AGREEMENT AND PLAN OF MERGER by and among MOBILEPRO CORP., NEOREACH, INC., TRANSCORDIA ACQUISITION CORP., TRANSCORDIA, LLC, AND ITS UNITHOLDERS Dated as of April ___, 2005
AGREEMENT
AND PLAN OF MERGER
by
and among
NEOREACH,
INC.,
TRANSCORDIA
ACQUISITION CORP.,
TRANSCORDIA,
LLC, AND
ITS
UNITHOLDERS
Dated
as of April ___, 2005
ARTICLE
I The
Merger
|
1
|
|
Section
1.1
|
The
Merger
|
1
|
Section
1.2
|
Effect
of the Merger; Closing
|
1
|
Section
1.3
|
Articles
of Incorporation
|
2
|
Section
1.4
|
Bylaws
|
2
|
Section
1.5
|
Board
of Directors and Officers
|
2
|
Section
1.6
|
Conversion
of Capital Stock
|
2
|
Section
1.7
|
Surrender
of Shares; Stock Transfer Books
|
3
|
Section
1.8
|
Adjustments
for Capital Changes
|
4
|
Section
1.9
|
Dissenting
Shares
|
4
|
Section
1.10
|
Further
Assurances
|
4
|
Section
1.11
|
Securities
Law Issues
|
4
|
ARTICLE
II Representations
and Warranties of Company And Company Xxxxxxxxxxx
|
0
|
|
Section
2.1
|
Organization,
Qualification and Corporation Power
|
4
|
Section
2.2
|
Capitalization;
Subsidiaries
|
5
|
Section
2.3
|
Ownership
of Shares
|
6
|
Section
2.4
|
Authority
Relative to this Agreement
|
7
|
Section
2.5
|
No
Conflict; Required Filings and Consents
|
7
|
Section
2.6
|
Financial
Statements; Debt
|
8
|
Section
2.7
|
Absence
of Certain Changes
|
8
|
Section
2.8
|
Tax
Matters.
|
9
|
Section
2.9
|
Title
to Properties
|
10
|
Section
2.10
|
Environmental
Matters
|
10
|
Section
2.11
|
Intellectual
Property
|
11
|
Section
2.12
|
Material
Agreements
|
13
|
Section
2.13
|
Insurance
|
15
|
Section
2.14
|
Litigation
|
15
|
Section
2.15
|
Employees
|
15
|
Section
2.16
|
Employee
Benefits
|
16
|
Section
2.17
|
Permits
|
17
|
Section
2.18
|
Broker’s
Fees
|
17
|
Section
2.19
|
Books
and Records
|
17
|
Section
2.20
|
Banking
Relationships and Investments
|
18
|
Section
2.21
|
Disclosure
|
18
|
-i-
ARTICLE
III Representations
and Warranties of Buyer and Buyer Sub
|
18
|
|
Section
3.1
|
Organization,
Qualification and Corporation Power
|
18
|
Section
3.2
|
Capitalization
|
19
|
Section
3.3
|
Authority
Relative to this Agreement
|
19
|
Section
3.4
|
No
Conflict; Required Filings and Consents
|
20
|
Section
3.5
|
SEC
Reports
|
20
|
Section
3.6
|
Buyer
Sub
|
21
|
Section
3.7
|
Broker’s
Fees
|
21
|
Section
3.8
|
Restrictions
on Transfer
|
21
|
Section
3.9
|
Disclosure
|
21
|
ARTICLE
IV Further
Covenants and Assurances
|
21
|
|
Section
4.1
|
Securities
Laws
|
21
|
Section
4.2
|
Public
Announcements
|
22
|
Section
4.3
|
Audited
Financial Statements
|
22
|
Section
4.4
|
Adjustments
in Merger Consideration
|
22
|
ARTICLE
V Conditions
of Merger
|
23
|
|
Section
5.1
|
Conditions
to Obligations of Buyer and Buyer Sub to Effect the Merger
|
23
|
Section
5.2
|
Conditions
to Obligations of the Company and the Company Unitholders to
Effect the
Merger
|
24
|
ARTICLE
VI Survival
and Indemnification
|
25
|
|
Section
6.1
|
Survival
of Representations
|
25
|
Section
6.2
|
Indemnification
of Buyer
|
25
|
Section
6.3
|
Indemnification
of Company Unitholders and Company
|
26
|
Section
6.4
|
General
Notice and Procedural Requirements for Indemnity Claims
|
26
|
Section
6.5
|
Notice
and Procedural Requirements for Third Party Claims
|
26
|
Section
6.6
|
Notice
and Procedural Requirements for Direct Claims
|
28
|
Section
6.7
|
Maximum
Liability
|
28
|
Section
6.8
|
Basket
|
28
|
-ii-
ARTICLE
VII General
Provisions
|
28
|
|
Section
7.1
|
Notices
|
28
|
Section
7.2
|
Expenses
|
29
|
Section
7.3
|
Amendment
|
29
|
Section
7.4
|
Entire
Agreement
|
29
|
Section
7.5
|
No
Third-Party Beneficiaries
|
29
|
Section
7.6
|
Assignment
|
30
|
Section
7.7
|
Severability
|
30
|
Section
7.8
|
Governing
Law
|
30
|
Section
7.9
|
Headings;
Interpretation
|
30
|
Section
7.10
|
Construction
|
30
|
Section
7.11
|
Counterparts
|
30
|
Section
7.12
|
Confidentiality
|
30
|
-iii-
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER,
dated
as of April ___, 2005 (this “Agreement”),
is
made by and among Mobilepro Corp., a Delaware corporation (“Parent”),
NeoReach, Inc., a Delaware corporation (“Buyer”) and a direct wholly owned
subsidiary of Parent (“Buyer”),
Transcordia Acquisition Corp., an Arizona corporation and directly wholly
owned
subsidiary of Buyer (“”Buyer
Sub”)
Transcordia, LLC an Arizona limited liability company (the “Company”)
and
Wazco, LLC (“Nasco”), Xxxxxx Xxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxxx X.
Xxxxxx, “XxXxxxxx: Family College Fund, Xxxx XxXxxxxx and Xxxxxx X. Xxxxxx, III
(collectively, the “Company
Unitholders”).
WHEREAS,
the
Board of Directors and/or Manager of Parent, Buyer, Buyer Sub and the Company
have determined that it is in the best interests of their respective companies
and their stockholders/unitholders to consummate the business combination
transaction provided for herein in which the Company will, subject to the
terms
and conditions set forth herein, merge with and into Buyer Sub, with Buyer
Sub
being the surviving entity (the “Merger”);
and
WHEREAS,
the
parties desire to make certain representations, warranties and agreements
in
connection with the Merger and also to prescribe certain conditions to the
Merger;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants, warranties and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE
I
The
Merger
Section
1.1 The
Merger.
Subject
to the terms and conditions of this Agreement, in accordance with the General
Corporation Law of the State of Delaware (the “Delaware
Law”)
and
the Arizona Limited Liability Company Act (“Arizona
Law”),
upon
the execution of this Agreement and concurrent with the filing of the
Certificate of Merger with the Secretary of State of Delaware and the Articles
of Merger with the Secretary of State of the State of Arizona (each a
“Merger
Certificate”
and
collectively ”Merger
Certificates”)
(in
accordance with the relevant provision of Delaware Law and Arizona Law,
respectively), the Company shall merge with and into Buyer Sub. The separate
corporate existence of the Company will cease upon the filing of the Merger
Certificates (the “Effective
Time”),
and
Buyer Sub will continue as the surviving corporation (hereinafter sometimes
referred to as the “Surviving
Corporation”)
in the
Merger. Buyer Sub, as the surviving corporation after the Merger, will be
governed by the laws of the State of Delaware.
For
purposes of this Agreement, the date of the filing of the Articles of Merger
shall be known as the “Closing
Date”
and the
actions taken on such date and at such time, the “Closing.”
Section
1.2 Effect
of the Merger; Closing.
At and
after the Effective Time, the Merger shall have the effects set forth in
this
Agreement and the applicable provisions of Delaware and Arizona Law. At the
Effective Time all the property, rights, privileges, powers and franchises
of
the Company and Buyer Sub will vest in the Surviving Corporation, and all
debts,
liabilities and duties of the Company and Buyer Sub not paid by the Company
at
or before Closing will become the debts, liabilities and duties of the Surviving
Corporation.
Section
1.3 Articles
of Incorporation.
At the
Effective Time, the Articles of Incorporation of Buyer Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation.
Section
1.4 Bylaws.
At the
Effective Time, the bylaws of Buyer Sub, as in effect immediately prior to
the
Effective Time, shall be the Bylaws of the Surviving Corporation.
Section
1.5 Board
of Directors and Officers.
The
directors and corporate officers of Buyer Sub immediately prior to the Effective
Time, shall be the directors and corporate officers of the Surviving
Corporation.
Section
1.6 Conversion
of Units.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
the Buyer Sub, the Company or the holder of any units of the Company
each
partnership unit of Company (as defined in Section 2.2(a)) (“Company
Units”)
issued
and outstanding immediately before the Effective Time will be converted into
and
become the right to receive:.
(a) 13,000
shares of Parent’s $0.001 par value common stock (“Stock
Consideration”
or the
“Merger
Consideration”).
(b) All
Company Units that are held by the Company as treasury units (the “Company
Treasury Units”)
shall
cease to exist and no cash, Buyer common stock, $0.001 par value per share
(“Buyer
Common
Stock”)
or
other consideration shall be delivered in exchange therefore.
(c) The
shares of Parent Common Stock will not have been registered and will be deemed
to be “restricted securities” under federal securities laws and may not be
resold without registration under or exemption from the Securities Act of
1933,
as amended (the “Securities
Act”).
Each
certificate evidencing shares of Parent Common Stock will bear the following
legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT EXEMPTION UNDER THE
SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO MOBILEPRO
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
2
Section
1.7 Surrender
of Units; Unit Transfer Books.
(a) At
the
Closing, the Company Unitholders will surrender such Company Unitholders’
Certificate(s) to Buyer (“Certificate”).
