AGREEMENT AND PLAN OF EXCHANGE
THIS
AGREEMENT (the “Agreement”),
dated
as of January 31, 2008, by and among each of the persons listed on the signature
page hereof (each, a “Member”
and
jointly and severally, the “Members”),
ForgeHouse LLC, a Georgia limited liability company (the “Operating
Company”),
and
Milk Bottle Cards Inc., a Nevada corporation (“Publico”).
WITNESSETH:
WHEREAS,
each Member owns of record and beneficially the percentage of capital
membership
interests (the “Interests”)
of the
Operating Company set forth opposite each such Member’s name on the annexed
Schedule 1;
WHEREAS,
the Members’ Interests represent all of the profit and loss interests of the
Operating Company and 70 percent of the capital interests of the Operating
Company;
WHEREAS,
Publico is a publicly-held company with a class of securities publicly quotable
on the OTC Electronic Bulletin Board that files periodic reports with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as
amended (the “Exchange
Act”);
WHEREAS,
Publico will divest itself of its current business activities effective at
Closing; and
WHEREAS,
the Members are desirous of exchanging all of their Interests to Publico for
an
aggregate of 10,500,000 (post-split) shares (the “Exchange
Shares”)
of
Publico’s common stock, par value $.001 per share (the “Publico
Common Stock”).
NOW,
THEREFORE, in consideration of the premises and of the mutual agreements herein
contained, the parties hereby agree as follows:
ARTICLE
1.
EXCHANGE
Section
1.1 Exchange
of Interests.
On the
terms and subject to the conditions set forth in this Agreement, at Closing:
(1)
each Member hereby agrees to sell, assign, transfer and deliver its, his or
her
respective Interest to Publico, free and clear of all liens, claims, charges
or
encumbrances, and (2) Publico shall issue and deliver to the Members the number
of Exchange Shares to be issued to each Member, as set forth on Schedule 1.1,
free and clear of all liens, claims, charges or encumbrances other than those
created by any Member (the “Transaction”).
Section
1.2 Share
Restrictions.
The
Exchange Shares shall be subject to the following restrictions:
(a) The
Members, for a period of two years following Closing (the “Two-Year
Period”),
shall
not sell, transfer, assign, pledge, hypothecate, or otherwise derive any
economic value (other than the receipt of dividends) therefrom, except in
accordance with Sections 1.2(b), 1.2(d), and 1.2(e) of this Agreement.
(b) Each
of
Xxxx X. Xxxxxxxxxx-Steel, Xxxx Xxxxxx, Xxxxxxx Xxxxxx, and Xxxx Xxxxxx (each,
an
“Individual,”
and
collectively, the “Individuals”)
is
currently providing services to the Operating Company and, at Closing, each
shall become an at-will employee of Publico or its affiliates (individually
and
collectively the “Aggregate
Entities”),
subject to the terms of the respective written employee agreement between
Publico and the respective Individuals, which are effective at Closing and
listed on Schedule 1.2(b) hereto (collectively, the “Employment
Agreements”).
If,
during the Two-Year Period, an Individual is dismissed for “Cause” or shall
terminate employment without “Good Reason” (as those terms are defined below),
and notwithstanding the prohibitions and provisions of Section 1.2(a), above,
all of the Exchange Shares then-owned by such Individual shall be subject to
a
right of first refusal in favor of all other Individuals as a group (on a
pro-rata basis) and, in respect of any such Exchange Shares then remaining
unpurchased, thereafter in favor of holders of Publico’s Series A preferred
stock as a group (on a pro-rata basis). The per-share right of first refusal
price shall be equal to the lessor of (i) ninety percent (90%) of the 10-day
volume-weighted average trading prices for the ten trading days prior to such
termination of employment or (ii) $0.75.
1
(i) “Cause”
means
any of the following that has a material adverse effect on Publico: (a) a
material breach by the respective Individual of any term of his or her
respective Employment Agreement; (b) an intentional refusal or failure to follow
the lawful and reasonable instructions of the Chief Executive Officer (or,
if
Individual is the Chief Executive Officer, the Board of Directors) or an
individual to whom the Chief Executive Officer (or, if Individual is the Chief
Executive Officer, the Board of Directors) instructed the respective Individual
to report (as appropriate); (c) a willful or habitual neglect of duties; (d)
misconduct on the part of the respective Individual that is materially injurious
to one or more of the Aggregate Entities; (e) any act of fraud or embezzlement
in respect of one or more of the Aggregate Entities or any of their respective
funds, properties or assets; (f) conviction of the respective Individual of
a
felony or of a plea of guilty or nolo contendre involving a felony, whether
or
not involving one or more of the Aggregate Entities; (g) willful misconduct
or
gross negligence by the participant in connection with the performance of the
respective Individual’s duties to one or more of the Aggregate Entities or
willful violation of one or more of the Aggregate Entities’ policies; (h)
intentional dishonesty by the respective Individual in the performance of the
his or her duties to one or more of the Aggregate Entities; (i) any fraud,
theft, misappropriation of or embezzlement by the respective Individual in
connection with the performance of his or her duties to one or more of the
Aggregate Entities; (j) engagement by the respective Individual in the use
of
illegal substances or alcohol, which use has impaired his or her ability, as
determined by the Board of Directors of Publico, on an ongoing basis, to perform
his or her duties to one or more of the Aggregate Entities; or (k) breach by
the
respective Individual of any terms and conditions set forth in any
non-competition, non-solicitation and/or non-disclosure agreement executed
by
him or her. A determination of Cause shall be made by the Board of Directors
of
Publico. With regard to clauses (a) through (c) and (k), the respective
Individual may cure such breach within thirty (30) days of his or her receipt
of
written notice from Publico; provided, however, that such cure period shall
not
be applicable if, in the case of clause (a) or (k), the Board of Directors,
in
its sole discretion, has determined that such breach is not capable of being
fully cured; provided, further, that, upon the second occurrence of a breach
under clauses (a) through (c) or (k), no such cure period need be extended
to
the respective Individual.
(ii) “Good
Reason”
means
as to any Individual the occurrence of any of the following without the consent
of such Individual: (a) a material diminution of such Individual’s compensation;
(b) a material diminution in the Individual’s authority, duties or
responsibilities (including, without limitation, a requirement that the
Individual report to a corporate officer rather than directly to the board
of
directors of one or more of the Aggregate Entities); or (c) a material change
in
the geographic location at which the Individual works; provided that for
purposes of this Agreement, a “material change” in geographic location shall
mean a change in the geographic location at which the Individual works that
increases the distance from his or her residence, as of the Closing Date, to
such location by more than fifty (50) miles; provided, however, that in no
event
shall a termination by the Individual be deemed to have been for “Good Reason”
if (i) the Individual fails to give Publico written notice of the applicable
Good Reason event within 90 days after such event first occurs or (ii) one
or
more of the Aggregate Entities corrects such event in all material respects
within 30 days following its receipt of such written notice from the
Individual.
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(c) Notwithstanding
anything contained in this Section 1.2, this Section 1.2 does not provide to
any
Individual any rights, privileges, or guarantees beyond what is in the
Employment Agreements.
(d) Trust;
Permitted Transfers.
(i) During
the Two-Year Period, the Exchange Shares owned by each of the Members, excluding
Xxxxx Xxxxxxxx, shall be held ‘in trust’ by a licensed attorney of each Member’s
choice for the benefit of such Member, in connection with the obligations and
restrictions of those certain Lock-Up Agreements by and among Publico and the
respective Members, dated as of the Closing Date (collectively, the
“Lock-Up
Agreements”).
(ii) Notwithstanding
the potential restrictions set forth in Section 1 of the Lock-Up Agreements,
during the Two-Year Period, should a Member desire to transfer its shares to
its
respective beneficial owners, such Member may, at any time and from time to
time, without any prior consent and without violating any other condition hereof
or of the relevant Lock-Up Agreement, transfer its Exchange Shares to such
beneficial owners. Upon such transfer, the beneficial owners of the respective
Member shall hold the Exchange Shares subject to all the terms and conditions
hereof and all terms and conditions set forth in the relevant Lock-Up Agreement
and shall provide notice to Publico of such transfer within five (5) business
days. Furthermore, such beneficial owners shall be subject to the provisions
of
Section 1.2(d)(i), above.
(iii) Notwithstanding
the potential restrictions set forth in Section 1 of the Lock-Up Agreements,
during the Two-Year Period, the Exchange Shares referenced in this Section
1.2(d) may be transferred to any trust or entity by the Member or its beneficial
owners, at any time and from time to time, so long as each such transfer is
for
tax or estate planning purposes of such beneficial owner. Upon such transfer,
such trust or entity shall hold the Exchange Shares subject to all the terms
and
conditions hereof and as set forth in the relevant Lock-Up Agreement and shall
provide notice to Publico of such transfer within five (5) business days.
Furthermore, such trust or entity shall be subject to the provisions of Section
1.2(d)(i), above, unless, in the case of a trust, compliance with such
provisions would materially reduce the tax or estate planning benefits.
(e) Notwithstanding
the potential restrictions set forth in Section 1 of the Lock-Up Agreements,
if
an Individual is dismissed by Publico as an employee for any reason other than
for Cause or terminates employment for Good Reason (the “Terminated
Individual”),
such
Terminated Individual may, at any time and from time to time during the two-year
period commencing on the Closing Date, sell, transfer, or otherwise dispose
of
shares of common stock (owned of record or beneficially or underlying such
Terminated Individual’s options to purchase shares of common stock), subject to
the limitations and in the manner set forth hereinafter in this Section 1.2(e).
Such dispositions shall be (i) to any other stockholder of Publico at a price
per share no less than the average of the high and low closing price, if the
common stock is then-listed on a national securities exchange, or, if not so
listed, the average of the high and low bid price, in either case, as of the
immediately preceding business day; (ii) in “brokers’ transactions” within the
meaning of Section 4(4) of the Securities Act of 1933, as amended (the
“Securities
Act”),
and
as further defined in Rule 144(g) promulgated by the Securities and Exchange
Commission thereunder; or (iii) in transactions directly with a “market maker,”
as that term is defined in Section 3(a)(38) of the Exchange Act. Such
dispositions, in aggregate, shall not exceed the Trickle Amount (as defined
below) in each calendar quarter from and after such dismissal. Aggregate
dispositions during partial calendar quarters shall be on a pro-rata basis.
Any
unused allocation of the aggregate dispositions shall not carry-over to any
subsequent quarter. For the purposes of this Section 1.2(e), “Trickle
Amount”
shall
mean $25,000 in Value (as defined below) per beneficial owner, that is a
Terminated Individual; and “Value”
shall
mean, in the case of (i), above, the product of the number of shares sold
multiplied by the relevant average price, and in the case of (ii) and (iii),
above, the net value received from sales in ordinary brokerage transactions
or
to a market maker. For clarity, if such “Terminated Individual” is Xxxx
Xxxxxxxxxx-Steel or Xxxx Xxxxxx and any relevant shares are held of record
by
TWE International, LLC and/or any successor trust or entity, then such Trickle
Amount shall relate to such person’s beneficial interest in such shares,
aggregated with the shares underlying such person’s options to purchase common
stock; and if such “Terminated Individual” is Xxxxxxx Xxxxxx or Xxxx Xxxxxx and
any relevant shares are held of record by Xxxxxx Trust and/or any successor
trust or entity, then such Trickle Amount shall relate to such person’s
beneficial interest in such shares, aggregated with the shares underlying such
person’s options to purchase common stock.
3
Section
1.3 Delivery
of Interests/Shares.
Subject
to the terms and conditions hereof, at the Closing, (a) the Members shall
transfer to Publico their Interests by delivering the certificates evidencing
the Interests, accompanied by duly endorsed security powers, with signatures
notarized, in form and substance satisfactory to Publico permitting the transfer
of the Interests to Publico; and (b) Publico shall deliver to each Member stock
certificate(s) registered in the name of such Member representing the Exchange
Shares issued to such Member.
Section
1.4 Supplemental
Action.
If, at
any time after the Closing Date, the Members or Publico shall determine that
any
further conveyances, agreements, documents, instruments, and assurances or
any
further action is necessary or desirable to carry out the provisions of this
Article 1, the Members or Publico, as the case may be, shall execute and deliver
any and all proper conveyances, agreements, documents, instruments, and
assurances and perform all necessary or proper acts to carry out the provisions
of this Article 1.
4
ARTICLE
2.
CLOSING;
CLOSING DATE
Section
2.1 The
exchange of the Members’ Interests for the Exchange Shares as contemplated
hereby (the “Closing”)
shall
take place at 8:30 a.m. PST on January 31, 2008, at the offices of Xxxxx Xxxx
LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, or such other time
or date as the parties hereto may mutually agree in writing. The date upon
which
the Closing occurs is herein called the “Closing
Date.”
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES OF
OPERATING
COMPANY AND MEMBERS
Except
(i) as set forth in the written disclosure letter delivered at or prior to
the
execution hereof to Publico (the “Operating
Company/Members Disclosure Letter”),
(ii)
as set forth in the agreements referred to in Sections 6.16 and 7.16 of this
Agreement, and (iii) for the representations and warranties set forth in Section
3.28, which are only made by the Members (for the purpose of this Article 3,
“Members” shall not include Xxxxx Xxxxxxxx, unless otherwise stated), on a joint
and several basis (excluding Xxxxx Xxxxxxxx, who shall only be severally
liable), the Operating Company and Members, jointly and severally, hereby
represent and warrant to Publico as set forth in this Article 3. The Operating
Company/Members Disclosure Letter shall be arranged in sections or subsections
corresponding to the number and lettered sections and subsections contained
in
this Article 3. The disclosures in each section or subsection of the Operating
Company/Members Disclosure Letter that qualify any representation or warranty
shall qualify only the correspondingly numbered representation and warranty
in
this Article 3, except to the extent it is reasonably clear from a reading
of
the disclosure that such disclosure is applicable to other representations
and
warranties herein.
Section
3.1 Organization;
Good Standing; Authority; Compliance With Law.
