;
(d) any
amounts paid by the Surviving Entity to former HoldCo Stockholders
with respect to Dissenting Shares required to be paid or otherwise
reasonably paid to the extent that the aggregate of such amounts
exceed the aggregate portion of the Merger Consideration that the
holders of such Dissenting Shares would have received in the Merger
pursuant to Section 2.1had they not
dissented;
(e) any
amount by which the Net Working Capital at Closing is less than the
Target Net Working Capital Amount, as any shortfall is conclusively
determined pursuant to Section 10.4;
(f) any
Pre-Closing Taxes; or
(g) any
claim by any current or former stockholder of HoldCo or the
Company.
HoldCo
shall have no liability with respect to this Article X after the Closing and the NSC
Indemnifying Parties will have no right to seek contribution from
HoldCo after the Closing with respect to their indemnification
obligations hereunder.
For the avoidance of doubt, (i) the indemnification obligations
contained in this Section 10.2 obligate each Key Holder in his
personal capacity, (ii) such indemnification obligations of each
Key Holder are limited to such Key Holder’s pro rata share of
the Merger Consideration, and (iii) such obligations of each Key
Holder may not exceed the sum of the portion of the Merger
Consideration actually received by such Key Holder, except, in each
case, as a result of a judicial determination of fraud committed by
such Key Holder.
10.3 Limitations.
(a) Threshold.
Subject to Sections 10.3(c) and 10.3(d), no Parent Indemnitee shall
be entitled to be indemnified pursuant to Section
10.2(a) or Section 10.2(b) for any actual
or alleged inaccuracy in or breach of any representation or
warranty in this Agreement until such time as the total amount of
all Damages (including the Damages arising from such actual or
alleged inaccuracy or breach and all other Damages arising from any
other actual or alleged inaccuracies or breaches of any
representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Parent
Indemnitees, or to which any one or more of the Parent Indemnitees
has or have otherwise directly or indirectly become subject,
exceeds $75,000 (the “Threshold”) in the aggregate. If
the total amount of Damages exceeds the Threshold, then the Parent
Indemnitees shall be entitled to be indemnified against
and
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compensated
and reimbursed for the amount of the Damages in excess of the
Threshold. For the sake of clarity, the Deductible shall not apply
to the indemnity for Pre-Closing Taxes.
(b) Liability
Cap. Subject to Sections 10.3(c) and 10.3(d), the maximum
amount for which a Parent Indemnitee may be indemnified pursuant to
Section 10.3(a) and Section 10.3(b)
for any actual or alleged inaccuracy in or breach of any
representation or warranty in this Agreement, shall be
$5,000,000.
(c) Applicability
of Threshold. The limitations set forth in
Section 10.3(a) and Section 10.3(b)
shall not apply in the event of fraud (whether on the part of such
NSC Indemnifying Party, any other NSC Indemnifying Party, HoldCo,
the Company or any representative of HoldCo or the
Company).
(d) Exceptions
to Limitations; Fraud. With respect to Damages arising or
resulting from any inaccuracies in or breaches of any of the
Fundamental Representations or pursuant to Sections 10.2(c) through (g), the maximum aggregate
amount for which Parent Indemnitees may be indemnified pursuant to
this Agreement shall be the Merger Consideration (except in the
case of actual fraud).
(e) Net
Working Capital. There shall be no obligation on the part of
the NSC Indemnifying Parties to indemnify the Parent Indemnitees
under this Article X to the extent that any claim for
indemnification relates to an amount otherwise included in the
calculation of the Net Working Capital as of the
Closing.
(f) Change
in Applicable Law. There shall be no obligation to indemnify
for any Damages which would not have arisen but for any alteration
or repeal or enactment of any Applicable Law after the Closing
Date.
(g) Determination
of Damages. For purposes of determining Damages and/or any
inaccuracy in or breach of any representation or warranty with
respect to this Article X, such Damages shall be determined without
regard to any materiality, Material Adverse Effect or other similar
qualification contained in or otherwise applicable to such
representation or warranty.