Until
so surrendered, such Certificate(s) will represent solely the right to receive
the Merger Consideration relating thereto.
(b) At
the
Effective Time, the unit transfer books of the Company will be closed and
there
will not be any further registration of transfers of any Company Units, options
or warrants thereafter on the records of the Company. If, at or after the
Effective Time, Certificates are presented to the Surviving Corporation for
transfer, they will be canceled and exchanged for Merger Consideration as
provided in Section
1.6.
(c) In
the
event any Certificate that has 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, Buyer will issue in exchange for such lost, stolen or
destroyed Certificate, the Merger Consideration deliverable in respect thereof
as determined in accordance with Section
1.6
if the
Person to whom the Merger Consideration is paid will, as a condition precedent
to the payment thereof, give the Surviving Corporation a bond in such sum
as the
Surviving Corporation may reasonably direct or otherwise indemnify the Surviving
Corporation in a manner reasonably satisfactory to it against any claim that
may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
Section
1.8 Adjustments
for Capital Changes.
If
prior to the Merger, Parent or Company recapitalizes through a split-up of
its
outstanding shares into a greater number, or a combination of its outstanding
shares into a lesser number, reorganizes, reclassifies or otherwise changes
its
outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided
for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities convertible into shares, the number of shares of
Parent
Common Stock into which the Company shares are to be converted will be adjusted
appropriately so as to maintain the proportionate interests of the holders
of
the Company shares and the holders of Buyer shares.
Section
1.9 General
Escrow Shares and General Escrow Cash.
(a) General
Escrow Shares.
At the
Effective Time, Buyer shall withhold from the Stock Consideration otherwise
deliverable to Nasco, five hundred thousand (500,000) shares of Parent Common
Stock (the “General
Escrow Shares”).
Any
such General Escrow Shares will be delivered by Parent to ____________ (the
“Escrow
Agent”),
as
escrow agent, to be held pursuant to the terms of the escrow agreement attached
hereto as Exhibit “A” (the “Escrow
Agreement”).
The
payment of any General Escrow Shares in satisfaction of any indemnification
obligations under ARTICLE
VI
shall be
made by Nasco. Escrow Agent shall hold the General Escrow Shares for one
year
following the Effective Time (the “General
Escrow Period”)
as
security for the Company indemnification obligations for Damages under
ARTICLE
VI.
(b) Distributions
on General Escrow Shares.
Any
dividends or distributions payable in shares of Parent Common Stock or other
equity securities or issued upon a stock split made in respect of any General
Escrow Shares shall be considered General Escrow Shares hereunder. Cash
dividends and any other dividends or distributions in kind on the General
Escrow
Shares (“General
Escrow Dividends”)
shall
be distributed to Nasco within fifteen (15) business days following the
expiration of the General Escrow Period.
3
(c) Voting
of General Escrow Shares.
Nasco
on whose behalf General Escrow Shares are held by Escrow Agent shall be entitled
to vote such shares. Buyer need not forward proxy information, annual or
other
reports or other information with respect to the General Escrow Shares to
Nasco
to the extent such documents or materials are otherwise furnished by Buyer
with
respect to other shares of Parent Common Stock distributed to such holders
pursuant to this Agreement.
(d) Release
of General Escrow Shares.
As soon
as reasonably practicable (but in any event within ten (10) business days)
following the expiration of the General Escrow Period, Escrow Agent shall
release to Nasco the General Escrow Dividends and all of the remaining General
Escrow Shares, if any, in excess of (i) any General Escrow Shares delivered
by
Escrow Agent in satisfaction of Claims (as defined in ARTICLE
VI)
for
Damages (as defined in ARTICLE
VI)
by
Buyer Indemnified Persons (as defined ARTICLE
VI)
and
(ii) any amount of General Escrow Shares that is necessary to satisfy all
unresolved, unsatisfied or disputed Claims for Damages specified in any Notice
of Claim (as defined in ARTICLE
VI)
delivered to the representative before the expiration of the General Escrow
Period. If any Claims are unresolved, unsatisfied or disputed as of the
expiration of the General Escrow Period, then Escrow Agent shall retain
possession of that number of General Escrow Shares determined by dividing
the
total maximum amount of Damages then being claimed by Buyer Indemnified Persons
in all such unresolved, unsatisfied or disputed Claims by $0.25, and as soon
as
reasonably practicable (but in any event within ten (10) business days)
following resolution of all such Claims, Escrow Agent shall release to Nasco
the
General Escrow Shares, all remaining General Escrow Shares, if any, not required
to satisfy such Claims. Such releases of General Escrow Dividends shall be
made
by check. If the number of General Escrow Shares to be distributed to any
Company shareholder is not evenly divisible by one, Buyer shall round to
the
nearest whole number.
(e) No
Transfer or Encumbrance.
To the
extent permitted by applicable law, no General Escrow Shares or General Escrow
Dividends or any beneficial interest therein may be pledged, encumbered,
sold,
assigned or transferred (including any transfer by operation of law), by
Buyer
or Nasco or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of Buyer or Nasco or used for
any
reason, prior to (i) in the case of Buyer, the retention of General Escrow
Shares in satisfaction of a resolved Claim for Damages to address any
post-closing Merger Adjustment in accordance with this Agreement or (ii)
in the
case of Nasco, the release by Escrow Agent to Nasco of General Escrow Shares
or
General Escrow Dividends in accordance with this Agreement, except that Nasco
shall be entitled to assign its rights to the General Escrow Shares or General
Escrow Dividends by will, by the laws of intestacy or by other operation
of
law.
(f) No
Liability of the Escrow Agent.
In
holding and administering the General Escrow Shares or General Escrow Dividends,
the Escrow Agent will incur no liability with respect to any action taken
by it
in reliance upon any written notice, direction, instruction, consent, statement
or other document believed by it to be genuine and to have been signed by
the
representative (and shall have no responsibility to determine the authenticity
thereof), nor for any other action or inaction, except the Escrow Agent’s own
willful misconduct or gross negligence. In all questions arising under this
Agreement with respect to the General Escrow Shares or General Escrow Dividends,
the Escrow Agent may rely on the advice of counsel, and the Escrow Agent
will
not be liable to anyone for anything done, omitted or suffered in good faith
by
the Escrow Agent based on such advice, except for the Escrow Agent’s own willful
misconduct or gross negligence.
4
Section
1.10 Parent’s
Repurchase Option.
The
Parent or its assignees shall have the option to repurchase all of the Unvested
Shares (as defined below) from Nasco on the terms and conditions set forth
in
this Section (the "Repurchase Option") if Nasco ceases to be Engaged or Employed
by the Parent (as defined herein) due to Cause (as defined below).
(a) Definition
of “Engaged or Employed by the Parent”; “Termination Date”; “Cause”. For
purposes of this Agreement, Nasco will be considered to be "Engaged or Employed
by the Parent" if he is rendering substantial services as an officer, employee,
consultant or independent contractor to the Parent or to any parent, subsidiary
or affiliate of the Parent pursuant to a written agreement. “Termination Date”
shall mean the date (i) Nasco voluntarily terminates his engagement or
employment with the Parent for any reason or (ii) the date Nasco’s relationship
with the Parent is terminated for “Cause”. “Cause” shall mean a termination of
the engagement or employment that is based upon (i) an act of dishonesty,
fraud,
embezzlement, breach of trust, misappropriation or acceptance of a bribe
or
kickback; (ii) material neglect by Employee of his duties, chronic absenteeism,
or any material or intentional breach of Employee’s obligations hereunder
including, without limitation, any intentional failure to implement material
policies and/or procedures established by the Parent which is not rectified
to
the reasonable satisfaction of Parent by Employee within ten (10) days after
written notification to Employee of said absenteeism, breach or violation;
(iii)
the conviction or a plea of nolo contendere, by Employee of a felony or of
a
crime involving fraud, dishonesty or moral turpitude or (iv) breach of any
provision of an Employment of Consulting Agreement between the Company and
Xxxx
Xxxxx.
(b) Unvested
and Vested Shares. Shares of Parent’s common stock (that are Nasco’s part of the
Merger Consideration) that are vested pursuant to the schedule set forth
herein
are "Vested Shares". Shares of Parent’s common stock (that are a Selling
Shareholders’ part of the Merger Consideration) that are not vested pursuant to
the schedule set forth herein are "Unvested Shares". Unvested Shares may
not be
sold or otherwise transferred by Nasco without the Parent's prior written
consent. On the Effective Date 1,040,000 shares of the Merger Consideration
held
by Nasco will be Unvested Shares. If Nasco has continuously been Engaged
or
Employed by the Parent or any subsidiary or parent entity of the Parent,
at all
times from the Effective Date until May ____, 2005 (the "First Vesting Date"),
then on the First Vesting Date 1/24th
of
Nasco’s Merger Consideration will become Vested Shares; and thereafter, for so
long (and only for so long) as Nasco remains Engaged or Employed by the Parent
or any subsidiary or parent of the Parent, at all times after the First Vesting
Date, an additional 1/24th
of
Nasco’s Merger Consideration will become Vested Shares upon the expiration of
each full month elapsed after the First Vesting Date. No Shares will become
Vested Shares after the Termination Date. If the application of the vesting
percentage results in a fractional share, such share shall be rounded down
to
the nearest whole share for each month except for the last month in such
vesting
period, at the end of which last month the balance of Unvested Shares shall
become fully Vested Shares.
5
(c)
Exercise
of Repurchase Option at Original Price. At any time within ninety (90) days
after the Termination Date, the Parent may elect to repurchase any or all
of the
Unvested Shares by giving Nasco written notice of exercise of the Repurchase
Option. The Parent and/or its assignee(s) will then have the option to
repurchase from Nasco all of the Unvested Shares for the sum of $1.00 (the
"Repurchase Option Price").
(d) Right
of
Termination Unaffected. Nothing in this Agreement will be construed to limit
or
otherwise affect in any manner whatsoever the right or power of the Parent
(or
any parent, subsidiary or affiliate of the Parent) to terminate Nasco’s
Engagement or Employment with the Parent (or any parent, subsidiary or affiliate
of the Parent) at any time for any reason or no reason, with or without cause.
