AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the
“Agreement”), dated
August 31, 2009, among Intelli-Check – Mobilisa, Inc., a Delaware corporation
(“Parent”), PA
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent (“Sub”), Positive
Access Corporation, a Minnesota corporation (“Company”), and Xxxx Xxxxxxxxx
and Xxxxxxx Xxxxx the holders of one hundred percent (100%) of the issued and
outstanding ownership interests in the Company (collectively referred to as the
“Shareholders”), and
Xxxx Xxxxxxxxx (the “Shareholders’ Representative”)
as agent and attorney-in-fact for the holders of Company Common Stock (as
defined in Section 2.1).
INTENDING TO BE LEGALLY BOUND, and in
consideration of the premises and the mutual representations, warranties,
covenants, and agreements in this Agreement, the parties hereby agree as
follows:
ARTICLE
I
THE
MERGER
1.1 Effective Time of the
Merger. Subject
to the provisions of this Agreement, Sub will be merged with and into Company
(the “Merger”). Articles
of merger (“Articles of
Merger”) will be duly prepared by the parties, executed by the Sub and
the Company and thereafter delivered to the Secretary of State of Minnesota for
filing, as provided in the Minnesota Business Corporation Act (the “MBCA”) as soon as practicable
on or after the Closing Date (as defined in Section 1.2). A
certificate of merger (“Certificate of Merger”) will
be duly prepared by the parties, executed by the Surviving Corporation (as
defined below) and thereafter delivered to the Secretary of State of the State
of Delaware for filing, as provided in the Delaware General Corporation Law (the
“DGCL” ) as soon as
practicable on or after the Closing Date (as defined in
Section 1.2). The Merger will become effective upon the later of
the acceptance for filing of the Certificate of Merger by the Secretary of State
of Delaware or at such later time as is provided in the Certificate of Merger
(the “Effective
Time”). Solely for purposes of clarification, Company and the
Shareholders’ Representative acknowledge and agree that Parent will have no
obligation to make any payment in accordance with this Agreement until the
Effective Time.
1.2 Closing. The
closing of the Merger (“Closing”) will take place as
soon as practicable after satisfaction or waiver of the last to be fulfilled of
the conditions set forth in Article VII (such date, the “Closing Date”), at the offices
of K&L Gates LLP at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx
00000, unless another date or place is agreed to in writing by Parent and
Company.
1.3 Effects of the
Merger. At the
Effective Time: (i) the separate existence of the Company will cease and
Company will be merged with and into the Sub and the Sub will continue as the
surviving corporation and as a wholly owned subsidiary of Parent (after the
Merger, the Sub is sometimes referred to in this Agreement as the “Surviving Corporation”);
(ii) the certificate of incorporation of the Surviving Corporation will
remain the same as the certificate of incorporation of Sub, as in effect
immediately before the Effective Time, until later amended in accordance with
the DGCL; (iii) the bylaws of the Surviving Corporation will remain the
same as the bylaws of Sub, as in effect immediately before the Effective Time,
until later amended in accordance with the provisions thereof, the articles of
incorporation and the DGCL; (iv) the directors and officers of the Sub
immediately before the Effective Time will be the directors and officers of the
Surviving Corporation in each case until their respective successors have been
duly elected, designated, or qualified or until their earlier death,
resignation, or removal in accordance with the Surviving Corporation’s
certificate of incorporation and bylaws; and (v) the Merger will, from and
after the Effective Time, have all the effects provided by Section 251 of the
DGCL and other applicable law. For federal and applicable state income tax
purposes, the Merger is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the “Code”), and no
party to this Agreement will take any action or filing position inconsistent
with such characterization except as otherwise required by a final and
non-appealable decision or other order by any court of competent jurisdiction or
by a final closing agreement or accepted offer in compromise under Section 7121
or 7122 of the Code.
ARTICLE
II
EFFECT
OF THE MERGER; DELIVERY OF CONSIDERATION
2.1 Effect on Capital
Stock. As
of the Effective Time, by virtue of the Merger and without any action (except as
provided in this Section 2.1) on the part of Sub, Parent, Company, or the
holder of any shares of Company common stock, $.01 par value (“Company Common
Stock”):
2.1.1 Capital
Stock of Sub. Each
share of Sub common stock, $.01 par value per share, issued and outstanding
immediately before the Effective Time, will be converted into one validly
issued, fully paid, and nonassessable share of Surviving Corporation common
stock (“Surviving Corporation
Common Stock”), with the stock certificate of Sub evidencing ownership of
such share of Surviving Corporation Common Stock.
2.1.2 Cancellation
of Company Common Stock. Each
share of Company Common Stock held by Company as treasury stock and each share
of Company Common Stock owned directly or indirectly by Company or by any
subsidiary (as defined in Section 10.2) of Company will automatically be
cancelled and retired and will cease to exist and no consideration will be
delivered or deliverable in exchange for such Company Common
Stock. Company will obtain a written consent to such cancellation
from any subsidiary, whether or not wholly owned, that owns Company Common
Stock. At the Effective Time, all Company Common Stock will be
cancelled and will cease to exist and each certificate (a “Certificate”) previously
representing any Company Common Stock will represent only the right to receive
the applicable Conversion Payment (as defined in Section 2.1.3) as provided by
Section 2.1.3.
2.1.3 Conversion
of Company Securities. Subject
to the limitations on payments and the timing of payments as set forth in
Section 2.2, Section 2.3, Section 2.4 and Article VIII, each validly issued
and outstanding share of Company Common Stock immediately before the Effective
Time (other than Company Common Stock referred to in Section 2.1.2), will,
without any action on the part of the holder thereof (except as set forth in
this Section 2.1.3) be converted into the right to receive the Per Share
Amount (as defined below) (“Conversion
Payment”).
The
“Per Share Amount” will
be made up of both cash and Parent Common Stock (as defined below) and is equal
to the Base Cash Amount (as defined below), plus the Stock Consideration (as
defined below), minus the Working Capital Deficit (as defined in
Section 2.4(a)), divided by the total issued and outstanding shares of
Company Common Stock.
The
“Base Cash Amount” means
$1,225,000, which includes the Holdback Amount (as defined in Section 2.2), and
the Deferred Payment (as defined in Section 2.3).
The
“Stock Consideration”
means the number of shares of Parent Common Stock, $.01 par value (“Parent Common Stock”), that,
in the aggregate, has a market value of $1,000,000 based upon the average daily
closing price per share of Parent Common Stock during the thirty (30) trading
day period prior to Closing Date.
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The
amount that the holders of Company Common Stock are entitled to receive at
Closing under this Section 2.1.3 will be reduced by their pro rata share of
the Holdback Amount (as defined in Section 2.2), which will be withheld by
Parent pursuant to Section 2.2 below and reduced by their pro rata share of the
Deferred Payment (as defined in Section 2.3), which will be withheld by Parent
pursuant to Section 2.3 .
2.2 Holdback. At Closing, cash
in the amount of $400,000 (the “Holdback Amount”) to be
received by holders of Company Common Stock in accordance with
Section 2.1.3 (pro rata based upon the total consideration to be received
by such holder at Closing) will not be distributed to or made available for
holders of Company Common Stock in accordance with Section 2.1.3 but rather
will be retained by Parent to secure claims by Parent or Surviving Corporation
for indemnification in accordance with Article VIII and to fund payments
related to Net Working Capital to the extent required by Section
2.4. The release of the Holdback Amount will occur as
follows:
(a) On
the first anniversary of the Closing Date, $200,000, plus interest calculated at
a rate of .5% per annum, minus any amounts used to pay indemnification in
accordance with Article VIII and to fund payments related to Net Working
Capital to the extent required by Section 2.4., will be distributed pro rata to
the holders of the Company Common Stock; and
(b) On
the second anniversary of the Closing Date, $200,000, plus interest calculated
at a rate of .5% per annum, minus any amounts used to pay indemnification in
accordance with Article VIII, will be distributed pro rata to the holders
of the Company Common Stock.
2.3 Deferred
Payment. At Closing, cash
in the amount of $200,000 and Stock Consideration valued at $200,000 as
calculated in Section 2.1 (together, the “Deferred Payment”) to be
received by holders of the Company Common Stock in accordance with
Section 2.1.3 (pro rata based upon the total consideration to be received
by such holder at Closing) will not be distributed to or made available for
holders of Company Common Stock in accordance with Section 2.1.3 but rather
will be retained by Parent and paid to the holders of the Company Common Stock
in accordance with Section 2.1.3 on the first anniversary of the Closing
Date. The $200,000 Deferred Payment that is to be paid in cash will
include interest calculatd at a rate of .5% per annum for the year in which it
was deferred. For the avoidance of doubt, the Deferred Payment will
not be used to pay indemnification in accordance with Article VIII or to
fund payments related to Net Working Capital to the extent required by Section
2.4.
2.4 Net Working
Capital.
(a) On
the Closing Date Company will have not less than $30,000 Net Working Capital,
nor less than $30,000 in cash. To the extent that Company has
negative Net Working Capital on the Closing Date, such deficiency will be
deducted from the Base Cash Amount in accordance with Section 2.1.3 as the
“Working Capital
Deficit.”
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(b) For
purposes of this Agreement, the term “Net Working Capital” means:
(i) Total Current Assets (as defined below) less (ii) all accrued Total
Current Liabilities (as defined below). “Fixed assets, net,” “intangible assets”
and deferred tax assets will be excluded from the determination of Net Working
Capital. For avoidance of doubt, “Total Current Assets” as
reflected on the Closing Balance Sheet will include: (i) cash and cash
equivalents; (ii) short-term investments; (iii) accounts receivable
outstanding less than 60 days and other receivables net of doubtful accounts;
and(iv) prepaid expenses and other current assets.. “Total Current Liabilities” as
reflected on the Closing Balance Sheet will include: (w) accounts payable;
(x) accrued taxes, payroll and benefits; (y) other “Current
Liabilities”; and (z) any Debt (including long-term Debt). Total
Current Liabilities will include any Expenses that have not been paid before
Closing. Each of the foregoing terms will be determined in accordance
with generally accepted accounting principals (“GAAP” ), except to the extent
described above and except that “Current Liabilities” will include long-term
Debt and except as otherwise provided in this Section 2.34(b). “Debt” means all funded
indebtedness, determined without duplication, and includes notes; capitalized
leases; bank term and revolving credit loans; obligations related to drawn
letters of credit; bonds evidencing funded indebtedness; debentures; borrowings
from lending institutions other than banks; subordinated loans and subordinated
debt securities with or without stated maturity; bank bills; bank overdrafts;
obligations with respect to the factoring or discounting of accounts receivable
and other instruments; any dividends payable to the holders of Company Common
Stock; and accrued interest and expense and penalties on any of the foregoing
(including prepayment penalties).
(c) At
least three business days before the anticipated Closing Date, Company will
prepare, subject to the reasonable approval of Parent, an unaudited estimated
balance sheet of Company as of the anticipated Closing Date as mutually expected
by the parties (the “Preliminary Closing Balance
Sheet”) and a computation of the Net Working Capital as of the expected
Closing Date based upon the financial information reflected in the Preliminary
Closing Balance Sheet (the “Preliminary Closing Date
NWC”). The Preliminary Closing Balance Sheet and the
Preliminary Closing Date NWC calculation will be provided as Schedule 2.4(c) and
become a part of this Agreement. The Preliminary Closing Balance
Sheet will be prepared in accordance with GAAP and on a basis consistent with
the Financial Statements (as defined in Section 3.1.5 below), and will fairly
and accurately present the financial position of Company as of the anticipated
Closing Date. The parties will use the Preliminary Closing Balance
Sheet and Preliminary Closing Date NWC to calculate the Per Share Amount for
purposes of payment at the Closing in accordance with Section
2.1.3.
(d) Within
30 days after the Closing Date, Parent will prepare and deliver to the
Shareholders’ Representative (i) an unaudited balance sheet of Company as of the
Closing Date, and which, to the knowledge of Parent, fairly and accurately
presents the financial position of Company as of the date of such balance sheet
(the “Proposed Closing Balance
Sheet,” along with its calculation of Net Working Capital as of the
Closing Date (“Closing Date
NWC”).
(e) Within
10 days after the delivery by Parent of the Proposed Closing Balance Sheet and
calculation of its Proposed Closing Date NWC under Section 2.3(d), the
Shareholders’ Representative will deliver to Parent a written notice either
approving or objecting to the Proposed Closing Balance Sheet and the
accompanying Closing Date NWC calculation (the “Review
Notice”). The Review Notice will reasonably state a
description of the Shareholders’ Representative’s differences, if any, with
Parent’s determination of the Proposed Closing Balance Sheet and the Closing
Date NWC calculations, together with proposed revisions (such revised Proposed
Closing Balance Sheet being referred to as the “Counter Proposed Closing Balance
Sheet”), along with revisions to the Closing Date NWC
calculations. A failure by the Shareholders’ Representative to so
deliver the Review Notice to Parent within such period will be deemed an
approval of and agreement with the Proposed Closing Balance Sheet and the
Closing Date NWC calculations of Parent, and such Proposed Closing Balance Sheet
and the accompanying Closing Date NWC calculations of Parent will be deemed the
Closing Balance Sheet and the final and conclusive calculation of the Closing
Date NWC (the “Final Closing
Date NWC”) .
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(f) If
the Proposed Closing Balance Sheet and the accompanying Closing Date NWC
calculation of Parent are disputed by the Shareholders’ Representative in
accordance with this Section 4, the Shareholders’ Representative and Parent will
negotiate in good faith in an effort to resolve any differences regarding such
determination. If Parent and the Shareholders’ Representative agree
on the Proposed Closing Balance Sheet and Closing Date NWC, the amount they
agree upon will be final, conclusive and binding as the Final Closing Date NWC,
but if the objection cannot be resolved by such negotiation within 30 days after
Parent’s receipt of the Review Notice (the “Reconciliation Deadline”), the
Proposed Closing Balance Sheet, the Counter Proposed Closing Balance Sheet, the
Review Notice, and all work papers related thereto (collectively, the “Determination Materials”),
will be submitted to a nationally recognized accounting firm as Parent and the
Shareholders’ Representative may mutually agree to (which agreement will not be
unreasonably withheld or delayed) which will review the Determination Materials
and will determine the Final Closing Date NWC.
(g) If
the Final Closing Date NWC (as determined in accordance with Sections 2.4(e) or
2.4(f) above) is less than the Preliminary Closing Date NWC, then an amount
equal to the difference between (y) the Preliminary Closing Date NWC, and (z)
the Final Closing Date NWC will be paid to Parent out of the Holdback
Amount.
(h) Nothing
in this Section 2.4 will be deemed to limit the indemnification rights of the
Indemnified Parties in accordance with Article VIII hereof with respect to any
breach of any representation and warranty of this Agreement, including without
limitation, a breach of any of the representations contained in Section
3.1.5.
(i) For
purposes of this Agreement, “Closing Balance Sheet” means the balance sheet
of Company as of the Closing Date determined in accordance with this Section
2.4.
2.5 Delivery of
Consideration.
2.5.1 Exchange
Procedures. At
the Effective Time, Parent will pay by certified check or wire transfer of same
day funds the applicable cash portion of the Conversion Payments, under Section
2.1 and subject to Section 2.2 and Section 2.3 hereof, and send a
certificate of certificates (or book entry) representing the Stock Consideration
portion of the Conversion Payments, to each record holder of Company Common
Stock as of the Effective Time as promptly as practicable following the
surrender of the Certificates in exchange for the applicable Conversion Payment
by such holder of record (which Certificates will then be
canceled). If any Certificate has been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
document to be lost, stolen, or destroyed and, if required by the Surviving
Corporation, the payment of any reasonable fees, and the posting by such Person
of a bond, in such reasonable amount as Parent may direct (but consistent with
past practice of Company) as indemnity against any claim that may be made
against it with respect to such document, Parent will issue in exchange for such
lost, stolen, or destroyed document, the applicable Conversion Payments to which
the holder is entitled under this Article II.