(h) Sole
and Exclusive Remedy. The parties acknowledge and agree that
their sole and exclusive remedy with respect to any and all claims
and Damages (other than claims and Damages arising from fraud)
relating to the Merger or other transactions contemplated by this
Agreement, shall be pursuant to the indemnification provisions set
forth in this Article X. Nothing in this Section 10.3 shall
limit any Person’s right to seek and obtain any (a) equitable
relief to which any Person shall be entitled pursuant to Section
11.5, (b) remedies under the Parent Ancillary Agreements and the
Merger Sub Ancillary Agreements, (c) to seek any remedy on account
of any party’s fraud (or agent thereof), or (d) the remedy
available to Parent under Section 9.2(e).
(i) Offset.
The parties hereby expressly acknowledge and agree that any amount
of Damages that any Parent Indemnitee may be entitled to recover
under this Article X may be satisfied (solely at the discretion of
Parent) by the cancellation of that number of shares of Parent
Common Stock of each Key Holder (on a pro rata basis as between
such Key Holders)
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equal
to the amount of such Damages. For purposes of this Article
X, each share of Parent
Common Stock shall be deemed to be worth the five (5) trading day
VWAP of each share of Parent Common Stock, as determined
immediately prior to such cancellation.
(j) General
Releases. In furtherance of the foregoing, each party hereby
waives, to the fullest extent permitted under Applicable Law, any
and all rights, claims and causes of action for any matter relating
to the Merger or other transactions contemplated by this Agreement
it may have against the other parties hereto and their Affiliates
and each of their respective representatives arising under or based
upon any Applicable Law, except pursuant to the indemnification
provisions set forth in this Article X.
(k) Key
Holder Waiver and Full Release. Notwithstanding anything to
the contrary herein, each Key Holder on behalf of himself, hereby
waives to the fullest extent permitted under Applicable Law, any
and all rights, claims and causes of action (including in
connection with the Merger or other transactions contemplated by
this Agreement) he may have against Parent, HoldCo, the Company,
Merger Sub, any Affiliate of the foregoing or each of their
respective representatives, in each case except pursuant to the
indemnification provisions set forth in this Section 10.3.
Further, each Key Holder hereby irrevocably and unconditionally
releases and forever discharges Parent, HoldCo, the Company, Merger
Sub, their respective Affiliates and each of their respective
current and former officers, directors, employees, partners,
managers, members, advisors, successors and assigns (collectively,
in such capacity, the “Released Parties”) of and from any
and all actions, causes of action, suits, proceedings, executions,
judgments, duties, debts, dues, accounts, bonds, contracts and
covenants (whether express or implied), and claims and demands
whatsoever whether in law or in equity relating to (A) the
transactions contemplated by this Agreement and (B) any employment
arrangements which each Key Holder may have against each of the
Released Parties, in either case in respect of any cause, matter or
thing occurring or arising on or prior to the Closing; provided, that this Section 10.3(j) shall
not alter, affect or terminate this Agreement or any rights of each
Key Holder arising hereunder. In addition, nothing in this
Section 10.3(j) shall affect the right of each Key Holder to
seek and obtain (a) equitable relief to which any Person shall be
entitled pursuant to Section 11.5, (b) remedies under the Ancillary
Agreements or (c) remedy on account of any party’s fraud in
any manner whatsoever.
(a) Within
ninety (90) days after the Closing Date, Parent shall prepare and
deliver to the Stockholders’ Agent a statement setting forth
its calculation of Net Working Capital as of the Closing (the
“Final Closing Working
Capital Statement”) and a certificate of Parent that
the Final Working Capital Statement was prepared using the same
accounting methods, policies, principles, practices and procedures,
with consistent classifications, judgments and estimation
methodologies that were used in the preparation of the Estimated
Working Capital Statement.