However, in the event of such a termination by the Parent without Cause,
all
remaining Unvested Shares shall immediately become Vested Shares.
Section
1.11 Further
Assurances.
The
Company agrees that if, at any time before or after the Effective Time, Buyer
considers or is advised that any further deeds, assignments or assurances
are
reasonably necessary or desirable to vest, perfect or confirm in Buyer title
to
any property or rights of Company, Buyer and its proper officers and directors
may execute and deliver all such proper deeds, assignments and assurances
and do
all other things necessary or desirable to vest, perfect or confirm title
to
such property or rights in Buyer and otherwise to carry out the purpose of
this
Agreement, in the name of Company or otherwise.
Section
1.12 Securities
Law Issues.
Based
in part on the representations of the Company Unitholders made herein, Parent
Common Stock to be issued in the Merger will be issued pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the “Securities
Act”)
and/or
Rule 506 under Regulation D promulgated under the Securities Act and applicable
state securities laws.
ARTICLE
II
Representations
and Warranties of Company And Nasco
Except
as
set forth in the Company Disclosure Letter attached to this Agreement (the
“Company
Disclosure Letter”),
the
Company and Nasco, jointly and severally, represent and warrant to the Buyer
as
follows:
Section
2.1 Organization,
Qualification and Corporation Power.
The
Company (a) is a limited liability company duly organized, validly
existing
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate power and authority to own, operate or lease
its
properties and to carry on its business as is now being conducted and proposed
to be conducted, except where the failure to be so organized, existing and
in
good standing or to have such power and authority would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(as defined below) on the Company, and (b) is duly qualified and in
good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
or
to be in good standing would not reasonably be expected to have, individually
or
in the aggregate, a Material Adverse Effect on the Company. The
Company has furnished to Buyer true, correct and complete copies of its Articles
of Organization and Operating Agreement.
6
For
purposes of this Agreement, the term “Material
Adverse Effect”
when
used in connection with an entity means any change, event, circumstance or
effect whether or not such change, event, circumstance or effect is caused
by or
arises in connection with a breach of a representation, warranty, covenant
or
agreement of such entity in this Agreement that is or is reasonably likely
to be
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations,
employees or prospects of such entity taken as a whole with its subsidiaries,
except to the extent that any such change, event, circumstance or effect
is
caused by results from (i) changes in general economic conditions,
(ii) changes affecting the industry generally in which such entity
operates
(provided that such changes do not affect such entity in a substantially
disproportionate manner) or (iii) changes in the trading prices for
such
entity’s capital stock.
Section
2.2 Capitalization;
Subsidiaries.
(a) The
authorized membership units of the Company consists of 100 units, of which
100
units are issued and outstanding (the “Company
Units”)
to the
individuals listed in Section
2.2(a)
of the
Company Disclosure Letter. Other than common stock, there are no other classes,
series or types of units for the Company. The Company Unitholders hold good
and
marketable title to such Company Units, free and clear of all liens, agreements,
voting trusts, proxies and other arrangements or restrictions of any kind
whatsoever (other than normal restrictions on transfer under applicable federal
and state securities laws). All issued and outstanding Company Units have
been
duly authorized and were validly issued, are fully paid and nonassessable,
are
not subject to any right of rescission, are not subject to preemptive rights
by
statute, the Articles of Organization or Operating Agreement of Company,
or any
agreement or document to which Company is a party or by which it is bound
and
have been offered, issued, sold and delivered by Company in compliance with
all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws. The Company is not under
any
obligation to register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued. There is no
liability for dividends accrued but unpaid with respect to the Company’s
outstanding securities.
(b) Except
as
disclosed in Section
2.2(b)
of the
Company Disclosure Letter, there are no existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating the Company to issue,
transfer or sell any shares of capital stock or other equity interest in,
the
Company or securities convertible into or exchangeable for such shares or
equity
interests, (ii) contractual obligations of the Company to repurchase, redeem
or
otherwise acquire any capital stock of the Company or (iii) voting trusts
or
similar agreements to which the Company is a party with respect to the voting
of
the capital stock of the Company.
The
Company has delivered to the Buyer, a correct and complete list of each Company
Option and Company Warrant outstanding as of the date hereof, including the
name
of the holder of such Company Option or Company Warrant, the Company Plan
pursuant to which such Company Option was issued, the number of shares covered
by such Company Option or Company Warrant, the per share exercise price of
such
Company Option or Company Warrant and the vesting commencement date and vesting
schedule applicable to each such Company Option, including the number of
shares
vested as of the date of this Agreement. The terms of the Company Plans permit
the assumption or substitution of options to purchase Company Common Stock
provided in this Agreement, without the consent or approval of the holders
of
such securities, the Company Unitholders, or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for
those
options. No other outstanding options, whether under the Company Plans or
otherwise, will be accelerated in connection with the Merger.
7
(c) Except
as
disclosed in Section 2.2(c) of the Company Disclosure Letter the Company
does
not have any direct or indirect Subsidiaries or any interest, direct or
indirect, in any corporation, partnership, joint venture or other business
entity.
For
purposes of this Agreement, the term “Subsidiary”
of a
Person means any corporation or other legal entity of which such Person (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
Section
2.3 Ownership
of Units.
(a) The
Company Unitholders are the record and beneficial owner of, and have good
and
valid title to, all of the Company Units, which Company Units (i) are free
and
clear of all liens, mortgages, encumbrances, pledges, claims, options, charges,
easements, restrictions, covenants, conditions of record, encroachments,
security interests and claims of every kind and character (each, a “Lien”)
and
(ii) are free of any other restriction (including any restriction on the
right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests).
(b) There
are
no outstanding existing (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character to which the Company Unitholders is a party obligating the
Company Unitholders to issue, transfer or sell any Company Units or other
equity
interest in the Company or securities convertible into or exchangeable for
such
shares or equity interests or (ii) voting trusts, stockholders’ agreements or
similar agreements to which the Company Unitholders are a party with respect
to
the voting of the Company Stock owned by such Company Unitholders.
Section
2.4 Authority
Relative to this Agreement.
The
Company has the necessary corporate power and authority to enter into this
Agreement and, subject to the filing of the Articles of Merger as required
by
Arizona Law, to carry out its obligations hereunder. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and the Company Unitholders and,
subject to the filing of the Articles of Merger as required by Arizona Law,
no
other corporate proceeding is necessary for the execution and delivery of
this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and,
assuming the due authorization, execution and delivery of this Agreement
by
Buyer and Buyer Sub, constitutes a legal, valid and binding obligation of
the
Company, enforceable against it in accordance with its terms, except that
(a)
the enforceability hereof may be subject to applicable bankruptcy, insolvency
or
other similar laws, now or hereinafter in effect, affecting creditors’ rights
generally, and (b) the general principles of equity (regardless of whether
enforceability is considered at a proceeding at law or in equity).
8
Section
2.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by the Company and the Company
Unitholders does not, and the consummation by the Company and the Company
Unitholders of the transactions contemplated hereby will not, (i) conflict
with or violate any law, court order, judgment or decree applicable to the
Company, its Subsidiaries or the Company Unitholders or by which any of their
property is bound, (ii) violate or conflict with the Articles of
Organization or Operating Agreement (or comparable organizational documents)
of
the Company or its Subsidiaries, or (iii) result in any breach of
or
constitute a default (or an event which with notice or lapse of time of both
would become a default) under, or give to others any rights of termination
or
cancellation of, or result in the creation of a Lien on any of the properties
or
assets of the Company or its Subsidiaries pursuant to, any contract, instrument,
Permit or license to which the Company or its Subsidiaries is a party or
by
which the Company or its Subsidiaries or any of their property is bound,
except
in the case of clauses (i) and (iii) for conflicts, violations, breaches
or
defaults which, individually or in the aggregate, would not have or result
in a
Material Adverse Effect on the Company.
(b) Except
for the filing of the Merger Certificates and any applicable requirements,
if
any, under “takeover” or “blue sky” laws of various states, neither the Company
nor any of its subsidiaries is required to submit any notice, report or other
filing with any federal,
state or local or foreign government, political subdivision thereof, any
court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental United States or foreign self-regulatory agency,
commission or authority or any arbitral tribunal (each, a “Governmental
Entity”)
in
connection with the execution, delivery or performance of this Agreement
or the
consummation of the transactions contemplated hereby the failure of which
to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on the Company. No waiver, consent, approval or authorization
of
any Governmental Entity or any third party is required to be obtained or
made by
the Company or its Subsidiaries in connection with its execution, delivery
or
performance of this Agreement the failure of which to obtain or make,
individually or in the aggregate, would have or result in a Material Adverse
Effect on the Company.
Section
2.6 Financial
Statements; Debt.
(a) Attached
as Section
2.6(a)
of the
Company Disclosure Letter is the Company’s unaudited balance sheet dated as of
the Closing Date (the “Closing
Balance Sheet”),
(the
Closing Balance Sheet is sometimes referred to herein as the “Company
Financial Statements”).
The
Company Financial Statements (a) are in accordance with the books and records
of
the Company, (b) fairly present the financial condition of the Company at
the
date therein indicated and the results of operation for the period therein
specified and (c) has been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis (“GAAP”).
9
(b) The
Company has no material debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become
due,
that is not reflected or reserved against in the Company Financial Statements
in
the ordinary course of its business, consistent with past practice and that
are
not material in amount either individually or collectively.
Section
2.7 Absence
of Certain Changes.
