AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
EXHIBIT
2.1
AGREEMENT
AND PLAN
OF
MERGER AND REORGANIZATION
THIS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (“Agreement”)
is
made and entered into as of January 19, 2007, by and among: SBE,
INC.,
a
Delaware corporation (“Parent”);
COLD
WINTER ACQUISITION CORPORATION,
a
Delaware corporation and wholly-owned subsidiary of Parent (“Merger
Sub”);
and
NEONODE
INC.,
a
Delaware corporation (the “Company”).
Certain capitalized terms used in this Agreement are defined in
EXHIBIT A and
EXHIBIT C.
Recitals
A. Parent,
Merger Sub and the Company intend to effect a merger of Merger Sub into the
Company (the “Merger”)
in
accordance with this Agreement and the Delaware General Corporation Law (the
“DGCL”).
Upon
consummation of the Merger, Merger Sub shall be merged with and into the
Company, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It
is
intended that the Merger qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”).
C. This
Agreement has been approved by the respective boards of directors of Parent,
Merger Sub and the Company.
D. Parent
has agreed to sell a substantial portion of its assets to One Stop Systems,
Inc.
(“One
Stop”),
a
Delaware corporation (the “Disposition”)
pursuant to Agreement for Purchase and Sale of Assets dated January 11, 2007
between Parent and One Stop (the “One
Stop Agreement”).
E. The
Company plans to issue the New Notes in a private placement (the “Bridge
Note Placement”).
Agreement
The
parties to this Agreement, intending to be legally bound, agree as
follows:
|
SECTION
1.
|
DESCRIPTION
OF TRANSACTION
|
1.1 Merger
of Merger Sub into the Company.
Upon the
terms and subject to the conditions set forth in this Agreement, at the
Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and
into the Company, the separate existence of Merger Sub shall cease, and the
Company will become a wholly owned subsidiary of Parent (the “Surviving
Entity”).
1.2 Effect
of the Merger.
The
Merger shall have the effects set forth in this Agreement and in the applicable
provisions of the DGCL.
1.3 Closing;
Effective Time.
The
consummation of the transactions contemplated by this Agreement (the
“Closing”)
shall
take place at the offices of Xxxx & Hessen LLP, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000 at 10:00 a.m. on a date to be designated jointly by the Company
and Parent (the “Scheduled
Closing Time”),
which
shall be no later than two business days after the last condition set forth
in
Sections 6 and 7 has been satisfied or waived (other than those conditions
that
by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of such conditions). The date on which the Closing
actually takes place is referred to in this Agreement as the “Closing
Date.”
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed agreement of merger conforming to the applicable requirements
of the DGCL shall be filed with the Secretary of State of the State of Delaware.
The Merger shall become effective at the time such agreement of merger is filed
with the Secretary of State of the State of Delaware (the “Effective
Time”).
1
1.4 Certificate
of Incorporation and Bylaws.
Unless
otherwise determined by mutual written consent of Parent and the Company prior
to the Effective Time, immediately upon the Closing:
(a) the
certificate of incorporation of the Surviving Entity shall be amended to be
identical to the certificate of incorporation of Merger Sub, except that the
name of the Surviving Entity shall be Neonode Inc.; and
(b) the
bylaws of the Surviving Entity shall be amended to be identical to the bylaws
of
Merger Sub.
1.5 Conversion
of Shares.
(a) At
the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any stockholder of the
Company:
(i) each
share of Company Common Stock outstanding immediately prior to the Effective
Time shall be converted into the right to receive the Applicable Number of
shares of Parent Common Stock; and
(ii) each
share of the common stock (par value $0.001 per share) of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Entity.
(b) The
Applicable Number shall be the quotient obtained by dividing Merger
Consideration (as defined below) by Company Shares (as defined below). For
the
purposes of this formula:
|
(i)
|
Applicable
Number = Merger Consideration ÷ Company
Shares;
|
|
(ii)
|
Company
Shares = the total number of shares of Company Common Stock issued
and
outstanding immediately prior to the Effective Time (including shares
issued upon conversion of the Bridge Notes, the Petrus Note and the
Convertible Almi Note);
|
|
(iii)
|
Merger
Consideration = Total Shares less Parent
Shares;
|
|
(iv)
|
Parent
Shares = the total number of shares of Parent Common Stock issued
and
outstanding immediately prior to the Effective
Time;
|
|
(v)
|
Total
Shares = Parent Shares ÷ (Value of Parent ÷ (Value of Parent + $15,330,150
+ total exercise price paid between the date of this Agreement and
the
Effective Time upon exercise of Company Options and Existing Warrants
+
total principal amount and accrued interest of the Bridge Notes issued
and
outstanding immediately prior to the Effective
Time));
|
2
|
(vi)
|
Value
of Parent = $5,000,000 - Adjusted Net Worth Shortfall;
and
|
|
(vii)
|
Adjusted
Net Worth Shortfall shall mean the difference, but not less than
$0,
between $4,000,000 and the Adjusted Net Worth amount set forth in
the Net
Worth Certificate.
|
(c) If
any
shares of Company Common Stock outstanding immediately prior to the Effective
Time are unvested or are subject to a repurchase option, risk of forfeiture
or
other condition under any applicable restricted stock purchase agreement or
other agreement with the Company, then the shares of Parent Common Stock issued
in exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends.
1.6 Employee
Stock Options.
(a) At
the
Effective Time, each stock option that is then outstanding under the Company
Option Plan, whether vested or unvested (a “Company
Option”),
shall
be assumed by Parent in accordance with the terms (as in effect as of the date
of this Agreement) of the Company Option Plan and the stock option agreement
by
which such Company Option is evidenced. All rights with respect to Company
Common Stock under outstanding Company Options shall thereupon be converted
into
rights with respect to Parent Common Stock. Accordingly, from and after the
Effective Time, (i) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to each such assumed Company Option shall be equal
to the number of shares of Company Common Stock that were subject to such
Company Option immediately prior to the Effective Time multiplied by the
Applicable Number, rounded down to the nearest whole number of shares of Parent
Common Stock, (iii) the per share exercise price for the Parent Common Stock
issuable upon exercise of each such assumed Company Option shall be determined
by dividing the exercise price per share of Company Common Stock subject to
such
Company Option, as in effect immediately prior to the Effective Time, by the
Applicable Number, and rounding the resulting exercise price up to the nearest
whole cent, and (iv) all restrictions on the exercise of each such assumed
Company Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such Company Option
shall otherwise remain unchanged; provided,
however,
that
each such assumed Company Option shall, in accordance with its terms, be subject
to further adjustment as appropriate to reflect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction effected
by
Parent after the Effective Time; provided
further,
that in
no event shall any assumed Company Option have a term in excess of ten years.
(b) The
Company and Parent shall take all action that may be necessary (under the
Company Option Plan and otherwise) to effectuate the provisions of this Section
1.6.
(c) Promptly
following the Closing, Parent will deliver to each holder of an assumed Company
Option a written notice setting forth (i) the number of shares of Parent Common
Stock subject to such assumed Company Option, and (ii) the exercise price per
share of Parent Common Stock issuable upon exercise of such assumed Company
Option (the “Option
Assumption Notice”).
1.7 Company
Warrants.
All
Company Warrants outstanding as of the Effective Time shall be assumed by
Parent, and each Company Warrant so assumed by Parent under this Agreement
will
continue to have, and be subject to, the same terms and conditions set forth
in
such Company Warrant immediately prior to the Effective Time (including any
repurchase rights or vesting provisions), except that (a) each Company Warrant
will be exercisable (or will become exercisable in accordance with its terms)
for that number of whole shares of Parent Common Stock equal to the product
of
the number of shares of Company Common Stock that were issuable upon exercise
of
such Company Warrant immediately prior to the Effective Time multiplied by
the
Applicable Number, rounded down to the nearest whole number of shares and (b)
the per share exercise price for the shares issuable upon exercise of such
assumed Company Warrant will be equal to the quotient determined by dividing
the
exercise price per share of Company Common Stock at which such Company Warrant
was exercisable immediately prior to the Effective Time by the Applicable
Number, rounded up to the nearest whole cent. As soon as reasonably practicable
following the Closing Date, Parent will issue to each person who holds an
assumed Company Warrant a document evidencing the foregoing assumption of such
Company Warrant by Parent (the “Warrant
Assumption Document”).
3
1.8 Closing
of the Company’s Transfer Books.
At the
Effective Time, holders of certificates representing shares of the Company’s
capital stock that were outstanding immediately prior to the Effective Time
shall cease to have any rights as stockholders of the Company, and the stock
transfer books of the Company shall be closed with respect to all shares of
such
capital stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of the Company’s capital stock shall be made on such
stock transfer books after the Effective Time. If, after the Effective Time,
a
valid certificate previously representing any of such shares of the Company’s
capital stock (a “Company
Stock Certificate”)
is
presented to the Surviving Entity or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section
1.9.
1.9 Exchange
of Certificates.
(a) As
soon
as practicable after the Effective Time, but in any event no more than ten
business days after the Effective Time, Parent will send to the holders of
Company Stock Certificates (i) a letter of transmittal in customary form
and containing such provisions as Parent may reasonably specify, and (ii)
instructions for use in effecting the surrender of Company Stock Certificates
in
exchange for certificates representing Parent Common Stock. Upon surrender
of a
Company Stock Certificate to Parent for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably required
by
Parent and referenced in the letter of transmittal, the holder of such Company
Stock Certificate shall be entitled to receive from Parent, and Parent shall
cause such holder to receive, in exchange therefor a certificate representing
the number of whole shares of Parent Common Stock that such holder has the
right
to receive pursuant to the provisions of this Section 1, and the Company
Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.9, each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive upon such surrender, a certificate representing shares of Parent Common
Stock (and cash in lieu of any fractional share of Parent Common Stock) as
contemplated by this Section 1. If any Company Stock Certificate shall have
been
lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate
to
provide an appropriate affidavit.
(b) No
dividends or other distributions declared or made with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder
of
any unsurrendered Company Stock Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of any fractional
share shall be paid to any such holder, until such holder surrenders such
Company Stock Certificate in accordance with this Section 1.9 (at which time
such holder shall be entitled to receive all such dividends and distributions
and such cash payment).
4
(c) No
fractional shares of Parent Common Stock shall be issued in connection with
the
Merger, and no certificates for any such fractional shares shall be issued.
In
lieu of such fractional shares, any holder of capital stock of the Company
who
would otherwise be entitled to receive a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock issuable
to such holder) shall, upon surrender of such holder’s Company Stock
Certificate(s), be paid in cash the dollar amount (rounded to the nearest whole
cent), without interest, determined by multiplying such fraction by the average
of the closing sale prices of a share of Parent Common Stock as reported on
the
Nasdaq Capital Market or the OTC Bulletin Board, as applicable, for each of
the
10 consecutive trading days immediately preceding the Closing Date.
(d) Parent
and the Surviving Entity shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder
of
capital stock of the Company pursuant to this Agreement such amounts as Parent
or the Surviving Entity may be required to deduct or withhold therefrom under
the Code or under any provision of state, local or foreign tax law. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the Person to
whom
such amounts would otherwise have been paid.
(e) Neither
Parent nor the Surviving Entity shall be liable to any holder or former holder
of capital stock of the Company for any shares of Parent Common Stock (or
dividends or distributions with respect thereto), or for any cash amounts,
delivered to any public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Each
certificate for Parent Common Stock, Option Assumption Notice and Warrant
Assumption Document shall bear appropriate legends (i) concerning the need
for
registration or an exemption from registration under the Securities Act prior
to
transfer of such Parent Common Stock, the Company Options and the Company
Warrants; and (ii) the lock-up restrictions reflected in EXHIBIT
D.
1.10 Tax
Consequences.
For
federal income tax purposes, the Merger is intended to constitute a
reorganization within the meaning of Section 368 of the Code. The parties to
this Agreement hereby adopt this Agreement as a “plan of reorganization” within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations. Each party to this Agreement acknowledges that it is responsible
for determining the tax consequences of the Merger for itself and for its
stockholders and that it has not relied on any other party to this Agreement,
or
any Representative of any other such party, in making such
determination.
1.11 Further
Action.
If, at
any time after the Effective Time, any further action is determined by Parent
to
be necessary or desirable to carry out the purposes of this Agreement or to
vest
the Surviving Entity or Parent with full right, title and possession of and
to
all rights and property of Merger Sub and the Company, the officers and
directors of the Surviving Entity and Parent shall be fully authorized (in
the
name of Merger Sub, in the name of the Company and otherwise) to take such
action.
|
SECTION
2.
|
REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY
|
Except
as
set forth in this Agreement or on the Company Disclosure Schedule, the Company
represents and warrants as set forth below. Unless the context clearly requires
otherwise, references in this Section 2 to the Company shall refer both to
the
Company and the Company’s wholly owned subsidiary, Neonode AB (the “Subsidiary”),
considered both individually and in the aggregate, such that every
representation shall be deemed made with respect to the Company and with respect
to the Subsidiary and with respect to the Company and the Subsidiary on an
aggregate or consolidated basis. The Company Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered paragraphs contained in
this Section 2, and the disclosure in any paragraph shall qualify (a) the
disclosure in the corresponding paragraph of this Section 2, and (b) the other
paragraphs of this Section 2 to the extent it is clear from the reading of
such
disclosure that it also qualifies or applies to such paragraphs.
5
2.1 Due
Organization; No Subsidiaries; Etc.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state or country of its incorporation and has all
necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and
use
its assets in the manner in which its assets are currently owned and used;
and
(iii) to perform its obligations under all Company Contracts.
(b) The
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name “Neonode Inc.” and “Neonode AB.”
(c) The
Company is qualified, authorized, registered or licensed to do business as
a
foreign corporation and is in good standing in each jurisdiction where the
nature of its activities and of its properties (both owned and leased) makes
such qualification, authorization, registration or licensing necessary, except
in such jurisdictions where the failure to do so has not had and will not have
a
Material Adverse Effect on the Company or its business. The Company is in good
standing as a foreign corporation in each of the jurisdictions identified in
Part 2.1 of the Company Disclosure Schedule.
(d) The
Company does not own any controlling interest in any Entity other than the
Subsidiary, a corporation organized under the laws of Sweden, and has never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect equity interest in, any other Entity. The Company has not
agreed and is not obligated to make any future investment in or capital
contribution to any Entity, other than the Subsidiary. The Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities, other than the Subsidiary, in which it owns or has owned any equity
interest.
2.2 Certificate
of Incorporation and Bylaws; Records.
The
Company has delivered to Parent accurate and complete copies of: (a) the
Company’s certificate of incorporation and bylaws or comparable charter
documents, including all amendments thereto; (b) the stock records of the
Company; and (c) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the stockholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There
have
been no formal meetings or other proceedings of the stockholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not reflected in such minutes or other records. There
has not been any violation of any of the provisions of the Company’s certificate
of incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company’s stockholders, the Company’s board of directors or any committee of the
Company’s board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up to date and complete in all
material respects, and, except as set forth in Part 2.2 of the Company
Disclosure Schedule, have been maintained in accordance with prudent business
practices.
2.3 Capitalization,
Etc.
6
(a) The
authorized capital stock of the Company consists of: (i) 6,500,000 shares
of Common Stock (par value $0.01 per share), of which 2,911,217 shares have
been
issued and are outstanding on the date of this Agreement. All of the outstanding
shares of Company Common Stock have been duly authorized and validly issued,
and
are fully paid and non-assessable. Part 2.3 of the Company Disclosure Schedule
provides an accurate and complete description of the terms of each repurchase
option that is held by the Company and to which any of such shares is subject.
All of the outstanding shares of the Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned beneficially
and
of record by the Company.
(b) The
Company has reserved 600,000 shares of Company Common Stock for issuance under
the Company Option Plan, of which 434,000 shares are reserved for issuance
upon
exercise of outstanding options. Part 2.3 of the Company Disclosure Schedule
accurately sets forth, with respect to each Company Option that is outstanding
as of the date of this Agreement: (i) the name of the holder of such Company
Option; (ii) the total number of shares of Company Common Stock that are subject
to such Company Option and the number of shares of Company Common Stock with
respect to which such Company Option is immediately exercisable; (iii) the
date
on which such Company Option was granted and the term of such Company Option;
(iv) the vesting schedule for such Company Option; (v) the exercise price per
share of Company Common Stock purchasable under such Company Option; and (vi)
whether such Company Option has been designated an “incentive stock option” as
defined in Section 422 of the Code. The Company has reserved 2,229,843 shares
of
Company Common Stock for issuance upon conversion of the Bridge Notes, Petrus
Note, Convertible Almi Note and Petrus Interest immediately prior to the Merger
and an additional 1,147,421 shares for issuance upon exercise of Company
Investor Warrants issuable upon such conversion. The Company has reserved
171,219 shares of Company Common Stock for issuance upon exercise of Existing
Warrants. Except as set forth in this Section 2.3(b), there is no: (i)
outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of the Company; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Company; (iii) Contract under which
the
Company is or may become obligated to sell or otherwise issue any shares of
its
capital stock or any other securities; or (iv) except as set forth in Part
2.3(b) of the Company Disclosure Schedule, to the knowledge of the Company,
condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled
to
acquire or receive any shares of capital stock or other securities of the
Company.
(c) All
outstanding shares of Company Common Stock, all outstanding Company Options
and
all outstanding Existing Warrants, Bridge Notes, the Petrus Note and the
Convertible Almi Note have been issued or granted, and all Company Investor
Warrants and shares issuable upon conversion of the Bridge Notes, the Petrus
Note and the Convertible Almi Note will be issued or granted, in compliance
in
all material respects with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) The
Company has never repurchased, redeemed or otherwise reacquired any shares
of
capital stock or other securities of the Company.
(e) As
of the
date hereof, the date the Information Statement is delivered to the Company’s
stockholders and the Closing Date, each Person that held shares of Company
Common Stock immediately prior to the Closing is a resident of the state or
foreign country, as the case may be, set forth opposite such Person’s name on
Part 2.3(e) of the Company Disclosure Schedule, as such Schedule may be updated
from time to time prior to the Closing to reflect any relocations by Company
stockholders that may occur.
7
2.4 Financial
Statements.
(a) The
Company has delivered to Parent the following financial statements and notes
(collectively, the “Company
Financial Statements”):
(i) The
unaudited consolidated balance sheets of the Company as of December 31, 2004
and
2005, and the related unaudited income statements, statements of stockholders’
equity and statements of cash flows of the Company for the years then ended;
and
(ii) the
unaudited balance sheet of the Company (the “Unaudited
Interim Balance Sheet”)
as of
September 30, 2006 (the “Interim
Statement Date”),
and
the related unaudited statements of income, cash flows and stockholders’ equity
of the Company for the nine months then ended.
(b) The
Company Financial Statements are accurate and complete in all material respects
and present fairly the financial position of the Company as of the respective
dates thereof and the results of operations and cash flows of the Company for
the periods covered thereby. The Company Financial Statements have been prepared
in accordance with United States generally accepted accounting principles
(“GAAP”)
applied on a consistent basis throughout the periods covered (except as
permitted by GAAP and except that the financial statements referred to in
Section 2.4(a)(ii) do not contain all footnotes required by GAAP and are subject
to normal and recurring year-end audit adjustments, which are not expected,
individually or in the aggregate, to be material in magnitude).
2.5 Absence
of Changes.