(a) Operating
Company is a limited liability company duly organized, validly existing and
in
good standing under the laws of the State of Georgia and has all requisite
power
and authority to own, lease and operate its properties and to carry on its
business as now conducted. Operating Company is duly licensed or qualified
and
is in good standing to transact business as a foreign limited liability company
in each jurisdiction in which the character of the properties owned or leased
by
it therein or in which the nature of its business makes such qualification
or
licensing necessary, except where the failure to be so licensed or qualified
would not have, individually or in the aggregate, an Operating Company Material
Adverse Effect. For purposes of this Agreement, an “Operating
Company Material Adverse Effect”
means
a
material adverse effect on the business, operations, prospects, assets
(including intangible assets), financial condition or results of operations
of
Operating Company taken as a whole.
(b) The
business of Operating Company has been operated in compliance with all laws,
ordinances, regulations and orders of all governmental entities, except for
violations that would not have, individually or in the aggregate, an Operating
Company Material Adverse Effect. Operating Company has all permits,
certificates, licenses, approvals, consents and other authorizations
(collectively, “Government
Approvals”)
of all
governmental and regulatory agencies, entities, commissions, boards, bureaus,
tribunals, officials or authorities, whether Federal, state or local
(collectively, “Governmental
Agencies”),
required by law with respect to the operation of its business, except those
the
absence of which would not, individually or in the aggregate, have an Operating
Company Material Adverse Effect or prevent or delay consummation of the
Transaction. All such Government Approvals are in full force and effect, and
Operating Company is in compliance with all conditions and requirements of
the
Government Approvals and with all rules and regulations relating thereto, other
than failures that would not have, inadvertently or in the aggregate, an
Operating Company Material Adverse Effect. Neither Operating Company nor the
Members have received any notices of violations of any Federal, state or local
laws, regulations or ordinances relating to the Operating Company’s business,
operations, prospects, or assets that, if it were determined that a violation
had occurred, would have an Operating Company Material Adverse
Effect.
5
(c) The
articles of organization and other charter documents, operating agreement,
organizational documents, and partnership, shareholder, joint venture or similar
agreements (and in each such case, all amendments thereto) of Operating Company
are listed in Section 3.1(c) of the Operating Company/Members Disclosure Letter,
true and correct copies of which have previously been delivered to Publico
or
its counsel.
Section
3.2 Authorization,
Validity and Effect of Agreements.
The
Operating Company and the Members (including Xxxxx Xxxxxxxx) have the requisite
power and authority to execute and deliver this Agreement and to consummate
the
Transaction. The managers of Operating Company have taken all necessary action
to approve this Agreement and the Transaction. The Operating Company and the
Members have taken all actions necessary to exempt the Transaction from the
operation of any “fair price,” “moratorium,” “control share acquisition,” or
other similar anti-takeover statute or regulation enacted under any state or
federal law of the United States. This Agreement constitutes the valid and
legally binding obligation of the Operating Company and the Members (including
Xxxxx Xxxxxxxx), enforceable against the Operating Company and the Members
(including Xxxxx Xxxxxxxx) in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors’
rights.
Section
3.3 Capitalization.
As of
the date hereof, the Members (including Xxxxx Xxxxxxxx) own all the profit
and
loss interests in Operating Company and 70 percent of the capital interest.
All
outstanding capital interests of Operating Company (“Operating
Company Interest”)
are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights or rights of first refusal created by statute, the articles
of
organization or operating agreement of Operating Company or any agreement to
which Operating Company is a party or by which it is bound, and free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof or under applicable federal or state securities or
“blue sky” laws. Operating Company has no outstanding bonds, debentures, notes
or other obligations the holders of which have or upon the happening of certain
events would have the right to vote (or which are convertible into or
exercisable or exchangeable for securities having the right to vote) with the
holders of any interest of Operating Company on any matter. There are no
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements, appreciation rights or similar derivative securities
or instruments or commitments that obligate Operating Company to issue, transfer
or sell any Operating Company membership interests or make any payments in
lieu
thereof. There are no agreements or understandings to which Operating Company
is
a party with respect to the voting of any Operating Company Interest or which
restrict the transfer of any such Interests, nor does the Operating Company
or
the Members (including Xxxxx Xxxxxxxx) have knowledge of any such agreements
or
understandings with respect to the voting of any such Interest or which restrict
the transfer of any such Interest. There are no outstanding contractual
obligations of Operating Company to repurchase, redeem or otherwise acquire
any
Operating Company Interest or any other securities of Operating Company.
Operating Company is not under any obligation, contingent or otherwise, by
reason of any agreement to register any of its securities under the Securities
Act. True and complete copies of all agreements and instruments relating to
the
securities described above and in Section 3.3 of the Operating Company/Members
Disclosure Letter have been provided to Publico and such agreements and
instruments have not been amended, modified or supplemented, and there are
no
agreements to amend, modify or supplement such agreements or instruments in
any
case from the form provided to Publico.
6
Section
3.4 Other
Interests.
Operating Company does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or other entity (other than investments in short term investment
securities).
Section
3.5 No
Violation.
Neither
the execution and delivery by the Operating Company and the Members of this
Agreement nor the consummation by the Operating Company and the Members of
the
Transaction will: (i) conflict with or result in a breach of any provisions
of
Operating Company’s articles of organization or operating agreement; (ii)
violate, result in a breach of any provision of, or constitute a default under,
or require any approval or consent under or result in the termination or in
a
right of termination or cancellation of, or accelerate the performance required
by or result in a material adverse change to, or result in the creation of
any
lien, security interest, charge or encumbrance upon any of the properties owned
or leased by Operating Company under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument to which Operating
Company and/or any of the Members is a party, or by which Operating Company
and/or any of the Members or any of the properties owned or leased by Operating
Company is bound or affected, except for any of the foregoing matters in this
clause which, individually or in the aggregate, would not have an Operating
Company Material Adverse Effect and would not reasonably be expected to prevent,
materially alter or materially delay the Transaction; (iii) contravene or
conflict with or constitute a violation of any provision of any law, rule,
regulation, judgment, injunction, order or decree binding upon or applicable
to
Operating Company; or (iv) require any consent, approval or authorization of,
or
declaration, filing or registration with, any governmental or regulatory
authority that has not been obtained or made, except where the failure to obtain
any such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have
an
Operating Company Material Adverse Effect and could not reasonably be expected
to prevent, materially alter or materially delay the Transaction.
Section
3.6 Auditors.
To the
Operating Company’s and the Members’ knowledge, the auditor of the Operating
Company’s financial statements provided to Publico pursuant to this Agreement
has at all times since the date of enactment of the Xxxxxxxx-Xxxxx Act been:
(i)
a registered public accounting firm (as defined in Section 2(a)(12) of the
Xxxxxxxx-Xxxxx Act); (ii) “independent” with respect to Operating Company within
the meaning of Regulation S-X under the Exchange Act; and (iii) in compliance
with subsections (g) through (l) of Section 10A of the Exchange Act and the
rules and regulations promulgated by the SEC and the Public Operating Company
Accounting Oversight Board thereunder.
Section
3.7 Financial
Statements.
The
Operating Company has delivered to Publico true and complete copies of the
audited balance sheet of the Operating Company at December 31, 2006, and the
related consolidated statements of income, changes in interest-holders' equity,
and cash flow for each of the two years in the period ended December 31, 2006
and for the period from June 24, 2002 (inception) to December 31, 2006, and
unaudited consolidated balance sheet of Operating Company at September 30,
2007,
and the related unaudited consolidated statements of income, changes in
interest-holders’ equity, and cash flow for both the three (3) and nine (9)
month periods ended September 30, 2007 and 2006 (collectively, the “Operating
Company Financials”).
The
Operating Company Financials (i) were prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the footnotes to the Operating Company Financials and that the
interim financial statements may not have notes thereto and other presentation
items that may be required by GAAP and are subject to normal and recurring
year-end adjustments that are not reasonably expected to be material in amount),
(ii) fairly present in all material respects the consolidated financial position
and operating results and cash flows of Operating Company as of the dates and
for the periods indicated therein, (iii) comply as to form in all material
respects with the published rules and regulations of the SEC as would be
applicable thereto if Operating Company were subject to the reporting
requirements of the Exchange Act, and (iv) in the case of the interim financial
statements, have been reviewed by the auditor of Operating Company to the same
extent as if Operating Company were subject to the reporting requirements of
the
Exchange Act.
7
Section
3.8 Litigation.
(a) There
are
(i) no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which Operating Company or any of the Members, in
their capacity as Members, is a party or by which any of its properties or
assets are bound or likely to be affected and (ii) no actions, suits or
proceedings pending against Operating Company or any of the Members, in their
capacity as Members, or to which any of their respective properties or assets
are subject or, to the knowledge of the Operating Company or the Members,
threatened against Operating Company or any Member, in their capacity as a
Member, or to which any of their respective properties or assets are subject,
at
law or in equity, that in each such case could, individually or in the
aggregate, have an Operating Company Material Adverse Effect.
(b) There
are
(i) no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which the Members, in their capacity as individuals,
are a party or by which any of their Interests are bound or likely to be
affected, and (ii) no actions, suits or proceedings pending against Members,
in
their capacity as individuals, or to which any of their Interests are subject
or, threatened against Member, in their capacity as individuals, or to which
any
of its Membership Interests are subject, at law or in equity, that in each
such
case could, individually or in the aggregate, have an Operating Company
Materials Adverse Effect.
Section
3.9 Absence
of Certain Changes.
Since
December 31, 2006, Operating Company has conducted its business only in the
ordinary course of such business and consistent with past practices and there
has not been any:
(a) Operating
Company Material Adverse Effect;
(b) amendment
or change in the articles of organization or operating agreement of Operating
Company;
8
(c) incurrence,
creation or assumption by Operating Company of (i) any mortgage, deed of trust,
security interest, pledge, lien, title retention device, collateral assignment,
claim, charge, restriction or other encumbrance of any kind on any of the assets
or properties of Operating Company; or (ii) any obligation or liability of
any
indebtedness for borrowed money;
(d) issuance
or sale of any debt or equity securities of Operating Company, or the issuance
or grant of any options, warrants or other rights to acquire from Operating
Company, directly or indirectly, any debt or equity securities of Operating
Company;
(e) payment
or discharge by Operating Company of any security interest, lien, claim, or
encumbrance of any kind on any asset or property of, or the payment or discharge
of any liability that was not either shown or reflected on the Operating Company
Financials or incurred in the ordinary course of Operating Company’s business
after September 30, 2007, in an amount in excess of $50,000 for any single
liability to a particular creditor;
(f) purchase,
license, sale, assignment or other disposition or transfer, or any agreement
or
other arrangement for the purchase, license, sale, assignment or other
disposition or transfer, of any of the assets, properties or goodwill of
Operating Company other than a license or sale of any product or products of
Operating Company made in the ordinary course of Operating Company’s
business;
(g) damage,
destruction or loss of any property or asset, whether or not covered by
insurance, having (or likely with the passage of time to have) an Operating
Company Material Adverse Effect;
(h) declaration,
setting aside or payment of any dividend on, or the making of any other
distribution in respect of, the membership interests of Operating Company,
any
split, combination or recapitalization of the membership interests of Operating
Company or any direct or indirect redemption, purchase or other acquisition
of
the membership interests of Operating Company or any change in any rights,
preferences, privileges or restrictions of any outstanding security of Operating
Company;
(i) increase
in the compensation payable or to become payable to any of the officers,
managers, or employees of Operating Company, or any bonus or pension, insurance
or other benefit payment or arrangement (including without limitation interest
awards, interest option grants, interest appreciation rights or interest option
grants) made to or with any of such officers, employees or agents;
(j) obligation
or liability incurred by Operating Company to any of its officers, managers
or
interest-holders except for normal and customary compensation and expense
allowances payable to officers in the ordinary course of Operating Company’s
business consistent with past practice;
(k) making
by
Operating Company of any loan, advance or capital contribution to, or any
investment in, any officer, manager or interest-holder of Operating Company
or
any firm or business enterprise in which any such person had a direct or
indirect material interest at the time of such loan, advance, capital
contribution or investment;
(l) entering
into, amendment of, relinquishment, termination or non-renewal by Operating
Company of any contract, lease, transaction, commitment or other right or
obligation other than in the ordinary course of its business or any written
or
oral indication or assertion by the other party thereto of any material problems
with Operating Company’s services or performance under such contract, lease,
transaction, commitment or other right or obligation or of such other party’s
demand to amend, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
9
(m) material
change in the manner in which Operating Company extends discounts, credits
or
warranties to customers or otherwise deals with its customers;
(n) entering
into by Operating Company of any transaction, contract or agreement that by
its
terms requires or contemplates a required minimum current and/or future
financial commitment, expenses (inclusive of overhead expenses) or obligation
on
the part of Operating Company or involving in excess of $50,000 (provided that
the amount of such financial commitments and expenses for all such transactions,
contracts or agreements does not exceed $150,000 in the aggregate, excluding
legal and accounting fees associated with the Agreement) or that is not entered
into in the ordinary course of Operating Company’s business, or the conduct of
any business or operations by Operating Company that is other than in the
ordinary course of Operating Company’s business; or
(o) license,
transfer or grant of a right under any Operating Company Intellectual Property
(as defined in Section 3.22 below), other than those licensed, transferred
or
granted in the ordinary course of business consistent with its past
practices.