Since
March 1, 2005, there has not been with respect to the Company or any
Subsidiary:
(a) any
change in the financial condition, properties, assets, liabilities, business
or
operations thereof which change by itself or in conjunction with all other
such
changes, whether or not arising in the ordinary course of business, has had
or
will have a material adverse effect thereon;
(b) any
material loss of customers. Set forth on Section
2.7(b)
of the
Company Disclosure Letter is a true, correct and complete list of all customers
lost in the preceding twelve (12) months, including all revenue generated
from
any customer generating at least $40 per month in revenue for the Company
for
the twelve (12) months preceding the date on which they were no longer
customers;
(c) any
contingent liability incurred thereby as guarantor or otherwise with respect
to
the obligations of others;
(d) any
mortgage, encumbrance or lien placed on any of the properties
thereof;
(e) any
material obligation or liability incurred thereby other than obligations
and
liabilities incurred in the ordinary course of business;
(f) any
purchase or sale or other disposition, or any agreement or other arrangement
for
the purchase, sale or other disposition, of any of the properties or assets
thereof other than in the ordinary course of business;
(g) any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the properties, assets or business thereof;
(h) any
declaration, setting aside or payment of any dividend on, or the making of
any
other distribution in respect of, the capital stock thereof, any split,
combination or recapitalization of the capital stock thereof or any direct
or
indirect redemption, purchase or other acquisition of the capital stock
thereof;
(i) any
labor
dispute or claim of unfair labor practices, any change in the compensation
payable or to become payable to any of its officers, employees or agents,
or any
bonus payment or arrangement made to or with any of such officers, employees
or
agents;
10
(j) any
change with respect to the management, supervisory or other key personnel
thereof;
(k) any
payment or discharge of a material lien or liability thereof which lien was
not
either shown on the Closing Balance Sheet or incurred in the ordinary course
of
business thereafter; or
(l) any
obligation or liability incurred thereby to any of its officers, directors
or
stockholders or any loans or advances made thereby to any of its officers,
directors or stockholders except normal compensation and expense allowances
payable to officers.
Section
2.8 Tax
Matters.
(a) The
Company and its Subsidiaries have timely filed all Tax Returns that each
was
required to file, and all such Tax Returns were correct and complete in all
material respects. All Tax liabilities of the Company and its Subsidiaries
for
all taxable periods or portions thereof ending on or prior to the Effective
Time
have been, or will be prior to the Effective Time, timely paid or are adequately
reserved for in the Company Financial Statements, other than such Tax
liabilities as are being contested in good faith by the Company or its
Subsidiaries. There are no ongoing federal, state, local or foreign audits
or
examination of any Tax Return of the Company or its Subsidiaries. Neither
the
Company nor any of its Subsidiaries has waived any statute of limitations
in
respect of Taxes or agreed to any extension of time, nor has any such waiver
or
extension been required with respect to a Tax assessment or deficiency. No
claim
has ever been made by an authority in a jurisdiction where the Company and
its
Subsidiaries do not file Tax Returns that it is or may be subject to taxation
by
that jurisdiction. There are no Liens on any of the assets of the Company
or its
Subsidiaries that arose in connection with any failure (or alleged failure)
to
pay any Tax.
(b) The
Company and its Subsidiaries have withheld or collected and paid or deposited
in
accordance with law all Taxes required to have been withheld or collected
and
paid or deposited by the Company or its Subsidiaries in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder,
or
other third party.
(c) There
is
no dispute or claim concerning any Tax liability of the Company or its
Subsidiaries either (i) claimed or raised by any authority in writing or
(ii) as
to which the Company has Knowledge.
(d) For
purposes of this Agreement:
(i) “Knowledge”
or
words of similar import means all information that is actually known, following
reasonable investigation, and in the case of the Company, by the individuals
set
forth on Section
2.15(a)
of the
Company Disclosure Letter.
(ii) “Taxes”
means
all taxes, charges, fees, levies or other similar assessments or liabilities,
including income, gross receipts, ad valorem, premium, value-added, excise,
real
property, personal property, sales, use, transfer, withholding, employment,
payroll and franchise taxes imposed by a Governmental Entity, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof,
and
any amounts of Taxes of a third Person that a Person or any Subsidiary of
such
Person is liable to pay by law or otherwise; and
11
(iii) “Tax
Returns”
means
all reports, returns, declarations, statements or other information supplied
or
required to be supplied to a taxing authority in connection with Taxes including
any schedules, attachments or amendments thereto.
Section
2.9 Title
to Properties.
The
Company has good and marketable title to all of its assets as shown on the
Closing Balance Sheet, free and clear of all liens, charges, restrictions
or
encumbrances (other than for taxes not yet due and payable). All machinery
and
equipment included in such properties is in good condition and repair, normal
wear and tear excepted, and all leases of real or personal property to which
the
Company or any its Subsidiaries is a party are fully effective and afford
the
Company or its Subsidiaries peaceful and undisturbed possession of the subject
matter of the lease. Neither the Company nor any of its Subsidiaries is in
violation of any zoning, building, safety or environmental ordinance, regulation
or requirement or other law or regulation applicable to the operation of
owned
or leased properties (the violation of which would have a material adverse
effect on its business), or has received any notice of violation with which
it
has not complied.
Section
2.10 Environmental
Matters.
(a) During
the period that the Company has leased or owned its properties or owned or
operated any facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under such
properties or facilities. The Company has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on, from
or
under any of such properties or facilities, which may have occurred prior
to the
Company having taken possession of any of such properties or facilities.
For the
purposes of this Agreement, the terms “disposal,”“release,”
and
“threatened
release”
shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.,
as amended (“CERCLA”).
For
the purposes of this Agreement “Hazardous
Materials”
shall
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing regulated under, or defined as a “hazardous substance,”“pollutant,”“contaminant,”“toxic chemical,”“hazardous materials,”“toxic
substance” or “hazardous chemical” under (1) CERCLA; (2) any similar
federal, state or local law; or (3) regulations promulgated under
any of
the above laws or statutes.
(b) None
of
the properties or facilities of the Company is in violation of any federal,
state or local law, ordinance, regulation or order relating to industrial
hygiene or to the environmental conditions on, under or about such properties
or
facilities, including, but not limited to, soil and ground water condition.
During the time that the Company has owned or leased its properties and
facilities, to the Company’s knowledge, no third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous
Materials.
12
(c) During
the time that the Company has owned or leased its properties and facilities,
there has been no litigation brought or threatened against the Company by,
or
any settlement reached by the Company with, any party or parties alleging
the
presence, disposal, release or threatened release of any Hazardous Materials
on,
from or under any of such properties or facilities.
Section
2.11 Intellectual
Property.
(a) The
term
“Intellectual
Property”
means
any (i) patents, (ii) trademarks, service marks, trade names, brand names,
trade
dress, slogans, logos and internet domain names, (iii) inventions, discoveries,
ideas, processes, formulae, designs, models, industrial designs, know-how,
proprietary information, trade secrets, and confidential information (including
customer lists, training materials and related matters, research and marketing
and sales plans), whether or not patented or patentable, (iv) copyrights,
writings and other copyrightable works and works in progress, databases and
software, (v) all other intellectual property rights and foreign equivalent
or
counterpart rights and forms of protection of a similar or analogous nature
or
having similar effect in any jurisdiction throughout the world, (vi) all
registrations and applications for registration of any of the foregoing,
(vii)
all common law trademarks and service marks used by the Company or its
Subsidiaries and (viii) any renewals, extensions, continuations, divisionals,
reexaminations or reissues or equivalent or counterpart of any of the foregoing
in any jurisdiction throughout the world. The term “Company
IP”
means
any Intellectual Property used or held for use by the Company or its
Subsidiaries, in the conduct of their businesses as currently conducted and
currently proposed to be conducted.
(b) Section
2.11(b)
of the
Company Disclosure Letter sets forth a true, correct and complete list
(including, the owner, title, registration or application number and country
of
registration or application, as applicable) of all of the following Company
IP:
(i) registered trademarks, (ii) applications for trademark registration,
(iii)
domain names, (iv) patents, (v) applications for patents, (vi) registered
copyrights (vii) applications for copyright registration and (viii) licenses
of
all Intellectual Property (other than off-the-shelf business productivity
software that is the subject of a shrink wrap or click wrap software license
agreement (“Desktop
Software”))
to or
from the Company. The Company has delivered or made available to Buyer prior
to
the execution of this Agreement true, complete and correct copies of all
licenses of Company IP both to and from the Company and its Subsidiaries,
except
Desktop Software.
(c) The
Company IP set forth on Section
2.11(b)
of the
Company Disclosure Letter constitutes all of the Intellectual Property used
by
and necessary for the Company and its Subsidiaries to operate their respective
business as currently conducted and currently proposed to be conducted. The
Company or its Subsidiaries owns all legal and beneficial right, title and
interests in the Company IP, and the Company or its Subsidiaries has the
valid,
sole and exclusive right to use, assign, transfer and license all such Company
IP for the life thereof for any purpose, free from (i) any Liens,
and
(ii) any requirement of any past, present or future royalty payments,
license fees, charges or other payments, or conditions or restrictions
whatsoever.
(d) All
patent, trademark, service xxxx, copyright, patent and domain name registrations
or applications set forth on Section
2.11(b)
of the
Company Disclosure Letter are in full force and effect and have not been
abandoned, dedicated, disclaimed or allowed to lapse for non-payment of fees
or
taxes or for any other reason.
13
(e) None
of
the Company IP owned by the Company or its Subsidiaries has been declared
or
adjudicated invalid, null or void, unpatentable or unregistrable in any judicial
or administrative proceeding. To the Knowledge of the Company, none of the
Company IP used (but not owned) by the Company or its Subsidiaries has been
declared or adjudicated invalid, null or void, unpatentable or unregistrable
in
any judicial or administrative proceeding.
(f) Neither
the Company nor its Subsidiaries has received any written notices of, or
has
Knowledge of, any infringement or misappropriation by or of, or conflict
with,
any third party with respect to the Company IP or Intellectual Property owned
by
any third party. Neither the Company nor its Subsidiaries has infringed,
misappropriated or otherwise violated or conflicted with any Intellectual
Property of any third party. The operation of the Company and its Subsidiaries
does not, as currently conducted and currently proposed to be conducted,
infringe, misappropriate or otherwise violate or conflict with the Intellectual
Property of any third party.
(g) The
transactions contemplated by this Agreement will not affect the right, title
and
interest of the Company or its Subsidiaries in and to the Company IP, and
each
of the Company and its Subsidiaries has taken all necessary action to maintain
and protect the Company IP set forth on Section
2.11(b)
of the
Company Disclosure Letter and, until the Effective Time, will continue to
maintain and protect such Company IP so as to not materially adversely affect
the validity or enforceability of such Company IP.