Except
as set forth in Part 2.5 of the Company Disclosure Schedule, since the Interim
Statement Date through the date of this Agreement:
(a) there
has
not been any Material Adverse Effect on the Company, and, to the knowledge
of
the Company, no event has occurred that will, or could reasonably be expected
to, have a Material Adverse Effect on the Company;
(b) there
has
not been any material Damage, or any material interruption in the use of, any
of
the Company’s assets (whether or not covered by insurance);
(c) the
Company has not declared, accrued, set aside or paid any dividend or made any
other distribution in respect of any shares of capital stock, and has not
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities;
(d) the
Company has not sold, issued or authorized the issuance of (i) any capital
stock
or other security (except for Company Common Stock issued upon the exercise
of
outstanding Company Options and Company Warrants), (ii) any option or right
to
acquire any capital stock or any other security (except for Company Options
and
Company Warrants), or (iii) any other instrument convertible into or
exchangeable for any capital stock or other security;
(e) the
Company has not amended or waived any of its rights under, or permitted the
acceleration of vesting under, (i) any provision of the Company Option Plan,
(ii) any provision of any agreement evidencing any outstanding Company Option,
or (iii) any restricted stock purchase agreement;
(f) there
has
been no amendment to the Company’s certificate of incorporation or bylaws, and
the Company has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
8
(g) the
Company has not formed any subsidiary or acquired any equity interest or other
interest in any other Entity;
(h) the
Company has not made any capital expenditure which, when added to all other
capital expenditures made on behalf of the Company since the Interim Statement
Date, exceeds $25,000;
(i) the
Company has not (i) entered into or permitted any of the assets owned or used
by
it to become bound by any Contract that is or would constitute a Material
Company Contract (as defined in Section 2.10(a)), or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such
Contract;
(j) the
Company has not (i) acquired, leased or licensed any right or other asset from
any other Person, (ii) sold or otherwise disposed of, or leased or licensed,
any
right or other asset to any other Person, or (iii) waived or relinquished any
right, except for immaterial rights or other immaterial assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent with
the Company’s past practices;
(k) the
Company has not written off as uncollectible, or established any extraordinary
reserve with respect to, any account receivable or other indebtedness, in each
case in excess of $10,000;
(l) the
Company has not made any pledge of any of its assets or otherwise permitted
any
of its assets to become subject to any Encumbrance, except for pledges of
immaterial assets made in the ordinary course of business and consistent with
the Company’s past practices;
(m) the
Company has not (i) lent money to any Person (other than pursuant to routine
travel advances made to employees in the ordinary course of business), or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(n) the
Company has not (i) established or adopted any Employee Benefit Plan, or
(ii) paid any bonus or made any profit sharing or similar payment to, or
materially increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees;
(o) the
Company has not changed any of its methods of accounting or accounting practices
in any respect;
(p) the
Company has not made any Tax election;
(q) the
Company has not commenced or settled any Legal Proceeding;
(r) the
Company has not entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent with
its
past practices; and
(s) the
Company has not agreed or committed to take any of the actions referred to
in
clauses “(c)” through “(r)” above.
2.6 Title
to Assets.
9
(a) The
Company owns, and has good, valid and marketable title to, all assets that
are
material to the Company’s business and purported to be owned by it, including:
(i) all assets reflected on the Unaudited Interim Balance Sheet;
(ii) all assets referred to in Parts 2.7 and 2.9 of the Company Disclosure
Schedule and all of the Company’s rights under the Contracts identified in Part
2.10 of the Company Disclosure Schedule; and (iii) all other assets
reflected in the Company’s books and records as being owned by the Company.
Except as set forth in Part 2.6 of the Company Disclosure Schedule, all of
said
assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and
that
do not (in any case or in the aggregate) materially detract from the value
of
the assets subject thereto or materially impair the operations of the
Company.
(b) Part
2.6
of the Company Disclosure Schedule identifies all assets that are material
to
the business of the Company and that are being leased or licensed to the
Company, in each case, having a value, individually, in excess of
$25,000.
2.7 Receivables.
Except
as
set forth in Part 2.7 of the Company Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on
the
Unaudited Interim Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since the Interim Statement Date and have
not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course
of business, and (ii) are current and will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful accounts
not to exceed $5,000 in the aggregate).
2.8 Equipment;
Leasehold.
(a) All
material items of equipment and other tangible assets owned by or leased to
the
Company are adequate for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted) and are adequate for
the
conduct of the Company’s business in the manner in which such business is
currently being conducted.
(b) The
Company does not own any real property or any interest in real property, except
for the leasehold created under the real property lease identified in Part
2.8
of the Company Disclosure Schedule.
2.9 Intellectual
Property.
(a) For
purposes of this Agreement, “Proprietary
Assets”
shall
mean all right, title and interest of the Company and the Subsidiaries in and
to
the following items or types of property: (i) every patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service xxxx (whether registered or
unregistered), service xxxx application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, know-how, customer list, franchise, system, computer software, computer
program, invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset other than goodwill; and (ii) all licenses and other rights to use or
exploit any of the foregoing.
(b) Except
as
set forth in the Company Disclosure Schedule, each of the Company or its
Subsidiaries: has good, valid and marketable title to each of the Proprietary
Assets owned by it, free and clear of all liens and other encumbrances; has
a
valid right to use all Proprietary Assets owned by third parties; and is not
obligated to make any payment to any Person for the use of any Proprietary
Asset
except as set forth in the applicable license agreement. Except as set forth
in
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has developed jointly with any other Person any material Proprietary Asset
with
respect to which such other Person has any rights.
10
(c) Each
of
the Company and its Subsidiaries has taken commercially reasonable and customary
measures and precautions to protect and maintain the confidentiality and secrecy
of all Proprietary Assets of the Company and its Subsidiaries (except
Proprietary Assets whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the value of all Proprietary Assets of the
Company and its Subsidiaries. Except as set forth in the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has (other than
pursuant to license agreements identified in the Company Disclosure Schedule)
disclosed or delivered to any Person, or permitted the disclosure or delivery
to
any Person of, (i) the source code, or any portion or aspect of the source
code,
of any Proprietary Asset, (ii) the object code, or any portion or aspect of
the
object code, of any Proprietary Asset of the Company and its Subsidiaries,
except in the ordinary course of its business or (iii) any patent applications
(except as required by law).
(d) To
the
knowledge of the Company, (i) none of the Proprietary Assets of the Company
and
its Subsidiaries infringes or conflicts with any Proprietary Asset owned or
used
by any other Person; (ii) neither the Company nor any Subsidiary is infringing,
misappropriating or making any unlawful use of any Proprietary Asset owned
or
used by any other Person; and (iii) no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Proprietary Asset
of the Company or any of its Subsidiaries.
(e) Except
as
set forth in the Company Disclosure Schedule, excluding warranty claims received
by Company or any of its Subsidiaries in the ordinary course of business, there
has not been any claim by any customer or other Person alleging that any
Proprietary Asset of the Company or any of its Subsidiaries (including each
version thereof that has ever been licensed or otherwise made available by
the
Company to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided by or on behalf of the Company.
(f) To
the
knowledge of the Company, the Proprietary Assets of the Company and its
Subsidiaries constitute all the Proprietary Assets necessary to enable the
Company and its Subsidiaries to conduct their respective businesses in the
manner in which such businesses have been and are being conducted. Except as
set
forth in the Company Disclosure Schedule, (i) neither the Company nor any
Subsidiary has licensed any of its Proprietary Assets to any Person on an
exclusive, semi-exclusive or royalty-free basis and (ii) neither the Company
nor
any Subsidiary has entered into any covenant not to compete or contract limiting
such entity’s ability to exploit fully any of such entity’s material Proprietary
Assets or to transact business in any material market or geographical area
or
with any Person.
(g) Except
as
set forth in the Company Disclosure Schedule, neither the Company nor any of
its
Subsidiaries has at any time received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other Person.
2.10 Contracts.
(a) Part
2.10
of the Company Disclosure Schedule identifies:
(i) each
Company Contract relating to the employment of, or the performance of services
by, any employee, consultant or independent contractor;
11
(ii) each
Company Contract relating to the acquisition, transfer, use, development,
sharing or license of any technology or any Intellectual Property or
Intellectual Property Right;
(iii) each
Company Contract imposing any restriction on the Company’s right or ability (A)
to compete with any other Person, (B) to acquire any product or other asset
or
any services from any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business or deal in
any
other manner with any other Person, or (C) develop or distribute any
technology;
(iv) each
Company Contract creating or involving any agency relationship, distribution
arrangement or franchise relationship;
(v) each
Company Contract relating to the acquisition, issuance or transfer of any
securities;
(vi) each
Company Contract relating to the creation of any Encumbrance with respect to
any
material asset of the Company;
(vii) each
Company Contract involving or incorporating any guaranty of indebtedness, any
pledge, any performance or completion bond, any indemnity or any surety
arrangement;
(viii) each
Company Contract creating or relating to any partnership or joint venture or
any
sharing of revenues, profits, losses, costs or liabilities;
(ix) each
Company Contract relating to the purchase or sale of any product or other asset
by or to, or the performance of any services by or for, any Related Company
Party (as defined in Section 2.18);
(x) any
other
Company Contract that contemplates or involves (A) the payment or delivery
of
cash or other consideration in an amount or having a value in excess of $25,000
in the aggregate, or (B) the performance of services having a value in excess
of
$25,000 in the aggregate.
(Contracts
in the respective categories described in clauses “(i)” through “(x)” above are
referred to in this Agreement as “Material
Company Contracts.”)
(b) The
Company has delivered to Parent accurate and complete copies of all written
Material Company Contracts identified in Part 2.10 of the Company Disclosure
Schedule, including all amendments thereto. Part 2.10 of the Company Disclosure
Schedule provides an accurate description of the terms of each Material Company
Contract that is not in written form. To the knowledge of the Company, each
Material Company Contract is valid and in full force and effect, and is
enforceable by the Company in accordance with its terms, subject to (i) laws
of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except
as
set forth in Part 2.10(c) of the Company Disclosure Schedule:
(i) the
Company has not materially violated or breached, or committed any material
default under, any Material Company Contract, and, to the knowledge of the
Company, no other Person has materially violated or breached, or committed
any
material default under, any Material Company Contract;
12
(ii) to
the
knowledge of the Company, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, (A) result in a violation or breach of any of the
material provisions of any Material Company Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Material Company
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Company Contract, or (D) give any Person the right
to cancel, terminate or modify any Material Company Contract;
(iii) the
Company has never received any written notice or, to the knowledge of the
Company, other communication regarding any actual or possible violation or
breach of, or default under, any Material Company Contract; and
(iv) the
Company has not knowingly waived any of its material rights under any Material
Company Contract.
(d) No
Person
is renegotiating, or has a right pursuant to the terms of any Company Contract
to renegotiate, any amount paid or payable to the Company under any Material
Company Contract or any other material term or provision of any Material Company
Contract.
(e) The
Contracts identified in Part 2.10(e) of the Company Disclosure Schedule
collectively constitute all of the Contracts necessary to enable the Company
to
conduct its business in the manner in which its business is currently being
conducted,
(f) Where
applicable, Part 2.10(f) of the Company Disclosure Schedule provides an accurate
description and breakdown of the Company’s backlog under Material Company
Contracts.
(g) Except
as
set forth in Part 2.10(g) of the Company Disclosure Schedule, the Company does
not, and has never, entered into, bid for, had any interest in or been
determined to be noncompliant with any Government Contract. The Company has
not
made, or participated in any way in, any Government Bid. Neither the Company
nor
any of its employees has been debarred or suspended from doing business with
any
Governmental Body, and, to the knowledge of the Company, no circumstances exist
that would warrant the institution of debarment or suspension proceedings
against the Company or any employee of the Company. The Company has not made
any
disclosure to any Governmental Body pursuant to any voluntary disclosure
agreement.
(h) Except
where the failure to comply has not had a Material Adverse Effect on the
Company, the Company has complied with all applicable regulations and other
Legal Requirements and with all applicable contractual requirements relating
to
the placement of legends or restrictive markings on technical data, computer
software and other Intellectual Property.
2.11 Liabilities.
The
Company has no accrued, contingent or other liabilities of any nature, either
matured or unmatured (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due or to become due), except
for: (a) liabilities identified as such in the “liabilities” column of the
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by the Company since the Interim Statement Date in
the
ordinary course of business and consistent with the Company’s past practices;
(c) liabilities under Company Contracts in accordance with the terms of
such Company Contracts; (d) immaterial liabilities that are not required by
GAAP to be disclosed on the Unaudited Interim Balance Sheet; and (e) the
liabilities identified in Part 2.11 of the Company Disclosure Schedule.
13
2.12 Compliance
with Legal Requirements.
Except
as set forth in Part 2.12 of the Company Disclosure Schedule, the Company is,
and has at all times been, in compliance with all applicable Legal Requirements,
except where the failure to comply with such Legal Requirements has not had
and
will not have a Material Adverse Effect on the Company. The Company has not
received any written notice or, to the knowledge of the Company, other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.13 Governmental
Authorizations.
Part
2.13 of the Company Disclosure Schedule identifies each material Governmental
Authorization held by the Company, and the Company has delivered to Parent
accurate and complete copies of all Governmental Authorizations identified
in
Part 2.13 of the Company Disclosure Schedule. The Governmental Authorizations
identified in Part 2.13 of the Company Disclosure Schedule are valid and in
full
force and effect, and collectively constitute all Governmental Authorizations
necessary to enable the Company to conduct its business in the manner in which
its business is currently being conducted. The Company is, and at all times
has
been, in substantial compliance with the terms and requirements of the
respective Governmental Authorizations identified in Part 2.13 of the
Company Disclosure Schedule. The Company has not received any written notice
or,
to the knowledge of the Company, other communication from any Governmental
Body
regarding (a) any actual or possible violation of or failure to comply with
any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 Tax
Matters.
(a) The
Company has filed all material Tax Returns that it was required to file under
applicable Legal Requirements. All such Tax Returns were correct and complete
in
all material respects and have been prepared in substantial compliance with
all
applicable Legal Requirements. All Taxes due and owing by the Company (whether
or not shown on any Tax Return) have been paid. The Company is not currently
the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of the Company.
(b) The
Company has withheld and paid all Taxes required to have been withheld and
paid
in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(c) No
director or officer (or employee responsible for Tax matters) of the Company
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. No Legal Proceedings with respect to Taxes are
pending or being conducted with respect to the Company. The Company has not
received from any Governmental Body any (i) notice indicating an intent to
open
an audit or other review, (ii) request for information related to Tax matters,
or (iii) notice of deficiency or proposed adjustment of or any amount of Tax
proposed, asserted, or assessed by any Governmental Body against the
Company.
(d) Part
2.14(d) of the Company Disclosure Schedule lists all Tax Returns filed with
respect to the Company for taxable periods ended on or after December 31,
2000, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject to audit. The Company has delivered
to Parent correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company filed or received since December 31, 2000.
14
(e) The
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
(f) The
Company has not filed a consent under section 341(f) of the Code concerning
collapsible corporations. The Company is not a party to any Contract that has
resulted or would reasonably be expected to result, separately or in the
aggregate, in the payment of (i) any “excess parachute payment” within the
meaning of section 280G of the Code (or any corresponding provisions of state,
local or foreign Tax law) and (ii) any amount that will not be fully deductible
as a result of section 162(m) of the Code (or any corresponding provisions
of
state, local or foreign Tax law). The Company has not been a United States
real
property holding corporation within the meaning of section 897(c)(2) of the
Code
during the applicable period specified in section 897(c)(1)(A)(ii) of the Code.
The Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662 of the Code. The Company is not a party
to or bound by any Tax allocation or sharing agreement. The Company has (A)
not
been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company) or (B)
no
liability for the Taxes of any Person (other than the Company) under regulation
1.1502-6 of the Code (or any similar provision of state, local, or foreign
law),
as a transferee or successor, by contract, or otherwise. The Company has not
participated in any “listed transactions” and “reportable transactions” within
the meaning of Section 1.6011-4(6) of the United States Treasury
Regulations.
(g) The
unpaid Taxes of the Company (A) did not, as of the date of the Unaudited Interim
Balance Sheet, exceed the reserve for tax liability (rather than any reserve
for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Unaudited Interim Balance Sheet, and (B) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its Tax
Returns. Since the date of the Unaudited Interim Balance Sheet, the Company
has
not incurred any liability for Taxes arising from extraordinary gains or losses,
determined in accordance with GAAP, outside the ordinary course of
business.
(h) The
Company will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion there)
ending after the Closing Date as a result of any: (A) change in method of
accounting for taxable period ending on or prior to the Closing Date; (B)
“closing agreement” as described in section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (C) intercompany transactions or
any
excess loss account described in United States Treasury Regulations under
section 1502 of the Code (or any corresponding or similar provisions of state,
local or foreign income Tax law); (D) installment sale or open transaction
disposition made on or prior to the Closing Date; or (E) prepaid amount received
on or prior to the Closing Date.
(i) The
Company has not distributed stock of another Person, or has had its stock
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by section 355 or section 361 of the
Code.
2.15 Employee
and Labor Matters; Benefit Plans.
(a) Part
2.15(a) of the Company Disclosure Schedule accurately identifies each former
employee of the Company who is receiving or is scheduled to receive (or whose
spouse or other dependent is receiving or is scheduled to receive) any benefits
(whether from the Company or otherwise) relating to such former employee’s
employment with the Company and accurately describes such benefits.
15
(b) Except
to
the extent provided in the Swedish Employment Protection Act, the employment
of
each of the Company’s employees is terminable by the Company at will. The
Company has delivered to Parent accurate and complete copies of all employee
manuals and handbooks, disclosure materials, policy statements and other
materials relating to the employment of the current and former employees of
the
Company.
(c) To
the
knowledge of the Company:
(i) no
Key
Employee of the Company intends to terminate his employment with the Company;
(ii) no
Key
Employee of the Company has received an offer to join a business that may be
competitive with the Company’s business ; and
(iii) no
Key
Employee of the Company is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other Contract (with any Person) that
may
have an adverse effect on: (A) the performance by such Key Employee of any
of
his duties or responsibilities as a Key Employee of the Company; or (B) the
Company’s business or operations .
(d) Except
as
set forth in Part 2.15(d) of the Company Disclosure Schedule, the Company is
not
a party to or bound by any employment agreement or any union Contract,
collective bargaining agreement or similar Contract.
(e) Except
as
set forth in Part 2.15(e) of the Company Disclosure Schedule: the Company is
not
engaged, and the Company has never been engaged, in any unfair labor practice
of
any nature; there has never been any slowdown, work stoppage, labor dispute
or
union organizing activity, or any similar activity or dispute, affecting the
Company or any of its employees; no event has occurred, and no condition or
circumstance exists, that might directly or indirectly give rise to or provide
a
basis for the commencement of any such slowdown, work stoppage, labor dispute
or
union organizing activity or any similar activity or dispute; there are no
actions, suits, claims, labor disputes or grievances pending or, to the
knowledge of the Company, threatened, or reasonably anticipated relating to
any
labor, safety or discrimination matters involving any Company Key Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints.
(f) Except
as
set forth on Part 2.15(f) of the Company Disclosure Schedule, none of the
current or former independent contractors of the Company could be reclassified
as an employee. There are no, and at no time have there been any, independent
contractors who have provided services to the Company or any Company Affiliate
for a period of six consecutive months or longer. The Company has never had
any
temporary or leased Key Employees. No independent contractor of the Company
is
eligible to participate in any Company Employee Plan other than the Company
Option Plan.
(g) Part
2.15(g) of the Company Disclosure Schedule contains an accurate and complete
list as of the date hereof of each Company Employee Plan and each Company
Employee Agreement. The Company does not intend nor has it committed to
establish or enter into any new Company Employee Plan or Company Employee
Agreement, or to modify any Company Employee Plan or Company Employee Agreement
(except to conform any such Company Employee Plan or Company Employee Agreement
to the requirements of any applicable Legal Requirements, in each case as
previously disclosed to Parent in writing or as required by this Agreement).
