AGREEMENT AND PLAN OF MERGER BY AND AMONG INSIGNIA SOLUTIONS PLC JEODE INC. DOLLARDAYS INTERNATIONAL, INC. AND THE REPRESENTATIVE OF THE HOLDERS OF ALL OF THE CAPITAL STOCK OF DOLLARDAYS INTERNATIONAL, INC. DATED AS OF JUNE 23, 2008
EXHIBIT 10.106
BY
AND AMONG
JEODE
INC.
DOLLARDAYS
INTERNATIONAL, INC.
AND
THE
REPRESENTATIVE OF THE HOLDERS OF ALL OF THE
CAPITAL
STOCK OF DOLLARDAYS INTERNATIONAL, INC.
DATED
AS OF JUNE 23, 2008
TABLE
OF CONTENTS
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Page
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SECTION
1.
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The
Merger.
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1
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1.1.
|
The
Merger
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1
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1.2.
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Effective
Time; Closing
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2
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1.3.
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Effect
of the Merger
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2
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1.4.
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Certificate
of Incorporation; Bylaws; Corporate Records.
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2
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1.5.
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Directors
and Officers
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2
|
|
1.6.
|
Appointment
of Representative; Agreements Binding on Company
Securityholders
|
2
|
|
SECTION
2.
|
Definitions;
Conversion and Exchange of Securities.
|
3
|
|
2.1.
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Certain
Definitions
|
3
|
|
2.2.
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Effect
on Capital Stock
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4
|
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2.3.
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Dissenting
Holders.
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5
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|
2.4.
|
Options
and Warrants
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5
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|
2.5.
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Surrender
of Certificates.
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6
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2.6.
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Further
Action
|
7
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2.7.
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Legends
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7
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|
SECTION
3.
|
Representations
and Warranties of the Company
|
8
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|
3.1.
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Organization
and Standing.
|
8
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|
3.2.
|
Capitalization
and Ownership of Shares
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8
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|
3.3.
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Subsidiaries
|
9
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|
3.4.
|
Authority
for Agreement.
|
9
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3.5.
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Consents
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9
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3.6.
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Financial
Statements; Liabilities
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10
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3.7.
|
Absence
of Changes
|
10
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3.8.
|
Taxes
|
11
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|
3.9.
|
Property
and Sufficiency.
|
12
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|
3.10.
|
Contracts
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12
|
|
3.11.
|
Benefit
Plans.
|
14
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|
3.12.
|
Intellectual
Property.
|
15
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|
3.13.
|
Accounts
Receivable
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17
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3.14.
|
Government
Funding
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17
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3.15.
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Insurance
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17
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|
3.16.
|
Personnel.
|
17
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|
3.17.
|
Litigation
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18
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|
3.18.
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Environmental
Matters
|
18
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|
3.19.
|
Compliance
with Instruments; Laws; Governmental Authorizations.
|
18
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|
3.20.
|
Banking
Relationships
|
19
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|
3.21.
|
Books
and Records
|
19
|
|
3.22.
|
Brokers
and Finders; Existing Discussions
|
19
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|
3.23.
|
Vote
Required; Notices
|
19
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|
3.24.
|
Anti-Takeover
Statute Not Applicable
|
20
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3.25.
|
Certain
Relationships and Related Transactions
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20
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3.26.
|
Disclosures
|
20
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SECTION
4.
|
Representations
and Warranties by Parent and Merger Sub
|
20
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|
4.1.
|
Organization
and Standing
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20
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|
4.2.
|
Capitalization
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21
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|
4.3.
|
Subsidiaries
|
21
|
-i-
TABLE
OF CONTENTS
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Page
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4.4.
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Parent
Financial Statements; Liabilities.
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21
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4.5.
|
Authority
for Agreement.
|
22
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|
4.6.
|
Taxes
|
22
|
|
4.7.
|
Benefit
Plans.
|
23
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|
4.8.
|
Insurance
|
24
|
|
4.9.
|
Personnel.
|
24
|
|
4.10.
|
Litigation
|
25
|
|
4.11.
|
Environmental
Matters
|
26
|
|
4.12.
|
Compliance
with Instruments; Laws; Governmental Authorizations.
|
26
|
|
4.13.
|
Banking
Relationships
|
26
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|
4.14.
|
Brokers
and Finders
|
26
|
|
4.15.
|
Property
and Sufficiency
|
26
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|
4.16.
|
Disclosures
|
27
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SECTION
5.
|
Additional
Agreements.
|
27
|
|
5.1.
|
Approvals
|
27
|
|
5.2.
|
Confidentiality;
Access to Information; No Modification of Representations, Warranties
or
Covenants.
|
27
|
|
5.3.
|
Public
Disclosure
|
27
|
|
5.4.
|
Representative
|
28
|
|
5.5.
|
Regulatory
Filings; Reasonable Efforts.
|
28
|
|
5.6.
|
Advise
of Changes
|
29
|
|
5.7.
|
Cooperation
|
29
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|
5.8.
|
Employee
Benefit Plans
|
29
|
|
SECTION
6.
|
Conditions
Precedent to the Obligations of Each Party to Effect the
Merger
|
29
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|
6.1.
|
Stockholder
Approvals
|
29
|
|
6.2.
|
No
Order
|
29
|
|
6.3.
|
Government
Approvals
|
29
|
|
6.4.
|
Government
Litigation and Legal Requirements
|
29
|
|
SECTION
7.
|
Additional
Conditions Precedent to the Obligations of Parent and Merger
Sub
|
30
|
|
7.1.
|
Representations,
Warranties and Covenants.
|
30
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|
7.2.
|
No
Material Adverse Effect
|
30
|
|
7.3.
|
Other
Third Party Approvals
|
30
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|
7.4.
|
Dissenting
Shares
|
30
|
|
7.5.
|
Stockholder
Approval
|
30
|
|
SECTION
8.
|
Conditions
Precedent to Obligations of the Company
|
30
|
|
8.1.
|
Representations,
Warranties and Covenants.
|
30
|
|
8.2.
|
Release
Agreement
|
30
|
|
8.3.
|
Voting
and Lockup Agreement
|
31
|
|
8.4.
|
Closing
Date Cash
|
31
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|
SECTION
9.
|
Closing
Deliveries.
|
31
|
|
9.1.
|
Closing
Deliveries of the Company
|
31
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|
9.2.
|
Closing
Deliveries of Parent
|
31
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|
SECTION
10.
|
Survival
|
32
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|
SECTION
11.
|
Termination.
|
32
|
|
11.1.
|
Termination
prior to the Effective Time of the Merger
|
32
|
|
11.2.
|
Notice
of Termination; Effect of Termination
|
33
|
-ii-
TABLE
OF CONTENTS
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Page
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SECTION
12.
|
Fees
and Expenses
|
33
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|
SECTION
13.
|
Indemnification.
|
33
|
|
13.1.
|
Indemnification
of Parent Indemnified Parties
|
33
|
|
13.2.
|
Certain
Limitations
|
34
|
|
13.3.
|
Indemnification
by LLC Holders
|
34
|
|
13.4.
|
Indemnification
of Company Indemnified Parties
|
34
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|
SECTION
14.
|
Representative.
|
34
|
|
14.1.
|
Powers
of the Representative
|
34
|
|
14.2.
|
Notices
|
36
|
|
14.3.
|
Agreement
of the Representative
|
36
|
|
SECTION
15.
|
Director
and Officer Indemnification.
|
36
|
|
SECTION
16.
|
Post-Closing
Covenants.
|
36
|
|
16.1.
|
Options
|
36
|
|
16.2.
|
Financial
Statements
|
37
|
|
16.3.
|
Delivery
of Merger Consideration
|
37
|
|
SECTION
17.
|
Miscellaneous.
|
37
|
|
17.1.
|
Notices
|
37
|
|
17.2.
|
Successors
and Assigns
|
38
|
|
17.3.
|
Interpretation
|
38
|
|
17.4.
|
Counterparts
|
39
|
|
17.5.
|
Facsimile
|
39
|
|
17.6.
|
Severability
|
39
|
|
17.7.
|
Third
Parties
|
39
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|
17.8.
|
Certain
Definitions
|
39
|
|
17.9.
|
Governing
Law
|
40
|
|
17.10.
|
Entire
Agreement, Not Binding Until Executed
|
40
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|
17.11.
|
Amendments;
No Waiver
|
40
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|
17.12.
|
Waiver
of Jury Trial
|
40
|
-iii-
EXHIBITS
|
Stockholders
Written Consent
|
Exhibit
A
|
|
Certificate
of Merger
|
Exhibit
B
|
|
Certificate
of Incorporation of Surviving Corporation
|
Exhibit
C
|
|
Parent
Pro Forma Capitalization Table
|
Exhibit
D
|
|
Form
of Warrant - Xxxxx Xxxxx
|
Exhibit
E
|
|
Form
of Warrant - Windstone
|
Exhibit
F
|
|
Letter
of Transmittal to Company Stockholders
|
Exhibit
G
|
|
Voting
and Lockup Agreement
|
Exhibit
H
|
|
Form
of Opinion of Company Counsel
|
Exhibit
I
|
|
Form
of Opinion of Parent Counsel
|
Exhibit
J
|
-iv-
THIS
AGREEMENT AND PLAN OF MERGER is made as of June 23, 2008 (this “Agreement”)
by and
among Insignia Solutions PLC, a corporation organized under the laws of England
and Wales (“Parent”),
Jeode
Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
(“Merger
Sub”),
DollarDays International, Inc., a Delaware corporation (the “Company”),
and
the Representative (as defined below). The holders of all of the capital stock
of the Company (the “Company
Stock”)
are
collectively referred to as the “Company
Stockholders,”
and
the
Company Stockholders, together with the holders of all other equity securities
of the Company, including securities convertible into, or exercisable or
exchangeable for, equity securities of the Company (the “Company
Securities”),
are
collectively referred to herein as the “Company
Securityholders.”
WHEREAS,
the board of directors of the Company has determined that the merger of Merger
Sub with and into the Company upon the terms and subject to the conditions
set
forth herein (the “Merger”)
is
desirable and in the best interests of the Company and the Company Stockholders;
has approved, in accordance with applicable provisions of the laws of the State
of Delaware (“Delaware
Law”),
this
Agreement and each of the transactions contemplated hereby, including the
Merger; and has unanimously recommended that the Company Stockholders approve
this Agreement and each of the transactions contemplated hereby, including
the
Merger; and
WHEREAS,
the board of directors of Merger Sub has determined that it is advisable and
in
the best interests of Merger Sub to enter into a business combination with
the
Company upon the terms and subject to the conditions set forth herein;
and
WHEREAS,
in furtherance of such combination, the board of directors of Merger Sub, and
Parent, as the sole stockholder of Merger Sub, have approved this Agreement
and
the Merger, upon the terms and subject to the conditions set forth herein,
in
accordance with applicable law; and
WHEREAS,
concurrently with the execution and delivery of this Agreement, the Company
has
delivered to Parent and Merger Sub (a) a written consent of certain Company
Stockholders, holding at least 75% of the Company’s capital stock, a copy of
which is attached hereto as Exhibit
A
(the
“Stockholders
Written Consent”),
adopting this Agreement and approving the Merger in accordance with (i) the
Certificate of Incorporation of the Company, as in effect on the date of this
Agreement (the “Charter”,
and
together with the Bylaws of the Company, as in effect on the date of this
Agreement the “Company
Organizational Documents”),
and
(ii) Delaware Law (collectively, the “Requisite
Stockholder Approval”),
and
(b) a voting agreement executed by such Company Stockholders, holding at least
75% of the Company’s capital stock, agreeing to vote the Parent ordinary shares
issued to them (in the form of Parent ADRs) in the Merger in favor of (a) the
authorization of 90,000,000 additional ordinary shares such that the total
authorized share capital of the Parent shall be 200,000,000 ordinary shares,
or
such larger amount as might subsequently be decided by the board of directors
of
Parent following the Effective Time of the Merger, and (b) the election of
the
Parent Director and the Independent Director to the board of directors of Parent
for at least two years following the Effective Time.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties hereby agree as follows:
SECTION
1. The
Merger.
1.1. The
Merger.
At the
Effective Time (as defined below), and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of Delaware Law,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the “Surviving
Corporation.”
1.2. Effective
Time; Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place on June 23, 2008 or not later than the second (2nd) Business Day
after the satisfaction or waiver of each of the conditions set forth in Sections
6, 7 and 8 below (other than conditions that by their nature are to be satisfied
at Closing, but subject to the satisfaction or waiver of those conditions at
such time) or at such other time as Parent and the Company shall agree (the
“Closing
Date”).
In
connection with the Closing, the parties shall cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of
the
State of Delaware, as contemplated by the General Corporation Law of the State
of Delaware (the “DGCL”),
and
in the form attached hereto as Exhibit
B
(the
“Certificate
of Merger”)
and
make all other filings or recordings required by Delaware Law in connection
with
the Merger. The Merger shall be effective upon the date and time of the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware (the “Effective
Time”).
The
Closing shall take place at 10:00 a.m., Pacific Time, on the Closing Date at
the
offices of Fenwick & West LLP, 000 Xxxxxxxxxx Xx., Xxx Xxxxxxxxx, Xxxxxxxxxx
00000.
1.3. Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in this Agreement,
the Certificate of Merger and the applicable provisions of Delaware Law,
including Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4. Certificate
of Incorporation; Bylaws; Corporate Records.
(a) Charter
and Bylaws of Merger Sub.
The
Company and Merger Sub shall take all necessary actions to cause the form of
the
Certificate of Incorporation as attached hereto as Exhibit
C
and
bylaws of the Company as in effect immediately prior to the Effective Time
to
become the Certificate of Incorporation and bylaws of the Surviving Corporation
from and after the Effective Time until thereafter changed or amended as
provided therein or by applicable Law. The name of the Surviving Corporation
shall be DollarDays International, Inc.
(b) Corporate
Records.
At the
Closing, the Company shall deliver or cause to be delivered to Parent possession
of the minute books, stock record books and, to the extent requested by Parent,
all other documents, books, records, agreements and financial data, of the
Company.
1.5. Directors
and Officers.
The
board of directors of the Parent immediately after the Effective Time shall
comprise of five (5) members, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation. One board
member (the “Parent Director”) shall be appointed by the current members of the
Parent board of directors, one independent board member will be appointed with
the approval of both the Parent Director and Xxxxx Xxxxx, and three board
members shall be appointed by the Representative on behalf of the Company
Stockholders. Parent agrees to take such actions as are available to it to
cause
the Parent Directors to continue to be nominated to the board of directors
of
Parent for at least two years following the Effective Time. The designated
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified, or their
earlier death, resignation or removal.
1.6. Appointment
of Representative; Agreements Binding on Company Securityholders.
Each
Company Stockholder that does not perfect his or its appraisal rights under
the
DGCL will, as a specific term of the Merger, be deemed to (a) have irrevocably
constituted and appointed, effective as of the Effective Time, Xxxxx Xxxxx
(together with its permitted successors, the “Representative”),
as
its true and lawful agent, proxy and attorney-in-fact, to exercise all or any
of
the powers, authority and discretion conferred on him or her under this
Agreement (including, without limitation, Section 13 and Section 14), and (b)
to
have irrevocably agreed to, and be bound by and comply with, all of the
obligations of the Company Stockholders set forth herein (including, without
limitation, Section 13 and Section 14). The Representative agrees to act as,
and
to undertake the duties and responsibilities of, such agent and attorney-in-fact
as set forth in Section 13 and Section 14. This power of attorney is coupled
with an interest and is irrevocable.
2
SECTION
2. Definitions;
Conversion and Exchange of Securities.
2.1. Certain
Definitions.
For
purposes of this Agreement, the following terms shall have the following
meanings:
“Balance
Sheet”
shall
mean the balance sheet of DDI LLC as of May 31, 2008 and included in the
Financial Statements.
“Closing
Date Cash”
shall
mean the amount of cash plus any account receivables (excluding the amount
contemplated by the Release Agreement) minus any account payables, held by
the
Parent on the Closing Date, as disclosed in Schedule
4.6(a)
hereto.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Company
Common Stock”
shall
mean the common stock, par value $.001 per share, of the Company.
“Company
Preferred Stock”
shall
mean the preferred stock, par value $.001 per share, of the Company.