(h) To
the
Knowledge of the Company, no officer, employee or director or the Company
or its
Subsidiaries is obligated under any contract (including any license, covenant
or
commitment of any nature) or other agreement, or subject to any judgment,
decree
or order of any court or administrative agency, that would conflict or interfere
with the performance of such person’s duties as an officer, employee or director
of the Company or its Subsidiaries, the use of such person’s best efforts to
promote the interests of the Company and its Subsidiaries or the Company’s or
its Subsidiary’s business as conducted or as currently proposed to be conducted
by the Company and its Subsidiaries. No prior employer of any current or
former
employee of the Company or its Subsidiaries has any right, title or interest
in
the Company IP and to the Knowledge of the Company, no person or entity has
any
right, title or interest in any Company IP. It is not and will not be with
respect to the business as currently proposed to be conducted necessary for
the
Company or its Subsidiaries to use any inventions of any of its employees
made
prior to their employment by the Company or its Subsidiaries.
Section
2.12 Material
Agreements.
(a) Section
2.12
of the
Company Disclosure Letter sets forth a true, correct and complete list of
the
following agreements (whether written or oral and including all amendments
thereto) to which the Company or its Subsidiaries is a party or a beneficiary
or
by which the Company or its Subsidiaries or any of their respective assets
are
bound (collectively, the “Material
Agreements”):
14
(i) any
real
estate leases;
(ii) any
other
agreement for the provision of services by the Company or its Subsidiaries
that
have accounted for revenues of more than $1,000 per month during any month
since
the Balance Sheet Date;
(iii) any
agreement creating, evidencing, securing, assuming, guaranteeing or otherwise
relating to any debt for which the Company or its Subsidiaries is liable
or
under which it has imposed (or may impose) a Lien on any of the assets, tangible
or intangible, of the Company or its Subsidiaries;
(iv) any
capital or operating leases or conditional sales agreements relating to personal
property of the Company or its Subsidiaries;
(v) any
supply or manufacturing agreements or arrangements pursuant to which the
Company
or its Subsidiaries is entitled or obligated to acquire any assets from a
third
party with a fair market value in excess of $1,000;
(vi) any
insurance policies;
(vii) any
employment, consulting, noncompetition, or separation agreements or
arrangements;
(viii) any
agreement with or for the benefit of any Company Unitholders, officer, director
or employee of the Company, or any Affiliate of the Company, or any Person
controlled by such individual or family member thereof;
(ix) any
license to which the Company or its Subsidiaries is a party;
(x) any
agreement in which the Company or its Subsidiaries has granted rights to
license, sublicense or copy, “most favored nation” pricing provisions or
exclusive marketing or distribution rights relating to any products
or territory or has agreed to purchase a minimum quantity of goods or services
or has agreed to purchase goods or services exclusively from a certain
party;
(xi) any
written arrangement establishing a partnership or joint venture;
(xii) a
list of
all parties to any written arrangement concerning confidentiality,
non-disclosure or noncompetition;
(xiii) any
written arrangement under which the consequences of a default or termination
could have a Material Adverse Effect on the Company; and
(xiv) any
other
agreement or arrangement pursuant to which the Company or its Subsidiaries
could
be required to make or be entitled to receive aggregate payments in excess
of
$500 per month or entered into outside of the ordinary course of business.
15
For
purposes of this Agreement, “Affiliate”
means
another Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, any
Person.
(b) The
Company has delivered to or made available to Buyer a true, correct and complete
copy of each Material Agreement and a written summary of each oral Material
Agreement. With respect to each Material Agreement:
(i) each
Material Agreement is legal, valid, binding and enforceable and in full force
and effect with respect to the Company or its Subsidiaries and, to the Knowledge
of the Company, the written arrangement is legal, valid, binding and is
enforceable and in full force and effect with respect to each other party
thereto (in each case except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting the enforcement of creditor’s rights generally, and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefore
may
be brought);
(ii) each
Material Agreement will continue to be legal, valid, binding and enforceable
and
in full force and effect against the Company, and to the Knowledge of the
Company against each other party thereto, immediately following the Closing
in
accordance with the terms thereof (in each case except as enforceability
may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the enforcement of creditor’s rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any
proceeding therefore may be brought) as in effect prior to the Closing;
and
(iii) neither
the Company nor its Subsidiaries is in breach or default, and, to the Knowledge
of the Company, no other party thereto is in breach or default, and no event
has
occurred which with notice or lapse of time would constitute a breach or
default
or permit termination, modification, or acceleration, under the written
arrangement.
Section
2.13 Insurance.
(a) Section
2.13
of the
Company Disclosure Letter sets forth a true, correct and complete list of
each
insurance policy (including fire, theft, casualty, general liability, director
and officer, workers compensation, business interruption, environmental,
product
liability and automobile insurance policies and bond and surety arrangements)
to
which the Company is a party, a named insured, or otherwise the beneficiary
of
coverage at any time within the past year. Section
2.13
of the
Company Disclosure Letter sets forth a true, correct and complete list of
each
person or entity required to be listed as an additional insured under each
such
policy. Each such policy is in full force and effect and by its terms and
with
the payment of the requisite premiums thereon will continue to be in full
force
and effect following the Closing.
16
(b) The
Company is not in breach or default, and does not anticipate being in breach
or
default after Closing (including with respect to the payment of premiums
or the
giving of notices) under any such policy, and no event has occurred which,
with
notice or the lapse of time, would constitute such a breach or default or
permit
termination, modification or acceleration, under such policy; and the Company
has not received any written notice or, to the Knowledge of the Company,
oral
notice, from the insurer disclaiming coverage or reserving rights with respect
to a particular claim or such policy in general. The Company has not incurred
any material loss, damage, expense or liability covered by any such insurance
policy for which it has not properly asserted a claim under such policy.
Section
2.14 Litigation.
(a) There
are
no claims, actions, suits, proceedings or investigations of any nature pending
or, to the Knowledge of the Company, threatened against the Company or any
properties or rights of the Company, before any court, administrative,
governmental or regulatory authority or body. The Company is not subject
to any
order, judgment, injunction or decree.
(b) There
are
no agreements or other documents or instruments settling any material claim,
complaint, action, suit or other proceeding against the Company.
Section
2.15 Employees.
(a) Set
forth
on Section
2.15(a)
of the
Company Disclosure Letter is a true, correct and complete list of all current
employees of the Company and its Subsidiaries, including date of employment,
current title and compensation (including commissions, bonus and other
compensation), and date and amount of last increase in compensation. None
of the
Company’s employees are members of a labor union. The Company is not a party to
any collective bargaining, union or labor agreements, contracts or other
arrangements with any group of employees, labor union or employee representative
and to the Knowledge of the Company, there is no organization effort currently
being made by or on behalf of any labor union with respect to employees of
the
Company or its Subsidiaries. The Company has not experienced, and to the
Knowledge of the Company, there is no basis for, any strike, grievances,
claims
of unfair labor practices, material labor trouble, work stoppage, slow down
or
other interference with or impairment of the business of Company.
(b) To
the
Knowledge of the Company, no employee has any plans to terminate employment
with
the Company within six months of the date hereof.
(c) The
Company is in compliance in all material respects with all currently applicable
laws and regulations respecting wages, hours, occupational safety, or health,
fair employment practices, and discrimination in employment terms and
conditions, and is not engaged in any unfair labor practice. There are no
pending claims against the Company under any workers compensation plan or
policy
or for long term disability. There are no proceedings pending or, to the
Knowledge of the Company, threatened, between the Company and its
employees.
(d) Section
2.15(a)
of the
Company Disclosure Letter sets forth a true, correct and complete list of
Persons whose employment has been terminated by the Company in the 90 days
prior
to Closing.
17
Section
2.16 Employee
Benefits.
(a) Neither
the Company, its Subsidiaries nor any predecessor in interest thereof has
maintained, or currently maintains, any Employee Benefit Plan. At no time
has
the Company, its Subsidiaries or any ERISA Affiliate been obligated to
contribute to any “multi-employer plan” (as defined in Section 4001(a)(3) of
ERISA). Neither the Company, its Subsidiaries nor any predecessor in interest
thereof has any liabilities or obligations with respect to any Employee Benefit
Plan.
(b) Section
2.16(b)
of the
Company Disclosure Letter discloses each: (i) agreement with any director,
executive officer or other key employee of the Company or its Subsidiaries,
including (A) the benefits of which are contingent, or the terms of which
are
altered, upon the occurrence of a transaction involving the Company or its
Subsidiaries of the nature of any of the transactions contemplated by this
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 director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from the
Company
or its Subsidiaries that may be subject to the tax imposed by Section 4999
of the Code or included in the determination of such person’s “parachute
payment” under Section 280G(b)(1) of the Code; and (iii) agreement or plan
binding the Company or its Subsidiaries, including any option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which
will be
increased, or the vesting of the benefits of which will be accelerated, by
the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of
any of
the transactions contemplated by this Agreement.
(c) For
purposes of this Agreement:
(i) “Employee
Benefit Plan”
means
any “employee pension benefit plan” (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended), any “employee welfare
benefit plan” (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement involving direct or indirect compensation,
including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, options, or other forms of incentive compensation
or
post-retirement compensation; and
(ii) “ERISA
Affiliate”
means
any entity which is a member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code), (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (iii)
an
affiliated service group (as defined under Section 414(m) of the Code or
the
regulations under Section 414(o) of the Code), any of which includes the
Company
or its Subsidiaries.
Section
2.17 Permits.
Section
2.17
of the
Company Disclosure Letter sets forth a true, correct and complete list of
all
material permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including those issued or required under
applicable export laws or regulations) (“Permits”)
issued
to or held by the Company and its subsidiaries. Such listed Permits are the
only
Permits that are required for the Company and its subsidiaries to conduct
their
business as presently conducted. Each such Permit is in full force and effect
and to the Knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit
will
not be renewable upon expiration. Each such Permit will continue in full
force
and effect following the Closing.
18
Section
2.18 Broker’s
Fees.
Neither
the Company nor any of its subsidiaries has any liability or obligation to
pay
any fees or commissions to any broker, investment banking firm, finder or
agent
with respect to the transactions contemplated by this Agreement.