16
(h) The
Company has delivered to Parent: (i) correct and complete copies of all
documents setting forth the terms of each Company Employee Plan and each Company
Employee Agreement, including all amendments thereto and all related trust
documents; (ii) all material written Contracts relating to each Company Employee
Plan, including administrative service agreements and group insurance Contracts;
(iii) all written materials provided to any Company Employee relating to any
Company Employee Plan and any proposed Company Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events
that
would result in any liability to the Company or any Company Affiliate; (iv)
all
correspondence to or from any Governmental Body relating to any Company Employee
Plan; (v) all insurance policies in the possession of the Company or any Company
Affiliate pertaining to fiduciary liability insurance covering the fiduciaries
for each Company Employee Plan. The Company has no Company Employee Plan subject
to ERISA or the Code.
(i) The
Company and each of the Company Affiliates have performed all obligations
required to be performed by them under each Company Employee Plan and are not
in
default or violation of, and the Company has no knowledge of any default or
violation by any other party to, the terms of any Company Employee Plan, and
each Company Employee Plan has been established and maintained substantially
in
accordance with its terms and in substantial compliance with all applicable
Legal Requirements. There are no claims or Legal Proceedings pending, or, to
the
knowledge of the Company, threatened, or reasonably anticipated (other than
routine claims for benefits), against any Company Employee Plan or against
the
assets of any Company Employee Plan. Except as set forth in Part 2.15(i) of
the Company Disclosure Schedule, each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Closing upon fewer than 90 days’
notice, without liability to Parent, the Company or any Company Affiliate (other
than ordinary administration expenses). There are no audits, inquiries or Legal
Proceedings pending or, to the knowledge of the Company, threatened by any
Governmental Body with respect to any Company Employee Plan. Neither the Company
nor any Company Affiliate has ever incurred any penalty or tax with respect
to
any Company Employee Plan. The Company and each Company Affiliate has made
all
contributions and other payments required by and due under the terms of each
Company Employee Plan.
(j) Neither
the Company nor any Company Affiliate has ever maintained, established,
sponsored, participated in, or contributed to any pension plan or multiemployer
employee benefit plan. The fair market value of the assets of each funded
Foreign Plan, the liability of each insurer for any Foreign Plan funded through
insurance, or the book reserve established for any Foreign Plan, together with
any accrued contributions, is sufficient to procure or provide in full for
the
accrued benefit obligations, with respect to all current and former participants
in such Foreign Plan according to the actuarial assumptions and valuations
most
recently used to determine employer contributions to and obligations under
such
Foreign Plan, and no transaction contemplated by this Agreement shall cause
any
such assets or insurance obligations to be less than such benefit
obligations.
(k) No
Company Employee Plan provides (except at no cost to the Company or any Company
Affiliate), or reflects or represents any liability of the Company or any
Company Affiliate to provide, retiree life insurance, retiree health benefits
or
other retiree employee welfare benefits to any Person for any reason, except
as
may be required by COBRA or other applicable Legal Requirements. Other than
commitments made that involve no future costs to the Company or any Company
Affiliate, neither the Company nor any Company Affiliate has ever represented,
promised or contracted (whether in oral or written form) to any Company Key
Employee (either individually or to Company Key Employees as a group) or any
other Person that such Company Key Employee(s) or other person would be provided
with retiree life insurance, retiree health benefit or other retiree employee
welfare benefits, except to the extent required by applicable Legal
Requirements.
17
(l) Except
as
set forth in Part 2.15(l) of the Company Disclosure Schedule, and except as
expressly required or provided by this Agreement, neither the execution of
this
Agreement nor the consummation of the transactions contemplated hereby will
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Company Employee Agreement,
trust or loan that will or may result (either alone or in connection with any
other circumstance or event) in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any Company
Employee.
(m) Except
as
set forth in Part 2.15(m) of the Company Disclosure Schedule, the Company and
each of the Company Affiliates: (i) are, and at all times have been, in
substantial compliance with all applicable Legal Requirements respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Company Employees; (ii) have withheld
and reported all amounts required by applicable Legal Requirements or by
Contract to be withheld and reported with respect to wages, salaries and other
payments to Company Employees; (iii) are not liable for any arrears of wages
or
any taxes or any penalty for failure to comply with the Legal Requirements
applicable of the foregoing; and (iv) are not liable for any payment to any
trust or other fund governed by or maintained by or on behalf of any
Governmental Body with respect to unemployment compensation benefits, social
security or other benefits or obligations for Company Employees (other than
routine payments to be made in the normal course of business and consistent
with
past practice). There are no pending or, to the knowledge of the Company,
threatened or reasonably anticipated claims or Legal Proceedings against the
Company or any Company Affiliate under any worker’s compensation policy or
long-term disability policy.
(n) To
the
knowledge of the Company, no stockholder nor any Company Key Employee is
obligated under any Contract or subject to any judgment, decree, or order of
any
court or other Governmental Body that would interfere with such Person’s efforts
to promote the interests of the Company or that would interfere with the
business of the Company or any Company Affiliate. Neither the execution nor
the
delivery of this Agreement, nor the carrying on of the business of the Company
or any Company Affiliate as presently conducted nor any activity of such
stockholder or Company Key Employees in connection with the carrying on of
the
business of the Company or any Company Affiliate as presently conducted will,
to
the knowledge of the Company, conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default under, any Contract under
which any of such stockholders or Company Key Employees is now
bound.
2.16 Environmental
Matters.
The
Company is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession by the Company
of
all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. The
Company has not received any written notice or, to the knowledge of the Company,
other communication, whether from a Governmental Body, citizens group, employee
or otherwise, that alleges that the Company is not in compliance with any
Environmental Law, and, to the knowledge of the Company, there are no
circumstances that may prevent or interfere with the Company’s compliance with
any Environmental Law in the future. To the knowledge of the Company, no current
or prior owner of any property leased or controlled by the Company has received
any notice or other communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or the Company is not in compliance with any
Environmental Law. There are no Governmental Authorizations currently held
by
the Company pursuant to Environmental Laws. This Section 2.16 contains the
sole and exclusive representation and warranty of the Company with respect
to
the Company’s compliance with Environmental Laws.
18
2.17 Insurance.
Except
as set forth in Part 2.17 of the Company Disclosure Schedule, each insurance
policy currently maintained by, at the expense of or for the benefit of the
Company is in full force and effect. The Company has never received any notice
or other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance
policy.
2.18 Related
Party Transactions.
No
Related Company Party has any direct or indirect interest in any material asset
used in or otherwise relating to the business of the Company. No Related Company
Party is, or has at any time been, indebted to the Company. Except as set forth
in Part 2.18 of the Company Disclosure Schedule, no Related Party has entered
into, or has had any direct or indirect financial interest in, any Material
Company Contract, transaction or business dealing involving the Company. To
the
knowledge of the Company, no Related Company Party is competing, or has at
any
time competed, directly or indirectly, with the Company. Except as set forth
in
Part 2.18 of the Company Disclosure Schedule, no Related Company Party has
any
claim or right against the Company (other than rights under Company Options
and
rights to receive compensation for services performed as an employee of the
Company). (For purposes of the Section 2.18 each of the following shall be
deemed to be a “Related
Company Party”:
(a) each individual who is, or who has at any time since incorporation of
the Company been, an officer of the Company; (b) each member of the
immediate family of each of the individuals referred to in clause “(a)” above;
and (c) any trust or other Entity (other than the Company) in which any one
of the individuals referred to in clauses “(a)” and “(b)” above holds (or in
which more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.)
2.19 Legal
Proceedings; Orders.
(a) There
is
no pending Legal Proceeding, and (to the knowledge of the Company) no Person
has
threatened to commence any Legal Proceeding: (i) that involves the Company
or
any of the assets owned or used by the Company or any Person whose liability
the
Company has or may have retained or assumed, either contractually or by
operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) There
is
no order, writ, injunction, judgment or decree of any Governmental Body to
which
the Company, or any of the assets owned or used by the Company, is subject.
To
the knowledge of the Company, no officer or other Key Employee of the Company
is
subject to any such order, writ, injunction, judgment or decree that prohibits
such officer or other Key Employee from engaging in or continuing any conduct,
activity or practice relating to the Company’s business.
2.20 Authority;
Binding Nature of Agreement.
The
Company has the absolute and unrestricted right, power and authority to enter
into and to perform its obligations under this Agreement; and the execution,
delivery and performance by the Company of this Agreement have been duly
authorized by all necessary action on the part of the Company, its board of
directors and its stockholders . This Agreement constitutes the legal, valid
and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (a) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing
specific performance, injunctive relief and other equitable
remedies.
19
2.21 Non
Contravention; Consents.
Neither
the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, nor the consummation of the Merger
or
any of the other transactions contemplated by this Agreement, will directly
or
indirectly (with or without notice or lapse of time):
(a) contravene,
conflict with or result in a violation of (i) any of the provisions of the
Company’s certificate of incorporation or bylaws, or (ii) any resolution adopted
by the Company’s stockholders, the Company’s board of directors or any committee
of the Company’s board of directors;
(b) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by
this
Agreement or to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to which the
Company, or any of the assets owned or used by the Company, is
subject;
(c) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the Company’s business or to any of the assets
owned or used by the Company;
(d) except
as
set forth in Part 2.21(d) of the Company Disclosure Schedule, contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any Material Company Contract, or give any Person the
right to (i) declare a default or exercise any remedy under any Material
Company Contract, (ii) accelerate the maturity or performance of any Material
Company Contract, or (iii) cancel, terminate or modify any Material Company
Contract; or
(e) result
in
the imposition or creation of any lien or other Encumbrance upon or with respect
to any asset owned or used by the Company (except for minor liens that will
not,
in any case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of the
Company).
Except
as
described in Section 2.22 and Section 4.3, the Company is not and will not
be
required to make any filing with or give any notice to, or to obtain any Consent
from, any Person in connection with (i) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this Agreement,
or (ii) the consummation of the Merger or any of the other transactions
contemplated by this Agreement.
2.22 Vote
Required.
The
affirmative vote of the holders of a majority of the shares of Company Common
Stock outstanding as of the date hereof is the only vote of the holders of
any
class or series of the Company’s capital stock necessary to adopt this Agreement
and approve the Merger and the other transactions contemplated by this
Agreement.
2.23 Brokers.
No
broker, investment banker, financial advisor or other person is entitled to
any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Company or any of its stockholders.
20
2.24 No
Other Representations.
Notwithstanding anything to the contrary contained in this Agreement, it is
the
explicit intent of each party hereto that none of the Company or its
Representatives or stockholders are making any representation or warranty
whatsoever, express or implied, except those representations and warranties
contained in this Agreement (including any schedule or exhibit attached hereto)
and in any certificate delivered pursuant hereto.
2.25 Full
Disclosure.
This
Agreement (when read together with the Company Disclosure Schedule) does not,
and the Company Closing Certificate (as defined in Section 6.4(c)) when read
together with any disclosure provided by or on behalf of the Company under
Section 5.10, will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) omit
to
state any material fact, in each case necessary in order to make the
representations, warranties and information contained in this Agreement
(including the Company Disclosure Schedule), in light of the circumstances
under
which such representations, warranties and information were provided, not false
or misleading.
|
SECTION
3.
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER
SUB
|
Except
as
set forth in this Agreement or the Parent Disclosure Schedule, Parent and Merger
Sub jointly and severally represent and warrant to the Company as set forth
below. The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered paragraphs contained in this Section 3, and the
disclosure in any paragraph shall qualify (a) the disclosure in the
corresponding paragraph of this Section 3, and (b) the other paragraphs of
this
Section 3 to the extent it is clear from the reading of such disclosure that
it
also qualifies or applies to such paragraphs.
3.1 Due
Organization.
(a) Each
of
Parent and Merger Sub is a corporation duly organized, validly existing and
in
good standing under the laws of Delaware and has all necessary corporate power
and authority: (i) to conduct its business in the manner in which its business
is currently being conducted; and (ii) to own and use its assets in the manner
in which its assets are currently owned and used.
(b) Parent
is
qualified, authorized, registered or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where the nature of
its
activities and of its properties (both owned and leased) makes such
qualification, authorization, registration or licensing necessary, except in
such jurisdictions where the failure to do so has not had and will not have
a
Material Adverse Effect on Parent or its business. Parent is in good standing
as
a foreign corporation in each of the jurisdictions identified in Part 3.1 of
the
Parent Disclosure Schedule.
(c) Other
than Merger Sub and LAN Media Corporation, Parent does not own any controlling
interest in any Entity and has never owned, beneficially or otherwise, any
shares or other securities of, or any direct or indirect equity interest in,
any
other Entity. Parent has not agreed and is not obligated to make any future
investment in or capital contribution to any Entity. Parent has not guaranteed
and is not responsible or liable for any obligation of any of the Entities
in
which it owns or has owned any equity interest. Merger Sub and LAN Media
Corporation do not own any assets that are material to Parent on a consolidated
basis and conduct no business.
3.2 Certificate
of Incorporation and Bylaws; Records. Parent
has made available to the Company accurate and complete copies of: (a) the
certificates of incorporation and bylaws or comparable charter documents of
Parent and Merger Sub, including all amendments thereto; and (b) the minutes
and
other records of the meetings and other proceedings (including any actions
taken
by written consent or otherwise without a meeting) of the stockholders of Parent
and Merger Sub, the boards of directors of Parent and Merger Sub and all
committees of the boards of directors of Parent and Merger Sub. There have
been
no formal meetings or other proceedings of the stockholders of Parent and Merger
Sub, the boards of directors of Parent and Merger Sub or any committee of the
boards of directors of Parent and Merger Sub that are not reflected in such
minutes or other records. There has not been any violation of any of the
provisions of Parent’s and Merger Sub’s respective certificates of incorporation
or bylaws, and neither Parent nor Merger Sub has taken any action that is
inconsistent in any material respect with any resolution adopted by Parent’s and
Merger Sub’s stockholders, Parent’s and Merger Sub’s boards of directors or any
committee of Parent’s and Merger Sub’s boards of directors. The books of
account, stock records, minute books and other records of Parent and Merger
Sub
are accurate, up to date and complete in all material respects, and, except
as
set forth in Part 3.2 of the Parent Disclosure Schedule, have been maintained
in
accordance with prudent business practices.
21
3.3 Capitalization,
Etc.
(a) The
authorized capital stock of Parent consists of: (i) 25,000,000 shares of
Common Stock (par value $0.001 per share), of which 11,101,554 shares have
been
issued and are outstanding on the date of this Agreement and (ii) 2,000,000
shares of convertible preferred stock (par value $0.001 per share), of which
no
share has been issued and is outstanding. All of the outstanding shares of
Parent Common Stock have been duly authorized and validly issued, and are fully
paid and non-assessable. Part 3.3 of the Parent Disclosure Schedule provides
an
accurate and complete description of the terms of each repurchase option that
is
held by Parent and to which any of such shares is subject. All of the
outstanding shares of Merger Sub have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned beneficially and of record
by
Parent.
(b) Parent
has reserved 4,528,950 shares of Parent Common Stock for issuance under the
Parent Option Plans, of which 2,983,287 shares are reserved for issuance upon
exercise of outstanding options. Parent has reserved 1,030,000 shares of Parent
Common Stock for issuance upon exercise of the Parent Warrants. Part 3.3(b)
of
the Parent Disclosure Schedule accurately sets forth, with respect to each
Parent Option and Parent Warrant that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Parent Option or Parent Warrant;
(ii) the total number of shares of Parent Common Stock that are subject to
such
Parent Option or Parent Warrant and the number of shares of Parent Common Stock
with respect to which such Parent Option or Parent Warrant is immediately
exercisable; (iii) the date on which such Parent Option or Parent Warrant was
granted and the term of such Parent Option or Parent Warrant; (iv) the vesting
schedule for such Parent Option; (v) the exercise price per share of Parent
Common Stock purchasable under such Parent Option or Parent Warrant; and (vi)
whether such Parent Option has been designated an “incentive stock option” as
defined in Section 422 of the Code. Except as set forth in this Section 3.3(b)
and in Section 5.14, other than this Agreement, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities
of
Parent; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock
or
other securities of Parent; (iii) Contract under which Parent is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) to the knowledge of Parent, condition or
circumstance that may give rise to or provide a basis for the assertion of
a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of Parent.
(c) All
outstanding shares of Parent Common Stock, all outstanding Parent Options and
all outstanding Parent Warrants have been issued or granted, and the warrants
described in Section 5.14 will be granted, in compliance in all material
respects with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable
Contracts.
22
(d) Since
October 31, 2005, Parent has not repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of Parent.
3.4 SEC
Filings; Financial Statements.
(a) Parent
has made available to the Company, by directing the Company to the SEC’s online
XXXXX database, each report, registration statement and definitive proxy
statement filed by Parent with the SEC since November 1, 2004 (the “Parent
SEC Documents”).
Since
November 1, 2004, Parent has timely made all filings with the SEC required
under
the applicable requirements of the Securities Act or the Exchange Act. As of
the
time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of
the
Parent SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be);
and
(ii) none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The
consolidated financial statements contained in the Parent SEC Documents: (i)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance
with
GAAP applied on a consistent basis throughout the periods covered, except as
may
be indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes as permitted by Form
10-Q and the Exchange Act, and are subject to year-end audit adjustments; and
(iii) are accurate and complete in all material respects and present fairly
the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of Parent
and its subsidiaries for the periods covered thereby.
3.5 Absence
of Changes.
Except
as set forth in Part 3.5 of the Parent Disclosure Schedule, or as set forth
in
the Parent SEC Documents, and except as may otherwise be specifically
contemplated by this Agreement or the One Stop Agreement, since July 31, 2006
through the date of this Agreement:
(a) there
has
not been any Material Adverse Effect on Parent, and, to the knowledge of Parent,
no event has occurred that will, or could reasonably be expected to, have a
Material Adverse Effect on Parent;
(b) there
has
not been any material Damage, or any material interruption in the use of, any
of
Parent’s assets (whether or not covered by insurance);
(c) Parent
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities and, except in compliance with Section 5.2(d), has
not
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, and;
(d) Parent
has not sold, issued or authorized the issuance of (i) any capital stock or
other security (except for Parent Common Stock issued under, or upon exercise
of
options granted under, the Parent Option Plans), (ii) any option or right to
acquire any capital stock or any other security (except for options granted
under the Parent Option Plans and as set forth in Section 5.14), or (iii) any
other instrument convertible into or exchangeable for any capital stock or
other
security;
(e) Parent
has not amended or waived any of its rights under, or permitted the acceleration
of vesting under, (i) any provision of the Parent Option Plans, (ii) any
provision of any agreement evidencing any outstanding Parent Option, or (iii)
any restricted stock purchase agreement;
23
(f) there
has
been no amendment to Parent’s certificate of incorporation or bylaws, and Parent
has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) Parent
has not formed any subsidiary other than Merger Sub or acquired any equity
interest or other interest in any other Entity;
(h) Parent
has not made any capital expenditure which, when added to all other capital
expenditures made on behalf of Parent since October 31, 2006, exceeds
$25,000;
(i) Parent
has not (i) entered into or permitted any of the assets owned or used by it
to
become bound by any Contract that is or would constitute a Material Parent
Contract (as defined in Section 3.9(a)), or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such
Contract;
(j) Parent
has not (i) acquired, leased or licensed any right or other asset from any
other
Person, (ii) sold or otherwise disposed of, or leased or licensed, any right
or
other asset to any other Person, or (iii) waived or relinquished any right,
except for immaterial rights or other immaterial assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent with
Parent’s past practices;
(k) Parent
has not written off as uncollectible, or established any extraordinary reserve
with respect to, any account receivable or other indebtedness, in each case
in
excess of $10,000;
(l) Parent
has not made any pledge of any of its assets or otherwise permitted any of
its
assets to become subject to any Encumbrance, except for pledges of immaterial
assets made in the ordinary course of business and consistent with Parent’s past
practices;
(m) Parent
has not (i) lent money to any Person (other than pursuant to routine travel
advances made to employees in the ordinary course of business), or (ii) incurred
or guaranteed any indebtedness for borrowed money;
(n) Parent
has not (i) established or adopted any Employee Benefit Plan, or (ii) paid
any bonus or made any profit sharing or similar payment to, or materially
increased the amount of the wages, salary, commissions, fringe benefits or
other
compensation or remuneration payable to, any of its directors, officers or
Key
Employees;
(o) Parent
has not changed any of its methods of accounting or accounting practices in
any
respect;
(p) Parent
has not made any Tax election;
(q) Parent
has not commenced or settled any Legal Proceeding;
(r) Parent
has not entered into any material transaction or taken any other material action
outside the ordinary course of business or inconsistent with its past practices;
and
(s) Parent
has not agreed or committed to take any of the actions referred to in clauses
“(c)” through “(r)” above.