“Indebtedness”
shall
include all liabilities and obligations, including any applicable penalties
(including with respect to any prepayment thereof), interest and premiums,
(i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) under leases required to be capitalized in accordance with
GAAP, (iv) with respect to letters of credit but only to the extent actually
drawn on or prior to Closing, (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person, or (vi) in
the
nature of obligations of the type referred to in clauses (i) through (v) of
any
other Person secured by any Security Interest on any asset of the Parent
Parties.
“Lien”
shall
mean any lien (including liens for Taxes), pledge, mortgage, deed of trust,
security interest, claim, lease license, charge, option, right of first refusal,
easement, restriction, reservation, servitude, proxy, voting trust or agreement,
transfer restriction under any stockholder or similar agreement, or encumbrance
of any nature whatsoever.
“Merger
Consideration”
shall
mean 73,333,333 Parent ADRs as described on Exhibit
D,
provided that (a) in the event that Parent shall be required to make any payment
prior to the Final Delivery Date (as defined in Section 2.2(a) pursuant to
any
of the liabilities disclosed on Section 4.4(c) of the Parent Disclosure Schedule
under the heading “Contingent Liabilities”, the Merger Consideration will be
increased by a number of Parent ADRs equal to the product of .15 multiplied
by
the amount of such payment, provided that such payment shall have been approved
by the Board of the Parent (such approval to include the approval of Xxxxxxx
Xxxx) (such approval not to unreasonably withheld), and provided further than
no
such increase shall be effected unless and until the amount of such payments
equals or exceeds $250,000, but in the event that such payments do equal or
exceed $250,000, then such an increase shall be effected for the entire amount
of such payments (i.e., from “dollar one”), and (b) in the event that Parent
recovers any cash prior to the Final Delivery Date as a result of any claim
held
by it immediately prior to the Effective Time, or is not required to make all
or
any part of any payment disclosed on Section 4.4(c) of the Parent Disclosure
Schedule under the heading “Non-Contingent Liabilities”, the Merger
Consideration will be reduced by a number of Parent ADRs equal to the product
of
.15 multiplied by the amount of cash received, or payment not required to be
made.
“Option”
shall
mean any option to acquire shares of Company Common Stock, including options
granted under the Option Plan.
3
“Option
Plans”
shall
mean the Company’s current option plan, as may be amended from time to time, and
any other plan or arrangement under which the Company or DDI LLC may have
outstanding or may grant equity-based awards.
“Parent
ADRs”
shall
mean the American Depository Receipts of the Parent issuable by The Bank of
New
York pursuant to that certain Deposit Agreement by and between Parent and The
Bank of New York.
“Parent
Option Plan”
shall
mean the Parent’s 1995 Incentive Stock Option Plan for U.S. Employees, and any
other plan or arrangement under which the Parent may grant equity-based
awards.
“Parent
Stockholders”
shall
mean the holders of all of the capital stock of the Parent immediately prior
to
the Effective Time.
“Per
Share Common Consideration”
shall
mean a number of Parent ADRs equal to (a) 73,333,333 divided by (b) the total
number of outstanding shares of capital stock of the Company immediately prior
to Closing.
“Person”
shall
mean a person, firm, entity, partnership, association or any business
organization thereof.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended.
“Subsidiary”
shall
mean any corporation or other organization, whether incorporated or
unincorporated, of which (a) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by the Company or by any one or more of the Subsidiaries or (b) the Company
is a
general partner (excluding any such partnership where the Company does not
have
a majority of the voting interest in such partnership).
“Warrants”
shall
mean warrants to acquire shares of the Company Common Stock.
2.2. Effect
on Capital Stock.
At the
Effective Time and upon the terms and subject to the conditions of this
Agreement, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, the Company or any Company Securityholder:
(a) Conversion
of Securities.
(i) Except
as
otherwise provided in Section 2.2(b) each share of Company Stock (other than
any
Dissenting Shares (as defined in Section 2.3(a)), issued and outstanding at
the
Effective Time shall be converted into the right to receive the Per Share Common
Consideration, without interest, upon the surrender of the certificate
representing such share in accordance with the terms hereof and in the manner
provided herein. Parent shall take all such actions as may be necessary to
authorize and deliver 46,978,375 Parent ADRs of the Merger Consideration within
ninety (90) days of the Effective Time. Pursuant to Section 16.3, Parent shall
take all such actions, including obtaining such approval of the Parent
shareholders as may be required to increase the authorized share capital of
Parent (the “Parent
Shareholder Approval”)
as may
be necessary to authorize and deliver all of the remaining Merger Consideration
as soon as reasonably practicable after the amendment and restatement of its
Certificate of Incorporation or the equivalent, but in no event later than
the
later of October 15, 2008 and (b) the date 90 days after the Company shall
have
obtained, prepared and filed with the Securities and Exchange Commission all
information and financial statements relating to the Company that may be
required by the SEC or otherwise in connection with the Parent Shareholder
Approval (the date of the actual delivery of the remaining Merger Consideration
being referred to as the “Final
Delivery Date”).
All
of the Merger Consideration shall be issued to DollarDays International, LLC
(“DDI
LLC”)
or, if
and when DDI LLC may distribute the Merger Consideration received by it to
its
members, to such members in proportion to their relative ownership of DDI
LLC.
4
(ii) From
and
after the Effective Time, each such converted share of Company Stock shall
no
longer be outstanding and shall be automatically cancelled and retired and
shall
cease to exist, and each holder of a certificate formerly representing each
such
share shall cease to have any rights with respect thereto, except the right
to
receive (subject to the terms of this Agreement) the portion of the
consideration specified in Section 2.2(a)(i) payable with respect to such
Company Stock, without interest, upon the surrender of such certificate in
accordance with the terms hereof and in the manner provided herein, or, if
such
share of Company Stock is a Dissenting Share, the right, if any, to receive
payment from the Surviving Corporation of the “fair
value”
or
“fair
market value”
of
such
Dissenting Share as determined in accordance with the applicable provisions
of
the DGCL.
(b) Cancellation.
Each
share of Company Stock owned by the Company as treasury stock or owned by
Parent, Merger Sub or any direct or indirect wholly owned subsidiary of Parent
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
be canceled and retired without payment of any consideration therefor and cease
to exist.
(c) Capital
Stock of Merger Sub.
Each
share of common stock of Merger Sub issued and outstanding immediately prior
to
the Effective Time shall be converted into and become, and shall represent,
one
fully paid and nonassessable share of common stock of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted and
shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
2.3. Dissenting
Holders.
(a) Notwithstanding
anything in this Agreement to the contrary, any shares of Company Stock
outstanding immediately prior to the Effective Time eligible under the DGCL
to
exercise appraisal or dissenters’ rights and held by a holder who has not voted
in favor of the Agreement and the Merger or consented thereto in writing and
who
has exercised and perfected appraisal or dissenters’ rights for such shares in
accordance with Section 262 of the DGCL and has not effectively withdrawn or
lost such appraisal or dissenters’ rights (collectively, the “Dissenting
Shares”)
shall
not be converted into or represent the right to consideration for Company Stock
set forth in Section 2.2(a), and the holder or holders of such shares shall
be
entitled only to such rights as may be granted to such holder or holders in
Section 262 of the DGCL.
(b) Notwithstanding
the provisions of Section 2.3(a), if any holder of Dissenting Shares shall
effectively withdraw or lose (through failure to perfect or otherwise) such
holder’s appraisal rights and dissenters’ rights under Section 262 of the DGCL,
then, as of the later of the Effective Time and the occurrence of such event,
such holder’s shares shall automatically be converted into and represent only
the right to receive the consideration for such shares set forth in Section
2.2(a)(i), without interest.
(c) Prior
to
Effective Time, the Company shall (i) comply with the requirements of Section
262 of the DGCL, (ii) give Parent prompt notice of any written demand received
by the Company pursuant to Section 262 of the DGCL, and of withdrawals of such
demands, and provide copies of any documents or instruments served pursuant
to
the DGCL and received by the Company and (iii) give Parent the opportunity
to
participate in all negotiations and proceedings with respect to any such
demands. Prior to the Effective Time of the Merger, the Company shall not make
any payment or settlement offer with respect to any such demand unless Parent
shall have consented in writing to such payment or settlement
offer.
2.4. Options
and Warrants.
The
Company and the Parent shall take all necessary steps to ensure that as soon
as
practicable after Closing:
(a) Each
Option outstanding and unexercised immediately prior to the Effective Time,
will
be deemed cancelled as of the Effective Time. Upon (and not before, or more
than
one week after) the date of the Parent Shareholder Approval, Parent shall issue
to each person who immediately prior to the Effective Time was the holder of
an
outstanding Option, an option to purchase Parent ADRs which will be exercisable
(or will become exercisable in accordance with its terms) for that number of
whole Parent ADRs equal to the product of the number of shares of Common Stock
that were issuable upon exercise of such Option immediately prior to the
Effective Time multiplied by the Per Share Common Consideration (with each
fractional share being rounded down to the nearest whole share) at an exercise
price equal to the greater of (x) the fair market value of the Parent ADRs
covered by the option as of the grant date or (y) the quotient determined by
dividing the exercise price per share of Common Stock at which such Option
was
exercisable immediately prior to the Effective Time by the Per Share Common
Consideration (rounded up to the nearest whole cent).
5
(b) Parent
shall take all such actions as may be necessary to authorize and deliver
4,921,791 Parent ADRs, at a price of $0.13 per Parent ADR within ninety (90)
days of the Effective Time to Xxxxxx or its affiliates. Pursuant to Section
16.3, Parent shall take all such actions, including obtaining Parent Shareholder
Approval as may be necessary to authorize and deliver an additional 2,761,135
Parent ADRs, at a price of $0.13 per Parent ADR, as soon as reasonably
practicable after the amendment and restatement of its Certificate of
Incorporation or the equivalent, but in no event later than the later of (a)
October 15, 2008 and (b) the date 90 days after the Company shall have obtained,
prepared and filed with the Securities and Exchange Commission all information
and financial statements relating to the Company that may be required by the
SEC
or otherwise in connection with the Parent Shareholder Approval. Receipt of
such
additional Parent ADRs by Xxxxxx or its affiliates shall be (i) in full
satisfaction of a note payable for the amount of $450,000 from the Company
payable to Xxxxxx or its affiliates and an additional investment of $550,000
in
the Company, and (ii) subject to and conditioned upon the execution by Xxxxxx
of
an acknowledgment that upon receipt of such ADRs, Xxxxxx and its affiliates
will
have received full payment of all amounts owing to it by the Company or DDI
LLC.
(c) Xxxxx
Xxxxx shall receive a warrant to purchase 8,551,450 Parent ADRs at a price
of
$0.01 per Parent ADR in the form set forth in Exhibit E.
(d) Windstone
Capital Partners shall receive a warrant to purchase 3,603,876 Parent ADRs,
at a
price of $0.13 per Parent ADR in the form set forth in Exhibit
F.
2.5. Surrender
of Certificates.
(a) Surrender
Procedures.
(i) As
soon
as reasonably practicable after the Effective Time, but no later than five
(5)
Business Days thereafter, Parent shall instruct The Bank of New York (the
“Bank”)
to
mail to each Company Stockholder as of the Effective Time (i) a letter of
transmittal in substantially the form attached as Exhibit G
hereto
and (ii) instructions for use in effecting the surrender of certificate(s)
representing all of the shares of Company Stock held by such Company Stockholder
in exchange for the Merger Consideration. The payment of the Merger
Consideration with respect to each such certificate is conditioned upon (A)
the
execution and delivery of such transmittal letter and (B) the delivery of such
certificates related thereto. As soon as practicable after receipt by the Bank
of such certificate(s), properly endorsed or otherwise in proper form for
transfer, for cancellation, together with such duly executed letter of
transmittal, the Bank shall, in exchange therefor, pay to such Company
Stockholder the Merger Consideration payable in respect of the shares of Company
Stock formerly represented by the certificate(s) surrendered, but without
interest, and the certificate(s) so surrendered shall forthwith be canceled.
If
payment of any portion of the applicable Merger Consideration is to be made
to a
person other than the Person in whose name the surrendered certificate(s) are
registered, it shall be a condition of payment that the Person requesting such
payment (i) shall have paid any transfer and other Taxes required by reason
of
the payment of those amounts to a Person other than the registered holder of
the
certificate(s) surrendered, and shall have established to the satisfaction
of
Parent that such Tax has been paid, or (ii) shall have established to the
satisfaction of Parent that such Tax is not applicable. From and after the
Effective Time, until surrendered as contemplated by this Section 2.5(a), each
certificate formerly representing shares of Company Stock shall be deemed to
represent for all purposes only the right to receive the applicable
consideration as provided pursuant to Section 2.2(a) hereof, if any, in respect
of such shares of Company Stock formerly represented thereby in accordance
with
the terms hereof and in the manner provided herein.
6
(b) Transfer
Books; No Further Ownership Rights in the Shares.
At the
Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the shares
of
Company Stock on the records of the Company. From and after the Effective Time,
the holders of certificates formerly evidencing ownership of the shares of
Company Stock outstanding immediately prior to the Effective Time shall cease
to
have any rights with respect to such shares, except as otherwise provided for
herein or by applicable Legal Requirements. Parent shall cause the Surviving
Corporation or the Bank to cancel and exchange, as provided in this Section
2,
any presented certificate representing shares of Company Stock outstanding
immediately prior to the Effective Time.
(c) Lost,
Stolen or Destroyed Certificates.
In the
event any certificate(s) which formerly represented shares of Company Common
Stock shall have been lost, stolen or destroyed, upon the making and delivery
of
an affidavit of that fact by the Company Stockholder thereof in form reasonably
satisfactory to Parent. Parent shall instruct the Bank to pay such Company
Stockholder the Merger Consideration which such Company Stockholder is entitled
to receive pursuant to Section 2.2(a) hereof.
(d) Dissenting
Shares.
The
provisions of this Section 2.5 shall also apply to Dissenting Shares that lose
their status as such, except that the obligations of Parent under this Section
2.5 shall commence on the date of loss of such status and the holder of such
shares shall be entitled to receive in exchange for such shares the applicable
amounts provided in Section 2.
2.6. Further
Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to vest the Surviving Corporation with full right, title and possession to
all
assets, property, rights, privileges, powers and franchises of the Company
and
Merger Sub, the officers and directors of the Company and Merger Sub immediately
prior to the Effective Time are and will remain fully authorized in the name
of
the Company and Merger Sub or otherwise to take, and shall take, all such
action. The rights of holders of existing options and warrants of Parent shall
not be impaired in any respect by any insufficiency in the authorized and
unissued share capital of Parent that may result from the transactions provided
for in this Agreement or any subsequent issuance by Parent of ordinary shares
or
Parent ADRs, or rights to acquire ordinary shares or Parent ADRs.
2.7. Legends.
The
certificates evidencing the Merger Consideration will bear the legends set
forth
below:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTIONS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON
TRANSFER AS SET FORTH IN A VOTING AGREEMENT DATED AS OF JUNE 23, 2008 BY AND
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. ANY TRANSFER HEREOF IN
VIOLATION OF SUCH TRANSFER RESTRICTIONS IS VOID.”
7
SECTION
3. Representations
and Warranties of the Company.
The
Company represents and warrants to Parent and Merger Sub that the statements
in
this Section 3 are true, complete and correct as of the date hereof (unless
the
particular statement speaks expressly as of another date, in which case it
is
true, complete and correct as of such other date), subject, in any case, to
the
exceptions provided in the Disclosure Schedule. Any exception or qualification
set forth in the Disclosure Schedule with respect to a particular representation
and warranty shall be deemed to be an exception or qualification with respect
to
any other applicable representations and warranties to which such exception
or
qualification is reasonably apparent on its face to be applicable, whether
or
not such exception or qualification is so numbered.
3.1. Organization
and Standing.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has full corporate
power
and authority to conduct its business as currently conducted and as proposed
to
be conducted by it. The Company is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction where the properties,
owned, leased or operated, or the business conducted by it requires such
qualification, except for such failures to be so duly qualified and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect. The term “Material
Adverse Effect”
as
used
in this Agreement shall mean any change in or effect on the Company that,
individually or in the aggregate, with all changes in or effects on the Company,
is or would reasonably be expected to have a materially adverse effect on (i)
the business, results of operations, or financial condition of the Company,
taken as a whole, or (ii) the Company’s ability to timely consummate the Merger
in accordance with the terms of this Agreement.
