Exhibit 2.1
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this "Agreement")
is entered into as of the 26th day of February, 2007 by and among Dynabazaar,
Inc., a Delaware corporation ("Dynabazaar"), LQ Merger Corp., a Delaware
corporation and a direct, wholly owned subsidiary of Dynabazaar ("LMC"), and L Q
Corporation, Inc., a Delaware corporation ("LQ").
A. WITNESSETH:
1. The Boards of Directors of Dynabazaar, LMC and LQ have each approved
and adopted this Agreement and determined that the merger (the "Merger") of LMC
with and into LQ, with the result that LQ, as the surviving corporation, will
continue as a wholly owned subsidiary of Dynabazaar, is advisable and in the
best interests of their respective stockholders. The parties intend (i) that the
Merger shall constitute a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder (the "Code"), (ii) by approving resolutions authorizing this
Agreement, to adopt this Agreement as a plan of reorganization within the
meaning of Sections 354 and 361 of the Code and (iii) that the transactions
contemplated by this Agreement be undertaken pursuant to such plan.
2. Pursuant to the Merger, each outstanding share of LQ's common stock,
par value $0.001 per share (the "LQ Common Stock" and each such share, a
"Share"), shall be converted into the right to receive the Merger Consideration
(as defined below), with the result that LQ's stockholders will receive, in the
aggregate, approximately 11,829,021 shares of Dynabazaar's common stock, par
value $0.001 per share (the "Dynabazaar Common Stock").
3. In connection with the Merger and this Agreement, Barington Capital
Group, L.P. and certain of its affiliates have agreed to vote all shares of LQ
Common Stock and Dynabazaar Common Stock beneficially owned by them as to the
approval of the Merger, in proportion to the votes of the other stockholders of
the respective corporations.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and intending to be legally
bound hereby, the parties hereto agree as follows:
B. THE MERGER
1. Effective Time, etc. As promptly as practicable (and in any event
within two business days) after the satisfaction or waiver of the conditions set
forth in F. below, the parties shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a properly executed
certificate of merger (the "Certificate of Merger") as contemplated by the
Delaware General Corporation Law (the "DGCL"). The Merger shall become effective
at the time of such filing or at such later time, if any, as is agreed by the
parties hereto and specified in the Certificate of Merger (the "Effective
Time"). At the Effective Time, LMC shall be merged with and into LQ, the
separate corporate existence of LMC shall cease, and LQ shall continue as the
surviving corporation (sometimes referred to as the "Surviving Corporation").
The certificate of incorporation and by-laws of LMC, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation and by-laws, respectively, of the Surviving Corporation until
amended as provided therein. The directors of LMC immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation and
the officers of LQ immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
2. Effect on Securities, Etc. At the Effective Time, by virtue of the
Merger:
(a) Conversion of Securities. (i) Each Share issued and outstanding
immediately prior to the Effective Time shall be converted, subject to
adjustment as provided in Section B.2(d) below, into the right to receive 3.68
shares (the "Exchange Ratio") of Dynabazaar Common Stock (the "Stock
Consideration"). Each Share held in the treasury of LQ or owned by Dynabazaar,
LMC or any direct or indirect subsidiary of LQ or Dynabazaar immediately prior
to the Effective Time shall be canceled and retired without payment.
(b) Stock Options. At the Effective Time, all options ("LQ Stock Options")
to purchase LQ Common Stock then outstanding, whether under LQ's 1996 Equity
Incentive Plan, or otherwise (together, the "LQ Stock Option Plans"), shall be
treated in accordance with Section E.9.
(c) Capital Stock of LMC. Each share of common stock, $0.01 par value per
share, of LMC issued and outstanding immediately prior to the Effective Time
shall constitute one validly issued, fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Surviving Corporation, with the
result that the Surviving Corporation shall become a wholly owned subsidiary of
Dynabazaar.
(d) Adjustments to Exchange Ratio, Etc. If, during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Dynabazaar or LQ shall occur, including by reason of
any reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, any acquisition or retirement of shares by the issuer
thereof, or any stock dividend thereon with a record date during such period
(but excluding any exercise of stock options issued and outstanding as of
December 22, 2006 as set forth in Section C.3.), the Exchange Ratio, the Merger
Consideration and any other amounts payable pursuant to the Merger or otherwise
pursuant to this Agreement shall be appropriately adjusted.
(e) Fractional Shares. No certificates or scrip representing less than one
share of Dynabazaar Common Stock shall be issued in exchange for shares of LQ
Common Stock upon the surrender for exchange of a certificate which immediately
prior to the Effective Time represented outstanding shares of LQ Common Stock
(the "Certificates"). In lieu of any such fractional share, each holder of LQ
Common Stock who would otherwise have been entitled to a fraction of a share of
Dynabazaar Common Stock upon surrender of LQ Common Stock for exchange shall be
paid upon such surrender (and after taking into account all Certificates
surrendered by such holder) cash (without interest) in an amount equal to such
fraction multiplied by the closing price of the Dynabazaar Common Stock on the
NASDAQ OTCBB as reported by Bloomberg Financial Markets (or if such service is
unavailable, a service providing
- 2 -
similar information selected by Dynabazaar and LQ) on the trading day
immediately preceding the date of the Effective Time.
3. Exchange of Shares. (a) Exchange Agent. Dynabazaar shall cause to be
supplied to a bank or trust company designated by Dynabazaar and reasonably
acceptable to LQ (the "Exchange Agent"), in trust for the benefit of the holders
of LQ Common Stock, as needed for exchange and payment in accordance with this
Section through the Exchange Agent, certificates evidencing the shares of
Dynabazaar Common Stock issuable pursuant to Section B.2(a), and the cash to be
paid in lieu of fractional shares pursuant to Section B.2(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Dynabazaar will cause the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Dynabazaar may
reasonably specify) and (ii) instructions to effect the surrender of the
Certificates in exchange for the certificates evidencing shares of Dynabazaar
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor solely (A) certificates evidencing that
number of whole shares of Dynabazaar Common Stock which such holder has the
right to receive in accordance with Section B.2.(a) and (B) cash in respect of
fractional shares as provided in Section B.2.(e) (the shares of Dynabazaar
Common Stock and cash in respect of fractional shares being referred to,
collectively, as the "Merger Consideration"), except that Shares held at the
Effective Time in book-entry form shall be exchanged for Merger Consideration in
accordance with the customary procedures of the Depository Trust Company.
Certificates surrendered shall be canceled as of the Effective Time. In the
event of a transfer of ownership of Shares which is not registered in the
transfer records of LQ as of the Effective Time, the Merger Consideration may be
issued and paid in accordance with this Section to a transferee if the
Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section and by evidence that any applicable stock transfer
taxes have been paid. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented Shares will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the ownership of the
number of full shares of Dynabazaar Common Stock, and cash in respect of
fractional shares, into which such Shares shall have been so converted.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Dynabazaar Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
Dynabazaar Common Stock such holder is entitled to receive until the holder of
such Certificate shall surrender such Certificate in accordance with the
provisions of Section B.3.(b).
(d) Transfers of Ownership. If any certificate for Dynabazaar Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it will be a condition of the issuance
thereof that the Certificate so surrendered shall
- 3 -
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall have paid to Dynabazaar or any agent
designated by it any transfer or other taxes required by reason of the issuance
of a certificate for Dynabazaar Common Stock in any name other than that of the
registered holder of the Certificate surrendered, or establish to the
satisfaction of Dynabazaar or any agent designated by it that such tax has been
paid or is not payable.
