EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is made and entered into as of May 28, 2004, by and
among PivX Solutions, Inc., a Nevada corporation ("PARENT"), Threat Focus Merger
Corp., a California corporation and wholly-owned subsidiary of Parent ("MERGER
SUBSIDIARY"), and Threat Focus, Inc., a California corporation (the "COMPANY").
WHEREAS, the Company is in the business of developing security software
and technology (the "BUSINESS"); and
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary, and the
Company have approved the merger of Merger Subsidiary with and into the Company
(the "MERGER") upon the terms and subject to the conditions set forth herein;
and
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"CODE"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants, and agreements contained herein,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), Merger Subsidiary will
be merged with and into the Company in accordance with the provisions of the
General Corporation Law of California (the "CGCL"), whereupon the separate
corporate existence of Merger Subsidiary will cease, and the Company will
continue as the surviving corporation (the "SURVIVING CORPORATION"). From and
after the Effective Time, the Surviving Corporation will possess all the rights,
privileges, powers, and franchises and be subject to all the restrictions,
disabilities, and duties of the Company and Merger Subsidiary, all as more fully
described in the CGCL.
1.2 EFFECTIVE TIME. As soon as practicable after each of the conditions
set forth in Article 5 and Article 6 has been satisfied or waived, the Company
and Merger Subsidiary will file, or cause to be filed, with the Secretary of
State of the State of California, Articles of Merger for the Merger, which
Articles will be in the form required by and executed in accordance with the
applicable provisions of the CGCL. The Merger will become effective at the time
such filing is made or, if agreed to by Parent and the Company, such later time
or date set forth in the Articles of Merger (the "EFFECTIVE TIME").
1.3 CLOSING. Unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article 7
hereof, the closing of the Merger (the "CLOSING"), will take place at a time and
on a date (the "CLOSING DATE") to be specified by the parties, which will be no
later than May __, 2004 (the "TERMINATION DATE"); provided, however, that all of
the conditions provided for in Articles 5 and 6 hereof have been satisfied or
waived by such date. The Closing will be held at the offices of Xxxxxxx Xxxxx &
Xxxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, or such other
place as the parties may agree, at which time and place the documents and
instruments necessary or appropriate to effect the transactions contemplated
herein will be exchanged by the parties. Except as otherwise provided herein,
all actions taken at the Closing will be deemed to be taken simultaneously.
1.4 CONVERSION OF SHARES. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of any holder of any share of capital stock of the Company or Merger
Subsidiary:
(a) Each share of common stock of the Company, par value
$.0001 per share ("COMPANY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time (except for shares referred to
in Section 1.4(b) hereof) will be converted into the right to receive
0.1846123 shares of common stock of Parent, par value $.001 per share,
as adjusted for any stock split, stock dividend and the like that may
occur prior to the Effective Time ("PARENT COMMON STOCK"). The amount
of Parent Common Stock into which each such share of Company Common
Stock is converted is referred to herein as the "MERGER CONSIDERATION".
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is then owned beneficially
or of record by Parent, Merger Subsidiary, or any direct or indirect
subsidiary of Parent or the Company will be canceled without payment of
any consideration therefor and without any conversion thereof.
(c) Each share of any other class of capital stock of the
Company (other than Company Common Stock) will be canceled without
payment of any consideration therefor and without any conversion
thereof.
(d) Each share of common stock of Merger Subsidiary, no par
value ("MERGER SUBSIDIARY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time will be converted into one
share of common stock of the Surviving Corporation, par value $.001 per
share ("SURVIVING CORPORATION COMMON Stock").
1.5 EXCHANGE OF COMPANY COMMON STOCK.
(a) At the Closing, the Company will arrange for each holder
of record (a "SHAREHOLDER") of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares
of Company Common Stock ("COMPANY CERTIFICATES") to deliver to Parent
such holder's Company Certificates, together with appropriate stock
powers signed by such holders, in exchange for the number of whole
shares of Parent Common Stock into which such shares have been
converted as provided in Section 1.4(a) and the Company Certificate(s)
so surrendered will be canceled.
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(b) All shares of Parent Common Stock issued upon the
surrender or exchange of Company Common Stock in accordance with the
terms hereof (including any cash paid for fractional shares pursuant to
Section 1.5(d) hereof) will be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common
Stock.
(c) As of the Effective Time, the holders of Company
Certificates representing shares of Company Common Stock will cease to
have any rights as shareholders of the Company, except such rights, if
any, as they may have pursuant to the CGCL. Except as provided above,
until such Company Certificates are surrendered for exchange, each such
Company Certificate will, after the Effective Time, represent for all
purposes only the right to receive the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock have been
converted pursuant to the Merger as provided in Section 1.4(a) hereof
and the right to receive the cash value of any fraction of a share of
Parent Common Stock as provided in Section 1.5(d) hereof.
(d) No fractional shares of Parent Common Stock will be issued
upon the surrender for exchange of Company Certificates, no dividend or
other distribution of Parent will relate to any fractional share, and
such fractional share interests will not entitle the owner thereof to
vote or to any rights of a shareholder of Parent. All fractional shares
of Parent Common Stock to which a holder of Company Common Stock
immediately prior to the Effective Time would otherwise be entitled, at
the Effective Time, will be aggregated if and to the extent multiple
Company Certificates of such holder are submitted together to Parent.
If a fractional share results from such aggregation, then such
fractional share will be rounded up to the nearest whole share and each
holder of shares of Company Common Stock who otherwise would be
entitled to receive such fractional share of Parent Common Stock will
receive one whole share in lieu of such fractional share.
1.6 EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK. From and after the
Effective Time, each outstanding certificate previously representing shares of
Merger Subsidiary Common Stock will be deemed for all purposes to evidence
ownership of and to represent the number of shares of Surviving Corporation
Common Stock into which such shares of Merger Subsidiary Common Stock have been
converted. Promptly after the Effective Time, the Surviving Corporation will
issue to Parent a stock certificate or certificates representing such shares of
Surviving Corporation Common Stock in exchange for the certificate or
certificates that formerly represented shares of Merger Subsidiary Common Stock,
which will be canceled.
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1.7 CAPITALIZATION CHANGES. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Parent Common Stock are changed
into a different number of shares or a different class by reason of any
reclassification, stock-split, combination, exchange of shares, stock dividend
or similar change in the capitalization of Parent, all per-share price amounts
and calculations set forth in this Agreement will be appropriately adjusted.
1.8 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, will be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of the Company, as
in effect immediately prior to the Effective Time, will be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.10 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
pre-Closing officers and directors of the Company shall submit their written
resignations from such offices effective as of the Effective Time. Prior to
their resignations, the pre-Closing directors of the Company shall appoint
Xxxxxx X. Xxxxxxx to the board of directors of the Company effective as of the
Effective Time.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
2.1 DISCLOSURE SCHEDULE. The disclosure schedule attached hereto as
EXHIBIT 2.1 (the "COMPANY DISCLOSURE SCHEDULE") is divided into sections that
correspond to the sections of this Article 2. The Company Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties set
forth in the remaining sections of this Article 2.
2.2 CORPORATE ORGANIZATION, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with the requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties and assets, is duly qualified or licensed to do business as a foreign
corporation in good standing in every other jurisdiction in which the character
or location of the properties and assets owned, leased or operated by it or the
conduct of its business requires such qualification or licensing, except in such
jurisdictions in which the failure to be so qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) on the Company. The Company Disclosure Schedule
contains a list of all jurisdictions in which the Company is qualified or
licensed to do business. The Company has delivered to Parent complete and
correct copies of the Company's articles of incorporation and bylaws. The
Company does not own or control any capital stock of any corporation or any
interest in any partnership, joint venture or other entity.
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2.3 CAPITALIZATION. The authorized capital stock of the Company is set
forth in the Company Disclosure Schedule. The number of shares of the capital
stock of the Company outstanding, as of the date of this Agreement and as set
forth in the Company Disclosure Schedule, represent all of the issued and
outstanding capital stock of the Company. All issued and outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and are without, and were not issued in violation of, preemptive
rights. There are no shares of capital stock or other equity securities of the
Company outstanding or any securities convertible into or exchangeable for such
shares, securities or rights. Other than as set forth on the Company Disclosure
Schedule and pursuant to this Agreement, there is no subscription, option,
warrant, call, right, contract, agreement, commitment, understanding or
arrangement to which the Company is a party, or by which it is bound, with
respect to the issuance, sale, delivery or transfer of the capital stock of the
Company, including any right of conversion or exchange under any security or
other instrument.