(b) Prior
to
the date of this Agreement, the Company has furnished to Parent complete and
correct copies of the Charter and the Bylaws of the Company as currently in
effect. The Charter and Bylaws are in full force and effect and the Company
is
not in violation of any provision of its Charter or Bylaws. Schedule
3.1(b)
attached
hereto lists the directors and officers of the Company as of the date hereof.
Except as provided in Schedule
3.1(b)
attached
hereto, the operations now being conducted by the Company are not now and have
never been conducted by the Company under any other name.
3.2. Capitalization
and Ownership of Shares.
All of
the capital stock of the Company is held by DDI LLC. Schedule
3.2
attached
hereto sets out a list of the members of DDI LLC, and holders of warrants and
convertible securities of DDI LLC, in a capitalization table of DDI LLC. The
authorized capital stock of the Company consists of 18,000 shares of Company
Common Stock, of which on the date hereof 4,451 shares are issued and
outstanding on a fully diluted basis, including 348 shares reserved for exercise
of options, and 2,000 shares of Company Preferred Stock of which on the date
hereof no shares are issued and outstanding. All of the issued and outstanding
shares of Company Stock have been, duly authorized, validly issued, fully paid
and non-assessable. No subscription, Warrant, option, convertible security
or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is outstanding, or will be outstanding as of the
Effective Time. From and after the Effective Time, no holder of any Option
or
Warrant will have the right to any consideration with respect thereto, except
as
expressly provided in Section 2.4 of this Agreement with respect to Options.
The
Company does not have any obligation (whether written, oral, contingent or
otherwise) to issue any subscription, warrant, option, convertible security
or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company. The
Company does not have any obligation (whether written, oral, contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. There are no outstanding or authorized stock
appreciation, phantom stock, or similar rights with respect to the Company.
All
of the issued and outstanding shares of capital stock of the Company have been
offered, issued and sold by the Company without violation of United States
federal, state, municipal or local or foreign order, judgment, writ, injunction,
decree, law, statute, standard ordinance, code, resolution, promulgation, rule,
regulation or any similar provision having the force or effect of law
(collectively, “Legal
Requirements”)
applicable to the Company’s offer, issuance and sale of such
securities.
8
3.3. Subsidiaries.
Except
as set out in Schedule
3.3
attached
hereto, the Company does not have any Subsidiaries, and the Company does not
own
or control, directly or indirectly, any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, or have any commitment or obligation to invest in, purchase
any securities or obligations of, fund, guarantee, contribute or maintain the
capital of or otherwise financially support any corporation, partnership, joint
venture or other business association or entity. Each former Subsidiary that
is
no longer in existence has been duly dissolved in accordance with its charter
documents and the laws of the jurisdiction of its incorporation or organization
and there are no outstanding liabilities or obligations (outstanding, contingent
or otherwise), including Taxes, with respect to any such entity.
3.4. Authority
for Agreement.
(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and each instrument required hereby to be executed and delivered
by the Company at the Closing and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Company of this Agreement and
each instrument required hereby to be executed and delivered by the Company
at
the Closing and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action; and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or any instrument required hereby
to
be executed and delivered by the Company at the Closing or to consummate the
Merger. The board of directors of the Company duly declared that the Merger
is
advisable as required by Section 251 of the DGCL, and has unanimously approved
and adopted this Agreement and the Merger. None of such actions by the board
of
directors of the Company has been amended, rescinded or modified. This Agreement
has been, and each instrument required hereby to be executed and delivered
by
the Company at the Closing will be, duly and validly executed and delivered
by
the Company and, assuming the due authorization, execution and delivery by
Parent, Merger Sub and the Representative, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, reorganization or similar
laws of general application affecting the rights and remedies of creditors,
and
to general equity principles.
(b) Except
as
set forth on Schedule
3.4(b)
attached
hereto, the execution and delivery of this Agreement by the Company and each
instrument required hereby to be executed and delivered by the Company at the
Closing, the compliance by the Company with the provisions of this Agreement
and
each instrument required hereby to be executed and delivered by the Company
at
the Closing and the consummation of the transactions contemplated hereby or
thereby, will not (i) conflict with or violate the Company Organizational
Documents, (ii) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice, consent or waiver under, or result in the
loss
of any benefit to which the Company is entitled under, any material Contract
or
Permit (as defined in Section 3.19), Security Interest (as defined below)
or other interest to which the Company is a party or by which the Company is
bound or to which its assets are subject, (iii) result in the creation or
imposition of any Security Interest upon any assets of the Company, or (iv)
violate any Legal Requirement applicable to the Company or any of its assets.
For purposes of this Agreement, “Security
Interest”
means
any mortgage, security interest, pledge, license, interest, encumbrance, claim,
charge, option, restriction on the right to sell or dispose (and in the case
of
securities, vote), lien or other adverse claim of any kind (whether arising
by
contract or by operation of law and whether voluntary or
involuntary).
3.5. Consents.
No
consent, approval, order, Permit or authorization of, or registration,
declaration or filing with, or notification to (together, the “Consents”)
any
United States federal, state, municipal or local or any foreign government,
or
political subdivision thereof, or any multinational organization or authority
or
any authority, agency or commission entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or Taxing Authority power,
or any court or tribunal (or any department, bureau or division thereof), or
any
arbitrator or arbitral body (collectively, “Governmental
Authorities”)
or any
Person is required to be obtained by the Company in connection with the
Company’s execution and delivery of this Agreement or the Company’s consummation
of the Merger or the other transactions to be consummated at the Closing as
contemplated by this Agreement, except for (i) compliance with the applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the “HSR
Act”)
and
the Legal Requirements analogous to the HSR Act existing in foreign
jurisdictions (collectively, “Foreign
Merger Laws”),
and
(ii) the filing and recordation of the Certificate of Merger with the Secretary
of State of the State of Delaware.
9
3.6. Financial
Statements; Liabilities
(a) Attached
hereto as Schedule
3.6
are the
audited financial statements (including balance sheets and statements of
operations) of DDI LLC for December 31, 2006 and 2005 and the years then ended,
and unaudited financial statements (including balance sheets and statements
of
operations) of DDI LLC for March 31, 2008 and December 31, 2007 and
the three and twelve months then ended, respectively (collectively, the
“Financial
Statements”):
The
Financial Statements were in each case prepared in accordance with United States
generally accepted accounting principles (“GAAP”),
consistently applied throughout the periods presented without modification
of
the accounting principles used in the preparation thereof throughout the periods
presented. The Financial Statements (i) are in accordance with the books
and records of the Company, and (ii) present fairly the financial condition
and
results of operations of the Company as of the dates and for the periods
indicated.
(b) The
Company and DDI LLC each has in place a system of internal accounting controls
that is sufficient to provide reasonable assurance regarding the reliability
of
the Company’s and DDI LLC’s financial statements (including the Financial
Statements), including reasonable assurance that transactions are recorded
as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and that receipts and expenditures
are
being made only in accordance with authorizations of management (such systems
and processes are herein referred to as the “Controls”).
Neither the Company’s employees nor the Company’s independent auditors have
identified or made the Company aware of any complaint, allegation, deficiency,
assertion or claim, whether written or oral, regarding the Controls or the
Financial Statements. To the Company’s Knowledge, there have been no instances
of fraud, whether or not material, that occurred during any period covered
by
the Financial Statements. The Company and DDI LLC each have in place a revenue
recognition policy consistent with GAAP.
(c) Except
as
set forth in Schedule 3.6(c)
attached
hereto, as of the date hereof and as of the Effective Time, Company has not
and
at the Effective Time will not have incurred, directly or indirectly, any
Indebtedness, obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person, except for those obligations of the Company (i) in the
ordinary course of business as reflected in the Financial Statements; and
(ii) obligations and liabilities incurred after May 31, 2008 in the
ordinary course of business. The consummation of the Merger will not give rise
to any severances, bonuses, payment obligations or other liabilities except
for
legal and accounting fees.
3.7. Absence
of Changes.
Except
as set forth on Schedule
3.7
attached
hereto, since December 31,
2007.
(i) there
has
been no change in the business, prospects, financial condition or results of
operations of the Company or DDI LLC that constitutes a Material Adverse
Effect;
(ii) There
has
been no change by the Company or DDI LLC in its accounting or cash management
methods, principles or practices or revaluation by the Company or DDI LLC of
any
of its assets;
10
(iii) Neither
the Company nor DDI LLC has declared, set aside or paid any dividend or other
distribution in respect of any of its capital stock; or repurchased, redeemed
or
otherwise acquired any of its securities;
(iv) Neither
the Company nor DDI LLC has sold, transferred, delivered, leased, subleased,
licensed, sublicenses, mortgaged, pledged, encumbered, impaired or otherwise
disposed of (in whole or in part), or created, incurred, assumed or caused
to be
subjected to any Lien on, any of the rights, assets or properties of the Company
or DDI LLC (including any Intellectual Property or accounts receivable), except
for the sale of inventory in the ordinary course of business consistent with
past practice;
(v) Neither
the Company nor DDI LLC has not acquired any rights, assets or properties other
than inventory in the ordinary course of business consistent with past
practice;
(vi) there
has
not been any damage, destruction or loss (whether or not covered by insurance)
with respect to any rights, assets or properties of the Company or DDI LLC;
and
(vii) the
Company and DDI LLC have each conducted its business only in the ordinary course
of business consistent with past practice.
3.8. Taxes.
(a) (i)
All
Tax Returns required to be filed by or on behalf of the Company or DDI LLC
have
been duly and timely filed with the appropriate Taxing Authority in all
jurisdictions in which such Tax Returns are required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and
all
such Tax Returns are true, complete and correct in all material respects; and
(ii) all Taxes payable by or on behalf of the Company or DDI LLC have been
fully
and timely paid. With respect to any period for which such Tax Returns have
not
yet been filed or for which such Taxes are not yet due or owing, DDI LLC has
made due and sufficient accruals for such Taxes on the Balance Sheet. All
required estimated Tax payments sufficient to avoid any underpayment penalties
or interest have been made by or on behalf of the Company or DDI
LLC.
(b) For
purposes of this Agreement:
“Tax”
or
“Taxes”
means
(i) all federal, state, local or foreign taxes, charges, fees, imposts, levies
or other assessments, including without limitation all income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, (ii) all interest, penalties, fines, additions to Tax or additional
amounts imposed by any Taxing Authority in connection with any item described
in
clause (i) and (iii) any liability in respect of any items described in clauses
(i) or (ii) payable by reason of any Contract, assumption, transferee
liability, operation of law, Treasury Regulation Section 1.1502 6 (or any
predecessor or successor thereof of any analogous or similar provision of Tax
Law) or otherwise.
“Taxing
Authority”
means
the IRS or any other governmental body (whether state, local or foreign)
responsible for the administration of any Tax.
“Tax
Law”
means
any Legal Requirement (whether domestic or foreign) relating to
Taxes.
“Tax
Return”
means
any return, report or statement required to be filed with respect to any Tax
(including any elections, declarations, schedules or attachments thereto, and
any amendment thereof) including any information return, estimate, claim for
refund, amended return or declaration of estimated Tax, and including, where
permitted or required, affiliated, combined, consolidated or unitary returns
for
any group of entities that includes the Company or DDI LLC.
11
3.9. Property
and Sufficiency.
(a) The
Company has good and marketable title to, or, in the case of leases of
properties and assets, a valid leasehold interest in, or otherwise has a valid
legal right to use, all of the properties and assets (whether real, personal,
tangible or intangible) (i) reflected on the Balance Sheet (other than
assets sold since the date of the Balance Sheet) or acquired thereafter and
(ii)
necessary to conduct all of the business and operations of the Company as
currently conducted, and none of such properties or assets is subject to any
Liens or Security Interest, other than those described in Schedule 3.9(a)
attached
hereto. The Company does not own any real property.
(b) The
properties, assets and contract rights of the Company constitute all of the
properties and assets owned by DDI LLC prior to the Effective Time (and prior
to
the execution and delivery of the Contribution Agreement dated the date hereof
between the Company and DDI LLC (the “Contribution
Agreement”).
The
Contribution Agreement has been duly authorized, executed and delivered by
the
Company and DDI LLC, and, at or prior to the Effective Time of the Merger,
all
of the properties, assets of DDI LLC will have been contributed to the Company
pursuant to the Contribution Agreement. The properties and assets contributed
to
the Company by DDI LLC at or prior to the Effective Time pursuant to the
Contribution Agreement constitute all of the assets and properties necessary
to
conduct all of the business and operations of DDI LLC as conducted immediately
prior to the date hereof.
(c) Each
of
the leases for real property of the Company is identified in Schedule
3.9(b)
attached
hereto (“Real
Property Leases”).
(d) Neither
the Company nor DDI LLC have transferred or assigned any interest in any Real
Property Lease, nor has the Company or DDI LLC subleased or otherwise granted
rights of use or occupancy of any of the premises described therein to any
Person. The facilities subject to a Real Property Lease (each a “Leased
Premises”)
and
the personal property owned or leased by the Company are in good operating
condition and repair and free from any material defects, reasonable wear and
tear excepted, and are suitable for the uses for which they are being used
in
all material respects.
3.10. Contracts.
Except
as disclosed in Schedule
3.10
attached
hereto, neither the Company nor DDI LLC is a party to, subject to or otherwise
bound by:
(a) any
Contract or series of related Contracts with the same counterparty or its
affiliates which requires, or could reasonably be expected to require, aggregate
future payments by or to the Company or DDI LLC in excess of
$50,000;
(b) any
Contract for the sale of any commodity, product, material, supplies, equipment
or other personal property for a sale price in excess of $50,000, other than
purchase or sale orders entered into in the ordinary course of business
consistent with past practice;
(c) any
distributor, reseller manufacturer’s representative, sales representative or
similar Contract under which the Company does not have the right to terminate
without penalty on less than thirty (30) days’ notice;
(d) any
Contract pursuant to which Intellectual Property is licensed to or from the
Company or DDI LLC other than Contracts licensing the right to use off-the-shelf
or other readily commercially available third party software (including, but
not
limited, to any click-wrap or shrink-wrap license);
(e) any
Contract with any current or former officer, employee or director of the Company
or DDI LLC or any “affiliate” (as defined in the Securities Act) of the Company
or DDI LLC or such persons or, to the Company’s Knowledge, any member of his or
her immediate family (any of the foregoing, a “Related
Party”),
including, without limitation, any Contract providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, or from, any Related Party;
12
(f) any
Contract under which the Company or DDI LLC is restricted from carrying on
any
business or other services or competing with any Person anywhere in the world,
or restricted from soliciting or hiring any person with respect to employment,
or which would so restrict the Company or the Surviving Corporation after the
Closing Date;
(g) any
loan
agreement, indenture, note, bond, debenture or any other document or Contract
evidencing Indebtedness or a Security Interest to any Person or any commitment
to provide any of the foregoing, or any agreement of guaranty, indemnification
or other similar commitment with respect to the obligations or liabilities
of
any other Person;
(h) any
Contract for the disposition of any of the Company’s or DDI LLC’s material
assets or business (whether by merger, sale of stock, sale of assets or
otherwise);
(i) any
Contract for the acquisition of the business or capital stock of another party
(whether by merger, sale of stock, sale of assets or otherwise);
(j) any
Contract concerning a partnership, joint venture, joint development or other
similar arrangement with one or more Persons;
(k) any
Contract creating any obligation with respect to the payment of any severance,
retention, bonus or other similar payment to any Person, one condition to the
payment or acceleration of which is the Company entering into this Agreement
or
the consummation of any of the transactions contemplated hereby; or
(l) any
other
agreement (or group of related Contracts with the same third party) to the
extent not otherwise disclosed in the Disclosure Schedule that is material
to
the Company .
Schedule
3.10(l)
attached
hereto provides a form of the Company’s and DDI LLC’s standard customer Contract
and sets forth a list of the top five customer Contracts which deviate (other
than with respect to prices, payment amounts or payment or delivery schedules)
in any material respect from the Company’s and DDI LLC’s standard form. Each
Contract to which DDI LLC was a party immediately prior to the date hereof
has
validly assigned to the Company.