24
3.6 Title
to Assets.
Except
as may result from completion of the Disposition and any sale or shutdown of
Parent’s remaining business operations, Parent owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including:
(i) all assets reflected on its most recent balance sheet contained in the
SEC Documents; (ii) all assets referred to in Part 3.7 of the Parent
Disclosure Schedule and all of Parent’s rights under the Contracts identified in
Part 3.9 of the Parent Disclosure Schedule; and (iii) all other assets
reflected in Parent’s books and records as being owned by Parent. Except as set
forth in Part 3.6 of the Parent Disclosure Schedule, all of said assets are
owned by Parent free and clear of any liens or other Encumbrances, except for
(x) any lien for current taxes not yet due and payable, and (y) minor liens
that
have arisen in the ordinary course of business and that do not (in any case
or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of Parent.
3.7 Bank
Accounts; Receivables.
(a) Part
3.7(a) of the Parent Disclosure Schedule provides accurate information with
respect to each account maintained by or for the benefit of Parent at any bank
or other financial institution.
(b) Part
3.7(b) of the Parent Disclosure Schedule provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other
receivables of Parent as of the Interim Statement Date.
(c) Except
as
set forth in Part 3.7 of the Parent Disclosure Schedule, all existing accounts
receivable of Parent (including those accounts receivable reflected on the
October 31, 2006 balance sheet included in the Parent SEC Documents that have
not yet been collected and those accounts receivable that have arisen since
October 31, 2006 and have not yet been collected, in each case excluding
accounts receivable that are to be sold in the Disposition) (i) represent valid
obligations of customers of Parent arising from bona fide transactions entered
into in the ordinary course of business, and (ii) are current and will be
collected in full when due, without any counterclaim or set off (net of an
allowance for doubtful accounts not to exceed $5,000 in the
aggregate).
3.8 Leasehold.
Parent
does not own any real property or any interest in real property, except for
the
leasehold created under the real property lease identified in Part 3.8 of the
Parent Disclosure Schedule (which leasehold will be assumed by One Stop pursuant
to the One Stop Agreement).
3.9 Contracts.
(a) Part
3.9
of the Parent Disclosure Schedule identifies the following Parent Contracts,
excluding Parent Contracts that are terminated or fully performed as of the
date
of this Agreement without any material future liability to Parent or will be
assumed by One Stop pursuant to the One Stop Agreement:
(i) each
Parent Contract relating to the employment of, or the performance of services
by, any current Key Employee, consultant or independent contractor, other than
offer letters that contain no severance or acceleration of vesting
benefits;
(ii) each
Parent Contract relating to the acquisition, transfer, use, development, sharing
or license of any technology or any Intellectual Property or Intellectual
Property Right;
25
(iii) each
Parent Contract imposing any restriction on Parent’s right or ability (A) to
compete with any other Person, (B) to acquire any product or other asset or
any
services from any other Person, to sell any product or other asset to or perform
any services for any other Person or to transact business or deal in any other
manner with any other Person, or (C) develop or distribute any
technology;
(iv) each
Parent Contract creating or involving any agency relationship, distribution
arrangement or franchise relationship;
(v) each
Parent Contract relating to the acquisition, issuance or transfer of any
securities;
(vi) each
Parent Contract relating to the creation of any Encumbrance with respect to
any
material asset of Parent;
(vii) each
Parent Contract involving or incorporating any guaranty of indebtedness, any
pledge, any performance or completion bond, any indemnity or any surety
arrangement;
(viii) each
Parent Contract creating or relating to any partnership or joint venture or
any
sharing of revenues, profits, losses, costs or liabilities;
(ix) each
Parent Contract relating to the purchase or sale of any product or other asset
by or to, or the performance of any services by or for, any Affiliate of
Parent;
(x) any
other
Parent Contract that contemplates or involves (A) the payment or delivery of
cash or other consideration in an amount or having a value in excess of $10,000
in the aggregate, or (B) the performance of services having a value in excess
of
$10,000 in the aggregate.
(Contracts
required to be set forth in Part 3.9 of the Disclosure Schedule are referred
to
in this Agreement as “Material
Parent Contracts.”)
(b) Parent
has delivered or made available to Company accurate and complete copies of
all
written Material Parent Contracts identified in Part 3.9 of the Parent
Disclosure Schedule, including all amendments thereto. Part 3.9 of the Parent
Disclosure Schedule provides an accurate description of the terms of each
Material Parent Contract that is not in written form. To the knowledge of
Parent, each Material Parent Contract is valid and in full force and effect,
and
is enforceable by Parent in accordance with its terms, subject to (i) laws
of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except
as
set forth in Part 3.9(c) of the Parent Disclosure Schedule:
(i) Parent
has not materially violated or breached, or committed any material default
under, any Material Parent Contract, and, to the knowledge of Parent, no other
Person has materially violated or breached, or committed any material default
under, any Material Parent Contract;
(ii) to
the
knowledge of Parent, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a violation or breach of any of the material
provisions of any Material Parent Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Material Parent Contract,
(C)
give any Person the right to accelerate the maturity or performance of any
Material Parent Contract, or (D) give any Person the right to cancel, terminate
or modify any Material Parent Contract;
26
(iii) Parent
has never received any written notice or, to the knowledge of Parent, other
communication regarding any actual or possible violation or breach of, or
default under, any Material Parent Contract; and
(iv) Parent
has not knowingly waived any of its material rights under any Material Parent
Contract.
(d) No
Person
is renegotiating, or has a right pursuant to the terms of any Parent Contract
to
renegotiate, any amount paid or payable to Parent under any Material Parent
Contract or any other material term or provision of any Material Parent
Contract.
(e) Except
as
set forth in Part 3.9(e) of the Parent Disclosure Schedule, since November
1,
2001: (i) Parent has never entered into or bid for, had any interest in or
been
determined to be noncompliant with, any Government Contract; (ii) Parent has
not
made, or participated in any way in, any Government Bid; (iii) neither Parent
nor any of its Key Employees has been debarred or suspended from doing business
with any Governmental Body, and, to the knowledge of Parent, no circumstances
exist that would warrant the institution of debarment or suspension proceedings
against Parent or any Key Employee of Parent; and (iv) Parent has not made
any
disclosure to any Governmental Body pursuant to any voluntary disclosure
agreement.
(f) Except
where the failure to comply has not had a Material Adverse Effect on Parent,
Parent has complied with all applicable regulations and other Legal Requirements
and with all applicable contractual requirements relating to the placement
of
legends or restrictive markings on technical data, computer software and other
Intellectual Property.
3.10 Liabilities.
Parent
has no accrued, contingent or other liabilities of any nature, either matured
or
unmatured (whether or not required to be reflected in financial statements
in
accordance with GAAP, and whether due or to become due), except for:
(a) liabilities identified as such in the “liabilities” column of the most
recent balance sheet contained in the Parent SEC Documents; (b) accounts
payable or accrued salaries that have been incurred by Parent since July 31,
2006 in the ordinary course of business and consistent with Parent’s past
practices; (c) liabilities under Parent Contracts in accordance with the
terms of such Parent Contracts; and (d) the liabilities identified in Part
3.10 of the Parent Disclosure Schedule.
3.11 Compliance
with Legal Requirements.
Except
as set forth in Part 3.11 of the Parent Disclosure Schedule, Parent is, and
has
at all times been, in compliance with all applicable Legal Requirements, except
where the failure to comply with such Legal Requirements has not had and will
not have a Material Adverse Effect on Parent. Parent has not received any
written notice or, to the knowledge of Parent, other communication from any
Governmental Body regarding any actual or possible violation of, or failure
to
comply with, any Legal Requirement.
3.12 Governmental
Authorizations.
Part
3.12 of the Parent Disclosure Schedule identifies each material Governmental
Authorization that will be held by Parent after the Disposition, and Parent
has
delivered to the Company accurate and complete copies of all Governmental
Authorizations identified in Part 3.12 of the Parent Disclosure Schedule. The
Governmental Authorizations identified in Part 3.12 of the Parent Disclosure
Schedule are valid and in full force and effect, and collectively constitute
all
Governmental Authorizations necessary to enable Parent to conduct its business
in the manner in which its business will be conducted after the Disposition.
Parent is, and at all times has been, in substantial compliance with the terms
and requirements of the respective Governmental Authorizations identified in
Part 3.12 of the Parent Disclosure Schedule. Parent has not received any written
notice or, to the knowledge of Parent, other communication from any Governmental
Body regarding (a) any actual or possible violation of or failure to comply
with
any term or requirement of any Governmental Authorization, or (b) any actual
or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
27
3.13 Tax
Matters.
(a) Parent
has filed all material Tax Returns that it was required to file under applicable
Legal Requirements. All such Tax Returns were correct and complete in all
material respects and have been prepared in substantial compliance with all
applicable Legal Requirements. All Taxes due and owing by Parent (whether or
not
shown on any Tax Return) have been paid. Parent is not currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has
ever
been made by an authority in a jurisdiction where Parent does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are
no liens for Taxes (other than Taxes not yet due and payable) upon any of the
assets of Parent.
(b) Parent
has withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any Key Employee, independent
contractor, creditor, stockholder or other third party.
(c) No
director or officer (or Key Employee responsible for Tax matters) of Parent
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. No Legal Proceedings with respect to Taxes are
pending or being conducted with respect to Parent. Parent has not received
from
any Governmental Body any (i) notice indicating an intent to open an audit
or
other review, (ii) request for information related to Tax matters, or (iii)
notice of deficiency or proposed adjustment of or any amount of Tax proposed,
asserted, or assessed by any Governmental Body against Parent.
(d) Part
3.13(d) of the Parent Disclosure Schedule lists all Tax Returns filed with
respect to Parent for taxable periods ended on or after December 31, 2000,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject to audit. Parent has delivered to the
Company correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by Parent filed or received since December 31, 2000.
(e) Parent
has not waived any statute of limitations in respect of Taxes or agreed to
any
extension of time with respect to a Tax assessment or deficiency.
(f) Parent
has not filed a consent under section 341(f) of the Code concerning collapsible
corporations. Parent is not a party to any Contract that has resulted or would
reasonable be expected to result, separately or in the aggregate, in the payment
of (i) any “excess parachute payment” within the meaning of section 280G of the
Code (or any corresponding provisions of state, local or foreign Tax law) and
(ii) any amount that will not be fully deductible as a result of section 162(m)
of the Code (or any corresponding provisions of state, local or foreign Tax
law). Parent has not been a United States real property holding corporation
within the meaning of section 897(c)(2) of the Code during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code. Parent has disclosed on
its
federal income Tax Returns all positions taken therein that could give rise
to a
substantial understatement of federal income Tax within the meaning of section
6662 of the Code. Parent is not a party to or bound by any Tax allocation or
sharing agreement. Parent has (A) not been a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Parent) or (B) no liability for the Taxes of any Person
(other than Parent) under regulation 1.1502-6 of the Code (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise. Parent has not participated in any “listed transactions”
and “reportable transactions” within the meaning of Treasury regulation Section
1.6011-4(6).
28
(g) The
unpaid Taxes of Parent (A) did not, as of July 31, 2006, exceed the reserve
for
Tax liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the July 31, 2006
balance sheet included in Parent SEC Documents, and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Parent in filing its Tax
Returns. Since July 31, 2006, Parent has not incurred any liability for Taxes
arising from extraordinary gains or losses, determined in accordance with GAAP,
outside the ordinary course of business.
(h) Parent
will not be required to include any item of income in, or exclude any item
of
deduction from, taxable income for any taxable period (or portion there) ending
after the Closing Date as a result of any: (A) change in method of accounting
for taxable period ending on or prior to the Closing Date; (B) “closing
agreement” as described in section 7121 of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C) intercompany transactions or any excess loss
account described in United States Treasury Regulations under section 1502
of
the Code (or any corresponding or similar provisions of state, local or foreign
income Tax law); (D) installment sale or open transaction disposition made
on or
prior to the Closing Date; or (E) prepaid amount received on or prior to the
Closing Date.
(i) Parent
has not distributed stock of another Person, or has had its stock distributed
by
another Person, in a transaction that was purported or intended to be governed
in whole or in part by section 355 or section 361 of the Code.
3.14 Employee
and Labor Matters; Benefit Plans.
(a) Part
3.14(a) of the Parent Disclosure Schedule accurately identifies each former
employee of Parent who is receiving or is scheduled to receive (or whose spouse
or other dependent is receiving or is scheduled to receive) any benefits
(whether from Parent or otherwise) relating to such former employee’s employment
with Parent and accurately describes such benefits.
(b) The
employment of each of Parent’s employees is terminable by Parent at will. Parent
has delivered to Parent accurate and complete copies of all employee manuals
and
handbooks, disclosure materials, policy statements and other materials relating
to the employment of the current and former employees of Parent.
(c) To
the
knowledge of Parent, no Key Employee of Parent is a party to or is bound by
any
confidentiality agreement, noncompetition agreement or other Contract (with
any
Person) that may have an adverse effect on: (i) the performance by such Key
Employee of any of his duties or responsibilities as a Key Employee of Parent;
or (ii) Parent’s business or operations .
(d) Except
as
set forth in Part 3.14(g) of the Parent Disclosure Schedule, Parent is not
a
party to or bound by any employment agreement (other than offer letters without
severance or acceleration of vesting benefits) or any union Contract, collective
bargaining agreement or similar Contract.
29
(e) Except
as
set forth in Part 3.14(e) of the Parent Disclosure Schedule: Parent is not
engaged, and Parent has never been engaged, in any unfair labor practice of
any
nature; there has never been any slowdown, work stoppage, labor dispute or
union
organizing activity, or any similar activity or dispute, affecting Parent or
any
of its employees; there are no actions, suits, claims, labor disputes or
grievances pending or, to the knowledge of Parent, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Parent Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints.
(f) None
of
the current or former independent contractors of Parent could be reclassified
as
an employee. There are no, and at no time since November 1, 2001 have there
been
any, independent contractors who have provided services to Parent or any Parent
Affiliate for a period of six consecutive months or longer. Parent has not
had
since November 1, 2001 any temporary or leased Key Employees. No independent
contractor of Parent is eligible to participate in any Parent Employee Plan
other than Parent Option Plans.
(g) Part
3.14(g) of the Parent Disclosure Schedule contains an accurate and complete
list
as of the date hereof of each Parent Employee Plan and each Parent Employee
Agreement. Except as set forth in Section 5.14, Parent does not intend nor
has
it committed to establish or enter into any new Parent Employee Plan or Parent
Employee Agreement, or to modify any Parent Employee Plan or Parent Employee
Agreement (except to increase the shares reserved under Parent’s 2006 Equity
Incentive Plan (as described in the Parent SEC Documents) or conform any such
Parent Employee Plan or Parent Employee Agreement to the requirements of any
applicable Legal Requirements, in each case as previously disclosed to the
Company in writing or as required by this Agreement).
(h) Parent
has made available to Parent: (i) correct and complete copies of all documents
setting forth the terms of each current Parent Employee Plan and each Parent
Employee Agreement currently in effect, including all amendments thereto and
all
related trust documents; (ii) all material written Contracts relating to each
such Parent Employee Plan, including administrative service agreements and
group
insurance Contracts; (iii) all written materials provided to any Parent Employee
relating to any current Parent Employee Plan and any proposed Parent Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events that would result in any liability to Parent or any
Parent Affiliate; (iv) all correspondence to or from any Governmental Body
since
November 1, 2001 relating to any Parent Employee Plan; (v) all current insurance
policies in the possession of Parent or any Parent Affiliate pertaining to
fiduciary liability insurance covering the fiduciaries for each Parent Employee
Plan.
(i) The
Parent and each of Parent Affiliates have performed in all material respects
all
obligations required to be performed by them under each Parent Employee Plan
and
are not in default or violation of, and Parent has no knowledge of any default
or violation by any other party to, the terms of any Parent Employee Plan,
and
each Parent Employee Plan has been established and maintained substantially
in
accordance with its terms and in substantial compliance with all applicable
Legal Requirements. Any Parent Employee Plan intended to be qualified under
Section 401(a) of the Code has obtained a favorable determination letter (or
opinion letter, if applicable) as to its qualified status under the Code. No
“prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408
of ERISA, has occurred with respect to any Parent Employee Plan. There are
no
claims or Legal Proceedings pending, or, to the knowledge of Parent, threatened
or reasonably anticipated (other than routine claims for benefits), against
any
Parent Employee Plan or against the assets of any Parent Employee Plan. Except
as set forth in Part 3.14(i) of the Parent Disclosure Schedule, each Parent
Employee Plan can be amended, terminated or otherwise discontinued after the
Closing in accordance with its terms, without liability to Parent, Parent or
any
Parent Affiliate (other than ordinary administration expenses). There are no
audits, inquiries or Legal Proceedings pending or, to the knowledge of Parent,
threatened by any Governmental Body with respect to any Parent Employee Plan.
Neither Parent nor any Parent Affiliate has ever incurred any penalty or tax
with respect to any Parent Employee Plan. The Parent and each Parent Affiliate
has made all contributions and other payments required by and due under the
terms of each Parent Employee Plan.
30
(j) Since
November 1, 2001, neither Parent nor any Parent Affiliate has ever maintained,
established, sponsored, participated in, or contributed to any: (i) Parent
Pension Plan subject to Title IV of ERISA; (ii) “multiemployer plan” within the
meaning of Section (3)(37) of ERISA or (iii) Foreign Plan. Neither Parent nor
any Parent Affiliate has ever maintained, established, sponsored, participated
in or contributed to, any Parent Pension Plan in which stock of Parent or any
Parent Affiliate is or was held as a plan asset.
(k) No
Parent
Employee Plan provides (except at no cost to Parent or any Parent Affiliate),
or
reflects or represents any liability of Parent or any Parent Affiliate to
provide, retiree life insurance, retiree health benefits or other retiree
employee welfare benefits to any Person for any reason, except as may be
required by COBRA or other applicable Legal Requirements. Other than commitments
made that involve no future costs to Parent or any Parent Affiliate, neither
Parent nor any Parent Affiliate has ever represented, promised or contracted
(whether in oral or written form) to any Parent Employee (either individually
or
to Parent Employees as a group) or any other Person that such Parent Employee(s)
or other person would be provided with retiree life insurance, retiree health
benefit or other retiree employee welfare benefits, except to the extent
required by applicable Legal Requirements.