(e) Escheat. Neither Dynabazaar nor LQ nor any of their respective
affiliates shall be liable to any holder of LQ Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. The Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement, such amounts as the Exchange Agent is required to deduct and withhold
with respect to such payment under the Code, or any provision of state, local or
non-United States tax law. To the extent that amounts are so withheld by the
Exchange Agent, such portion of the Merger Consideration that is withheld shall
be treated for all purposes of this Agreement as having been received by the
holder of the Shares in respect of which such deduction and withholding was made
by the Exchange Agent.
(g) Undistributed Certificates. Any portion of the certificates evidencing
the Dynabazaar Common Stock or the cash to be paid in lieu of fractional shares
supplied to the Exchange Agent which remains undistributed to the holders of the
Certificates for one year after the Effective Time shall be delivered to the
Surviving Corporation, upon demand, and any holders of the Certificates who have
not theretofore complied with this Section B.3 shall thereafter look only to the
Surviving Corporation for payment of their claim for Merger Consideration and
any dividends or distributions with respect to Dynabazaar Common Stock.
4. Stock Transfer Books. At the close of business on the date of the
Effective Time, the stock transfer books of LQ shall be closed, and there shall
be no further registration of transfers of the LQ Common Stock thereafter on the
records of LQ. The Merger Consideration delivered upon the surrender for
exchange of Shares in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Shares. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section B.
5. Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefor, upon the making of an affidavit of that fact by the holder
thereof, such Merger Consideration as may be required pursuant to this Section
B; provided, however, that the Surviving Corporation may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Dynabazaar, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
- 4 -
C. CERTAIN REPRESENTATIONS AND WARRANTIES
The representations and warranties by LQ to LMC and Dynabazaar set forth
below are qualified by the LQ disclosure schedule, which sets forth certain
disclosures concerning LQ and its subsidiaries (the "LQ Disclosure Schedule")
and the representations and warranties by LMC and Dynabazaar to LQ set forth
below are qualified by the LMC and Dynabazaar disclosure schedule, which sets
forth certain disclosures concerning LMC and Dynabazaar and its subsidiaries
(the "LMC and Dynabazaar Disclosure Schedule"). The disclosure of any fact or
item in any section of the LQ Disclosure Schedule or the LMC and Dynabazaar
Disclosure Schedule shall, should the existence of such fact or item be relevant
to any other section, be deemed to be disclosed with respect to such other
section so long as the relevance of such disclosure to such other section is
reasonably apparent.
LQ hereby represents and warrants to LMC and Dynabazaar with respect to LQ
and its subsidiaries, and LMC and Dynabazaar hereby represent and warrant to LQ
with respect to LMC and Dynabazaar and its subsidiaries, as follows:
1. Organization and Qualification; Subsidiaries. Each of such party and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except as would not have a Material
Adverse Effect. Each of such party and its subsidiaries is duly qualified as a
foreign corporation and is in good standing in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary, except as would not have a Material Adverse Effect. All
of LQ's subsidiaries are set forth in the reports, schedules, proxy statements
and other documents filed by LQ with the Securities and Exchange Commission
("SEC") after December 31, 2004 and prior to the date of this Agreement (the "LQ
SEC Documents"), and all of Dynabazaar's subsidiaries other than LMC are set
forth in the reports, schedules, proxy statements and other documents filed by
Dynabazaar with the SEC after December 31, 2004 and prior to the date of this
Agreement (the "Dynabazaar SEC Documents").
2. Certificate of Incorporation and By-laws. LQ has made available to
Dynabazaar, and LMC and Dynabazaar have made available to LQ, complete and
correct copies of their respective certificates of incorporation and by-laws,
each as amended to date (the "Charter Documents"). Neither such party nor any of
its subsidiaries is in violation of any of the provisions of its Charter
Documents except as would not materially interfere with the operations of such
entity or with the transactions contemplated hereby.
3. Capitalization. (a) The authorized capital stock of LQ consists of
30,000,000 shares of LQ Common Stock and 5,000,000 shares of Preferred Stock,
par value $.001 per share (the "LQ Preferred Stock"). As of December 22, 2006,
(i) 3,214,408 shares of LQ Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable and none
of which were issued in violation of preemptive or similar rights, (ii) no
shares of LQ Preferred Stock were issued and outstanding, and (iii) 344,800
shares of LQ Common Stock were reserved for issuance upon exercise of stock
options issued under LQ Stock Option Plans and 5,210,000 shares were reserved
for future grants
- 5 -
pursuant to LQ Stock Option Plans. No change in such capitalization has occurred
since September 30, 2006, except for changes resulting from the exercise or
termination of LQ Stock Options. Except as expressly set forth in this Section
or the LQ SEC Documents, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character binding on LQ or any of
its subsidiaries relating to the issued or unissued capital stock of LQ or any
of its subsidiaries or obligating LQ or any of its subsidiaries, directly or
indirectly, to issue, sell or register any shares of capital stock of, or other
equity interests in, LQ or any of its subsidiaries. Except as expressly set
forth in the LQ SEC Documents, there are no obligations, contingent or
otherwise, of LQ or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of LQ Common Stock or the capital stock of any subsidiary.
All of the outstanding shares of capital stock (other than directors' qualifying
shares, if any) of each of LQ's subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and all such shares (other than directors'
qualifying shares, if any) owned by LQ or any of its subsidiaries are free and
clear of all security interests, liens, claims, pledges, agreements, limitations
in LQ's voting rights, charges or other encumbrances (collectively, "LQ
Encumbrances") of any nature whatsoever, except for such LQ Encumbrances as
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) The authorized capital stock of Dynabazaar consists of 90,000,000
shares of Dynabazaar Common Stock and 10,000,000 shares of Preferred Stock, par
value $.001 per share, of which 75,000 shares have been designated as Series A
Junior Participating Cumulative Preferred Stock ("Series A Preferred Stock") and
952,380 shares have been designated as Series B Preferred Stock ("Series B
Preferred Stock" and together with the Series A Preferred Stock, the "Dynabazaar
Preferred Stock"). As of December 22, 2006, (i) 23,691,756 shares of Dynabazaar
Common Stock were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and non-assessable and none of which were issued in
violation of preemptive or similar rights, (ii) no shares of Dynabazaar
Preferred Stock were outstanding and (iii) 1,140,000 shares of Dynabazaar Common
Stock were reserved for issuance upon exercise of stock options issued under
Dynabazaar's stock option plans and 4,221,177 shares were reserved for future
grants pursuant to such plans. No change in such capitalization has occurred
since September 30, 2006, except for changes resulting from the exercise or
termination of stock options. Except as expressly set forth in this Section or
in the Dynabazaar SEC Documents, there are no outstanding (x) securities of
Dynabazaar convertible into or exchangeable for shares of capital stock or
voting securities of Dynabazaar or (y) options or other rights to acquire from
Dynabazaar, or other obligation of Dynabazaar to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Dynabazaar. There are no outstanding obligations
of Dynabazaar or any of its subsidiaries to repurchase, redeem or otherwise
acquire any of its equity securities.