2.5.2 No
Further Ownership Rights in Company Common Stock. The
applicable Conversion Payment delivered upon surrender in exchange for Company
Common Stock in accordance with the terms hereof will be deemed to have been
delivered in full satisfaction of all rights pertaining to such Company Common
Stock. After the Effective Time, no further transfers will be made on
the stock transfer books of Company of Company Common Stock issued before the
Effective Time. When the Merger becomes effective, all Company Common
Stock issued before then will cease to exist, and each Certificate previously
representing any such shares will represent only the right to receive the
applicable Conversion Payment as described in Section 2.1.3 subject to the
terms of this Agreement. If, after the Effective Time, Certificates are
presented to Surviving Corporation for transfer, they will be cancelled and
exchanged as provided in this Article II, except as otherwise provided by
law.
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2.5.3 Withholding
Rights. Parent
will be entitled to deduct and withhold from the applicable Conversion Payment
otherwise payable under this Agreement to any Person (as defined in
Section 10.2) who was a holder of Company Common Stock immediately before
the Effective Time, such amounts as Parent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local, or foreign tax law. Any such withheld amounts will be
timely paid over to the appropriate Governmental Entity (as defined in
Section 3.1.4). To the extent that amounts are so withheld by Parent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder of the Certificates in respect of which such deduction
and withholding was made by Parent.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and
Warranties of Company. Except
as set forth in a correspondingly numbered disclosure schedule delivered by
Company to Parent dated as of the date hereof (the “Company Disclosure Schedule”),
Company represents to Parent and Sub as follows:
3.1.1
Organization,
Standing, and Power.
(a) The
Company is an entity duly organized, validly existing, and in good standing, as
applicable, under the laws of its jurisdiction of incorporation or
organization. Company has all requisite corporate power and authority
to own, lease, and operate its properties and to carry on its businesses as now
being conducted. Company is duly qualified and in good standing to do
business in each jurisdiction in which the character of the property owned,
leased, or operated by it or the nature of its activities makes such
qualification necessary (all such jurisdictions are listed in
Section 3.1.1(a) of the Company Disclosure Schedule), except in such
jurisdictions in which a failure to be so organized, existing, or in good
standing or to have such corporate power and authority would not result, or
reasonably be expected to result, individually or in the aggregate, in a
material adverse effect on the financial condition, business, assets, results of
operations, or prospects of Company, taken as a whole, or that would materially
impair the ability of Company to consummate the Merger (“Company Material Adverse
Effect”).
(b) Company
has delivered or made available to Parent or its counsel complete and correct
copies of Company’s articles of incorporation, bylaws, stock records and minutes
books, in each case, as amended to the date hereof. The minute books
of Company contain correct and complete records of all material proceedings and
actions taken at all meetings of, or effected by written consent of, the
shareholders of Company and its board of directors (and each committee thereof),
and the stock records of Company contain correct and complete records of all
original issuances and subsequent transfers, repurchases, and cancellations of
Company’s capital stock. Company does not own or control, directly or
indirectly, shares of capital stock of any other corporation, or any interest in
any partnership, joint venture, or other non-corporate business entity or
enterprise.
3.1.2 Capital
Structure.
(a) The
authorized capital stock of Company consists of 2,000,000 shares of stock
consisting of 1,000,000 Company Common Shares, $.01] par value, of which, as of
the date hereof, 870 shares are issued and outstanding and consisting of
1,000,000 Company Preferred Shares, of which, as of the date hereof, no shares
are issued and outstanding. All Company Common Stock and any other
securities of Company outstanding as of the date hereof (collectively referred
to as “Company
Securities”), and the record owners of such securities are as set forth
in Section 3.1.2 of the Company Disclosure Schedule, and no such securities
are held by Company in its treasury. True and complete copies of all
Company stock option plans and the forms of any other instruments setting forth
the rights of all Company Securities as of the date hereof have been delivered
to Parent or its counsel.
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(b) All
outstanding Company Common Shares are validly issued, fully paid, nonassessable,
and not subject to any preemptive rights or similar rights under the MBCA,
Company’s articles of incorporation or bylaws, or to any agreement to which
Company is a party or by which Company may be bound. There are no
options, warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, equity-linked securities, or rights of any
character to which Company is a party or by which Company may be bound
obligating Company to issue additional shares of the capital stock of
Company. Other than as set forth in Section 3.1.2(a) Company does not
have outstanding any bonds, debentures, notes nor does it owe any other
indebtedness, the holders of which (i) have the right to vote (or are
convertible or exercisable into securities having the right to vote) with
holders of Company Common Shares on any matter or (ii) are or will become
entitled to receive any payment as a result of the Merger. Other than
as set forth in Section 3.1.2(a) Company does not have outstanding any
restricted stock, restricted stock units, stock appreciation rights, stock
performance awards, dividend equivalents, or other stock-based or equity-linked
securities of a similar nature. There is no agreement or right
allowing for the repurchase or redemption of any capital stock or convertible
securities of Company, and Company has not repurchased any of its capital
stock. There are no agreements requiring Company to contribute to the
capital of, or lend or advance funds to, any subsidiaries of
Company. Company is not party to nor to its knowledge is any
shareholder of Company a party to, any voting agreement, voting trust, or
similar agreement or arrangement relating to any class or series of its capital
stock, or any agreement or arrangement providing for registration rights with
respect to any capital stock or other securities of Company. There
are no accrued and unpaid dividends with respect to any outstanding shares of
Company capital stock. Company does not own or hold the right to
acquire any shares of capital stock or any other security or interest in any
other Person.
(c) All
of the issued and outstanding Company Securities have been offered, issued, and
sold by Company in compliance with applicable federal and state securities
laws.
(d) To
Company’s knowledge, no shareholder of Company has granted options or other
rights to purchase any Company Securities from such shareholder.
3.1.3 Authority. Company
has all requisite corporate power and authority to execute and deliver this
Agreement, subject to approval of the shareholders of Company to consummate the
Merger. The execution and delivery by Company of this Agreement and
the performance of Company’s obligations hereunder have been duly and validly
authorized by all necessary corporate action on the part of Company, subject
only to approval of the Merger and this Agreement by the shareholders of
Company. This Agreement has been duly executed and delivered by
Company and constitutes a valid and binding obligation of Company enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by the effect of (a) any applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors’ rights generally, and (b) general equitable principles,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
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3.1.4 Consents
and Approvals; No Violations. Subject
to the satisfaction of the conditions in Sections 7.1 and 7.3, the
execution and delivery of this Agreement or any other agreement or document
contemplated by this Agreement do not, and the consummation of the Merger will
not, conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge, or other
encumbrance on assets (any such conflict, violation, default, right, loss, or
creation, a “Violation”)
under (a) any provision of the articles of incorporation or bylaws of
Company, or (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Company or its properties or
assets, other than, in the case of clause (b), any such Violation that
would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect. No consent, approval, order, or
authorization of, or registration, declaration, or filing with or exemption by,
any court, administrative agency, or commission or other governmental authority
or instrumentality, whether domestic or foreign (each a “Governmental Entity”)
(collectively any consents or waivers with respect to Violations under
clauses (a) and (b) of the first sentence of this Section 3.1.4,
“Consents”), is required
by or with respect to Company in connection with the execution and delivery of
this Agreement or the consummation by Company of the Merger, except for
Consents, if any, relating to the filing of the Certificate of Merger in
accordance with the DGCL and except for such other Consents that if not
obtained or made would not result, or reasonably be expected to result,
individually or in the aggregate, in a Company Material Adverse
Effect. Company is in compliance with all applicable federal, state,
local, or foreign statutes, laws, ordinances, rules, judgments, orders, and
regulations of any Governmental Entity applicable to its business and
operations, except for violations that would not result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect. All permits required to conduct the business of
Company as currently conducted have been obtained, are in full force and effect,
and are being complied with, except where the failure to hold or to be in
compliance with such permits would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse
Effect.
3.1.5 Financial
Statements
The (a)
balance sheet of Company as of December 31, 2008 (the “Balance Sheet Date”) and the
related statements of income, changes in owner’s equity for the 12 months then
ended and (b) an unaudited balance sheet of Company as of August 26,
2009 (the “Interim Balance
Sheet Date”), and the related unaudited statements of income, and changes
in owner’s equity for the three months then ended (collectively, the “Financial Statements”) that
have been provided to Parent comply in all material respects with all accounting
requirements applicable to Company, and fairly present, in all material
respects, the consolidated financial position of Company as at the dates thereof
and the results of its operations for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring audit adjustments not
material in scope or amount). There has been no change in Company’s
accounting policies or the methods of making accounting estimates or changes in
estimates that are material to the Financial
Statements. Section 3.1.5 of the Company Disclosure Schedule
lists, and Company has delivered to Parent 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 promulgated by the
SEC) effected by Company since the Balance Sheet Date. There are no
material liabilities, claims or obligations of any nature, whether accrued,
absolute, contingent, anticipated or otherwise, whether due or to become due,
that are not reflected in the Financial Statements. Except as
disclosed in the Financial Statements, Company is not a guarantor or indemnitor
of any indebtedness or other liability of any other Person
3.1.6 No
Defaults. Company
is not, and has not received notice that it would be with the passage of time,
in default or violation of any term, condition, or provision of (i) the
articles of incorporation or bylaws of Company, (ii) any judgment, decree,
or order, or (iii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, or other instrument to which
Company is now a party or by which it or any of its properties or assets may be
bound, except with respect to (iii) for Violations that would not result, or
reasonably be expected to result, individually or in the aggregate, in a Company
Material Adverse Effect.
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3.1.7 Litigation. here is
no claim, action, suit, or proceeding pending or, to the knowledge of Company,
threatened, against or affecting Company, any of its officers, directors, or
employees, or any of its properties before any court or arbitrator or any
Governmental Entity. There is no investigation pending or, to the
knowledge of Company, threatened against Company, before any Governmental
Entity. Section 3.1.7 of the Company Disclosure Schedule sets
forth as of the date hereof, with respect to any pending action, suit,
proceeding, or investigation to which Company is a party, the forum, the parties
thereto, the subject matter thereof, and the amount of damages claimed, or the
nature of any other relief sought.
3.1.8 No
Material Adverse Change. Since
the Balance Sheet Date, there has not been a Company Material Adverse
Effect. Except as contemplated by this Agreement, since the Balance
Sheet Date, there has not been:
(a) any
declaration, setting aside, or payment of any dividend or other distribution,
stock split, reclassification, subdivision, or exchange with respect to any
Company Common Stock;
(b) any
amendment of any provision of the articles of incorporation or bylaws of, or of
any term of any outstanding security issued by, Company;
(c) any
incurrence, assumption, or guarantee by Company of any indebtedness for borrowed
money, or any mortgage, pledge, imposition of any security interest, claim,
encumbrance, or other restriction on any of the assets, tangible or intangible,
of Company;
(d) a
material change to any tax election or any accounting method, or any settlement
or consent to any claim or assessment relating to taxes incurred, or incurrence
of any obligation to make any payment of, or in respect of, taxes, except in the
ordinary course of business, or agreement to extend or waive the statutory
period of limitations for the assessment or collection of taxes;
(e) any
(i) grant of severance or termination pay to any director, officer, or
employee of Company, (ii) entry into any employment, deferred compensation
(based upon the meaning of such term before the adoption of Code
Section 409A), or other similar agreement (or any material amendment to any
such existing agreement) with any director, officer, or employee of Company,
(iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements, (iv) increase in
compensation, bonus, or other benefits payable to directors, officers, or
employees of Company, in each case other than those required by written
contractual agreements, or (vi) acceleration of, or amendment or change to,
the period of exercisability, vesting, or exercise price of options, restricted
stock, stock bonus, or other awards granted under the Incentive Plan (including
any discretionary acceleration of the exercise periods by Company’s board of
directors, the compensation committee of Company’s board of directors, or a
committee overseeing the Incentive Plan as permitted under such plan) or
authorization of cash payments in exchange for any options, warrants, restricted
stock, stock bonus, or other awards granted under any of such plans except, in
each case, as may be required under applicable law or the existing terms of the
Incentive Plan or other related agreements;
(f) any
issuance of capital stock or securities convertible into capital stock of
Company (including grants or other issuances of options, warrants, or other
rights to acquire capital stock of Company);
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(g) any
acquisition or disposition of assets (other than in the ordinary course of
business), any acquisition or disposition of capital stock of any third party,
or any merger or consolidation with any third party;
(h) any
entry by Company into any joint venture, partnership, or limited liability
company or operating agreement with any Person;
(i) any
damage, destruction, or loss (whether or not covered by insurance) affecting
Company’s properties or business that has resulted, or would reasonably be
expected to result, individually or in the aggregate, in a Company Material
Adverse Effect;
(j) any
granting by Company of a security interest in or lien on any material property
or assets of Company;
(k) any
cancellation of debt or waiver of any claim or right;
(l) any
capital expenditure or acquisition of any property, plant, and equipment by
Company for a cost in excess of $5,000 in the aggregate;
(m) any
discharge or satisfaction by Company of any lien or encumbrance, or any payment
of any obligation or liability (absolute or contingent) other than current
liabilities shown on the balance sheet included in the Financial Statements as
of the Balance Sheet Date and current liabilities incurred since the Balance
Sheet Date in the ordinary course of business;
(n) any
termination, modification, or rescission of, or waiver by Company of rights
under, any existing contract resulting, or reasonably likely to result,
individually or in the aggregate, in a Company Material Adverse
Effect;
(o) any
material grant or assignment of Company Intellectual Property;
(p) any
event or condition resulting individually or in the aggregate in a Company
Material Adverse Effect; or
(q) any
agreement, authorization, or commitment, whether in writing or otherwise, to
take any action described in this Section 3.1.8.
3.1.9 Absence
of Undisclosed Liabilities. Company
has no liabilities, obligations, or contingencies (whether absolute, accrued, or
contingent) except (i) liabilities, obligations, or contingencies (each a
“Liability” and
collectively, “Liabilities”) that are accrued
or reserved against in the consolidated balance sheet of Company as of the
Balance Sheet Date; (ii) additional Liabilities reserved against since the
Balance Sheet Date that (x) have arisen in the ordinary course of business,
and (y) are accrued or reserved against on the books and records of
Company; (iii) additional Liabilities incurred since the Balance Sheet Date that
(x) have arisen in the ordinary course of business, and (y) are not
accrued or reserved against on the books and records of Company and none of
which, individually or in the aggregate, are expected to exceed $5,000; or (iv)
additional Liabilities that are expressly provided for in any of Company’s
contracts that are not required to be reflected in Company’s financial
statements under GAAP.
3.1.10 Certain
Agreements. Neither
the execution and delivery of this Agreement nor the consummation of the Merger
will (i) result in any payment (including severance, unemployment
compensation, parachute payment, bonus, or otherwise) becoming due to any
director, employee, or independent contractor of Company, from Company under any
Plan (as defined in Section 3.1.12), agreement, document, or otherwise,
(ii) increase any benefits payable under any Plan, agreement, or document,
or (iii) result in the acceleration of the time of payment or vesting of
any such benefits
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3.1.11 Employees. Since
the inception of Company (or any predecessor entity, if applicable), Company has
been in compliance with all then applicable laws and regulations respecting
employment, termination of employment, hiring, discrimination in employment,
terms and conditions of employment, wages, hours, and occupational safety and
health and employment practices, and has not engaged in any unfair labor
practice. Since the inception of Company (or any predecessor entity,
if applicable), Company has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries, and other payments to its employees,
including any common law employees, and is not liable for any arrears of wages
(including commissions, bonuses, or other compensation), or any taxes or any
penalty for failure to comply with any of the foregoing (or, if any arrears,
penalty, or interest were assessed against Company regarding the foregoing, it
has been fully satisfied). Company 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, social benefits,
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). There are no pending claims against Company under any
workers’ compensation plan or policy or for long-term
disability. There are no controversies pending or, to Company’s
knowledge, threatened, between Company and any of its employees, or any works
council or similar body, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration, or
investigation before any agency, court, or tribunal, foreign or domestic,
including claims for compensation, severance benefits, vacation time, vacation
pay, or pension benefits, or any other claim pending in any court or
administrative agency from any current or former employee or any other Person
arising out of Company’s status as employer or purported employer or any
workplace practices or policies whether in the form of claims for
discrimination, harassment, unfair labor practices, grievances, wage and hour
violations, wrongful discharge, or otherwise. Company is not a party
to any collective bargaining agreement or other labor union contract nor does
Company know of any activities or proceedings of any labor union to organize any
employees of Company. No employees of Company are or have in the past
been in violation of any term of any employment contract, non-competition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by Company because of the nature of
the business conducted by Company or work performed by the employee or to the
use of trade secrets or proprietary information of others. All
releases of employment claims in favor of Company obtained from employees during
the three-year period preceding the Effective Time are effective and binding to
release all employment claims for each such employee.