(l) Except
as
set forth in Part 3.14(l) of the Parent Disclosure Schedule, and except as
expressly required or provided by this Agreement, neither the execution of
this
Agreement nor the consummation of the transactions contemplated hereby will
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Parent Employee Plan, Parent Employee Agreement,
trust or loan that will or may result (either alone or in connection with any
other circumstance or event) in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any Parent
Employee.
(m) Except
as
set forth in Part 3.14(m) of the Parent Disclosure Schedule, Parent and each
of
Parent Affiliates: (i) are, and at all times have been, in substantial
compliance with all applicable Legal Requirements respecting employment,
employment practices, terms and conditions of employment and wages and hours,
in
each case, with respect to Parent Employees; (ii) have withheld and reported
all
amounts required by applicable Legal Requirements or by Contract to be withheld
and reported with respect to wages, salaries and other payments to Parent
Employees; (iii) are not liable for any arrears of wages or any taxes or any
penalty for failure to comply with the Legal Requirements applicable of the
foregoing; and (iv) are not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any Governmental Body with respect
to unemployment compensation benefits, social security or other benefits or
obligations for Parent Employees (other than routine payments to be made in
the
normal course of business and consistent with past practice). There are no
pending or, to the knowledge of Parent, threatened or reasonably anticipated
claims or Legal Proceedings against Parent or any Parent Affiliate under any
worker’s compensation policy or long-term disability policy.
(n) To
the
knowledge of Parent, no stockholder or any Parent Key Employee is obligated
under any Contract or subject to any judgment, decree or order of any court
or
other Governmental Body that would interfere with such Person’s efforts to
promote the interests of Parent or that would interfere with the business of
Parent or any Parent Affiliate. Neither the execution nor the delivery of this
Agreement, nor the carrying on of the business of Parent or any Parent Affiliate
as presently conducted nor any activity of such stockholder or Parent Key
Employees in connection with the carrying on of the business of Parent or any
Parent Affiliate as presently conducted will, to the knowledge of Parent,
conflict with, result in a breach of the terms, conditions or provisions of,
or
constitute a default under, any Contract under which any of such stockholders
or
Parent Key Employees is now bound.
31
3.15 Environmental
Matters.
The
Parent is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession by Parent of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. Since
November 1, 2001, Parent has not received any written notice or, to the
knowledge of Parent, other communication, whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that Parent is not in
compliance with any Environmental Law, and, to the knowledge of Parent, there
are no circumstances that may prevent or interfere with Parent’s compliance with
any Environmental Law in the future. To the knowledge of Parent, no current
or
prior owner of any property leased or controlled by Parent has received any
notice or other communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or Parent is not in compliance with any Environmental
Law. There are no Governmental Authorizations currently held by Parent pursuant
to Environmental Laws. This Section 3.15 contains the sole and exclusive
representation and warranty of Parent with respect to Parent’s compliance with
Environmental Laws.
3.16 Insurance.
Except
as set forth in Part 3.16 of the Parent Disclosure Schedule, each insurance
policy currently maintained by, at the expense of or for the benefit of Parent
is in full force and effect. The Parent has never received any notice or other
communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy or (c) material adjustment in the amount
of the premiums payable with respect to any insurance policy.
3.17 Legal
Proceedings; Orders.
There
is no pending Legal Proceeding, and (to the knowledge of Parent) no Person
has
threatened to commence any Legal Proceeding: (i) that involves Parent or any
of
the assets owned or used by Parent or any Person whose liability Parent has
or
may have retained or assumed, either contractually or by operation of law;
or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the knowledge of Parent, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
(a) There
is
no order, writ, injunction, judgment or decree of any Governmental Body to
which
Parent, or any of the assets owned or used by Parent, is subject. To the
knowledge of Parent, no officer or other Key Employee of Parent is subject
to
any such order, writ, injunction, judgment or decree that prohibits such officer
or other Key Employee from engaging in or continuing any conduct, activity
or
practice relating to Parent’s business.
3.18 Non
Contravention; Consents.
Neither
the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, nor the consummation of the Merger
or
any of the other transactions contemplated by this Agreement, will directly
or
indirectly (with or without notice or lapse of time):
(a) contravene,
conflict with or result in a violation of (i) any of the provisions of Parent’s
certificate of incorporation or bylaws, or (ii) any resolution adopted by
Parent’s stockholders, Parent’s board of directors or any committee of Parent’s
board of directors;
32
(b) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by
this
Agreement or to exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to which Parent,
or any of the assets owned or used by Parent, is subject;
(c) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by Parent
or
that otherwise relates to Parent’s business or to any of the assets owned or
used by Parent;
(d) except
as
set forth in Part 3.18(d) of the Parent Disclosure Schedule, contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any Material Parent Contract, or give any Person the
right to (i) declare a default or exercise any remedy under any Material
Parent Contract, (ii) accelerate the maturity or performance of any Material
Parent Contract, or (iii) cancel, terminate or modify any Material Parent
Contract; or
(e) result
in
the imposition or creation of any lien or other Encumbrance upon or with respect
to any asset owned or used by Parent (except for minor liens that will not,
in
any case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Parent).
Except
as
described in Section 3.18 and Section 3.19, Parent is not and will not be
required to make any filing with or give any notice to, or to obtain any Consent
from, any Person in connection with (i) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this Agreement,
or (ii) the consummation of the Merger or any of the other transactions
contemplated by this Agreement, other than the filing of a Form D with the
Securities and Exchange Commission and any required state filings.
3.19 Parent
Stockholder Approval Required.
The
Parent Stockholder Approval is the only vote of the holders of any class or
series of Parent’s capital stock necessary to adopt this Agreement and approve
the Merger and the other transactions contemplated by this
Agreement.
3.20 Brokers.
No
broker, investment banker, financial advisor or other person is entitled to
any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Parent or any of its stockholders.
3.21 Full
Disclosure.
This
Agreement (when read together with the Parent Disclosure Schedule and Parent
SEC
Documents) does not, and the Parent Closing Certificate when read together
with
any disclosure provided by or on behalf of Parent under Section 5.9(b), will
not, (i) contain any representation, warranty or information that is false
or
misleading with respect to any material fact, or (ii) omit to state any material
fact, in each case necessary in order to make the representations, warranties
and information contained in this Agreement (including the Parent Disclosure
Schedule and Parent SEC Documents), in light of the circumstances under which
such representations, warranties and information were provided, not false or
misleading.
|
SECTION
4.
|
CERTAIN
COVENANTS OF THE COMPANY
|
4.1 Access
and Investigation.
During
the period from the date of this Agreement through the Effective Time (the
“Pre-Closing
Period”),
the
Company shall, and shall cause its Representatives to: (a) provide Parent and
Parent’s Representatives with reasonable access to the Company’s
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent’s Representatives with copies of such
existing books, records, Tax Returns, work papers and other documents and
information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
33
4.2 Operation
of the Company’s Business.
During
the Pre-Closing Period:
(a) the
Company shall conduct its business and operations in the ordinary course and
in
substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement;
(b) the
Company shall use reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and Key
Employees and maintain its relations and goodwill with all suppliers, customers,
landlords, creditors, employees and other Persons having business relationships
with the Company;
(c) the
Company shall keep in full force all insurance policies identified in Part
2.17
of the Company Disclosure Schedule;
(d) the
Company shall cause its officers to report regularly (but in no event less
frequently than monthly) to Parent concerning the status of the Company’s
business;
(e) the
Company shall not declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, and shall not
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities (except that the Company may repurchase Company Common Stock from
former employees pursuant to the terms of existing restricted stock purchase
agreements);
(f) the
Company shall not sell, issue or authorize the issuance of (i) any capital
stock
or other security, (ii) any option or right to acquire any capital stock or
other security, or (iii) any instrument convertible into or exchangeable for
any
capital stock or other security (except that the Company shall be permitted
to
issue Company Common Stock to employees upon the exercise of outstanding Company
Options or to holders of warrants upon the exercise of Company
Warrants);
(g) the
Company shall not amend or waive any of its rights under, or permit the
acceleration of vesting under, (i) any provision of the Company Option Plan,
(ii) any provision of any agreement evidencing any outstanding Company Option,
or (iii) any provision of any restricted stock purchase agreement;
(h) the
Company shall not amend or permit the adoption of any amendment to the Company’s
certificate of incorporation (except to increase the number of shares of Company
Common Stock authorized to 10,000,000 shares) or bylaws, or effect or permit
the
Company to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(i) the
Company shall not form any subsidiary or acquire any equity interest or other
interest in any other Entity;
34
(j) the
Company shall not make any capital expenditure, except for capital expenditures
that, when added to all other capital expenditures made on behalf of the Company
between the date hereof and Closing, do not exceed $350,000 per month on a
cumulative basis;
(k) the
Company shall not (i) enter into, or permit any of the assets owned or used
by
it to become bound by, any Contract that is or would constitute a Material
Company Contract, or (ii) amend or prematurely terminate, or waive any material
right or remedy under, any such Contract;
(l) the
Company shall not (i) acquire, lease or license any right or other asset from
any other Person, (ii) sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person, or (iii) waive or relinquish any
right, except for assets acquired, leased, licensed or disposed of by the
Company pursuant to Contracts that are not Material Company
Contracts;
(m) the
Company shall not (i) lend money to any Person (except that the Company may
make
routine travel advances to employees in the ordinary course of business), or
(ii) incur or guarantee any indebtedness for borrowed money;
(n) the
Company shall not (i) establish, adopt or amend any Employee Benefit Plan or
(ii) pay any bonus or make any profit sharing payment, cash incentive
payment or similar payment to, or increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable
to,
any of its directors, officers or Key Employees;
(o) the
Company shall not change any of its methods of accounting or accounting
practices in any material respect;
(p) the
Company shall not make any Tax election;
(q) the
Company shall not commence or settle any material Legal Proceeding;
and
(r) the
Company shall not agree or commit to take any of the actions described in
clauses “(e)” through “(q)” above.
Notwithstanding
the foregoing, the Company may take any action described in clauses “(e)”
through “(r)” above if Parent gives its prior written consent to the taking of
such action by the Company, which consent will not be unreasonably withheld
(it
being understood that Parent’s withholding of consent to any action will not be
deemed unreasonable if Parent determines in good faith that the taking of such
action would not be in the best interests of Parent or would not be in the
best
interests of the Company).
4.3 Bridge
Note Placement.
The
Company shall use its reasonable best efforts to complete the Bridge Note
Placement within 14 days after the date hereof.
|
SECTION
5.
|
COVENANTS
OF PARENT; ADDITIONAL COVENANTS OF THE
PARTIES
|
5.1 Access
and Investigation.
During
the Pre-Closing Period, Parent shall, and shall cause its Representatives to:
(a) provide the Company and the Company’s Representatives with reasonable access
to Parent’s Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent; and (b) provide the Company and the Company’s Representatives with
copies of such existing books, records, Tax Returns, work papers and other
documents and information relating to Parent, and with such additional
financial, operating and other data and information regarding Parent, as the
Company may reasonably request.
35
5.2 Operation
of Parent’s Business.
During
the Pre-Closing Period, except as may be required pursuant to the One Stop
Agreement or as may otherwise be specifically contemplated by this
Agreement:
(a) Parent
shall conduct its business and operations in the ordinary course and in
substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement, but shall use its reasonable
efforts to complete the Disposition and to sell or shut down its remaining
business operations as soon as practicable after the date hereof;
(b) Parent
(i) shall keep in full force all insurance policies identified in Part 3.16
of
the Parent Disclosure Schedule, except to the extent such policies expire or
are
no longer needed as a result of the Disposition and/or any sale or shut-down
of
Parent’s remaining business operations, (ii) shall use its reasonable best
efforts to obtain director’s and officer’s insurance coverage for directors and
officers of Parent after giving effect to the Merger substantially similar
to
Parent’s current coverage and (iii) shall obtain tail (“D&O
Tail”)
on its
current director’s and officer’s insurance policy for at least three years
following Closing;
(c) Parent
shall cause its officers to report regularly (but in no event less frequently
than monthly) to the Company concerning the status of Parent’s
business;
(d) Except
to
the extent Parent’s Adjusted Net Worth reflected in the Net Worth Certificate
would otherwise exceed $5,000,000, Parent shall not declare, accrue, set aside
or pay any dividend or make any other distribution in respect of any shares
of
capital stock, and shall not repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities (except that Parent may repurchase
Parent Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(e) Except
as
set forth in Section 5.14, Parent shall not sell, issue or authorize the
issuance of (i) any capital stock or other security, (ii) any option or right
to
acquire any capital stock or other security, or (iii) any instrument convertible
into or exchangeable for any capital stock or other security (except that Parent
shall be permitted to issue Parent Common Stock upon the exercise of outstanding
Parent Options or outstanding warrants to purchase Parent Common
Stock);
(f) Parent
shall not amend or waive any of its rights under (i) any provision of the Parent
Option Plans, (ii) any provision of any agreement evidencing any outstanding
Parent Option, or (iii) any provision of any restricted stock purchase
agreement;
(g) Parent
shall not amend or permit the adoption of any amendment to Parent’s certificate
of incorporation or bylaws, or effect or permit Parent to become a party to
any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split or similar transaction, except that Parent shall be permitted to effect
one or more reverse stock splits as it may determine necessary or appropriate
to
maintain listing of the Parent Common Stock on the Nasdaq Capital
Market;
(h) Parent
shall not form any subsidiary or acquire any equity interest or other interest
in any other Entity;
(i) Parent
shall not make any capital expenditure except in the ordinary course of its
business in a manner that is not inconsistent with its plan to complete the
Disposition and to sell or shut down its remaining business operations as soon
as practicable after the date hereof;
36
(j) Parent
shall not (i) acquire, lease or license any right or other asset (other than
cash or cash equivalents) from any other person, or (ii) waive or relinquish
any
right except in the ordinary course of its business in a manner that is not
inconsistent with its plan to complete the Disposition and to sell or shut
down
its remaining business operations as soon as practicable after the date
hereof;
(k) Parent
shall not (i) lend money to any Person (except that Parent may make routine
travel advances to employees in the ordinary course of business), or (ii) incur
or guarantee any indebtedness for borrowed money;
(l) Parent
shall not (i) establish, adopt or (except as set forth in Section 5.14) amend
any Parent Employee Plan, or (ii) pay any bonus or make any profit sharing
payment, cash incentive payment or similar payment to, or increase the amount
of
the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its Key Employees; provided, however, that
Parent in its discretion may make severance payments to departing executive
officers if (i) such officers execute binding general releases of claims in
favor of Parent prior to receiving such payments and (ii) such payments are
reflected in the Net Worth Certificate;
(m) Parent
shall not change any of its methods of accounting or accounting practices in
any
material respect;
(n) Parent
shall not make any Tax election;
(o) Parent
shall not commence or settle any material Legal Proceeding; and
(p) Parent
shall not agree or commit to take any of the actions described in clauses “(d)”
through “(n)” above.
Notwithstanding
the foregoing, Parent may take any action described in clauses “(d)” through
“(o)” above if the Company gives its prior written consent to the taking of such
action by Parent, which consent will not be unreasonably withheld (it being
understood that the Company’s withholding of consent to any action will not be
deemed unreasonable if the Company determines in good faith that the taking
of
such action would not be in the best interests of the Company or would not
be in
the best interests of Parent).
5.3 Filings
and Consents.
As
promptly as practicable after the execution of this Agreement, each party to
this Agreement (a) shall make all filings (if any) and give all notices (if
any)
required to be made and given by such party in connection with the Merger and
the other transactions contemplated by this Agreement, and (b) shall use all
commercially reasonable efforts to obtain all Consents (if any) required to
be
obtained (pursuant to any applicable Legal Requirement or Contract, or
otherwise) by such party in connection with the Merger and the other
transactions contemplated by this Agreement. Each party shall (upon reasonable
request) promptly deliver to the other party a copy of each such filing made,
each such notice given and each such Consent obtained during the Pre-Closing
Period.
5.4 SEC
Filings; Stockholders Meetings.
i) As
promptly as practicable after the date of this Agreement, Parent shall prepare
and cause to be filed with the SEC a proxy statement with respect to the Parent
Stockholder Approval and the transactions contemplated hereby (the “Proxy
Statement”).
Parent shall use its reasonable best efforts to cause the Proxy Statement to
comply with the rules and regulations promulgated by the SEC and to respond
promptly to any comments of the SEC or its staff. Parent will use its reasonable
best efforts to cause the Proxy Statement to be mailed to Parent’s stockholders.
The Company shall promptly furnish to Parent all information concerning the
Company and the Company’s stockholders that may be required or reasonably
requested in connection with any action contemplated by this Section 5.5. No
filing of, or amendment or supplement to the Proxy Statement will be made by
Parent, without providing the Company and its counsel a reasonable opportunity
to review and comment thereon. The Company agrees to advise Parent promptly
if,
at any time prior to the Parent Stockholders Meeting, any information provided
by them in the Proxy Statement is or becomes incorrect or incomplete in any
material respect and to provide Parent with the information needed to correct
such inaccuracy or omission. If any event relating to the Company occurs, or
if
the Company becomes aware of any information that should be disclosed in an
amendment to the Proxy Statement, then the Company shall promptly inform Parent
thereof and shall cooperate with Parent in filing such amendment or supplement
with the SEC.
37
(b) The
Company shall, as soon as practicable following the date of this Agreement,
establish a record date for and promptly take any and all actions in connection
therewith, including preparing and delivering to its stockholders an information
statement (the “Information
Statement”),
based
on the Proxy Statement and duly call, give notice of, convene and hold, a
meeting of its stockholders (the “Company
Stockholders Meeting”)
solely
for the purpose of obtaining the Company Stockholder Approval. Parent agrees
to
advise the Company promptly if, at any time prior to the Company Stockholders
Meeting, any information provided by them in the Information Statement is or
becomes incorrect or incomplete in any material respect and to provide the
Company with the information needed to correct such inaccuracy or omission.
If
any event relating to Parent occurs, or if Parent becomes aware of any
information that should be disclosed in an amendment to the Information
Statement, then Parent shall promptly inform the Company thereof and shall
cooperate with the Company in preparing an amendment to the Information
Statement. Except as may be permitted by Section 5.17, the Company shall,
through the Company’s Board of Directors, recommend to its stockholders adoption
of this Agreement, the Merger and the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company’s
obligations pursuant to the first sentence of this Section 5.4(b) shall not
be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any proposal regarding an Acquisition
Transaction or (ii) any Adverse Recommendation Change.
(c) Parent
shall, as soon as practicable following the date of this Agreement, establish
a
record date for and promptly take any and all actions in connection therewith,
and duly call, give notice of, convene and hold, a meeting of its stockholders
(the “Parent
Stockholders Meeting”)
solely
for the purpose of obtaining the Parent Stockholder Approval. Except as may
be
permitted by Section 5.17, Parent shall, through Parent’s Board of Directors,
recommend to its stockholders adoption of this Agreement, the Merger and the
other transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Parent’s obligations pursuant to the first sentence
of this Section 5.4(c) shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to Parent of any proposal regarding
an Acquisition Transaction or (ii) any Adverse Recommendation
Change.
5.5 Securities
Compliance; Blue Sky.
Parent
and the Company shall take such action as Parent shall reasonably determine
to
be necessary in order for the issuance of the Parent Common Stock in connection
with the Merger under Regulation S and Rule 506 under the Securities Act and
applicable foreign and state securities or “Blue Sky” laws; provided,
however,
that
Parent shall not for any such purpose be required to qualify to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction.