2.4 AUTHORIZATION, ETC. The Company has all requisite corporate power
and authority to enter into, execute, deliver, and perform its obligations under
this Agreement. This Agreement has been duly and validly executed and delivered
by the Company and is the valid and binding legal obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, moratorium, principles of equity and other limitations limiting the
rights of creditors generally.
2.5 NON-CONTRAVENTION. Except as set forth in the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement, and
each other agreement to be entered into in connection with this Agreement, nor
the consummation of the transactions contemplated herein will:
(a) violate, contravene or be in conflict with any provision
of the articles of incorporation or bylaws of the Company;
(b) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right
of termination, cancellation, imposition of fees or penalties under any
debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement
or obligation to which the Company is a party or by which the Company
or any of the Company's properties or assets is or may be bound;
(c) result in the creation or imposition of any pledge, lien,
security interest, restriction, option, claim or charge of any kind
whatsoever ("ENCUMBRANCES") upon any property or assets of the Company
under any debt, obligation, contract, agreement or commitment to which
the Company is a party or by which the Company or any of the Company's
assets or properties are bound; or
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(d) materially violate any statute, treaty, law, judgment,
writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters known to the Company to be
applicable to the Company or its business or assets (referred to herein
individually as a "LAW" and collectively as "LAWS") of any foreign,
federal, state or local governmental or quasi-governmental,
administrative, regulatory or judicial court, department, commission,
agency, board, bureau, instrumentality or other authority (referred to
herein individually as an "AUTHORITY" and collectively as
"AUTHORITIES").
2.6 CONSENTS AND APPROVALS. Except as set forth in the Company
Disclosure Schedule, with respect to the Company, no consent, approval, order or
authorization of or from, or registration, notification, declaration or filing
with ("CONSENT") any individual or entity, including without limitation any
Authority, is required in connection with the execution, delivery or performance
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated herein.
2.7 FINANCIAL STATEMENTS. The Company Disclosure Schedule contains a
copy of the balance sheet of the Company as of March 31, 2004 (the "BALANCE
SHEET") and a statement of income for the Company for the twelve (12) months
ended December 31, 2003, and for the three (3) months ended March 31, 2004
(collectively, the "INCOME STATEMENTS") (collectively, the "FINANCIAL
STATEMENTS"). Except as disclosed therein or in the Company Disclosure Schedule,
the aforesaid Financial Statements: (i) are in accordance with the books and
records of the Company and have been prepared in conformity with good accounting
practices (except as stated therein or in the notes thereto); and (ii) are true,
complete and accurate in all material respects and fairly present the financial
position of the Company as of the date thereof, and the income or loss for the
period then ended, except that the Balance Sheet and the Income Statements do
not contain all required footnotes and are subject to normal year-end
adjustments.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
material liabilities, obligations or claims of any kind whatsoever, whether
secured or unsecured, accrued or unaccrued, fixed or contingent, matured or
unmatured, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due (referred to herein individually as a "LIABILITY"
and collectively as "LIABILITIES"), other than: (a) Liabilities that are fully
reflected or reserved for in the Balance Sheet; (b) Liabilities that are set
forth on the Company Disclosure Schedule; (c) Liabilities incurred by the
Company in the ordinary course of business after the date of the Balance Sheet
and consistent with past practice and in an amount not to exceed $5,000
individually or in the aggregate (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement or violation of Law) unless such amounts are
disclosed on the Company Disclosure Schedule; or (d) Liabilities for express
executory obligations to be performed after the Closing under the contracts
described in Section 2.15 of the Company Disclosure Schedule (other than any
express executory obligations that might arise due to any default or other
failure of performance by the Company prior to the Closing Date).
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2.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Company
Disclosure Schedule, since the date of the Balance Sheet, the Company has owned
and operated its assets, properties and business in the ordinary course of
business and consistent with past practice. Without limiting the generality of
the foregoing, subject to the aforesaid exceptions:
(a) the Company has not experienced any change that has had or
could reasonably be expected to have a Material Adverse Effect on the
Company;
(b) the Company has not suffered (i) any loss, damage,
destruction or other property or casualty (whether or not covered by
insurance) or (ii) any loss of officers, employees, dealers,
distributors, independent contractors, customers or suppliers, which
had or may reasonably be expected to result in a Material Adverse
Effect on the Company; and
(c) no event has taken place which if consummated following
the date hereof would constitute a violation of Section 4.2 hereof.
2.10 ASSETS. Except as set forth in the Company Disclosure Schedule,
the Company has good and marketable title to all of its assets and properties,
whether or not reflected in the Balance Sheet or acquired after the date thereof
(except for properties sold or otherwise disposed of since the date thereof in
the ordinary course of business and consistent with past practices), that relate
to or are necessary for the Company to conduct its business and operations as
currently conducted (collectively, the "ASSETS"), free and clear of any
mortgage, pledge, lien, security interest, conditional or installment sales
agreement, encumbrance, claim, easement, right of way, tenancy, covenant,
encroachment, restriction or charge of any kind or nature (whether or not of
record) (a "LIEN"), other than (i) liens securing specific Liabilities shown on
the Balance Sheet with respect to which no breach, violation or default exists;
(ii) mechanics', carriers', workers' or other like liens arising in the ordinary
course of business; (iii) minor imperfections of title that do not individually
or in the aggregate, impair the continued use and operation of the Assets to
which they relate in the operation of the Company as currently conducted; and
(iv) liens for current taxes not yet due and payable or being contested in good
faith by appropriate proceedings ("PERMITTED LIENS"). The Company has full right
and power to, and at the Closing will, deliver to Parent good and marketable
title to all of the Assets, free and clear of any Lien, other than Permitted
Liens.
2.11 RECEIVABLES AND PAYABLES.
(a) Except as set forth on the Company Disclosure Schedule,
all accounts receivable of the Company represent sales in the ordinary
course of business and are current and, to the Company's knowledge,
collectible net of any reserves shown on the Balance Sheet and none of
such receivables is subject to any Lien other than a Permitted Lien.
(b) The Company Disclosure Schedule contains a true and
complete list of the names, addresses and telephone numbers of all
current clients of the Company. Except as otherwise set forth in the
Company Disclosure Schedule, since January 1, 2003, there has not been
any dispute with any client of the Company or any set of circumstances,
either of which is reasonably anticipated to have a materially adverse
effect on the relationship between the Company and any its clients or
on the revenue or profitability expected from any clients of the
Company.
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(c) Except as set forth on the Company Disclosure Schedule, all
payables by the Company arose in bona fide transactions in the
ordinary course of business and no such payable is delinquent
by more than sixty (60) days beyond the due date in its
payment.
2.12 INTELLECTUAL PROPERTY RIGHTS. The Company owns or has the
unrestricted right to use, and the Company Disclosure Schedule contains a
detailed listing of, all patents, patent applications, patent rights, registered
and unregistered trademarks, trademark applications, tradenames, service marks,
service xxxx applications, copyrights, internet domain names, computer programs
and other computer software, inventions, know-how, trade secrets, technology,
proprietary processes, trade dress, software and formulae (collectively,
"INTELLECTUAL PROPERTY RIGHTS") used in, or necessary for, the operation of its
business as currently conducted or proposed to be conducted. Except as set forth
on the Company Disclosure Schedule, the use of all intellectual property rights
does not infringe or violate the intellectual property rights of any person or
entity. Except as described on the Company Disclosure Schedule: (a) the Company
does not own or use any Intellectual Property Rights pursuant to any written
license agreement; (b) the Company has not granted any person or entity any
rights, pursuant to a written license agreement or otherwise, to use the
Intellectual Property Rights except such rights as are granted to the Company's
customers pursuant to its ordinary course customer contracts; and (c) the
Company owns, has unrestricted right to use and has sole and exclusive
possession of and has good and valid title to, all of the Intellectual Property
Rights, free and clear of all Liens and Encumbrances. All license agreements
relating to Intellectual Property Rights are binding and there is not, under any
of such licenses, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default, or would
constitute a basis for a claim on non-performance) on the part of the Company
or, to the knowledge of the Company, any other party thereto.