Section
2.19 Books
and Records.
(a) The
books, records and accounts of the Company (a) are in all material
respects
true, complete and correct, (b) have been maintained in accordance
with
good business practices on a basis consistent with prior years, (c) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of the assets of the Company, and (d) accurately
and
fairly reflect the basis for the Financial Statements.
(b) The
Company has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions
are
executed in accordance with management’s general or specific authorization;
(b) transactions are recorded as necessary (i) to permit preparation
of financial statements in conformity with generally accepted accounting
principles or any other criteria applicable to such statements, and (ii) to
maintain accountability for assets, and (c) the amount recorded for
assets
on the books and records of the Company is compared with the existing assets
at
reasonable intervals and appropriate action is taken with respect to any
differences.
Section
2.20 Banking
Relationships and Investments.
Section
2.20
of the
Company Disclosure Letter sets forth sets forth a true, correct and complete
list of all banks and financial institutions in which the Company has an
account, deposit, safe-deposit box or borrowing relationship, factoring
arrangement or other loan facility or relationship, including the names of
all
persons authorized to draw on those accounts or deposits, or to borrow under
loan facilities, or to obtain access to such boxes. Section
2.20
of the
Company Disclosure Letter sets forth a true, correct and complete list of
all
certificates of deposit, debt or equity securities and other investments
owned,
beneficially or of record, by the Company (the “Investments”).
The
Company has good and legal title to all Investments.
Section
2.21 Disclosure.
No
representation or warranty by the Company contained in this Agreement, including
any statement contained in the Company Disclosure Letter or any document
delivered in connection herewith, contains any untrue statement of a material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein
not misleading.
19
ARTICLE
III
Representations
and Warranties of Parent, Buyer and Buyer Sub
Except
as
set forth in the Buyer Disclosure Letter attached to this Agreement (the
“Buyer
Disclosure Letter”),
Buyer
and Buyer Sub, jointly and severally, represent and warrant to the Company
and
the Company Unitholders as follows:
Section
3.1 Organization,
Qualification and Corporation Power.
Each of
Parent, Buyer and Buyer Sub as of the Effective Time (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power
and
authority and any necessary governmental authority to own, operate or lease
the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted and proposed to be conducted, and
(b) is duly qualified as a foreign corporation to do business, and
is in
good standing, in each other jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except in the case of clause (b) for failures
which, when taken together with all other such failures, would not have a
Material Adverse Effect on Buyer. Buyer Sub is a wholly owned Subsidiary
of
Buyer.
Section
3.2 Capitalization.
(a) The
authorized capital stock of Parent consists of 600,000,000 shares of common
stock, $0.001 par value (the “Parent
Common Stock”),
5,000,000 shares of preferred stock, $0.001 par value (the “Parent
Preferred Stock”)
and
35,425 shares of Series A Convertible Preferred Stock, $0.001 par value (the
“Series
A Preferred Stock”).
As of
March 16, 2005, (i) 350,918,011 shares of Parent Common Stock were issued
and
outstanding and 35,425 shares of Series A Preferred Stock were issued and
outstanding and (ii) 6,000,000 shares of Buyer Common Stock were reserved
for issuance under the Company’s 2001 Equity Performance Plan; however these
shares have not been approved by the stockholders of Parent. All
of
the issued and outstanding shares of Parent Common Stock and Series A Preferred
Stock (i)
have
been duly authorized and validly issued; (ii) are fully paid and nonassessable;
(iii) are free and clear of all Liens; and (iv) are free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). The certificates
representing the Parent Common Stock are in proper form for the enforcement
of
the rights and limitations of rights pertaining to such Shares which are
set
forth in Parent’s certificate of incorporation, as amended, and bylaws. There
are no declared or accrued but unpaid dividends with respect to any Parent
Common Stock. All shares of Parent Common Stock were issued in compliance
with
applicable law.
(b) The
authorized capital stock of Buyer Sub consists of 1,000 shares of common
stock,
$0.001 par value (the “Buyer
Sub Common Stock”),
of
which 1,000 shares were issued and outstanding. Buyer owns all of the issued
and
outstanding shares of Buyer Common Stock. Buyer owns all of the issued and
outstanding shares of Buyer Sub Common Stock. All
of
the issued and outstanding shares of Buyer Sub Common Stock (i)
have
been duly authorized and validly issued; (ii) are fully paid and nonassessable;
(iii) are free and clear of all Liens; and (iv) are free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). All shares of
Buyer
Sub Common Stock were issued in compliance with applicable law.
20
Section
3.3 Authority
Relative to this Agreement.
As of
the Effective Time each of Parent, Buyer and Buyer Sub has the necessary
corporate power and authority to enter into this Agreement and, subject to
the
filing of the Articles of Merger, to carry out its obligations hereunder.
The
execution and delivery of this Agreement by Buyer and Buyer Sub and the
consummation by them of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer and Buyer
Sub
and, subject to the filing of the Articles of Merger, no other corporate
proceeding is necessary for the execution and delivery of this Agreement
by
Buyer and Buyer Sub, the performance by them of their respective obligations
hereunder and the consummation by them of the transactions contemplated hereby.
As of the Effective Time this Agreement has been duly executed and delivered
by
Parent, Buyer and Buyer Sub and, assuming the due authorization, execution
and
delivery of this Agreement by the Company and the Company Unitholders,
constitutes a legal, valid and binding obligation of each of Parent, Buyer
and
Buyer Sub, enforceable against each in accordance with its terms, except
that
(a) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereinafter in effect, affecting
creditors’ rights generally, and (b) the general principles of equity
(regardless of whether enforceability is considered at a proceeding at law
or in
equity).
Section
3.4 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by each of Parent, Buyer and Buyer
Sub
do not, and the consummation by each of them of the transactions contemplated
hereby will not, (i) conflict with or violate any law, court order,
judgment or decree applicable to Parent, Buyer or Buyer Sub or by which any
of
their respective property is bound, (ii) violate or conflict with
the
articles of incorporation or bylaws (or comparable organizational documents)
of
any of Parent, Buyer or Buyer Sub, or (iii) result in any breach of,
or
constitute a default (or an event which with notice or lapse of time of both
would become a default) under, or give to others any rights of termination
or
cancellation of, or result in the creation of a Lien on any of the properties
or
assets of Parent or any of its Subsidiaries pursuant to, any contract,
instrument, Permit or license to which Buyer or any of its Subsidiaries is
a
party or by which Parent or any of its Subsidiaries or their respective property
is bound, except in the case of clauses (i) and (iii) for conflicts, violations,
breaches or defaults which, individually or in the aggregate, would not have
or
result in a Material Adverse Effect on Buyer.
(b) Except
for the filing of the Articles of Merger, and applicable requirements, if
any,
under “takeover” or “blue sky” laws of various states, none of Parent, Buyer or
Buyer Sub is required to submit any notice, report or other filing with any
Governmental Entity in connection with the execution, delivery or performance
of
this Agreement or the consummation of the transactions contemplated hereby
the
failure of which to submit would, individually or in the aggregate, have
or
result in a Material Adverse Effect on Buyer. No waiver, consent, approval
or
authorization of any Governmental Entity or any third party is required to
be
obtained or made by Parent, Buyer or Buyer Sub in connection with its execution,
delivery or performance of this Agreement the failure of which to obtain
or
make, individually or in the aggregate, would have or result in a Material
Adverse Effect on Buyer.
21
Section
3.5 SEC
Reports.
Buyer
has filed all forms, reports, schedules, registration statements, proxy
statements and other documents (including any document required to be filed
as
an exhibit thereto) required to be filed by Parent with the Securities and
Exchange Commission (“SEC”)
since
December 31, 2003. All such required forms, reports, schedules, registration
statements, proxy statements and other documents (including those that Buyer
may
file subsequent to the date hereof) are referred to herein as the “SEC
Reports.”
As of
their respective dates, the SEC Reports (including any financial statements
or
schedules included or incorporated by reference therein) (i) were prepared
in
all material respects in accordance with the requirements of the Securities
Act
or the Securities Exchange Act of 1934 (the “Exchange
Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such SEC Reports 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 light of the circumstances under which they were made,
not misleading. As of the date hereof, there has not been any Material Adverse
Effect with respect to Buyer that would require disclosure under the Securities
Act.
Section
3.6 Buyer
Sub.
Buyer
Sub is not and has never been a party to any material agreement and has not
conducted any activities other than in connection with the organization of
Buyer
Sub, the negotiation and execution of this Agreement and the consummation
of the
transactions contemplated hereby. Buyer Sub has not incurred or assumed any
expenses or liabilities prior to the Closing.
Section
3.7 Broker’s
Fees.
Neither
Buyer nor Buyer Sub has any liability or obligation to pay any fees or
commissions to any broker, investment banking firm, finder or agent with
respect
to the transactions contemplated by this Agreement.
Section
3.8 Restrictions
on Transfer.
Parent,
Buyer and Buyer Sub have no Knowledge of any restrictions on the transfer
of
Parent Common Stock issuable under this Agreement, other than as required
by law
or as set forth in the Merger Documents.
Section
3.9 Disclosure.
No
representation or warranty by Parent, Buyer or Buyer Sub contained in this
Agreement, including any statement contained in the Buyer Disclosure Letter
or
any document delivered in connection herewith, contains any untrue statement
of
a material fact or omits to state any material fact necessary, in light of
the
circumstances under which it was made, in order to make the statements herein
not misleading.
ARTICLE
IV
Further
Covenants and Assurances
Section
4.1 Securities
Laws.
(a) Parent,
Buyer, Buyer Sub and the Company will 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 Parent Common Stock in connection with
the
Merger. The Company will use commercially reasonable efforts to assist Buyer
as
may be necessary to comply with such securities and blue sky laws.
22
(b) So
long
as Buyer or any successor entity has securities registered under Securities
Act
or the Exchange Act, Buyer or such successor entity will file all reports
required to be filed by it under the Securities Act and the Exchange Act,
all to
the extent required pursuant to Rule 144 to enable stockholders, who may
receive
Parent Common Stock under this Agreement, to sell Parent Common Stock pursuant
to Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange Commission.