Section
3.10 Taxes.
Except
where such failure would not have, individually or in the aggregate, an
Operating Company Material Adverse Effect:
(a) Operating
Company has paid or caused to be paid all federal, state, local, foreign, and
other taxes, and all deficiencies, or other additions to tax, interest, fines
and penalties (collectively, “Taxes”),
owed
or accrued by it and due and payable through the Closing Date (including any
Taxes payable pursuant to Treasury Regulation §1.1502-6 (and any similar state,
local or foreign provision));
(b) Operating
Company has timely filed all federal, state, local and foreign tax returns
(collectively, “Tax
Returns”)
required to be filed by it through the date hereof, and all such returns
accurately set forth the amount of any Taxes relating to the applicable
period;
(c) Operating
Company has withheld and paid all Taxes required to have been withheld and
paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, interest-holder or other party;
(d) The
Operating Company Financials reflect adequate reserves for Taxes payable by
Operating Company for all taxable periods and portions thereof through the
date
of such financial statements;
(e) Since
December 31, 2006, Operating Company has made sufficient accrual for Taxes
in
accordance with GAAP with respect to periods for which Tax Returns have not
been
filed;
(f) There
are
no outstanding agreements, waivers or arrangements extending the statutory
period of limitations applicable to any claim for, or the period for the
collection or assessment of, Taxes due from Operating Company for any taxable
period and there have been no deficiencies proposed, assessed or asserted for
such Taxes;
10
(g) There
are
no closing agreements that could affect Taxes of Operating Company for periods
after the Closing Date pursuant to Section 7121 of the Internal Revenue Code
of
1986, as amended (the “Code”),
or
any similar provision under state, local or foreign tax laws;
(h) No
audit
or other proceedings by any court, governmental or regulatory authority or
similar authority has occurred, been asserted or is pending and Operating
Company has not received notice that any such audit or proceeding may be
commenced;
(i) [Reserved];
(j) Operating
Company has not agreed or filed application to, or is not required to, make
any
changes or adjustments to its accounting method; and
(k) There
is
no contract, agreement, plan or arrangement covering any person that,
individually or collectively, could give rise to the payment of any amount
that
would not be deductible by Operating Company by reason of Section 280G or
Section 162(m) of the Code.
Section
3.11 Books
and Records.
(a) The
books
of account and other financial records of Operating Company are true, complete
and correct in all material respects, have been maintained in accordance with
good business practices, and are accurately reflected in all material respects
in the Operating Company Financials.
(b) The
minute books and other records of Operating Company contain accurate records
of
all meetings and accurately reflect all other action of the interest-holders
and
managers and any committees of the managers of Operating Company.
Section
3.12 Properties.
(a) Section
3.12(a) of the Operating Company/Members Disclosure Letter sets forth a list
of
all real property currently, or at any time in the past five (5) years, owned
or
leased by Operating Company, and, with respect to all real property currently
leased by Operating Company, the name of the lessor, the date of the lease
and
each amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease. All such current leases are, to the knowledge of the
Operating Company and the Members, in full force and effect, are valid and
effective in accordance with their respective terms, and there is not to the
knowledge of the Operating Company or the Members any existing material default
or event of default under any such lease (or event which with notice or lapse
of
time, or both, would constitute such a material default).
(b) Operating
Company has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used or held for use in its business, free and clear
of any liens, except as reflected in the Operating Company Financials and except
for liens for taxes not yet due and payable and such imperfections of title
and
encumbrances, if any, which are not material in character, amount or extent,
and
which do not materially detract from the value, or materially interfere with
the
present use, of the property subject thereto or affected thereby.
11
Section
3.13 Condition
and Sufficiency of Assets.
The
buildings, plants, structures and equipment owned by Operating Company are
sufficient for the continued conduct of Operating Company’s business after the
Closing in substantially the same manner as conducted prior to the
Closing.
Section
3.14 Accounts
Receivable.
All
accounts receivable of Operating Company that are reflected in the Operating
Company Financials or on the accounting records of Operating Company as of
the
Closing Date (collectively, the “Accounts
Receivable”)
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown in
the
Operating Company Financials or on the accounting records of Operating Company
as of the Closing Date (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserve as of the Closing Date,
will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Operating Company Financials represented
of the Accounts Receivable reflected therein and will not represent a material
adverse change in the composition of such Accounts Receivable in terms of
aging). Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days
after
the day on which it first becomes due and payable. There is no contest, claim,
or right of set-off, other than returns in the ordinary course of business,
under any contract or agreement relating to the amount or validity of an
Accounts Receivable. Section 3.14 of the Operating Company/Members Disclosure
Letter contains a complete and accurate list of all Accounts Receivable as
of
the date of the Operating Company Financials, which list sets forth the aging
of
such Accounts Receivable.
Section
3.15 Inventory.
Operating Company does not own any inventory, whether or not required to be
reflected in the Operating Company Financials.
Section
3.16 Contracts;
No Defaults.
(a) Section
3.16(a) of the Operating Company/Members Disclosure Letter contains a complete
and accurate list, and the Members have delivered to Publico true and complete
copies, of:
(i) each
licensing agreement or other contract with respect to software (collectively,
the “Software
Licenses”);
(ii) each
contract with respect to the providing of consulting services by Operating
Company or any of its employees or agents, or by any of the Members
(collectively, the “Consulting
Contracts”);
(iii) [Reserved];
(iv) each
contract that involves performance of services or delivery of goods or materials
to Operating Company of an amount or value in excess of $10,000;
12
(v) each
contract (other than the Software Licenses and the Consulting Contracts) that
was not entered into in the ordinary course of business and that involves
expenditures or receipts of Operating Company in excess of $10,000;
(vi) each
lease, rental or occupancy agreement, license, installment and conditional
sale
agreement, and other contracts affecting the ownership of, leasing of, title
to,
use of, or any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $10,000
and with terms of less than one year);
(vii) each
licensing agreement or other contract (other than the Software Licenses) with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property;
(viii) each
collective bargaining agreement and other contract to or with any labor union
or
other employee representative of a group of employees;
(ix) each
joint venture, partnership, and other contract (however named) involving a
sharing of profits, losses, costs, or liabilities by Operating Company with
any
other person;
(x) each
contract containing covenants that in any way purport to restrict the business
activity of Operating Company or any of its affiliates or limit the freedom
of
Operating Company or any of its affiliates to engage in any line of business
or
to compete with any person;
(xi) each
contract providing for payments to or by any person based on sales, purchases,
or profits, other than direct payments for goods;
(xii) each
power of attorney executed by a Member affecting or related to its or his
position as a Member that is currently effective and outstanding;
(xiii) each
contract entered into other than in the ordinary course of business that
contains or provides for an express undertaking by Operating Company to be
responsible for consequential damages;
(xiv) each
contract for capital expenditures in excess of $10,000;
(xv) each
written warranty, guaranty, and or other similar undertaking with respect to
contractual performance extended by Operating Company other than in the ordinary
course of business; and
(xvi) each
amendment, supplement, and modification (whether oral or written) in respect
of
any of the foregoing.
Section
3.16 of the Operating Company/Members Disclosure Letter sets forth reasonably
complete details concerning
such contracts, including the parties to the contracts, the amount of the
remaining commitment of Operating Company under the contracts, and Operating
Company’s office where details relating to the contracts are
located.
13
(b) (i)
No
Interest-holder of Operating Company (and no affiliate of any Interest-holder
of
Operating Company) has or may acquire any rights under, and no Interest-holder
of Operating Company has or may become subject to any obligation or liability
under, any contract that relates to the business of, or any of the assets owned
or used by, Operating Company; and (ii) to the knowledge of the Operating
Company and the Members, no officer, manager, agent, employee, consultant,
or
contractor of Operating Company is bound by any contract that purports to limit
the ability of such officer, manager, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or practice relating to
the
business of Operating Company, or (B) assign to Operating Company or to any
other person any rights to any invention, improvement, or
discovery.
(c) Each
contract identified or required to be identified in Section 3.16(a) of the
Operating Company/Members Disclosure Letter is in full force and effect and,
to
the knowledge of the Operating Company and the Members, is valid and enforceable
in accordance with its terms.
(d) (i)
Operating Company is, and at all times since formation, has been, in full
compliance with all applicable terms and requirements of each contract under
which it has or had any obligation or liability or by which it or any of the
assets owned or used by it is or was bound, except where the failure to so
comply would not reasonably be expected to have an Operating Company Material
Adverse Effect; (ii) to the knowledge of the Operating Company and the Members,
each other person that has or had any obligation or liability under any contract
under which it has or had any rights is, and at all times since formation,
has
been, in full compliance with all applicable terms and requirements of such
contract, except where the failure to so comply would not reasonably be expected
to have an Operating Company Material Adverse Effect; (iii) to the knowledge
of
the Operating Company and the Members, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give Operating Company or other
person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any contract; and (iv) Operating Company has not given to or received from
any
other person, at any time since formation, any written notice or other written
communication regarding any actual, alleged, possible, or potential violation
or
breach of, or default under, any contract.
(e) There
are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to Operating Company under
current or completed contracts with any person and, to the knowledge of the
Operating Company and the Members, no such person has made written demand for
such renegotiation.
(f) The
contracts relating to the sale, design, manufacture, or provision of products
or
services by Operating Company have been entered into in the ordinary course
of
business and, to the knowledge of the Operating Company and the Members, have
been entered into without the commission of any act alone or in concert with
any
other person, or any consideration having been paid or promised, that is or
would be in violation of any Federal or state law.
Section
3.17 Environmental
Matters.
Operating Company is not in violation of any laws, regulations, judgments or
consent decrees relating to hazardous substances or hazardous waste
(collectively, “Environmental
Laws”),
which
violation could reasonably be expected to result in an Operating Company
Material Adverse Effect. Neither Operating Company nor, to the knowledge of
the
Operating Company or the Members, any third party has used, released,
discharged, generated, manufactured, produced, stored, or disposed of in, on,
or
under or about its owned or leased property or other assets, or transported
thereto or therefrom, any hazardous substances or hazardous wastes, including
asbestos, lead and petroleum, during the period of Operating Company’s ownership
or lease of such property in a manner that could reasonably be expected to
subject Operating Company to a material liability under the Environmental Laws.
Operating Company has not received written notice from any governmental
authority that any property owned or leased by Operating Company is in violation
of any Environmental Laws. There is no pending civil, criminal or administrative
suit or other legal proceeding against Operating Company with respect to any
Environmental Laws. Operating Company has provided Publico complete copies
of
all environmental reports, assessments and studies in Operating Company’s
possession and control with respect to properties owned or leased by Operating
Company. As used in this Agreement, the terms “hazardous
substances”
and
“hazardous
wastes”
shall
have the meanings set forth in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and the regulations thereunder;
the
Resource Conservation and Recovery Act, as amended, and the regulations
thereunder; the Federal Clean Water Act, as amended, and the regulations
thereunder; the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 et seq.;
the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001
et
seq.; the Occupational Safety and Health Act of 1970; the Hazardous Materials
Transportation Act, as amended by the Hazardous Materials Transportation
Authorization Act of 1994, 49 U.S.C. Sections 5101 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 et seq.; the Oil Pollution Act of 1990,
33
U.S.C. Sections 2701 et seq.; as each of these may be amended from time to
time;
and any and state or local analogues to any of these statutes.
14
Section
3.18 Brokers.
Operating Company has not entered into any contract, arrangement or
understanding with any person or firm that may result in the obligation of
such
entity or Publico to pay any finder’s fees, brokerage or agent’s commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Transaction. Neither the Operating Company
nor the Members are aware of any claim for payment of any finder’s fees,
brokerage or agent’s commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
Transaction.
Section
3.19 [Reserved].
Section
3.20 Related
Party Transactions.
Section
3.20 of the Operating Company/Members Disclosure Letter sets forth all
arrangements,
agreements and contracts or understandings entered into by Operating Company
(which are or will be in effect as of or after the date of this Agreement)
with
(i) any consultant (X) involving payments in excess of $50,000 or (Y) which
may
not be terminated at will by Operating Company that is a party thereto without
penalty, or (ii) any person who is an officer, manager or affiliate of Operating
Company. All such documents are listed (and any unwritten arrangement or
understanding is accurately and completely described) in Section 3.20 of the
Operating Company/Members Disclosure Letter and the copies of such documents,
and such descriptions, all of which have previously been provided to Publico
and
its counsel, are true, complete and correct copies. Operating Company has not
made any payments to, received any services from, or is dependent on any
services of, any affiliate of Operating Company other than services provided
by
officers and managers in such capacities and payments to such officers and
managers of Operating Company in such capacities. Operating Company is not
a
party to any arrangement, agreement, contract or understanding of the type
that
would be grandfathered in or prohibited by Section 402 of the Xxxxxxxx-Xxxxx
Act
of 2002 if Operating Company were subject to Section 402.
15
Section
3.21 Employee
Matters and Benefit Plans.
(a) With
the
exception of the definition of “Affiliate” set forth in Section 3.21(a)(i) below
(which definition shall apply only to this Section 3.21 and Section 4.17),
for
purposes of this Agreement, the following terms shall have the meanings set
forth below:
(i) “Affiliate”
shall
mean any other person under common control with or otherwise required to be
aggregated with a person or any Subsidiary of such person as set forth in
Section 414(b), (c), (m) or (o) of the Code and the regulations
thereunder;
(ii) “Employee”
shall
mean any current, former or retired employee, officer, or director of a person
or any Subsidiary or any Affiliate of such person;
(iii) “Employee
Agreement”
shall
refer to any material management, employment, severance, consulting, relocation,
repatriation, or expiration agreement; visas; work permit; or similar agreement
or contract between a person or any Subsidiary or Affiliate of such person
and
any Employee or consultant that is not an Employee Plan;
(iv) “Employee
Plan”
shall
refer to any plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, performance
awards, interest or interest-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether formal or informal, funded or
unfunded and whether or not legally binding, including without limitation,
each
“employee benefit plan” within the meaning of Section 3(3) of ERISA (as defined
below), which is or has been maintained, contributed to, or required to be
contributed to, by a person or any of its Subsidiaries or any Affiliate for
the
benefit of any “Employee,” and pursuant to which such person or any of its
Subsidiaries or any Affiliate has or may have any material liability contingent
or otherwise;
(v) “ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended;
(vi) “IRS”
shall
mean the Internal Revenue Service;
(vii) “Multiemployer
Plan”
shall
mean any “Pension Plan” (as defined below) which is a “multiemployer plan,” as
defined in Sections 3(37) and 4001(a)(3) of ERISA;
(viii) “Pension
Plan”
shall
refer to each Operating Company and Subsidiary Employee Plan that is an
“employee pension benefit plan,” within the meaning of Section 3(2) of ERISA;
and
(ix) “Subsidiary”
shall
mean an entity controlled by another entity through the ownership of greater
than 50 percent of the former entity’s voting securities.