2.13 LITIGATION. Except as set forth in the Company Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, or any judgment, decree, decision, injunction, writ or order pending,
noticed, scheduled, or, to the knowledge of the Company, threatened or
contemplated by or against or involving the Company, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
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2.14 BANK ACCOUNTS; POWERS OF ATTORNEY. The Company Disclosure Schedule
sets forth: (a) the names of all financial institutions, investment banking and
brokerage houses, and other similar institutions at which the Company maintains
accounts, deposits, safe deposit boxes of any nature, and the account numbers
and names of all persons authorized to draw thereon or make withdrawals
therefrom; (b) the terms and conditions thereof and any limitations or
restrictions as to use, withdrawal or otherwise; and (c) the names of all
persons or entities holding general or special powers of attorney from the
Company and a summary of the terms thereof.
2.15 CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) Except as set forth in the Company Disclosure Schedule,
the Company is not a party to, nor are any of the Company Assets bound
by, any written or oral:
(i) employment, non-competition, consulting or
severance agreement, collective bargaining agreement, or
pension, profit-sharing, incentive compensation, deferred
compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay or retirement plan or
agreement;
(ii) indenture, mortgage, note, installment
obligation, agreement or other instrument relating to the
borrowing of money by the Company;
(iii) contract, agreement, lease (real or personal
property) or arrangement that (A) is not terminable on less
than 30 days' notice without penalty, (B) is not over one year
in length of obligation of the Company, or (C) involves an
obligation of more than $5,000 over its term;
(iv) contract, agreement, commitment or license
relating to Intellectual Property Rights or contract,
agreement or commitment of any other type, whether or not
fully performed, not otherwise disclosed pursuant to this
Section 2.15;
(v) obligation or requirement to provide funds to or
make any investment (in the form of a loan, capital
contribution or otherwise) in any person or entity;
(vi) outstanding sales or purchase contracts,
commitments or proposals that are expected to result in any
material loss upon completion or performance thereof after
allowance for direct distribution expenses, or bound by any
outstanding contracts, bids, sales or service proposals
quoting prices that are not reasonably expected to result in a
normal profit; or
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(vii) contract, commitment, agreement or arrangement
with any "disqualified individual" (as defined in Section
280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a
disallowance of the deduction for any "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) under
Section 280G of the Code.
(b) True and complete copies (or summaries, in the case of
oral items) of all agreements disclosed pursuant to this Section 2.15
(the "COMPANY CONTRACTS") have been provided to Parent for review.
Except as set forth in the Company Disclosure Schedule, all of the
Company Contracts items are valid and enforceable by and, to the
Company's knowledge, against the Company in accordance with their
terms, and are in full force and effect. Except as otherwise specified
in the Company Disclosure Schedule, none of the Company Contracts
contains a provision requiring the consent of any party with respect to
the consummation of the transactions contemplated by this Agreement.
The Company is not in material breach, violation or default, however
defined, in the performance of any of its obligations under any of the
Company Contracts, and no facts and circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would constitute
such breach, violation or default thereunder or thereof, and, to the
knowledge of the Company, no other parties thereto are in a material
breach, violation or default, however defined, thereunder or thereof,
and no facts or circumstances exist which, whether with the giving of
due notice, lapse of time, or both, would constitute such a breach,
violation or default thereunder or thereof. None of the Company
Contracts is subject to renegotiation with any Authority.
2.16 COMPLIANCE WITH LAW; PERMITS AND OTHER OPERATING RIGHTS. Except as
set forth in the Company Disclosure Schedule, the Assets, properties, business
and operations of the Company are and have been in compliance in all respects
with all Laws applicable to the Company's assets, properties, business and
operations, except where the failure to comply would not have a Material Adverse
Effect. Except as set forth in the Company Disclosure Schedule, the Company does
not require the Consent of any Authority to permit it to operate in the manner
in which its business is presently being operated. The Company possesses all
material permits, licenses and other authorizations from all Authorities
necessary to permit it to operate its business in the manner in which it
presently is conducted and the consummation of the transactions contemplated by
this Agreement will not prevent the Company from being able to continue to use
such permits and operating rights. Except as set forth in the Company Disclosure
Schedule, the Company is not restricted by agreement from carrying on its
business or any part thereof anywhere in the world or from competing in any line
of business with any person or entity. The Company has not received notice of
any violation of any such applicable Law, and is not in default with respect to
any order, writ, judgment, award, injunction or decree of any Authority.
2.17 BROKERS. Neither the Company nor, to the knowledge of the Company,
any of the shareholders of the Company, has employed any broker, finder,
investment banker or financial advisor or incurred any liability for any
brokerage fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is there any basis
known to the Company for any such fee or commission to be claimed by any person
or entity.
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2.18 ISSUANCE OF PARENT COMMON STOCK. To the Company's knowledge, as of
the date of this Agreement and as of the Effective Time, no facts or
circumstances exist or will exist that could cause the issuance of Parent Common
Stock pursuant to the Merger to fail to meet the exemption from the registration
requirements of the Securities Act set forth in Rule 506 of Regulation D under
of the Securities Act.
2.19 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other material records of the Company, all of which have been
made available to Parent, are complete and correct in all material respects and
have been maintained in accordance with reasonable business practices. The
minute books of the Company contain accurate and complete records of all formal
meetings held of, and corporate action taken by, the shareholders, the Board of
Directors, and committees of the Board of Directors of the Company. At the
Closing, all of those books and records will be in the possession of the
Company.
2.20 BUSINESS GENERALLY; ACCURACY OF INFORMATION. No representation or
warranty made by the Company in this Agreement, the Company Disclosure Schedule,
or in any document, agreement or certificate furnished or to be furnished to
Parent at the Closing by or on behalf of the Company in connection with any of
the transactions contemplated by this Agreement contains or will contain any
untrue statement of material fact or omit or will omit to state any material
fact necessary in order to make the statements herein or therein not misleading
in light of the circumstances in which they are made, and all of the foregoing
completely and correctly present the information required or purported to be set
forth herein or therein. To the knowledge of the Company, there is no material
fact as of the date hereof that has not been disclosed in writing to Parent
related to the Company, its operations, properties, financial condition or
prospects, taken as a whole, that has, or could reasonably be expected to have,
a Material Adverse Effect on the Company. The representations and warranties
contained in this Article 2 or elsewhere in this Agreement or any document
delivered pursuant hereto will not be affected or deemed waived by reason of the
fact that Parent or its representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any respect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUBSIDIARY
Parent and the Merger Subsidiary represent and warrant to the Company
as follows:
3.1 DISCLOSURE SCHEDULE. The disclosure schedule attached hereto as
EXHIBIT 3.1 (the "PARENT DISCLOSURE SCHEDULE") is divided into sections that
correspond to the sections of this Article 3. The Parent Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties set
forth in the remaining sections of this Article 3.
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3.2 CORPORATE ORGANIZATION, ETC. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. Parent and
Merger Subsidiary each have the requisite corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets, is duly qualified or licensed to do business as a foreign
corporation in good standing in every other jurisdiction in which the character
or location of the properties and assets owned, leased or operated by it or the
conduct of its business requires such qualification or licensing, except in such
jurisdictions in which the failure to be so qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) on Parent or Merger Subsidiary. The Parent Disclosure
Schedule contains a list of all jurisdictions in which Parent and Merger
Subsidiary are qualified or licensed to do business. Parent has delivered to the
Company complete and correct copies of Parent's articles of incorporation and
bylaws and Merger Subsidiary's articles of incorporation. Merger Subsidiary has
not conducted any activities other than in connection with the organization of
Merger Subsidiary, the negotiation and execution of this Agreement and
consummation of the transactions contemplated hereby.
3.3 CAPITALIZATION. The authorized capital stock of Parent is set forth
in the Parent Disclosure Schedule. The number of shares of the capital stock of
Parent outstanding, as of the date of this Agreement and as set forth in the
Parent Disclosure Schedule, represent all of the issued and outstanding capital
stock of Parent. All issued and outstanding shares of capital stock of Parent
are duly authorized, validly issued, fully paid and nonassessable and are
without, and were not issued in violation of, preemptive rights. There are no
shares of capital stock or other equity securities of Parent outstanding or any
securities convertible into or exchangeable for such shares, securities or
rights. Other than as set forth on the Parent Disclosure Schedule and pursuant
to this Agreement, there is no subscription, option, warrant, call, right,
contract, agreement, commitment, understanding or arrangement to which Parent is
a party, or by which it is bound, with respect to the issuance, sale, delivery
or transfer of the capital stock of Parent, including any right of conversion or
exchange under any security or other instrument. The authorized capital stock of
Merger Subsidiary is 1,000 shares of common stock, all of which are owned by
Parent.