(b) If
the Stockholders’ Agent disagrees with the Final Closing
Working Capital Statement, the Stockholders’ Agent shall
notify Parent in writing of such disagreement within thirty (30)
days after delivery of the statement, which notice shall describe
the nature of any such disagreement in reasonable detail, identify
the specific items involved and, to the extent practicable, the
dollar amount of each such disagreement and provide
reasonable
69
supporting
documentation for each such disagreement (collectively, a
“Disagreement
Notice”). During the Stockholders’ Agent review
of the Final Closing Working Capital Statement, the
Stockholders’ Agent shall have reasonable access to any
documents, schedules or work papers, to the personnel who prepared
the statement and to other employees of or advisors to Parent or
the Surviving Entity to the extent access is reasonably required
for the Stockholders’ Agent to assess the acceptability of
the Final Closing Working Capital Statement. If the
Stockholders’ Agent fails to deliver such notice in such
thirty (30) day period, the Stockholders’ Agent shall have
waived its right to contest, and shall be deemed to have agreed to,
the Final Closing Working Capital Statement.
(c) If
the Stockholders’ Agent notifies Parent of any objections to
the Final Closing Working Capital Statement, the
Stockholders’ Agent and Parent shall, within thirty (30) days
following the date of such notice (the “Resolution Period”), negotiate in
good faith to resolve their differences and any written resolution
by them as to any disputed item or amount shall be final and
binding for all purposes under this Agreement. If at the conclusion
of the Resolution Period, the Stockholders’ Agent and Parent
are unable to resolve all disagreements identified by the
Stockholders’ Agent pursuant to Section 10.4(a),
then such disagreements shall be submitted for final and binding
resolution to an independent nationally recognized accounting firm
selected in good faith and by mutual agreement of the
Stockholders’ Agent and Parent to resolve such disagreements
(the “Accounting
Arbitrator”). The Accounting Arbitrator will only
consider those items and amounts set forth in the Final Closing
Working Capital Statement as to which the Stockholders’ Agent
and Parent have disagreed and must resolve the matter in accordance
with the terms and provisions of this Agreement and shall deliver
to the Stockholders’ Agent and Parent, as promptly as
practicable and in any event within sixty (60) days after
its appointment, a written report setting forth the resolution of
any such disagreement determined in accordance with the terms of
this Agreement. The Accounting Arbitrator shall make its
determination based solely on presentations and supporting material
provided by the parties and not pursuant to any independent review.
In reaching its determination, the only alternatives available to
the Accounting Arbitrator will be to (i) accept the position of the
Stockholders’ Agent, (ii) accept the position of Parent or
(iii) accept a position between those two positions. The
determination of the Accounting Arbitrator shall be final and
binding upon the Stockholders’ Agent and Parent. Judgment may
be entered upon the determination of the Accounting Arbitrator in
any court having jurisdiction over the party against which such
determination is to be enforced. The fees, expenses and costs of
the Accounting Arbitrator shall be borne pro rata as between the
Stockholders’ Agent (on behalf of the NSC Indemnifying
Parties), on the one hand, and Parent, on the other hand, in
proportion to the final allocation made by such Accounting
Arbitrator of the disputed items weighted in relation to the claims
made by the Stockholders’ Agent and Parent, such that the
prevailing party pays the lesser proportion of such fees, costs and
expenses.
10.5 Defense
of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding
(whether against the Surviving Entity, HoldCo, Parent or any other
Person) with respect to which any Parent Indemnitee has a right to
indemnification pursuant to this Article X, the Stockholders’
Agent shall have the right, at his election, to proceed with the
defense of such claim or Legal Proceeding on his own with counsel
reasonably satisfactory to Parent. The parties agree that, without
limiting the Stockholders’ Agent’s choice of counsel,
it shall be reasonable for the Stockholders’ Agent to use
counsel that has used by the Company in the past. Parent shall have
the right to participate in the defense of
70
the
claim at its own expense (on behalf of the Parent Indemnitees). If
the Stockholders’ Agent so proceeds with the defense of any
such claim or Legal Proceeding:
(a) The
Stockholders’ Agent shall keep Parent reasonably informed as
to the status of and all material developments in the
defense;
(b) subject
to the other provisions of this Article X, all reasonable expenses
relating to the defense of such claim or Legal Proceeding shall be
borne and paid exclusively by the NSC Indemnifying Parties and not
made subject to the Threshold;
(c) each
Parent Indemnitee shall make available to the Stockholders’
Agent any documents and materials in such indemnitee’s
possession or control that may be necessary to the defense of such
claim or Legal Proceeding; and
(d) The
Stockholders’ Agent shall not have the right to settle,
adjust or compromise such claim or Legal Proceeding without the
consent of Parent (which consent shall not be unreasonably withheld
or delayed). Any settlement, adjustment or compromise of a claim or
Legal Proceeding with the written consent of Parent shall be
conclusive evidence of the amount of Damages incurred by the Parent
Indemnitee in connection with such claim or Legal
Proceeding.