(b) Section
3.21(b) of the Operating Company/Members Disclosure Letter contains an accurate
and complete list of each Employee Agreement of Operating Company. Operating
Company
has
no Employee Plans. No benefits under any Employee Agreement of Operating Company
will be increased, or subject to accelerated vesting, by the occurrence of
the
Transaction, nor will the value of any of the benefits thereunder be calculated
on the basis of the Transaction. Neither Operating Company nor any of its
Affiliates has any announced plan or commitment, whether legally binding or
not,
to establish any new Employee Plan or Employee Agreement, to modify any Employee
Agreement (except to the extent required by law or to conform any such Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Publico in writing, or as required by this Agreement), or to enter
into any Employee Plan or Employee Agreement, nor does it have any intention
or
commitment to do any of the foregoing.
16
(c) Operating
Company has provided to Publico correct and complete copies of all material
documents embodying or relating to each Employee Agreement.
(d) Neither
Operating Company nor any of its Affiliates currently maintain, sponsor,
participate in or contribute to, nor have they ever maintained, established,
sponsored, participated in, or contributed to, any Pension Plan which is subject
to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412
of
the Code.
(e) At
no
time has Operating Company or any of its Affiliates contributed to or been
requested or obligated to contribute to any Multiemployer Plan.
(f) Except
as
required by local, state or federal law, no Employee Agreement provides, or
is
required to provide, life insurance, medical or other employee benefits to
any
Employee upon his or her retirement or termination of employment for any reason,
and Operating Company has never represented, promised or contracted (whether
in
oral or written form) to any Employee (either individually or to Employees
as a
group) that such Employee(s) would be provided with life insurance, medical
or
other employee welfare benefits upon their retirement or termination of
employment.
(g) The
execution of this Agreement and the consummation of the Transaction will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Employee Agreement, trust or loan that will or
may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits, or
obligation to fund benefits with respect to any Employee.
(h) Operating
Company (i) is in compliance in all respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours,
in
each case, with respect to Employees except as would not have an Operating
Company Material Adverse Effect; (ii) is not liable for any arrears of wages
of
any taxes or any penalty for failure to comply with any of the foregoing; and
(iii) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(i) No
work
stoppage or labor strike against Operating Company is pending or, to the
knowledge of Operating Company or the Members, threatened. Operating Company
is
not involved in or, to the knowledge of the Operating Company or the Members,
threatened with, any labor dispute, grievance, administrative proceeding or
litigation relating to labor, safety, employment practices or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, have an Operating Company Material
Adverse Effect. Operating Company has not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act that would, individually
or in the aggregate, directly or indirectly have an Operating Company Material
Adverse Effect. Neither Operating Company nor any of its Affiliates has ever
been a party to any agreement with any labor organization or union, and none
of
the Operating Company Employees are represented by any labor organization or
union, nor, to the best knowledge of the Operating Company and the Members,
have
any Operating Company Employees threatened to organize or join a union or filed
a petition for representation with the National Labor Relations
Board.
17
(j) Section
3.21(j) of Operating Company/Members Disclosure Letter sets forth (i) the
aggregate amounts of bonus and severance payments that could be payable to
Employees of Operating Company under existing Employee Agreements or Employee
Plans on account of the Transaction (without regard to termination of
employment), and (ii) the aggregate amounts of severance obligations that could
be payable to Employees of Operating Company under existing Employee Agreements
and Employee Plans on account of terminations of employment following the
Closing Date, separately stating the amounts that are payable by reason of
a
termination following a change of control of Operating Company.
Section
3.22 Intellectual
Property.
(a) For
the
purposes of this Agreement, the following terms have the following
definitions:
(i) “Intellectual
Property”
shall
mean any or all of the following and all rights in, arising out of, or
associated therewith: all common law, United States, international and foreign
(a) patents and applications therefor, including, but not limited to, all
reissues, reexaminations, divisions, renewals, extensions, provisionals,
continuations and continuations in part thereof; (b) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
architectures, structures, display screens, layouts, development tools and
all
documentation and media constituting, describing or relating to the above,
including, without limitation, manuals, memoranda and records;
(c) copyrights, copyright registrations and applications therefor, and all
other rights corresponding thereto, including, but not limited to, moral rights,
rights of integrity, and rights or attribution; (d) industrial
designs and any registrations and applications therefor; (e) trademarks,
service marks, and their respective registrations and applications therefor,
including but not limited to trade names, logos, intent to use applications,
and
common law trademarks and service marks; (f) proprietary
databases and data collections and all other rights therein; and (g) any
equivalent rights to any of the foregoing anywhere in the world.
(ii) “Operating
Company Intellectual Property”
shall
mean that Intellectual Property owned by or licensed to or controlled by
Operating Company, including, but not limited to, Operating Company Registered
Intellectual Property.
(iii) “Operating
Company Registered Intellectual Property”
means
those United States, international and foreign: (a) patents and
applications therefor; (b) copyright registrations and applications
therefor; (c) industrial design registrations and applications therefor;
and (d) trademark and service xxxx registrations and applications therefor,
owned by Operating Company.
18
(iv) “Publico
Intellectual Property”
shall
mean that Intellectual Property owned by or licensed to or controlled by
Publico, including, but not limited to, Publico Registered Intellectual
Property.
(v) “Publico
Registered Intellectual Property”
means
those United States, international and foreign: (a) patents and
applications therefor; (b) copyright registrations and applications
therefor; (c) industrial design registrations and applications therefor;
and (d) trademark and service xxxx registrations and applications therefor,
owned by Publico.
(vi) “Utilize”
or
“Utilization”
means
to make, manufacture, use, offer for sale, reproduce, prepare derivative works,
perform, market, import, export, distribute, sell, dispose, assign, license,
develop, publish, display, modify and/or amend.
(b) Section
3.22(b) of the Operating Company/Members Disclosure Letter lists all material
proceedings or actions known to the Operating Company and the Members before
any
court, tribunal (including the United States Patent and Trademark Office
(“PTO”)
or
equivalent authority anywhere in the world) related to any Operating Company
Intellectual Property. No Operating Company Intellectual Property is the subject
of any outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by Operating
Company, or which may affect the validity, use or enforceability of any
Operating Company Intellectual Property.
(c) Section
3.22(c) of the Operating Company/Members Disclosure Letter lists all Operating
Company Intellectual Property. With respect to each item of Operating Company
Registered Intellectual Property, all material registration,
maintenance and renewal fees in connection with such Operating Company
Registered Intellectual Property have been made, and all necessary documents
and
certificates in connection with such Operating Company Registered Intellectual
Property have been filed with the relevant patent, trademark or copyright
authorities in the United States or other jurisdictions for the purposes of
maintaining such Operating Company Registered Intellectual Property.
Furthermore, the Operating Company owns all right, title, and interest in and
to
all Operating Company Intellectual Property stated on Section 3.22(c) of the
Operating Company/Members Disclosure Letter.
(d) Operating
Company has the right to prevent others from using, marketing, distributing,
selling or licensing all Operating Company Intellectual Property used in its
business as presently conducted and as it is expected to be conducted as of
the
Closing Date, including without limitation, all Intellectual Property used
or to
be used in the Operating Company Products (as defined below), and such rights
to
Utilize the Operating Company Intellectual Property are sufficient for such
conduct of its business.
(e) To
the
Operating Company’s and the Members’ knowledge, the manufacture, development,
publication, marketing, license, sale, distribution and use intended by
Operating Company of any Operating Company Intellectual Property currently
being
licensed, used, produced or sold by Operating Company or currently under
development or consideration by Operating Company (the “Operating
Company Products”)
does
not violate any license or agreement between Operating Company and any third
party, and does not infringe any Intellectual Property right, moral right or
right of publicity or privacy of any other party. Neither the Operating Company
nor any of the Members has received notice of any pending or threatened claim
or
litigation contesting the validity, ownership or right to Utilize any Operating
Company Intellectual Property, and, to the knowledge of the Operating Company
or
the Members, there is no basis for any such claim under applicable law.
Furthermore, neither the Operating Company nor any of the Members has received
any notice asserting that any Operating Company Intellectual Property or the
Utilization thereof conflicts or will conflict with the rights of any other
party. Section 3.22(e) of the Operating Company/Members Disclosure Letter sets
forth a list of all Operating Company Products.
19
(f) Operating
Company has timely and satisfactorily fulfilled its obligations under all
material agreements pursuant to which Operating Company has agreed to program,
design or develop on behalf of a third party, whether for original use or for
porting or conversion (for use on a different hardware platform or in a
different language), any software products or any part thereof, except where
the
failure to so comply would not reasonably be expected to have an Operating
Company Material Adverse Effect.
(g) To
the
extent that any work, invention, or material has been developed or created
by a
third party for Operating Company, to the Operating Company’s and the Members’
knowledge, Operating Company has a written agreement with such third party
with
respect thereto, and Operating Company thereby has obtained ownership of, and
is
the exclusive owner of, or has a valid license to use, all Operating Company
Intellectual Property in such work, material or invention by operation of law
or
by valid assignment or by agreement, as the case may be.
(h) Section
3.22(h) of the Operating Company/Members Disclosure Letter lists all material
contracts, licenses and agreements to which Operating Company is a party that
are currently in effect (i) with respect to Operating Company Intellectual
Property licensed or offered to any third party; or (ii) pursuant to which
a
third party has licensed or transferred any Intellectual Property to Operating
Company. Operating Company has not transferred ownership of, or granted any
exclusive license with respect to, any Operating Company Intellectual Property
to any third party.
(i) The
contracts, licenses and agreements listed in Section 3.22(h) of the Operating
Company/Members Disclosure Letter are in full force and effect to the Operating
Company’s and the Members’ knowledge. The consummation of the Transaction will
not violate or result in the breach, modification, cancellation, termination,
or
suspension of such contracts, licenses and agreements listed in Section 3.22(h)
of the Operating Company/Members Disclosure Letter and will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any rights of Operating Company to any Operating Company Intellectual
Property or impair the right of Operating Company to Utilize any Operating
Company Intellectual Property or portion thereof. Operating Company is in
material compliance with, and has not materially breached any term of, such
contracts, licenses and agreements listed in Section 3.22(h) of the Operating
Company/Members Disclosure Letter, and to the knowledge of the Operating Company
and the Members, all other parties to such contracts, licenses and agreements
listed in Section 3.22(h) of the Operating Company/Members Disclosure Letter
are
in compliance with, and have not breached any term of, such contracts, licenses
and agreements.
(j) [Reserved.]
20
(k) (i)
Operating Company (including each of its executive officers, managers and,
to
the knowledge of the Operating Company and the Members, employees) has not
received any notice or claim (whether written, oral or otherwise) challenging
Operating Company’s ownership or rights in the Operating Company Intellectual
Property or claiming that any other person or entity has any legal or beneficial
ownership with respect thereto; (ii) all the Operating Company Intellectual
Property rights owned by Operating Company and embodied in its products are,
to
the Operating Company’s and the Members’ knowledge, legally valid and
enforceable without any material qualification, limitation or restriction on
their use, and Operating Company has not received any notice or claim (whether
written or oral) challenging the validity or enforceability of any of the
Operating Company Intellectual Property rights; and (iii) to the Operating
Company’s and the Members’ knowledge, no third party is infringing or
misappropriating any part of the Operating Company Intellectual Property.
(l) Operating
Company has taken reasonable and practicable measures designed to protect its
rights in its confidential information and trade secrets or any trade secrets
or
confidential information of third parties provided to Operating Company. None
of
Operating Company, its employees, or, to the Operating Company’s or the Members’
knowledge, its consultants has permitted any such confidential information
or
trade secrets to be used, divulged or appropriated for the benefit of persons
to
the material detriment of Operating Company.
(m) Section
3.22(m) of the Operating Company/Members Disclosure Letter sets forth a list
of
all Internet domain names used by Operating Company in its business
(collectively, the “Domain
Names”).
Operating Company has, and after the Closing Date, will continue to have, a
valid registration and all material rights (free of any material restriction)
in
and to the Domain Names, including, without limitation, all rights necessary
to
continue to conduct Operating Company’s business as it is currently conducted.
(n) Operating
Company is not or has not been a party to any Government Contract relating
to or
affecting ownership or Utilization of any Operating Company Intellectual
Property. For purposes of this Agreement, the term “Government
Contract”
means
any Government Prime Contract, Government Subcontract, or Teaming Agreement.
“Government
Prime Contract”
means
any prime contract, basic ordering agreement, letter contract, purchase order,
delivery order, change, arrangement or other commitment of any kind, on which
final payment has not been made, between a party and either the U.S. Government
or a State Government. “Government
Subcontract”
means
any subcontract, basic ordering agreement, letter subcontract, purchase order,
delivery order, change, arrangement, or other commitment of any kind, on which
final payment has not been made, between a party and any prime contractor to
either the U.S. Government or a State Government or any subcontractor with
respect to a Government Prime Contract. “State
Government”
means
any state, territory or possession of the United States or any department,
agency or instrumentality thereof, or any department or agency of any of the
above with statewide jurisdiction and responsibility, or any municipal or local
government, department, agency or instrumentality. “Teaming
Agreement”
has
the
same meaning as the term “contractor team arrangement(s)” as defined in the
Federal Acquisition Regulation (FAR) Subpart 9.601. “U.S.
Government”
means
the United States Government or any department, agency or instrumentality
thereof.
Section
3.23 Anti-Takeover
Plan.
Operating Company does not have in effect any plan, scheme, device or
arrangement, commonly or colloquially known as a “poison pill,” or an
“anti-takeover” plan or any similar plan, scheme, device or
arrangement.
21
Section
3.24 Interest-Holder
Vote Required.
The
only vote of the holders of membership interests of Operating Company necessary
to approve the Agreement and the Transaction is the affirmative vote of holders
of a majority of the outstanding Operating Company Interest. Operating Company
has obtained the required votes described in this Section 3.24 and timely
complied with its obligations under the laws of the State of
Georgia.
Section
3.25 Undisclosed
Liabilities.
Except
as and to the extent reflected, reserved against or otherwise disclosed in
the
Operating Company Financials (including the notes thereto), to the Operating
Company’s and the Members’ knowledge, Operating Company has no liabilities or
obligations of any kind, whether accrued, absolute, asserted or unasserted,
contingent or otherwise, whether or not such liabilities would have been
required to be reflected in a balance sheet prepared in accordance with GAAP
consistently applied, which would have, individually or in the aggregate, an
Operating Company Material Adverse Effect.