Each
Contract disclosed in the Disclosure Schedule or required to be disclosed
pursuant to this Section 3.10, each Real Property Lease and each other Contract
to which the Company or DDI LLC is a party or otherwise bound relating to any
Intellectual Property that is material to the business of the Company or DDI
LLC
is a valid and binding agreement of the Company and, to the Company's Knowledge,
is in full force and effect in accordance with its terms, and neither the
Company nor, to the Company’s Knowledge, any other party thereto is in default
or breach in any material respect under the terms of any of the foregoing
Contracts (a “default”
being
defined for purposes hereof as an actual default or event of default or the
existence of any fact or circumstance which would, upon receipt of notice or
passage of time, constitute a default or right of termination), nor will the
consummation of the transactions contemplated by this Agreement give rise to
any
such default or breach. No party to any of the foregoing Contracts has exercised
any termination rights with respect thereto, and no party has given notice
of
any significant dispute with respect to any of the foregoing Contract. True
and
complete copies of each of the Contracts described in this paragraph have been
made available to Parent.
As
used
in this Agreement, a “Contract”
shall
mean any agreement, understanding, contract, deed, mortgage, lease, sublease,
license, sublicense, instrument, commitment, promise, undertaking or other
binding arrangement, whether written or oral.
13
3.11. Benefit
Plans.
(a) For
purposes of this Agreement, the term “Company
Employee Plan”
or
“Plan”
means
any employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”),
whether or not subject to ERISA), any other bonus, profit sharing, compensation,
pension, retirement, “401(k),” “SERP,” severance, savings, deferred
compensation, fringe benefit, insurance, welfare, post-retirement health or
welfare benefit, health, life, stock option, stock purchase, restricted stock,
tuition refund, service award, company car or car allowance, scholarship,
housing or living allowances, relocation, disability, accident, sick pay, sick
leave, accrued leave, vacation, holiday, termination, unemployment, individual
employment, consulting, executive compensation, incentive, commission, payroll
practices, retention, change in control, non competition, other material plan,
agreement, policy, trust fund or arrangement (whether written or unwritten,
insured or self-insured) providing compensation or benefits, and any plan
subject to Sections 125, 127, 129, 137 or 423 of the Code, currently
maintained, sponsored or contributed to by the Company or DDI LLC or any trade
or business, whether or not incorporated, that together with the Company would
be deemed to be a “single employer” within the meaning of Section 4001(b) of
ERISA (an “ERISA
Affiliate”)
or to
which the Company or DDI LLC or any ERISA Affiliate is a party, or to which
the
Company or an ERISA Affiliate had, has or will have any liability. Each Plan
is
in writing. Schedule
3.11
attached
hereto includes a true and complete list of all Plans, and the Company has
provided or made available to Parent a complete copy of each Plan (or, in the
case of any unwritten Plan, descriptions of the material terms thereof) as
well
as, if applicable, a copy of each trust or other funding arrangement, each
summary plan description and summary of material modifications, and the most
recent application for determination letter submitted to the IRS and the most
recent determination letter received from the IRS. The Company has delivered
to
Parent true and complete copies of all Form 5500 Series annual reports for
each
Plan, together with all schedules, attachments, and related opinions and copies
of any correspondence from or to the IRS, the Department of Labor or other
U.S.
government department or agency relating to an audit or penalty assessment
with
respect to any Plan or relating to requested relief from any liability or
penalty relating to any Plan.
(b) The
Company, DDI LLC and each ERISA Affiliate is and has been in compliance with
its
obligations under the terms of each Plan.
(c) Each
Plan
and each funding vehicle related to such Plan is currently in compliance in
all
material respects with, and has been administered and operated in compliance
with, its terms and all applicable statutes, orders, rules and regulations.
Each
Plan which is intended to be a “qualified plan” as described in Section 401(a)
of the Code has been determined by the IRS to so qualify, and there are no
facts
which might adversely affect such qualification.
(d) Neither
the Company nor its ERISA Affiliates nor DDI LLC maintain, sponsor or contribute
to any single employer plan (as such term is defined in Section 4001(b) of
ERISA) subject to Title IV of ERISA or any “multiemployer plan” (as such term is
defined in Section 3(37) of ERISA), nor have they incurred any material
liability, including, without limitation, withdrawal liability, with respect
to
any such Plan that remains unsatisfied.
(e) No
Plan
is funded by, associated with or related to a “voluntary employees’ beneficiary
association” within the meaning of Section 501(c)(9) of the Code. No Plan is or
has been subject to Section 302 or Title IV of ERISA.
(f) The
Company and DDI LLC have made or will accrue prior to the Closing Date all
payments and contributions (including insurance premiums) due and payable as
of
the Closing Date to each Plan as required to be made under the terms of such
Plan.
(g) With
respect to all Plans and related trusts, there are no “prohibited transactions,”
as that term is defined in Section 406 of ERISA or Section 4975 of the Code,
that have occurred which could subject any Plan, related trust or party dealing
with any such Plan or related trust to any tax or penalty on prohibited
transactions imposed by Section 501(i) of ERISA or Section 4975 of the
Code.
14
(h) There
are
no actions, suits, arbitrations or claims (other than routine claims for
benefits by employees of the Company or DDI LLC, or beneficiaries or dependents
of such employees arising in the normal course of operation of a Plan) pending,
or to the Knowledge of the Company, threatened, with respect to any Plan or
any
fiduciary or sponsor of a Plan with respect to their duties under such Plan
or
the assets of any trust under any such Plan.
(i) The
Company and DDI LLC have complied in all material respects with the health
care
continuation requirements of Section 601, et. seq. of ERISA with respect to
employees and their spouses, former spouses and dependents.
(j) Neither
the Company nor DDI LLC has any obligations under any Plan to provide
post-retirement medical benefits to any employee or any former employee of
the
Company other than statutory liability for providing group health plan
continuation coverage under Part 6 of Title I of ERISA and Section 4980B of
the
Code or applicable state law.
(k) Neither
the negotiation or execution of this Agreement, nor the consummation of the
transactions contemplated by this Agreement will, either alone or in combination
with another event, (i) entitle any current or former employee, officer or
consultant of the Company or DDI LLC or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment or additional rights, except
as
expressly provided in this Agreement, or (ii) accelerate the time of payment
or
vesting, or increase the amount of compensation (including equity compensation)
due any such employee, officer or consultant.
(l) Neither
the Company nor DDI LLC is a party to, or otherwise obligated under, any
contract, agreement, plan or arrangement covering any person that, individually
or collectively, could give rise to the payment of any amount that would not
be
deductible by Parent, the Company or any of their respective affiliates by
reason of Section 280G of the Code or that could be subject to Section 4999
of
the Code.
(m) Each
Company Employee Plan which is subject to the requirements of Section 409A
of
the Code has been adopted in good faith compliance with such Section and the
guidance issued by the Department of Treasury thereunder to date. Each Option
has been granted by the Board of Directors of the Company on the date the Board
met and was granted with an exercise price equal to no less than one hundred
percent of the fair market value per share of Company Common Stock on the date
of grant.
3.12. Intellectual
Property.
(a) Schedule
3.12(a)
attached
hereto sets forth true, complete and correct lists of the Intellectual Property
(as defined below), both U.S. and foreign, that is owned by the Company as
of
the date of this Agreement, along with the record owner of each such item of
Intellectual Property, the jurisdiction in which each such item of Intellectual
Property has been registered or filed and the applicable registration,
application or serial number or similar identifier. All of the Intellectual
Property that was owned by DDI LLC immediately prior to the date of this
Agreement has been validly and fully contributed to the Company, and DDI LLC
has
not retained any rights thereto.
(b) Other
than (i) inbound “shrink-wrap” and similar publicly-available commercial binary
code end-user licenses and (ii) outbound “shrink-wrap” licenses in the form set
forth on Section
3.12(b)
of the
Disclosure Schedule, Schedule
3.12(b)
attached
hereto lists all contracts, licenses and agreements to which the Company is
a
party with respect to any Intellectual Property, including all licenses of
Intellectual Property granted to or by the Company and all assignments of
Intellectual Property to or by the Company. All such contracts, licenses and
agreements are in full force and effect, and neither the Company nor DDI LLC
is
in material breach of any of the foregoing contracts, licenses or agreements
and, to the Company’s Knowledge, no other party to any such contract, license or
agreement is in breach thereof or has failed to perform thereunder. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of such contracts, licenses and agreements. Following the Closing
Date, both the Surviving Corporation will be permitted to exercise all of the
Company’s and DDI LLC’s rights under such contracts, licenses and agreements to
the same extent the Company would have been able to had the transactions
contemplated by this Agreement not occurred (but the transactions contemplated
by the Contribution Agreement had occurred) and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Company or DDI LLC would otherwise be required to
pay.
15
(c) Schedule
3.12(c)
attached
hereto lists all contracts, licenses and agreements between the Company and
any
other person wherein or whereby the Company or DDI LLC have agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or provide
a
right of rescission or similar right with respect to the infringement by the
Company or such other person of the Intellectual Property of any person other
than the Company.
(d) No
government funding, facilities of a university, college, other educational
institution or research center or funding from third parties (other than equity
or debt funding from Company Securityholders and financial lending institutions)
was used in the development of any Intellectual Property owned by the Company
or
DDI LLC or Intellectual Property purported to be owned by the Company or DDI
LLC. To the Knowledge of the Company, no current or former employee, consultant
or independent contractor of the Company or DDI LLC, who was involved in, or
who
contributed to, the creation or development of any Company Intellectual Property
or Intellectual Property purported to be owned by the Company or DDI LLC, has
performed services for the government, university, college, or other educational
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services
for
the Company.
(e) The
Company has provided to Parent a complete and accurate list of all material
and
replicable failures of Company software as currently made commercially available
by the Company in the ordinary course of Company’s or DDI LLC’s business to
materially conform to its user documentation in ordinary use.
(f) For
purposes of this Agreement, “Intellectual
Property”
shall
mean (i) trademarks, service marks, trade names, slogans, logos, trade dress,
internet domain names and other similar designations of source or origin,
together with all goodwill, registrations, applications, renewals and extensions
related to the foregoing; (ii) patents, utility, models and industrial design
registrations or applications (including without limitation any continuations,
divisionals, continuations-in-part, provisionals, renewals, reissues,
re-examinations, substitutions, extensions and applications for any of the
foregoing); (iii) copyrights, copyrightable subject matter and moral rights
(including without limitation any registrations, applications, renewals,
extensions and reversions for any of the foregoing); (iv) mask works rights;
(v)
trade secrets and other confidential information, know-how, technology,
proprietary processes, formulae, inventions, compositions, techniques, technical
data and information, procedures, databases, algorithms, models, methodologies,
customer lists, supplier lists, pricing and cost information, and business
and
marketing plans and proposals; and (vi) and computer programs, including any
and
all software implementation of algorithms, models and methodologies (whether
in
source code, object code or other form), databases, compilations, descriptions,
flow-charts and other work product to design, plan, organize and develop any
of
the foregoing, screens, user interfaces, report formats, firmware, development
tools, templates, menus, buttons and icons, and all documentation, including
user manuals and other training documentation, related to any of the foregoing;
in each of the foregoing subsections (i) through (vi) used in, held for use
or necessary for the conduct of the business of the Company, as currently
conducted and as planned to be conducted, or the business of DDI LLC as
conducted immediately prior to the date hereof, whether such Intellectual
Property is owned by the Company or a third party.
16
3.13. Accounts
Receivable.
All of
the accounts and notes receivable of the Company or DDI LLC, whether reflected
on the Balance Sheet or arising since the date of the Balance Sheet, have arisen
from bona fide transactions in the ordinary course of business consistent with
past practices and are valid, genuine, and to the Knowledge of the Company,
subject to the allowance for doubtful accounts set forth therein, are fully
collectible in the aggregate amount thereof; provided,
that
the foregoing shall not be construed as a guarantee of such
collectibility.
3.14. Government
Funding.
Neither
the Company nor DDI LLC have applied for or received any financial assistance
from any supranational, national, local or foreign Governmental
Authority.
3.15. Insurance. Schedule
3.15
attached
hereto contains a complete and correct list as of the date hereof of all
insurance policies maintained by or on behalf of the Company. Such list includes
the type of policy, form of coverage, policy number and insurer, coverage dates,
named insured, limit of liability and premium and deductible amounts. True
and
complete copies of each listed policy have been made available to Parent. Such
policies are in full force and effect, all premiums due thereon have been paid
and the Company and DDI LLC have complied in all material respects with the
provisions of such policies. Neither the Company nor DDI LLC have received
any
notices from any issuer of any of their insurance policies canceling or amending
any policies listed in Schedule
3.15
attached
hereto, increasing any deductibles or retained amounts thereunder, or increasing
premiums payable thereunder. There is no claim by the Company or DDI LLC pending
under any of such policies as to which coverage has been denied or disputed
by
the underwriters or in respect of which the underwriters have reserved their
rights. Neither the Company nor DDI LLC nor any affiliate thereof has ever
maintained, established, sponsored, participated in or contributed to any
self-insurance plan.
3.16. Personnel.
(a) Schedule
3.16(a)
attached
hereto sets forth a list of all employees, consultants or independent
contractors of the Company as of the date hereof, (which also represents all
employees, consultants or independent contractors of DDI LLC immediately prior
to the date hereof) including, as of such date, their title, then current base
salary or other compensation rate as well as any bonus paid for the fiscal
year
ended December 31, 2007 and any accrued and unpaid bonus scheduled for or paid
or agreed to be paid to them by the Company for any future period. Schedule
3.16(a)
attached
hereto also sets forth a list of all independent contractors and consultants
of
the Company or DDI LLC who received more than $30,000 with respect to services
provided during 2007.
(b) The
Company and DDI LLC comply in all material respects with all Legal Requirements
relating to the employment of labor, including all such Legal Requirements
relating to wages, hours, WARN and any similar state or local “mass
layoff”
or
“plant
closing”
Legal
Requirement, collective bargaining, discrimination, civil rights, safety and
health, workers’ compensation and the collection and payment of withholding
and/or social security taxes and any similar tax. There has been no
“mass
layoff”
or
“plant
closing”
(as
defined by WARN) with respect to the Company within the six (6) months prior
to
Closing. “WARN”
means
the Worker Adjustment and Retraining Notification Act of 1988, as
amended.
(c) Neither
the Company nor DDI LLC is subject to any collective bargaining agreement or
other labor union contract and no employee of the Company is represented by
a
labor union. There is not pending or, to the Company’s Knowledge, threatened,
any picketing, strike, labor dispute, slowdown, lockout, walkout, work stoppage
or other similar labor trouble involving employees of the Company or DDI LLC,
and no union organizing activities are taking place or have taken place with
respect to such employees.
(d) To
the
Company’s Knowledge, none of the Company’s officers or employees or consultants
intend to terminate his or her relationship with the Company for any reason,
including, without limitation, as a result of the transactions contemplated
hereby.
17
3.17. Litigation.
Except
as disclosed in Schedule
3.17
attached
hereto, there is no (a) action, suit, claim, charge, cause of action or suit
(whether in contract or tort or otherwise), litigation (whether at law or in
equity, whether civil or criminal), controversy, assessment, arbitration,
investigation, hearing, complaint, demand or other proceeding to, from, by
or
before any arbitrator, court, tribunal or other Governmental Authority
(collectively, “Actions”)
pending, or to the Company’s Knowledge, threatened against or affecting the
Company or DDI LLC, (b) Action, to the Company’s Knowledge, pending or
threatened against or affecting any of the material assets of the Company or
DDI
LLC, or the Merger or the other transactions contemplated hereby, (c)
governmental inquiry or investigation pending or, to the Company’s Knowledge,
threatened against or affecting the Company or DDI LLC (including, without
limitation, any inquiry as to the qualification of the Company or DDI LLC to
hold or receive any license or other Permit), (d) to the Company’s Knowledge,
governmental inquiry or investigation pending or threatened against or affecting
any of the material assets of the Company or DDI LLC, or (e) to the Company’s
Knowledge, any Actions pending or threatened against any Related Party in
connection with the business of the Company or DDI LLC and there is no
reasonable basis for any of the foregoing. Neither the Company nor DDI LLC
is in
default with respect to any order, writ, injunction or decree of any
Governmental Authority served upon the Company or DDI LLC or that exists to
the
Knowledge of the Company. There is no action or suit by the Company or DDI
LLC
pending, threatened or contemplated by the Company against any other
Person.
3.18. Environmental
Matters.