3.1.12 Employee
Benefit Plans.
Section 3.1.12(a) of the Company Disclosure Schedule lists each employee
benefit plan, equity incentive plan, or compensation plan or program covering
currently active, former, or retired employees of Company (“Plan”). No
Plan is subject to any ongoing or scheduled audit, investigation, or other
administrative proceeding of the Internal Revenue Service (“IRS”), the U.S. Department of
Labor, or any other federal, state, or local government entity.
3.1.13 Real
Property; Leases. Company does not own,
and has never owned, real property. Company has made available to
Parent copies of all leases or subleases in effect on the date hereof under
which Company leases (i) real property (as either a tenant, subtenant, or
lessor), or (ii) personal property that requires annual payments in excess
of $5,000 with respect to each such lease or sublease of personal property (in
case of either clause (i) or (ii), a “Company Lease”). No
default exists under any Company Lease. No Company Lease is
terminable because of the execution of this Agreement or the consummation of the
Merger. Section 3.1.13 of the Company Disclosure Schedule lists
each Company Lease. Each Company Lease is in full force and effect in
accordance with its respective terms. No consent is required from any
party under any Company Lease in connection with the completion of the Merger,
and Company has not received notice that a party to any Company Lease intends to
cancel, terminate, or refuse to renew any Company Lease or to exercise any
option or other right thereunder, except where the failure to receive such
consent, or where such cancellation, termination, or refusal, would not result,
or reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect.
-11-
3.1.14 Customers
and Suppliers.
(a) As
of the date hereof: (i) Company has no outstanding dispute that
has been communicated orally or in writing, concerning its business operations,
including any Company Technology (as defined in Section 3.1.18) or services
with any distributor, or any customer who, in the 24 months ended as of the date
of this Agreement, was one of the 20 largest sources of revenues for Company
during such period (each, a “Significant Customer”);
(ii) Section 3.1.14(a) of the Company Disclosure Schedule lists each
Significant Customer and the percentage of Company’s total revenues such
Significant Customer represented during such period; (iii) Company has not
received any oral or written notice from any Significant Customer that such
customer will not continue as a customer of Surviving Corporation after Closing
or that such customer intends to terminate or materially modify existing
agreements with Company or Surviving Corporation; and (iv) no purchaser,
reseller, or distributor of Company’s services has asserted any claims of breach
of warranty with regard to such services nor does Company have any indemnity
liability for any such services to purchasers, resellers, or
distributors. To Company’s knowledge, Company could not reasonably be
expected as a result of warranty or liability claims against it to be required
to modify in any material respect any of Company’s services that are material to
Company.
(b) As
of the date hereof: (i) Company has no outstanding dispute that
has been communicated orally or in writing, concerning technology, products, or
services provided by any supplier; and (ii) Company has not received any
oral or written notice from any supplier that such supplier will not continue as
a supplier to the Surviving Corporation after the Closing or that such supplier
intends to terminate or materially modify existing agreements with Company or
the Surviving Corporation.
(c) To
Company’s knowledge no supplier, distributor, or customer has any interest in
any real or personal, tangible or intangible property, including Company Owned
Intellectual Property (as defined in Section 3.1.18(a)(ii)), used in or
pertaining to the business of Company.
3.1.15 Material
Contracts.
(a) Section 3.1.15
of the Company Disclosure Schedule sets forth all of the following contracts to
which Company is a party as of the date of this Agreement (the “Material
Contracts”):
(i) any
agreement (A) relating to the employment of, or the performance of services
by, any employee, consultant, or other Person other than ordinary course,
at-will written or oral offers or agreements terminable without notice and
without the payment of any severance or penalty and other than employment
arrangements required by law, (B) in accordance with which Company is or
may become obligated to make any severance, termination, or similar payment to
any current or former employee or director, other than with respect to
agreements listed or described in the Company Disclosure Schedule as applicable
to all Company employees generally, or applicable to all Company employees in
specified jurisdictions outside of the United States, (C) in accordance
with which Company is or may become obligated to make any bonus or similar
payment to any current or former employee or director, other than with respect
to agreements listed or described in the Company Disclosure Schedule as
applicable to all Company employees generally, or applicable to all Company
employees in specified jurisdictions outside of the United States, or
(D) in accordance with which Company may be required to provide, or
accelerate the vesting of, any payments, benefits, or equity rights upon the
occurrence of any of the Merger;
-12-
(ii) any
agreement that provides for indemnification of any officer, director, employee,
or agent of Company;
(iii) any
agreement imposing any restriction on the right or ability of Company, or that,
after consummation of the Merger, would impose a restriction on the right or
ability of Parent or any of its subsidiaries, to compete in any line of business
or in any geographic region with any other Person or to transact business or
deal in any other manner with any other Person;
(iv) any
agreement with a third party in accordance with which Company (A) has paid
$10,000 or more during the year ended December 31, 2008, or (B) is
obligated to pay $10,000 or more during the year beginning January 1,
2009;
(v) any
agreement with a distributor, VAR, reseller, OEM, marketing partner, or
Significant Customer;
(vi) any
agreement of partnership or joint venture, limited liability company or
operating agreement that would give rise to an obligation on the part of Company
to form a joint venture or to acquire securities of a third party;
(vii) any
other contract, agreement, or commitment not otherwise listed in
Section 3.1.15 of the Company Disclosure Schedule, (A) the termination
of which would result, or reasonably be expected to result, individually or in
the aggregate, in a Company Material Adverse Effect, or (B) that, if no
required consent regarding the Merger is obtained, would result, or reasonably
be expected to result, individually or in the aggregate, in a Company Material
Adverse Effect or a material adverse effect on the operation of the business of
Company in the same manner as the business of Company is currently
operated;
(viii) any
union contract or collective bargaining agreement;
(ix) any
Company Lease;
(x) except
for trade indebtedness incurred in the ordinary course of business and except as
disclosed in the Financial Statements, any instrument evidencing or related in
any way to indebtedness for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale, guarantee, or
otherwise.
(b) Each
Material Contract is in full force and effect and is a valid and binding
obligation of Company, and, to the knowledge of Company, neither Company nor any
other party thereto is in breach of, or default under, any such Material
Contract, except for such failures to be in full force and effect and such
breaches and defaults that would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse
Effect. As of the date hereof, none of the parties to any of the
Material Contracts identified in Section 3.1.15 of the Company Disclosure
Schedule has expressed in writing an intent to terminate or materially reduce
the amount of its business with Company in the future.
-13-
3.1.16 Taxes.
(a) For
the purposes of this Agreement, the terms “tax” and “taxes” mean all federal,
state, local, and foreign income taxes (including any tax on or based upon net
income, gross income, income as specially defined, earnings, profits or selected
items of income, earnings or profits), capital taxes, gross receipts taxes,
environmental taxes, sales taxes, use taxes, ad valorem taxes, value added
taxes, transfer taxes, franchise taxes, license taxes, withholding taxes or
other withholding obligations, payroll taxes, employment taxes, excise,
severance, social security premiums, workers’ compensation premiums, employment
insurance or compensation premiums, stamp taxes, occupation taxes, premium
taxes, property taxes, windfall profits taxes, alternative or add-on minimum
taxes, goods and services tax, customs duties or other taxes of any kind
whatsoever imposed by any taxing authority (domestic or foreign) on such entity
or for which such entity is responsible, and any interest, penalties, additional
taxes, additions to tax or other amounts imposed with respect to the
foregoing.
(b) Company
has timely filed (or caused to be filed) all federal, state, local, and foreign
tax returns, reports, information statements, and similar statements (“Returns”) required to be
filed, which Returns are true, correct, and complete in all
respects. Company has timely paid when due, all taxes in respect of
all periods (or portions thereof), whether or not any Return reflects such
taxes. The unpaid taxes of Company will not, as of the Closing Date,
exceed the reserves for tax liability set forth on the Closing Balance
Sheet. Company has not engaged in any “reportable transaction” within
the meaning of Code Section 6707A(c)(1). Company has not taken
any position on any Return that is or would be subject to penalties under Code
Section 6662. Company is not currently the beneficiary of any
extension of time to file any Return that has not yet been filed. All
material elections with respect to taxes made by or with respect to Company are
set forth in Section 3.1.16(b) of the Company Disclosure
Schedule. Company has provided to Parent or made available true and
correct copies of all filed Returns and related work papers, all correspondence
with any taxing authorities, any tax planning memoranda, or other material tax
data of Company, in each case with respect to taxes and Returns for which the
statute of limitations has not expired.
(c) No
deficiencies or adjustments that remain outstanding for any tax have been
claimed, proposed, assessed, or threatened. No authority in a
jurisdiction where Company does not file Returns has ever made any claim that
Company is or may be subject to taxation by that
jurisdiction. Section 3.1.16(c) of the Company Disclosure
Schedule accurately sets forth the years for which Company’s federal, state,
local, and foreign Returns have been audited and any years that are the subject
of a pending audit by the IRS or any applicable state, local, or foreign taxing
authorities. Except as so disclosed, Company is not subject to any
pending or threatened tax audit or examination and Company has not waived or
entered into any other agreement with respect to any statute of limitation with
respect to its taxes or Returns. Section 3.1.16(c) of the
Company Disclosure Schedule sets forth as of the date hereof a list of all joint
ventures, partnerships, limited liability companies, or other business entities
(within the meaning of Treasury Regulation Section 301.7701-3) in which
Company has an interest.
(d) There
are no liens for taxes upon the assets of Company except for taxes not yet due
and payable. Company has withheld all taxes required to be withheld
by it in respect of wages, salaries, and other payments to all employees,
officers, and directors and any taxes required to be withheld from any other
Person and has timely paid all such amounts withheld to the proper taxing
authority. Company is not party to any tax sharing or tax allocation
agreements and has not been a member of any affiliated group of corporations
within the meaning of Code Section 1504. Company has no
liability for taxes of any other Person under Treasury Regulation Section
1.1502-6 (or any similar provisions of state, local or foreign law) as a
transferee or successor, by contract, or otherwise. Company neither
has nor had a “permanent establishment” (as defined in any applicable income tax
treaty) in any country other than the United States. There are no
outstanding rulings or requests for rulings from any taxing authority with
respect to Company. Company neither is nor has ever been a “United
States real property holding corporation” within the meaning of Code
Section 897.
-14-
(e) Company
is not required to include in income any adjustment in accordance with Code
Section 481(a) (or similar provisions of other law or regulations) in its
current or in any future taxable period, because of a change in accounting
method, nor has the IRS (or other taxing authority) proposed any such change in
accounting method. None of the assets of Company is “tax exempt use property”
within the meaning of Code Section 168(h). None of the assets of
Company secures any debt the interest on which is tax exempt under Code
Section 103.
(f) Company
has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under
Code Section 355 (i) in the two years before the date of this
Agreement, or (ii) in a distribution that could otherwise constitute part
of a “plan” or “series of related transactions” (within the meaning of Code
Section 355(e)) in conjunction with the Merger.
(g) All
Plans or arrangements to which Company is a party that are “nonqualified
deferred compensation plans” within the meaning of Code Section 409A(d)(1)
satisfy the requirements of Code Sections 409A(a)(2), 409A(a)(3) and 409A(a)(4)
and the guidance thereunder and have been operated in accordance with such
requirements.
(h) No
outstanding share of Company Common Stock is non-transferable and subject to a
substantial risk of forfeiture within the meaning of Section 83 of the
Code, and no payment to any holder of Company Common Stock of any Conversion
Payments in accordance with this Agreement will result in compensation income to
such holder of Company Common Stock.
(i) The
Company has been a validly electing S corporation within the meaning of Code
Sections 1361 and 1362 at all times during its existence. The Company
is not liable and has no potential liability for any tax under Code Section
1374.
3.1.17 Interests
of Officers. None
of Company’s officers or directors has any interest in any property, real or
personal, tangible or intangible, including inventions, copyrights, trademarks,
or trade names, used in the business of Company, nor to the knowledge of Company
does any supplier, distributor, or customer of Company.
-15-
3.1.18 Technology
and Intellectual Property Rights.
(a) Definitions:
(i) “Intellectual Property” means
any or all of the following and all rights in, arising out of, or associated
therewith: (x) all United States, international, and
foreign: (1) patents, utility models, and applications therefor,
and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries, including
invention disclosures; (2) all trade secrets and other rights in know-how
and confidential or proprietary information; (3) all mask works and
copyrights, registrations and applications therefor, and all other rights
corresponding thereto (including moral rights), throughout the world;
(4) all rights in World Wide Web addresses and domain names and
applications and registrations therefor, all trade names, logos, common law
trademarks and service marks, trade dress, trademark and service xxxx
registrations, and applications therefor, and all goodwill associated therewith
throughout the world; and (5) any similar, corresponding, or equivalent
rights to any of the foregoing in (1) through (4) above, anywhere in
the world (items (1) through (5) collectively, “Intellectual Property
Rights”); and (y) any and all of the following: computer
software and code, including software and firmware listings, assemblers,
applets, compilers, source code, object code, net lists, design tools, user
interfaces, application programming interfaces, protocols, formats,
documentation, annotations, comments, data, data structures, databases, data
collections, system build software and instructions, design documents,
schematics, diagrams, product specifications, know-how, show-how, techniques,
algorithms, routines, works of authorship, processes, prototypes, test
methodologies, supplier and customer lists, trade secrets, materials that
document design or design processes, or that document research or testing
(including design, processes, and results); any media on which any of the
foregoing is recorded; and any other tangible embodiments of any of the
foregoing or of Intellectual Property Rights (“Technology”).
(ii) “Company Owned Intellectual
Property” means all Intellectual
Property owned by Company.
(iii) “Company Licensed Intellectual
Property” means all Intellectual Property owned by third Persons and
licensed to Company. Unless otherwise noted, all references to “Company Intellectual Property”
refer to both Company Owned Intellectual Property and Company Licensed
Intellectual Property.
(b) Section 3.1.18(b)
of the Company Disclosure Schedule lists:
(i) all
of Company’s registrations and applications for registration for Company Owned
Intellectual Property;
(ii) except
for Customer agreements listed in Section 3.1.15 of the Company Disclosure
Schedule, all licenses, sublicenses, reseller, distribution, customer, and other
agreements or arrangements in accordance with which any other Person is
authorized by Company to have access to, resell, distribute, or use Company
Owned Intellectual Property or to exercise any other right with regard
thereto;
(iii) all
agreements and licenses in accordance with which Company has been granted a
license to any Company Licensed Intellectual Property (other than license
agreements for standard “shrink wrapped, off-the-shelf” third party Intellectual
Property that is otherwise commercially available) where such Company Licensed
Intellectual Property is used by Company in connection with the development,
support, or maintenance of Company’s products, Technology or service offerings
(“In-Licenses”);
(iv)
any obligations of exclusivity, covenants not to xxx, noncompetition, right of
first refusal, parity of treatment and/or most favored nation status, or right
of first negotiation to which Company is subject and that relate to and/or
restrict any Company Intellectual Property Rights or Company products or
services that are provided using Company Intellectual Property;
(v) any
grants to Company of exclusivity (including exclusive license rights granted to
Company by any third party in Company Licensed Intellectual Property or other
exclusivity grants), covenants not to xxx, noncompetition, right of first
refusal, parity of treatment, or most favored nation status, or right of first
negotiation;
-16-
(vi) all
current Company products, Technology, and service offerings made commercially
available by Company.