3.4 AUTHORIZATION. Each of Parent and the Merger Subsidiary has all the
requisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated herein. The Board of Directors of Parent
and the Merger Subsidiary, and Parent as the sole shareholder of the Merger
Subsidiary have taken all action required by law, their respective articles of
incorporation and bylaws or otherwise to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein. This Agreement is the valid and binding legal obligation of
Parent and the Merger Subsidiary enforceable against each of them in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws that affect creditors'
rights generally.
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3.5 NON-CONTRAVENTION. Neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated herein
will: (i) violate any provision of the articles of incorporation or bylaws of
Parent or the Merger Subsidiary; or (ii) except for such violations, conflicts,
defaults, accelerations, terminations, cancellations, impositions of fees or
penalties, mortgages, pledges, liens, security interests, encumbrances,
restrictions and charges which would not, individually or in the aggregate, have
a Material Adverse Effect on Parent, (A) violate, be in conflict with, or
constitute a default, however defined (or an event which, with the giving of due
notice or lapse of time, or both, would constitute such a default), under, or
cause or permit the acceleration of the maturity of, or give rise to, any right
of termination, cancellation, imposition of fees or penalties under, any debt,
note, bond, lease, mortgage, indenture, license, obligation, contract,
commitment, franchise, permit, instrument or other agreement or obligation to
which Parent or the Merger Subsidiary is a party or by which Parent or the
Merger Subsidiary or any of their respective properties or assets is or may be
bound (unless with respect to which defaults or other rights, requisite waivers
or consents will have been obtained at or prior to the Closing) or (B) result in
the creation or imposition of any mortgage, pledge, lien, security interest,
encumbrance, restriction, adverse claim or charge of any kind, upon any property
or assets of Parent or the Merger Subsidiary under any debt, obligation,
contract, agreement or commitment to which Parent or the Merger Subsidiary is a
party or by which Parent or the Merger Subsidiary or any of their respective
assets or properties is or may be bound; or (iii) violate any Law of any
Authority.
3.6 CONSENTS AND APPROVALS. No Consent is required by any person or
entity, including without limitation any Authority, in connection with the
execution, delivery and performance by Parent of this Agreement, or the
consummation of the transactions contemplated herein, other than any Consent
which, if not made or obtained, will not, individually or in the aggregate, have
a Material Adverse Effect on the business of Parent.
3.7 VALID ISSUANCE. Parent Common Stock to be used in connection with
the Merger will be duly authorized and, when issued, delivered and paid for as
provided in this Agreement, will be validly issued, fully paid and
non-assessable.
3.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company
accurate and complete copies (excluding copies of exhibits) of each
report, registration statement and definitive proxy statement filed by
Parent with the SEC since January 1, 2003 (collectively, with all
information incorporated by reference therein or deemed to be
incorporated by reference therein, the "PARENT SEC DOCUMENTS"). All
Parent SEC Documents have been filed on a timely basis. As of the time
it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing):
(i) each of the Parent SEC Documents complied in all material respects
with the applicable requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"); 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.
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(b) The consolidated financial statements contained in the
10-QSB for the three months ended March 31, 2004 filed by Parent: (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 generally accepted accounting principles 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-QSB of the SEC, and
except that unaudited financial statements may not contain footnotes
and are subject to normal and recurring year-end audit adjustments
which will not, individually or in the aggregate, be material in
amount); and (iii) fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated
subsidiaries as of the respective dates thereof and the consolidated
results of operations of Parent and its consolidated subsidiaries for
the periods covered thereby. All adjustments considered necessary for a
fair presentation of the financial statements have been included.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Parent does not have any
Liabilities other than: (a) Liabilities that are fully reflected or reserved for
in the Parent SEC Documents; (b) Liabilities that are set forth on the Parent
Disclosure Schedule; (c) Liabilities incurred by Parent in the ordinary course
of business after the date of the most recent 10-QSB filed by Parent and
consistent with past practice and in an amount not to exceed $25,000
individually or in the aggregate (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement or violation of Law) unless such amounts are
disclosed on the Parent Disclosure Schedule; or (d) Liabilities for express
executory obligations to be performed after the Closing under any contracts to
which Parent or any of its subsidiaries is a party.
3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Parent
Disclosure Schedule, the Company has owned and operated its assets, properties
and business in the ordinary course of business and consistent with past
practice. Without limiting the generality of the foregoing, subject to the
aforesaid exceptions:
(a) Parent has not experienced any change that has had or
could reasonably be expected to have a Material Adverse Effect on
Parent;
(b) Parent has not suffered (i) any loss, damage, destruction
or other property or casualty (whether or not covered by insurance) or
(ii) any loss of officers, employees, dealers, distributors,
independent contractors, customers or suppliers, which had or may
reasonably be expected to result in a Material Adverse Effect on
Parent.
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3.11 LITIGATION. Except as disclosed in the Parent Disclosure Schedule,
there is no legal, administrative, arbitration, or other proceeding, suit, claim
or action of any nature or investigation, review or audit of any kind, or any
judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled, or, to the knowledge of Parent or Merger Subsidiary, threatened or
contemplated by or against or involving Parent, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
3.12 CONTRACTS AND COMMITMENTS; NO DEFAULT. Parent is not a party to,
nor are any of its Assets bound by, any material contract (a "PARENT CONTRACT")
that is not disclosed in the Parent SEC Documents and that is or will be
required to be disclosed in the Parent SEC Documents pursuant to Item 601(b)(10)
of Regulation S-K (or the equivalent provision of Regulation S-B). Except as
disclosed in the Parent SEC Documents, none of the Parent Contracts contains a
provision requiring the consent of any party with respect to the consummation of
the transactions contemplated by this Agreement. Parent is not in breach,
violation or default, however defined, in the performance of any of its
obligations under any of the Parent Contracts, and no facts and circumstances
exist which, whether with the giving of due notice, lapse of time, or both,
would constitute such breach, violation or default thereunder or thereof, and,
to the knowledge of Parent, no other parties thereto are in a breach, violation
or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of time,
or both, would constitute such a breach, violation or default thereunder or
thereof. None of Parent Contracts is subject to renegotiation with any
Authority.
3.13 NO BROKER OR FINDER. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
3.14 BUSINESS GENERALLY; ACCURACY OF INFORMATION. No representation or
warranty made by Parent or Merger Subsidiary in this Agreement, the Parent
Disclosure Schedule, or in any document, agreement or certificate furnished or
to be furnished to the Company at the Closing by or on behalf of Parent in
connection with any of the transactions contemplated by this Agreement contains
or will contain any untrue statement of material fact or omit or will omit to
state any material fact necessary in order to make the statements herein or
therein not misleading in light of the circumstances in which they are made, and
all of the foregoing completely and correctly present the information required
or purported to be set forth herein or therein. To the knowledge of Parent,
there is no material fact as of the date hereof that has not been disclosed in
writing to the Company related to Parent or Merger Subsidiary, their operations,
properties, financial condition or prospects, taken as a whole, that has, or
could reasonably be expected to have, a Material Adverse Effect on Parent or
Merger Subsidiary. The representations and warranties contained in this Article
3 or elsewhere in this Agreement or any document delivered pursuant hereto will
not be affected or deemed waived by reason of the fact that the Company or its
representatives knew or should have known that any such representation or
warranty is or might be inaccurate in any respect.