The
Company and DDI LLC are and have been in compliance with all Environmental
Laws;
(ii) there has been no release or threatened release of any pollutant,
contaminant or toxic or hazardous material, substance or waste, or petroleum
or
any fraction thereof, (each a “Hazardous
Substance”)
on,
upon, into or from any site currently or heretofore owned, leased or otherwise
used by the Company; (iii) there have been no Hazardous Substances generated
by
the Company or DDI LLC that have been disposed of, or come to rest at, any
site
that has been included in any published U.S. federal, state or local “superfund”
site list or any other similar list of hazardous or toxic waste sites published
by any Governmental Authority within or outside the United States; (iv) there
are no underground storage tanks located on, no polychlorinated biphenyls
(“PCBs”)
or
PCB-containing equipment used or stored on, and no hazardous waste as defined
by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned, leased or otherwise used by the Company or DDI LLC, except for the
storage of hazardous waste in compliance with Environmental Laws; and (v) the
Company has made available to Parent true and correct copies of all material
environmental records, reports, notifications, certificates of need, permits,
pending permit applications, correspondence, engineering studies and
environmental studies or assessments in the possession of the Company or any
of
its representatives or advisors.
For
purposes of this Agreement, “Environmental
Laws”
means
any Legal Requirement (whether domestic or foreign) relating to (i) releases
or
threatened release of Hazardous Substances, (ii) pollution or protection of
employee health or safety, public health or the environment or (iii) the
manufacture, handling, transport, use, treatment, storage, or disposal of
Hazardous Substances.
3.19. Compliance
with Instruments; Laws; Governmental Authorizations.
(a) The
Company is not and the Company has not been, in violation of any term or
provision of the Company Organizational Documents. The Company and DDI LLC
have
complied in all material respects with all terms and provisions of all Permits
and Legal Requirements. Neither the Company nor DDI LLC nor, to the Company’s
Knowledge, any Related Person, is under investigation with respect to, has
been
threatened to be charged with, or has been given notice of, any violation of
any
Legal Requirement. All permits, concessions, grants, franchises, licenses and
other governmental authorizations and approvals (collectively, “Permits”)
(i)
pursuant to which the Company currently operates or holds any interest in any
of
its properties, or (ii) which is required for the operation of the Company’s
business as currently conducted or the holding of any such interest, have been
issued or granted to the Company, and all such Permits are in full force and
effect and constitute all Permits required to permit the Company to operate
or
conduct its business or hold any interest in its properties or
assets.
18
(b) The
Company and DDI LLC have each conducted their resepctive transactions in
material compliance with applicable provisions of U.S. law, including the United
States export control laws and regulations and U.S. economic sanctions
laws.
(c) Neither
the Company nor DDI LLC (nor, to the Company’s Knowledge, each of its officers,
directors, agents, employees and other Persons associated with or acting on
its
behalf) has directly or indirectly, taken any action which would cause it to
be
in violation of the U.S. Foreign Corrupt Practices Act , as amended, or any
rules or regulations thereunder, including by offering or conveying, directly
or
indirectly (such as through an agent), anything of value to obtain or retain
business or to obtain any improper advantage, including any bribe, rebate,
payoff, influence payment, kickback or other similar unlawful payment to a
foreign government official, candidate for office, or political party or
official of a political party.
3.20. Banking
Relationships. Schedule
3.20
attached
hereto sets forth a true and complete list of the name and location of each
bank, brokerage or investment firm, savings and loan or similar financial
institution in which the Company has an account or a safe deposit box or other
arrangement, the account or other identifying numbers thereof and the names
of
all Persons authorized to draw on or who have access to such account or safe
deposit box or such other arrangement. All such accounts or other arrangements
of DDI LLC immediately prior to the date hereof have been transferred to the
Company. There are no outstanding powers of attorney executed by or on behalf
of
the Company.
3.21. Books
and Records.
The
minute books of the Company and DDI LLC contain complete and accurate records
of
all meetings and other corporate actions of their respective stockholders and
the board of directors and committees thereof. The stock records of the Company
and DDI LLC are correct and complete and reflect all issuances, transfers,
repurchases and cancellations of shares of capital stock of the Company and
DDI
LLC, respectively. The Company has made available to Parent true and complete
copies of (a) the Company Organizational Documents, (b) all documents relating
to the transactions contemplated by the Contribution Agreement, (c) all minute
books (containing the records of meetings of stockholders, the board of
directors and any committees of the board of directors to date) of the Company,
(d) all stock certificate and stock record books of the Company and (e) any
similar records or documents of the Company. Except as disclosed in Schedule
3.21
attached
hereto, neither the Company nor DDI LLC have any prior names, and since the
date
of its incorporation or formation has not conducted business under any name
other than the current name of the Company.
3.22. Brokers
and Finders; Existing Discussions.
Except
as disclosed in Schedule
3.22,
no
broker, financial advisor, finder or investment banker or other Person is
entitled to any broker’s, financial advisor’s, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or DDI
LLC.
3.23. Vote
Required; Notices
(a) The
affirmative vote of the holders of at least a majority of the outstanding
Company Common Stock constitute the Requisite Stockholder Approval and are
the
only votes of the holders of any of the Company’s capital stock necessary to
approve this Agreement and the transactions contemplated hereby, and have been
obtained in accordance with the terms of the Charter and the DGCL on or prior
to
the date hereof.
(b) Prior
to
the Effective Time, the Company will have notified the holders of Company Stock,
Options and Warrants with respect to the transactions contemplated hereby as
and
to the extent required by the terms and conditions of the Company Organizational
Documents, the Option Plans, the DGCL, and other agreements of instruments
governing such securities.
(c) Any
information provided to the Company Stockholders in connection with the
solicitation of their consent to, and adoption of, this Agreement and the Merger
will not contain, at or prior to the Effective Time, any untrue statement of
a
material fact and did or will comply with any applicable requirement of the
DGCL.
19
3.24. Anti-Takeover
Statute Not Applicable.
No
“business combination,” “fair price,” “moratorium,” “control share acquisition”
or other similar anti-takeover statute or regulation, including, but not limited
to, Section 203 of the DGCL, or anti-takeover provision in the Company
Organizational Documents is applicable to the Company, any shares of Company
Stock or other Company Securities, this Agreement, the Merger or any of the
other transactions contemplated by this Agreement.
3.25. Certain
Relationships and Related Transactions.
Except
as provided in Section 3.25
of the
Disclosure Schedule, no Related Party is indebted to the Company or DDI LLC.
No
Related Party owns any asset used in, or necessary to, the business of the
Company or DDI LLC. Except as described in Section 3.25
of the
Disclosure Schedule, there is no transaction involving the Company or DDI LLC
of
the nature described in Item 404 of Regulation S K under the Securities Act.
To
the Company’s Knowledge, no Related Person owns any direct or indirect interest
in, or controls or is a director, officer, employer or partner of, of consultant
to, a competitor of the Company or DDI LLC.
3.26. Disclosures.
The
information prepared or provided by the Company to the Parent or Merger Sub
in
connection with this Agreement or the Merger does not contain any untrue
statement of a material fact or omits to state a material fact necessary to
make
the statements therein (in light of the circumstances under which they were
made) not misleading.
SECTION
4. Representations
and Warranties by Parent and Merger Sub.
Parent
and Merger Sub (collectively known as the “Parent
Parties”)
represent and warrant to the Company that the statements in this Section 4
are
true, complete and correct as of the date hereof (unless the particular
statement speaks expressly as of another date, in which case it is true,
complete and correct as of such other date), subject, in any case, to the
exceptions provided in the Disclosure Schedule. Any exception or qualification
set forth in the Disclosure Schedule with respect to a particular representation
and warranty shall be deemed to be an exception or qualification with respect
to
any other applicable representations and warranties to which such exception
or
qualification is reasonably apparent on its face to be applicable, whether
or
not such exception or qualification is so numbered.
4.1. Organization
and Standing.
Except
as disclosed on Schedule
4.1
attached
hereto, each of Parent, its subsidiaries and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
20
4.2. Capitalization.
Schedule 4.2 attached hereto sets out a list of the stockholders in a
capitalization table of the Parent, including a complete list of authorized
and
outstanding Parent ADRs. The authorized capital stock of the Parent consists
of
110 million shares of common stock, of which on the date hereof 50,938,247
shares are issued and outstanding. All of the outstanding capital stock of
Merger Sub is owned, beneficially and of record, by Parent. All of the issued
and outstanding shares of Parent Parties’ Stock have been, duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in this
Section 4.2, no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Parent Parties is authorized or outstanding, other than the Options
and Warrants set forth in Schedule 4.2 attached hereto. From and after the
Effective Time, no holder of any Option or Warrant will have the right to any
consideration with respect thereto, except as set forth in this Agreement.
Other
than upon the exercise of currently outstanding Options and Warrants, the Parent
Parties do not have any obligation (whether written, oral, contingent or
otherwise) to issue any subscription, warrant, option, convertible security
or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Parent Parties.
Except as set forth in their respective charters, the Parent Parties do not
have
any obligation (whether written, oral, contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof. There are no outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to the Parent Parties. All of the issued
and outstanding shares of capital stock of the Parent Parties have been offered,
issued and sold by the Parent Parties without violation of any Legal
Requirements applicable to the Parent Parties’ offer, issuance and sale of such
securities.
4.3. Subsidiaries.
Except
as described in Schedule
4.3
attached
hereto, Parent does not have any Subsidiaries other than Merger Sub, and Parent
does not own or control, directly or indirectly, any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
equity or similar interest in, or have any commitment or obligation to invest
in, purchase any securities or obligations of, fund, guarantee, contribute
or
maintain the capital of or otherwise financially support any corporation,
partnership, joint venture or other business association or entity. Each former
Subsidiary that is no longer in existence has been duly dissolved in accordance
with its charter documents and the laws of the jurisdiction of its incorporation
or organization and there are no outstanding liabilities or obligations
(outstanding, contingent or otherwise), including Taxes, with respect to any
such entity.
4.4. Parent
Financial Statements; Liabilities.
(a) Attached
hereto as Schedule
4.4
are the
Parent Parties’ Consolidated audited financial statements (including balance
sheets and statements of operations) for December 31, 2006 and 2005, and the
years then ended (collectively, the “Parent
Financial Statements”):
The
Financial Statements were in each case prepared in accordance with GAAP,
consistently applied throughout the periods presented without modification
of
the accounting principles used in the preparation thereof throughout the periods
presented. The Parent Financial Statements (i) are in accordance with the
books and records of the Parent Parties, and (ii) present fairly the financial
condition and results of operations of the Parent Parties as of the dates and
for the periods indicated.
(b) The
Parent Parties have in place a system of internal accounting controls that
is
sufficient to provide reasonable assurance regarding the reliability of the
Parent Parties’ financial statements (including the Parent Financial
Statements), including reasonable assurance that transactions are recorded
as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and that receipts and expenditures
are
being made only in accordance with authorizations of management (such systems
and processes are herein referred to as the “Controls”).
Neither the Parent Parties’ employees nor the Parent Parties’ independent
auditors have identified or made the Parent Parties aware of any complaint,
allegation, deficiency, assertion or claim, whether written or oral, regarding
the Controls or the Parent Financial Statements. To the Knowledge of the Parent
Parties, there have been no instances of fraud, whether or not material, that
occurred during any period covered by the Parent Financial Statements. The
Parent Parties have in place a revenue recognition policy consistent with GAAP.
21
(c) Except
as
set forth in Schedule
4.4(c)
attached
hereto, as of the date hereof and as of the Effective Time, the Parent Parties
have not and at the Effective Time will not have incurred, directly or
indirectly, any Indebtedness, obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person, except for those obligations of
the
Parent (i) in the ordinary course of business as reflected in the Parent
Financial Statements; and (ii) obligations and liabilities incurred after
May 31, 2008 in the ordinary course of business, and (iii) under that
certain Release Agreement dated as of June 23, 2008 by and among the Company,
Xxxxx Micro Software, Inc. (“Xxxxx Micro”), IS Acquisition Sub, Inc., Parent,
and certain of Parent’s subsidiaries (the “Release Agreement”). Pursuant to the
Release Agreement, upon consummation of the Merger, the Company will cause
Parent and certain of its subsidiaries to deliver to Xxxxx Micro $500,000 and
release certain claims against Xxxxx Micro in exchange for the release of all
claims by Xxxxx Micro against Parent and its subsidiaries pursuant to that
certain asset purchase agreement between Parent, Xxxxx Micro, and the other
parties thereto dated February 11, 2007, as amended April 4, 2007. Except as
set
forth in Schedule
4.4(c)
attached hereto, the consummation of this transaction will not give rise to
any
severances, bonuses, payment obligations or other liabilities except for legal
and accounting fees.
4.5. Authority
for Agreement.
(a) Each
of
the Parent Parties have all necessary corporate power and authority to execute
and deliver this Agreement and each instrument required hereby to be executed
and delivered at Closing and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by the Parent Parties of this Agreement and each
instrument required hereby to be executed and delivered by them at Closing
and
the consummation by the Parent Parties of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action, and
no
other corporate proceedings on the part of the Parent Parties are necessary
to
authorize this Agreement or any instrument required hereby to be executed and
delivered by them at the Closing or to consummate the Merger. This Agreement
has
been and each instrument required hereby to be delivered by the Parent Parties
at the Closing will be duly and validly executed and delivered by the Parent
Parties and, assuming the due authorization, execution and delivery by the
Company and the Representative, constitutes a legal, valid and binding
obligation of the Parent Parties, enforceable against the Parent Parties in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
or
similar laws of general application affecting the rights and remedies of
creditors, and to general equity principles. Notwithstanding the foregoing,
the
parties hereto understand and agree that Parent has not received the Parent
Shareholder Approval as of the date of this Agreement, and the failure to have
obtained the Parent Shareholder Approval shall not be deemed a breach of any
of
the representations set forth in this Section 4.5(a) or elsewhere in this
Agreement.
(b) The
execution and delivery of this Agreement by the Parent Parties, and each
instrument required hereby to be executed and delivered by the Parent Parties
at
the Closing, the compliance with the provisions of this Agreement and each
such
instrument by the Parent Parties and the consummation by the Parent Parties,
of
the transactions contemplated hereby or thereby, will not (i) conflict with
or
violate the Certificate of Incorporation or the Bylaws of Parent, each as
amended to date and currently in effect, or the Certificate of Incorporation
or
the Bylaws of Merger Sub, each as amended to date and currently in effect,
or
(ii) violate any Legal Requirement applicable to Parent or Merger Sub or any
of
their respective properties or assets.
4.6. Taxes.
(a) (i)
All
Tax Returns required to be filed by or on behalf of the Parent Parties have
been
duly and timely filed with the appropriate Taxing Authority in all jurisdictions
in which such Tax Returns are required to be filed (after giving effect to
any
valid extensions of time in which to make such filings), and all such Tax
Returns are true, complete and correct in all material respects; and (ii) all
Taxes payable by or on behalf of the Parent Parties have been fully and timely
paid. With respect to any period for which such Tax Returns have not yet been
filed or for which such Taxes are not yet due or owing, the Parent Parties
have
made due and sufficient accruals for such Taxes on the Parent’s Statement of
Cash and Accounts Payable as of the date hereof, attached as Schedule
4.6(a)
hereto.
(the “Parent
Balance Sheet”).
All
required estimated Tax payments sufficient to avoid any underpayment penalties
or interest have been made by or on behalf of the Parent
Parties.
22
4.7. Benefit
Plans.