(c) Company
owns free and clear of conditions, adverse claims, or other restrictions or any
requirement of any past, present, or future royalty payments, all rights
necessary to carry out, or that otherwise are material to, the current and
anticipated future (as contemplated by Company) business of Company and had
during the relevant period all rights reasonably necessary to carry out, or that
otherwise were material to, the business of Company.
(d) Company
is not, nor as a result of the execution or delivery of this Agreement, or
performance of Company’s obligations hereunder, will Company be, in violation of
any license, sublicense, or other agreement relating to Company Intellectual
Property, including any In-License.
(e) Neither
the (i) use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale, offering for sale, import, or any other exercise
of rights in Company Owned Intellectual Property, (ii) operation of
Company’s business, including Company’s provision of products or services, nor
(iii) the use, reproduction, modification, manufacture, distribution,
licensing, sublicensing, sale, offering for sale or other exploitation of any of
Company’s products, services, or Technology, infringes any Intellectual Property
Rights, or any other intellectual property, proprietary, or personal right, of
any Person, or constitutes unfair competition or unfair trade practice under the
laws of the applicable jurisdiction. To the knowledge of Company, there is no
unauthorized use, infringement, or misappropriation of any of the Company Owned
Intellectual Property by any third party, employee, or former
employee.
(f) Company
has not received written notice of any claims (y) challenging the validity,
effectiveness or ownership by Company of any Company Owned Intellectual
Property, or (z) that any of (i), (ii), or (iii) in
Section 3.1.18(e) above infringes, or will infringe on, any third party
Intellectual Property Right or constitutes unfair competition or unfair trade
practices under the laws of the applicable jurisdiction, nor, to the knowledge
of Company, are there any valid grounds for any bona fide claim of any such
kind.
(g) No
parties other than Company possess any current or contingent rights of any kind
to any source code included in Company Owned Intellectual Property, nor has
Company granted any current or contingent rights of any kind to any source code
that is part of any Company Licensed Intellectual Property.
(h) Section 3.1.18(h)
of the Company Disclosure Schedule lists all parties who have created any
material portion of, or otherwise have any rights in or to, Company Intellectual
Property other than employees of Company who meet all of the following
requirements: (i) their work in any Company product, Technology,
or service was created by them entirely within the scope of their employment by
Company, (ii) their copyrightable work product in any Company product,
Technology, or service is owned by Company as a work made for hire under U.S.
copyright law, and (iii) any inventions of such employees that are included
or implemented in any Company product, Technology, or service have been assigned
to Company under Company’s standard form employee invention assignment
agreement.
-17-
(i) Company
has secured from all current and former employees, consultants, and contractors
of Company who have created any material portion of, or otherwise have any
rights in or to, any Company product, Technology, or service, valid and
enforceable written assignments or licenses to Company of any such employees’,
consultants’ and contractors’ contribution or rights therein and Company has
provided true and complete copies of such assignments or licenses to
Parent.
(j) Company
has taken commercially reasonable steps to protect rights in confidential
information (both of Company and that of third Persons that Company has received
under an obligation of confidentiality). Company has obtained legally binding
written agreements from all employees and third parties with whom Company has
shared confidential proprietary information (i) of Company, or
(ii) received from others that Company is obligated to treat as
confidential and that require employees and third parties to keep such
information as confidential.
(k) Company
is in compliance in all material respects with all applicable laws, rules,
regulations, and Company contractual obligations governing the collection,
interception, storage, receipt, purchase, sale, transfer and use (“Collection and Use”) of
personal, consumer, or customer information, including name, address, telephone
number, electronic mail address, social security number, bank account number or
credit card numbers (collectively, “Customer
Information”). Company’s Collection and Use of such Customer
Information are in accordance in all material respects with Company’s privacy
policy as published on its website or any other privacy policies presented to
consumers or customers and to which Company is bound or otherwise subject and
any contractual obligations of Company to its customers regarding
privacy. Company does not use in connection with the provision of its
products or services or collect or receive social security numbers or credit
card numbers. Company takes commercially reasonable steps to protect the
confidentiality, integrity and security of its software, databases, systems,
networks and Internet sites and all information stored or contained therein or
transmitted thereby from unauthorized or improper Collection and
Use. The execution or delivery of this Agreement or any other
agreement or document contemplated by this Agreement, or the performance of
Company’s obligations hereunder or thereunder, will not materially violate any
such applicable law, rule, or regulation or any of Company’s privacy policies or
any contractual obligation of Company governing the Collection and Use of
Customer Information.
(l) Section
3.1.18(l) of the Company Disclosure Schedule lists any Company software or
software used in any Company provided product or service (including Company
software under development) is, or, when delivered to Parent, will be, in whole
or in part, governed by an open source license.
(m) Company
has not incorporated into any Company software or software used in any Company
product, Technology, or service any code, modules, utilities, or libraries that
are covered in whole or in part by a license that requires that Company give
attribution for its use of such code, modules, utilities, or
libraries.
(n) Company
is not a member of any standards organization (including any similar
organizations, such as special interest groups or associations).
(o) Company
has not participated in any standards-setting activities that would affect the
proprietary nature of any Company Intellectual Property or restrict the ability
of Company to enforce, license or exclude others from using any Company
Intellectual Property.
(p) Company
is not subject to, and the Merger will not give rise to, any Company obligations
of exclusivity (including exclusive license rights granted by Company to any
third party in Company Intellectual Property or other exclusivity grants),
covenants not to xxx, non-competition, right of first refusal, parity of
treatment, most favored nation status, right of first negotiation, or other
material restriction on the operation of Company’s business.
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(q) The
Merger will not give rise to or cause under any agreements relating to Company
Intellectual Property (i) a right of termination under, or a breach of, or
any loss or change in the rights or obligations of Company, (ii) an
obligation to pay any royalties or other amounts to any third Person in excess
of those that Company is otherwise obligated to pay absent a Merger, or
(iii) Parent’s granting to any third party any right to or with respect to
any of Parent’s Intellectual Property.
(r) Company
is not under any contractual obligation (i) to include any Company Licensed
Intellectual Property in any Company product, Technology, or service, or
(ii) to obtain a third party’s approval of any Company product, Technology,
or service at any stage in the development, licensing, distribution, or sale of
that product, Technology, or service.
(s) Company
has no obligation to perform services for any third party other than customer
support and maintenance services for those customers listed in Section 3.1.18 of
the Company Disclosure Schedule.
(t) All
granted or issued patents and all mask works, registered trademarks, and
copyright registrations held by Company, are valid, enforceable, and
subsisting. Section 3.1.18(t) of the Company Disclosure Schedule
accurately identifies and describes each filing, payment, and action that should
be made or taken on or before the date that is 120 days after the date of this
Agreement in order to maintain each such item of Company Owned Intellectual
Property in full force and effect.
(u) Company
has not exported or re-exported its products, services, or Technology, directly
or indirectly, in violation of law to any countries that are subject to U.S.,
Canadian, or European Union export restrictions or export restrictions of any
other jurisdiction in which Company operates or is otherwise subject; and
Company has complied with all end-user, end-use, and destination restrictions
issued by the U.S., Canada, the European Union, and any other jurisdiction to
which Company operates or is subject.
(v) The
Company software or software used in any Company-provided product or
service: (i) has sufficiently documented source code enabling a
reasonably skilled software developer to understand, modify, compile and
otherwise utilize all aspects of the related Technology without reference to
other sources of information; (ii) is complete and no other computer
hardware, software, system, or other information technology is needed in order
to carry on the business of the Company; (iii) is free from known material
defects or deficiencies, errors in design, and operating defects; (iv) does
not require a material upgrade or replacement within the 12-month period after
the Closing Date and none are planned; and (v) does not contain any
disabling mechanisms or protection features which are designed to disrupt or
prevent the use of the Company software, product or service, including computer
viruses, time locks or any code, instruction or device that may be used without
authority to access, modify, delete or damage any of the Company software or any
system or equipment on which any of the Company software is installed or in
connection with which it may operate.
3.1.19 Vote
Required. The
affirmative vote of (i) the holders of a majority of the outstanding Company
Common Shares (the “Company
Shareholder Approval”) voting together as a single class on an as
converted basis at a shareholder meeting or in accordance with a written consent
is the only vote of the holders of Company’s capital stock necessary to approve
this Agreement and the consummation of the Merger.
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3.1.20 Complete
Copies of Materials. Company
has delivered or made available to Parent or its counsel true and complete
copies of each document listed in the Company Disclosure Schedule.
3.1.21 Board
Recommendation. Company’s
board of directors has unanimously (i) determined that this Agreement and
the Merger, including the Merger, are advisable and in the best interests of
Company and its shareholders, (ii) approved and adopted this Agreement and
the Merger, including the Merger, and (iii) subject to the other terms and
conditions of this Agreement, resolved to recommend the Merger and approval and
adoption of this Agreement and the Merger by Company’s shareholders, and, as of
the date of this Agreement, none of such actions by Company’s board of directors
has been amended, rescinded, or modified.
3.1.22 Insurance. Company
has made available to Parent or its counsel a copy of all insurance policies and
all self-insurance programs and arrangements relating to the business, assets,
and operations of Company. All premiums due and payable under all
such policies have been paid and Company is otherwise in compliance with the
terms of such policies and bonds. As of the date of this Agreement,
there has been no threatened termination of, or premium increase with respect
to, any such policies.
3.1.23 Accounts
Receivable. All
of the accounts receivable shown on the consolidated balance sheet of Company as
of the Interim Balance Sheet Date have been collected or are current and
collectible in the aggregate recorded amounts thereof (less the allowance for
doubtful accounts also appearing in such balance sheet and net of returns and
payment discounts allowable by Company’s policies) and can reasonably be
anticipated to be paid in full without outside collection efforts within 60 days
of the due date, and are not subject to counterclaims or setoffs.
3.1.24 Personal
Property. As
of the date hereof Company has good and marketable title, free and clear of all
title defects, security interests, pledges, options, claims, liens,
encumbrances, and restrictions of any nature whatsoever (including leases,
chattel mortgages, conditional sale contracts, purchase money security
interests, collateral security arrangements, and other title or
interest-retaining agreements) to all inventory, receivables, furniture,
machinery, equipment, and other personal property, tangible or otherwise,
reflected on the consolidate balance sheet of Company as of the Interim Balance
Sheet Date or used in Company’s business as of the Interim Balance Sheet Date
even if not reflected thereon. Section 3.1.24 of the Company
Disclosure Schedule lists (i) all computer equipment and (ii) all
other personal property having a depreciated book value of $5,000 or more
currently used by Company in the conduct of its business, and all such equipment
and property, in the aggregate, is in good operating condition and repair,
reasonable wear and tear excepted.
3.1.25 Guarantees
and Suretyships. Company
has no powers of attorney outstanding, (other than those issued in the ordinary
course of business with respect to tax matters). Company has no
obligations or liabilities (absolute or contingent) as guarantor, surety,
cosigner, endorser, co-maker, indemnitor, or otherwise with respect to the
obligations or liabilities of any Person.
3.1.26 Certain
Transactions. Except
for (a) relationships with Company as an officer, director, or employee
(and compensation by Company in consideration of such services) and
(b) relationships with Company as holders of Company Securities, none of
the directors, officers, or holders of 5% or more of the Company Common Stock,
or any member of any of their families, is presently a party to, or was a party
to during the year preceding the date of this Agreement, any transaction with
Company, including any contract, agreement, or other arrangement
(i) providing for the furnishing of services to or by, (ii) providing
for rental of real or personal property to or from, or (iii) otherwise
requiring payments to or from, any such person or any corporation, partnership,
trust, or other entity in which any such person has or had a 5% or more interest
(as a shareholder, partner, beneficiary, or otherwise) or is or was a director,
officer, employee, or trustee.
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3.1.27 Government
Contracts.
(a) “Government Contracts” means
any agreement, commitment, undertaking, or arrangement of any kind with a
government agency, government prime contractor, government grant recipient, or
higher-tier government subcontractor to which Company is a party as of the date
of this Agreement.
(b) Company is
in compliance with all legal requirements of all Government
Contracts.
(c) Company
has not, in obtaining or performing any Government Contract, violated any
material aspect or provision of any of the following: (i) the Federal
Acquisition Regulation (the “FAR”) or any applicable agency
supplement thereto; (ii) any state procurement law or regulation; and (iii)
any other applicable procurement law or regulation.
(d) To
the knowledge of Company, there are not and have not been any irregularities,
misstatements, or omissions relating to any Government Contracts, including
certifications.
(e) Company
is not undergoing, and has not undergone, any audit of any Government Contract,
and Company has no knowledge of any basis for any impending audit, arising
under or relating to any Government Contract, except for routine audits
conducted during the ordinary course of business.
(f) Company
has taken adequate steps to ensure that its right, title and interest in
inventions, technical data, computer software, and copyrightable
material developed under any Government Contract have been retained and
protected.
3.1.28 Disclosure. No
representation or warranty made by Company in this Agreement, nor any document,
written information, financial statement, certificate, or exhibit prepared and
furnished or to be prepared and furnished by Company or its Representatives (as
defined in Section 4.1.2) under this Agreement, or in connection with the
Merger, when read together in their entirety, contains as of the date hereof or
will contain upon the consummation of the Merger any untrue statement of a
material fact, or omits as of the date hereof or will omit upon the consummation
of the Merger to state a material fact necessary to make the statements or facts
contained herein or therein, not misleading, in light of the circumstances under
which they were made.
3.1.29 Reliance. Company
makes the foregoing representations and warranties with the knowledge and
expectation that Parent and Sub are placing reliance thereon.
3.2 Representations
and Warranties of Shareholders. Each
Shareholder represents and warrants, severally but not jointly, to and for the
benefit of Parent and Sub as follows:
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3.2.1 Authority. Each
Shareholder has full power and authority to execute and deliver this Agreement
and all other documents and agreements to be executed by such Shareholder as
contemplated hereunder, and to perform his, her, or its obligations hereunder
and thereunder. This Agreement and all other documents and agreements
to be executed by Shareholder as contemplated hereunder constitutes the valid
and legally binding obligations of such Shareholder enforceable against each in
accordance with their terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or other similar laws affecting or relating
to the enforcement of creditors’ rights generally and general principles of
equity.
3.2.2 Voting
Agreements. Shareholder is
not a party to any voting agreement, voting trust, or similar agreement or
arrangement relating to any class or series of its capital stock, or any
agreement or arrangement providing for registration rights with respect to any
capital stock or other securities of Company.
3.2.3 Non-Contravention;
Consents.
The
execution and delivery of this Agreement, and all other documents and agreements
to be executed by the Shareholders as contemplated by this Agreement, and the
consummation of the Merger will not, conflict with, or result in any Violation
of (i) any injunction, judgment, order, decree, ruling, charge, or other
restriction of any Governmental Entity to which a Shareholder is subject, or
(ii) any agreement, contract, lease, license, instrument, or other
arrangement to which a Shareholder is a party, or by which it is bound, or to
which any of its Company Securities are subject. No Shareholder was,
is, or will be required to make a filing with, give any notice to, or to obtain
any consent from, any Person or any Governmental Entity in connection with the
execution and delivery of this Agreement or any other agreement or document
contemplated by this Agreement or the consummation or performance of any of the
Merger.