(c) Upon completion of the actions described in 4.(a)(ii) below, the
shares of Dynabazaar Common Stock to be delivered as Merger Consideration will
have been duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will have been validly issued and will be fully paid
and nonassessable, and the issuance thereof is not subject to any preemptive or
other similar right.
4. Authority Relative to This Agreement. (a) Such party has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its
- 6 -
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by such party and the consummation
by such party of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of such party, and no other corporate
proceedings on the part of such party are necessary to authorize this Agreement
or to consummate the transactions so contemplated, other than (i) the adoption
of this Agreement by the stockholders of LQ, (ii) the adoption of this Agreement
by the stockholders of Dynabazaar, and (iii) the filing and recording of the
Certificate of Merger as required by the DGCL.
(b) The provisions of Section 203 of the DGCL will not apply to the
Merger.
(c) As of the date hereof, the Boards of Directors of LQ, LMC and
Dynabazaar, respectively, have (i) determined that it is advisable and in the
best interest of such party's stockholders for such party to enter into this
Agreement and to consummate the Merger upon the terms and subject to the
conditions of this Agreement, (ii) adopted this Agreement in accordance with the
applicable provisions of the DGCL and (iii) recommended the adoption of this
Agreement by holders of such party's common stock, and (x) in the case of LQ
directed that this Agreement be submitted for consideration by LQ's stockholders
at a special meeting thereof (the "LQ Stockholders Meeting"), and (y) in the
case of Dynabazaar directed that (A) this Agreement, and (B) an amendment to
Dynabazaar's certificate of incorporation providing for a change in the
corporate name of Dynabazaar to a name mutually acceptable to the parties hereto
and the removal of the classification of the Dynabazaar Board of Directors
(clause (B) is herein referred to as the "Dynabazaar Proposal") be submitted for
consideration by Dynabazaar's stockholders at a special meeting thereof (the
"Dynabazaar Stockholders Meeting"). This Agreement has been duly and validly
executed and delivered by such party and, assuming the due authorization,
execution and delivery of this Agreement by the other parties hereto,
constitutes a legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms.
5. No Conflicts; Required Filings and Consents. (a) The execution and
delivery of this Agreement by such party does not, and the performance of this
Agreement by such party will not, (i) conflict with or violate such party's
Charter Documents, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to such party or any of its subsidiaries or
by which any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair such party's or
any of its subsidiaries' rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of such party or any of its
subsidiaries pursuant to, any note, credit facility, contract, agreement, lease,
license, or other instrument or obligation to which such party or any of its
subsidiaries is a party or by which such party or any of its subsidiaries or any
of their respective properties is bound or affected, except, in the case of
clause (ii) or (iii), as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement by such party does not,
and the performance of this Agreement by such party will not, require such party
or any of its subsidiaries to make or seek any consent, approval, authorization
or permit of, or filing with or
- 7 -
notification to, any governmental, administrative or regulatory authority, U.S.
and non-U.S. (each, a "Governmental Authority"), except (i) (I) for applicable
requirements, if any, of the Securities Act of 1933, as amended, and the rules
and regulations of the SEC thereunder (the "Securities Act"), (II) for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder (the "Exchange
Act"), (III) for applicable requirements, if any, under state securities laws
and of the securities commissions or similar regulatory authorities in other
applicable jurisdictions, if any; and (IV) filing and recordation of appropriate
merger or other documents as required by the DGCL, (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or materially delay consummation of
the Merger, or otherwise prevent or materially delay such party from performing
its material obligations under this Agreement, or would not otherwise,
individually or in the aggregate, have a Material Adverse Effect, or (iii) as to
which any necessary consents, approvals, authorizations, permits, filings or
notifications have heretofore been obtained or filed, as the case may be, by
such party.
6. SEC Filings; Financial Statements. (a) Such party has filed all
reports, schedules, statements and other documents (including all exhibits
thereto) required to be filed with the SEC since December 31, 2004. Except as
disclosed in such party's SEC Documents, such reports, schedules, statements and
other documents (i) complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Except as expressly set forth in such party's SEC Documents, each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such party's SEC Documents were prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all material
respects the consolidated financial position of such party and its subsidiaries
at the respective dates thereof and the consolidated results of its operations
and cash flows for the respective periods indicated, except that for purposes of
the foregoing representation, any unaudited interim financial statements (i)
shall be read in conjunction with such party's most recent audited consolidated
financial statements contained in the case of Dynabazaar, in Dynabazaar's 2005
Annual Report on Form 10-K, and in the case of LQ, in LQ's 2005 Annual Report on
Form 10-K, and (ii) were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
7. Absence of Certain Changes or Events. Except as expressly set forth in
such party's SEC Documents, since September 30, 2006, such party has conducted
its business in the ordinary course and there have not occurred: (i) any
changes, effects or circumstances, including any damage to, destruction or loss
of any asset of such party (whether or not covered by insurance) constituting,
individually or in the aggregate, a Material Adverse Effect; (ii) any amendments
or changes in such party's Charter Documents; (iii) any material changes to any
of such party's employee benefit plans, arrangements or agreements, including
the establishment
- 8 -
of any new such plans, arrangements or agreements or the extension of coverage
to new groups of employees or other individuals; (iv) any material change by
such party in its accounting methods, principles or practices (other than as
required by GAAP subsequent to the date of this Agreement); or (v) other than in
the ordinary course of business, any disposition of a material amount of assets
of such party.
8. No Undisclosed Liabilities. Except as expressly set forth in such
party's SEC Documents, neither such party nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities (i)
in the aggregate fully reflected and adequately provided for in such party's
unaudited balance sheet (including any related notes thereto) as of September
30, 2006, included in LQ's and Dynabazaar's respective Quarterly Reports on Form
10-Q for the quarter ended September 30, 2006 (in each case, such party's "2006
Balance Sheet"), (ii) incurred in the ordinary course of business and not
required under GAAP to be reflected on such party's 2006 Balance Sheet, (iii)
incurred since September 30, 2006 in the ordinary course of business and
consistent with past practice in an amount not exceeding $250,000 in the
aggregate, or (iv) incurred in connection with this Agreement or the Merger or
the other transactions contemplated hereby.
9. Compliance; Permits. (a) Except as expressly set forth in such party's
SEC Documents, neither such party nor any of its subsidiaries is (or has been as
a result of which it could reasonably be expected now or in the future to have
material liability) in conflict with, or in breach, default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to such party or
any of its subsidiaries or by which its or any of their respective properties is
bound or affected, (ii) any note, bond, debenture, indenture, credit agreement
or facility pursuant to which such party or any of its subsidiaries has or may
incur indebtedness for borrowed money (a "Financing Agreement") or any security,
pledge, mortgage or trust agreement or arrangement in respect of any Financing
Agreement or (iii) any other contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such party or any of its
subsidiaries is a party or by which such party or any of its subsidiaries or its
or any of their respective properties is bound or affected except for any such
conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Except as expressly set forth in such party's SEC Documents, such
party and its subsidiaries hold all permits, licenses, and approvals from
governmental authorities which are material to the operation of the business of
such party and its subsidiaries, taken as a whole, as it is now being conducted
(collectively, the "Permits"), except where the failure to hold such Permits
would not individually or in the aggregate, have a Material Adverse Effect. Such
party and its subsidiaries are in compliance with the terms of the Permits,
except as described in such party's SEC Documents or where the failure to so
comply would not, individually or in the aggregate, have a Material Adverse
Effect.