(a) For
purposes of this Agreement, the term “Parent
Employee Plan”
or
“Plan”
means
any employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”),
whether or not subject to ERISA), any other bonus, profit sharing, compensation,
pension, retirement, “401(k),” “SERP,” severance, savings, deferred
compensation, fringe benefit, insurance, welfare, post-retirement health or
welfare benefit, health, life, stock option, stock purchase, restricted stock,
tuition refund, service award, company car or car allowance, scholarship,
housing or living allowances, relocation, disability, accident, sick pay, sick
leave, accrued leave, vacation, holiday, termination, unemployment, individual
employment, consulting, executive compensation, incentive, commission, payroll
practices, retention, change in control, non competition, other material plan,
agreement, policy, trust fund or arrangement (whether written or unwritten,
insured or self-insured) providing compensation or benefits, and any plan
subject to Sections 125, 127, 129, 137 or 423 of the Code, currently
maintained, sponsored or contributed to by the Parent Parties or any trade
or
business, whether or not incorporated, that together with the Parent Parties
would be deemed to be a “single employer” within the meaning of Section 4001(b)
of ERISA (an “ERISA
Affiliate”)
or to
which the Parent Parties or any ERISA Affiliate is a party, or to which the
Parent Parties or an ERISA Affiliate had, has or will have any liability. Each
Plan is in writing. Schedule
4.7
attached
hereto includes a true and complete list of all Plans, and the Parent Parties
have provided or made available to the Company a complete copy of each Plan
(or,
in the case of any unwritten Plan, descriptions of the material terms thereof)
as well as, if applicable, a copy of each trust or other funding arrangement,
each summary plan description and summary of material modifications, and the
most recent application for determination letter submitted to the IRS and the
most recent determination letter received from the IRS. The Parent Parties
have
delivered to the Company true and complete copies of all Form 5500 Series annual
reports for each Plan, together with all schedules, attachments, and related
opinions and copies of any correspondence from or to the IRS, the Department
of
Labor or other U.S. government department or agency relating to an audit or
penalty assessment with respect to any Plan or relating to requested relief
from
any liability or penalty relating to any Plan.
(b) The
Parent Parties and each ERISA Affiliate is and has been in compliance with
its
obligations under the terms of each Plan.
(c) Each
Plan
and each funding vehicle related to such Plan is currently in compliance in
all
material respects with, and has been administered and operated in compliance
with, its terms and all applicable statutes, orders, rules and regulations.
Each
Plan which is intended to be a “qualified plan” as described in Section 401(a)
of the Code has been determined by the IRS to so qualify, and there are no
facts
which might adversely affect such qualification.
(d) Neither
the Parent Parties nor their ERISA Affiliates maintain, sponsor or contribute
to
any single employer plan (as such term is defined in Section 4001(b) of ERISA)
subject to Title IV of ERISA or any “multiemployer plan” (as such term is
defined in Section 3(37) of ERISA), nor have they incurred any material
liability, including, without limitation, withdrawal liability, with respect
to
any such Plan that remains unsatisfied.
(e) No
Plan
is funded by, associated with or related to a “voluntary employees’ beneficiary
association” within the meaning of Section 501(c)(9) of the Code. No Plan is or
has been subject to Section 302 or Title IV of ERISA.
(f) The
Parent Parties have made or will accrue prior to the Closing Date all payments
and contributions (including insurance premiums) due and payable as of the
Closing Date to each Plan as required to be made under the terms of such
Plan.
23
(g) With
respect to all Plans and related trusts, there are no “prohibited transactions,”
as that term is defined in Section 406 of ERISA or Section 4975 of the Code,
that have occurred which could subject any Plan, related trust or party dealing
with any such Plan or related trust to any tax or penalty on prohibited
transactions imposed by Section 501(i) of ERISA or Section 4975 of the
Code.
(h) There
are
no actions, suits, arbitrations or claims (other than routine claims for
benefits by employees of the Parent Parties, beneficiaries or dependents of
such
employees arising in the normal course of operation of a Plan) pending, or
to
the Knowledge of the Parent Parties, threatened, with respect to any Plan or
any
fiduciary or sponsor of a Plan with respect to their duties under such Plan
or
the assets of any trust under any such Plan.
(i) The
Parent Parties have complied in all material respects with the health care
continuation requirements of Section 601, et. seq. of ERISA with respect to
employees and their spouses, former spouses and dependents.
(j) The
Parent Parties do not have any obligations under any Plan to provide
post-retirement medical benefits to any employee or any former employee of
the
Parent Parties other than statutory liability for providing group health plan
continuation coverage under Part 6 of Title I of ERISA and Section 4980B of
the
Code or applicable state law.
(k) Neither
the negotiation or execution of this Agreement, nor the consummation of the
transactions contemplated by this Agreement will, either alone or in combination
with another event, (i) entitle any current or former employee, officer or
consultant of the Parent Parties or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment or additional rights, except
as
expressly provided in this Agreement, or (ii) accelerate the time of payment
or
vesting, or increase the amount of compensation (including equity compensation)
due any such employee, officer or consultant.
(l) The
Parent Parties are not a party to, or otherwise obligated under, any contract,
agreement, plan or arrangement covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by Parent, the Company or any of their respective affiliates by
reason of Section 280G of the Code or that could be subject to Section 4999
of
the Code.
(m) Each
Parent Employee Plan which is subject to the requirements of Section 409A of
the
Code has been adopted in good faith compliance with such Section and the
guidance issued by the Department of Treasury thereunder to date. Each Option
has been granted by the Board of Directors of the Company on the date the Board
met and was granted with an exercise price equal to no less than one hundred
percent of the fair market value per share of Company Common Stock on the date
of the grant.
4.8. Insurance. Schedule
4.8
attached
hereto contains a complete and correct list as of the date hereof of all
insurance policies maintained by or on behalf of the Parent Parties. Such list
includes the type of policy, form of coverage, policy number and insurer,
coverage dates, named insured, limit of liability and premium and deductible
amounts. True and complete copies of each listed policy have been made available
to the Company. Such policies are in full force and effect, all premiums due
thereon have been paid and the Parent Parties have complied in all material
respects with the provisions of such policies. The Parent Parties have not
received any notices from any issuer of any of their insurance policies
canceling or amending any policies listed in Schedule
4.8
attached
hereto, increasing any deductibles or retained amounts thereunder, or increasing
premiums payable thereunder. There is no claim by the Parent Parties pending
under any of such policies as to which coverage has been denied or disputed
by
the underwriters or in respect of which the underwriters have reserved their
rights. Neither the Parent Parties nor any affiliate thereof has ever
maintained, established, sponsored, participated in or contributed to any
self-insurance plan.
4.9. Personnel.
(a) Schedule
4.9(a)
attached
hereto sets forth a list of all employees, consultants or independent
contractors of the Parent Parties as of the date hereof, including, as of such
date, their title, then current base salary or other compensation rate as well
as any bonus paid for the fiscal year ended December 31, 2007 and any accrued
and unpaid bonus scheduled for or paid or agreed to be paid to them by the
Parent Parties for any future period. Schedule
4.9(a)
attached
hereto also sets forth a list of all independent contractors and consultants
of
the Parent Parties as of the date hereof who received more than $30,000 with
respect to services provided during 2007.
24
(b) The
Parent Parties comply in all material respects with all Legal Requirements
relating to the employment of labor, including all such Legal Requirements
relating to wages, hours, WARN and any similar state or local “mass
layoff”
or
“plant
closing”
Legal
Requirement, collective bargaining, discrimination, civil rights, safety and
health, workers’ compensation and the collection and payment of withholding
and/or social security taxes and any similar tax. There has been no
“mass
layoff”
or
“plant
closing”
(as
defined by WARN) with respect to the Parent Parties within the six (6) months
prior to Closing.
(c) The
Parent Parties are not subject to any collective bargaining agreement or other
labor union contract and no employee of the Parent Parties is represented by
a
labor union. There is not pending or, to the Parent Parties’ Knowledge,
threatened, any picketing, strike, labor dispute, slowdown, lockout, walkout,
work stoppage or other similar labor trouble involving employees of the Parent
Parties, and no union organizing activities are taking place or have taken
place
with respect to such employees.
(d) To
the
Parent Parties’ Knowledge, none of the Parent Parties’ officers or employees or
consultants intend to terminate his or her relationship with the Parent Parties
for any reason, including, without limitation, as a result of the transactions
contemplated hereby.
4.10. Litigation.
Except
as disclosed in Schedule
4.10
attached
hereto, there is no (a) action, suit, claim, charge, cause of action or
suit (whether in contract or tort or otherwise), litigation (whether at law
or
in equity, whether civil or criminal), controversy, assessment, arbitration,
investigation, hearing, complaint, demand or other proceeding to, from, by
or
before any arbitrator, court, tribunal or other Governmental Authority
(collectively, “Actions”)
pending, or to the Parent Parties’ Knowledge, threatened against or affecting
the Parent Parties, (b) Action, to the Parent Parties’ Knowledge, pending or
threatened against or affecting any of the material assets of the Parent
Parties, or the Merger or the other transactions contemplated hereby, (c)
governmental inquiry or investigation pending or, to the Parent Parties’
Knowledge, threatened against or affecting the Parent Parties (including,
without limitation, any inquiry as to the qualification of the Parent Parties
to
hold or receive any license or other Permit), (d) to the Parent Parties’
Knowledge, governmental inquiry or investigation pending or threatened against
or affecting any of the material assets of the Parent Parties, or (e) to the
Parent Parties’ Knowledge, any Actions pending or threatened against any Related
Party in connection with the business of the Parent Parties and there is no
reasonable basis for any of the foregoing. The Parent Parties are not in default
with respect to any order, writ, injunction or decree of any Governmental
Authority served upon the Parent Parties or that exists to the Knowledge of
the
Parent Parties. There is no action or suit by the Parent Parties pending,
threatened or contemplated by the Parent Parties against any other Person.
25
4.11. Environmental
Matters.
The
Parent Parties are and have been in compliance with all Environmental Laws;
(ii)
there has been no release or threatened release of any Hazardous Substance
on,
upon, into or from any site currently or heretofore owned, leased or otherwise
used by the Parent Parties; (iii) there have been no Hazardous Substances
generated by the Parent Parties that have been disposed of, or come to rest
at,
any site that has been included in any published U.S. federal, state or local
“superfund” site list or any other similar list of hazardous or toxic waste
sites published by any Governmental Authority within or outside the United
States; (iv) there are no underground storage tanks located on, no PCBs or
PCB-containing equipment used or stored on, and no hazardous waste as defined
by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned, leased or otherwise used by the Parent Parties, except for the storage
of
hazardous waste in compliance with Environmental Laws; and (v) the Parent
Parties have made available to the Company true and correct copies of all
material environmental records, reports, notifications, certificates of need,
permits, pending permit applications, correspondence, engineering studies and
environmental studies or assessments in the possession of the Parent Parties
or
any of its representatives or advisors.`
4.12. Compliance
with Instruments; Laws; Governmental Authorizations.
(a) The
Parent Parties are not in violation of any term or provision of the Parent
Parties’ Organizational Documents. The Parent Parties have complied in all
material respects with all terms and provisions of all Permits and Legal
Requirements. Neither the Parent Parties nor, to the Parent Parties’ Knowledge,
any Related Person, is under investigation with respect to, has been threatened
to be charged with, or has been given notice of, any violation of any Legal
Requirement. All permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals (collectively, “Permits”)
(i)
pursuant to which the Parent Parties currently operate or hold any interest
in
any of their properties, or (ii) which is required for the operation of the
Parent Parties’ businesses as currently conducted or the holding of any such
interest, have been issued or granted to the Parent Parties, and all such
Permits are in full force and effect and constitute all Permits required to
permit the Parent Parties to operate or conduct its business or hold any
interest in its properties or assets.
(b) The
Parent Parties have conducted their transactions in material compliance with
applicable provisions of U.S. law, including the United States export control
laws and regulations and U.S. economic sanctions laws.
(c) The
Parent Parties (and, to the Parent Parties’ Knowledge, each of its officers,
directors, agents, employees and other Persons associated with or acting on
its
behalf) has not, directly or indirectly, taken any action which would cause
it
to be in violation of the U.S. Foreign Corrupt Practices Act , as amended,
or
any rules or regulations thereunder, including by offering or conveying,
directly or indirectly (such as through an agent), anything of value to obtain
or retain business or to obtain any improper advantage, including any bribe,
rebate, payoff, influence payment, kickback or other similar unlawful payment
to
a foreign government official, candidate for office, or political party or
official of a political party.
4.13. Banking
Relationships. Schedule
4.13
attached
hereto sets forth a true and complete list of the name and location of each
bank, brokerage or investment firm, savings and loan or similar financial
institution in which the Parent Parties have an account or a safe deposit box
or
other arrangement, the account or other identifying numbers thereof and the
names of all Persons authorized to draw on or who have access to such account
or
safe deposit box or such other arrangement. There are no outstanding powers
of
attorney executed by or on behalf of the Parent Parties.
4.14. Brokers
and Finders.
No
broker, financial advisor, finder or investment banker or other Person is
entitled to any broker’s, financial advisor’s, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
4.15. Property
and Sufficiency.
Except
as set forth in Schedule
4.15,
the
Parent Parties have good and marketable title to, or, in the case of leases
of
properties and assets, a valid leasehold interest in, or otherwise has a valid
legal right to use, all of the properties and assets (whether real, personal,
tangible or intangible) (i) reflected on the Parent Balance Sheet (other
than assets sold since the date of the Parent Balance Sheet) or acquired
thereafter and (ii) necessary to conduct all of the businesses and
operations of the Parent Parties as currently conducted, and none of such
properties or assets is subject to any Liens or Security Interest other than
those described in Schedule 4.15
attached
hereto. The Parent Parties do not own any real property.
26
4.16. Disclosures.
The
information prepared or provided by the Parent or Merger Sub to the Company
in
connection with this Agreement or the Merger and any information in the filings
of the Parent or Merger Sub with the Securities and Exchange Commission, do
not
contain any untrue statement of a material fact or omit to state a material
fact
necessary to make the statements therein (in light of the circumstances under
which they were made) not misleading.
SECTION
5. Additional
Agreements.
5.1. Approvals.
Upon
execution of this Agreement, each party to this Agreement shall obtain all
necessary Board and stockholder approvals (except that Parent shall obtain
the
Parent Shareholder Approval following the Effective Time, as contemplated by
Section 16.3). Without limitation to the foregoing, the Company shall take
all
action necessary to obtain the Requisite Stockholder Approval within two days
after the execution of this Agreement.
5.2. Confidentiality;
Access to Information; No Modification of Representations, Warranties or
Covenants.
(a) Confidentiality.
The
parties acknowledge that the Company and Parent have previously executed the
Non-Disclosure Agreement dated March 25, 2008 (the “Confidentiality
Agreement”),
which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms. Each of Parent and the Company will hold, and will cause its
respective affiliates, directors, officers, employees, agents, advisors and
representatives (including, without limitation, attorneys, accountants,
consultants, bankers and financial advisors) to hold any Confidential
Information (as defined in the Confidentiality Agreement) confidential in
accordance with the terms of the Confidentiality Agreement. The parties
acknowledge and agree that the existence of this Agreement, the Disclosure
Schedule, and the documents and instruments contemplated hereby and thereby,
the
terms and conditions hereof and thereof, and transactions contemplated hereby
and thereby, shall constitute “Confidential
Information”
under
the Confidentiality Agreement. In addition, any information obtained from the
Company pursuant to the access contemplated by Section 5.2(b) shall be
subject to the Confidentiality Agreement.
(b) Access
to Information.
The
Company will afford Parent and Parent’s accountants, counsel and other
representatives reasonable access during normal business hours to its premises,
properties, books, records, financial, tax and accounting records (including,
without limitation, the work papers of the Company’s independent accountants),
Contracts, personnel, counsel, financial advisors and auditors, and those of
DDI
LLC, during the period prior to the Effective Time to obtain all information
concerning its business, including, without limitation, the status of product
development efforts, properties, results of operations and personnel for
purposes of this Agreement, as Parent may reasonably request; provided,
however,
that
the Company may restrict the foregoing access to the extent that any applicable
Legal Requirement requires the Company to restrict or prohibit access to any
such properties or information. In addition, any information obtained from
the
Company pursuant to the access contemplated by this Section 5.2(b) shall be
subject to the Confidentiality Agreement.
5.3. Public
Disclosure.
No press
release or any public disclosure, either written or oral, of the transactions
contemplated hereby shall be made by the Company, the Representative or any
officer, director, employee or affiliate under the control of the Company (other
than to the Company Securityholders and the Company’s employees), without the
express prior written consent of Parent. Prior to the Effective Time, no press
release or any public disclosure, either written or oral, of the transactions
contemplated hereby shall be made by Parent or any officer, director, employee
or affiliate under the control of Parent, without providing the Company a
reasonable opportunity to review such release or disclosure.
27
5.4. Representative.
Unless
otherwise required by applicable Legal Requirements, the Representative agrees
that it (and its legal, financial, accounting and other representatives) shall
hold in confidence all non-public information acquired in accordance with the
terms of the Confidentiality Agreement as if the Representative were a party
thereto.
5.5. Regulatory
Filings; Reasonable Efforts.