To that end, without limitation, (a) the Company shall use its reasonable best
efforts to cause each stockholder that is a U.S. Person (as defined in
Regulation S of the SEC) and that Parent determines is not an “accredited
investor” and is not “sophisticated” within the meaning of Rule 506 under the
Securities Act to appoint a “purchaser representative” in accordance with Rule
501(h) under the Securities Act, (b) the Company shall use its reasonable best
efforts to cause such purchaser representative to make such disclosures as
may
be required under Rule 501(h) under the Securities Act and (c) the Company
shall
use its reasonable best efforts to cause each other stockholder to certify
to
Parent that it is either (1) not a U.S. Person and is not acquiring the
securities for the account or benefit of any U.S. Person; or (2) is an
accredited investor.
38
5.6 Public
Announcements.
During
the Pre-Closing Period, except as may be required by law, Legal Proceeding
or
Nasdaq listing requirement, the Company and Parent shall not issue any press
release or make any public statement regarding this Agreement or the Merger,
or
regarding any of the other transactions contemplated by this Agreement, without
the other party’s prior written consent, which consent shall be unreasonably
withheld.
5.7 Affiliate
Agreements and Voting Agreements.
Upon the
execution of this Agreement, the Company shall cause the holders of at least
67%
of the Company Common Stock outstanding on the date of this Agreement, all
directors and executive officers of the Company and each holder of a promissory
note evidencing indebtedness by the Company to execute and deliver to Parent
a
voting agreement in form and substance reasonably acceptable to Parent. The
Company shall use its reasonable best efforts to cause each director, executive
officer and other person owning at least 10% of the Company Common Stock
immediately prior to the Closing (plus any other stockholder of the Company
who
reasonably may be viewed as an “affiliate” of the Company within the meaning of
the federal securities laws) to deliver an affiliate agreement in form and
substance reasonably acceptable to Parent as soon as practicable after the
date
of this Agreement.
5.8 Best
Efforts.
During
the Pre-Closing Period, (a) the Company shall use its reasonable best efforts
to
cause the conditions set forth in Section 6 to be satisfied on a timely basis,
and (b) Parent and Merger Sub shall use their reasonable best efforts to cause
the conditions set forth in Section 7 to be satisfied on a timely
basis.
5.9 Tax
Matters.
(a) At
the
Closing, the Company shall deliver to (a) Parent a statement in the form agreed
upon by Parent and the Company prior to the execution hereof and (b) the IRS
the
notification required under Section 1.897-2(h)(2) of the United States Treasury
Regulations.
(b) Parent
and the Company agree to report the Merger as a reorganization within the
meaning of Section 368(a) of the Code for all tax purposes. Parent shall not
take any action, or fail to take any action, and will cause the Company and
the
Surviving Entity after the Closing, not to take any action or fail to take
any
action, that could cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code. Neither the Parent nor the
Surviving Entity will make an election to treat the Surviving Entity, or take
any action that may cause the Surviving Entity to be treated, as an association
or otherwise as an entity separate from Parent for federal income tax purposes,
if such action could cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code.
5.10 Nasdaq
Listing.
Parent
shall use commercially reasonable efforts to maintain its listing on the Nasdaq
Capital Market and shall use reasonable best efforts to list the Parent
securities issuable in connection with the transactions contemplated in this
Agreement on the Nasdaq Capital Market.
5.11 Notification;
Updates to Disclosure Schedule.
(a) During
the Pre-Closing Period, the Company shall promptly notify Parent in writing
of:
39
(i) the
discovery by the Company of any event, condition, fact or circumstance that
occurred or existed on or prior to the date of this Agreement and that could
cause or constitute an inaccuracy in or breach of any representation or warranty
made by the Company in this Agreement;
(ii) any
material breach of any covenant or obligation of the Company;
(iii) any
claims by One Stop under the One Stop Agreement; and
(iv) any
event, condition, fact or circumstance that would make the timely satisfaction
of any of the conditions set forth in Section 6 or Section 7 impossible or
unlikely.
(b) During
the Pre-Closing Period, Parent shall promptly notify the Company in writing
of:
(i) the
discovery by Parent of any event, condition, fact or circumstance that occurred
or existed on or prior to the date of this Agreement and that could cause or
constitute an inaccuracy in or breach of any representation or warranty made
by
Parent or Merger Sub in this Agreement;
(ii) any
material breach of any covenant or obligation of Parent or Merger Sub;
and
(iii) any
event, condition, fact or circumstance that would make the timely satisfaction
of any of the conditions set forth in Section 6 or Section 7 impossible or
unlikely.
(c) If
any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section 5.11(a) requires any change in the Company Disclosure Schedule,
or if
any such event, condition, fact or circumstance would require such a change
assuming the Company Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to
the
Company Disclosure Schedule specifying such change. No such update shall be
deemed to supplement or amend the Company Disclosure Schedule for the purpose
of
(i) determining the accuracy of any of the representations and warranties made
by the Company in this Agreement, or (ii) determining whether any of the
conditions set forth in Section 6 or Section 7 has been satisfied.
(d) If
any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section 5.11(b) requires any change in the Parent Disclosure Schedule, or
if
any such event, condition, fact or circumstance would require such a change
assuming the Parent Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Parent shall promptly deliver to the Company an update to
the
Parent Disclosure Schedule specifying such change. No such update shall be
deemed to supplement or amend the Parent Disclosure Schedule for the purpose
of
(i) determining the accuracy of any of the representations and warranties made
by Parent in this Agreement, or (ii) determining whether any of the conditions
set forth in Section 6 or Section 7 has been satisfied.
5.12 Employee
Matters.
Except
as set forth on Parent Disclosure Schedule Part 5.12, Parent shall terminate
the
employment of all its employees, effective at the Effective Time.
5.13 Directors
of Parent Post-Effective Time. At
the
Effective Time, the board of directors of Parent shall consist of Xxxxx Major,
Per Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx Ihrfelt and at least one other individual
designated by the Company who (i) is reasonably acceptable to Parent and (ii)
qualifies as an independent director under the rules of the Nasdaq Capital
Market and the Securities and Exchange Commission. In addition, Parent shall
have constituted an Audit Committee, comprised of at least three of such
directors, meeting the requirements of the Nasdaq Capital Market and the
Securities and Exchange Commission (including, without limitation, Nasdaq’s
audit committee financial sophistication requirements).
40
5.14 Parent
Adjusted Net Worth.
(a) Parent
has delivered to the Company prior to the date hereof estimates of the following
information:
(i) the
fees
and expenses payable by the Parent in connection with the Merger, including,
without limitation, the D&O Tail, fees and expenses of Xxxxxx Godward
Kronish LLP, BDO Xxxxxxx LLP, Xxxxxx Xxxxxxx & Co., Inc., and any other
advisors engaged by Parent or its subsidiaries in connection with the Merger
(the “Parent
Transaction Expenses”);
(ii) the
costs
of all severance obligations, including, without limitation, the cost of any
unpaid bonuses or benefits, payable to Parent’s or any subsidiary’s management
and staff accrued prior to or in connection with the Merger (including as a
result of the Merger) (the “Severance
Costs”);
(iii) the
costs
of winding down and closing Parent’s California office, to the extent required
after the Disposition (the “Office
Wind-Down Costs”);
(iv) all
other
liabilities and accounts payable that would be required under GAAP to be
reflected on Parent’s balance sheet as of the Closing; and
(v) the
amount of all taxes due and payable by the Parent and any of its subsidiaries
with respect to all tax periods ending on or prior to the Effective Time,
including any transferee or successor liability for any of such periods in
respect of taxes (whether by contract or otherwise) and any several liability
in
respect of any tax for any of such periods as a result of being a member of
any
affiliated, consolidated, combined, unitary or similar group.
(b) No
more
than five and no fewer than three business days prior to the Closing Date,
Parent shall prepare and deliver to the Company a certificate (the “Net
Worth Certificate”)
containing Parent’s estimate of Parent’s consolidated cash, cash equivalents and
accounts receivable as of the Closing (“Closing
Liquid Assets”)
and
Parent’s estimated balance sheet liabilities as of the Closing (“Closing
Balance Sheet Liabilities”)
including, without limitation, an individual estimated accrual for each of
the
paid and unpaid expenses and accruals listed in paragraph (a) above, prepared
from the books and records of the Parent and its subsidiaries in accordance
with
GAAP, applied on a consolidated basis consistent with Parent’s audited
consolidated balance sheet for the fiscal year ended October 31, 2006. The
difference between Closing Liquid Assets and Closing Balance Sheet Liabilities,
plus (1) 50% of all Parent Transaction Expenses paid or payable by Parent (with
a maximum increase of $150,000) and (2) any expenses paid or payable by Parent
as of the Closing to the Nasdaq Stock Market in respect of the issuance of
shares to the Company’s stockholders pursuant to this Agreement or the reverse
stock split contemplated by this Agreement., shall be referred to in this
Agreement as “Adjusted
Net Worth.”
5.15 No
Negotiation.
During
the Pre-Closing Period, or until the termination of this Agreement if prior
to
the end of the Pre-Closing Period, neither party shall, directly or
indirectly:
41
(a) solicit,
or encourage or facilitate the initiation or submission of, any expression
of
interest, inquiry, proposal or offer from any Person (other than the other
party) relating to a possible Acquisition Transaction;
(b) participate
in any discussions or negotiations or enter into any agreement with, or provide
any non public information to, any Person (other than the other party) relating
to or in connection with a possible Acquisition Transaction; or
(c) entertain,
consider or accept any proposal or offer from any Person (other than the other
party) relating to a possible Acquisition Transaction.
Each
party shall promptly notify the other party in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by such party during the Pre-Closing Period. In the event the board
of
directors of such party determines in good faith (after receiving advice of
its
outside counsel) that in view of the requirements of such proposal or offer
(the
“Superior
Proposal”)
it is
necessary to do so in order to comply with its fiduciary duties to the
stockholders of such party under applicable law, and after giving the other
party two business days written notice of such determination, such party may
(A)
furnish information with respect to such party to the Person making such
Superior Proposal (and its Representatives) pursuant to a customary
confidentiality agreement, provided
that all
such information (to the extent that such information has not been previously
provided or made available to the other party) is provided or made available
to
the other party, as the case may be, prior to or substantially concurrent with
the time it is provided or made available to such Person, as the case may be,
and (B) participate in discussions or negotiations with the Person making such
Superior Proposal (and its Representatives) regarding such Superior
Proposal.
Neither
the board of directors of the Company or the board of directors of the Parent
nor any committee thereof shall (i) (A) withdraw (or modify in a manner adverse
to the other party), or propose to withdraw (or modify in a manner adverse
to
the other party), the approval, recommendation or declaration of advisability
by
such board or any such committee thereof of this Agreement or the Merger (it
being understood that taking a neutral position or no position for more than
seven (7) business days after receipt of a Superior Proposal with respect to
a
Superior Proposal shall be considered an adverse modification) or (B) recommend,
adopt or approve, or propose publicly to recommend, adopt or approve, any
Superior Proposal (any action described in this clause (i) being referred to
as
a “Adverse
Recommendation Change”)
or
(ii) approve or recommend, or propose to approve or recommend, or allow such
party 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 constituting or related to, any Superior Proposal.
Notwithstanding the foregoing the board of directors of a party may make an
Adverse Recommendation Change if such board determines in good faith (after
receiving advice of its outside counsel) that it is necessary to do so in order
to comply with its fiduciary duties to the stockholders of such party under
applicable law; provided,
however,
that no
Superior Adverse Recommendation change may be made in response to a Superior
Proposal until after the fifth business day following the other party’s receipt
of written notice from such party (an “Adverse
Recommendation Notice”)
advising the other party that such party’s board has determined that it intends
to make such Adverse Recommendation Change, together with copies of any written
offer or proposal in respect of such Superior Proposal (it being understood
and
agreed that any amendment to the financial terms or other material terms of
such
Superior Proposal shall require a new Adverse Recommendation Notice and a new
five (5) business day period). In determining whether to make an Adverse
Recommendation Change in response to a Superior Proposal, such party’s board
shall take into account any changes to the terms of this Agreement proposed
by
the other party (in response to an Adverse Recommendation Notice or otherwise)
in determining whether such third party Superior Proposal still constitutes
a
Superior Proposal.
42
5.16 Registration
Rights.
Parent
agrees to the registration rights set forth on EXHIBIT
C.
The
Holders (as defined in EXHIBIT
C)
shall
be deemed third party beneficiaries of this covenant.
5.17 Indemnification.
(a) From
and
after the Effective Time for a period of three years, Parent shall fulfill
its
obligations to indemnify each person who is or was a director or officer of
Parent against losses such person may incur based upon matters existing or
occurring prior to the Effective Time pursuant to any applicable indemnification
agreements and any indemnification provision of Parent's charter documents
as
each is in effect on the date hereof.
(b) In
the
event a current or former director or officer of Parent is entitled to
indemnification under this Section 5.17, such director or officer shall be
entitled to reimbursement from Parent (from and after the Closing Date) for
reasonable attorney fees and expenses incurred by such director or officer
in
pursuing such indemnification, including payment of such fees and expenses
by
Parent, in advance of the final disposition of such action upon receipt of
an
undertaking by such current or former director or officer to repay such payment
if it shall be adjudicated that such current or former director or officer
was
not entitled to such payment.
(c) If
Parent
or any of its successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, or (ii) transfers all or substantially all
of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent assume,
as
a matter of law or otherwise, the obligations set forth in this Section
5.17.
|
SECTION
6.
|
CONDITIONS
PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER
SUB
|
The
obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 Accuracy
of Representations.
Each of
the representations and warranties made by the Company in this Agreement and
in
each of the other agreements and instruments delivered to Parent in connection
with the transactions contemplated by this Agreement (without giving effect
to
any “Material Adverse Effect” or other materiality qualifications, or any
similar qualifications, contained or incorporated directly or indirectly in
such
representations and warranties), shall be accurate in all respects when made
and
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(except to the extent such representations and warranties speak as of a
specified date other than the date made or the Scheduled Closing Time, and
without giving effect to any update to the Disclosure Schedule), except where
the failure of such representations and warranties to be true and correct
(individually or in the aggregate) would not have a Material Adverse Effect
on
the Company.
6.2 Performance
of Covenants
All of
the covenants and obligations that the Company is required to comply with or
to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
6.3 Consents.
All
Consents required to be obtained in connection with the Merger and the other
transactions contemplated by this Agreement (including the Consents identified
in Part 3.21 of the Company Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
43
6.4 Agreements
and Documents.
Parent
and the Company shall have received the following agreements and documents,
each
of which shall be in full force and effect:
(a) affiliate
agreements in form and substance reasonably acceptable to Parent and the
Company, executed by the persons specified in Section 5.7;
(b) confidential
invention and assignment agreements, reasonably satisfactory in form and content
to Parent, executed by each of the current employees of the
Company;
(c) a
certificate executed on behalf of the Company by its President, certified as
to
the President’s title by its Secretary, certifying that each of the
representations and warranties set forth in Section 2 is accurate in all
respects as of the Closing Date as if made on the Closing Date and certifying
that the conditions set forth in Sections 6.1, 6.2, 6.3, 6.6, 6.8, 6.9 and
6.10
have been duly satisfied (the “Company
Closing Certificate”);
(d) a
legal
opinion of Xxxxxxxxx Advokatbyra, dated as of the Closing Date, to the effect
that:
(i) Neonode
AB has been duly incorporated and is validly existing as a corporation in good
standing under the laws of Sweden with requisite corporate power to own or
lease, as the case may be, and to operate its properties and conduct its
business as currently conducted;
(ii) the
Company is the sole record owner of all outstanding shares of Neonode AB and
that the issuance of such shares to the Company was made in compliance with
Swedish law;
(iii) to
such
firm’s knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of
the
authorized but unissued capital shares of Neonode AB;
(iv) to
such
firm’s knowledge, there is no action, suit or proceeding by or before any court
or other governmental agency, authority or body or any arbitrator pending or
overtly threatened by a third party against the Company or Neonode AB or its
properties of a character required by the terms of this Agreement to be
disclosed in the Company Disclosure Schedule that is not disclosed in the
Disclosure Schedule
(v) (a)
The
execution and delivery of the Merger Agreement and the Loan Conversion
Agreement, and (b) the consummation of the Merger and the transactions
contemplated by the Loan Conversion Agreement will not result in a breach or
violation of (i)
the
charter or bylaws of Neonode AB, (ii) the terms of any Company Material
Contract; or (iii) any Swedish statute, law, rule, or regulation that in such
firm’s experience is typically applicable to transactions of the nature
contemplated by this Agreement and is applicable to the Company or Neonode
AB,
or any order, writ, judgment, injunction, decree, or award that has been entered
against the Company or Neonode AB and of which such firm is aware;
(vi) a
legal
opinion of Xxxx & Hessen LLP, dated as of the Closing Date, to the effect
that (a) the Company Stockholder Approval has been obtained and (b) to such
firm’s knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of
the
authorized but unissued shares of capital stock of the Company; and
44
(e) executed
Loan Conversion Agreements.
6.5 Questionnaires
and Lock-Ups.
Parent,
or its counsel, shall have received a Company Stockholder Questionnaire and
Lock-up in the applicable form included on EXHIBIT
D
from
each of the stockholders, warrantholders and optionholders of the
Company.
6.6 FIRPTA
Compliance.
The
Company shall have filed with the IRS the notification referred to in Section
5.8(a).
6.7 No
Restraints.
No
temporary restraining order, preliminary or permanent injunction or other order
preventing the consummation of the Merger shall have been issued by any court
of
competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the Merger that makes consummation
of the Merger illegal.
6.8 No
Legal Proceedings.
No
Person shall have commenced or threatened to commence any Legal Proceeding
challenging or seeking the recovery of a material amount of Damages in
connection with the Merger or seeking to prohibit or limit the exercise by
Parent of any material right pertaining to its ownership of stock of the
Surviving Entity.
6.9 No
Material Adverse Effect.
There
shall have been no Material Adverse Effect on the Company since the date of
this
Agreement, and no event shall have occurred or circumstances exist that, in
combination with any other events or circumstances, could reasonably be expected
to have or result in a Material Adverse Effect on the Company since the date
of
this Agreement.
6.10 Opinion
of Financial Advisor.
The
board of directors of Parent shall have received the opinion in writing of
Xxxxxx Xxxxxxx & Co., Inc. dated as of the date of this Agreement, to the
effect that, as of such date, and subject to the various assumptions and
qualifications set forth therein, the consideration paid in the Merger is fair
from a financial point of view to Parent.
6.11 Audited
Financial Statements.
Parent
shall have received a complete copy of the audited financial statements of
the
Company described in Section 3.4(a)(i) of this Agreement, including the notes
thereto and the unqualified report and opinion of PricewaterhouseCoopers LLP
relating thereto.
6.12 Sale
of Certain Parent Assets. Parent
shall have completed the Disposition.
6.13 Stockholder
Approval. Parent
shall have received the Parent Stockholder Approval, and the Company shall
have
received the Company Stockholder Approval. Holders of not more than 5% of the
outstanding shares of Company Common Stock (measured as of the date such Company
Stockholder Approval was obtained) shall have exercised or be entitled to
exercise dissenters’ rights under Section 262 of the Delaware General
Corporation Law or any similar applicable statute.
6.14 Financing.
The
Company shall have completed the Bridge Note Placement and Parent shall have
received a complete copy of all agreements executed in connection
therewith.