(e) If
the Stockholders’ Agent does not elect to proceed with the
defense of any such claim or Legal Proceeding, Parent may proceed
with the defense of such claim or Legal Proceeding with counsel
reasonably satisfactory to the Stockholders’ Agent;
provided,
however, that
Parent may not settle, adjust or compromise any such claim or Legal
Proceeding without the prior written consent of the
Stockholders’ Agent (which consent may not be unreasonably
withheld or delayed). Parent shall give the Stockholders’
Agent prompt notice of the commencement of any such Legal
Proceeding against Parent, Merger Sub, HoldCo or the Company;
provided,
however, that any
failure on the part of Parent to so notify the Stockholders’
Agent shall not limit any of the indemnification obligations set
forth in this Article X (except to the extent such failure
materially prejudices the defense of such Legal
Proceeding).
10.6 Indemnification
Claim Procedure.
(a) If
any Indemnitee has or claims in good faith to have incurred or
suffered, or believes in good faith that it may incur or suffer,
Damages for which it is or may be entitled to be held harmless,
indemnified, compensated or reimbursed under this Article X or for
which it is or may be entitled to a monetary remedy (such as in the
case of a claim based on fraud), such Indemnitee may deliver a
notice of claim (a “Notice of
Claim”) to the Indemnifying Party; provided, however, that the failure
timely to give a Notice of Claim shall affect the rights of an
Indemnitee hereunder only to the extent that such failure has a
materially prejudicial effect on the defenses or other rights
available to the Indemnitee. Each Notice of Claim shall: (i) state
that such Indemnitee believes in good faith that such Indemnitee is
or may be entitled to indemnification, compensation or
reimbursement under this Article X or is or may otherwise be
entitled to a monetary remedy; (ii) contain a brief description of
the facts and circumstances supporting the Indemnitee’s
claim; and (iii) if practicable, contain a good faith, non-binding,
preliminary estimate of the aggregate amount of the actual and
potential Damages that the Indemnitee believes have arisen and may
arise as a result of such facts and circumstances (the aggregate
amount of such
71
estimate,
as it may be modified by such Indemnitee in good faith from time to
time, being referred to as the “Claimed Amount”).
(b) During
the 30-day period commencing upon delivery by an Indemnitee to the
Indemnifying Party of a Notice of Claim (the “Dispute Period”), the Indemnifying
Party may deliver to the Indemnitee who delivered the Notice of
Claim a written response (the “Response Notice”) in which the
Indemnifying Party: (i) agrees that the full Claimed Amount is owed
to the Indemnitee; (ii) agrees that part, but not all, of the
Claimed Amount (the “Agreed
Amount”) is owed to the Indemnitee; or (iii) indicates
that no part of the Claimed Amount is owed to the Indemnitee. If
the Response Notice is delivered in accordance with clause (ii) or
(iii) of the preceding sentence, the Response Notice shall also
contain a brief description of the facts and circumstances
supporting the Indemnifying Party’s claim that only a portion
or no part of the Claimed Amount is owed to the Indemnitee, as the
case may be. Any part of the Claimed Amount that is not agreed to
be owed to the Indemnitee pursuant to the Response Notice (or the
entire Claimed Amount, if the Indemnifying Party asserts in the
Response Notice that no part of the Claimed Amount is owed to the
Indemnitee) is referred to in this Agreement as the
“Contested
Amount” (it being understood that the Contested Amount
shall be modified from time to time to reflect any good faith
modifications by the Indemnitee to the Claimed Amount). If a
Response Notice is not received by the Indemnitee prior to the
expiration of the Dispute Period, then the Stockholders’
Agent shall be conclusively deemed to have agreed that the full
Claimed Amount is owed to the Indemnitee.