3.2.4 Accredited
Investor. Shareholder is an
“accredited investor” within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and will submit to Parent such further assurances of such
status as may be reasonably requested by Parent.
3.2.5 Reliance. Shareholder makes
the foregoing representations and warranties with the knowledge and expectation
that Parent and Sub are placing reliance thereon.
3.3 Representations and
Warranties of Parent and Sub. Parent
and Sub represent to Company as follows:
3.3.1 Organization;
Standing and Power.
Each of
Parent and Sub is a corporation duly organized and validly existing and in good
standing, as applicable, under the laws of its jurisdiction of incorporation or
organization. Each of Parent and Sub has all requisite corporate
power and authority to own, lease, and operate its properties and to carry on
its businesses as now being conducted, and is duly qualified to do business in
each jurisdiction in which the character of the property owned, leased, or
operated by it or the nature of its activities makes such qualification
necessary, except in such jurisdictions in which a failure to so qualify would
not result, or be reasonably expected to result, individually or in the
aggregate, in a material adverse effect on the financial condition, business,
assets, or results of operations of Parent, Sub and either of their
subsidiaries, taken as a whole, or that would materially impair the ability of
Parent or Sub to consummate the Merger (“Parent Material Adverse
Effect”).
3.3.2 Authority. Each
of Parent and Sub has all requisite corporate power and authority to execute and
deliver this Agreement, to consummate the Merger. The execution and
delivery by Parent and Sub of this Agreement and the performance of Parent’s and
Sub’s respective obligations hereunder have been duly and validly authorized by
all necessary corporate action on the part of Parent and Sub, as
applicable. This Agreement has been duly executed and delivered by
Parent and Sub and constitutes a valid and binding obligation of Parent and Sub
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors’ rights generally, and (ii) general
equitable principles, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
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3.3.3 Consents
and Approvals; No Violations. Subject
to satisfaction of the conditions set forth in Sections 7.1 and 7.2, the
execution and delivery of this Agreement do not, and the consummation of the
Merger will not, conflict with or result in any Violation of (a) any
provision of the restated certificate of incorporation or bylaws of Parent or
the articles of incorporation or bylaws of Sub, or (b) any loan or credit
agreement, note, bond, mortgage, indenture, contract, lease, or other agreement
or instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Parent or Sub or
their respective properties or assets, other than, in the case of (b), any
such Violation that would not result, or reasonably be expected to result,
individually or in the aggregate in a Parent Material Adverse
Effect. No Consent is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent or Sub or
the consummation by Parent and Sub of the Merger, except for the filing of
the Certificate of Merger in accordance with the DGCL and except for such other
Consents that if not obtained would not result, or reasonably be expected to
result, in a Parent Material Adverse Effect.
3.3.4 Disclosure. No
representation or warranty made by Parent or Sub, nor any document, written
information, statement, financial statement, certificate, or exhibit prepared
and furnished or to be prepared and furnished by Parent or its Representatives
under this Agreement, when read together in their entirety, contains upon the
date hereof or will contain upon the consummation of the Merger any untrue
statement of a material fact, or omits upon the date hereof or will omit upon
the consummation of the Merger to state a material fact necessary to make the
statements or facts contained herein or therein, not misleading, in light of the
circumstances under which they were made.
3.3.5 Reliance. Parent
makes the foregoing representations and warranties with the knowledge and
expectation that Company is placing reliance thereon.
ARTICLE
IV
COVENANTS
OF COMPANY
During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Company agrees (except as expressly contemplated by this
Agreement, or with Parent’s prior written consent) that:
4.1 Conduct
of Business.
4.1.1 Ordinary
Course. Company
will carry on its business in the ordinary course consistent with past practice,
will continue to observe its obligations to comply with the requirements of all
applicable laws and regulations, and will use commercially reasonable efforts to
preserve intact its present business organization, keep available the services
of its present officers, consultants, and employees and maintain satisfactory
relationships with licensors, licensees, customers, suppliers, contractors,
distributors, and others having business relationships with
it. Company will promptly notify Parent of any event or occurrence or
emergency not in the ordinary course of business of Company that would result,
or reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect. Without limiting the above, without
the consent of Parent, Company will not:
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(a) grant
any severance or termination pay to any officer, director, or employee of
Company;
(b) transfer
to any third Person ownership of Company Intellectual Property
Rights;
(c) declare,
set aside, or pay any dividend or other distribution with respect to any shares
of capital stock of Company, or repurchase, redeem, or acquire any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Company, or effect any stock split (forward or reverse) or
otherwise change its capitalization or capital structure in any manner from the
way it existed on the date hereof;
(d) split,
combine, or reclassify any class of capital stock of Company;
(e) amend
any provision of the articles of incorporation or bylaws of Company, or any term
of any outstanding security issued by Company;
(f) incur,
assume, or guarantee any indebtedness for borrowed money;
(g) change
any method of accounting or accounting practice by Company, except for any such
change required by reason of a change in GAAP or with prior agreement with
Company’s auditor;
(h) commence
a lawsuit other in such cases where Company in good faith determines that
failure to commence a suit would result in a material impairment of a valuable
aspect of Company’s business, provided Company consults with Parent before
filing such a suit;
(i) extend
an offer of employment to a candidate for any position;
(j) grant
or issue or accelerate the vesting of any capital stock, securities convertible
into capital stock of Company, restricted stock, restricted stock units, stock
appreciation rights, stock options, warrants, or other equity
rights;
(k) adopt
or pay, accelerate, or accrue salary or other payments or benefits or promise or
make discretionary employer contributions to, under, or with respect to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, group insurance, severance pay, retirement, or other employee
benefit plan, agreement, or arrangement, or any employment or consulting
agreement with or for the benefit of any Company director, officer, employee,
agent, or consultant, whether past or present, or amend any such existing plan,
agreement, or arrangement, in each case other than in the ordinary course of
business or as required by law;
(l) assign,
transfer, dispose of, or license assets of Company, grant any license of any
assets of Company, or acquire or dispose of capital stock of any third party or
merge or consolidate with any third party in each case other than in the
ordinary course of business;
(m) enter
into any joint venture, partnership, limited liability company, or operating
agreement with any Person;
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(n) breach,
modify, amend, or terminate any of Company’s Material Contracts, or waive,
release, or assign any rights or claims under any of Company’s Material
Contracts, except as expressly required by this Agreement or except in the
ordinary course of business;
(o) settle,
compromise, or otherwise terminate any litigation, claim, investigation, or
other settlement negotiation;
(p) fail
to keep in full force insurance policies covering Company’s properties and
assets under substantially similar terms and conditions as Company’s current
policies;
(q) enter
into any contract that would require Company to expend a sum in excess of
$5,000;
(r) enter
into any contract that licenses or sells Company products or services that (i)
exceeds $15,000 in revenue; (ii) licenses an entity on an enterprise-wide basis;
or (iii) provides more than a 10% discount off of Company’s per-seat licensing
list prices;
(s) adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization (other than the
Merger);
(t) acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association, or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets;
(u) adopt
or amend any employee benefit plan or employee stock purchase or employee stock
option plan or grant agreement (other than amendments required by law or to
comply with the Code or as requested by Parent under Section 6.6), or enter
into any employment contract, pay any special bonus or special remuneration to
any director, officer, consultant, or employee, or increase the salaries or wage
rates or fringe benefits (including rights to severance or indemnification) of
its directors, officers, consultants, or employees other than increases as
required by law, or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons under an employee benefit
plan or otherwise;
(v) pay
or make any accrual or arrangement for payment of any pension, retirement
allowance, or other employee benefit under any existing plan, agreement, or
arrangement to any officer, director, or employee or pay or agree to pay or make
any accrual or arrangement for payment to any officers, directors, or employees
of Company or any amount relating to unused vacation days, other than in the
ordinary course of business consistent with past practice and except as required
by law ;
(w) grant
rights or licenses to Company Intellectual Property to any standards
organization or to any third Person in compliance with the requirements of any
standards organization, or use or incorporate any intellectual property from any
standards organization in Company’s software or software used in any Company
product, Technology, or service;
(x) except
as required or permitted under this Agreement, knowingly take any action that
would or is reasonably likely to (i) make any representation or warranty of
Company contained in this Agreement inaccurate, (ii) result in any of the
conditions to the Merger in Article VII not being satisfied, or
(iii) impair the ability of Company to consummate the Merger in accordance
with the terms of this Agreement;
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(y) make
any capital expenditure; or
(z) authorize,
commit, or agree to take any of the foregoing actions except as otherwise
permitted by this Agreement.
4.1.2 Exclusivity;
Acquisition Proposals.
(a) Unless
and until this Agreement has been terminated by either party in accordance with
Section 9.1 hereof, Company agrees that it will not (and will use its
commercially reasonable efforts to ensure that none of its officers, directors,
agents, employees, or affiliates, or any investment banker, financial advisor,
attorney, accountant, or other advisor, agent, or representative (collectively,
“Representatives”)) take
or cause or permit any Person to take, directly or indirectly, any of the
following actions with any party other than Parent and its
designees: (i) solicit, encourage, initiate, or participate in any
negotiations, inquiries, or discussions with respect to any offer or proposal to
acquire all or any significant part of Company, its business, assets, or capital
shares, whether by merger, consolidation, other business combination, purchase
of capital stock purchase of assets, license (but excluding non-exclusive
licenses entered into in the ordinary course of business), lease, tender or
exchange offer, or otherwise (each of the foregoing, a “Restricted Transaction”); (ii)
disclose, in connection with a Restricted Transaction, any nonpublic information
to any Person other than Parent or its Representatives concerning Company’s
business or properties or afford to any Person other than Parent or its
Representatives access to its properties, books, or records, except as required
by law or in accordance with a governmental request for information; (iii) enter
into or execute any agreement relating to a Restricted Transaction; or (iv) make
or authorize any public statement, recommendation, or solicitation in support of
any Restricted Transaction or any offer or proposal relating to a Restricted
Transaction other than with respect to the Merger. If Company is
contacted by any third party expressing an interest in discussing a Restricted
Transaction, Company will promptly, but in no event later than 24 hours
following Company’s knowledge of such contact, notify Parent in writing of such
contact and the identity of the party so contacting Company and any information
conveyed to Company by such third party in connection with such contact or
relating to such Restricted Transaction, and will promptly, but in no event
later than 24 hours, advise Parent of any material modification or proposed
modification thereto; provided, however, before Company Shareholder Approval, in
each case, if and to the extent that (a) Company’s board of directors determines
in good faith by resolution duly adopted, after consultation with Company’s
outside legal counsel and Company’s financial advisor, that such Restricted
Transaction is, or could reasonably be expected to lead to, a Superior Proposal
(as defined hereafter), and (b) Company’s board of directors determines in good
faith by resolution duly adopted, after consultation with Company’s outside
legal counsel, that the failure to participate in such discussions, disclose
such nonpublic information, provide such access to its properties, books, or
records, enter into any agreement relating to such Restricted Transaction, or
make or authorize any public statement relating to any Restricted Transaction or
any offer or proposal relating to a Restricted Transaction would be inconsistent
with the fiduciary duties of Company’s board of directors under applicable law,
then Company may participate in discussions regarding such Restricted
Transaction, provide non-public information with respect to Company, afford
access to the properties, books, or records of Company, enter into any agreement
relating to such Restricted Transaction, or make or authorize any public
statement relating to any Restricted Transaction or any offer or proposal
relating to a Restricted Transaction, as applicable.
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(b) Neither
the board of directors of Company nor any committee thereof will directly or
indirectly (i) (A) withdraw (or amend or modify in a manner adverse to
Parent), or publicly propose to withdraw (or amend or modify in a manner adverse
to Parent), the approval, recommendation, or declaration of advisability by the
board of directors of Company or any such committee thereof of this Agreement or
the Merger, or (B) recommend, adopt, or approve, or propose publicly to
recommend, adopt, or approve, any Acquisition Proposal (any action described in
this clause (i) being referred to as a “Change of Recommendation”) or
(ii) approve or recommend, or publicly propose to approve or recommend, or
allow Company or any subsidiary of Company to execute or enter into, any letter
of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture agreement,
partnership agreement, or other similar agreement, arrangement, or understanding
(A) constituting or related to, or that is intended to or could reasonably
be expected to lead to, any Acquisition Proposal or (B) requiring it to
abandon, terminate, or fail to consummate the Merger or any other transaction
contemplated by this Agreement.
(c) Despite
anything to the contrary contained in this Agreement, the obligation of Company
to call, give notice of, convene, and hold a shareholders’ meeting will not be
limited or otherwise affected by the commencement, disclosure, announcement, or
submission to it of any Acquisition Proposal, or by any Change of
Recommendation. Despite the foregoing, until Company Shareholder Approval is
obtained, and subject to Company’s compliance at all times with the other
provisions of this Section 4.1.2, the board of directors of Company may
make a Change of Recommendation if such board of directors determines in good
faith by resolution duly adopted, after consultation with outside legal counsel,
that it is required to do so in order to comply with its fiduciary duties to the
shareholders of Company under applicable law. Company will provide
Parent with forty eight (48) hours’ prior notice of any meeting of
Company’s board of directors at which the board of directors is reasonably
expected to take action with respect to any Acquisition Proposal or Change of
Recommendation.
(d) “Acquisition Proposal” means
any inquiry, proposal, or offer from any Person relating to, or that could
reasonably be expected to lead to a Restricted Transaction. For purposes of this
Agreement, “Superior
Proposal” means any unsolicited proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, substantially all of the equity securities of Company entitled to
vote generally in the election of directors or substantially all of the assets
of Company, on terms which Company’s board of directors reasonably believes
(after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to its shareholders than the Merger and the
Merger.
4.2 Breach of Representations
and Warranties; Notification; Access to Information.
(a) Despite
anything in this Agreement to the contrary, from the date hereof to the earlier
of the Effective Time or the termination of this Agreement in accordance with
Section 9.1 Company will (i) confer with Parent and its respective
Representatives, at such times as they may request, about operational and
integration matters to the extent permitted by law, (ii) in the event of,
and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event that would cause or constitute a breach of
any of the representations and warranties in Section 3.1, give detailed
written notice thereof to Parent and use commercially reasonable efforts to
promptly remedy any such material breach or inaccuracy, and (iii) promptly
notify Parent of any change in the normal course of any business, operations, or
financial condition of Company or its assets or properties, or any emergency
related thereto.
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(b) Subject
to appropriate restrictions on access to information that Company determines in
good faith to be proprietary, or competitively sensitive and any applicable law
that restricts Company from disclosing information related to Company’s
employees or customers, Company will, subject to applicable law, afford Parent
and its respective Representatives reasonable access during normal business
hours during the period before the Effective Time to (i) Company’s
properties, books, contracts, commitments, communications (including e-mail),
and records, and (ii) all other information concerning the business,
properties, and personnel of Company, as Parent may reasonably request that is
necessary to complete the transaction and prepare for an orderly transition of
operations after the Effective Time. Company agrees to provide to
Parent and its Representatives copies of monthly internal financial statements
within 30 days of completion of such month. No information or
knowledge obtained in any investigation in accordance with this Section 4.2
will affect or be deemed to modify any representation or warranty in this
Agreement or the conditions to the obligations of Parent to consummate the
Merger. Any access to Company’s properties will be subject to
Company’s reasonable security measures and insurance requirements and will not
include the right to perform any “invasive” testing. Company will
permit Parent’s Representatives to meet with the officers of Company responsible
for the financial statements and internal controls of Company to discuss such
matters as Parent may deem reasonably necessary or appropriate to satisfy its
obligations under Section 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 and
any rules and regulations relating thereto.
4.3 Consents and
Notices. Company
will promptly apply for or otherwise seek, and use commercially reasonable
efforts to obtain, all Consents and to provide all notices set forth in
Schedule 4.3 (without the expenditure of any out-of-pocket payments to a
third party to obtain such third party’s consent or approval), and make all
filings, required with respect to Company for the consummation of the
Merger.