10. Absence of Litigation. Except as expressly set forth in such party's
SEC Documents or arising out of the transactions contemplated by this Agreement,
there are no claims, actions, suits, arbitrations, proceedings or investigations
pending or, to the knowledge of such party, threatened against such party or any
of its subsidiaries, or any properties or rights of such party or any of its
subsidiaries, before any court, arbitrator or Governmental Authority, that would
individually or in the aggregate, have a Material Adverse Effect.
- 9 -
11. Restrictions on Business Activities. (a) Except for this Agreement or
as expressly set forth in such party's SEC Documents, to such party's knowledge,
there is no agreement, judgment, injunction, order or decree binding upon such
party or any of its subsidiaries which has or would reasonably be expected to
have the effect of prohibiting or impairing the conduct of business by such
party or any of its subsidiaries, or restricting any transactions between such
party and its subsidiaries, except for any prohibition or impairment as would
not individually or in the aggregate, have a Material Adverse Effect.
12. Taxes. Except as expressly set forth in such party's SEC Documents or
as would not, individually or in the aggregate, have a Material Adverse Effect:
(a) Such party and each of its subsidiaries has timely and accurately
filed all Tax Returns required to be filed by it, and has paid, collected or
withheld, all Taxes required to be paid, collected or withheld, other than such
Taxes for which adequate reserves in the 2006 Balance Sheet have been
established or which are being contested in good faith. There are no claims or
assessments pending against such party or any of its subsidiaries for any
alleged deficiency in any Tax, there are no pending or, to the knowledge of such
party, threatened audits or investigations for or relating to any liability in
respect of any Taxes, and such party has not been notified in writing of any
proposed Tax claims or assessments against such party or any of its subsidiaries
(other than in each case, claims or assessments for which adequate reserves in
the 2006 Balance Sheet have been established or which are being contested in
good faith). Neither such party nor any of its subsidiaries has executed any
waivers or extensions of any applicable statute of limitations to assess any
Taxes. There are no outstanding requests by such party or any of its
subsidiaries for any extension of time within which to file any Tax Return or
within which to pay Taxes shown to be due on any Tax Return. To the best
knowledge of such party, there are no liens for Taxes on the assets of such
party or any of its subsidiaries except for statutory liens for current Taxes
not yet due and payable. Other than with respect to such party and its
subsidiaries, neither such party nor any of its subsidiaries is liable for Taxes
of any other Person, or is currently under any contractual obligation to
indemnify any person with respect to Taxes or is a party to any tax sharing
agreement or any other agreement providing for payments by such party or any of
its subsidiaries with respect to Taxes.
(b) For purposes of this Agreement, the term "Tax" shall mean any United
States federal, national, state, provincial, local or other jurisdictional
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, estimated, alternative or add-on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge imposed by any Governmental Authority, together
with any interest or penalty imposed thereon. The term "Tax Return" shall mean a
report, return or other information (including any attached schedules or any
amendments to such report, return or other information) required to be supplied
to or filed with a Governmental Authority with respect to any Tax, including an
information return, claim for refund, amended return or declaration of estimated
Tax.
13. Insurance. All material fire and casualty, general liability, business
interruption, product liability and sprinkler and water damage insurance
policies maintained by such party or any of its subsidiaries are with reputable
insurance carriers and provide coverage amounts which such party reasonably
believes are both adequate for all normal risks incident to
- 10 -
the current business of such party and its subsidiaries and their respective
properties and assets, and appropriate for the businesses currently conducted by
such party, except as would not individually or in the aggregate, have a
Material Adverse Effect.
14. Brokers. Except for Xxxxxx & Xxxxxxx, LLC (the "LQ Financial
Advisor"), the fees and expenses of which shall be paid by LQ, and Susquehanna
Financial Group, LLLP (the "Dynabazaar Financial Advisor"), the fees and
expenses of which will be paid by Dynabazaar, and Barington Capital Group, L.P.,
the fees and expense of which will be paid one-half by LQ and one-half by
Dynabazaar, there is no investment banker, broker, finder or other intermediary
who might be entitled to any fee or commission, in connection with the
transactions contemplated by this Agreement based on arrangements made by or on
behalf of such party.
15. Opinions of Financial Advisors. The Board of Directors of LQ and its
special committee have received the opinion of the LQ Financial Advisor to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair from a
financial point of view to the holders of the Shares. The Board of Directors of
Dynabazaar and its special committee have received the opinion of the Dynabazaar
Financial Advisor to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair from a financial point of view to Dynabazaar and the
holders of Dynabazaar Common Stock.
16. Customers. Since January 1, 2006, no party has received any written
notification from any of the ten (10) largest customers (measured in dollar
value) of, in the case of Dynabazaar, its wholly owned subsidiary Costar Video
Systems, LLC, and, in the case of LQ, its wholly owned subsidiary Sielox, LLC,
(a) that any such customer is canceling or otherwise terminating its
relationship with such party and no party knows of any such customer
contemplating taking any such action or (b) of a material dispute or a material
dissatisfaction concerning the goods or services rendered to such customer by
such party or its subsidiary that could reasonably be expected to result in the
cancellation or termination of such customer relationship.
D. CONDUCT OF BUSINESS PENDING THE MERGER
1. Conduct of Business by LQ. During the period from the date of this
Agreement until the earlier of the termination of this Agreement or the
Effective Time, unless Dynabazaar shall otherwise agree in writing, LQ shall
conduct its business and the businesses of its subsidiaries only in the ordinary
course of business and consistent with past practice; and LQ shall use
reasonable commercial efforts to preserve substantially intact the business
organization of LQ and its subsidiaries, to keep available the services of the
present officers, employees and consultants of LQ and its subsidiaries and to
preserve the present relationships of LQ and its subsidiaries with customers,
suppliers and other persons with which LQ or any of its subsidiaries has
significant business relations. During such period, neither LQ nor any of its
subsidiaries shall, directly or indirectly, without the prior written consent of
Dynabazaar: (a) amend LQ Charter Documents; (b) issue, sell, pledge, dispose of
or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance
of, any shares of capital stock, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest (including, without limitation, any phantom
- 11 -
interest) in LQ or any of its subsidiaries (except for the issuance of shares of
LQ Common Stock issuable pursuant to LQ Stock Options outstanding on the date
hereof); (c) sell, pledge, dispose of or encumber any assets (except for sales
of immaterial assets not in excess of $100,000 in the aggregate); (d) (i)
declare, make or pay any dividend or other distribution in respect of any of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
amend the terms or change the period of exercisability of any option, warrant or
right, directly or indirectly, to acquire any such securities; (e) incur any
indebtedness for borrowed money (other than in the ordinary course of business
and consistent with past practice under any existing lines of credit) or issue
any debt securities; (f) increase the compensation (including bonus) or
severance payable to its directors, officers, employees or consultants; (g) fail
to comply in all material respects with applicable laws and regulations or to
timely file such documents or make such disclosures as may be required by
applicable law or regulation; or (h) take any action which would make any of the
representations or warranties of LQ contained in this Agreement untrue or
incorrect or prevent LQ from performing its covenants hereunder or cause any
condition to LQ's obligations to consummate the transactions contemplated hereby
not to be satisfied.