Section
4.2 Public
Announcements.
Parent
and the Company will consult with each other before holding any press
conferences, analyst calls or other meetings or discussions and before issuing
any press release or other public announcements with respect to the transactions
contemplated by this Agreement, including the Merger. The parties will provide
each other the opportunity to review and comment upon any press release or
other
public announcement or statement with respect to the transactions contemplated
by this Agreement, including the Merger, and will not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement will be mutually
agreed upon prior to the issuance thereof. In addition, the Company will,
and
will cause its Subsidiaries to consult with Buyer regarding communications
with
customers, stockholders and employees relating to the transactions contemplated
by this Agreement.
Section
4.3 Audited
Financial Statements.
At the
sole cost and expense of the Surviving Corporation, promptly after the Effective
Time, a qualified certified public accountant shall be provided with access
to
the Books and Records and financial information of the Company and shall
prepare
an audited balance sheet dated as of the Closing Date (“Audited
Balance Sheet”)
and
balance sheet, income statement and statement of cash flows for the year
ended
December 31, 2004 within sixty (60) days of the Effective Time (the “Audited
Financial Statements”).
The
Audited Financial Statements shall (a) be prepared in accordance with the
books
and records of the Company, (b) fairly present the financial condition of
the
Company at the date therein indicated and the results of operation for the
period therein specified and (c) have been prepared in accordance with
GAAP.
Section
4.4 Adjustments
in Merger Consideration.
The
Merger Consideration due and payable to the Nasco in accordance with
Section
1.6
will be
adjusted as follows:
(a) Reductions
in Merger Consideration Prior to the Closing.
If the
Closing Balance Sheet reveals (i) debt and/or prepayments to affiliates in
excess of $______ or (ii) cash and cash equivalents less than $0 the Merger
Consideration shall
be
reduced by one dollar for every dollar of debt in excess of $_____ and/or
cash
and cash equivalents less than $0 on the Closing Balance Sheet.
(b) Reductions
in Merger Consideration After Closing.
If the
Audited Balance Sheet reveals (i) debt and/or prepayments to affiliated in
excess of $____ that was not reported on the Closing Balance Sheet and/or
(ii)
cash and cash equivalents less than $0 not reported on the Closing Balance
Sheet, the Merger Consideration shall be reduced by one dollar for every
dollar
of debt in excess of $____ and/or cash and cash equivalents less than $0
reported on the Closing Balance Sheet.
23
ARTICLE
V
Conditions
of Merger
Section
5.1 Conditions
to Obligations of Buyer and Buyer Sub to Effect the
Merger.
The
obligations of Parent, Buyer and Buyer Sub to effect the Merger will be subject
to the satisfaction or waiver of the following conditions prior to the Effective
Time:
(a) Representations
and Warranties.
Those
representations and warranties of the Company and Nasco set forth in this
Agreement will be true and correct as of the Closing Date (except to the
extent
such representations and warranties expressly relate to a specific date in
which
case such representations and warranties will be true and correct as of such
date). Buyer shall receive a certificate to such effect executed by the
Company’s Manager.
(b) Agreements
and Covenants.
The
Company and Company Unitholders shall have performed in all material respects
all obligations and complied in all material respects with all agreements
and
covenants of the Company and the Company Unitholders required to be performed
or
complied with by it under this Agreement. The Buyer shall receive a certificate
to such effect executed by the Company’s Manager.
(c) Certificate
of Manager.
Buyer
will have received from the Manager of the Company a certificate
(i) certifying the Company Articles of Organization and Operating
Agreement
and (ii) attesting to the incumbency of the officers of the
Company.
(d) Required
Consents.
Any
consent, authorization, order or approval of (or filing or registration with)
any third party identified by Buyer on Schedule 5.1(d) will have been obtained
or made.
(e) Certificates.
The
Company shall have delivered to the Buyer (i) tax and corporate good standing
certificates issued by the appropriate governmental authority, as of the
most
recent practicable date, which date shall be within five (5) days of the
Closing, as to the good standing of the Company in the State of Arizona and
in
each jurisdiction in which it is qualified to do business. Nothing in
this Section
5.1(e)
shall
relieve the Company disclosing any exceptions to the representation made
in
Section
2.1
of this
Agreement.
(f) Closing
Balance Sheet.
Buyer
will have received from the Company, the Closing Balance Sheet, dated as
of the
Closing Date, attached hereto as Exhibit
B.
(g) Assignment
of Inventions, Non-Solicitation and Non-Competition Agreements.
The
Company shall obtain from each of Xxxx Xxxxx, Xxxx McCaigh, Xxx Xxxxxxx and
Xxxxxxx Xxxxxxxx an agreement, in substantially the form attached hereto
as
Exhibit
C,
not to
compete with the business of Buyer and the Surviving Corporation (or any
subsidiaries or successor corporations) for a period of three years after
the
Effective Time of the Merger.
24
(h) Payment
of Promissory Notes and Prepayments / Releases.
The
Surviving Company shall pay all outstanding promissory notes and prepayments
listed on the Closing Balance Sheet and shall have received a release from
each
such payee.
(i) Bank
Statements and Signature Cards.
The
Company shall deliver to Buyer a bank statement dated one day prior to closing
and signature cards for all of its bank accounts.
(j) Guaranty.
Xxxx
Xxxxx shall execute and deliver to Buyer and Buyer Sub a guaranty agreement
substantially in the form of Exhibit
D
attached
hereto.
Section
5.2 Conditions
to Obligations of the Company and the Company Unitholders to Effect the
Merger.
The
obligations of the Company and the Company Unitholders to effect the Merger
will
be further subject to the satisfaction or waiver of the following conditions
prior to the Effective Time:
(a) Representations
and Warranties.
Those
representations and warranties of Parent, Buyer and Buyer Sub set forth in
this
Agreement will be true and correct as of the Closing Date (except to the
extent
such representations and warranties expressly relate to a specific date in
which
case such representations will be true and correct as of such date). The
Company
shall receive a certificate to such effect executed by the Buyer’s Chief
Executive Officer.
(b) Agreements
and Covenants.
Parent,
Buyer and Buyer Sub shall have performed in all material respects all
obligations and complied in all material respects with all agreements and
covenants of Buyer and Buyer Sub required to be performed or complied with
by
them under this Agreement. The Company shall receive a certificate to such
effect executed by the Buyer’s Chief Executive Officer.
(c) Certificate
of Secretary.
The
Company will have received from the corporate secretary of each of Parent,
Buyer
and Buyer Sub a certificate (i) certifying Buyer’s Certificate of
Incorporation, Buyer’s Certificate of Incorporation and Buyer Sub’s Articles of
Incorporation, (ii) certifying the bylaws of Buyer and Buyer Sub,
(iii) certifying the resolutions of the board of directors of Buyer
and
Buyer Sub and (iv) certifying the resolutions of the stockholder of
Buyer
Sub.
ARTICLE
VI
Survival
and Indemnification
Section
6.1 Survival
of Representations.
All
representations, warranties and covenants of the parties contained in this
Agreement will remain operative and in full force and effect, regardless
of any
investigation made by or on behalf of the other parties to this Agreement,
until
the earlier of the termination of this Agreement or two (2) years after the
Closing Date (the “Survival
Period”),
whereupon such representations, warranties and covenants will expire (except
for
covenants that by their terms survive for a longer period). The parties’
post-closing remedies for a breach are not limited by the pre-closing discovery
of a breach.
25
Section
6.2 Indemnification
of Buyer.
Subject
to the limitations set forth in this Article VI, the Company and Nasco agree
to
jointly and severally indemnify and hold harmless Buyer and its officers,
directors, agents and employees, and each person, if any, who controls or
may
control Buyer within the meaning of the Securities Act from and against any
and
all claims, demands, actions, causes of actions, losses, costs, damages,
liabilities and expenses including, without limitation, reasonable legal
fees
(hereinafter referred to as “Damages”):
(a) Arising
out of any misrepresentation or breach of or default in connection with any
of
the representations, warranties and covenants given or made by the Company
in
this Agreement or any certificate, document or instrument delivered by or
on
behalf of the Company pursuant hereto; or
(b) Resulting
from any failure of the Company Unitholders to have good, valid and marketable
title to the issued and outstanding Company Units held by them, free and
clear
of all liens, claims, pledges, options, adverse claims, assessments or charges
of any nature whatsoever, or to have full right, capacity and authority to
vote
such Company Stock in favor of the Merger and the other transactions
contemplated by the Merger Agreement.
The
foregoing are collectively referred to as the “Buyer
Indemnity Claims.”
Section
6.3 Indemnification
of Nasco and Company.
Subject
to the limitations set forth in this Article VI, the Buyer and Buyer Sub
agree
to jointly and severally indemnify and hold harmless Nasco and Company and
its
officers, directors, agents and employees, from and against any and all Damages:
(a) Arising
out of any misrepresentation or breach of or default in connection with any
of
the representations, warranties and covenants given or made by the Buyer
or
Buyer Sub in this Agreement or any certificate, document or instrument delivered
by or on behalf of the Buyer or Buyer Sub pursuant hereto; or
(b) Resulting
from any failure of Buyer to have good, valid and marketable title to the
full
paid nonassessable share of Buyer Common Stock constituting all or any part
of
the Merger Consideration, free and clear of all liens, claims, pledges, options,
adverse claims, assessments or charges of any nature whatsoever, or to have
full
right, capacity and authority to cause all of the shares representing such
Buyer
Common Stock to be issued to the Company Unitholders in connection with the
conversion of each share of the Company Stock as contemplated by the Merger
Agreement.
The
foregoing are collectively referred to as the “Nasco
and Company Indemnity Claims.” The
Nasco
and Company Indemnity Claims together with the Buyer Indemnity Claims are
collectively referred to as the “Indemnity
Claims.”
Section
6.4 General
Notice and Procedural Requirements for Indemnity Claims.