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ARTICLE 4
COVENANTS OF THE PARTIES
4.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Company will conduct its business and operations according to its
ordinary and usual course of business consistent with past practices with the
intent of preserving substantially intact its business organizations and
preserving its current relationships with customers, employees, suppliers and
other persons with which it has significant business relations. Without limiting
the generality of the foregoing, and, except as otherwise expressly provided in
this Agreement or as otherwise disclosed on the Company Disclosure Schedule,
prior to the Closing Date, without the prior written consent of Parent, the
Company will not:
(a) amend its articles of incorporation or bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock of any class, or securities convertible into capital
stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(d) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, redeem or otherwise acquire
any shares of its capital stock or other securities, alter any term of
any of its outstanding securities;
(e) (i) except as required under any employment agreement,
increase in any manner the compensation of any of its directors,
officers or other employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or
permitted by any existing plan, agreement or arrangement to any such
director, officer or employee, whether past or present; or (iii) except
in connection with any written arrangement approved by Parent, commit
itself to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment agreement
or consulting agreement (arising out of prior employment ) with or for
the benefit of any person, or, except to the extent required to comply
with applicable law, amend any of such plans or any of such agreements
in existence on the date of this Agreement;
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(f) hire any additional personnel;
(g) incur, assume, suffer or become subject to, whether
directly or by way of guarantee or otherwise, any Liabilities which,
individually or in the aggregate, would have a Material Adverse Effect
on the Company;
(h) pay, discharge or satisfy' any Liabilities other than the
payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice;
(i) sell, transfer, or otherwise dispose of any of its Assets
or license to other the use of any of its technology, other than in the
ordinary course of business and consistent with past practice;
(j) permit or allow any of its Assets to be subjected to any
Encumbrance, except for Permitted Liens;
(k) write down the value of any inventory or write off as
uncollectible any receivables, except for immaterial write-downs and
write-offs in the ordinary course of business and consistent with past
practice;
(l) cancel any debts or waive any claims or rights, in each
case, of substantial value;
(m) dispose of or permit to lapse any Intellectual Property
Rights, or dispose of or disclose (except as necessary in the conduct
of its business) to any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or, as
applicable, any other entity ("Person") other than representatives of
Parent, any Intellectual Property Rights not theretofore a matter of
public knowledge;
(n) make or enter into any commitment for capital expenditures
in excess of $5,000 in any one case;
(o) pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of
its officers or directors or any affiliate or associate of any of its
officers or directors;
(p) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment identified in Section
2.15 of the Company Disclosure Schedule, or take any action or omit to
take any action which will cause a breach, violation or default
(however defined) under any such items, except in the ordinary course
of business and consistent with past practice;
(q) acquire any of the business or assets of any other person
or entity;
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(r) permit any of its current insurance (or reinsurance)
policies to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to
or greater than coverage remaining under those cancelled, terminated or
lapsed are in full force and effect;
(s) suffer any adverse change in its relationship with a
material customer, including the loss of any such customer or a
contract with such customer;
(t) enter into other material agreements, commitments or
contracts not in the ordinary course of business or in excess of
current requirements;
(u) settle or compromise any suit, claim or dispute or
threatened suit, claim or dispute; and
(v) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty
in this Agreement untrue or incorrect in any material respect.
4.2 NO COMPANY SOLICITATION OF ALTERNATE TRANSACTION. Until the
Termination Date, the Company, the Company's directors, officers and employees,
independent contractors, consultants, counsel, accountants, investment advisors
and other representatives and agents will not, directly or indirectly, solicit,
initiate or entertain offers from, or participate in any way in negotiations
with, provide any nonpublic information to, enter into any agreement with, or in
any manner encourage, discuss, accept or consider any proposal of, any third
party relating to the acquisition of the Company, its assets or business, in
whole or in part, whether through a tender offer (including a self tender
offer), exchange offer, merger, consolidation, sale of substantial assets or of
a significant amount of assets, sale of securities, acquisition of the Company's
securities, liquidation, dissolution or similar transactions involving the
Company or any division of the Company (such proposals, announcements or
transactions being called herein "ACQUISITION PROPOSALS"). Until the Termination
Date, the Company will promptly inform Parent of any inquiry (including the
terms thereof and the identity of the third party making such inquiry) that it
may receive in respect of an Acquisition Proposal and furnish to Parent a copy
of any such written inquiry, unless the Company believes that furnishing a copy
would violate any confidentiality agreements to which the Company is a party as
of the date of this Agreement.
4.3 NO PARENT SOLICITATION OF ALTERNATE TRANSACTION. Until the
Termination Date, Parent, Parent's directors, officers and employees,
independent contractors, consultants, counsel, accountants, investment advisors
and other representatives and agents will not, directly or indirectly, solicit,
initiate or entertain offers from, or participate in any way in negotiations
with, provide any nonpublic information to, enter into any agreement with, or in
any manner encourage, discuss, accept or consider any proposal of, any third
party relating to the acquisition of any security software or consulting
business (a "COMPETITOR BUSINESS") or its assets in whole or in part, whether
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through a tender offer (including a self tender offer), exchange offer, merger,
consolidation, sale of substantial assets or of a significant amount of assets,
sale of securities, acquisition of the securities, liquidation, dissolution or
similar transactions involving a Competitor Business. Until the Termination
Date, Parent will promptly inform the Company of any inquiry (including the
terms thereof and the identity of the third party making such inquiry) that it
may receive in respect of an Acquisition Proposal and furnish to the Company a
copy of any such written inquiry, unless Parent believes that furnishing a copy
would violate any confidentiality agreements to which Parent is a party as of
the date of this Agreement.
4.4 FULL ACCESS TO PARENT. Throughout the period prior to Closing, the
Company will afford to Parent and its directors, officers, employees, counsel,
accountants, investment advisors and other authorized representatives and
agents, reasonable access to the facilities, properties, books and records of
the Company in order that Parent may have full opportunity to make such
investigations as it will desire to make of the affairs of the Company. The
Company will furnish such additional financial and operating data and other
information as Parent will, from time to time, reasonably request, including
without limitation access to the working papers of its independent certified
public accountants; PROVIDED, HOWEVER, that any such investigation will not
affect or otherwise diminish or obviate in any respect any of the
representations and warranties of the Company herein.
4.5 CONFIDENTIALITY. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other party
hereto furnished to it in connection with the transactions contemplated herein
("INFORMATION") in a manner or for a purpose detrimental to such other party or
otherwise than in connection with the transaction, and that they will not
disclose, divulge, provide or make accessible (collectively, "DISCLOSE"), or
permit the Disclosure of, any of the Information to any person or entity, other
than their respective directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents, except as
may be required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law; provided, however, that prior to
any Disclosure of any Information permitted hereunder, the disclosing party will
first obtain the recipients' undertaking to comply with the provisions of this
Section with respect to such information. The term "INFORMATION" as used herein
will not include any information relating to a party that the party disclosing
such information can show: (i) to have been in its possession prior to its
receipt from another party hereto; (ii) to be now or to later become generally
available to the public through no fault of the disclosing party; (iii) to have
been available to the public at the time of its receipt by the disclosing party;
(iv) to have been received separately by the disclosing party in an unrestricted
manner from a person entitled to disclose such information; or (v) to have been
developed independently by the disclosing party without regard to any
information received in connection with this transaction. Each party hereto also
agrees to promptly return to the party from whom it originally received such
information all original and duplicate copies of written materials containing
Information should the transactions contemplated herein not occur. A party
hereto will be deemed to have satisfied its obligations to hold the Information
confidential if it exercises the same care as it takes with respect to its own
similar information.
4.6 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS; TAX STATUS. Subject to
the terms and conditions herein provided, the parties hereto will use their best
efforts to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable, the transactions contemplated
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hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert commercially reasonable efforts to that end,
including without limitation: (i) the removal or satisfaction, if possible, of
any objections to the validity or legality of the transactions contemplated
herein; and (ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby. Parent and the Company intend that the Merger
will qualify as a "reorganization" within the meaning of Section 368 (a) of the
Code. Each of Parent, Merger Subsidiary and the Company shall use reasonable
efforts to cause the Merger to so qualify.
4.7 FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, at any time after the Closing, at the
reasonable request of Parent and without further consideration, the
Company will execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as Parent
may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby.
(b) The Company and Parent will work together to promptly
develop plans for the management of the business after the Closing,
including without limitation plans relating productivity, marketing,
operations and improvements, and the Company and Parent will work
together to provide for the implementation of such plans as soon as
practicable after the Closing.
(c) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure
by such party to satisfy the conditions specified in this Article 4.
4.8 SUPPLEMENTS TO COMPANY DISCLOSURE SCHEDULE. Prior to the Closing,
the Company will supplement or amend the Company Disclosure Schedule with
respect to any event or development which, if existing or occurring at or prior
to the date of this Agreement, would have been required to be set forth or
described in the Company Disclosure Schedule or which is necessary to correct
any information in the Company Disclosure Schedule or in any representation and
warranty of the Company which has been rendered inaccurate by reason of such
event or development. For purposes of determining the accuracy as of the date
hereof of the representations and warranties of the Company contained in Article
2 hereof in order to determine the fulfillment of the conditions set forth
herein, the Company Disclosure Schedule will be deemed to exclude any
information contained in any supplement or amendment hereto delivered after the
delivery of the Company Disclosure Schedule.