6.15 Conversion
of Certain Company Debt. The
Petrus Note, Convertible Almi Note and Petrus Interest shall have been converted
into Units pursuant to the Loan Conversion Agreement.
45
|
SECTION
7.
|
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE
COMPANY
|
The
obligations of the Company to effect the Merger and otherwise consummate the
transactions contemplated by this Agreement are subject to the satisfaction,
at
or prior to the Closing, of the following conditions:
7.1 Accuracy
of Representations.
Each of
the representations and warranties made by Parent and Merger Sub in this
Agreement and in each of the other agreements and instruments delivered to
Parent in connection with the transactions contemplated by this Agreement
(without giving effect to any “Material Adverse Effect” or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties), shall be
accurate in all respects when made and as of the Scheduled Closing Time as
if
made at the Scheduled Closing Time (except to the extent such representations
and warranties speak as of a specified date other than the date made or the
Scheduled Closing Time, and without giving effect to any update to the
Disclosure Schedule), except where the failure of such representations and
warranties to be true and correct (individually or in the aggregate) would
not
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole.
7.2 Performance
of Covenants.
All of
the covenants and obligations that Parent and Merger Sub are required to comply
with or to perform at or prior to the Closing shall have been complied with
and
performed in all material respects.
7.3 Agreements
and Documents.
The
Company shall have received the following agreements and documents, each of
which shall be in full force and effect:
(a) the
Net
Worth Certificate; and
(b) a
certificate executed on behalf of Parent by its President and its Secretary
certifying that each of the representations and warranties set forth in Section
3 and the Net Worth Certificate is accurate in all respects as of the Closing
Date as if made on the Closing Date and that the conditions set forth in
Sections 7.1, 7.2, 7.4, 7.5, 7.6, 7.7 and 7.8 have been duly satisfied (the
“Parent
Closing Certificate”).
7.4 Sale
of Certain Parent Assets. Parent
shall have completed the Disposition.
7.5 No
Legal Proceedings.
No
Person shall have commenced or threatened to commence any Legal Proceeding
challenging or seeking the recovery of a material amount of Damages in
connection with the Merger.
7.6 No
Material Adverse Effect
There
shall have been no Material Adverse Effect on Parent since the date of this
Agreement, and no event shall have occurred or circumstances exist that, in
combination with any other events or circumstances, will or could reasonably
be
expected to, have or result in a Material Adverse Effect on Parent since the
date of this Agreement.
7.7 No
Restraints.
No
temporary restraining order, preliminary or permanent injunction or other order
preventing the consummation of the Merger shall have been issued by any court
of
competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the Merger that makes consummation
of the Merger illegal.
46
7.8 Consents.
All
Consents required to be obtained in connection with the Merger and the other
transactions contemplated by this Agreement (including the Consents identified
in Part 3.18 of the Parent Disclosure Schedule) shall have been obtained and
shall be in full force and effect.
7.9 Resignations.
The
Company shall have received copies of the executed resignations, effective
as of
the Effective Time, of each director and officer of the Parent (except as set
forth in Part 5.12 of the Parent Disclosure Schedule).
7.10 Sale
of Certain Parent Assets Parent
shall have completed the Disposition.
7.11 Stockholder
Approval.
Parent
shall have received the Parent Stockholder Approval, and the Company shall
have
received the Company Stockholder Approval.
|
SECTION
8.
|
TERMINATION
|
8.1 Termination
Events.
This
Agreement may be terminated prior to the Closing:
(a) by
Parent
if Parent reasonably determines that the timely satisfaction of any condition
set forth in Section 6 has become impossible (other than as a result of any
failure on the part of Parent or Merger Sub to comply with or perform any
covenant or obligation of Parent or Merger Sub set forth in this Agreement
or in
any other agreement or instrument delivered to the Company);
(b) by
the
Company if the Company reasonably determines that the timely satisfaction of
any
condition set forth in Section 7 has become impossible (other than as a result
of any failure on the part of the Company to comply with or perform any covenant
or obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent);
(c) by
Parent
at or after the Scheduled Closing Time if any condition set forth in Section
6
has not been satisfied by the Scheduled Closing Time (other than as a result
of
any failure on the part of Parent or Merger Sub to comply with or perform any
covenant or obligation of Parent or Merger Sub set forth in this Agreement
or in
any other agreement or instrument delivered to the Company);
(d) by
the
Company at or after the Scheduled Closing Time if any condition set forth in
Section 7 has not been satisfied by the Scheduled Closing Time (other than
as a
result of any failure on the part of the Company to comply with or perform
any
covenant or obligation set forth in this Agreement or in any other agreement
or
instrument delivered to Parent);
(e) by
Parent
if the Closing has not taken place on or before May 31, 2007 (other than as
a
result of any failure on the part of Parent to comply with or perform any
covenant or obligation of Parent set forth in this Agreement or in any other
agreement or instrument delivered to the Company);
(f) by
the
Company if the Closing has not taken place on or before May 31, 2007 (other
than as a result of the failure on the part of the Company to comply with or
perform any covenant or obligation set forth in this Agreement or in any other
agreement or instrument delivered to Parent); or
(g) by
the
mutual consent of Parent and the Company.
8.2 Termination
Procedures.
If
Parent wishes to terminate this Agreement pursuant to Section 8.1(a), Section
8.1(c) or Section 8.1(e), Parent shall deliver to the Company a written notice
stating that Parent is terminating this Agreement and setting forth a brief
description of the basis on which Parent is terminating this Agreement. If
the
Company wishes to terminate this Agreement pursuant to Section 8.1(b), Section
8.1(d) or Section 8.1(f), the Company shall deliver to Parent a written notice
stating that the Company is terminating this Agreement and setting forth a
brief
description of the basis on which the Company is terminating this
Agreement.
47
8.3 Effect
of Termination.
If this
Agreement is terminated pursuant to Section 8.1, all further obligations of
the
parties under this Agreement shall terminate; provided,
however,
that:
(a) neither the Company nor Parent shall be relieved of any obligation or
liability arising from any prior breach by such party of any provision of this
Agreement; and (b) the parties shall, in all events, remain bound by and
continue to be subject to the provisions set forth in Section 8.4 and
Section 9.
8.4 Termination
Fee.
In the
event that (a) after the date of this Agreement, a Superior Proposal shall
have
been made to either party, and (b) within 12 months after termination of this
Agreement, such party shall have reached a definitive agreement to consummate,
or shall have consummated, a Superior Proposal, on the date of such
consummation, such party shall pay the other party a fee (the “Termination
Fee”)
by
wire transfer of same day funds. In the case of such a transaction by Parent,
the Termination Fee shall be $400,000, and in the case of such a transaction
by
Company, the Termination Fee shall be $800,000. In the event that a party fails
to promptly pay the Termination Fee, such party shall pay the other party the
reasonable costs and expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with any Legal Proceeding initiated to obtain
payment of the Termination Fee.
|
SECTION
9.
|
MISCELLANEOUS
PROVISIONS
|
9.1 Further
Assurances.
Each
party hereto shall execute and cause to be delivered to each other party hereto
such instruments and other documents, and shall take such other actions, as
such
other party may reasonably request (prior to, at or after the Closing) for
the
purpose of carrying out or evidencing any of the transactions contemplated
by
this Agreement.
9.2 No
Survival of Representations and Warranties.
None of
the representations and warranties contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the
Merger.
9.3 Fees
and Expenses.
Each
party to this Agreement shall bear and pay all fees, costs and expenses
(including legal fees and accounting fees) that have been incurred or that
are
incurred by or on behalf of such party in connection with the transactions
contemplated by this Agreement, including all fees, costs and expenses incurred
by such party in connection with or by virtue of (a) the investigation and
review conducted by Parent and its Representatives with respect to the Company’s
business (and the furnishing of information to Parent and its Representatives
in
connection with such investigation and review), (b) the negotiation, preparation
and review of this Agreement (including the Disclosure Schedule) and all
agreements, certificates, opinions and other instruments and documents delivered
or to be delivered in connection with the transactions contemplated by this
Agreement, (c) the preparation and submission of any filing or notice required
to be made or given in connection with any of the transactions contemplated
by
this Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the consummation of the
Merger.
9.4 Attorneys’
Fees.
If any
action or proceeding relating to this Agreement or the enforcement of any
provision of this Agreement is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys’ fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may
be entitled).
48
9.5 Notices.
Any
notice or other communication required or permitted to be delivered to any
party
under this Agreement shall be in writing and shall be deemed properly delivered,
given and received when delivered (by hand, by registered mail, by courier
or
express delivery service or by facsimile) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
| if to Parent or | ||
| Merger Sub: | SBE, Inc. | |
| Attn: Xxxxx Xxxxxxx | ||
| 0000 Xxxxxxxxx Xxxxxxx | ||
| Xxxxx 000 | ||
| Xxx Xxxxx, XX 00000 | ||
| Facsimile: (000) 000-0000 | ||
| with a copy to: | Cooley Godward Kronish LLP | |
| 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx | ||
| Xxx Xxxxxxxxx, XX 00000-0000 | ||
| Attention: Xxxxx Xxxxxxx, Esq. | ||
| Fax: 000-000-0000 | ||
| if to the Company: | Neonode Inc. | |
| Xxxxxxxxxxxxxxx 00, 0xx xxxxx. | ||
| XX-000 00 Xxxxxxxxx, XXXXXX | ||
| Attn: President | ||
| Fax: 00000 0 000 00 00 | ||
| with a copy to: | Xxxx & Hessen LLP | |
| 000 Xxxxxxx Xxxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attention: Xxxxx Xxxxxx, Esq. | ||
| Fax: (000) 000-0000 |
9.6 Headings.
The
headings contained in this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and shall not be referred
to
in connection with the construction or interpretation of this
Agreement.
9.7 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
9.8 Governing
Law.
This
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of Delaware (without giving effect to
principles of conflicts of laws). In any action between any of the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (a) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue
of
the state and federal courts located in the State of Delaware; (b) if any such
action is commenced in a state court, then, subject to applicable law, no party
shall object to the removal of such action to any federal court located in
Delaware; and (c) each of the parties irrevocably consents to service of process
by first class certified mail, return receipt requested, postage prepaid, to
the
address at which such party is to receive notice in accordance with Section
9.5.
49
9.9 Successors
and Assigns.
This
Agreement shall be binding upon: the Company and its successors and assigns
(if
any); Parent and its successors and assigns (if any); and Merger Sub and its
successors and assigns (if any). This Agreement shall inure to the benefit
of:
the Company; the Company’s stockholders (to the extent set forth in
Section 1.5 and 5.16); the holders of assumed Company Options (to the
extent set forth in Section 1.6 and 5.16); the holders of assumed Company
Warrants (to the extent set forth in Section 1.7 and 5.16); Parent; Merger
Sub;
Parent’s directors (to the extent set forth in Section 5.17); and the respective
successors and assigns (if any) of the foregoing.
9.10 Remedies
Cumulative; Specific Performance.
The
rights and remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the event of any
breach or threatened breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the benefit of
any
other party to this Agreement, such other party shall be entitled (in addition
to any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance
of
such covenant, obligation or other provision, and (b) an injunction restraining
such breach or threatened breach.
9.11 Waiver
(a) No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or
remedy.
(b) No
Person
shall be deemed to have waived any claim arising out of this Agreement, or
any
power, right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and
any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9.12 Amendments.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of all
of
the parties hereto; provided that Sections 5.16 and 5.17 may not be amended,
modified, altered or supplemented after either the Parent Stockholder Approval
or the Company Stockholder Approval is obtained.
9.13 Severability.
Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties hereto agree
that the court making such determination shall have the power to limit the
term
or provision, to delete specific words or phrases, or to replace any invalid
or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable as
so
modified. In the event such court does not exercise the power granted to it
in
the prior sentence, the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable term or provision
that will achieve, to the extent possible, the economic, business and other
purposes of such invalid or unenforceable term.
9.14 Parties
in Interest.
Except
for the provisions of Sections 1.5, 1.6 and 1.7, none of the provisions of
this
Agreement is intended to provide any rights or remedies to any Person other
than
the parties hereto and their respective successors and assigns (if
any).
50
9.15 Entire
Agreement.
This
Agreement and the other agreements referred to herein set forth the entire
understanding of the parties hereto relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and thereof;
provided,
however,
that the
confidentiality agreements executed on behalf of Parent and the Company on
October 3, 2006 and in December 2006 shall not be superseded by this Agreement
and shall remain in effect until the date on which such confidentiality
agreement is terminated in accordance with its terms.
9.16 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words “include” and “including,” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words “without limitation.”
(d) Except
as
otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to
this Agreement.
9.17 CIRCULAR
230 DISCLAIMER.
THE TAX
LAW IS VERY COMPLEX. THIS AGREEMENT CONTAINS STATEMENTS REGARDING GENERAL TAX
PRINCIPLES THAT MAY NOT BE SPECIFIC TO YOUR TAX SITUATION. THIS ADVICE WAS
NOT
INTENDED OR WRITTEN TO BE USED BY YOU FOR THE PURPOSE OF AVOIDING TAX PENALTIES
THAT MIGHT BE IMPOSED ON YOU. YOU SHOULD SEEK ADVICE BASED ON YOUR OWN
PARTICULAR CIRCUMSTANCES FROM YOUR INDEPENDENT TAX ADVISOR. THIS DISCLAIMER
IS
REQUIRED BY THE INTERNAL REVENUE SERVICE’S CIRCULAR 230.
The
parties hereto have caused this Agreement to be executed and delivered as of
the
date first above written.
SBE,
INC.,
a
Delaware Corporation
By:_/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Title:
President & CEO
COLD
WINTER ACQUISITION CORPORATION,
a
Delaware Corporation
By:
/s/
Xxxxxxx X. Xxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxx
Title:
President & CEO
NEONODE
INC.,
a
Delaware Corporation
By:
/s/
Per Xxxxxxx
Name:
Per
Xxxxxxx
Title:
CEO & Chairman
51
Exhibit
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this EXHIBIT
A):
Acquisition
Transaction. “Acquisition
Transaction”
shall
mean any transaction involving:
(a) in
the
case of the Company, the sale, license, disposition or acquisition of all or
a
material portion of such party’s business or assets;
(b) with
respect to any party, the issuance, disposition or acquisition of (i) any
capital stock or other equity security of such party (other than common stock
issued to employees of such party, upon exercise of options or warrants or
otherwise, in routine transactions in accordance with such party’s past
practices), (ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock or other equity security of such
party
(other than stock options granted to employees of such party in routine
transactions in accordance with such party’s past practices and outstanding
warrants), or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or other equity security
of such party; or
(c) with
respect to any party, any merger, consolidation, business combination,
reorganization or similar transaction involving such party.
Adverse
Recommendation Change.“Adverse
Recommendation Change”
shall
have the meaning set forth in Section 5.15 of this Agreement.
Affiliate.“Affiliate”
shall
mean a Person controlling, controlled by or under common control with another
Person.
Agreement.“Agreement”
shall
mean the Agreement and Plan of Merger and Reorganization to which this
EXHIBIT
A is
attached (including the Disclosure Schedule), as it may be amended from time
to
time.
Almi.
“Almi”
shall
mean Almi Foretagspartner AB, a corporation organized under the laws of
Sweden.
Bridge
Notes.“Bridge
Notes”
shall
mean the Existing Notes and New Notes.
COBRA.
“COBRA”
shall
mean the United States Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
Company
Affiliate.“Company
Affiliate”
shall
mean any Person under common control with the Company within the meaning of
Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued
thereunder.
Company
Common Stock.“Company
Common Stock”
shall
mean shares of the common stock (par value $0.01 per share) of the
Company.
Company
Contract.“Company
Contract”
shall
mean any Contract: (a) to which the Company is a party; (b) by which the Company
or any of its assets is or may become bound or under which the Company has,
or
may become subject to, any obligation; or (c) under which the Company has or
may
acquire any right or interest.
Company
Disclosure Schedule.“Company
Disclosure Schedule”
shall
mean the schedule (dated as of the date of the Agreement) delivered to Parent
on
behalf of the Company.
Company
Employee.“Company
Employee”
shall
mean any current or former employee, independent contractor or director of
the
Company or any Company Affiliate.
Company
Employee Agreement.“Company
Employee Agreement”
shall
mean each management, employment, severance, consulting, relocation,
repatriation or expatriation agreement or other Contract between the Company
or
any Company Affiliate and any Company Employee, other than any such management,
employment, severance, consulting, relocation, repatriation or expatriation
agreement or other Contract with a Company Employee which is terminable “at
will” without any obligation on the part of the Company or any Company Affiliate
to make any payments or provide any benefits in connection with such
termination.
Company
Employee Plan.“Company
Employee Plan”
shall
mean any plan, program, policy, practice, Contract or other arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten or
otherwise, funded or unfunded, that is or has been maintained, contributed
to,
or required to be contributed to, by the Company or any Company Affiliate for
the benefit of any Company Employee, or with respect to which the Company or
any
Company Affiliate has or may have any liability or obligation, except such
definition shall not include any Company Employee Agreement.
Company
Investor Warrants.“Company
Investor Warrants”
shall
mean warrants to purchase Company Common Stock issuable upon conversion of
the
Bridge Notes, Petrus Note, Convertible Almi Note and Petrus
Interest.
Company
Option.“Company
Option”
shall
have the meaning set forth in Secton1.6(a) of this Agreement.
Company
Option Plan.“Company
Option Plan”
shall
mean the 2007 Company Equity Incentive Plan.
Company
Software.“Company
Software”
shall
mean any software (including firmware and other software embedded in hardware
devices) owned, developed (or currently being developed), used, marketed,
distributed, licensed or sold by the Company at any time (other than
non-customized third-party software licensed to the Company for internal use
on
a non-exclusive basis).
Company
Stockholder Approval. “Company
Stockholder Approval” shall
mean a vote by the holders of a majority of the outstanding voting capital
stock
of the Company in favor of approval of the Merger.
Company
Stockholder Questionnaire and Lock-Up. “Company
Stockholder Questionnaire and Lock-Up”
shall
be in substantially the form attached hereto as EXHIBIT
D.
Company
Warrants. “Company
Warrants”
shall
mean the Existing Warrants and the Company Investor Warrants.
Consent.“Consent”
shall
mean any approval, consent, ratification, permission, waiver or authorization
(including any Governmental Authorization).
Contract.“Contract”
shall
mean any written, oral or other agreement, contract, subcontract, lease,
understanding, instrument, note, warranty, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature.
Convertible
Almi Loan.“Convertible
Almi Loan”
shall
mean an agreed portion of the Almi loan principal equal to 646,000 SEK
(converted at 6.83 Krona to the US Dollar, $94,583).
Damages.“Damages”
shall
include any loss, damage, injury, decline in value, lost opportunity, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys’ fees), charge, cost (including costs of investigation) or
expense of any nature.
Deal
Costs.“Deal
Costs”
shall
mean the Parent Transaction Expenses, Severance Costs and Office Wind-Down
Costs.
Encumbrance.“Encumbrance”
shall
mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on
the
transfer of any security or other asset, any restriction on the receipt of
any
income derived from any asset, any restriction on the use of any asset and
any
restriction on the possession, exercise or transfer of any other attribute
of
ownership of any asset).
Entity.“Entity”
shall
mean any corporation (including any non profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization or
entity.
Environmental
Law. “Environmental
Law”
means
any currently enacted and effective federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface
or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
ERISA.“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
Exchange
Act.“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended.
Existing
Notes.“Existing
Notes”
shall
mean the Senior Secured Notes in aggregate principal amount of $5,000,000 issued
through the date hereof.