(c) If:
(i) the Stockholders’ Agent delivers a Response Notice to the
Indemnitee agreeing that the full Claimed Amount is owed to the
Indemnitee; or (ii) the Stockholders’ Agent does not deliver
a Response Notice to the Indemnitee during the Dispute Period, then
the Indemnifying Parties shall pay the Claimed Amount to the
Indemnitee within three (3) Business Days.
(d) If
the Indemnifying Party delivers a Response Notice to the Indemnitee
during the Dispute Period agreeing that less than the full Claimed
Amount is owed to the Indemnitee, then the Indemnifying Parties
shall pay such lesser amount to the Indemnitee within three (3)
Business Days.
(e) If
the Indemnifying Party delivers a Response Notice to the Indemnitee
during the Dispute Period indicating that there is a Contested
Amount, the Indemnifying Party and the Indemnitee shall attempt in
good faith to resolve the dispute related to the Contested Amount.
If the Indemnitee and the Indemnifying Party resolve such dispute,
then their resolution of such dispute shall be binding on the
Indemnifying Party and such Indemnitee and a settlement agreement
stipulating the amount owed to the Indemnitee (the
“Stipulated
Amount”) shall be signed by the Indemnitee and the
Indemnifying Party. The Indemnifying Party shall pay within three
(3) Business Days following the execution of such settlement
agreement (or such shorter period of time as may be set forth in
the settlement agreement) the Stipulated Amount to the
Indemnitee.
10.7
Exercise of Remedies Other
Than by Parent. No Parent Indemnitee (other than Parent or
any successor thereto or assign thereof) shall be permitted to
assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto
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or
assign thereof) shall have consented to the assertion of such
indemnification claim or the exercise of such other
remedy.
10.8 Certain
Limitations. The amount of any
Damages for which indemnification is provided under this Agreement
shall be net of any Tax benefits realized by an Indemnitee in
connection with such Damages and amounts actually recovered by the
Indemnitees from third parties (including amounts actually
recovered under insurance policies) with respect to such Damages.
Any netting of insurance proceeds may be satisfied by the
Indemnitees assigning any potential insurance claims to the
Indemnifying Parties and, in any event, the potential availability
of insurance proceeds shall not permit delay by the Indemnifying
Party in the performance of its duties under this Aricle
X. Any Indemnifying
Parties hereunder shall be subrogated to the rights of the
Indemnitees as against any relevant insurer upon payment in full of
the amount of the relevant indemnifiable loss.
10.9 Stockholders’
Agent.
(a) Appointment.
By virtue of the adoption and approval of this Agreement in
exchange for Merger Consideration pursuant to this Agreement, the
NSC Indemnifying Parties irrevocably nominate, constitute and
appoint Stockholders’ Agent as the agent and true and lawful
attorney in fact of the NSC Indemnifying Parties, with full power
of substitution, to act in the name, place and stead of the NSC
Indemnifying Parties for purposes of executing any documents and
taking any actions that the Stockholders’ Agent may, in the
Stockholders’ Agent’s sole discretion, determine to be
necessary, desirable or appropriate in connection with any claim
for indemnification, compensation or reimbursement under this
Article X.
Stockholders’ Agent hereby accepts such
appointment.
(b) Authority.
The NSC Indemnifying Parties grant to the Stockholders’ Agent
full authority to execute, deliver, acknowledge, certify and file
on behalf of such NSC Indemnifying Party any and all documents that
the Stockholders’ Agent may, in its sole discretion,
determine to be necessary, desirable or appropriate, in such forms
and containing such provisions as the Stockholders’ Agent
may, in its sole discretion, determine to be appropriate, in
performing its duties as contemplated by Section
10.9(a). Notwithstanding anything to the contrary
contained in this Agreement or in any other agreement executed in
connection with the transactions contemplated hereby: (i) each
Parent Indemnitee shall be entitled to deal exclusively with the
Stockholders’ Agent on all matters relating to any claim for
indemnification, compensation or reimbursement under this
Article X; and (ii)
each Parent Indemnitee shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document
executed or purported to be executed on behalf of any NSC
Indemnifying Parties by the Stockholders’ Agent, and on any
other action taken or purported to be taken on behalf of any NSC
Indemnifying Parties by the Stockholders’ Agent, as fully
binding upon such NSC Indemnifying Parties.