4.4 Commercially Reasonable
Efforts. Company
will use commercially reasonable efforts to effect the Merger and to fulfill and
cause to be fulfilled the conditions to Closing under this
Agreement.
4.5 Intellectual
Property. Company will not
incorporate any software from any third party into any part of any Company
software or service.
4.6 Deliveries. Company
will deliver to Parent (i) an unaudited balance sheet of Company as of
month-end for the month immediately preceding the month of Closing (or as of
month-end for the month that is 2 months preceding the month of Closing if
Closing occurs on any of the first 10 business days of a month) (in either case,
the “Pre-Closing Balance Sheet
Date”), and the related unaudited statements of income, changes in
owner’s equity, and cash flow from the period from [·] until the
Pre-Closing Balance Sheet Date; and (ii) the Preliminary Closing Balance Sheet
no later than three business days before the anticipated Closing Date, and
(iii) all minute books of Company before Closing.
4.7 Shareholder
Approval. Company will take
all action, and Shareholders will use their best efforts to cause Company to
take all action, necessary in accordance with the MBCA and Company’s articles of
incorporation and bylaws to solicit consent or to hold and convene a special
meeting of the Shareholders to be held as soon as practicable to submit this
Agreement, the Merger, and related matters for the consideration and approval of
the Shareholders.
ARTICLE
V
COVENANTS
OF PARENT
During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Parent agrees (except as expressly contemplated by this
Agreement) that:
5.1 Breach of Representations
and Warranties. In
the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event that would cause or constitute a
breach of any of the representations and warranties set forth in
Section 3.3, Parent will give detailed notice thereof to Company and will
use commercially reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
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5.2 Commercially Reasonable
Efforts. Parent
will use commercially reasonable efforts to effect the Merger and to fulfill and
cause to be fulfilled the conditions to Closing under this
Agreement.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
In addition to the foregoing, Parent
and Company each agree to take the following actions after the execution of this
Agreement.
6.1 Non-Disclosure
Agreement. Company
and Parent agree that the Mutual Confidentiality Agreement by and among Company
and Parent dated April 13, 2009 (“Non-Disclosure Agreement”)
will continue in full force and effect and will be applicable to all
Confidential Information (as defined in the Non-Disclosure Agreement) exchanged
in connection with this Agreement and the Merger.
6.2 Legal Conditions to the
Merger. Subject
to Section 9.1(c), each of Parent, Sub, and Company (a) will take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on it with respect to the Merger and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon the other, and (b) will take all reasonable actions to obtain
(and to cooperate with the other parties in obtaining) any consent, approval,
order, or authorization of, or any exemption by, any Governmental Entity, or
other third party, required to be obtained or made by Company or Parent in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
6.3 Expenses. All
costs and expenses incurred in connection with this Agreement and the Merger
will be paid by the party incurring such expense.
6.4 Additional
Agreements. In
case at any time after the Effective Time any further action is reasonably
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities, and franchises of Company or Sub, the proper officers and
directors of each corporation that is a party to this Agreement will take all
such action.
6.5 Public
Announcements. Company
will not make any public announcement concerning this Agreement and the Merger
without the prior written consent of Parent, and will furnish to Parent all
releases before publication. Nothing in this Agreement will prevent
Company at any time from furnishing any information to any Governmental Entity
or from issuing any release, each as required by law, in which circumstance
Company will make commercially reasonable efforts to consult with Parent in
advance to the extent practicable and in any event will notify Parent as soon as
practicable. Company will not make any communication to customers or
announcements to its employees with respect to the Merger without the prior
written consent of Parent.
6.6 Employee
Matters. Company
will cooperate with regard to the recruitment and hiring of employees by Parent
or continuing employment with Company.
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6.7 Tax
Matters.
6.7.1 Returns
and Payments.
(a) The
Shareholders shall prepare (or cause to be prepared) the Company's IRS Form
1120S (U.S. Income Tax Return for an S Corporation) (and any comparable form
under state or local law) for all S Corporation Taxable Periods (together, the
“S Corporation
Returns”). Each S Corporation Return shall be prepared in
accordance with applicable law. The Shareholders' Representative
shall provide each S Corporation Return to Parent for review and comment no
later than 30 days before the due date of such S Corporation
Return. If the Shareholders' Representative and Parent are
unable to resolve any dispute regarding any such S Corporation Return within 20
days of Parent’s receipt thereof, the dispute shall referred for final
resolution to a nationally recognized accounting firm (the “Accountants”). The
fees of the Accountants shall be shared equally by the Shareholders and
Parent. Parent shall cause to be timely filed any S Corporation
Return in the form ultimately agreed upon by Parent and the Shareholders'
Representative pursuant to this Section 6.7.1(a); provided, however, that in the
case of any S Corporation Return with respect to which there is a dispute that
is referred to the Accountants, if such dispute cannot be resolved before the
due date of such S Corporation Return, Parent shall cause such Return to be
filed as originally prepared and then shall file an amended Return if one is
required as the result of the dispute being resolved. The
Shareholders shall reflect on their personal income tax returns any income,
gain, loss, deduction or other tax in a manner consistent with the Schedule K-1s
(or any comparable form under state or local law) to the S Corporation Returns
prepared pursuant to this Section 6.7.1(a). For purposes of this Agreement,
“S Corporation Taxable
Period” means any taxable period
for which the Company was a valid S corporation under Section 1361(a)
of the Code, including the taxable period ending on the Closing
Date.
(b) Parent
shall prepare and file (or cause to be prepared and filed) all Returns with
respect to the Company for periods beginning before the Closing Date that are
due after the Closing Date (other than the S Corporation Returns prepared by the
Shareholders pursuant to Section 6.7.1(a)). Any such Returns of the
Company shall be prepared in a manner reasonably consistent with past practices
employed with respect to the Company, except where a contrary manner is required
by law. Parent shall provide the Shareholders' Representative with a
copy of such completed Returns at least 10 days prior to the due date (including
any extensions thereof) for the filing of such Returns, and the Shareholders'
Representative shall have the right to review and comment on such Returns;
provided, however, that for any Return required to be filed within 90 days of
the Closing Date (taking into account any available extensions), Parent shall
instead use commercially reasonable efforts to afford the Shareholders'
Representative a reasonable opportunity to review and approve such Return prior
to filing. The failure of the Shareholders' Representative to propose
any changes to any such Return within such 10 days following the receipt thereof
shall be deemed to constitute its approval thereof. If the
Shareholders' Representative and Parent are unable to resolve any dispute
regarding any such Return within ten days of the Shareholders' Representative's
receipt thereof, the dispute shall be referred for final resolution to the
Accountants. The fees of the Accountants shall be shared equally by
the Shareholders and Parent. Parent shall file or cause to be filed
all such Returns in the form ultimately agreed upon by Parent and the
Shareholders' Representative pursuant to this Section 6.7.1(b); provided,
however, that in the case of any such Return with respect to which there is a
dispute that is referred to the Accountants, if such dispute cannot be resolved
before the due date of such Return, Parent shall cause such Return to be filed
as originally prepared and then shall file an amended Return if one is required
as the result of the dispute being resolved; and provided further that nothing
contained in the foregoing shall in any manner terminate, limit or adversely
affect any right of Parent to receive indemnification pursuant to any provision
in this Agreement.
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6.7.2 Cooperation
with Respect to Tax Returns. Parent and the
Shareholders shall furnish or cause to be furnished to each other, as promptly
as practicable, such information (including access to books and records) and
assistance, relating to the Company as is reasonably necessary for the filing of
any Return, for the preparation for any audit and for the prosecution or defense
of any claim, suit or proceeding relating to any adjustment or proposed
adjustment with respect to taxes. Parent shall retain in its
possession, and shall provide the Shareholders reasonable access to (including
the right to make copies of), such supporting books and records and any other
materials that Shareholders’ Representative may specify with respect to tax
matters relating to any taxable period ending on or prior to the Closing Date
until the relevant statute of limitations has expired. After such
time, Parent may dispose of such material.
6.7.3 Tax
Audits; Tax Disputes. Notwithstanding
anything to the contrary herein, in the event Parent or the Surviving
Corporation receives notice of any examination, claim, adjustment, or other
proceeding (a “Proceeding
Notice”) with respect to the liability for income taxes for any S
Corporation Taxable Period of the Company for which the Shareholders are liable
under Section 6.7.1(a) or for any other taxes for which the Shareholders
are required to indemnify Parent under Article VIII, Parent shall notify the
Shareholders' Representative in writing thereof (the “Parent Notice”) no later
than 10 days after the receipt by Parent or the Surviving
Corporation. As to any such income taxes for which the Shareholders
are solely liable under the last sentence of Section 6.7.1(a) and as to any
taxes for which the Shareholders may be liable pursuant to Article VIII, the
Shareholders shall be entitled at their sole expense to control the contest of
such examination, claim, adjustment, or other proceeding to the extent it
relates to such taxes; provided, however, that: (a) the Shareholders'
Representative notifies Parent in writing that the Shareholders desire to do so
no later than the earlier of (i) 30 days after receipt of the Parent
Notice, or (ii) five days prior to the deadline for responding to the
Proceeding Notice, and (b) the Shareholders may not, without the consent of
Parent, which will not be unreasonably withheld, agree to any settlement that
could result in an increase in the amount of taxes for which Parent is not
entitled to be fully indemnified under Article VIII.
ARTICLE
VII
CONDITIONS
PRECEDENT
7.1 Conditions to Each Party’s
Obligation to Effect the Merger. The
respective obligations of each party to consummate the Merger are subject to the
satisfaction, or to the extent permitted by applicable law, the written waiver
at or before the Effective Time, of each of the following
conditions:
7.1.1 Shareholder
Approval. This
Agreement and the Merger will have received Company Shareholder
Approval.
7.1.2 Consents. Other
than the filing of the Articles of Merger with the Secretary of State of
Minnesota, all Consents, third party consents, and notices that are legally
required to be obtained or provided for the consummation of the Merger and the
Merger, including those listed on Schedule 4.3, will have been satisfied,
filed, occurred, or been obtained, in accordance with the terms and conditions
of all applicable agreements other than such Consents and third party consents
(i) as Parent and Company agree Company will not seek or obtain, or
(ii) the failure of which to obtain would not result, individually or in
the aggregate, or reasonably be expected to result in a Company Material Adverse
Effect or as a result of the Merger, a Parent Material Adverse
Effect.
7.1.3 No
Order. No
Governmental Entity of competent jurisdiction will have enacted, issued,
promulgated, enforced, or entered any statute, rule, regulation, executive
order, decree, injunction, or other order (whether temporary, preliminary, or
permanent) that (i) is in effect, and (ii) has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger (which
illegality or prohibition would have a material impact on Company if the Merger
were consummated notwithstanding such statute, rule, regulation, executive
order, decree, injunction, or other order).
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7.2 Conditions of Obligations of
Parent and Sub. The
obligations of Parent and Sub to consummate the Merger are further subject to
the satisfaction or waiver at or before the Effective Time of each of the
following conditions:
7.2.1
Representations
and Warranties of Company. The
representations and warranties of Company in this Agreement will be true and
correct in all material respects on the date hereof and as of the Closing Date
with the same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date will have been true and correct only on such date), it being understood
that, for purposes of determining the accuracy of such representations and
warranties, all “Material Adverse Effect” and materiality qualifications and
other qualifications based on the word “material” in such representations and
warranties will be disregarded. Parent and Sub will have received a
certificate with respect to the foregoing signed on behalf of Company by the
Chief Executive Officer and the Chief Financial Officer of Company.
7.2.2 Performance
of Obligations of Company. Company
will have performed in all material respects all agreements and covenants
required to be performed by it under this Agreement before the Closing
Date. Parent will have received a certificate signed on behalf of
Company by the Chief Executive Officer and the Chief Financial Officer of
Company to such effect.
7.2.3 No
Company Material Adverse Effect. From
the date of this Agreement until the Closing Date, there has been no change,
event, circumstance, development, or effect that resulted, individually or in
the aggregate, in a Company Material Adverse Effect, and Parent will have
received a certificate to that effect signed on behalf of Company by the Chief
Executive Officer and the Chief Financial Officer of Company.
7.2.4 Legal
Action. There
will not be pending any action, proceeding, or other application brought by any
Governmental Entity: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger, or seeking to obtain any material
damages in connection therewith; or (ii) seeking to prohibit or impose any
material limitations on Parent’s or Surviving Corporation’s ownership or
operation of all or any portion of Company’s business or to compel
Parent or Surviving Corporation to dispose of or hold separate all or any
material portion of the assets of Company as a result of the
Merger.
7.2.5 Resignations. Parent
will have received the resignations of all of the officers and directors of
Company, effective as of the Effective Time (which resignations, other than the
right to serve as an officer or director, will not impair the rights of any
officer or director).
7.2.6 Noncompetition
Agreement.
Each of
Xxxxxxx Xxxxx and Xxxx Xxxxxxxxx will have executed a non-competition and
non-solicitation agreement with Parent in the form attached hereto as
Exhibit 7.2.6, and will not have taken any action or expressed any intent
to terminate or modify such agreement.
7.2.7 Consulting
Agreement.
Each of
Xxxxxxx Xxxxx and Xxxx Xxxxxxxxx will have executed a consulting agreement with
Parent in the form attached hereto as Exhibit 7.2.7, and will not have
taken any action or expressed any intent to terminate or modify such
agreement.
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7.2.8 Intellectual
Property Assignment. Xxxx Xxxxxxxxx will
have executed an Intellectual Property assignment agreement to Company in the
form attached hereto as Exhibit 7.2.8 assigning all rights and ownership to
software developed by Xxxx Xxxxxxxxx on behalf of Company.
7.2.9 Termination
of Certain Agreements. All agreements
set forth in Schedule 7.2.9 will have been terminated by the parties
thereto.
7.2.10 Amendment
of Certain Agreements. All agreements
set forth in Schedule 7.2.10 will have been amended as provided in such
schedule, and such amendments will be in full force and effect.
7.2.11 Opinion
of Counsel.
Parent
will have received an opinion dated as of the Closing Date of Vest &
Xxxxxxx, P.A. reasonably satisfactory to Parent, substantially in the form
attached hereto as Exhibit 7.2.11.
7.2.12 Assignment
of Rights to Company Intellectual Property. Company
and the employees, independent contractors (including former employees and
independent contractors) and customers of Company will have executed such
assignments and other documentation as may be reasonably requested by Parent to
effectively transfer or confirm the transfer of all right, title, and interest
to Company Intellectual Property to Company and/or Parent as its
successor.
7.2.13 Deliveries. Company
will have made the deliveries required by Section 4.6.
7.2.14 FIRPTA
Certificate.
Each
Shareholder will have delivered to Parent a non-foreign person affidavit in the
form and substance as required under the Treasury Regulations issued pursuant to
Section 1445 of the Code stating that each such Shareholder is not a “foreign
person” within the meaning of Section 1445 of the Code.
7.3 Conditions of Obligation of
Company. The
obligation of Company to consummate the Merger is subject to the satisfaction,
or to the extent permitted by applicable law, the written waiver at or before
the Effective Time of each of the following conditions:
7.3.1 Representations
and Warranties of Parent and Sub. The
representations and warranties of Parent and Sub contained in this Agreement
will be true and correct in all respects on the date hereof and as of the
Closing Date with the same force and effect as if made on the Closing Date
(except that those representations and warranties which address matters only as
of a particular date will have been true and correct only on such date), except,
individually or in the aggregate, as does not constitute a Parent Material
Adverse Effect at the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, all “Material
Adverse Effect” and materiality qualifications and other qualifications based on
the word “material” in such representations and warranties will be
disregarded). Company will have received a certificate with respect
to the foregoing signed on behalf of Parent, with respect to the representations
and warranties of Parent, by an authorized officer of Parent and a certificate
with respect to the foregoing signed on behalf of Sub, with respect to the
representations and warranties of Sub, by an authorized officer of
Sub.