2. Conduct of Business by Dynabazaar. During the period from the date of
this Agreement and until the earlier of the termination of this Agreement or the
Effective Time, unless LQ shall otherwise agree in writing, Dynabazaar shall
conduct its business and the businesses of its subsidiaries only in the ordinary
course of business and consistent with past practice, other than actions taken
by Dynabazaar or its subsidiaries in contemplation of consummation of the
Merger. During such period, neither Dynabazaar nor any of its subsidiaries
shall, directly or indirectly, without the prior written consent of LQ: (a)
amend the Dynabazaar Charter Documents; (b) issue, sell, pledge, dispose of or
encumber, or authorize the issuance, sale, pledge, disposition or encumbrance
of, any shares of capital stock, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest (including, without limitation, any phantom
interest) in Dynabazaar or any of its subsidiaries (except for the issuance of
shares of Dynabazaar Common Stock issuable pursuant to Dynabazaar Stock Options
outstanding on the date hereof); (c) sell, pledge, dispose of or encumber any
assets (except sales of immaterial assets not in excess of $100,000 in the
aggregate); (d)(i) declare, make or pay any dividend or other distribution in
respect of any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) amend the terms or change the period of exercisability
of any option, warrant or right, directly or indirectly, to acquire any such
securities; (e) incur any indebtedness for borrowed money (other than in the
ordinary course of business and consistent with past practice under any existing
lines of credit) or issue any debt securities; (f) increase the compensation
(including bonus) or severance payable to its directors, officers, employees or
consultants; (g) fail to comply in all material respects with applicable laws
and regulations or to timely file such documents or make such disclosures as may
be required by applicable law or regulation; or (h) take any action that would
make any of the representations or warranties of Dynabazaar and LMC contained in
this Agreement untrue or incorrect or prevent Dynabazaar and LMC from performing
their covenants hereunder or cause any condition to their obligations to
consummate the transactions contemplated hereby not to be satisfied.
- 12 -
3. No Solicitation. (a) Neither LQ nor Dynabazaar shall directly or
indirectly through any officer, director, employee, representative or agent of
such party or any of its subsidiaries, (i) solicit, facilitate or encourage
(including by way of furnishing information) or engage in negotiation with
respect to any inquiries or proposals regarding any merger, sale of assets, sale
of shares of capital stock (including, without limitation, by way of a tender
offer) or similar transactions involving such party or any of its subsidiaries
that if consummated would constitute an Alternative Transaction (as defined
below) (any of the foregoing inquiries or proposals being referred to herein as
an "Acquisition Proposal"), (ii) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal or (iii) approve or recommend, or
propose to approve or recommend, or enter into, any agreement (whether or not
purportedly legally binding) related to any Acquisition Proposal. For purposes
of this Agreement, "Alternative Transaction" means any of (w) a transaction
other than the Merger pursuant to which any person (or group of persons)
acquires or would acquire more than 20% of the outstanding shares of any class
of equity securities of such party, whether from such party or pursuant to a
tender offer or exchange offer or otherwise, (x) a merger or other business
combination other than the Merger involving such party pursuant to which any
person (or group of persons) acquires or would acquire more than 20% of the
outstanding equity securities of such party or the entity surviving such merger
or business combination, (y) any transaction other than the Merger pursuant to
which any person (or group of persons) acquires or would acquire control of
assets (including for this purpose the outstanding equity securities of
subsidiaries of such party and securities of the entity surviving any merger or
business combination including any of such party's subsidiaries) of such party
or any of its subsidiaries having a fair market value equal to more than 20% of
the fair market value of all the assets of such party and its subsidiaries,
taken as a whole, or (z) any other consolidation, business combination,
recapitalization or similar transaction involving such party or any significant
subsidiary of such party, other than the transactions contemplated by this
Agreement.
(b) LQ shall notify Dynabazaar, and Dynabazaar shall notify LQ, promptly
(but in no event later than 24 hours) after such party's receipt of any
Acquisition Proposal with respect to such party, or any modification of or
amendment to any such Acquisition Proposal, or any request for nonpublic
information relating to such party or any of its subsidiaries in connection with
an Acquisition Proposal or for access to the properties, books or records of
such party or any of its subsidiaries by any person or entity that informs the
Board of Directors of such party or such subsidiary that it is considering
making, or has made, an Acquisition Proposal. Such notice shall be made orally
and in writing, and shall indicate the identity of the person making the
Acquisition Proposal or intending to make an Acquisition Proposal or requesting
non-public information or access to the books and records of such party, and the
terms of any such Acquisition Proposal or modification or amendment thereto. LQ
or Dynabazaar, as the case may be, shall keep the other fully informed, on a
current basis, of any material changes in the status and any material changes or
modifications in the material terms of any such Acquisition Proposal, indication
or request. Neither LQ nor Dynabazaar nor their respective Boards of Directors
shall withdraw or modify, or publicly propose to withdraw or modify, in a manner
adverse to the other party, the approval by such Board of Directors of this
Agreement or the Merger or the recommendation of such Board of Directors that
such party's stockholders adopt this Agreement (and, in the case of Dynabazaar,
approve the Dynabazaar Proposal). Neither LQ nor Dynabazaar nor their respective
Boards of Directors shall enter into any agreement with
- 13 -
respect to, or otherwise approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or Alternative Transaction.
(c) Notwithstanding the foregoing, in the event that (i) prior to the date
of the LQ Stockholders Meeting (in the case of LQ) or the Dynabazaar
Stockholders Meeting (in the case of Dynabazaar) (x) an unsolicited, bona fide
written proposal that in the reasonable judgment of the Board of Directors of
the Offeree is reasonably likely to lead to a Superior Offer is submitted by a
third party to LQ or Dynabazaar, as the case may be (the "Offeree"); (y) the
Board of Directors of the Offeree determines in good faith, based on
consultation with its outside legal counsel and financial advisor, that such
offer constitutes a Superior Offer; and (z) following consultation with outside
legal counsel, the Board of Directors of the Offeree determines that the
withdrawal or modification of its recommendation that stockholders of the
Offeree adopt this Agreement is necessary or advisable to comply with the
fiduciary duties of the Board of Directors to the stockholders of the Offeree
under applicable law, and (ii) (A) the Board of Directors of the Offeree
provides written notice to the other party (a "Notice of Superior Offer") that
the Offeree has received a Superior Offer, specifying the material terms and
conditions of such Superior Offer and identifying the person or persons making
such Superior Offer, (B) the Offeree thereafter negotiates in good faith with
the other party and (C) the other party does not, within ten (10) business days
of the other party's receipt of the Notice of Superior Offer, make an offer that
the Board of Directors of the Offeree determines in good faith, after
consultation with its financial advisor, to be at least as favorable to the
Offeree's stockholders as the Superior Offer; then the Board of Directors of the
Offeree may thereafter (I) withdraw or modify its recommendation that the
Offeree's stockholders adopt this Agreement (and, in the case of Dynabazaar,
approve the Dynabazaar Proposal) and/or (II) approve or recommend such Superior
Offer. A "Superior Offer" means, with respect to any Offeree, a third-party
Acquisition Proposal on terms that the Board of Directors of such Offeree
determines in good faith, based on consultation with its outside legal counsel
and financial advisor, are meaningfully more favorable to the Offeree's
stockholders than the Merger (after giving effect to any adjustments proposed in
writing by the other party in response to such third-party Acquisition Proposal)
and is reasonably certain to be consummated, taking into account all legal,
financial and regulatory aspects of, and conditions to, such third-party
Acquisition Proposal (including any required financing).