(c) Power
of Attorney. The NSC Indemnifying Parties recognize and
intend that the power of attorney granted in Section
10.9(a) and the powers: (i) are coupled with an
interest and irrevocable; (ii) may be delegated by the
Stockholders’ Agent; (iii) shall survive the death,
incapacity, dissolution, liquidation or winding up of each of the
NSC Indemnifying Parties and shall be binding on any successor
thereto; and (iv) shall survive the delivery of an
73
assignment
by any NSC Indemnifying Party of the whole or any fraction of his,
her or its interest in the Merger Consideration and/or this
Agreement.
(d) Replacement.
If the Stockholders’ Agent shall die, resign, become disabled
or otherwise be unable to fulfill his responsibilities hereunder,
the NSC Indemnifying Parties shall (by consent of those Persons
entitled to at least a majority of the Merger Consideration),
within 10 days after such death, disability or inability, appoint a
successor to the Stockholders’ Agent (who shall be reasonably
satisfactory to Parent) and immediately thereafter notify Parent of
the identity of such successor. Any such successor shall succeed
the Stockholders’ Agent as Stockholders’ Agent
hereunder. If for any reason there is no Stockholders’ Agent
at any time, all references herein to the Stockholders’ Agent
shall be deemed to refer to the NSC Indemnifying Parties. The
immunities and rights to indemnification shall survive the
resignation or removal of the Stockholders’ Agent and the
Closing and/or any termination of this Agreement.
(e) Stockholders’
Agent Limitations. Notwithstanding anything to the contrary
in this Agreement or any Stockholders’ Agent letter
agreement, the Stockholders’ Agent will only have the power
or authority to act regarding matters pertaining to the NSC
Indemnifying Parties as a group and does not have the power
authority to act regarding matters pertaining to an individual NSC
Indemnifying Party, or to treat any particular NSC Indemnifying
Party in a manner different from any other NSC Indemnifying Party,
except as consistent with such NSC Indemnifying Party’s pro
rata share of the Merger Consideration. Further, the powers
conferred on the Stockholders’ Agent in this Agreement do not
authorize or empower the Stockholders’ Agent to do or cause
to be done any action (including without limitation by amending or
waiving any provision of this Agreement or otherwise) that (i)
results in an increase of any NSC Indemnifying Party’s
indemnity or other obligations or liabilities under this Agreement
or any Ancillary Agreement, or (ii) results in the amounts payable
under this Agreement to any NSC Indemnifying Party being
distributed in any manner other than as specified in this
Agreement.
10.10
Parent
Indemnification. Effective at and after the Effective Time,
Parent hereby indemnifies the NSC Indemnifying Parties, their
Affiliates and their respective successors and assignees
(collectively, the “Stockholder Indemnitees”) against
and agrees to hold each of them harmless from any and all Damages
incurred or suffered by the Stockholder Indemnitees arising out of
(a) any inaccuracy in or breach of any representation or warranty
made by Parent or the Merger Sub as of the date of this Agreement;
(b) any inaccuracy or breach of any representation or warranty made
by Parent or the Merger Sub (i) in this Agreement as if such
representation or warranty was made as of the Closing; or (ii) in
Parent’s closing certificate; (c) any breach of any covenant
or obligation of Parent, the Merger Sub or the Surviving Entity in
this Agreement; and (d) any amount by which the Net Working Capital
exceeds the Target Working Capital Amount, as any excess is
conclusively determined pursuant to Section 10.4; provided, that,
except with respect to any Damages pursuant to Section 10.10(d),
Parent’s maximum aggregate liability shall not exceed
$250,000; and provided further, that the Stockholder Indemnitees
can only execute any claim pursuant to this Section
10.10 against Parent through the Stockholders’
Agent.
ARTICLE XI
MISCELLANEOUS
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11.1 Governing
Law. The internal laws
of the State of Delaware, irrespective of its conflicts of law
principles, shall govern the validity of this Agreement, the
construction of its terms, the interpretation and enforcement of
the rights and duties of the parties hereto and the consummation
and effects of the Merger; provided, however, that the internal laws of the
Commonwealth of Virginia shall govern the validity of the Merger in
Virginia.