Existing
Warrants.“Existing
Warrants”
shall
mean the outstanding warrants of the Company held by Petrus, Almi and certain
employees of the Company, exercisable to purchase an aggregate of 171,219 shares
of Company Common Stock.
Foreign
Plan.“Foreign
Plan”
shall
mean: (i) any plan, program, policy, practice, Contract or other arrangement
mandated by a Governmental Body other than the United States; (ii) any Company
Employee Plan maintained or contributed to by the Company or any Company
Affiliate that is not subject to United States law; and (iii) any Company
Employee Plan that covers or has covered Company Employees whose services are
performed primarily outside of the United States.
Government
Bid.“Government
Bid”
shall
mean any quotation, bid or proposal submitted to any Governmental Body or any
proposed prime contractor or higher-tier subcontractor of any Governmental
Body.
Government
Contract.“Government
Contract”
shall
mean any prime contract, subcontract, letter contract, purchase order or
delivery order executed or submitted to or on behalf of any Governmental Body
or
any prime contractor or higher-tier subcontractor, or under which any
Governmental Body or any such prime contractor or subcontractor otherwise has
or
may acquire any right or interest.
Governmental
Authorization.“Governmental
Authorization”
shall
mean any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant
to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental
Body.“Governmental
Body”
shall
mean any: (a) nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; or (c) governmental or quasi
governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, organization, unit,
body or Entity and any court or other tribunal).
Xxxxxxx
Warrants. “Xxxxxxx
Warrants”
shall
mean Unit purchase warrants issued by the Company to Xxxxxxx Securities,
exercisable to purchase 65,000 Units (i.e.,
65,000
shares of Company Common Stock and 32,500 Company Investor
Warrants).
Information
Statement. “Information
Statement”
shall
have the meaning set forth in Section 5.4(b) of this Agreement.
Intellectual
Property.“Intellectual
Property”
shall
mean algorithms, APIs, apparatus, circuit designs and assemblies, gate arrays,
IP cores, net lists, photomasks, semiconductor devices, test vectors, databases,
data collections, diagrams, formulae, inventions (whether or not patentable),
know-how, logos, marks (including brand names, product names, logos, and
slogans), methods, network configurations and architectures, processes,
proprietary information, protocols, schematics, specifications, software,
software code (in any form, including source code and executable or object
code), subroutines, techniques, user interfaces, URLs, web sites, works of
authorship and other forms of technology (whether or not embodied in any
tangible form and including all tangible embodiments of the foregoing, such
as
instruction manuals, laboratory notebooks, prototypes, samples, studies and
summaries).
Intellectual
Property Rights.“Intellectual
Property Rights”
shall
mean all past, present, and future rights of the following types, which may
exist or be created under the laws of any jurisdiction in the world: (A) rights
associated with works of authorship, including exclusive exploitation rights,
copyrights, moral rights and mask works; (B) trademark and trade name
rights and similar rights; (C) trade secret rights; (D) patent and
industrial property rights; (E) other proprietary rights in Intellectual
Property; and (F) rights in or relating to registrations, renewals,
extensions, combinations, divisions, and reissues of, and applications for,
any
of the rights referred to in clauses “(A)” through “(E)” above.
IRS.“IRS”
shall
mean the United States Internal Revenue Service.
Key
Employee.“Key
Employee”
shall
mean any current employee who is an executive officer or is paid at an annual
rate of more than $100,000.
Knowledge.
An
individual shall be deemed to have “knowledge”
of a
particular fact or other matter if:
(a) such
individual is actually aware of such fact or other matter; or
(b) a
prudent
individual could be expected to discover or otherwise become aware of such
fact
or other matter in the course of conducting a diligent and comprehensive
investigation concerning the truth or existence of such fact or other
matter.
The
Company shall be deemed to have “knowledge” of a particular fact or other matter
if any officer, director or other Representative of the Company has knowledge
of
such fact or other matter. The Parent shall be deemed to have “knowledge” of a
particular fact or other matter if any officer, director or other Representative
of Parent has knowledge of such fact or other matter.
Legal
Proceeding.“Legal
Proceeding”
shall
mean any action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding), hearing,
inquiry, audit, examination or investigation commenced, brought, conducted
or
heard by or before, or otherwise involving, any court or other Governmental
Body
or any arbitrator or arbitration panel.
Legal
Requirement.“Legal
Requirement”
shall
mean any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Body.
Material
Adverse Effect.
A
violation or other matter will be deemed to have a “Material
Adverse Effect”
on
a
person if such violation or other matter (considered together with all other
matters that would constitute exceptions to the representations and warranties
set forth in the Agreement or in the person’s Closing Certificate but for the
presence of “Material Adverse Effect” or other materiality qualifications, or
any similar qualifications, in such representations and warranties) would have
a
material adverse effect on the person’s business, condition, assets,
liabilities, operations, financial performance or prospects.
Materials
of Environmental Concern. “Materials
of Environmental Concern”
include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated
by
any Environmental Law or that is otherwise a danger to health, reproduction
or
the environment.
New
Notes.“New
Notes”
shall
mean the Senior Secured Notes in aggregate principal amount of up to $5,000,000
issuable in the Bridge Note Placement.
Loan
Conversion Agreement. “Loan
Conversion Agreement”
shall
mean each note conversion agreement in substantially the form attached as
EXHIBIT
B,
providing
for conversion of the Petrus Note, Convertible ALMI
Note
and
Petrus Interest.
Parent
Affiliate.
“Parent
Affiliate”
shall
mean any Person under common control with the Parent within the meaning of
Sections 414(b), (c), (m) and (o) of the Code, and the regulations issued
thereunder.
Parent
Closing Certificate.“Parent
Closing Certificate”
shall
have the meaning set forth in Section 7.3(b) of this Agreement.
Parent
Common Stock.“Parent
Common Stock”
shall
mean shares of the common stock (par value $0.001 per share) of
Parent.
Parent
Contract.“Parent
Contract”
shall
mean any Contract: (a) to which Parent is a party; (b) by which Parent or any
of
its assets is or may become bound or under which Parent has, or may become
subject to, any obligation; or (c) under which Parent has or may acquire any
right or interest.
Parent
Disclosure Schedule.“Parent
Disclosure Schedule”
shall
mean the schedule (dated as of the date of the Agreement) delivered to Company
on behalf of Parent.
Parent
Employee.“Parent
Employee”
shall
mean any current or former employee, independent contractor or director of
Parent or any Parent Affiliate.
Parent
Employee Agreement.“Parent
Employee Agreement”
shall
mean each management, employment, severance, consulting, relocation,
repatriation or expatriation agreement or other Contract between Parent or
any
Parent Affiliate and any Parent Employee, other than any such management,
employment, severance, consulting, relocation, repatriation or expatriation
agreement or other Contract with a Parent Employee which is terminable “at will”
without any obligation on the part of Parent or any Parent Affiliate to make
any
payments or provide any benefits in connection with such
termination.
Parent
Employee Plan.“Parent
Employee Plan”
shall
mean any plan, program, policy, practice, Contract or other arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten or
otherwise, funded or unfunded, including each “employee benefit plan,” within
the meaning of Section 3(3) of ERISA (whether or not ERISA is applicable to
such
plan), that is or has been maintained, contributed to, or required to be
contributed to, by Parent or any Parent Affiliate for the benefit of any Parent
Employee, or with respect to which Parent or any Parent Affiliate has or may
have any liability or obligation, except such definition shall not include
any
Parent Employee Agreement.
Parent
Option. “Parent
Option” shall
mean the options granted to any Parent Employee pursuant to the Parent Option
Plans.
Parent
Option Plans. “Parent
Option Plans” shall
mean the 1996 Equity Incentive Plan, the 1998 Non-Officer Stock Option Plan,
the
2001 Non-Employee Director Stock Option Plan, the PyX 2005 Stock Option Plan
and
the 2006 Equity Incentive Plan.
Parent
Pension Plan.“Parent
Pension Plan”
shall
mean each Parent Employee Plan that is an “employee pension benefit plan,”
within the meaning of Section 3(2) of ERISA.
Parent
Stockholder Approval.“Parent
Stockholder Approval”
shall
mean (i) a vote by holders of a majority of the outstanding voting capital
stock
of Parent in favor of the following actions: (A) issuance of Parent Common
Stock
and reservation of shares of Parent Common Stock as required pursuant to this
Agreement; (B) amendment of the Parent certificate of incorporation to provide
for (1) increase in its authorized shares of Parent Common Stock in order to
permit the issuance of shares contemplated by the Transactions, (2) change
of
name of the Parent, effective upon Closing, to the name of the Company and
(3)
approval of a reverse stock split of Parent Common Stock on a one for 15, one
for 20, one for 25 or one for 30 basis (measured on an aggregate basis from
the
date of this Agreement), as determined by the Parent Board of Directors
immediately prior to the Merger; and (ii) a vote by holders of a majority of
the
shares of voting capital stock of Parent voting at the meeting in favor of
the
issuance of the warrants described in Section 5.14.
Parent
Warrant. “Parent
Warrant” shall
mean any warrant or other direct or indirect right to purchase capital stock
of
Parent.
Person.“Person”
shall
mean any individual, Entity or Governmental Body.
Petrus.“Petrus”
shall
mean Petrus Holdings SA, a Luxembourg corporation.
Petrus
Interest.“Petrus
Interest”
shall
mean $43,106 (at 6.83 Krona to the US Dollar) of interest accrued through March
31, 2007 on the Petrus Loan and Convertible Almi Loan.
Petrus
Loan.“Petrus
Loan”
shall
mean the full Petrus loan principal of 5,353,000 SEK (converted at 6.83 Krona
to
the US Dollar, $783,748 USD).
Representatives.“Representatives”
shall
mean officers, directors, employees, agents, attorneys, accountants, advisors
and representatives.
SEC.“SEC”
shall
mean the United States Securities and Exchange Commission.
Securities
Act.“Securities
Act”
shall
mean the Securities Act of 1933, as amended.
Senior
Secured Notes.“Senior
Secured Notes”
shall
mean Senior Secured Notes, due August 28, 2007, of the Company issued through
the date hereof or issuable in the Bridge Note Placement, in aggregate principal
amount of $10,000,000.
Tax.“Tax”
shall
mean any tax (including any income tax, franchise tax, capital gains tax, gross
receipts tax, value added tax, surtax, excise tax, ad valorem tax, transfer
tax,
stamp tax, sales tax, use tax, property tax, business tax, withholding tax
or
payroll tax), levy, assessment, tariff or duty (including any customs duty),
and
any related charge or amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any Governmental
Body.
Tax
Return.“Tax
Return”
shall
mean any return (including any information return), report, statement,
declaration, estimate, schedule, notice, notification, form, election,
certificate or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
Unit.“Unit”
shall
mean one share of Company Common Stock and one-half Company Investor Warrant
exercisable to purchase one-half share of Company Common Stock.
=====================================================================
among:
SBE,
INC.,
a
Delaware corporation;
Cold
Winter Acquisition Corporation,
a
Delaware corporation;
and
NEONODE
INC.,
a
Delaware corporation;
___________________________
Dated
as of January 19, 2007
___________________________
=====================================================================
| Exhibits | |||
| Exhibit A | - | Certain Definitions | |
| Exhibit B | - | Form of Loan Conversion Agreement | |
| Exhibit C | - | Registration Rights Agreement | |
| Exhibit D-1 | - | Company Stockholders Questionnaire and Lock-Up - Non U.S. persons | |
| Exhibit D-2 | - | Company Stockholders Questionnaire and Lock-Up - U.S. persons | |
| Exhibit D-3 | - | Questionnaire and Lock-Up - Warrant and Option Holders |
|
SECTION
1.
|
DESCRIPTION OF TRANSACTION |
1
|
|
1.1
|
Merger
of Merger Sub into the Company
|
1
|
|
1.2
|
Effect
of the Merger
|
1
|
|
1.3
|
Closing;
Effective Time
|
1
|
|
1.4
|
Certificate
of Incorporation and Bylaws
|
2
|
|
1.5
|
Conversion
of Shares
|
2
|
|
1.6
|
Employee
Stock Options
|
3
|
|
1.7
|
Company
Warrants
|
3
|
|
1.8
|
Closing
of the Company’s Transfer Books
|
4
|
|
1.9
|
Exchange
of Certificates
|
4
|
|
1.10
|
Tax
Consequences
|
5
|
|
1.11
|
Further
Action
|
5
|
| SECTION 2. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
5
|
|
2.1
|
Due
Organization; No Subsidiaries; Etc.
|
6
|
|
2.2
|
Certificate
of Incorporation and Bylaws; Records
|
6
|
|
2.3
|
Capitalization,
Etc.
|
6
|
|
2.4
|
Financial
Statements
|
8
|
|
2.5
|
Absence
of Changes
|
8
|
|
2.6
|
Title
to Assets
|
9
|
|
2.7
|
Receivables
|
10
|
|
2.8
|
Equipment;
Leasehold
|
10
|
|
2.9
|
Intellectual
Property
|
10
|
|
2.10
|
Contracts
|
11
|
|
2.11
|
Liabilities
|
13
|
|
2.12
|
Compliance
with Legal Requirements
|
14
|
|
2.13
|
Governmental
Authorizations
|
14
|
|
2.14
|
Tax
Matters
|
14
|
|
2.15
|
Employee
and Labor Matters; Benefit Plans
|
15
|
|
2.16
|
Environmental
Matters
|
18
|
|
2.17
|
Insurance
|
19
|
|
2.18
|
Related
Party Transactions
|
19
|
|
2.19
|
Legal
Proceedings; Orders
|
19
|
|
2.20
|
Authority;
Binding Nature of Agreement
|
19
|
|
2.21
|
Non
Contravention; Consents
|
20
|
|
2.22
|
Vote
Required
|
20
|
|
2.23
|
Brokers
|
20
|
|
2.24
|
No
Other Representations
|
21
|
|
2.25
|
Full
Disclosure
|
21
|
|
SECTION 3.
|
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
21
|
|
3.1
|
Due
Organization
|
21
|
|
3.2
|
Certificate
of Incorporation and Bylaws; Records
|
21
|
|
3.3
|
Capitalization,
Etc.
|
22
|
|
3.4
|
SEC
Filings; Financial Statements
|
23
|
|
3.5
|
Absence
of Changes
|
23
|
|
3.6
|
Title
to Assets
|
25
|
|
3.7
|
Bank
Accounts; Receivables
|
25
|
|
3.8
|
Leasehold
|
25
|
|
3.9
|
Contracts
|
25
|
|
3.10
|
Liabilities
|
27
|
|
3.11
|
Compliance
with Legal Requirements
|
27
|
|
3.12
|
Governmental
Authorizations
|
27
|
|
3.13
|
Tax
Matters
|
28
|
|
3.14
|
Employee
and Labor Matters; Benefit Plans
|
29
|
|
3.15
|
Environmental
Matters
|
32
|
|
3.16
|
Insurance
|
32
|
|
3.17
|
Legal
Proceedings; Orders
|
32
|
|
3.18
|
Non
Contravention; Consents
|
32
|
|
3.19
|
Parent
Stockholder Approval Required
|
33
|
|
3.20
|
Brokers
|
33
|
|
3.21
|
Full
Disclosure
|
33
|
|
SECTION 4.
|
CERTAIN COVENANTS OF THE COMPANY |
33
|
|
4.1
|
Access
and Investigation
|
33
|
|
4.2
|
Operation
of the Company’s Business
|
34
|
|
4.3
|
Bridge
Note Placement
|
35
|
|
SECTION 5.
|
COVENANTS OF PARENT; ADDITIONAL COVENANTS OF THE PARTIES |
35
|
|
5.1
|
Access
and Investigation
|
35
|
|
5.2
|
Operation
of Parent’s Business
|
36
|
|
5.3
|
Filings
and Consents
|
37
|
|
5.4
|
SEC
Filings; Stockholders Meetings
|
37
|
|
5.5
|
Securities
Compliance; Blue Sky
|
38
|
|
5.6
|
Public
Announcements
|
39
|
|
5.7
|
Affiliate
Agreements and Voting Agreements
|
39
|
|
5.8
|
Best
Efforts
|
39
|
|
5.9
|
Tax
Matters
|
39
|
|
5.10
|
Nasdaq
Listing.
|
39
|
|
5.11
|
Notification;
Updates to Disclosure Schedule.
|
39
|
|
5.12
|
Employee
Matters
|
40
|
|
5.13
|
Directors
of Parent Post-Effective Time
|
40
|
|
5.14
|
Parent
Adjusted Net Worth
|
41
|
|
5.15
|
No
Negotiation
|
41
|
|
5.16
|
Registration
Rights.
|
43
|
|
5.17
|
Indemnification.
|
43
|
|
SECTION 6.
|
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB |
43
|
|
6.1
|
Accuracy
of Representations
|
43
|
|
6.2
|
Performance
of Covenants
|
43
|
|
6.3
|
Consents
|
43
|
|
6.4
|
Agreements
and Documents
|
44
|
|
6.5
|
Questionnaires
|
45
|
|
6.6
|
FIRPTA
Compliance
|
45
|
|
6.7
|
No
Restraints
|
45
|
|
6.8
|
No
Legal Proceedings
|
45
|
|
6.9
|
No
Material Adverse Effect
|
45
|
|
6.10
|
Opinion
of Financial Advisor
|
45
|
|
6.11
|
Audited
Financial Statements
|
45
|
|
6.12
|
Sale
of Certain Parent Assets
|
45
|
|
6.13
|
Stockholder
Approval
|
45
|
|
6.14
|
Financing.
|
45
|
|
6.15
|
Conversion
of Certain Company Debt
|
45
|
|
SECTION 7.
|
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY |
46
|
|
7.1
|
Accuracy
of Representations
|
46
|
|
7.2
|
Performance
of Covenants
|
46
|
|
7.3
|
Agreements
and Documents
|
46
|
|
7.4
|
Sale
of Certain Parent Assets
|
46
|
|
7.5
|
No
Legal Proceedings
|
46
|
|
7.6
|
No
Material Adverse Effect
|
46
|
|
7.7
|
No
Restraints
|
46
|
|
7.8
|
Consents.
|
47
|
|
7.9
|
Resignations.
|
47
|
|
7.10
|
Sale
of Certain Parent Assets
|
47
|
|
7.11
|
Stockholder
Approval.
|
47
|
|
SECTION 8.
|
TERMINATION |
47
|
|
8.1
|
Termination
Events
|
47
|
|
8.2
|
Termination
Procedures
|
47
|
|
8.3
|
Effect
of Termination
|
48
|
|
8.4
|
Termination
Fee.
|
48
|
|
SECTION 9.
|
MISCELLANEOUS PROVISIONS |
48
|
|
9.1
|
Further
Assurances
|
48
|
|
9.2
|
No
Survival of Representations and Warranties
|
48
|
|
9.3
|
Fees
and Expenses
|
48
|
|
9.4
|
Attorneys’
Fees
|
48
|
|
9.5
|
Notices
|
49
|
|
9.6
|
Headings
|
49
|
|
9.7
|
Counterparts
|
49
|
|
9.8
|
Governing
Law
|
49
|
|
9.9
|
Successors
and Assigns
|
50
|
|
9.10
|
Remedies
Cumulative; Specific Performance
|
50
|
|
9.11
|
Waiver
|
50
|
|
9.12
|
Amendments
|
50
|
|
9.13
|
Severability
|
50
|
|
9.14
|
Parties
in Interest
|
50
|
|
9.15
|
Entire
Agreement
|
51
|
|
9.16
|
Construction
|
51
|
|
9.17
|
CIRCULAR
230 DISCLAIMER
|
51
|