Section
3.26 Insurance.
Operating Company maintains, and has maintained or caused to be maintained,
without interruption, during its existence, policies or binders of insurance
covering such risk, and events, including personal injury, property damage,
errors and omissions and general liability in amounts the Operating Company
and
the Members reasonably believe are adequate for Operating Company’s business and
operations, and its current insurance policies (other than managers’ and
officers’ insurance) will not terminate due to the consummation of the
Transaction. Section 3.26 of the Operating Company/Members Disclosure Letter
sets forth a summary of all current insurance policies (including, without
limitation, limits, deductibles and terms) maintained by Operating
Company.
Section
3.27 Relationships
with Suppliers, Licensors and Customers.
No
current distributor to, customer of, or supplier to Operating Company has
notified Operating Company or any Member of an intention to terminate or
substantially alter its existing business relationship with Operating Company,
nor has any licensor under a license agreement with Operating Company notified
Operating Company or any Member of an intention to terminate or substantially
alter Operating Company’s rights under such license, which termination or
alteration would have an Operating Company Material Adverse Effect.
Section
3.28 Members’
Representations and Warranties.
The
following representations and warranties are made solely by each of the Members
to Publico:
(a) Ownership
of Interest.
Each
Member is the sole beneficial and record owner of the Interests set forth
opposite such Member’s name on Schedule 1. At the Closing, pursuant to the terms
and conditions of this Agreement, each Member will sell and convey to Publico
such Interests, free and clear of any liens, other than restrictions imposed
by
federal and applicable state securities laws. Each Member has not, and as of
the
Closing such Member shall not have, sold or otherwise disposed of, or granted
any options or rights to purchase, and such Member has not, and as of the
Closing shall not have, entered into any agreement obligating such Member to
sell or otherwise dispose of, or to grant options or rights to purchase, any
of
such Interest, except to Publico.
(b) No
Violation.
The
execution, delivery and performance by each Member of this Agreement and the
consummation of the Transaction does not and will not (i) contravene or conflict
with or constitute a violation of any provision of any law, judgment,
injunction, order or decree binding upon or applicable to the Member; (ii)
require the consent or other action of any person under, constitute a default
under, or give rise to any right of termination, cancellation or acceleration
of
any right or obligation of the Member or to a loss of any benefit to which
the
Member is entitled under any provision of any material agreement or other
instrument binding upon the Member; or (iii) result in the creation or
imposition of any material lien on any asset of the Member.
22
(c) Investment
Representations.
(i) Each
Member understands that the Exchange Shares issued pursuant to Section 1.2
of
this Agreement have not been registered under the Securities Act by reason
of a
specific exemption from the registration provisions of the Securities Act,
the
availability of which depends upon, among other things, the bona fide nature
of
the investment intent and the accuracy of such Member’s representations as
expressed herein or otherwise made pursuant hereto. Each Member is acquiring
the
Exchange Shares for his/her/its own account, not as a nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act.
(ii) Each
Member understands that the Exchange Shares issued pursuant to this Agreement
will be “restricted securities” under the federal securities laws, inasmuch as
the Exchange Shares are being acquired from Publico in a transaction not
involving a public offering and that under such laws such Exchange Shares may
not be resold without registration under the Securities Act or an exemption
therefrom. The Exchange Shares issued pursuant to this Agreement will be
endorsed with a legend to such effect. Each Member has been informed and
understands that (i) there are substantial restrictions on the transferability
of the Exchange Shares, and (ii) no federal or state agency has made any finding
or determination as to the fairness for public investment, nor any
recommendation nor endorsement, of the Exchange Shares.
(iii) Each
Member has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to Publico and
acknowledges that such Member can protect his/her/its own interests. Each Member
has such knowledge and experience in financial and business matters so that
such
Member is capable of evaluating the merits and risks of his/her/its investment
in Publico.
(iv) Each
Member is an “accredited investor” within the meaning of Rule 501 of Regulation
D promulgated under the Securities Act.
(v) Each
Member acknowledges receipt of a preliminary Information Statement on Form
14C
in respect of the Transaction.
(vi) Each
Member understands that all books, records, and documents of Publico relating
to
this investment have been and remain available for inspection by such Member
upon reasonable notice. Each Member confirms that all documents requested have
been made available, and that such Member has been supplied with all of the
information concerning this investment that has been requested. Each Member
confirms that he/she/it has obtained sufficient information, in his/her/its
judgment or that of his/her/its’ independent purchaser representative, if any,
to evaluate the merits and risks of this investment. Each Member confirms that
he/she/it has had the opportunity to obtain such independent legal and tax
advice and financial planning services as such Member has deemed appropriate
prior to making a decision to subscribe for the Exchange Shares. In making
a
decision to purchase the Exchange Shares, each Member has relied exclusively
upon his/her/its’ experience and judgment, or that of his/her/its’ purchaser
representative, if any, upon such independent investigations as he/she/it,
or
they, deemed appropriate, and upon information provided by Publico in writing
or
found in the books, records, or documents of Publico.
23
(vii) Each
Member is aware that an investment in the Exchange Shares is highly speculative
and subject to substantial risks. Each Member is capable of bearing the high
degree of economic risk and burdens of this venture, including, but not limited
to, the possibility of a complete loss, the lack of a sustained and orderly
public market, and limited transferability of the Exchange Shares, which may
make the liquidation of this investment impossible for the indefinite
future.
(viii) The
offer
to sell the Exchange Shares was directly communicated to each Member by such
a
manner that such Member, or his/her/its purchaser representative, if any, was
able to ask questions of and receive answers from Publico or a person acting
on
its behalf concerning the terms and conditions of this Transaction. At no time,
except in connection and concurrently with such communicated offer, was such
Member presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement, or any other form of general
advertising.
(ix) None
of
the following information has ever been represented, guaranteed, or warranted
to
the undersigned, expressly or by implication by any broker, Publico, or agent
or
employee of the foregoing, or by any other person:
(1) The
approximate or exact length of time that the undersigned will be required to
remain as a holder of the Exchange Shares;
(2) The
amount of consideration, profit, or loss to be realized, if any, as a result
of
an investment in Publico; or
(3) That
the
past performance or experience of Publico, its officers, directors, associates,
agents, affiliates, or employees or any other person will in any way indicate
or
predict economic results in connection with the plan of operations of Publico
or
the return on the investment.
(x) No
Member
has distributed any information relating to this investment to anyone other
than
his/her/its’ purchaser representative, if any, and no other person except such
personal representative and such Member has used this information.
(xi) Each
Member hereby agrees to indemnify Publico and its affiliates and to hold them
harmless from and against any and all liability, damage, cost, or expense,
including their respective attorneys’ fees and costs for a period of four (4)
years from the Closing Date, incurred on account of or arising out
of:
(1) Any
material inaccuracy in the declarations, representations, and warranties
hereinabove set forth;
(2) The
disposition of the Exchange Shares or any part thereof by such Member, contrary
to the foregoing declarations, representations, and warranties; and
24
(3) Any
action, suit, or proceeding based upon:
a. the
claim
that said declarations, representations, or warranties were inaccurate or
misleading or otherwise cause for obtaining damages or redress from Publico
or
its affiliates; or
b. the
disposition of the Exchange Shares or any part thereof.
ARTICLE
4.
REPRESENTATIONS
AND WARRANTIES OF PUBLICO
Except
as
set forth in the written disclosure letter delivered at or prior to the
execution hereof to the Members (the “Publico
Disclosure Letter”)
and
except as set forth in the agreements referred to in Sections 6.16 and 7.16
of
this Agreement, Publico hereby represents and warrants to each Member as
follows. The Publico Disclosure Letter shall be arranged in sections or
subsections corresponding to the number and lettered sections and subsections
contained in this Article 4. The disclosures in any section or subsection of
Publico Disclosure Letter shall qualify the correspondingly numbered
representation and warranty and such other representations and warranties in
this Article 4 to the extent it is reasonably clear from a reading of the
disclosure that such disclosure is applicable to such other representations
and
warranties.
Section
4.1 Organization;
Good Standing; Authority; Compliance With Law.
(a) Publico
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Nevada. Publico has all requisite power and authority
to
own, lease and operate its properties and to carry on its business as now
conducted. Publico is duly licensed or qualified and is in good standing to
transact business as a foreign corporation in each jurisdiction in which the
character of the properties owned or leased by it therein or in which the nature
of its business makes such qualification or licensing necessary, except where
the failure to be so licensed or qualified would not have, individually or
in
the aggregate, a Publico Material Adverse Effect. For purposes of this
Agreement, a “Publico
Material Adverse Effect”
means
a
material adverse effect on the business, assets (including intangible assets),
financial condition or results of operations of Publico, taken as a
whole.
(b) Except
as
described in Publico SEC Documents (as defined in Section 4.25), the business
of
Publico has been operated in compliance with all laws, ordinances, regulations
and orders of all governmental entities, except for violations which would
not
have, individually or in the aggregate, a Publico Material Adverse Effect.
Publico has all Government Approvals of all Governmental Agencies required
by
law with respect to the operation of its business, except those the absence
of
which would not, individually or in the aggregate, have a Publico Material
Adverse Effect or prevent or delay consummation of the Transaction. All such
Government Approvals are in full force and effect, and Publico is in compliance
with all conditions and requirements of the Government Approvals and with all
rules and regulations relating thereto other than failures that would not have
a
Publico Material Adverse Effect. Publico has not received any notices of
violations of any Federal, state or local laws, regulations or ordinances
relating to its business, operations or assets that, if it were determined
that
a violation had occurred, would have a Publico Material Adverse
Effect.
25
(c) The
Amended and Restated Articles of Incorporation, the form of which is stated
on
Exhibit A, shall be in effect prior to Closing, and all other charter documents
and Bylaws (and in each such case, all amendments thereto) of Publico are
described in Publico SEC Documents.
Section
4.2 Authorization,
Validity and Effect of Agreements.
Publico
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transaction. To the extent required by law,
the
Board of Directors of Publico has approved this Agreement and the Transaction.
The execution by Publico of this Agreement and the consummation of the
Transaction have been duly authorized by all requisite actions on the part
of
Publico, subject to the approvals described in Section 4.2 of Publico Disclosure
Letter. This Agreement constitutes the valid and legally binding obligation
of
Publico, enforceable against Publico in accordance with its terms, subject
to
applicable bankruptcy, insolvency, moratorium or other similar laws relating
to
creditors’ rights and general principles of equity.
Section
4.3 Capitalization.
(a) The
authorized capital stock of Publico consists of Publico Common Stock. In
connection with this Agreement, Publico is amending its articles of
incorporation, to be effective prior to Closing, to authorize 10,000,000 shares
of preferred stock, $0.001 par value, of which 2,000,000 will be designated
as
Series A preferred stock (the “Publico
Preferred Shares”).
As of
the date hereof, there are 52,500,000 (post-split) shares of Publico Common
Stock issued and outstanding and zero Publico Preferred Shares issued and
outstanding. All such outstanding shares of Publico are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Except as
described in Publico SEC Documents or as called for by this Agreement, Publico
has no outstanding bonds, debentures, notes or other obligations the holders
of
which have or upon the happening of certain events would have the right to
vote
(or which are convertible into or exercisable for securities having the right
to
vote) with the stockholders of Publico on any matter. Except as described in
Publico SEC Documents or as called for in this Agreement, there are no existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements, stock appreciation rights or similar derivative securities
or instruments or commitments which obligate Publico to issue, transfer or
sell
any shares of Publico Common Stock or make any payments in lieu thereof other
than options granted to employees, directors and consultants after the date
of
the most recent SEC Report.
(b) The
Publico Common Stock and Publico Preferred Shares to be issued pursuant to
the
Transaction and the related transactions will be duly authorized, validly
issued, fully paid and unassessable and free of preemptive rights of any
nature.
(c) Publico
has no outstanding or effective employee or director stock purchase or option
plans that have been approved or adopted by the Board of Directors of Publico
or
approved by the stockholders of Publico.
Section
4.4 No
Violation.
Neither
the execution and delivery by Publico of this Agreement nor the consummation
by
Publico of the Transaction will: (i) conflict with or result in a breach of
any
provisions of Publico’s articles of incorporation or by-laws; (ii) violate,
result in a breach of any provision of, or constitute a default under, or
require any approval or consent under or result in the termination or in a
right
of termination or cancellation of, or accelerate the performance required by
or
result in a material adverse change to, or result in the creation of any lien,
security interest, charge or encumbrance upon any of Publico’s properties under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, contract,
agreement or other instrument to which Publico is a party, or by which Publico
or any of its properties is bound or affected, except for any of the foregoing
matters in this clause which, individually or in the aggregate, would not have
a
Publico Material Adverse Effect; (iii) contravene or conflict with or constitute
a violation of any provision of any law, rule, regulation, judgment, injunction,
order or decree binding upon or applicable to Publico; or (iv) other than the
filings provided for in this Agreement and the filings required under the
Exchange Act, the Securities Act, or applicable state securities and “Blue Sky”
laws (collectively, the “Regulatory
Filings”),
require any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority which has not been
obtained or made or which is currently not in the process of being obtained
or
made, except where the failure to obtain any such consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority would not have a Publico Material Adverse
Effect.
26
Section
4.5 [Reserved].
Section
4.6 [Reserved].
Section
4.7 [Reserved].
Section
4.8 Litigation.
There
are (i) no continuing orders, injunctions or decrees of any court, arbitrator
or
governmental authority to which Publico is a party or by which any of its
properties or assets are bound or likely to be affected and (ii) no actions,
suits or proceedings pending against Publico as to which any of their respective
properties or assets are subject or, to the knowledge of Publico threatened
against Publico or to which any of their respective properties or assets are
subject, at law or in equity, that in each such case could, individually or
in
the aggregate, have an Publico Material Adverse Effect.
Section
4.9 Absence
of Certain Changes.