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4.9 SUPPLEMENTS TO PARENT DISCLOSURE SCHEDULE. Prior to the Closing,
Parent will supplement or amend the Parent Disclosure Schedule with respect to
any event or development which, if existing or occurring at or prior to the date
of this Agreement, would have been required to be set forth or described in the
Parent Disclosure Schedule or which is necessary to correct any information in
the Parent Disclosure Schedule or in any representation and warranty of Parent
or Merger Subsidiary which has been rendered inaccurate by reason of such event
or development. For purposes of determining the accuracy as of the date hereof
of the representations and warranties of Parent and Merger Subsidiary contained
in Article 3 hereof in order to determine the fulfillment of the conditions set
forth herein, the Parent Disclosure Schedule will be deemed to exclude any
information contained in any supplement or amendment hereto delivered after the
delivery of the Parent Disclosure Schedule.
4.10 PUBLIC ANNOUNCEMENTS. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein without
the prior written consent of the other parties, which consent will not be
unreasonably withheld or delayed; PROVIDED, HOWEVER, that any of the parties
hereto may at any time make any announcements that are required by applicable
Law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
4.11 SATISFACTION OF CONDITIONS PRECEDENT. Each party will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to them, and to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all material consents and authorizations
of third parties and to make filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions contemplated hereby.
4.12 REGISTRATION RIGHTS. If at any time prior to one (1) year from the
Effective Date, Parent shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) a registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Rule 145 transaction, Parent will:
(a) promptly give to each recipient of Parent Common Stock in
the Merger ("Registrable Securities") or transferee thereof (a
"Holder") written notice thereof; and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities held by
such Holder, specified in a written request or requests, made within
twenty (20) days after receipt of such written notice from Parent, by
any Holder; PROVIDED THAT such Holder agrees in writing to limit its
resale of such Registrable Securities in accordance with the volume
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limitations set forth in Rule 144(e) of the Securities Act if and when
such Holder elects to sell such Registrable Securities following
registration (the "RESALE LIMITATION"). In order to effect the Resale
Limitation, Parent may, at its election, place a legend on any
certificate representing such Registrable Securities and provide
appropriate instructions to its transfer agent.
If the registration of which Parent gives notice is for a registered
public offering involving an underwriting, Parent shall so advise the Holders as
a part of the written notice of the registration. In such event the right of any
Holder to registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of the Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
Parent and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by Parent. If the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may, in its sole
disrection, limit or exclude altogether the Registrable Securities or other
securities to be included in such registration. In such case, Parent shall so
advise all Holders that the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among all
Holders, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, Parent may round the number of shares allocated to any Holder or
holder to the nearest 100 shares. If any Holder or holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to Parent and the managing underwriter. In the event of any such
withdrawal, the participating Holders may increase their participation pro rata
up to the amount equal to the withdrawn securities. Holder hereby acknowledges
that investors who have purchased, or may purchase in the future, Parent's
securities in private placement financings for cash may have or may be granted
registration rights that are senior to such Holder's rights set forth in Article
4 of this Agreement.
4.13 EXPENSES OF REGISTRATION. All registration expenses, excluding
underwriting discounts and sales expenses, incurred in connection with any
registration shall be borne by Parent. All underwriting and sales expenses
relating to securities registered on behalf of a Holder, including but not
limited to attorney's fees for special counsel, shall be borne by the Holder.
4.14 REGISTRATION PROCEDURES. Holder hereby acknowledges that Parent
may abandon a registration at any time in its sole discretion. In the case of
each registration, qualification or compliance effected by Parent, Parent will
keep each Holder advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense
Parent will:
(a) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
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(b) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that Parent shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions.
(c) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and as soon
as practicable thereafter, prepare and furnish to each Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then
existing.
(d) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by Parent are then listed.
(e) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not
later than the effective date of such registration.
(f) Use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than eighteen (18)
months, beginning with the first month after the effective date of any
registration statement, which earnings statement shall satisfy the
provisions of section 11(a) of the Act.
4.15 INDEMNIFICATION.
(a) Parent will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder
within the meaning of section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected
pursuant to this Article 4, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages or
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liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation
by Parent of any federal, state or common law rule or regulation
applicable to Parent in connection with any such registration,
qualification or compliance, and Parent will reimburse each such
Holder, each of its officers and directors, and each person controlling
such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that Parent
will not be liable in any such case (i) to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written
information furnished to Parent by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically
for use therein; or (ii) for any settlement entered into by an
Indemnified Party (as defined below) without Parent's prior written
consent.
(b) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at
such party's expense, provided, however, that the Indemnifying Party
shall bear the expense of independent counsel for the Indemnified Party
if the Indemnified Party reasonably determines that representation of
both parties by the same counsel would be inappropriate due to actual
or potential conflicts of interest, and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations hereunder
unless the failure to give such notice is materially prejudicial to an
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Indemnifying Party's ability to defend such action and provided
further, that the Indemnifying Party shall not assume the defense for
matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
4.16 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to Parent such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as Parent may request in
writing and as shall be required in connection with any registration,
qualification or compliance.
4.17 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of Parent, Parent
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, for so
long as Parent remains subject to the reporting requirements of the
Securities Act or the Exchange Act.
(b) Use its best efforts to file with the SEC in a timely
manner all reports and other documents required of Parent under the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements).
(c) So long as a Holder owns any Registrable Securities that
are "restricted securities" under Rule 144 under the Act, to furnish to
the Holder forthwith upon request a written statement by Parent as to
its compliance with the reporting requirements of said Rule 144, and of
the Act and the Exchange Act (at any time after it has become subject
to such reporting requirements).
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF PARENT
AND MERGER SUBSIDIARY
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Parent and Merger Subsidiary to effect the transactions
contemplated herein will be subject to the satisfaction at or prior to the
Closing, or waiver by Parent, of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company contained in this Agreement, including without
limitation in the Company Disclosure Schedule initially delivered to Parent as
Exhibit 2.1 (and not including any changes or additions delivered to Parent
pursuant to Section 4.8), will be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of such time, except for
changes specifically permitted or contemplated by this Agreement, and except
insofar as the representations and warranties relate expressly and solely to a
particular date or period, in which case they will be true and correct at the
Closing with respect to such date or period.
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5.2 PERFORMANCE. The Company will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Company on or
prior to the Closing.
5.3 REQUIRED APPROVALS AND CONSENTS.
(a) All action required by law and otherwise to be taken by
the shareholders of the Company to authorize the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and Parent will have received copies
thereof.
5.4 AGREEMENTS AND DOCUMENTS. Parent and Merger Subsidiary will have
received the following agreements and documents, each of which will be in full
force and effect:
(a) a certificate executed on behalf of the Company by its
Chief Executive Officer confirming that the conditions set forth in
Sections 5.1, 5.2, 5.3, 5.5, 5.6 and 5.7 have been duly satisfied;
(b) an investor representation letter and waiver of dissenters
or appraisal rights in the form of Exhibit 5.4(b) executed by each
holder of capital stock of the Company immediately prior to the
Effective Time;
(c) a non-competition and confidentiality agreement in the
Form attached hereto as EXHIBIT 5.4(c) (the "CONFIDENTIALITY
AGREEMENT") executed and delivered by each of the Principal
Shareholders; and
(d) a proprietary information and intellectual property
agreement in the Form attached hereto as Exhibit 5.4(d) executed and
delivered by each of the employees listed on EXHIBIT 6.8.
5.5 ADVERSE CHANGES. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of the
Company since March 31, 2004.
5.6 NO PROCEEDING OR LITIGATION. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which delays or questions the validity or legality
of the transactions contemplated hereby or which, if successfully asserted,
would, in the reasonable judgment of Parent, individually or in the aggregate,
otherwise have a Material Adverse Effect on the Company's business, financial
condition, prospects, assets or operations or prevent or delay the consummation
of the transactions contemplated by this Agreement.
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5.7 LEGISLATION. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
5.8 APPROPRIATE DOCUMENTATION. Parent will have received, in a form and
substance reasonably satisfactory to Parent, dated the Closing Date, all
certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 5 as Parent may
reasonably request.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDERS
Notwithstanding anything in this Agreement to the contrary, the
obligation of the Company and the Principal Shareholders to effect the
transactions contemplated herein will be subject to the satisfaction at or prior
to the Closing of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Parent and Merger Subsidiary contained in this Agreement,
including without limitation in the Parent Disclosure Schedule initially
delivered to the Company as Exhibit 3.1 (and not including any changes or
additions delivered to Parent pursuant to Section 4.9), will be true, complete
and accurate in all material respects as of the date when made and at and as of
the Closing Date as though such representations and warranties were made at and
as of such time, except for changes specifically permitted or contemplated by
this Agreement, and except insofar as the representations and warranties relate
expressly and solely to a particular date or period, in which case they will be
true and correct at the Closing with respect to such date or period.