(d) Nothing contained in this Section shall prohibit either LQ or
Dynabazaar from taking and disclosing to its stockholders a position expressly
required by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its stockholders expressly required by applicable law, rule or
regulation, or (except in connection with an Acquisition Proposal) from
providing information to, or engaging in discussions with, third parties to the
extent that providing such information or engaging in such discussions is
expressly required by applicable law and the Board of Directors of such party
has received a written opinion of independent counsel of nationally recognized
standing that such action is so expressly required.
- 14 -
E. ADDITIONAL AGREEMENTS
1. Proxy Statement/Prospectus; Registration Statement. (a) As promptly as
reasonably practicable after the execution of this Agreement, LQ and Dynabazaar
shall prepare and file with the SEC, preliminary proxy materials which shall
constitute the Joint Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") and the Registration Statement relating to the adoption
of this Agreement by LQ's stockholders and Dynabazaar's stockholders and the
approval of the Dynabazaar Proposal by Dynabazaar's stockholders, and shall use
all reasonable efforts to cause the Registration Statement to become effective
and shall mail the Proxy Statement/Prospectus to their respective stockholders
as soon thereafter as reasonably practicable. LQ shall furnish to Dynabazaar all
information concerning LQ and the holders of capital stock of LQ as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Proxy Statement/Prospectus.
(b) The Proxy Statement/Prospectus shall include the recommendation of the
Board of Directors of LQ in favor of adoption of this Agreement by the
stockholders of LQ and the recommendation of the Board of Directors of
Dynabazaar in favor of the adoption of this Agreement and the approval of the
Dynabazaar Proposal by the stockholders of Dynabazaar.
2. Stockholders Meetings. Each of LQ and Dynabazaar shall establish a
record date for, duly call, give notice of, convene and hold the LQ Stockholders
Meeting and the Dynabazaar Stockholders Meeting, respectively, as promptly as
practicable for the purpose of voting upon the adoption of this Agreement and,
in the case of Dynabazaar, the approval of the Dynabazaar Proposal, and shall
use all reasonable efforts to cause the Proxy Statement/Prospectus to be mailed
to their respective stockholders and to hold such meetings as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. Each of LQ and Dynabazaar shall solicit from their respective
stockholders proxies in favor of adoption of this Agreement and, in the case of
Dynabazaar, the approval of the Dynabazaar Proposal, and shall take all other
reasonable action necessary or advisable to secure the vote or consent of such
stockholders in favor of such adoption and approval.
3. Access to Information; Confidentiality. Upon reasonable notice, each of
LQ and Dynabazaar shall (and shall cause its subsidiaries to), during the period
after the execution and delivery of this Agreement and prior to the Effective
Time, (i) afford to the officers, employees, accountants, counsel, investment
bankers, and other representatives of the other reasonable access to the
properties, books, records and contracts and agreements of such party, its
subsidiaries and joint ventures, (ii) furnish promptly to the other party all
information concerning the business, properties, prospects, assets (tangible and
intangible), liabilities, financial statements, regulatory compliance, risk
management, books, records, contracts, agreements, commitments and personnel of
such party and its subsidiaries as the other party may request, and (iii) make
available to the other party the appropriate officers, employees, consultants
and other individuals of such party and its subsidiaries for discussion thereof
as the other party may request. Such information shall be kept confidential in
accordance with the terms of the existing Confidentiality Agreement, dated
October 5, 2006 between Dynabazaar and LQ (the "Confidentiality Agreement").
- 15 -
4. Consents; Approvals. LQ and Dynabazaar shall each use its reasonable
best efforts to obtain and to cooperate with each other in order to obtain all
consents, waivers, approvals, authorizations or orders, and shall make as
promptly as reasonably practicable all filings required in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby. LQ and Dynabazaar shall furnish all
information required to be included in the Proxy Statement/Prospectus and the
Registration Statement, or for any application or other filing to be made
pursuant to the rules and regulations of any United States or non-United States
governmental body in connection with the transactions contemplated by this
Agreement.
5. Notification of Certain Matters. LQ shall give prompt notice to
Dynabazaar, and Dynabazaar shall give prompt notice to LQ, of (i) the occurrence
or nonoccurrence of any event the occurrence or nonoccurrence of which would
reasonably be expected to cause any representation or warranty contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of LQ,
Dynabazaar or LMC, as the case may be, materially to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice; and provided further that failure to give such
notice shall not be treated as a breach of covenant for the purposes of G.1.(g)
unless and except to the extent that the failure to give such notice results in
material prejudice to the other party.
6. Further Action. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement.
7. Public Announcements. Dynabazaar and LQ shall consult with each other
before issuing any press release or making any written public statement with
respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement without the prior consent of the other
party, which shall not be unreasonably withheld; provided, however, that either
party may, without the prior consent of the other, issue such press release or
make such public statement as may upon the advice of counsel be required by law
or the applicable rules and regulations of the SEC if it has used all reasonable
efforts to consult with the other party. This Agreement shall be first publicly
announced by means of a joint press release in substantially the form of Exhibit
A hereto.
8. Dynabazaar Common Stock. Dynabazaar shall use its best efforts to cause
the Dynabazaar Common Stock to be delivered to the holders of LQ Common Stock in
the Merger to be listed, upon official notice of issuance, on the NASDAQ OTCBB
prior to the Effective Time, and to take any action reasonably required to be
taken under non-U.S. securities laws in connection with the issuance of
Dynabazaar Common Stock in the Merger.
- 16 -
9. Stock Options. At the Effective Time, and subject to the last sentence
of this Section, Dynabazaar and LQ shall take all necessary action to provide
that each outstanding LQ Stock Option will continue to have, and be subject to,
the same terms and conditions set forth in the relevant LQ stock option plan and
applicable award agreement immediately prior to the Effective Time except that
(i) each LQ Stock Option will be exercisable for that number of whole shares of
Dynabazaar Common Stock equal to the product of the number of shares of LQ
Common Stock that were issuable upon exercise of such Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded to the
nearest whole number of shares of Dynabazaar Common Stock and (ii) the per share
exercise price for the shares of Dynabazaar Common Stock issuable upon exercise
of such LQ Stock Option will be equal to the quotient determined by dividing the
exercise price per share of LQ Common Stock at which such LQ Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded to the nearest whole cent.
10. Directors. At the Effective Time, three (3) vacancies shall be created
on the Dynabazaar Board of Directors through resignation or by increase in the
size of the Board of Directors, and the names set forth on Schedule E.10. hereto
shall be designated by the Dynabazaar Board of Directors to fill such vacancies
11. Officers. At the Effective Time, the persons named on Schedule E.11.
hereto shall be the executive officers of Dynabazaar.
12. Director and Officer Liability.
(a) For seven (7) years after the Effective Time, Dynabazaar shall provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to the Effective Time covering each such person currently
serving as an officer or director of Dynabazaar or LQ on terms with respect to
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided that, in satisfying its obligation under this Section
E.12.(a), Dynabazaar shall not be obligated to pay an aggregate premium per
annum in excess of 200% of the amount per annum Dynabazaar paid in its last full
fiscal year (the "Maximum Premium"); provided, further, that if the aggregate
premium per annum is in excess of the Maximum Premium, Dynabazaar shall obtain a
policy with the greatest coverage available not exceeding the Maximum Premium.