Except
as set forth in Publico SEC Documents, since September 30, 2007, Publico has
conducted its business only in the ordinary course of such business and
consistent with past practices and there has not been any:
(a) Publico
Material Adverse Effect;
(b) amendment
or change in the Articles of Incorporation or By-Laws of Publico; other than
the
amendment to effectuate a 17.5-for-1 forward stock split of Publico Common
Stock
and other than as stated in Sections 4.1(c) and 4.3(a) of this
Agreement;
(c) incurrence,
creation or assumption by Publico of (i) any mortgage, deed of trust, security
interest, pledge, lien, title retention device, collateral assignment, claim,
charge, restriction or other encumbrance of any kind on any of the assets or
properties of Publico; or (ii) any obligation or liability of any indebtedness
for borrowed money;
(d) issuance
or sale of any debt or equity securities of Publico, or the issuance or grant
of
any options, warrants or other rights to acquire from Publico, directly or
indirectly, any debt or equity securities of Publico, other than upon exercise
of any then-outstanding options and warrants;
27
(e) payment
or discharge by Publico of any security interest, lien, claim, or encumbrance
of
any kind on any asset or property of Publico, or the payment or discharge of
any
liability that was not either shown or reflected in Publico SEC Documents or
incurred in the ordinary course of Publico’s business after September 30, 2007
in an amount in excess of $50,000 for any single liability to a particular
creditor;
(f) purchase,
license, sale, assignment or other disposition or transfer, or any agreement
or
other arrangement for the purchase, license, sale, assignment or other
disposition or transfer, of any of the assets, properties or goodwill of Publico
other than a license or sale of any product or products of Publico made in
the
ordinary course of Publico’s business;
(g) damage,
destruction or loss of any property or asset, whether or not covered by
insurance, having (or likely with the passage of time to have) a Publico
Material Adverse Effect;
(h) declaration,
setting aside or payment of any dividend on, or the making of any other
distribution in respect of, the capital stock of Publico, any split (other
than
stated in Section 4.9(b) of this Agreement), combination or recapitalization
of
the capital stock of Publico or any direct or indirect redemption, purchase
or
other acquisition of the capital stock of Publico or any change in any rights,
preferences, privileges or restrictions of any outstanding security of
Publico;
(i) increase
in the compensation payable or to become payable to any of the officers,
directors, or employees of Publico, or any bonus or pension, insurance or other
benefit payment or arrangement (including without limitation stock awards,
stock
option grants, stock appreciation rights or stock option grants) made to or
with
any of such officers, employees or agents;
(j) obligation
or liability incurred by Publico to any of its officers, directors or
stockholders except for normal and customary compensation and expense allowances
payable to officers in the ordinary course of Publico’s business consistent with
past practice;
(k) making
by
Publico of any loan, advance or capital contribution to, or any investment
in,
any officer, director or stockholder of Publico or any firm or business
enterprise in which any such person had a direct or indirect material interest
at the time of such loan, advance, capital contribution or
investment;
(l) entering
into, amendment of, relinquishment, termination or non-renewal by Publico of
any
contract, lease, transaction, commitment or other right or obligation other
than
in the ordinary course of its business or any written or oral indication or
assertion by the other party thereto of any material problems with Publico’s
services or performance under such contract, lease, transaction, commitment
or
other right or obligation or of such other party’s demand to amend, terminate or
not renew any such contract, lease, transaction, commitment or other right
or
obligation;
(m) material
change in the manner in which Publico extends discounts, credits or warranties
to customers or otherwise deals with its customers;
(n) entering
into by Publico of any transaction, contract or agreement that by its terms
requires or contemplates a required minimum current and/or future financial
commitment, expenses (inclusive of overhead expenses) or obligation on the
part
of Publico involving in excess of $10,000 (provided that the amount of such
financial commitments and expenses for all such transactions, contracts or
agreements does not exceed $50,000 in the aggregate, excluding legal and
accounting fees associated with this Agreement) or that is not entered into
in
the ordinary course of Publico’s business, or the conduct of any business or
operations by Publico that is other than in the ordinary course of Publico’s
business; or
28
(o) license,
transfer or grant of a right under any Publico Intellectual Property (as defined
in Section 4.18 below), other than those licensed, transferred or granted in
the
ordinary course of business consistent with its past practices.
Section
4.10 Ownership
of Interest.
As of
the date hereof, and during the three (3) year period immediately preceding
the
date hereof, neither Publico nor, to Publico’s knowledge, any affiliate or
associate thereof, is an “interested stockholder” of Operating Company within
the meaning of the laws of the State of Nevada.
Section
4.11 Taxes.
Except
where such failure would not have, individually or in the aggregate, a Publico
Material Adverse Effect:
(a) Publico
has paid or caused to be paid all Taxes, owed or accrued by it and due and
payable through the Closing Date (including any Taxes payable pursuant to
Treasury Regulation §1.1502-6 (and any similar state, local or foreign
provision));
(b) Publico
has timely filed all Tax Returns required to be filed by it through the date
hereof, and all such returns accurately set forth the amount of any Taxes
relating to the applicable period;
(c) Publico
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other party;
(d) The
financial statements included in Publico SEC Documents reflect adequate reserves
for Taxes payable by Publico for all taxable periods and portions thereof
through the date of such financial statements;
(e) Since
December 31, 2006, Publico has made sufficient accrual for Taxes in accordance
with GAAP with respect to periods for which Tax Returns have not been
filed;
(f) There
are
no outstanding agreements, waivers or arrangements extending the statutory
period of limitations applicable to any claim for, or the period for the
collection or assessment of, Taxes due from Publico for any taxable period
and
there have been no deficiencies proposed, assessed or asserted for such
Taxes;
(g) There
are
no closing agreements that could affect Taxes of Publico for periods after
the
Closing Date pursuant to Section 7121 of the Code or any similar provision
under
state, local or foreign tax laws;
(h) No
audit
or other proceedings by any court, governmental or regulatory authority or
similar authority has occurred, been asserted or is pending, and Publico has
not
received notice that any such audit or proceeding may be commenced;
29
(i) [Reserved];
(j) Publico
has not agreed or filed application to, or is not required to, make any changes
or adjustments to its accounting method; and
(k) There
is
no contract, agreement, plan or arrangement covering any person that,
individually or collectively, could give rise to the payment of any amount
that
would not be deductible by Publico by reason of Section 280G or Section 162(m)
of the Code.
Section
4.12 Books
and Records.
(a) The
books
of account and other financial records of Publico are true, complete and correct
in all material respects, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in Publico
SEC
Documents.
(b) The
minute books and other records of Publico contain accurate records of all
meetings and accurately reflect all other actions of the stockholders and Board
of Directors and any committees of the Board of Directors of
Publico.
Section
4.13 Properties.
(a) Section
4.13(a) of Publico Disclosure Letter sets forth a list of all real property
currently, or at any time in the past five (5) years, owned or leased by
Publico, and, with respect to all real property currently leased by Publico,
the
name of the lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and/or other fees payable under any such lease. All
such
current leases are, to the knowledge of Publico, in full force and effect and
are valid and effective in accordance with their respective terms; and there
is
not, to the knowledge of Publico, any existing material default or event of
default under any such lease (or event which with notice or lapse of time,
or
both, would constitute such a material default).
(b) Publico
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of
any
liens, except as reflected in Publico SEC Documents and except for liens for
taxes not yet due and payable and such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do
not
materially detract from the value, or materially interfere with the present
use,
of the property subject thereto or affected thereby.
Section
4.14 Environmental
Matters.
Publico
is not in violation of any Environmental Laws, which violation could reasonably
be expected to result in a Publico Material Adverse Effect. Neither Publico
nor,
to the knowledge of Publico, any third party has used, released, discharged,
generated, manufactured, produced, stored, or disposed of in, on, or under
or
about its owned or leased property or other assets, or transported thereto
or
therefrom, any hazardous substances or hazardous wastes, including asbestos,
lead and petroleum, during the period of Publico’s ownership or lease of such
property in a manner that could reasonably be expected to subject Publico to
a
material liability under the Environmental Laws. Publico has not received
written notice from any governmental authority that any property owned or leased
by Publico is in violation of any Environmental Laws. There is no pending civil,
criminal or administrative suit or other legal proceeding against Publico with
respect to any Environmental Laws. Publico has provided Operating Company
complete copies of all environmental reports, assessments and studies in
Publico’s possession and control with respect to properties owned or leased by
Publico.
30
Section
4.15 No
Brokers.
Publico
has not entered into any contract, arrangement or understanding with any person
or firm that may result in the obligation of such entity or the Members to
pay
any finder’s fees, brokerage or agent’s commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the Transaction. Publico is not aware of any claim for payment of any
finder’s fees, brokerage or agent’s commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the Transaction.
Section
4.16 Related
Party Transactions.
Except
as set forth in Publico SEC Documents, since September 30, 2007, no event has
occurred that would be required to be reported by Publico pursuant to Item
404
of Regulation S-B promulgated under the Securities Act.
Section
4.17 Employee
Matters and Benefit Plans.
(a) Section
4.17(a) of Publico Disclosure Letter contains an accurate and complete list
of
each Employee Agreement of Publico. Publico has no Employee Plans. No benefits
under any Employee Agreement of Publico will be increased, or subject to
accelerated vesting, by the occurrence of the Transaction, nor will the value
of
any of the benefits thereunder be calculated on the basis of the Transaction.
Neither Publico nor any of its Affiliates has any announced plan or commitment,
whether legally binding or not, to establish any new Employee Plan or Employee
Agreement, to modify any Employee Agreement (except to the extent required
by
law or to conform any such Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Operating Company in
writing, or as required by this Agreement), or to enter into any Employee Plan
or Employee Agreement, nor does it have any intention or commitment to do any
of
the foregoing.
(b) Publico
has provided or made available to the Members correct and complete copies of
all
material documents embodying or relating to each Publico Employee Plan and
Employee Agreement including: (i) all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations,
if
any, prepared for each Publico Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA
or
the Code in connection with each Publico Employee Plan or related trust; (iv)
if
Publico Employee Plan is funded, the most recent annual and periodic accounting
of Employee Plan assets; (v) the most recent summary plan description together
with the most recent summary of material modifications, if any, required under
ERISA with respect to each Publico Employee Plan; (vi) all IRS determination
letters and rulings relating to Publico Employee Plans and copies of all
applications and correspondence to or from the IRS or Department of Labor
(“DOL”)
with
respect to any Publico Employee Plan; and (vii) all communications material
to
any Employee or Employees relating to any Publico Employee Plan and any proposed
Publico Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments
or
vesting schedules or other events which would result in any material liability
to Publico.
(c) (i)
Publico and its Affiliates have performed in all material respects all
obligations required to be performed by them under each Publico Employee Plan,
and each Publico Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA and the Code; (ii) no “prohibited transaction,” within the
meaning of Section 4975 of the Code or Section 406 of ERISA for which no class
or statutory exemption is available, has occurred with respect to any Publico
Employee Plan; (iii) there are no material actions, suits or claims pending
or,
to the knowledge of Publico, threatened or anticipated (other than routine
claims for benefits) against any Publico Employee Plan or against the assets
of
any Publico Employee Plan; (iv) such Publico Employee Plan can be amended,
terminated or otherwise discontinued after the Closing Date in accordance with
its terms, without material liability to Publico or any of its Affiliates (other
than ordinary administration expenses typically incurred in a termination
event); (v) there are no audits, inquiries or proceedings pending or, to the
knowledge of Publico, threatened by the IRS or DOL with respect to any Publico
Employee Plan; (vi) Publico is not subject to any penalty or tax with respect
to
any Publico Employee Plan under Section 402(i) of ERISA or Section 4975 through
4980 of the Code; and (vii) all contributions, including any top heavy
contributions, required to be made prior to the Closing by Publico or any ERISA
Affiliate to any Employee Plan have been made or shall be made on or before
the
Closing Date.
31
(d) Neither
Publico nor any of its Affiliates currently maintain, sponsor, participate
in or
contribute to, nor have they ever maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to Part
3
of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code.
(e) At
no
time has Publico or any of its Affiliates contributed to or been requested
or
obligated to contribute to any Multiemployer Plan.
(f) Except
as
required by local, state or federal law, no Employee Plan or any other
Employment Agreement to which Publico is a party provides, or is required to
provide, life insurance, medical or other employee benefits to any Employee
upon
his or her retirement or termination of employment for any reason, and Publico
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of
employment.
(g) The
execution of this Agreement and the consummation of the Transaction will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Publico Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits, or obligation to fund benefits with respect to any Publico
Employee.
(h) Publico
(i) is in compliance in all respects with all applicable foreign, federal,
state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case,
with respect to Employees except as would not have an Publico Material Adverse
Effect; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to Employees; (iii) is
not
liable for any arrears of wages of any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to
any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
32
(i) No
work
stoppage or labor strike against Publico is pending or, to the knowledge of
Publico, threatened. Publico is not involved in or, to the knowledge of Publico,
threatened with, any labor dispute, grievance, administrative proceeding or
litigation relating to labor, safety, employment practices or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, have a Publico Material Adverse Effect.
Publico has not engaged in any unfair labor practices within the meaning of
the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly have a Publico Material Adverse Effect. Neither Publico
nor any of its Affiliates has ever been a party to any agreement with any labor
organization or union, and none of Publico Employees are represented by any
labor organization or union, nor have any Publico Employees threatened to
organize or join a union or filed a petition for representation with the
National Labor Relations Board.
(j) Section
4.17(j) of Publico Disclosure Letter sets forth (i) the aggregate amounts of
bonus and severance payments that could be payable to Employees of Publico
under
existing Employee Agreements or Employee Plans on account of the Transaction
(without regard to termination of employment), and (ii) the aggregate amounts
of
severance obligations that could be payable to Employees of Publico under
existing Employee Agreements and Employee Plans on account of terminations
of
employment following the Closing Date, separately stating the amounts that
are
payable by reason of a termination following a change of control of
Publico.
Section
4.18 Intellectual
Property.
(a) Section
4.18(a) of Publico Disclosure Letter lists all material proceedings or actions
known to Publico before any court, tribunal (including the PTO or equivalent
authority anywhere in the world) related to any Publico Intellectual Property.
No Publico Intellectual Property is the subject of any outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Publico, or which may affect the validity,
use
or enforceability of any Publico Intellectual Property.
(b) Section
4.18(b) of Publico Disclosure Letter lists all Publico Intellectual Property.
With respect to each item of Publico Registered Intellectual Property, all
material registration, maintenance and renewal fees in connection with such
Publico Registered Intellectual Property have been made and all material
documents and certificates in connection with such Publico Registered
Intellectual Property have been filed with the relevant patent, trademark or
copyright authorities in the United States or other jurisdictions for the
purposes of maintaining such Publico Registered Intellectual Property.