11.2 Assignment;
Binding Upon Successors and Assigns. This Agreement
shall inure to the benefit of the successors and assigns of Parent,
including any successor to, or assignee of, all or substantially
all of the business and assets of Parent. Except as set forth in
the preceding sentence, no party hereto may assign any of its
rights or obligations hereunder without the prior written consent
of the other parties hereto; provided, this provision shall not
apply to an assignment by operation of law to a designated executor
of a HoldCo Stockholder resulting from the death of such HoldCo
Stockholder. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. Any assignment in violation of this provision
shall be void.
11.3 Severability.
If any provision of this Agreement, or the application thereof,
shall for any reason and to any extent be invalid or unenforceable,
then the remainder of this Agreement and the application of such
provision to other persons or circumstances shall be interpreted so
as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision
that shall achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable
provision.
11.4 Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be an original as regards any party whose signature
appears thereon and all of which together shall constitute one and
the same instrument. This Agreement shall become binding when one
or more counterparts hereof, individually or taken together, shall
bear the signatures of all parties reflected hereon as
signatories.
11.5 Other
Remedies. Except as
otherwise expressly provided herein, any and all remedies herein
expressly conferred upon a party hereunder shall be deemed
cumulative with and not exclusive of any other remedy conferred
hereby or by law on such party, and the exercise of any one remedy
shall not preclude the exercise of any other. 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.
11.6 Amendments
and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the
party to be bound thereby. The waiver by a party of any breach
hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach
or default. This Agreement may be amended by the parties hereto as
provided in this Section 11.6 at any time before
or after adoption of this Agreement by the HoldCo
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Stockholders,
but, after such adoption, no amendment shall be made which by
Applicable Law requires the further approval of the HoldCo
Stockholders without obtaining such further approval. At any time
prior to the Effective Time, each of HoldCo and Parent, may, to the
extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other,
(b) waive any inaccuracies in the representations and warranties
made to it contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any of the agreements or
conditions for its benefit contained herein. No such waiver or
extension shall be effective unless signed in writing by the party
against whom such waiver or extension is asserted. The failure of
any party to enforce any of the provisions hereof shall not be
construed to be a waiver of the right of such party thereafter to
enforce such provisions.
11.7 Expenses.
Whether or not the Merger is successfully consummated, except as
other provided in Section 9.2(b), each party shall bear its
respective legal, accountants, and financial advisory fees and
other expenses incurred with respect to this Agreement, the Merger
and the transactions contemplated hereby.
11.8 Attorneys’
Fees. Should suit be
brought to enforce or interpret any part of this Agreement, the
prevailing party shall be entitled to recover, as an element of the
costs of suit and not as Damages, reasonable attorneys’ fees
to be fixed by the court (including costs, expenses and fees on any
appeal). The prevailing party shall be entitled to recover its
costs of suit, regardless of whether such suit proceeds to final
judgment.
11.9 Notices.
All notices and other communications required or permitted under
this Agreement shall be in writing and shall be either hand
delivered in person, sent by facsimile, sent by certified or
registered first-class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and
other communications shall be effective upon receipt if hand
delivered or sent by facsimile, three (3) Business Days after
mailing if sent by mail, and one Business Day after dispatch if
sent by express courier, to the following addresses, or such other
addresses as any party may notify the other parties in accordance
with this Section 11.9:
If to
Parent, Merger Sub (prior to and after the Closing) or the Company
(after the Closing):
00000
Xxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX
00000
Attention: Xxxxxx
Xxxxxx
with a
copy to:
Xxxxxxx
& Xxxxxx LLP
0000
Xxxxxxxxxxxx Xxxxxx, XX,
Xxxxxxxxxx, XX
00000
Attention: Xxxxxx
X. XxXxx Xx., Esq.
Fax
No.: (000) 000-0000
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If to
HoldCo or the Company (prior to the Closing):
NeoSystems
Corp.