Notwithstanding the foregoing, the party or person having the indemnity
obligation under this Article VI (the “Indemnifying
Party”),
shall
be obligated to indemnify and hold harmless the party or person entitled
to
indemnity under this Article VI (the “Indemnified
Party”),
only
with respect to any Indemnity Claims of which the Indemnified Party notifies
with specificity the Indemnifying Party in accordance with Section
7.1
of this
Agreement and, if applicable, within the following time period: (i) with
regard
to any representation or warranty under this Agreement, prior to the end
of the
Survival Period of such representation or warranty; or (ii) with regard to
any
covenant under this Agreement which by its terms expires, prior to the end
of
the survival period relating to such covenant.
26
Section
6.5 Notice
and Procedural Requirements for Third Party Claims.
If a
complaint, claim or legal action is brought by a third party (a “Third
Party Claim”)
as to
which an Indemnified Party is entitled to indemnification, the Indemnified
Party
shall give written notice of such Third Party Claim to the Indemnifying Party
in
accordance with Section
7.1
of this
Agreement promptly after the Indemnified Party receives notice thereof, which
notice shall include a copy of any letter, complaint or similar writing received
by the Indemnified Party; provided however, that any failure to provide or
delay
in providing such information shall not constitute a bar or defense to
indemnification except to the extent the Indemnifying Party has been prejudiced
thereby.
The
Indemnifying Party shall have the right to assume the defense of such Third
Party Claim with counsel reasonably satisfactory to the Indemnified Party.
After
notice from the Indemnifying Party to the Indemnified Party of the Indemnifying
Party’s election so to assume the defense of such Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or
other expenses subsequently incurred by the Indemnified Party in connection
with
the defense of such Third Party Claim except as hereinafter provided. If
the
Indemnifying Party elects to assume such defense and select counsel, the
Indemnified Party may participate in such defense through its own separate
counsel, but the fees and expenses of such counsel shall be borne by the
Indemnified Party unless: (i) otherwise specifically agreed by the Indemnifying
Party, or (ii) counsel selected by the Indemnifying Party determines that
because of a conflict of interest between the Indemnifying Party and the
Indemnified Party such counsel for the Indemnifying Party cannot adequately
represent both parties in conducting the defense of such action. In the event
the Indemnified Party maintains separate counsel because counsel selected
by the
Indemnifying Party has determined that such counsel cannot adequately represent
both parties because of a conflict of interest between the Indemnifying Party
and the Indemnified Party, then the Indemnifying Party shall not have the
right
to direct the defense of such Third Party Claim on behalf of the Indemnified
Party.
The
failure of the Indemnifying Party to notify an Indemnified Party of its election
to defend such Third Party Claim within thirty (30) days after notice thereof
was given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its rights to defend such Third Party Claim.
If
the
Indemnifying Party assumes the defense of a Third Party Claim, the obligations
of the Indemnifying Party shall include taking all steps necessary in the
defense of such Third Party Claim and holding the Indemnified Party harmless
from and against any and all Damages caused or arising out of any settlement
approved by the Indemnified Party or any judgment in connection with the
claim
or litigation.
If
the
Indemnifying Party does not assume the defense of such Third Party Claim
in
accordance with this Section, the Indemnified Party may defend against such
claim or litigation in such manner as it deems appropriate; provided, however,
that the Indemnified Party may not settle such Third Party Claim without
the
prior written consent of the Indemnifying Party; provided that the Indemnifying
Party may not withhold such consent unless it has provided security of a
type
and in an amount reasonably acceptable to the Indemnified Party for the payment
of its indemnification obligations with respect to such Third Party Claim.
The
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount
of Damages caused or arising out of any judgment rendered with respect to
such
Third Party Claim, and for all costs and expenses incurred by the Indemnified
Party in the defense of such claim.
27
The
Indemnifying Party may settle any Third Party Claim in its sole discretion
without the prior written consent of the Indemnified Party, provided that
such
settlement involves only the payment of cash by the Indemnifying Party to
the
claimant and does not impose any other obligation on the Indemnifying Party
or
any liability or obligation on the Indemnified Party.
Section
6.6 Notice
and Procedural Requirements for Direct Claims.
Any
claim for indemnification by an Indemnified Party on account of Damages which
do
not result from a Third Party Claim (a “Direct
Claim”)
shall
be asserted by giving the Indemnifying Party reasonably prompt notice thereof
in
accordance with Section 7.1 of this Agreement; provided, however, that any
failure to provide, or delay in providing, such notification shall not
constitute a bar or defense to indemnification except to the extent the
Indemnifying Party has been prejudiced thereby. After receiving notice of
a
Direct Claim, the Indemnifying Party will have a period of thirty (30) days
within which to respond in writing to such Direct Claim. If the Indemnifying
Party rejects such claim or does not respond within such thirty (30) day
period
(in which case the Indemnifying Party will be deemed to have rejected such
claim), the Indemnified Party will be free to pursue such remedies as may
be
available to the Indemnified Party on the terms and subject to the provisions
of
this Article VI.
ARTICLE
VII
General
Provisions
Section
7.1 Notices.
All
notices and other communications given or made pursuant hereto will be in
writing and will be deemed to have been duly given or made (a) as
of the
date delivered, if delivered personally or by overnight courier, (b) on
the
third Business Day after deposit in the U.S. mail, if mailed by registered
or
certified mail (postage prepaid, return receipt requested), or (c) when
successfully transmitted by facsimile (with a confirming copy of such
communication to be sent as provided in clauses (a) or (b) above), and, in
each
case to the parties at the following addresses or facsimile number (or at
such
other address for a party as will be specified by like notice, except that
notices of changes of address will be effective upon receipt):
(a) If
to
Parent, Buyer or Buyer Sub:
0000
Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
XX 00000
Attention: Xxx
X.
Xxxxxx, President and CEO
Facsimile: (000)
000-0000
28
With
a
copy (which will not constitute notice) to:
Xxxxxxxx
X. Xxxxx, Esq.
000
X.
Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Facsimile: (000)
000-0000
(b) If
to the
Company or the Company Unitholders:
Transcordia,
LLC
_______________________
_______________________
Attention:
Facsimile: (___)___________
With
a
copy (which will not constitute notice) to:
Xxxxxx
X.
Xxxxxx, III
Xxxxxxx
& Xxxxxxx, P.L.C.
Two
X.
Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
Facsimile: (000)
000.0000
For
purposes of this Agreement, a “Business Day” shall mean any day that is not a
Saturday, a Sunday or other day on which banking organizations in Washington,
D.C. are authorized or required by law to close.
Section
7.2 Expenses.
All
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such
fees,
costs and expenses.
Section
7.3 Amendment.
This
Agreement may not be amended except by an instrument in writing signed by
the
parties hereto.
Section
7.4 Entire
Agreement.
This
Agreement and the schedules and exhibits attached hereto, constitute the
entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to
the
subject matter hereof.
Section
7.5 No
Third-Party Beneficiaries.
Except
for the parties hereto, this Agreement is not intended to confer upon any
other
Person any rights or remedies hereunder.
Section
7.6 Assignment.
This
Agreement will not be assigned by operation of law or otherwise, except that
Buyer and Buyer Sub may assign all or any of their rights hereunder to any
Affiliate of Buyer; provided,
however,
that no
such assignment will relieve the assigning party of its obligations hereunder.
This Agreement will be binding upon, and will be enforceable by and inure
to the
benefit of the parties hereto and their respective successors and
assigns.
29
Section
7.7 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions
and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the maximum extent possible.
Section
7.8 Governing
Law.
This
Agreement will be governed by, and construed in accordance with, the Laws
of the
State of Delaware applicable to contracts executed in and to be performed
entirely within that State.
Section
7.9 Headings;
Interpretation.
The
headings contained in this Agreement are for reference purposes only and
will
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words “include,”“includes”
or
“including”
are
used in this Agreement, they will be understood to be followed by the words
“without
limitation.”
Section
7.10 Construction.
In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or disfavoring any party
by
virtue of the authorship of any provisions of this Agreement.
Section
7.11 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed will
be
deemed to be an original but all of which will constitute one and the same
agreement.
Section
7.12 Confidentiality.
The
Company and Buyer each recognize that they have received and will receive
confidential information concerning the other during the course of the Merger
negotiations and preparations. Accordingly, the Company and Buyer each agrees
(a) to use its respective best efforts to prevent the unauthorized
disclosure of any confidential information concerning the other that was
or is
disclosed during the course of such negotiations and preparations, and is
clearly designated in writing as confidential at the time of disclosure,
and
(b) to not make use of or permit to be used any such confidential
information other than for the purpose of effectuating the Merger and related
transactions. The obligations of this section will not apply to information
that
(i) is or becomes part of the public domain, (ii) is disclosed
by the
disclosing party to third parties without restrictions on disclosure,
(iii) is received by the receiving party from a third party without
breach
of a nondisclosure obligation to the other party or (iv) is required
to be
disclosed by law.
*
*
*
30
IN
WITNESS WHEREOF,
Parent,
Buyer, Buyer Sub, the Company and the Company Unitholders have executed this
Agreement as of the date first written above.
By:
Name: Xxx
X.
Xxxxxx
Title: President
and CEO
NEOREACH,
INC.
By:
Name: Xxxxx
Xxxxxxxxxxx
Title: President
TRANSCORDIA
ACQUISITION CORP.
By:
Name: Xxxxx
Xxxxxxxxxxx
Title: President
TRANSCORDIA,
LLC.
By:
Name: Xxxxxxx
X. Xxxxx, Manager
UNITHOLDERS
WAZCO,
LLC
By
XX
Xxxxx,
Manager
XXXXXX XXXXXX
XXX XXXXXX
XXXXXXX XXXXXXX
XXXXXX X. XXXXXX
“XXXXXXXX” FAMILY COLLEGE FUND
XXXX XXXXXXXX
XXXXXX X. XXXXXX, III
[Signature
Page to Agreement and Plan of Merger]
EXHIBIT
A
ESCROW
AGREEMENT
A-1
EXHIBIT
B
CLOSING
BALANCE SHEET AND INCOME STATEMENT
B-1
EXHIBIT
C
ASSIGNMENT
OF INVENTIONS, NON-SOLICITAION AND NON-COMPETITION
AGREEMENT
C-1
EXHIBIT
D
GUARANTY
2