Furthermore, Publico owns all right, title, and interest in and to Publico
Intellectual Property stated on Section 4.18(b) of Publico Disclosure
Letter.
(c) Publico
has the right to prevent others from using, marketing, distributing, selling
or
licensing all Publico Intellectual Property used in its business as presently
conducted and as it is expected to be conducted as of the Closing Date,
including without limitation, all Intellectual Property used or to be used
in
Publico Products (as defined below), and such rights to Utilize Publico
Intellectual Property are sufficient for such conduct of its
business.
33
(d) To
Publico’s knowledge, the manufacture, development, publication, marketing,
license, sale, distribution and use intended by Publico of any Publico
Intellectual Property currently being licensed, used, produced or sold by
Publico or currently under development or consideration by Publico (the
“Publico
Products”)
does
not violate any license or agreement between Publico and any third party, and
does not infringe any Intellectual Property right, moral right or right of
publicity or privacy of any other party. Publico has not received notice of
any
pending or threatened claim or litigation contesting the validity, ownership
or
right to Utilize any Publico Intellectual Property, and to the knowledge of
Publico, there is no basis for any such claim under applicable law. Publico
has
not received any notice asserting that any Publico Intellectual Property or
Utilization thereof conflicts or will conflict with the rights of any other
party. Section 4.18(d) of Publico Disclosure Letter sets forth a list of all
Publico Products, if any.
(e) Publico
has timely and satisfactorily fulfilled its obligations under all material
agreements related to any Publico Intellectual Property or Publico Products,
except where the failure to so comply would not reasonably be expected to have
a
Publico Material Adverse Effect.
(f) To
the
extent that any work, invention, or material has been developed or created
by a
third party for Publico, to Publico’s knowledge, Publico has a written agreement
with such third party with respect thereto, and Publico thereby has obtained
ownership of, and is the exclusive owner of, or has a valid license to use,
all
Publico Intellectual Property in such work, material or invention by operation
of law or by valid assignment or by agreement, as the case may be.
(g) Section
4.18(g) of Publico Disclosure Letter lists all material contracts, licenses
and
agreements to which Publico is a party that are currently in effect (i) with
respect to Publico Intellectual Property licensed or offered to any third party;
or (ii) pursuant to which a third party has licensed or transferred any
Intellectual Property to Publico. Publico has not transferred ownership of,
or
granted any exclusive license with respect to, any Publico Intellectual Property
to any third party.
(h) The
contracts, licenses and agreements listed in Section 4.18(g) of Publico
Disclosure Letter are in full force and effect to Publico’s knowledge. The
consummation of the Transaction will not violate or result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements listed in Section 4.18(g) of Publico Disclosure Letter
and will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any rights of Publico to any Publico Intellectual
Property or impair the right of Publico to Utilize any Publico Intellectual
Property or portion thereof. Publico is in material compliance with, and has
not
materially breached any term of, such contracts, licenses and agreements listed
in Section 4.18(g) of Publico Disclosure Letter and, to the knowledge of
Publico, all other parties to such contracts, licenses and agreements listed
in
Section 4.18(g) of Publico Disclosure Letter are in compliance with, and have
not breached any term of, such contracts, licenses and agreements. Following
the
Closing Date, Publico will be permitted to exercise all of Publico’s rights, if
any, under the contracts, licenses and agreements listed in Section 4.18(g)
of
Publico Disclosure Letter to the same extent Publico would have been able to
had
the Transaction not occurred and without the payment of any additional funds
other than ongoing fees, royalties or payments which Publico would otherwise
be
required to pay.
(i) [Reserved]
34
(j) (i)
Publico (including each of its executive officers, directors and, to the
knowledge of Publico, employees) has not received any notice or claim (whether
written, oral or otherwise) challenging Publico’s ownership or rights in Publico
Intellectual Property or claiming that any other person or entity has any legal
or beneficial ownership with respect thereto; (ii) all Publico Intellectual
Property rights owned by Publico and embodied in its products are, to Publico’s
knowledge, legally valid and enforceable without any material qualification,
limitation or restriction on their use, and Publico has not received any notice
or claim (whether written or oral) challenging the validity or enforceability
of
any of Publico Intellectual Property rights; and (iii) to Publico’s knowledge,
no third party is infringing or misappropriating any part of Publico
Intellectual Property.
(k) Publico
has taken reasonable and practicable measures designed to protect its rights
in
its confidential information and trade secrets or any trade secrets or
confidential information of third parties provided to Publico. None of Publico,
its employees, or, to Publico’s knowledge, its consultants has permitted any
such confidential information or trade secrets to be used, divulged or
appropriated for the benefit of persons to the material detriment of
Publico.
(l) Section
4.18(l) of Publico Disclosure Letter sets forth a list of all Internet domain
names used by Publico in its business (collectively, the “Publico
Domain Names”).
To
Publico’s knowledge, Publico has a valid registration and all material rights
(free of any material restriction) in and to Publico Domain Names, including,
without limitation, all rights necessary to continue to conduct Publico’s
business as it is currently conducted.
(m) Publico
is not or has not been a party to any Government Contract relating to or
affecting ownership or Utilization of any Publico Intellectual
Property.
Section
4.19 Anti-Takeover
Matters.
Publico
has taken all action necessary to exempt the Transaction from the operation
of
any “fair price,” “moratorium,” “control share acquisition,” or other similar
anti-takeover statute or regulation enacted under the state or federal laws
of
the United States, including without limitation, the laws of the State of
Nevada. Publico does not have in effect any plan, scheme, device or arrangement
commonly or colloquially known as a “poison pill” or an “anti-takeover” plan or
any similar plan, scheme, device or arrangement.
Section
4.20 Consent
Required.
The
affirmative consent of the holders of a majority of Publico Common Stock is
the
only consent of the holders of any class or series of Publico’s capital stock
necessary to approve the (i) issuance of Publico Common Stock in the
Transaction; (ii) change of control of Publico for purposes of NASD Rules;
and
(iii) amendment of Publico’s organizational documents.
Section
4.21 Undisclosed
Liabilities.
Except
as and to the extent reflected, reserved against or otherwise disclosed in
Publico’s consolidated balance sheet dated September 30, 2007 (including the
notes thereto), Publico has no liabilities or obligations of any kind, whether
accrued, absolute, asserted or unasserted, contingent or otherwise, whether
or
not such liabilities would have been required to be reflected in a balance
sheet
prepared in accordance with GAAP consistently applied, which would be reasonably
expected to have, individually or in the aggregate, a Publico Material Adverse
Effect.
Section
4.22 Insurance.
Publico
maintains, and has maintained or caused to be maintained, without interruption,
during its existence, policies or binders of insurance covering such risk,
and
events, including personal injury, property damage, errors and omissions and
general liability in amounts Publico reasonably believes adequate for Publico’s
business and operations, and its current insurance policies (other than
directors’ and officers’ insurance) will not terminate due to the consummation
of the Transaction. Section 4.22 of Publico Disclosure Letter sets forth a
summary of all current insurance policies (including, without limitation,
limits, deductibles and terms) maintained by Publico.
35
Section
4.23 [Reserved].
Section
4.24 Continuity
of Business Enterprise.
It is
the present intention of Publico to continue at least one significant historic
business line of Operating Company, or to use at least a significant portion
of
Operating Company’s historic assets in a business, in each case within the
meaning of the United States Treasury Regulations Section
1.368-1(d).
Section
4.25 SEC
Filings; Financial Statements.
(a) Publico
has delivered to Operating Company accurate and complete copies of all
registration statements, proxy statements, Certifications (as defined below)
and
other statements, reports, schedules, forms and other documents filed by Publico
with the SEC since April 25, 2005 (the “Publico
SEC Documents”),
other
than such documents that can be obtained on the SEC’s website at xxx.xxx.xxx.
Except as would not have a Publico Material Adverse Effect, all statements,
reports, schedules, forms and other documents required to have been filed by
Publico with the SEC have been filed on a timely basis. As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing): (i) each of Publico SEC
Documents complied in all material respects with the applicable requirements
of
the Securities Act or the Exchange Act (as the case may be); and (ii) none
of
Publico SEC Documents contained any untrue statement of a material fact or
omitted 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. The certifications and statements required
by
(A) Rule 13a-14 under the Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of
the Xxxxxxxx-Xxxxx Act) relating to Publico SEC Documents (collectively, the
“Certifications”)
are
accurate and complete and comply as to form and content with all applicable
laws
or rules of applicable governmental and regulatory authorities.
(b) Except
as
described in Publico SEC Documents, (i) Publico maintains disclosure controls
and procedures that satisfy the requirements of Rule 13a-15 under the Exchange
Act, and (ii) such disclosure controls and procedures are designed to ensure
that all material information concerning Publico is made on a timely basis
to
the individuals responsible for the preparation of Publico’s filings with the
SEC and other public disclosure documents.
(c) The
financial statements (including any related notes) contained or incorporated
by
reference in Publico SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with GAAP (except as may be indicated in the
notes to such financial statements or, in the case of unaudited financial
statements, as permitted by Form 10-QSB of the SEC, and except that the
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end adjustments that are not reasonably expected
to be
material in amount) applied on a consistent basis unless otherwise noted therein
throughout the periods indicated; and (iii) fairly present the consolidated
financial position of Publico as of the respective dates thereof and the
consolidated results of operations and cash flows of Publico for the periods
covered thereby.
36
(d) Publico’s
auditor has at all required times since the date of enactment of the
Xxxxxxxx-Xxxxx Act been: (i) to the knowledge of Publico, a registered public
accounting firm (as defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act);
(ii)
“independent” with respect to Publico within the meaning of Regulation S-X under
the Exchange Act; and (iii) to the knowledge of Publico, in compliance with
subsections (g) through (l) of Section 10A of the Exchange Act and the rules
and
regulations promulgated by the SEC and the Public Operating Company Accounting
Oversight Board thereunder.
(e) Section
4.25(e) of Publico Disclosure Letter lists, and Publico has delivered to the
Members accurate and complete copies of the documentation creating or governing,
all securitization transactions and “off-balance sheet arrangements” (as defined
in Item 303(c) of Regulation S-K under the Exchange Act) effected by Publico
since April 25, 2005.
ARTICLE
5.
COVENANTS
AND AGREEMENTS OF THE PARTIES
Section
5.1 [Reserved].
Section
5.2 [Reserved].
Section
5.3 [Reserved].
Section
5.4 [Reserved].
Section
5.5 [Reserved].
Section
5.6 Consent
to Jurisdiction and Service of Process.
Any
legal action, suit or proceeding arising out of or relating to this Agreement
or
the Transaction shall be instituted in any state or federal court of competent
jurisdiction located in Xxxxx County, Nevada, and each party agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of such court, that its property is exempt or immune from attachment or
execution, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that
this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the exclusive jurisdiction of any
such
court in any such action, suit or proceeding.
Section
5.7 Regulatory
and Other Approvals.
Each
party will (a) take all commercially reasonable steps necessary or desirable,
and proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable, to obtain all consents, approvals or
actions of, to make all filings with, and to give all notices to Governmental
Agencies or any other person required of such party to consummate the
Transaction; (b) provide such other information and communications to such
Governmental Agencies or other persons as such Governmental Agencies or other
persons may reasonably request in connection therewith; and (c) provide
reasonable cooperation to the other party in obtaining all consents, approvals
or actions of, making all filings with, and giving all notices to Governmental
Agencies or other persons required of the other party to consummate the
Transaction. Each party will provide prompt notification to the other party
when
any such consent, approval, action, filing, or notice referred to in clause
(a)
above is obtained, taken, made, or given, as applicable, and will advise the
other party of any communications (and, unless precluded by law, provide copies
of any such communications that are in writing) with any Governmental Agency
or
other person regarding the Transaction.
37
ARTICLE
6.
CONDITIONS
TO PUBLICO’S OBLIGATIONS
The
obligations of Publico to consummate the Transaction provided for in this
Agreement shall be subject to the satisfaction of each of the following
conditions
on
or before the Closing Date (unless otherwise stated), subject to the right
of
Publico to waive any one or more of such conditions:
Section
6.1 Representations
and Warranties of the Operating Company and the Members.
The
representations and warranties of the Operating Company and the Members
contained in this Agreement, including the Schedules hereto, and in the
certificates to be delivered to Publico pursuant hereto and in connection
herewith, shall be true and correct in all material respects on the date hereof
and on the Closing Date as though such representations and warranties were
made
on the Closing Date.
Section
6.2 Performance
of this Agreement.
The
Members shall have duly performed or complied in all material respects with
all
of the obligations to be performed or complied with by them under the terms
of
this Agreement on or prior to the Closing Date.
Section
6.3 Certificate
of Members.
Publico
shall have received a certificate signed by all the Members, dated as of the
Closing Date and subject to no qualification, certifying that the conditions
set
forth in Section 6.1 and 6.2 hereof have been fully satisfied. Such certificate
shall be deemed representations and warranties of the Members under this
Agreement.
Section
6.4 No
Material Adverse Change.
Publico
shall have received60 a certificate, signed by Xxxx Xxxxxxxxxx-Steel and Xxxx
Xxxxxx, as Managers of the Operating Company, to the effect that as of the
Closing Date there has been no material adverse change in the financial
condition, results of operations, business or prospects of the Operating Company
since September 1, 2007, or any material adverse change in the nature of the
Operating Company’s business, the manner of conducting such business, or the
prospects of the business since such date, except as associated with the
execution, delivery and performance of this Agreement.
Section
6.5 Satisfactory
Business Review.
Publico
shall have satisfied itself, after receipt and consideration of the Schedules
and after Publico and its Representatives have completed the review of the
Operating Company and its business contemplated by this Agreement, that none
of
the information revealed thereby has resulted in, or in the opinion of Publico,
may result in, a material adverse change in the assets, properties, business
or
condition (financial or otherwise) of the Operating Company.
Section
6.6 Laws.
There
shall not be in effect on the Closing Date any law restraining, enjoining,
or
otherwise prohibiting or making illegal the consummation of the
Transaction.