0000
Xxxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx
Xxxxxx, XX 00000
with a
copy to:
Xxxxxxx
LLP
000
Xxxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX
00000
Attention: Xxxxxxx
X. Xxxxxx, Xx., Esq.
Fax
No.: (000) 000-0000
If to
the Stockholders’ Agent:
Xxxxxxx
Xxxxxxx
0000
Xxxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx
Xxxxxx, XX 00000
11.10 Interpretation;
Rules of Construction. When a reference
is made in this Agreement to Exhibits, Sections or Articles, such
reference shall be to an Exhibit to, Section of or Article of this
Agreement, respectively, unless otherwise indicated. The words
“include”, “includes” and
“including” when used herein shall be deemed in each
case to be followed by the words “without limitation”.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. The parties hereto agree that they have been
represented by legal counsel during the negotiation and execution
of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that
ambiguities in an agreement or other document shall be construed
against the party drafting such agreement or document. Any dollar
amount included herein shall not be used as a basis for
interpreting the terms “material,”
“materially,” “materiality,”
“Material Adverse Effect” or any other similar
qualification in this Agreement.
11.11 Third
Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any
client, customer, employee, Affiliate, stockholder, partner or any
party hereto or any other Person unless specifically provided
otherwise herein and, except as so provided, all provisions hereof
shall be personal solely among the parties to this Agreement. Each
Holder shall be an intended third party beneficiary solely with
regard to the provisions of Section 2.10(c).
11.12 Public
Announcement. HoldCo shall not make any public announcement of any
kind regarding the terms of this Agreement and the transactions
contemplated hereby. Following the date hereof, Parent may issue
such press releases, and make such other public disclosures
regarding the Merger, as it determines are required or deems
appropriate. HoldCo and Parent each confirm that they have entered
into the Confidentiality Agreement and that, subject to the
preceding sentence, they are each bound by, and shall abide by, the
provisions of such Confidentiality Agreement; provided, however,
that Parent shall not be bound by such
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Confidentiality
Agreement after the Closing. If this Agreement is terminated, the
Confidentiality Agreement shall remain in full force and effect,
and all copies of documents containing confidential information of
a disclosing party shall be returned by the receiving party to the
disclosing party or be destroyed, as provided in the
Confidentiality Agreement. Each HoldCo Stockholder that is a
partnership, a limited liability company or a venture capital or
private equity fund may disclose to its limited partners, members
or investors, as applicable, and to their respective
representatives, the terms of this Agreement or the transactions
contemplated by this Agreement.
11.13 Entire
Agreement. This Agreement,
the exhibits and schedules hereto, the HoldCo Ancillary Agreements,
the Company Ancillary Agreements, the Parent Ancillary Agreements
and the Merger Sub Ancillary Agreements constitute the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, among the parties
with respect hereto other than the Confidentiality Agreement. The
express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the
terms hereof.
11.14 Waiver
of Jury Trial. EACH OF PARENT,
MERGER SUB, HOLDCO, THE COMPANY, THE STOCKHOLDERS’ AGENT AND
EACH KEY HOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB, HOLDCO, THE
COMPANY, THE STOCKHOLDERS’ AGENT OR ANY KEY HOLDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
[Signature Page Follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
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NeoSystems LLC.
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/s/ Xxxxxx X.
Xxxxxx
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/s/ Xxxxxxx
Xxxxxxx
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Name: Xxxxxx
X. Xxxxxx
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Name: Xxxxxxx
Xxxxxxx
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Title: Chief
Exeicutive Officer
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Title: Chief
Executive Officer
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NeoSystems HoldCo, Inc.
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/s/
Xxxxxxx Xxxxxxx
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Name:
Xxxxxxx
Xxxxxxx
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Title:
Chief Executive Officer
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its Sole Member
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By: /s/ Xxxxxx X.
Xxxxxx
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Name: Xxxxxx X. Xxxxxx
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Title: Chief Executive Officer
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/s/
Xxxxxxx Xxxxxxx
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XXXXXXX XXXXXXX,
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as
the Stockholders' Agent
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/s/ Xxxxxxx Xxxxxxx
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XXXXXXX XXXXXXX,
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in
his personal capacity
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/s/ Xxxxxx X. Xxxxxx, Xx.
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XXXXXX X. XXXXXX, XX
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in
his personal capacity
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