(a) Regulatory
Filings.
Each of
Parent, Merger Sub and the Company shall coordinate and cooperate with one
another and shall each use all reasonable efforts to comply with, and shall
each
refrain from taking any action that would impede compliance with, all applicable
Legal Requirements, and as soon as reasonably practicable after the date hereof,
each of Parent, Merger Sub and the Company shall (and shall cause each of their
respective affiliates to) obtain or make all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with any
Governmental Authority in connection with the Merger and the transactions
contemplated hereby, including, (i) any filings under any applicable Foreign
Merger Laws and (ii) any filings required under the Securities Act, the Exchange
Act, any applicable state or securities or “blue sky” laws and the securities
laws of any foreign country, or any other applicable Legal Requirement relating
to the Merger. Each of Parent, Merger Sub and the Company will cause all
documents that it is responsible for filing with any Governmental Authority
under this Section 5.5(a) to comply in all material respects with all applicable
Legal Requirements.
(b) Exchange
of Information.
Parent,
Merger Sub and the Company each shall (and shall cause each of their respective
affiliates to) promptly supply the other with any information that is required
in order to effectuate or obtain any filings or other actions pursuant to
Section 5.5(a). Except where prohibited by applicable Legal Requirements, and
subject to the Confidentiality Agreement and any joint defense agreement entered
into between the parties or their counsel, each of Parent, Merger Sub and the
Company shall (and shall cause each of their respective affiliates to) (i)
consult with the others prior to taking a position with respect to any such
filing or other actions, (ii) to the extent reasonably required to permit
appropriate coordination of efforts, permit the others to review and discuss
in
advance, and consider in good faith the views of the others in connection with,
any analyses, appearances, presentations, memoranda, briefs, white papers,
arguments, opinions and proposals before making or submitting any of the
foregoing to any Governmental Authority in connection with any Action in
connection with this Agreement or the transactions contemplated hereby, (iii)
coordinate with the others in preparing and exchanging such information and
(iv) promptly provide the others (and their counsel) with copies of all
filings, presentations or submissions (and a summary of any oral presentations)
made by such party with any Governmental Authority in connection with this
Agreement or the transactions contemplated hereby; provided,
however,
that,
notwithstanding the foregoing, with respect to any such filing, presentation
or
submission, each of Parent, Merger Sub and the Company (and their respective
affiliates) need not supply the others (or their counsel) with copies (or in
case of oral presentations, a summary) to the extent that any applicable Legal
Requirement requires such party or its subsidiaries to restrict or prohibit
access to any such information.
(c) Notification.
Each of
Parent, Merger Sub and the Company will notify the others promptly upon the
receipt of: (i) any comments from any Governmental Authority in connection
with
any filings or other actions made pursuant hereto and (ii) any request by any
Governmental Authority for amendments or supplements to any filings or other
actions made pursuant to, or for information provided to comply in all material
respects with any Legal Requirements. Whenever any event occurs that is required
to be set forth in an amendment or supplement to any filing or other action
made
pursuant to Section 5.5(a), Parent, Merger Sub or the Company, as the case
may
be, will promptly inform the others of such occurrence and cooperate in filing
with the applicable Governmental Authority such amendment or
supplement.
(d) Reasonable
Efforts.
Upon
the terms and subject to the conditions set forth herein, each of the parties
hereto agrees to use all reasonable efforts to take, or cause to be taken,
all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, to consummate and make effective,
in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including, without limitation,
using all reasonable efforts to satisfy the conditions precedent set forth
in
Sections 6, 7 and 8.
28
5.6. Advise
of Changes.
From the
date hereof and continuing until the earlier of the termination of this
Agreement or the Effective Time, Parent and the Company shall promptly advise
the other party in writing to the extent it has Knowledge of (a) any event
or
circumstance that would reasonably be expected to result in the representations
and warranties made by it (and, in the case of Parent, made by Merger Sub)
in
this Agreement becoming untrue or inaccurate in any material respect, (b) the
failure by it (and, in the case of Parent, by Merger Sub) to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement prior
to the Effective Time, (c) any change or event that constitutes a Material
Adverse Effect or (d) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; provided,
however,
that no
such notification will be deemed to prevent or cure any breach of, or inaccuracy
in, amend or supplement any Section of the Disclosure Schedule, or otherwise
disclose an exception to, or affect in any manner, the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties or the Company
Stockholders under this Agreement.
5.7. Cooperation.
Subject
to compliance with applicable Legal Requirements, from the date hereof until
the
Effective Time, the Company shall confer on a regular and frequent basis with
one or more representatives of Parent to report operational matters that are
material and the general status of ongoing operations, in each case with respect
to the Company.
5.8. Employee
Benefit Plans
(a) .
With
respect to each benefit plan, program, practice, policy or arrangement
maintained by Parent Parties in which employees of the Company subsequently
participate, for purposes of determining eligibility, vesting and entitlement
to
benefits, including for severance benefits and vacation entitlement, service
with the Company (or predecessor employers to the extent the Company provides
past service credit) shall be treated as service with Parent Parties, as
applicable; provided
that
such service shall not be recognized for purpose of accruals of benefits or
to
the extent that such recognition would result in a duplication of benefits
or to
the extent that such service was not recognized under the applicable Company
plan.
SECTION
6. Conditions
Precedent to the Obligations of Each Party to Effect the Merger.
The
respective obligations of each party under this Agreement to consummate the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of the following
conditions:
6.1. Stockholder
Approvals.
The
Requisite Stockholder Approval shall have not been rescinded, revoked or
changed.
6.2. No
Order.
No
temporary restraining order, preliminary or permanent injunction or other order
or judgment preventing the consummation of the Merger shall have been issued
by
any court of competent jurisdiction and remain in effect.
6.3. Government
Approvals.
All
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with, any Governmental Authority (if any) identified on Schedule
6.3
shall
have been obtained or made, in a manner reasonably satisfactory in form and
substance to Parent and the Company, and no such consent, approval, order or
authorization shall have been revoked.
29
6.4. Government
Litigation and Legal Requirements.
There
shall be no Action pending against Parent, the Company or any of their
respective affiliates by any Governmental Authority or any Legal Requirement
enacted or deemed applicable (a) seeking to enjoin or make illegal, delay or
otherwise restrain or prohibit the consummation of the Merger or the other
transactions contemplated hereby, (b) that would result in the Merger or any
of
the other transactions contemplated hereby being rescinded following
consummation, (c) seeking to require an Action of divestiture, (d) that
otherwise would have a Material Adverse Effect or (e) that is reasonably likely,
directly or indirectly, to result in any of the consequences referred to in
clauses (a) through (d) of this Section 6.4.
SECTION
7. Additional
Conditions Precedent to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub under this Agreement to consummate the
Merger and the other transactions contemplated hereby shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions:
7.1. Representations,
Warranties and Covenants.
(a) Each
of
the representations and warranties of the Company in Section 3 of this
Agreement shall be true, complete and correct in all material respects as of
the
date hereof and, as updated as of the Effective Time (except that those
representations and warranties which address matters only as of another
particular date shall remain true, compete and correct as of such date),
and
(b) The
Company and the Representative shall have performed and complied in all material
respects with all covenants and obligations of this Agreement required to be
performed and complied with by them as of the Effective Time.
7.2. No
Material Adverse Effect.
Since
the date of this Agreement, there shall not have occurred any circumstance
or
change in or effect on the Company or any Company Securityholder that
constitutes a Material Adverse Effect.
7.3. Other
Third Party Approvals.
All
consents, approvals, orders or authorizations of, or registrations, declarations
or filings with, any Person identified on Schedule
7.3
shall
have been obtained or made, in a manner reasonably satisfactory in form and
substance to Parent, and no such consent, approval, order or authorization
shall
have been revoked.
7.4. Dissenting
Shares.
Holders
of no more than two percent (2%) of the Company Stock shall have exercised
any
appraisal or dissenters’ rights pursuant to the DGCL.
7.5. Stockholder
Approval.
The
Company shall have obtained the Requisite Stockholder Approval.
SECTION
8. Conditions
Precedent to Obligations of the Company.
All
obligations of the Company under this Agreement to consummate the Merger and
the
other transactions contemplated hereby are subject to the satisfaction at or
prior to the Closing Date of the following conditions:
8.1. Representations,
Warranties and Covenants.
(a) Section 4
of this Agreement, taken as a whole, shall be true, complete and correct in
all
material respects as of the date hereof and, as updated as of the Effective
Time
(except that those representations and warranties which address matters only
as
of another particular date shall remain true, complete and correct as of such
date), and
(b) Parent
and Merger Sub shall have performed and complied in all material respects with
all covenants and obligations of this Agreement required to be performed and
complied with by them as of the Effective Time
8.2. Release
Agreement.
A
Release Agreement by and among the Company, Xxxxx Micro Software, Inc., a
Delaware corporation (“Xxxxx Micro”), Xxxxx Micro’s wholly-owned subsidiary, IS
Acquisition Sub, Inc., a Delaware corporation, Parent and Merger Sub shall
have
been executed and delivered to the Company.
30
8.3. Voting
and Lockup Agreement.
All
directors and officers of the Parent, who are stockholders of the Parent, shall
have executed and delivered a voting and lockup agreement to the Company in
the
form attached as Exhibit
H
hereto
agreeing (a) not to transfer their shares for a certain period of time, and
(b)
vote their shares in favor of the authorization of 90,000,000 additional
ordinary shares such that the total authorized share capital of the Parent
shall
be 200,000,000 ordinary shares (including any actions that may be required
therefore) (ii) give effect to the appointment of directors in accordance with
Section 1.5 herein (if such matter is to be submitted for the approval of
Parent’s shareholders), and (iii) approve such other actions as may be required
to consummate the Merger and the transactions contemplated by this Agreement
or
any provisions of this Agreement.
8.4. Closing
Date Cash.
The
Closing Date Cash shall be $4,004,267.
SECTION
9. Closing
Deliveries.
9.1. Closing
Deliveries of the Company.
At or
prior to the Closing, the Company shall deliver, or caused to be delivered,
to
Parent the following:
(a) a
certificate executed on behalf of the Company by its Chief Executive Officer
or
its Chief Financial Officer to the effect that, as of the Effective Time, each
of the conditions set forth in Sections 7.1 and 7.2 have been
satisfied;
(b) the
Certificate of Merger, duly executed by the Company;
(c) a
certificate of the Secretary of the Company dated the Closing Date, in form
and
substance reasonably satisfactory to Parent as to (i) the Company Organizational
Documents and the Company being in good standing (including attaching the
Company Organizational Documents and certificates of good standing dated not
more than five (5) Business Days prior to the Closing issued by the Secretary
of
State of the State of Delaware and by each state in which the Company is
qualified to do business as a foreign corporation), (ii) the attached actions
taken by the Company’s board of directors and stockholders to authorize this
Agreement, the Merger and the other transactions contemplated hereby, including
evidence of compliance with the Company Organizational Documents, (iii) the
incumbency and signatures of the officers of the Company executing this
Agreement and the other agreements, instruments and other documents executed
by
or on behalf of the Company pursuant to this Agreement or otherwise in
connection with the transactions contemplated hereby, and (iv) the Company
having taken all necessary and appropriate steps such that all Company
Securities, including Options and Warrants, will be treated as set forth in
Section 2; and
(d) A
legal
opinion of Ellenoff Xxxxxxxx & Schole LLP in the form attached as
Exhibit I
hereto.
9.2. Closing
Deliveries of Parent.
At or
prior to the Closing, Parent shall deliver, or caused to be delivered, to the
Company the following:
(a) a
certificate executed on behalf of the Parent by one of its Senior or Executive
Vice Presidents to the effect that, as of the Effective Time, the conditions
set
forth in Section 9.1 above have been satisfied;
(b) the
Certificate of Merger, duly executed by Merger Sub; and
(c) a
legal
opinion of Fenwick & West LLP in the form attached as Exhibit J
hereto.
(d) a
bank
statement or some other document satisfactory to the Company, describing the
cash balance of the Parent as at Closing.
31
SECTION
10. Survival.
All
representations, warranties, covenants and obligations contained herein shall
survive the Closing and shall continue until eighteen (18) months after the
Effective Time (the “Survival
Period”)
and
shall thereafter terminate, provided
that if
any claims for indemnification have been asserted in good faith with respect
to
inaccuracy or a breach of such representations, warranties, covenants and
obligations prior to the end of the Survival Period, such claim shall survive
and continue in effect until final resolution of such claims.
SECTION
11. Termination.
11.1. Termination
prior to the Effective Time of the Merger.
This
Agreement may be terminated at any time prior to the Effective Time, by action
taken or authorized by the Board of Directors of the terminating party or
parties:
(a) by
mutual
written consent duly authorized by the Boards of Directors of Parent and the
Company;
(b) by
either
the Company or Parent if the Merger shall not have been consummated by June
30,
2008 (the “End
Date”);
provided
that the
right to terminate this Agreement under this Section 11.1(b) shall not be
available to any party whose intentional action or inaction has been a principal
cause of, or resulted in the failure of, the Merger to occur on or before such
date and such intentional action or inaction constitutes a breach of this
Agreement;
(c) by
the
Company if the Merger shall not have been consummated by June 30, 2008;
(d) by
either
the Company or Parent if a Governmental Authority shall have issued or enacted
any Legal Requirement or taken any other action (including, without limitation,
the failure to have taken an action), in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, which
Legal Requirement is final and nonappealable, as applicable;
(e) by
the
Company, (i) upon a breach of any representation, warranty, covenant or
agreement set forth in this Agreement by Parent or Merger Sub, or (ii) if any
representation or warranty of Parent or Merger Sub shall have become untrue,
in
either case such that the conditions set forth in Section 9.1 would not be
satisfied as of the time of such breach or as of the time such representation
or
warranty shall have become untrue, provided
that if
such inaccuracy in Parent’s or Merger Sub’s representations and warranties or
breach by Parent or Merger Sub is curable prior to the End Date through the
exercise of reasonable efforts, then the Company may not terminate this
Agreement under this Section 11.1(d) prior to thirty (30) days following the
receipt of written notice from the Company by Parent of such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
Section 11.1(d) if the Company shall have materially breached this Agreement
or
if such breach by Parent or Merger Sub is cured such that such conditions would
then be satisfied);
(f) by
Parent, (i) upon a breach of any representation, warranty, covenant or agreement
set forth in this Agreement by the Company or the Representative, or (ii) if
any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 7.1 or Section 7.2 would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided
that if
such inaccuracy in the Company’s representations and warranties or breach by the
Company or the Representative is curable by the Company or the Representative
prior to the End Date through the exercise of reasonable efforts, then Parent
may not terminate this Agreement under this Section 11.1(f) prior to the thirty
(30) days following the receipt of written notice from Parent by the Company
of
such breach (it being understood that Parent may not terminate this Agreement
pursuant to this Section 11.1(f) if Parent shall have materially breached this
Agreement or if such breach by the Company or the Representative is cured such
that such conditions would then be satisfied);
32
(g) by
Parent, if a Material Adverse Effect shall have occurred, or Parent first
becomes aware of a Material Adverse Effect, after the date hereof;
or
(h) By
Parent, if the Company shall not have obtained the Requisite Stockholder
Approval by the close of business on the date two days after the date of this
Agreement.
11.2. Notice
of Termination; Effect of Termination.
If a
party wishes to terminate this Agreement pursuant to Section 11.1, then such
party shall deliver to the other parties to this Agreement a written notice
stating that such party is terminating this Agreement and setting forth a brief
description of the basis on which such party is terminating this Agreement.
Any
termination of this Agreement under Section 12.1 above will be effective
immediately upon the delivery of a valid written notice of the terminating
party
to the other party hereto. In the event of the termination of this Agreement
as
provided in Section 11.1, this Agreement shall be of no further force or effect,
except (i) as set forth in Sections 5.2(a), 5.3, 5.4, 11..2, 12, 16 and 17,
each
of which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any breach of this Agreement or
willful failure to perform any covenant set forth in this Agreement prior to
such termination. No termination of this Agreement shall affect the obligations
of the parties contained in the Confidentiality Agreement, all of which
obligations shall survive termination of this Agreement in accordance with
their
terms.
SECTION
12. Fees
and Expenses.