6.2 PERFORMANCE. Parent and Merger Subsidiary will have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by
Parent or Merger Subsidiary at or prior to the Closing.
6.3 REQUIRED APPROVALS AND CONSENTS.
(a) All action required by law and otherwise to be taken by
the shareholder of Merger Subsidiary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will have been duly and validly taken.
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(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and the Company will have received copies
thereof.
6.4 OFFICER'S CERTIFICATE. The Company will have received a certificate
executed on behalf of Parent by its Chief Executive Officer confirming that the
conditions set forth in Sections 6.1, 6.2, 6.3, 6.5, 6.6 and 6.7 have been duly
satisfied.
6.5 ADVERSE CHANGES. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of Parent or
Merger Subsidiary since March 31, 2004.
6.6 NO PROCEEDING OR LITIGATION. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which delays or questions the validity or legality
of the transactions contemplated hereby or which, if successfully asserted,
would, in the reasonable judgment of the Company, individually or in the
aggregate, otherwise have a Material Adverse Effect on Parent's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
6.7 LEGISLATION. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
6.8 EMPLOYMENT AND CONSULTING. Parent shall have entered into
employment offer letters or consulting agreements with the employees of or
consultants to Company shown on EXHIBIT 6.8. The compensation level, including
cash and stock options, for each such individual will be as set forth on EXHIBIT
6.8.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Closing by the written consent of the Company and Parent.
7.2 TERMINATION BY EITHER THE COMPANY OR PARENT. This Agreement may be
terminated by either the Company or Parent if the Closing is not consummated by
the Termination Date (provided that the right to terminate this Agreement under
this Section 7.2 will not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date).
7.3 TERMINATION BY PARENT. This Agreement may be terminated at any time
prior to the Closing by Parent if any of the conditions provided for in Article
5 have not been met or waived by Parent in writing prior to the Closing.
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7.4 TERMINATION BY THE COMPANY. This Agreement may be terminated prior
to the Closing by action of the Company if any of the conditions provided for in
Article 6 have not been met or waived by the Company in writing prior to the
Closing.
7.5 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by the
Company or Parent pursuant to this Article 7, written notice thereof will be
given to all other parties and this Agreement will terminate (except to the
extent provided in Section 8.1 hereof) and the transactions contemplated hereby
will be abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) Each of the parties will, upon request, redeliver all
documents, work papers and other material of the other parties relating
to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same;
(b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action
or omission of such party or any representative, agent, employee or
independent contractor thereof, and except for such representations,
warranties and covenants that will survive termination of this
Agreement pursuant to Section 8.1; and
(c) All filings, applications and other submissions made
pursuant to the terms of this Agreement will, to the extent
practicable, be withdrawn from the agency or other person to which
made.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INVESTIGATION. The representations, warranties and covenants of the Company set
forth in Sections 2.1 through 2.6, 2.8, 2.11(b), 2.12 and 2.15, and the
representations , warranties and covenants of Parent and Merger Subsidiary set
forth in Sections 3.1 through 3.7, and 3.9 through 3.12 (collectively, the
"SURVIVING REPRESENTATIONS") will survive the Closing for a period of six (6)
months thereafter. All other representations, warranties and covenants of each
of the parties hereto will expire as of Closing. The right to indemnification or
any other remedy based on representations, warranties, covenants and obligations
in this Agreement will not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification or any other remedy based on such representations,
warranties, covenants, and obligations. The termination of representations,
warranties and covenants set forth in this Section 8.1 shall not apply to or
adversely affect any collateral agreements entered into by the parties,
including but not limited to, the Confidentiality Agreement.
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8.2 INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS. Subject to the
limitations set forth herein, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx and Xxxxxxx Leicester
(the "PRINCIPAL SHAREHOLDERS") and the Company, jointly and severally, agree to
indemnify Parent and the Merger Subsidiary and each of their respective
shareholders, officers, directors, employees and agents (collectively, the
"PARENT INDEMNITEES") from and against any and all losses, liabilities,
obligations, demands, judgments, settlements, damages, or expenses (including,
but not limited to, interest, penalties, fees, and reasonable professional fees
and expenses) and against all claims in respect thereof (including, without
limitation, amounts paid 'in settlement and costs of investigation) or
diminution in value, whether or not involving a third-party claim (referred to
in this Article 8 collectively as "LOSSES" or individually as a "LOSS") that any
of the Parent Indemnitees may incur, directly or indirectly, as a result from or
in connection with any untrue representation or breach of warranty by the
Company in any of the Surviving Representations included in this Agreement. The
Principal Shareholders acknowledge that if a representation or warranty that is
qualified by materiality (including a Material Adverse Effect) is breached after
giving effect to such materiality qualification then the Losses incurred by
Parent resulting from such breach will include all Losses resulting from a
breach of such representation or warranty and not solely the portion of such
Losses in excess of such materiality qualifier. The Principal Shareholders
further acknowledge that upon the Closing, the Company will cease to have any
indemnification obligations pursuant to this Section 8.2 and that the Principal
Shareholders will bear such obligations and will have no right of contribution
from the Company with respect to their indemnification obligations.
8.3 INDEMNIFICATION BY PARENT. Subject to the limitations set forth
herein, Parent agrees to indemnify, defend and hold the Principal Shareholders
harmless from and against any and all Loss or Losses that any of the
Shareholders may incur, directly or indirectly, as a result of or in connection
with any untrue representation of, or breach of warranty by, Parent in any of
the Surviving Representations of Parent.
8.4 LIMITATIONS ON INDEMNIFICATION.
(a) The aggregate indemnification obligations of the Company,
the Principal Shareholders and Parent for indemnification under this
Article 8 will be limited to $500,000. In addition, no party hereto
will be entitled to indemnification under this Article 8 unless such
party has incurred Losses in excess of $100,000 in the aggregate, in
which case such Indemnified Party (as defined below) will be entitled
to indemnification for any and all Losses in accordance with this
Article 8.
(b) Notwithstanding anything to the contrary herein, the
Principal Shareholders' obligation on the one hand, and Parent's
obligation on the other, to satisfy any indemnification claims
hereunder (including, without limitation, the obligation to cover
professional fees and expenses incurred by the Indemnified Party (as
defined below)) will be: (a) in the case of the Principal Shareholders'
obligations, limited to the return of the Parent Common Stock received
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by each Principal Shareholder or, if the Principal Shareholder has sold
or otherwise transferred such shares, the payment of an equivalent
amount of money, calculated as provided herein; and (b) in the case of
Parent's indemnification obligations, issuance of additional shares of
Parent Common Stock, but in all events subject to the aggregate cap on
indemnification obligations of $500,000 set forth in subsection (a)
above. The procedure for satisfying an indemnification claim will be as
follows:
(i) The amount of the indemnification obligation will
be established, whether by litigation, arbitration or
otherwise, and reduced to a final amount owed by the
Indemnifying Party to the Indemnified Party.
(ii) For claims against the Principal Shareholders,
after the indemnification obligation has been established for
all Principal Shareholders (including the amount of any
defense fees incurred by Parent), each Principal Shareholder's
portion of the obligation will be calculated by multiplying
the overall obligation by the relative percentage of Parent
Common Stock received in the Merger by each Principal
Shareholder. Each Principal Shareholder may satisfy his
indemnification obligation at his option by paying his
individual indemnification obligation to Parent in cash or by
surrendering to Parent a number of shares of Parent Common
Stock with an aggregate Fair Market Value (as defined below)
equal to the amount necessary to satisfy such indemnification
obligation. If a Principal Shareholder has sold or otherwise
transferred his shares of Parent Common Stock, he will be
obligated to satisfy his indemnification obligation by paying
cash to Parent. If a Principal Shareholder elects to surrender
Parent Common Stock to satisfy an indemnification obligation,
and he surrenders all such stock he received in the Merger but
it is not of sufficient value to cover his indemnification
obligation, he nonetheless will be deemed to have satisfied
such obligation and will not owe any deficiency.
(iii) For claims against Parent, notwithstanding
anything to the contrary herein, Parent, in its sole
discretion and subject to applicable securities laws, may
satisfy all or any portion of an obligation resulting from any
indemnification claims arising hereunder (including, without
limitation, the obligation to cover professional fees and
expenses incurred by the Principal Shareholders) in cash or
through the issuance of its common stock to the Principal
Shareholders with an aggregate Fair Market Value equal to the
amount necessary to satisfy such obligation.