(b) The certificate of incorporation and the by-laws of Dynabazaar shall
contain provisions relating to indemnification, advancement of expenses and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time (including, without limitation, in connection with the Merger and
the other transactions contemplated by this Agreement) no less favorable to the
recipients than those set forth in the certificate of incorporation and the
by-laws of Dynabazaar as in effect on the date hereof, and such provisions shall
not be amended or modified, in any material respect, in any manner that would be
less favorable to such recipients, for seven (7) years after the Effective Time.
- 17 -
F. CONDITIONS TO THE MERGER
1. Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act, and no stop order shall have been issued by the SEC and no proceedings for
that or any similar purpose shall have been initiated or threatened by the SEC;
(b) Stockholder Adoption. This Agreement shall have been adopted by the
requisite vote of the stockholders of each of LQ and Dynabazaar;
(c) Legal Actions. There shall not have been instituted, pending or
threatened any action or proceeding by any Governmental Authority or before any
Governmental Authority or court of competent jurisdiction, United States or
non-United States, that is reasonably likely to result in, nor shall there be in
effect, any judgment, decree or order of any Governmental Authority or court of
competent jurisdiction or any other legal restraint (i) preventing consummation
of the Merger, (ii) prohibiting or limiting Dynabazaar from exercising all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Dynabazaar or any of its
subsidiaries of all or a material portion of the business or assets of the
Surviving Corporation and its subsidiaries, or (iii) compelling Dynabazaar or
any of its subsidiaries (including the Surviving Corporation and its
subsidiaries) to dispose of or hold separate assets which are, or impose any
liability which is, material to Dynabazaar or LQ, or material as compared
against the aggregate Merger Consideration;
(d) Illegality. No statute, rule, regulation, order or judicial decision
shall be enacted, published, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal; and
(e) Tax-Free Reorganization. There shall not have been enacted any change
in any applicable law, rule or regulation that prevents the Merger from
qualifying as a tax-free reorganization pursuant to Section 368(a) of the Code.
2. Additional Conditions to Obligations of Dynabazaar and LMC. The
obligations of Dynabazaar and LMC to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
LQ contained in this Agreement shall be true and correct in all respects
(without for this purpose giving effect to qualifications of materiality
contained in such representations and warranties) on and as of the Effective
Time, with the same force and effect as if made on and as of the Effective Time,
except for (i) changes contemplated by this Agreement, (ii) those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date, subject to clause
(iii)), or (iii) where the failure to be true and correct would not individually
or in the aggregate with all other such failures, have a Material Adverse Effect
(except the representations and warranties set forth in Section C.3.
(capitalization), which
- 18 -
shall be true and correct in all respects), and Dynabazaar shall have received a
certificate of LQ to such effect signed by the Chief Executive Officer or Chief
Financial Officer of LQ;
(b) Agreements and Covenants. LQ shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time, and
Dynabazaar shall have received a certificate to such effect signed by the Chief
Executive Officer or Chief Financial Officer of LQ;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by LQ for the authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have been
obtained and made by LQ, except where the failure to receive such consents,
waivers, approvals, authorizations or orders or to make such filings would not
individually or in the aggregate with all other such failures, to have a
Material Adverse Effect on LQ or Dynabazaar; and
(d) Dissenters. Holders of no more than 10% of the Shares shall have
exercised dissenters' rights in accordance with the DGCL.
3. Additional Conditions to Obligation of LQ. The obligation of LQ to
effect the Merger is also subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
Dynabazaar and LMC contained in this Agreement shall be true and correct in all
respects (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) on and as of the
Effective Time, with the same force and effect as if made on and as of the
Effective Time, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, subject
to clause (iii)), or (iii) where the failure to be true and correct would not,
individually or in the aggregate with all other such failures, to have a
Material Adverse Effect, and LQ shall have received a certificate to such effect
signed by the Chief Executive Officer or Chief Financial Officer of Dynabazaar;
(b) Agreements and Covenants. Dynabazaar and LMC shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Effective Time, and LQ shall have received a certificate of Dynabazaar to such
effect signed by the Chief Executive Officer or Chief Financial Officer of
Dynabazaar;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by LMC or Dynabazaar for the authorization, execution and delivery of this
Agreement, and the consummation by them of the transactions contemplated hereby
shall have been obtained and made by LMC or Dynabazaar, except where the failure
to receive such consents, waivers, approvals, authorizations or orders or to
make such filings would not individually or in the aggregate with all other such
failures, to have a Material Adverse Effect on LQ, LMC or Dynabazaar; and
- 19 -
(d) Listing. The Dynabazaar Common Stock to be delivered in connection
with the Merger shall have been authorized for listing on the NASDAQ OTCBB upon
official notice of issuance.
G. TERMINATION
1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, notwithstanding adoption thereof by the stockholders of LQ or
Dynabazaar:
(a) by mutual written consent duly authorized by the Boards of Directors
of Dynabazaar, LMC and LQ; or
(b) by either Dynabazaar or LQ, if the Merger shall not have been
consummated by June 30, 2007 (other than for the reasons set forth in clause (c)
below); provided, however, that the right to terminate this Agreement pursuant
to this clause (b) shall not be available to a party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated on or prior to such date; or
(c) by either Dynabazaar or LQ, if the requisite vote of the stockholders
of LQ or Dynabazaar shall not have been obtained by June 25, 2007, or if the
stockholders of LQ shall not have adopted this Agreement at the LQ Stockholders
Meeting or the stockholders of Dynabazaar shall not have adopted this Agreement
and approved the Dynabazaar Proposal at the Dynabazaar Stockholders Meeting;
provided, however, that the right to terminate this Agreement pursuant to this
clause (c) shall not be available to a party which has not complied in all
material respects with its obligations under Section E.1 and 2; or
(d) by either Dynabazaar or LQ, if a court of competent jurisdiction or
Governmental Authority shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(e) by Dynabazaar, on one hand, or LQ, on the other hand, if, whether or
not permitted to do so by this Agreement, the Board of Directors of the other
party or the other party shall (x) (i) withdraw, modify or change its approval
of this Agreement or the Merger, or its recommendation that its stockholders
approve this Agreement (and, in the case of Dynabazaar, approve the Dynabazaar
Proposal), in a manner adverse to the terminating party or shall have resolved
to do so; (ii) approve or recommend to its stockholders an Acquisition Proposal
or Alternative Transaction; (iii) approve or recommend that its stockholders
tender their shares in any tender or exchange offer that is an Alternative
Transaction; or (iv) fail to include the recommendation of its Board of
Directors in favor of approval of this Agreement pursuant to Section E.1.(b) or
fail to take the action required by the second sentence of Section E.2.; or (y)
take any public position or make any disclosures to its stockholders generally,
whether or not permitted pursuant to Section D.3., which has the effect of any
of the foregoing; or
(f) by Dynabazaar if any representation or warranty of LQ set forth in
this Agreement, or by LQ if any representation or warranty of Dynabazaar or LMC
set forth in this Agreement, (i) shall have been untrue when made, or (ii) shall
have been true when made but shall have become untrue thereafter, such that the
conditions set forth in Sections F.2.(a) or
- 20 -
F.3.(a), as the case may be, would not be satisfied (a "Terminating
Misrepresentation"); provided that if such Terminating Misrepresentation is
reasonably curable prior to the earlier of June 20, 2007 or 45 days after notice
thereof and for so long as the breaching party continues to exercise reasonable
best efforts to effect such cure, neither Dynabazaar nor LQ, respectively, may
terminate this Agreement under this Section G.1.(f) prior to June 20, 2007; or
(g) by Dynabazaar upon a breach of any covenant or agreement on the part
of LQ set forth in this Agreement, or by LQ upon a breach of any covenant or
agreement on the part of Dynabazaar or LMC set forth in this Agreement, such
that the conditions set forth in Sections F.2.(b) or F.3.(b), as the case may
be, would not be satisfied (a "Terminating Breach"); provided that, if such
Terminating Breach is reasonably curable prior to the earlier of June 20, 2007
or 45 days after notice thereof and for so long as the breaching party continues
to exercise reasonable best efforts to effect such cure, neither Dynabazaar nor
LQ, respectively, may terminate this Agreement under this Section G.1.(g) prior
to June 20, 2007.