7.3.2 Performance
of Obligations of Parent and Sub. Parent
and Sub will have performed all agreements and covenants required to be
performed by them under this Agreement before the Closing Date, and Company will
have received a certificate signed on behalf of Parent and Sub by an authorized
officer of Parent and Sub to such effect.
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ARTICLE
VIII
INDEMNIFICATION
8.1 Indemnification Relating to
Agreement. Subject
to the limitations set forth in this Article VIII, the holders of the Company
Common Stock jointly and severally will defend, indemnify, and hold Parent and
Surviving Corporation harmless from and against, and to reimburse Parent and
Surviving Corporation with respect to, any and all losses, damages, liabilities,
claims, judgments, settlements, fines, costs, and expenses (including reasonable
attorneys’ fees) (“Indemnifiable Amounts”) of
every nature whatsoever incurred by Parent and Surviving Corporation by reason
of or arising out of or in connection with (i) any breach, or any claim
(including claims by parties other than Parent) that if true, would constitute a
breach of any representation or warranty of Company in this Agreement (as
modified by the Company Disclosure Schedule as of the date hereof) or in any
certificate or other document delivered to Parent in accordance with this
Agreement, (ii) the failure, partial or total, of Company to perform any
agreement or covenant required by this Agreement to be performed by it,
(iii) any Working Capital Deficit adjustment to the extent not paid in
accordance with Section 2.3 and (iv) all taxes of Company relating to all
taxable periods ended on or before the Closing Date and the portion of taxes of
Company attributable to the portion of any Straddle Period beginning as of the
first day of such Straddle Period and ending as of the end of the Closing Date
(a “Pre-Closing Period”)
(calculated in the manner set forth in Section 8.7 (Straddle Period)); in each
case of (i) and (ii) above, without giving effect to any “materiality”
limitations or references to “material adverse effect” set forth
therein. Any payment to Parent in accordance with this
Article VIII will be treated for tax purposes as an adjustment to the cash
portion of the consideration for the Company Common Shares.
8.2 Third Party
Claims. Despite
anything to the contrary in this Agreement, whenever Parent receives a written
notice that a claim or demand has been asserted or threatened by a third party
for which Parent may seek indemnification hereunder, Parent will notify the
Shareholders’ Representative of such claim or demand and of the related facts
within Parent’s knowledge within a reasonable time after receiving such written
notice. Parent will have the right to conduct and control, through counsel of
its own choosing, any third-party claim, action, or suit (“Third Party Claim”) and will
keep the Shareholders’ Representative informed of the status
thereof. If in the reasonable judgment of Parent and the
Shareholders’ Representative there is a conflict or a reasonably likely
potential conflict between the positions of Shareholders’ Representative and
Parent in conducting the defense of such claim, the Shareholders’ Representative
will be entitled to participate in the defense of such claim, the cost of such
participation to be at the expense of the Shareholders’
Representative.
8.3 Binding
Effect. The
indemnification provisions in this Article VIII are an integral part of
this Agreement and Merger in the absence of which Parent would not have entered
into this Agreement.
8.4 Time
Limit.
(a) The
representations, warranties, covenants, and agreements of Company and
Shareholders set forth in this Agreement will survive Closing and will continue
until the 24 month anniversary of the Closing Date (“Termination Date”), at which
time all representations and warranties will expire.
(b) Despite
Section 8.4(a), no time limit will apply (other than the date that is 30 days
after the expiration of the applicable statute of limitations period) for
indemnification arising from: (a) fraud, willful breach, or intentional
misrepresentation by Company or the holders of Company Common Stock;
(b) any breaches of representations and warranties in Sections 3.1.2
(Capital Structure) and Sections 3.1.3 and 3.2.1 (Authority); and (c) any
taxes of Company as described in Section 8.1(iv) and any breaches of
representations and warranties in Sections 3.1.16
(Taxes). Despite the above, no representation, warranty, covenant, or
agreement will expire to the extent Parent has provided to the Shareholders’
Representative written notice of Parent’s claim for indemnification in
accordance with the terms of this Agreement before the expiration of the
applicable survival period.
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8.5 Contribution. Holders
of Company Common Stock will have no right of contribution from the Surviving
Corporation for liabilities for such holders’ obligations under this
Article VIII.
8.6 Exclusive
Remedy. With
the exception of (a) claims based upon fraud, willful breach, or
intentional misrepresentation, (b) claims under Section 8.1(iv),
(c) claims arising out of breaches of the representations and warranties in
Section 3.1.2 (Capital Structure), Sections 3.1.3 and 3.2.1 (Authority) and
Section 3.1.18 (Taxes), from and after the Effective Time, resort to
indemnification under this Article VIII will be the exclusive right and
remedy of Parent and Surviving Corporation for Indemnifiable Amounts or other
damages under this Agreement (it being understood that nothing in this
Section 8.6 or elsewhere in this Agreement will affect Parent’s or
Surviving Corporation’s rights to equitable remedies to the extent
available).
8.7 Straddle
Period. For
purposes of Section 8.1(iv), in the case of any taxable period that
includes but does not end on the Closing Date (a “Straddle Period”), the amount
of any taxes based on or measured by income or receipts of Company deemed to
relate to a Pre-Closing Period will be determined based on an interim closing of
the books as of the close of business on the Closing Date, and the amount of
other taxes of Company for a Straddle Period which relate to a Pre-Closing
Period will be deemed to be the amount of such tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
total number of days in such Straddle Period.
ARTICLE
IX
TERMINATION,
AMENDMENT, AND WAIVER
9.1 Termination. Despite
anything in this Agreement to the contrary, this Agreement may be terminated and
the Merger abandoned at any time before the Effective Time:
(a) by
mutual written consent of Parent and Company, duly authorized by Parent and by
the board of directors of Company;
(b) by
either Parent or Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or agreement
contained in this Agreement) if (i) there has been a material breach by the
non-terminating party of any representation, warranty, covenant, or agreement as
set forth in the Agreement that results in the closing conditions in
Article VII in the terminating party’s favor not being capable of being met
by the date set forth in Section 9.1(c)below or (ii) if any
representation or warranty of the non-terminating party is or has been untrue or
inaccurate such that, in the aggregate, such untruths or inaccuracies would
result, or reasonably be expected to result, in a Company Material Adverse
Effect or a material adverse effect on a party’s ability to consummate the
Merger; provided, however, that if in each case such breach is curable, then
this Agreement may not be terminated under this Section 9.1(b) until the
earlier of (i) 30 days after delivery of written notice of such untruth or
inaccuracy or breach, or (ii) the date on which the non-terminating party
ceases to exercise commercially reasonable efforts to cure such untruth or
inaccuracy or breach;
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(c) by
either Parent or Company if the Merger has not been consummated before 120 days
following the date of this Agreement (the “Outside Date”); provided,
however, that the right to terminate this Agreement under this Section 9.1
will not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to have been
consummated on or before such date and such action or failure to act constitutes
a breach of this Agreement; or
(d) by
either Parent or Company if any permanent injunction or other order of a court
or other competent authority preventing the Merger will have become final and
not subject to appeal.
9.2
Effect of
Termination. In
the event of termination of this Agreement by either Company or Parent as
provided in Section 9.1, this Agreement will become void and have no
effect, and there will be no liability or obligation on the part of Parent, Sub,
or Company, or their respective officers or directors, except that (i) the
provisions of Sections 6.1 (Non-Disclosure Agreement),
6.5 (Public Announcements), 9.2 (Effect of Termination),
10.6 (Governing Law), 10.10 (Specific Performance),
10.12 (Submission to Jurisdiction), and 10.13 (Shareholders’
Representative) and the Non-Disclosure Agreement will survive any such
termination and abandonment, and (ii) no party will be released or relieved
from any liability arising from the willful breach by such party of any of its
representations, warranties, covenants, or agreements as set forth in this
Agreement.
ARTICLE
X
GENERAL
PROVISIONS
10.1 Notices. All
notices, requests, demands, or other communications required or permitted to be
given under this Agreement will be in writing and deemed given
upon: (i) personal delivery, (ii) confirmed delivery by a
standard overnight courier or when delivered by hand, (iii) when mailed in
the United States by certified or registered mail, postage prepaid, addressed at
the following addresses (or at such address for a party as will be specified by
notice given hereunder), or (iv) transmitter’s confirmation of a receipt of
a facsimile transmission:
|
(a)
|
if
to Parent
|
|||
|
or
Sub, to:
|
Intelli-Check
– Mobilisa
|
|||
|
000
Xxxx Xx.
|
||||
|
Xxxx
Xxxxxxxx, XX 00000
|
||||
|
Attention: Xxxx
Xxxxx, General Counsel
|
||||
|
Facsimile
No.: 000-000-0000
|
||||
|
With
a copy to:
|
K&L
Gates LLP
|
|||
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
|
||||
|
Xxxxxxx,
XX 00000-0000
|
||||
|
Attention: Xxxxx
Xxxxxxxxxx
|
||||
|
Facsimile
No.: 206-623-7022
|
||||
|
(b)
|
if
to Company, to:
|
Positive
Access Corporation
|
||
|
0000
Xxxx 00xx
Xx. #000
|
||||
|
Xxxx
Xxxxxxx, XX 00000
|
||||
|
Attention:
Xxxx Xxxxxxxxx
|
||||
|
|
|
Facsimile
No.: 000-000-0000
|
-36-
|
With
a copy to:
|
Vest
& Xxxxxxx, P.A.
|
|||
|
0000
Xxxxxxxxx Xxxxxx, #000
|
||||
|
Xxxxxxxx
Xxxx, XX 00000
|
||||
|
Attention: Xxxxxxx
X. Xxxx
|
||||
|
Facsimile
No.: 763-566-3720
|
||||
|
(c)
|
if
to Shareholders’
|
|||
|
Representative
to:
|
Positive
Access Corporation
|
|||
|
0000
Xxxx 00xx
Xx. #000
|
||||
|
Xxxx
Xxxxxxx, XX 00000
|
||||
|
Attention:
Xxxx Xxxxxxxxx
|
||||
|
|
|
Facsimile
No.: 000-000-0000
|
10.2 Interpretation. For
purposes of this Agreement, “subsidiary” or “subsidiaries” means
with respect to any Person, any entity or entities of which securities or other
ownership interests having voting power sufficient to elect a majority of its
board of directors or other governing body are at any time directly or
indirectly owned by such Person. For purposes of this Agreement,
“Person” means an
individual, corporation, partnership, association, limited liability company,
trust, estate, organization, or other entity. The words “include,” “includes,” and “including” when used in this
Agreement will be deemed in each case to be followed by the words “without
limitation.” The table of contents and headings contained in
this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement. The “knowledge of” or other
derivations of “know” in
this Agreement with respect to a party will mean the knowledge of the executive
officers of such party, after the exercise of reasonable inquiry and
investigation by such executive officers. As used in this Agreement,
the term “affiliate” has
the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act. As used in this Agreement, the term “business day” means any day
other than a Saturday, Sunday, or a day on which banking institutions in
Seattle, Washington are permitted or obligated by law to be closed for regular
banking business. The respective parties hereto and their attorneys
have negotiated this Agreement and the language hereof will not be construed for
or against either party, as drafter. A reference to a section,
schedule, or an exhibit will mean a section in, or schedule or exhibit to, this
Agreement unless otherwise explicitly set forth.
10.3 Counterparts. This
Agreement may be executed (i) in one or more partially or fully executed
counterparts, each of which will be deemed an original and will bind the
signatory, but all of which together will constitute the same instrument, and
(ii) by facsimile. The execution and delivery of a Signature
Page - Agreement and Plan of Merger, in the form annexed to this
Agreement, by any party hereto who will have been furnished the final form of
this Agreement will constitute the execution and delivery of this Agreement by
such party.
10.4 Miscellaneous. This
Agreement, the Non-Disclosure Agreement, and the documents referred to in this
Agreement (i) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (ii) is not intended to confer upon any other Person
any rights or remedies hereunder (except as otherwise expressly provided in this
Agreement); and (iii) will not be assigned by operation of law or otherwise
except as otherwise specifically provided.
10.5 No Joint
Venture. Nothing
in this Agreement will be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. No party is by virtue
of this Agreement authorized as an agent, employee, or legal representative of
any other party. No party will have the power to control the
activities and operations of any other and their status is, and at all times,
will continue to be, that of independent contractors with respect to each
other. No party will have any power or authority to bind or commit
any other. No party will hold itself out as having any authority or
relationship in contravention of this Section 10.5.
-37-
10.6 Governing
Law. This
Agreement, other than the Merger and the effects of the Merger, which will be
governed by the laws of the State of Minnesota, will be governed in all
respects, including validity, interpretation, and effect, by the laws of the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
10.7 Amendment. Except
as may otherwise be provided in this Agreement, any provision of this Agreement
may be amended or modified by the parties hereto before the Closing Date, if,
and only if such amendment or modification is in writing and signed on behalf of
each of the parties hereto; provided that after the approval of this Agreement
by the shareholders of Company, no such amendment will be made except as allowed
under applicable law.
10.8 Extension,
Waiver. At
any time before the Effective Time, any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties in this Agreement or in any document
delivered pursuant hereto made to such party, and (iii) waive compliance
with any of the agreements, covenants, or conditions in this Agreement for the
benefit of such party. Any agreement on the part of a party hereto to
any such extension or waiver will be valid only if set forth in an instrument in
writing and signed by the party against whom the waiver is to be
effective.
10.9 Successors and
Assigns. This
Agreement will not be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion and without the
consent of any other party, any or all of its rights, interests, and obligations
hereunder to (a) Parent, or (b) Parent and one or more direct or
indirect wholly-owned subsidiaries of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and assigns.
10.10 Specific
Performance. The
parties acknowledge and agree that any breach of the terms of this Agreement
would give rise to irreparable harm for which money damages would not be an
adequate remedy and accordingly the parties agree that, in addition to any other
remedies, each will be entitled to enforce the terms of this Agreement by a
decree of specific performance without the necessity of proving the inadequacy
of money damages as a remedy.
10.11 Severability. If
any term or other provision of this Agreement is invalid, illegal, or incapable
of being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the Merger are not affected in any
manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner.
10.12 Submission to
Jurisdiction. All
actions and proceedings arising out of or relating to this Agreement will be
heard and determined exclusively in any Washington state or federal court
sitting in King County. The parties hereto hereby (a) submit to
the exclusive jurisdiction of any state or federal court sitting in King County
for the purpose of any action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to
assert by way of motion, defense, or otherwise, in any such action, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
action is brought in an inconvenient forum, that the venue of the action is
improper, or that this Agreement or the Merger may not be enforced in or by any
of the above-named courts.
-38-
10.13 Shareholders’
Representative.
(a) By
virtue of the Company Shareholder Approval, and without any further act of any
holder of Company Common Stock, the holders of Company Common Stock will be
deemed to have appointed Xxxx Xxxxxxxxx (previously defined as the Shareholders’
Representative) as agent and attorney-in-fact for each holder of Company Common
Stock for all matters relating to this Agreement, including to give and receive
notices and communications; to authorize delivery of cash from the Holdback
Amount in satisfaction of claims by Parent or Surviving Corporation; to object
to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims; and to take all actions
necessary or appropriate in the judgment of the Shareholders’ Representative for
the accomplishment of the foregoing.
(b) The
Shareholders’ Representative will not be liable for any act done or omitted
hereunder as the Shareholders’ Representative while acting in good
faith. Holders of Company Common Stock on whose behalf the Holdback
Amount is withheld will severally indemnify the Shareholders’ Representative and
hold the Shareholders’ Representative harmless against all loss, liability, or
expense incurred without bad faith or willful misconduct on the part of such
Shareholders’ Representative and arising out of or in connection with the
acceptance or administration of such Shareholders’ Representative’s duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholders’ Representative. The Shareholders’
Representative will be entitled to the advance and reimbursement of costs and
expenses incurred by or on behalf of the Shareholders’ Representative in the
performance of their duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Shareholders’
Representative.