Section
6.7 Third
Party Consents.
All
consents, permits, and approvals from parties to contracts or other agreements
with the Operating Company that may be required in connection with the
performance by the Members of their obligations under this Agreement or the
continuance of such contracts or other agreements after the Closing shall have
been obtained.
38
Section
6.8 Certified
Resolutions.
The
Members shall have delivered to Publico copies of the Members’ resolutions
approving and adopting this Agreement and authorizing the Transaction, certified
as true and correct by Xxxx Xxxxxxxxxx-Steel and Xxxx Xxxxxx, as Managers of
the
Operating Company.
Section
6.9 Good
Standing.
The
Members shall have delivered to Publico certificates of good standing, existence
or its equivalent with respect to the Operating Company, certified as of a
recent date by the appropriate governmental authority of the Operating Company’s
jurisdiction of organization, and each other jurisdiction in which the failure
to so qualify and be in good standing would have a material adverse effect
on
the Operating Company and its business.
Section
6.10 Litigation.
At the
Closing Date, no suit, action or other proceeding shall be pending or threatened
before any court or governmental agency in which it is sought (i) to restrain,
prohibit, invalidate or set aside (in whole or in part) the Transaction, (ii)
to
affect the right of the Operating Company to operate or control, after the
Closing Date, its assets, properties and businesses (in whole or in part),
or
(iii) to obtain damages or a discovery order in connection with this Agreement
or the consummation of the Transaction.
Section
6.11 Legal
Opinion.
The
Operating Company shall have delivered to Publico an opinion of a law firm
reasonably acceptable to Publico’s counsel.
Section
6.12 Directors.
The
nominees for director of Publico stated on Schedule 6.12 shall each be duly
elected and standing as directors of Publico.
Section
6.13 [Reserved].
Section
6.14 [Reserved].
Section
6.15 Termination
of Operating Company Employment Agreements.
The
following agreements shall be terminated, with no additional compensation or
the
like provided by either party:
(a) Executive
Employment Agreement, dated as of April 1, 2005, by and between the Operating
Company and Xxxx X. Xxxxxx; and
(b) Executive
Employment Agreement, dated as of April 1, 2005, by and between the Operating
Company and Xxxx Xxxxxxxxxx Steel.
Section
6.16 Agreements.
The
following agreements, forms of which are attached hereto as the corresponding
Exhibit stated, shall be in full force and effect at Closing and Publico shall
have received a copy of such executed agreement:
(a) Capital
Interest Purchase Agreement (Exhibit B)
(b) Promissory
Note (Exhibit C)
(c) Subordination
and Intercreditor Agreement (Exhibit D)
39
(d) Termination
of License Agreement (Exhibit E)
(e) Repurchase
Agreement (Exhibit F)
(f) Mutual
Release (Exhibit G)
Section
6.17 Information
Statement.
The
definitive Information Statement on Schedule 14C, as filed with the SEC, shall
have been mailed to the record stockholders of Publico and at least 20 days
shall have elapsed since such mailing.
Section
6.18 Regulatory
Consents and Approvals.
All
consents, approvals and actions of, filings with and notices to any Governmental
Agency necessary to permit the Operating Company to perform its obligations
under this Agreement and to consummate the Transaction shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental
Agency necessary for the consummation of the Transaction shall have
occurred.
ARTICLE
7.
CONDITIONS
TO THE MEMBERS’ OBLIGATIONS
The
obligations of the Members to consummate the Transaction provided for in this
Agreement
shall be subject to the satisfaction of each of the following conditions on
or
before the Closing Date (unless otherwise stated), subject to the right of
the
Members to waive any one or more of such conditions:
Section
7.1 Representations
and Warranties of Publico.
The
representations and warranties of Publico contained in this Agreement, including
the Schedules hereto, and in the certificates to be delivered to the Members
pursuant hereto and in connection herewith shall be true and correct in all
material respects on the date hereof and on the Closing Date as though such
representations and warranties were made on the Closing Date.
Section
7.2 Performance
of this Agreement.
Publico
shall have duly performed or complied in all material respects with all of
the
obligations to be performed or complied with by it under the terms of this
Agreement on or prior to the Closing Date.
Section
7.3 Certificate
of Publico.
The
Members shall have received a certificate signed by Publico, dated as of the
Closing Date and subject to no qualification, certifying that the conditions
set
forth in Sections 7.1 and 7.2 hereof have been fully satisfied. Such certificate
shall be deemed representations and warranties of Publico under this
Agreement.
Section
7.4 No
Material Adverse Change.
The
Members shall have received a certificate, signed by a duly authorized officer
of Publico, to the effect that as of the Closing Date there has been no material
adverse change in the financial condition, results of operations, or business
of
Publico since the date of its last filing pursuant to Section 13 of the Exchange
Act or any material adverse change in the nature of Publico’s business, or the
manner of conducting such business since such date, except as associated with
the execution, delivery and performance of this Agreement.
Section
7.5 Laws.
There
shall not be in effect on the Closing Date any law restraining, enjoining,
or
otherwise prohibiting or making illegal the consummation of the
Transaction.
40
Section
7.6 Regulatory
Consents and Approvals.
All
consents, approvals and actions of, filings with and notices to any Governmental
Agency necessary to permit Publico to perform its obligations under this
Agreement and to consummate the Transaction shall have been duly obtained,
made
or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental Agency necessary
for
the consummation of the Transaction shall have occurred.
Section
7.7 Third-Party
Consents.
All
consents, permits and approvals from parties to contracts or other agreements
with Publico that may be required in connection with the performance by Publico
of its obligations under this Agreement or the continuance of such contracts or
other agreements after the Closing shall have been obtained.
Section
7.8 Certified
Resolutions.
Publico
shall have delivered to the Members copies of board resolutions approving and
adopting this Agreement and authorizing the Transaction, certified as true
and
correct by the Secretary or Assistant Secretary of Publico.
Section
7.9 Good
Standing.
Publico
shall have delivered to the Members certificates of good standing, existence
or
its equivalent with respect to Publico, certified as of a recent date by the
appropriate governmental authority of Publico’s jurisdiction of incorporation,
and each other jurisdiction in which the failure to so qualify and be in good
standing would have a material adverse effect on Publico and its
business.
Section
7.10 Publico’s
Deliveries.
Publico
shall have delivered to the Members all stockholder records of Publico and
a
true and complete copy of Publico’s corporate minute books.
Section
7.11 Litigation.
At the
Closing Date no suit, action or other proceeding shall be pending or threatened
before any court or governmental agency in which it is sought (i) to restrain,
prohibit, invalidate or set aside (in whole or in part) the Transaction, (ii)
to
affect the right of Publico to operate or control, after the Closing Date,
its
assets, properties and businesses (in whole or in part) or (iii) to obtain
damages or a discovery order in connection with this Agreement or the
consummation of the Transaction.
Section
7.12 Legal
Opinion.
Publico
shall have delivered to the Members an opinion of a law firm reasonably
acceptable to the Members’ counsel.
Section
7.13 Directors.
The
nominees for director of Publico stated on Schedule 6.12 shall each be duly
elected and standing as directors of Publico.
Section
7.14 [Reserved].
Section
7.15 Series
A Preferred Stock Designation.
Prior
to the Closing Date, the certificate of designation for Publico’s Series A
convertible preferred stock, attached hereto as Exhibit H, shall be filed with
the Secretary of State of the State of Nevada and shall be in effect, with
no
amendment thereto.
Section
7.16 Agreements.
The
following agreements, forms of which are attached hereto as the corresponding
Exhibit stated, shall be in full force and effect at Closing and Publico shall
have received a copy of such executed agreement:
(a) Series
A
Convertible Preferred Stock Subscription Agreement (Exhibit I)
41
(b) Capital
Interest Purchase Agreement (Exhibit B)
(c) Promissory
Note (Exhibit C)
(d) Subordination
and Intercreditor Agreement (Exhibit D)
(e) Termination
of License Agreement (Exhibit E)
(f) Employment
Agreement with Xxxx X. Xxxxxx (Exhibit J)
(g) Employment
Agreement with Xxxx Xxxxxxxxxx Steel (Exhibit K)
(h) Employment
Agreement with Xxxxxxx Xxxxxx (Exhibit L)
(i) Employment
Agreement with Xxxx Xxxxxx (Exhibit M)
(j) Employment
Agreement with Xxxxx Xxxxxxxxxx (Exhibit N)
(k) Employment
Agreement with Xxxxxx Pasisca (Exhibit O)
(l) Repurchase
Agreement (Exhibit F)
(m) Mutual
Release (Exhibit G)
ARTICLE
8.
REPRESENTATION
Section
8.1 No
Legal Advice.
The
Members acknowledge that they have had an opportunity to review this Agreement
(and the transactions contemplated by this Agreement or any other agreements
related thereto) with their own legal and tax counsel. The Members are relying
solely on such counsel and not on any statements or representations of Xxxxx,
Xxxxxxxx & Xxxxxxx, LLP (the “Operating
Company Counsel”),
the
Operating Company, Xxxxx Xxxx LLP (“Publico
Counsel”),
Publico or any of their respective agents for legal or tax advice with respect
to this Agreement (or the transactions contemplated by this Agreement or any
other agreements related thereto), except for the representations, warranties
and covenants expressly set forth herein. Members should not consider Operating
Company Counsel or Publico Counsel to be their own counsel and were advised
by
Operating Company Counsel and Publico Counsel that the Members should retain
and
consult with their own legal and tax counsel on all matters concerning this
Agreement (and the transactions contemplated by this Agreement or any other
agreements related thereto).
ARTICLE
9.
MISCELLANEOUS
Section
9.1 Notices.
Any
notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. Any such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if mailed, three
(3)
days after the date of deposit in the mails, as follows:
(i) if
to
Publico, to:
Milk
Bottle Cards, Inc.
000
X.
00xx
Xxx.
Xxxxxxxxx,
XX, Xxxxxx X0X 0X0
42
with
a
copy to:
(which
shall not constitute notice)
Xxxxxxx
X. Xxxx, Esq.
Xxxxx
Xxxx LLP
0000
Xxxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
(ii) if
to the
Members, to:
(Name
of
Member)
0000
Xxxxxxxxx Xxxxx Xxxxxxxx 000, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
Any
party
may by notice given in accordance with this Section or via electronic mail
to
the other parties designate another address or person for receipt of notices
hereunder.
Section
9.2 Entire
Agreement.
This
Agreement (including the schedules and exhibits) and the agreements referred
to
herein and/or executed in connection with the consummation of the Transaction
contain the entire agreement among the parties with respect to the exchange
of
the Members’ Interests for the Exchange Shares and the related transactions, and
supersede all prior agreements, written or oral, with respect
thereto.
Section
9.3 Waivers
and Amendments; Non-Contractual Remedies; Preservation of
Remedies.
This
Agreement may be amended, superseded, canceled, renewed, or extended, and the
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the parties waiving compliance. No delay on
the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any inaccuracy in or breach
of
any representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach
is
based may also be the subject of any other representation, warranty, covenant
or
agreement contained in this Agreement (or in any other agreement between the
parties) as to which there is no inaccuracy or breach.
Section
9.4 Governing
Law.
This
Agreement shall be governed and construed in accordance with the laws of Nevada,
applicable to agreements made and to be performed entirely within such State
(without giving effect to conflicts of law principles thereof).
43
Section
9.5 Binding
Effect; No Assignment; No Third Party Beneficiaries.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and legal representatives. Nothing contained herein
is intended or shall be construed as creating third party beneficiaries to
this
Agreement, except with respect to the rights and duties of the holders of
Publico’s Series A preferred stock as set forth in (and only as in) Sections
1.2(a) and 1.2(b), above. This Agreement is not assignable except by operation
of law.
Section
9.6 Variations
in Pronouns.
All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
Section
9.7 Counterparts.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto.
Section
9.8 Exhibits
and Schedules.
The
Exhibits and Schedules are a part of this Agreement as if fully set forth
herein. All references herein to Sections, subsections, clauses, Exhibits and
Schedules shall be deemed references to such parts of this Agreement, unless
the
context shall otherwise require.
Section
9.9 Headings.
The
headings in this Agreement are for reference only, and shall not affect the
interpretation of this Agreement.
44
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement as of the date first above
written.
| PUBLICO | ||
|
a
Nevada corporation
|
||
| |
|
|
| /s/ Alexander Man-Kit Xxxx | ||
|
Xxxxxxxxx Man-Kit Ngan, Assistant Secretary |
||
| MEMBERS | ||
|
TWE
INTERNATIONAL, LLC
|
||
| |
|
|
| /s/ Xxxx Xxxxxxxxxx-Steel | ||
|
Xxxx X. Xxxxxxxxxx-Steel, its Manager |
||
| /s/ Xxxx Xxxxxx | ||
|
Xxxx X. Xxxxxx, its Manager |
||
| XXXXXX TRUST | ||
| /s/ Xxxxxxx Xxxxxx | ||
|
Xxxxxxx Xxxxxx, its Trustee |
||
| /s/ Xxxx Xxxxxx | ||
|
Xxxx Xxxxxx, its Trustee |
||
| /s/ XXXXX XXXXXXXX | ||
|
|
||
| OPERATING COMPANY | ||
|
FORGEHOUSE
LLC,
a
Georgia limited liability company
|
||
|
/s/
Xxxx Xxxxxxxxxx-Steel
|
||
|
Xxxx
X. Xxxxxxxxxx-Steel,
Manager
of TWE International, LLC,
Its
Manager
|
||
|
/s/
Xxxx Xxxxxx
|
||
|
Xxxx
X. Xxxxxx,
Manager
of TWE International, LLC,
Its
Manager
|
||
[Signature
page continued]
| With respect to Section 1.2 only: | ||
| /s/ Xxxx X. Xxxxxxxxxx-Steel | ||
|
Xxxx X. Xxxxxxxxxx-Steel, an individual |
||
| /s/ Xxxx X. Xxxxxx | ||
|
Xxxx X. Xxxxxx, an individual |
||
| /s/ Xxxxxxx Xxxxxx | ||
|
Xxxxxxx Xxxxxx, an individual |
||
| /s/ Xxxx Xxxxxx | ||
|
Xxxx Xxxxxx, an individual |
||