2. Effect of Termination. In the event of the termination pursuant to
Section G.1, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or any of its affiliates, directors,
officers or stockholders except as set forth in Section G.3. Notwithstanding the
foregoing, nothing herein shall relieve LQ or Dynabazaar from liability for any
willful breach hereof or willful misrepresentation herein.
3. Fees and Expenses. Except as set forth in this Section G.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that if the Merger is not
consummated Dynabazaar and LQ shall share equally all SEC filing fees and
printing expenses incurred in connection with the printing and filing of the
Proxy Statement/Prospectus (including any preliminary materials related thereto)
and the Registration Statement (including financial statements and exhibits) and
any amendments or supplements thereto.
(a) LQ shall pay Dynabazaar a fee of $200,000 (such amount, the
"Termination Fee"), and shall also pay Dynabazaar's actual, documented and
reasonable out-of-pocket expenses relating to the authorization, negotiation,
execution and performance of the transactions contemplated by this Agreement,
the preparation, printing, filing or mailing of the Proxy Statement/Prospectus,
the solicitation of stockholder approvals and other matters related to the
consummation of the transaction contemplated by this Agreement (including, but
not limited to, fees and expenses of counsel, accountants and financial
advisors) in an aggregate amount not to exceed $350,000 (such expenses of
Dynabazaar, "Dynabazaar's Expenses," and such expenses of LQ, "LQ's Expenses"),
upon the first to occur of any of the following events: (i) the termination of
this Agreement by Dynabazaar or LQ pursuant to Section G.1.(c) following the LQ
Stockholders Meeting at which the stockholders of LQ failed to adopt this
Agreement, provided that the Alternative Transaction Condition is satisfied by a
transaction with respect to LQ; and (ii) the termination of this Agreement by
Dynabazaar pursuant to Section G.1.(e), (f) or (g).
(b) Dynabazaar shall pay LQ the Termination Fee and shall also pay LQ's
Expenses, upon the first to occur of any of the following events: (i) the
termination of this
- 21 -
Agreement by Dynabazaar or LQ pursuant to Section G.1(c) following the
Dynabazaar Stockholders Meeting at which the stockholders of Dynabazaar failed
to adopt this Agreement, provided that the Alternative Transaction Condition is
satisfied by a transaction with respect to Dynabazaar; and (ii) the termination
of this Agreement by LQ pursuant to Section G.1.(e), (f) or (g).
(c) The "Alternative Transaction Condition" shall be satisfied in respect
of a termination of this Agreement if an Alternative Transaction with respect to
LQ (in the case of (a) above), or an Alternative Transaction with respect to
Dynabazaar (in the case of (b) above), shall be publicly announced during the
period beginning on the date of this Agreement and ending twelve (12) months
following the date of termination of this Agreement and such transaction shall
at any time thereafter be consummated on terms substantially equivalent to or
more favorable to LQ or its stockholders (in the case of (a) above) or to the
Dynabazaar or its stockholders (in the case of (b) above) than the terms
theretofore announced. In no event shall a party be required to pay the
Termination Fee or any Expenses hereunder if, immediately prior to the
termination of this Agreement, the entity otherwise entitled to receive such
Termination Fee and/or Expenses was in material breach of its obligations under
this Agreement. The payments provided for in Section G.3(a) shall be the sole
and exclusive remedy of Dynabazaar upon a termination of this Agreement by
Dynabazaar pursuant to Section G.1(c), (e), (f) or (g), and the payments
provided for in Section G.3(b) shall be the sole and exclusive remedy of LQ upon
a termination of this Agreement by LQ pursuant to Section G.1(c), (e), (f) or
(g); provided, however, that the foregoing shall not apply to any willful breach
of this Agreement or any willful misrepresentation hereunder.
H. GENERAL PROVISIONS
1. Notices. All notices pursuant hereto shall be in writing and shall be
deemed to have been duly given if and when delivered personally or by overnight
courier to the parties at the following addresses or sent by electronic
transmission, with confirmation received, to the telecopy numbers specified
below (or at such other address or telecopy number for a party as shall be
specified by like notice):
If to LMC or Dynabazaar:
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxx Xxxx LLP Xxx Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
- 22 -
If to LQ:
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx XxXxxxxxxx & Xxxxxx, PA
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
2. Material Adverse Effect. For purposes of this Agreement, the term
"Material Adverse Effect," when used in connection with LQ or any of its
subsidiaries or Dynabazaar or any of its subsidiaries, as the case may be, means
any change, effect or circumstance that (i) is materially adverse to the
business, financial condition, prospects or results of operations of LQ and its
subsidiaries or Dynabazaar and its subsidiaries, as the case may be, in each
case taken as a whole, excluding the effects of changes to the extent related to
(A) the United States or global economy or capital markets generally, (B)
general changes in conditions in the industries in which LQ and Dynabazaar
conduct business or (C) this Agreement, the announcement thereof and the
transactions contemplated thereby, or (ii) materially adversely affects the
ability of LQ, or LMC and Dynabazaar, as the case may be, timely to perform the
obligations or consummate the transactions contemplated by this Agreement.
3. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after adoption of this
Agreement by the stockholders of LQ or Dynabazaar, no amendment may be made
which by law requires approval by such stockholders without such approval. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
4. Entire Agreement. This Agreement constitute the entire agreement and
supersedes all prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matters hereof.
5. Assignment. This Agreement shall not be assigned by operation of law or
otherwise, except that all or any of the rights of LMC hereunder may be assigned
to Dynabazaar or any direct or indirect wholly owned subsidiary of Dynabazaar.
- 23 -
6. Governing Law; Jurisdiction. (a) This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed therein.
(b) Each of the parties hereto submits to the exclusive jurisdiction of
the federal courts of the United States located in the City of New York, Borough
of Manhattan, State of New York, with respect to any claim or cause of action
arising out of this Agreement or the transactions contemplated hereby.
7. Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
- 24 -
IN WITNESS WHEREOF, LMC, Dynabazaar and LQ have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
L Q CORPORATION, INC.
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: Chairman
LQ MERGER CORP.
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer and Treasurer
DYNABAZAAR, INC.
By: /s/ Xxxx Xxxxx
----------------------------------------
Name: Xxxx Xxxxx
Title: Chairman
[Schedules and Exhibits Intentionally Omitted]
- 25 -