(c) A
decision, act, consent, or instruction of the Shareholders’ Representative
relating to this Agreement will constitute a decision of the holders of Company
Common Stock and will be final, binding, and conclusive upon each such
holder. Parent, and all other persons entitled to indemnification
under this Agreement or any other document or agreement entered into in
connection herewith or therewith (the “Indemnified Persons”), may
rely upon any such decision, act, consent, or instruction of the Shareholders’
Representative as being the decision, act, consent, or instruction of the
holders of Company Common Stock. Parent and all other Indemnified
Persons are hereby relieved from any liability to any person for any acts done
by them in accordance with such decision, act, consent, or instruction of the
Shareholders’ Representative.
[remainder of page intentionally
blank]
-39-
SIGNATURE
PAGE—AGREEMENT AND PLAN OF MERGER
IN
WITNESS WHEREOF, Parent, Sub, Company, Shareholders, and the Shareholders’
Representative have signed or caused their respective duly authorized officers
to sign this Agreement, all as of the date first written above.
| INTELLI-CHECK – MOBILISA, INC. | |
|
By
|
/s/ Xxxxxx Xxxxxx
|
|
Its
|
CEO
|
| DL SUB CORPORATION | |
|
By
|
/s/ Xxxxxx Xxxxxx
|
|
Its
|
President
|
| POSITIVE ACCESS CORPORATION | |
|
By
|
/s/ Xxxxxxx X. Xxxxxxxxx
|
|
Xxxxxxx X. Xxxxxxxxx
|
|
|
Its
|
CEO
|
| /s/ Xxxxxxx X. Xxxxxxxxx | |
| Xxxxxxx X. Xxxxxxxxx as Shareholder | |
| /s/ Xxxxxxx Xxxxx | |
| Xxxxxxx Xxxxx as Shareholder | |
| SHAREHOLDERS’ REPRESENTATIVE | |
| /s/ Xxxxxxx Xxxxxxxxx | |
| Xxxxxxx Xxxxxxxxx | |
TABLE
OF CONTENTS
|
Page
|
|||
| ARTICLE I THE MERGER | |||
|
1.1
|
Effective
Time of the Merger
|
1
|
|
|
1.2
|
Closing
|
1
|
|
|
1.3
|
Effects
of the Merger
|
1
|
|
| ARTICLE II EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION | |||
|
2.1
|
Effect
on Capital Stock
|
2
|
|
|
2.1.1
|
Capital
Stock of Sub
|
2
|
|
|
2.1.2
|
Cancellation
of Company Shares
|
2
|
|
|
2.1.3
|
Conversion
of Company Securities
|
2
|
|
|
2.2
|
Holdback
|
3
|
|
|
2.2
|
Deferred
Payment
|
3
|
|
|
2.3
|
Net
Working Capital
|
3
|
|
|
2.4
|
Delivery
of Consideration
|
5
|
|
|
2.4.1
|
Exchange
Procedures
|
5
|
|
|
2.4.2
|
No
Further Ownership Rights in Company Shares
|
5
|
|
|
2.4.3
|
Withholding
Rights
|
6
|
|
| ARTICLE III REPRESENTATIONS AND WARRANTIES | |||
|
3.1
|
Representations
and Warranties of Company
|
6
|
|
|
3.1.1
|
Organization,
Standing, and Power
|
6
|
|
|
3.1.2
|
Capital
Structure
|
7
|
|
|
3.1.3
|
Authority
|
7
|
|
|
3.1.4
|
Consents
and Approvals; No Violations
|
8
|
|
|
3.1.5
|
Financial
Statements
|
8
|
|
|
3.1.6
|
No
Defaults
|
8
|
|
|
3.1.7
|
Litigation
|
9
|
|
|
3.1.8
|
No
Material Adverse Change
|
9
|
|
|
3.1.9
|
Absence
of Undisclosed Liabilities
|
10
|
|
|
3.1.10
|
Certain
Agreements
|
10
|
|
|
3.1.11
|
Employees
|
11
|
|
|
3.1.12
|
Employee
Benefit Plans
|
11
|
|
|
3.1.13
|
Real
Property; Leases
|
11
|
|
|
3.1.15
|
Customers
and Suppliers
|
12
|
|
|
3.1.16
|
Material
Contracts
|
14
|
|
|
3.1.17
|
Taxes
|
15
|
|
|
3.1.18
|
Interests
of Officers
|
16
|
|
|
3.1.19
|
Technology
and Intellectual Property Rights
|
19
|
|
|
3.1.20
|
Vote
Required
|
20
|
|
|
3.1.21
|
Complete
Copies of Materials
|
20
|
|
|
3.1.22
|
Board
Recommendation
|
20
|
|
|
3.1.23
|
Insurance
|
20
|
|
|
3.1.24
|
Accounts
Receivable
|
20
|
|
|
3.1.25
|
Personal
Property
|
20
|
|
|
3.1.26
|
Guarantees
and Suretyships
|
20
|
|
|
3.1.27
|
Certain
Transactions
|
21
|
|
|
3.1.28
|
Government
Contracts
|
21
|
|
|
3.1.29
|
Disclosure
|
21
|
|
|
3.1.30
|
Reliance
|
21
|
|
|
3.2
|
Representations
and Warranties of Major Shareholders
|
21
|
|
|
3.2.1
|
Authority
|
22
|
|
|
3.2.2
|
Voting
Agreements
|
22
|
|
|
3.2.3
|
Non-Contravention;
Consents
|
22
|
|
|
3.2.5
|
Reliance
|
22
|
|
|
3.3
|
Representations
and Warranties of Parent and Sub
|
22
|
|
|
3.3.1
|
Organization;
Standing and Power
|
22
|
|
|
3.3.2
|
Authority
|
22
|
|
|
3.3.3
|
Consents
and Approvals; No Violations
|
23
|
|
|
3.3.4
|
Disclosure
|
23
|
|
|
3.3.5
|
Reliance
|
23
|
|
|
ARTICLE
IV COVENANTS OF COMPANY
|
|||
|
4.1
|
Conduct
of Business
|
23
|
|
|
4.1.1
|
Ordinary
Course
|
23
|
|
|
4.1.2
|
Exclusivity;
Acquisition Proposals
|
26
|
|
|
4.2
|
Breach
of Representations and Warranties; Notification; Access to
Information
|
27
|
|
|
4.3
|
Consents
and Notices
|
28
|
|
|
4.4
|
Commercially
Reasonable Efforts
|
28
|
|
|
4.5
|
Intellectual
Property
|
28
|
|
|
4.6
|
Deliveries
|
28
|
|
|
4.7
|
Shareholder
Approval
|
28
|
|
|
ARTICLE
V COVENANTS OF PARENT
|
|||
|
5.1
|
Breach
of Representations and Warranties
|
28
|
|
|
5.2
|
Commercially
Reasonable Efforts
|
29
|
|
|
ARTICLE
VI ADDITIONAL AGREEMENTS
|
|||
|
6.1
|
Non-Disclosure
Agreement
|
29
|
|
|
6.2
|
Legal
Conditions to the Merger
|
29
|
|
|
6.3
|
Expenses
|
29
|
|
|
6.4
|
Additional
Agreements
|
29
|
|
|
6.5
|
Public
Announcements
|
29
|
|
|
6.6
|
Employee
Matters
|
29
|
|
|
6.7
|
Tax
Matters
|
30
|
|
|
6.7.1
|
Returns
and Payments
|
30
|
|
|
6.7.2
|
Cooperation
with Respect to Tax Returns
|
31
|
|
|
6.7.3
|
Tax
Audits; Tax Disputes
|
31
|
|
|
ARTICLE
VII CONDITIONS PRECEDENT
|
|||
|
7.1
|
Conditions
to Each Party’s Obligation to Effect the Merger
|
31
|
|
|
7.1.1
|
Shareholder
Approval
|
31
|
|
|
7.1.2
|
Consents
|
31
|
|
|
7.1.3
|
No
Order
|
31
|
|
|
7.2
|
Conditions
of Obligations of Parent and Sub
|
32
|
|
|
7.2.1
|
Representations
and Warranties of Company
|
32
|
|
|
7.2.2
|
Performance
of Obligations of Company
|
32
|
|
|
7.2.3
|
No
Company Material Adverse Effect
|
32
|
|
|
7.2.4
|
Legal
Action
|
32
|
|
|
7.2.5
|
Resignations
|
32
|
|
|
7.2.6
|
Noncompetition
Agreement
|
32
|
|
|
7.2.8
|
Intellectual
Property Payment
|
33
|
|
|
7.2.9
|
Termination
of Certain Agreements
|
33
|
|
|
7.2.10
|
Amendment
of Certain Agreements
|
33
|
|
|
7.2.11
|
Opinion
of Counsel
|
33
|
|
|
7.2.12
|
Assignment
of Rights to Company Intellectual Property
|
33
|
|
|
7.2.13
|
Deliveries
|
33
|
|
|
7.2.14
|
FIRPTA
Certificate
|
33
|
|
-xlii-
|
7.3
|
Conditions
of Obligation of Company
|
33
|
|
|
7.3.1
|
Representations
and Warranties of Parent and Sub
|
33
|
|
|
7.3.2
|
Performance
of Obligations of Parent and Sub
|
33
|
|
|
ARTICLE
VIII INDEMNIFICATION
|
|||
|
8.1
|
Indemnification
Relating to Agreements
|
34
|
|
|
8.2
|
Third
Party Claims
|
34
|
|
|
8.3
|
Binding
Effect
|
34
|
|
|
8.4
|
Time
Limit
|
34
|
|
|
8.5
|
Contribution
|
35
|
|
|
8.6
|
Exclusive
Remedy
|
35
|
|
|
8.7
|
Straddle
Period
|
35
|
|
|
ARTICLE
IX TERMINATION, AMENDMENT, AND WAIVER
|
|||
|
9.1
|
Termination
|
35
|
|
|
9.2
|
Effect
of Termination
|
36
|
|
| ARTICLE X GENERAL PROVISIONS | |||
|
10.1
|
Notices
|
36
|
|
|
10.2
|
Interpretation
|
37
|
|
|
10.3
|
Counterparts
|
37
|
|
|
10.4
|
Miscellaneous
|
37
|
|
|
10.5
|
No
Joint Venture
|
37
|
|
|
10.6
|
Governing
Law
|
38
|
|
|
10.7
|
Amendment
|
38
|
|
|
10.8
|
Extension,
Waiver
|
38
|
|
|
10.9
|
Successors
and Assigns
|
38
|
|
|
10.10
|
Specific
Performance
|
38
|
|
|
10.11
|
Severability
|
38
|
|
|
10.12
|
Submission
to Jurisdiction
|
38
|
|
|
10.13
|
Shareholders’
Representative
|
39
|
|
-xliii-
LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit
7.2.6
|
Form
of Non-Competition and Non-Solicitation Agreement
|
|
Exhibit
7.2.7
|
Form
of Consulting Agreement
|
|
Exhibit
7.2.8
|
Form
of Intellectual Property Assignment
|
|
Exhibit
7.2.11
|
Form
of Opinion of Counsel
|
|
Company
Disclosure Schedule
|
|
|
Schedule
2.4(c)
|
Preliminary
Closing Balance Sheet
|
|
Schedule
4.3
|
Required
Consents
|
|
Schedule
7.2.9
|
List
of Agreements to be Terminated
|
|
Schedule
7.2.10
|
List
of Agreements to be
Amended
|
-xliv-
INDEX
OF DEFINED TERMS
|
Accounting
Arbitrator
|
5
|
|
Acquisition
Proposal
|
31
|
|
affiliate
|
39
|
|
Agreement
|
1
|
|
Articles
of Merger
|
1
|
|
Balance
Sheet Date
|
8
|
|
Base
Cash Amount
|
2
|
|
business
day
|
39
|
|
Xxxxxx
Agreement
|
10
|
|
Certificate
|
2
|
|
Change
of Recommendation
|
30
|
|
Closing
|
1
|
|
Closing
Balance Sheet
|
5
|
|
Closing
Date
|
1
|
|
Closing
Date NWC
|
4
|
|
Code
|
1
|
|
Collection
and Use
|
21
|
|
Company
|
1
|
|
Company
Common Stock
|
2
|
|
Company
Disclosure Schedule
|
6
|
|
Company
Intellectual Property
|
19
|
|
Company
Lease
|
13
|
|
Company
Licensed Intellectual Property
|
19
|
|
Company
Material Adverse Effect
|
6
|
|
Company
Owned Intellectual Property
|
19
|
|
Company
Securities
|
6
|
|
Company
Stockholder Approval
|
23
|
|
Consents
|
8
|
|
Conversion
Payment
|
2
|
|
Counter
Proposed Closing Balance Sheet
|
4
|
|
Customer
Information
|
21
|
|
Debt
|
3
|
|
Determination
Materials
|
4
|
|
Effective
Time
|
1
|
|
Environmental
Law
|
14
|
|
Environmental
Permits
|
13
|
|
ERISA
|
12
|
|
Excluded
License
|
21
|
|
FAR
|
24
|
|
Final
Closing Date NWC
|
4
|
|
Financial
Statements
|
8
|
|
GAAP
|
8
|
|
Government
Contracts
|
24
|
|
Governmental
Entity
|
8
|
|
Hazardous
Material
|
14
|
|
Hazardous
Materials Activities
|
13
|
|
Holdback
Amount
|
3
|
|
include
|
39
|
|
includes
|
39
|
|
including
|
39
|
|
Indemnifiable
Amounts
|
36
|
|
Indemnified
Persons
|
42
|
|
In-Licenses
|
19
|
|
Intellectual
Property
|
18
|
|
Intellectual
Property Rights
|
18
|
|
Interim
Balance Sheet Date
|
8
|
|
IRS
|
13
|
|
know
|
39
|
|
knowledge
of
|
39
|
|
Liabilities
|
10
|
|
Liability
|
10
|
|
Material
Contracts
|
15
|
|
MBCA
|
1
|
|
Merger
|
1
|
|
Net
Working Capital
|
3
|
|
Non-Disclosure
Agreement
|
33
|
|
Outside
Date
|
38
|
|
Parent
|
1
|
|
Parent
Common Stock
|
2
|
|
Parent
Material Adverse Effect
|
26
|
|
Per
Share Amount
|
2
|
|
Person
|
39
|
|
Plan
|
11
|
|
Pre-Closing
Balance Sheet Date
|
32
|
|
Pre-Closing
Period
|
36
|
|
Preliminary
Closing Balance Sheet
|
4
|
|
Preliminary
Closing Date NWC
|
4
|
|
Proposed
Closing Balance Sheet
|
4
|
|
Reconciliation
Deadline
|
4
|
|
Representatives
|
29
|
|
Restricted
Transaction
|
29
|
|
Returns
|
16
|
|
Review
Notice
|
4
|
|
Shareholders
|
1
|
|
Shareholders’
Representative
|
1
|
|
Significant
Customer
|
14
|
|
Significant
Supplier
|
15
|
|
Stock
Consideration
|
2
|
|
Straddle
Period
|
37
|
|
Sub
|
1
|
|
subsidiaries
|
39
|
|
subsidiary
|
39
|
|
Superior
Proposal
|
31
|
|
Surviving
Corporation
|
1
|
|
Surviving
Corporation Common Stock
|
2
|
|
tax
|
16
|
|
taxes
|
16
|
|
Technology
|
18
|
|
Termination
Date
|
37
|
|
Third
Party Claim
|
36
|
|
Total
Current Assets
|
3
|
|
Total
Current Liabilities
|
3
|
|
Violation
|
7
|
|
without
limitation
|
39
|
|
Working
Capital Deficit
|
3
|
-xlv-