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(iv) For purposes of this Section 8.4, "Fair Market
Value" shall mean seventy-five percent (75%) of the average
closing price of Parent's common stock as reported on the OTC
bulletin board or such other national securities exchange or
quotation system as the case may be for the five (5) trading
days immediately preceding the date on which such
indemnification obligation becomes final.
8.5 CLAIMS FOR INDEMNIFICATION.
(a) GENERAL. The parties intend that all indemnification
claims be made as promptly as practicable by the party seeking
indemnification (the "INDEMNIFIED PARTY"). Whenever any claim arises
for indemnification hereunder the Indemnified Party will promptly
notify the party from whom indemnification is sought (the "INDEMNIFYING
PARTY") of the claim and, when known, the facts constituting the basis
for such claim. The failure to so notify the Indemnifying Party will
not relieve the Indemnifying Party of any liability that it may have to
the Indemnified Party except to the extent the Indemnifying Party
demonstrates that the defense of such action is prejudiced thereby.
(b) CLAIMS BY THIRD PARTIES. With respect to claims made by
third parties, the Indemnifying Party will be entitled, but not
required, to assume control of the defense of such action or claim with
counsel reasonably satisfactory to the Indemnified Party; provided,
however, that:
(i) the Indemnified Party will be entitled to
participate in the defense of such claim and to employ counsel
at its own expense to assist in the handling of such claim,
and will do so if the Indemnifying Party elects not to;
(ii) no Indemnifying Party will consent to (A) the
entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by
each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect of such claim or (B) if,
pursuant to or as a result of such consent or settlement,
injunctive or other equitable relief would be imposed against
the Indemnified Party or such judgment or settlement could
materially interfere with the business, operations or assets
of the Indemnified Party; and
(iii) if the Indemnifying Party does not assume
control of the defense of such claim in accordance with the
foregoing provisions within three days after receipt of notice
of the claim, the Indemnified Party will defend such claim in
such manner as it may deem appropriate at its cost and
expense, and the Indemnifying Party will promptly reimburse
the Indemnified Party therefore at the time required by and in
accordance with the limits in Section 8.4, provided that the
Indemnified Party will not be entitled to consent to the entry
of any judgment or enter into any settlement of such claim
that does not include as an unconditional term thereof the
giving by each claimant or plaintiff to each Indemnifying
Party of a release from all liability in respect of such claim
without the prior written consent of the Indemnifying Party
if, pursuant to or as a result of such consent or settlement,
injunctive or other equitable relief would be imposed against
the Indemnifying Party or such judgment or settlement could
materially interfere with the business, operations or assets
of the Indemnifying Party.
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(c) REMEDIES EXCLUSIVE. The remedies provided herein for a
valid indemnification claim made pursuant to this Article 8 will be
exclusive and no party hereto will assert any rights or seek any other
remedies against any other party hereto for the transactions
contemplated by this Agreement except pursuant to this Article 8. The
Principal Shareholders hereby agree that they will not make any claim
for indemnification against Parent or the Company by reason of the fact
that any such Principal Shareholder was a director, officer, employee,
or agent of the Company or was serving at the request of any such
entity as a partner, trustee, director, officer, employee or agent of
another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses
or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim or demand brought by Parent against
such Principal Shareholders (whether such action, suit, proceeding,
complaint, claim or demand is pursuant to this Agreement, applicable
law, or otherwise).
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 EXPENSES. Parent and the Company (including the Principal
Shareholders) will each bear their own costs and expenses relating to the
transactions contemplated hereby, including without limitation, fees and
expenses of legal counsel, accountants, investment bankers, brokers or finders,
printers, copiers, consultants or other representatives for the services used,
hired or connected with the transactions contemplated hereby.
9.2 AMENDMENT AND MODIFICATION. Subject to applicable Law, this
Agreement may be amended or modified by the parties hereto at any time with
respect to any of the terms contained herein; PROVIDED, HOWEVER, that all such
amendments and modifications must be in writing duly executed by all of the
parties hereto.
9.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial exercise
of a right or remedy will preclude any other or further exercise thereof or of
any other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent will be given in writing in
the same manner as for waivers of compliance.
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9.4 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement will
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
9.5 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or other similar
telegraphic communications equipment, or to such other person or address as the
Company will furnish to the other parties hereto in writing in accordance with
this subsection.
If to the Company or any Principal
Shareholder prior to the Merger: With a copy to:
Threat Focus, Inc. Pillsbury Winthrop LLP
00000 Xxxxxxx Xxxxxx, #0, Xxxxx 000 000 Xxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000 Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxx Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
or to such other person or address as either the Company or the Principal
Shareholders will furnish to the other parties hereto in writing in accordance
with this subsection.
If to any Principal Shareholder following the Merger, to the address
set forth in the investor representation letter executed and delivered by such
Principal Shareholder pursuant to Section 5.4(b) hereto.
If to Parent or Merger Subsidiary: With a copy to:
PivX Solutions, Inc. Xxxxxxx Xxxxx & Xxxxx LLP
00 Xxxxxxxxx Xxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx Attn: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
or to such other person or address as Parent will furnish to the other parties
hereto in writing in accordance with this subsection.
9.6 ASSIGNMENT. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the other parties.
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9.7 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the internal
substantive laws of the State of California (without regard to the laws of
conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
9.8 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.9 HEADINGS. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and will not
constitute a part hereof.
9.10 ENTIRE AGREEMENT. This Agreement, the Company Disclosure Schedule
and the exhibits and other writings referred to in this Agreement or in the
Company Disclosure Schedule or any such exhibit or other writing are part of
this Agreement, together they embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this Agreement
and together they are referred to as this "Agreement" or the "Agreement." There
are no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transaction or transactions contemplated
by this Agreement, including, but not limited to, the letter of intent dated
April 20, 2004. Provisions of this Agreement will be interpreted to be valid and
enforceable under applicable Law to the extent that such interpretation does not
materially alter this Agreement; PROVIDED, HOWEVER, that if any such provision
becomes invalid or unenforceable under applicable Law such provision will be
stricken to the extent necessary and the remainder of such provisions and the
remainder of this Agreement will continue in full force and effect.
9.11 REMEDIES AND INJUNCTIVE RELIEF. It is expressly agreed among the
parties hereto that monetary damages would be inadequate to compensate a party
hereto for any breach by any other party of its covenants in Article 4 hereof.
Accordingly, the parties agree and acknowledge that any such violation or
threatened violation will cause irreparable injury to the other and that, in
addition to any other remedies which may be available, such party will be
entitled to injunctive relief against the threatened breach of Article 4 hereof
or the continuation of any such breach without the necessity of proving actual
damages and may seek to specifically enforce the terms thereof.
9.12 DEFINITION OF MATERIAL ADVERSE EFFECT; KNOWLEDGE. "MATERIAL
ADVERSE EFFECT" with respect to the Company means a material adverse change in
or effect on the business, operations, financial condition, properties or
liabilities of the Company taken as a whole; provided, however, that a Material
Adverse Effect will not be deemed to include (i) changes as a result of the
announcement of this transaction, (ii) events or conditions arising from changes
in general business or economic conditions or (iii) changes in generally
accepted accounting principles. Whenever used herein, the phrase "to the
Company's knowledge" or "to the knowledge of the Company" means to the actual
knowledge of the Principal Shareholders.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"PARENT" THE "COMPANY"
PIVX SOLUTIONS, INC. THREAT FOCUS, INC.
a Nevada corporation a California corporation
By: /S/ XXXXXX X. XXXXXXX By: /S/ XXXX XXXXXXXXX
-------------------------------- ---------------------
Xxxxxx X. Xxxxxxx, President and Xxxx Xxxxxxxxx,
Chief Executive Officer Chief Executive Officer
"MERGER SUBSIDIARY"
THREAT FOCUS MERGER CORP..
a California corporation
By: /S/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx, President and
Chief Executive Officer
"PRINCIPAL SHAREHOLDERS"
(as to Article 8 only)
/S/ XXXX XXXXXXXXX
--------------------------------------
Xxxx Xxxxxxxxx
/S/ XXXXX XXXXXX
--------------------------------------
Xxxxx Xxxxxx
/S/ XXXXXXX LEICESTER
--------------------------------------
Xxxxxxx Leicester
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
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