Except
as otherwise provided in this Agreement, (a) all fees, costs and expenses of
Parent or Merger Sub incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, fees and
expenses of financial advisors, financial sponsors, legal counsel and other
advisors, shall be paid by Parent whether or not the Merger is consummated
and
(b) all fees, costs and expenses of the Company, the Representative and the
Company Stockholders to the extent incurred, or required to be incurred prior
to
the Closing or arising from any Company action prior to the Closing in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of financial advisors,
financial sponsors, legal counsel and other advisors, shall be paid by the
Company.
SECTION
13. Indemnification.
13.1. Indemnification
of Parent Indemnified Parties.
Subject
to Section 13.3 below, each Company Stockholder who accepts payment of
consideration pursuant to this Agreement upon conversion of the share(s) of
Company Stock pursuant to Section 2, shall be deemed to have agreed, and hereby
agrees, to indemnify, defend and hold harmless Parent, Merger Sub, their
respective affiliates (including, without limitation, following the Effective
Time, the Surviving Corporation) and their respective directors, officers,
representatives, successors and assigns (collectively, the “Parent
Indemnified Parties”)
shall
be entitled to be held harmless and indemnified from and against, and shall
be
entitled to be compensated and reimbursed for, any and all Damages arising
from
or related to any of the following (each a “Parent
Claim”):
(a) any
misrepresentation or breach or failure of any representation or warranty made
by
the Company or the Representative in this Agreement to be true and correct
in
all respects (in each case, as such representation or warranty would read if
all
qualifications as to materiality, including, without limitation, each reference
to the defined term Material Adverse Effect, were deleted
therefrom);
(b) any
breach or non-fulfillment of any covenant or agreement to be performed by the
Company in this Agreement prior to the Effective Time;
(c) any
amount paid by Parent, the Company or the Surviving Corporation to any Company
Stockholder with respect to Dissenting Shares pursuant to the DGCL in excess
of
the value such Person would have received in the Merger for such Dissenting
Shares had such shares been converted pursuant to Section 2, and all interest,
costs, expenses and fees incurred by the Company, Parent or the Surviving
Corporation in connection with the exercise of all dissenters’ rights under the
DGCL.
33
13.2. Certain
Limitations.
Except
in the event of (i) fraud or willful misconduct of the Company prior to the
Effective Time or (ii) breaches of the Extended Representation (collectively
the
“Non-Threshold
Claims”),
no
Parent Indemnified Person shall be entitled to recover any Damages pursuant
to
this Section 14 until such time as and except to the extent that the total
amount of all Damages otherwise indemnifiable pursuant to this Agreement that
have been directly or indirectly suffered or incurred by the Parent Indemnified
Parties, or to which any one or more Parent Indemnified Parties has otherwise
become subject, exceeds $200,000 in the aggregate. Following such time as the
cumulative amount of such Damages exceeds $200,000 in the aggregate, the Parent
Indemnified Parties shall be entitled to recover all such Damages (it being
understood that all Damages related to Non-Threshold Claims shall be disregarded
for purposes of such $200,000 calculation).
13.3. Indemnification
by LLC Holders.
To the
extent that each holder of membership interests in DDI LLC (“LLC
Holder”)
receives any Merger Consideration, as a condition to such transfer, each LLC
Holder agrees to be bound by Section 13.1 herein, and failure to agree shall
render such transfer null and void. If the LLC Holder sells, transfers or
conveys such Merger Consideration, he shall remain liable during the Survival
Period for claims under Section 13.1, up to the amount of the Merger
Consideration he has received.
13.4. Indemnification
of Company Indemnified Parties.
The
Parent shall indemnify, defend and hold harmless the Company and its respective
affiliates (including, without limitation, following the Effective Time, the
Surviving Corporation) and their respective directors, officers,
representatives, successors and assigns (collectively, the “Company
Indemnified Parties”)
shall
be entitled to be held harmless and indemnified from and against, and shall
be
entitled to be compensated and reimbursed for, any and all Damages arising
from
or related to any of the following (each a “Company
Claim”):
(a) any
misrepresentation or breach or failure of any representation or warranty made
by
the Parent Parties in this Agreement to be true and correct in all respects
(in
each case, as such representation or warranty would read if all qualifications
as to materiality, including, without limitation, each reference to the defined
term Material Adverse Effect, were deleted therefrom); or
(b) any
breach or non-fulfillment of any covenant or agreement to be performed by the
Parent Parties in this Agreement prior to the Effective Time.
SECTION
14. Representative.
14.1. Powers
of the Representative.
By
approval of this Agreement and the transactions contemplated hereby by the
requisite percentage of the Company Stockholders under the DGCL and the Charter,
and pursuant to the Letters of Transmittal, the Company Stockholders designate
the Representative to serve as the representative of the Company Stockholders
with respect to the matters expressly set forth in this Agreement.
(a) The
Representative shall have and may exercise all of the powers expressly conferred
upon him, her or it pursuant to this Agreement, which shall include, without
limitation:
(i) The
power
to execute as Representative any other agreement or instrument entered into
or
delivered in connection with the transactions contemplated hereby;
(ii) The
power
to give or receive any notice or instruction permitted or required under this
Agreement, or any other agreement, document or instrument entered into or
executed in connection herewith, to be given or received by any Company
Stockholder, and each of them (other than notice for service of process relating
to any Action before a court or other tribunal of competent jurisdiction, which
notice must be given to each Company Stockholder, individually, as applicable),
and to take any and all action for and on behalf of the Company Stockholders,
and each of them, under this Agreement or any other such agreement, document
or
instrument;
34
(iii) The
power
(subject to the provisions of Section 15.1(c) hereof) to (A) contest, negotiate,
defend, compromise or settle any Actions for which a Parent Indemnified Party
may be entitled to indemnification through counsel selected by the
Representative and solely at the cost, risk and expense of the Company
Stockholders, (B) agree to, negotiate, enter into settlements and compromises
of, and comply with orders of courts with respect to such Parent Claims, (C)
resolve any Parent Claims, (D) take any actions in connection with the
resolution of any dispute relating hereto or to the transactions contemplated
hereby by arbitration, settlement or otherwise, and (E) take or forego any
or
all actions permitted or required of any Company Stockholder or necessary in
the
judgment of the Representative for the accomplishment of the foregoing and
all
of the other terms, conditions and limitations of this Agreement;
(iv) The
power
to consult with legal counsel, independent public accountants and other experts
selected by it, solely at the cost and expense of the Company
Stockholders;
(v) The
power
to waive any terms and conditions of this Agreement providing rights or benefits
to the Company Stockholders (other than the payment of the consideration payable
to such Company Stockholders pursuant to Section 2 of this Agreement) in
accordance with the terms hereof and in the manner provided herein);
and
(vi) The
power
to take any actions in regard to such other matters as are reasonably necessary
for the consummation of the transactions contemplated hereby or as the
Representative reasonably believes are in the best interests of the Company
Stockholders.
(b) The
Representative represents and warrants to Parent and Merger Sub
that:
(i) The
Representative has all necessary power and authority to execute and deliver
this
Agreement and to carry out his, her or its obligations hereunder and
thereunder;
(ii) This
Agreement has been duly executed and delivered by the Representative and,
assuming the due authorization, execution and delivery of this Agreement by
Parent, Merger Sub and the Company, constitutes the valid and legally binding
obligation of the Representative, enforceable against the Representative in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
or
similar laws of general application affecting the rights and remedies of
creditors, and to general equity principles; and
(c) Each
Company Stockholder agrees that Parent, Merger Sub, their respective affiliates
(including, without limitation, after the Effective Time, the Surviving
Corporation) shall be entitled to rely on any action taken by the
Representative, on behalf of such Company Stockholder, pursuant to Section 14.1(a)
above
(an “Authorized
Action”),
and
that each Authorized Action shall be binding on each Company Stockholder as
fully as if such Company Stockholder had taken such Authorized Action. Parent
agrees that the Representative, as the Representative, shall have no liability
to Parent for any Authorized Action, except to the extent that such Authorized
Action is found by a final order of a court of competent jurisdiction to have
constituted fraud or willful misconduct. Each Company Stockholder severally
(in
proportion to their ownership of Company Stock immediately prior to the
Effective Time) agrees to indemnify, defend and hold harmless the Representative
against all expenses (including reasonable attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
Representative in connection with any action, suit or proceeding to which the
Representative is made a party by reason of the fact it is or was acting as
the
Representative pursuant to the terms of this Agreement and any expenses incurred
by the Representative in connection with the performance of its duties
hereunder. Each Company Stockholder agrees that none of Parent, Merger Sub,
their respective affiliates (including, without limitation, after the Effective
Time, the Surviving Corporation) shall be liable to any Company Stockholder
for
any actions taken or omitted by them in reliance upon any instructions, notice
or other instruments delivered by the Representative. No resignation of the
Representative shall become effective unless at least thirty (30) days prior
written notice of the replacement or resignation of such Representative shall
be
provided to Parent. Parent, Merger Sub and their respective affiliates
(including, without limitation, after the Effective Time, the Surviving
Corporation) shall be entitled to rely at any time after receipt of any such
notice on the most recent notice so received. If the Representative shall be
unable or unwilling to serve in such capacity, his, her or its successor who
shall serve and exercise the powers of the Representative hereunder shall be
appointed by a written instrument signed by a majority of the Company
Stockholders.
35
(d) The
Representative shall not have by reason of this Agreement a fiduciary
relationship in respect of any Company Stockholder, except in respect of amounts
received on behalf of such Company Stockholder. The Representative shall not
be
liable to any Company Stockholder for any action taken or omitted by it or
any
agent employed by it hereunder or under any other document entered into in
connection herewith, except that the Representative shall not be relieved of
any
liability imposed by law for willful misconduct or fraud. The Representative
shall not be liable to Company Stockholders for any apportionment or
distribution of payments made by the Representative in good faith, and if any
such apportionment or distribution is subsequently determined to have been
made
in error, the sole recourse of any Company Stockholder to whom payment was
due,
but not made, shall be to recover from other Company Stockholders any payment
in
excess of the amount to which they are determined to have been entitled. The
Representative shall not be required to make any inquiry concerning either
the
performance or observance of any of the terms, provisions or conditions of
this
Agreement. Neither the Representative nor any agent employed by it shall incur
any liability to any Company Stockholder by virtue of the failure or refusal
of
the Representative for any reason to consummate the transactions contemplated
hereby or relating to the performance of its other duties hereunder, except
for
actions or omissions constituting fraud, bad faith or willful
misconduct.
14.2. Notices.
Any
notice given to the Representative will constitute notice to each and all of
the
Company Stockholders at the time notice is given to the Representative. Any
action taken by, or notice or instruction received from, the Representative
will
be deemed to be action by, or notice or instruction from, each and all of the
Company Stockholders. Parent, Merger Sub, the Company and the Surviving
Corporation may, disregard any notice or instruction received from any one
or
more individual Company Stockholders.
14.3. Agreement
of the Representative.
The
Representative hereby agrees to do such acts, and execute further documents,
as
shall be necessary to carry out the provisions of this Agreement.
SECTION
15. Director
and Officer Indemnification.
(a) Parent
and Merger Sub agree that all rights to exculpation and indemnification for
acts
or omissions occurring prior to the Effective Time existing as of the date
of
this Agreement in favor of each present and former officer, director and
employee of the Company as provided in the Charter and Bylaws of the Company
or
the indemnification agreements between the Company and its directors and
officers in effect as of the date of this Agreement shall survive the Merger
and
shall continue in full force and effect in accordance with their terms for
three
(3) years following the Effective Time, and Parent shall cause the Surviving
Corporation to fulfill and honor such obligations in accordance with their
terms
as in effect as of the date of this Agreement.
SECTION
16. Post-Closing
Covenants.
16.1. Options.
Parent
covenants that as soon as practicable after the Closing, but subject to any
amendment to its Articles of Association, and any increase in its authorized
share capital, as may be required therefore, Parent will reserve a number of
shares equal to 11.6% of its outstanding stock for options for employees of
the
Company, which will include the options to be granted pursuant to Section
2.4(a), and of which no more than 3.9% shall be reserved for options granted,
or
to be granted, to Xxxxx Xxxxx. Any new options granted after the Effective
Time
(other than any options granted as provided in Section 2.4(a)) will have an
exercise price equal to the greater of (a) $0.15 and (b) the fair market value
of the Parent ADRs at the time of the grant.
36
16.2. Financial
Statements.
The
Company covenants that it will deliver to Parent audited financial statements
of
the Company as of and for the year ended December 31, 2007, no later than ninety
(90) days after the Closing Date.
16.3. Delivery
of Merger Consideration.
Parent
covenants that it shall:
(a) take
all
such actions as may be necessary to authorize and deliver (i) all of the
remaining Merger Consideration within the time period specified pursuant to
Section 2.2 herein and (ii) an additional 2,761,135 Parent ADRs to Xxxxxx or
its
affiliates within the time period specified pursuant to Section 2.4(b) herein,
including obtaining the Parent Shareholder Approval to authorize of 90,000,000
additional ordinary shares such that the total authorized share capital of
the
Parent shall be 200,000,000 ordinary shares.
(b) give
effect to the appointment of directors in accordance with Section 1.5 herein,
and
(c) approve
such other actions as may be required to consummate the Merger and the
transactions contemplated by this Agreement or any provisions of this
Agreement.
SECTION
17. Miscellaneous.
17.1. Notices.
All
notices, requests, demands, consents and communications necessary or required
under this Agreement shall be delivered by hand or sent by registered or
certified mail, return receipt requested, by overnight prepaid courier or by
facsimile (receipt confirmed) to:
if
to
Parent or Merger Sub:
00
Xxxx
Xxxxxxxx Xxxxxx,
Xxxxx
000
Xxxxxxxx,
Xxxxxxxxxx 00000
Attention:
Xxxxxx Xxxx
Facsimile:
(000) 000 0000
with
a
copy to:
Fenwick
& West LLP
000
Xxxxxxxxxx Xx.
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
if
to the
Company:
DollarDays
International, Inc.
0000
Xxxx
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Facsimile:
(000) 000 0000
Attention:
Xxxxx Xxxxx
37
with
a
copy to:
Xxxxxxxxx
Traurig, LLP
0000
X.
Xxxxxxxxx Xxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
if
to the
Representative:
Xxxxx
Xxxxx
c/o
DollarDays International, Inc.
0000
Xxxx
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Facsimile:
(000) 000 0000
with
a
copy to:
Xxxxxxxxx
Xxxxxxx, LLP
0000
X.
Xxxxxxxxx Xxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
All
such
notices, requests, demands, consents and other communications shall be deemed
to
have been duly given or sent three (3) days following the date on which mailed,
or one (1) day following the date mailed if sent by overnight courier, or on
the
date on which delivered by hand or by facsimile transmission (receipt
confirmed), as the case may be, and addressed as aforesaid. Any notice to be
given to any Company Stockholders hereunder shall be given to the Representative
or, if for any reason there ceases to be a Representative, to each Company
Stockholder.
17.2. Successors
and Assigns.
All
covenants and agreements and other provisions set forth in this Agreement and
made by or on behalf of any of the parties hereto shall bind and inure to the
benefit of the successors, heirs and permitted assigns of such party, whether
or
not so expressed. None of the parties may assign, transfer or delegate any
of
their respective rights or obligations under this Agreement without the consent
in writing of the Company, Parent and the Representative provided,
that
Parent and Merger Sub (including the Surviving Corporation) may, without
obtaining the prior written consent of Representative, assign any of its rights,
or delegate any of its obligations, under this Agreement to (a) any affiliate
of
Parent, (b) any successor of such party by merger or otherwise, or (c) the
purchaser of all or substantially all of the assets or stock of such Person.
The
Representative shall execute such acknowledgements of such assignments in such
forms as Parent or Merger Sub (including the Surviving Corporation) may from
time to time reasonably request. Any purported assignment or delegation of
rights or obligations in violation of this Section 17.2 is void and of no force
or effect.
17.3. Interpretation.
For
purposes of this Agreement, the following rules of interpretation
apply:
(a) Descriptive
Headings.
The
headings of the sections and paragraphs of this Agreement have been inserted
for
convenience of reference only and shall not be deemed to be part of this
Agreement.
38
(b) Calculation
of Time Period.
When
calculating the period of time before which, within which or following which
any
act is to be done or step taken pursuant to this Agreement, the date that is
the
reference date in calculating such period is excluded. If the last day of such
period is a non-business day, the period in question ends on the next succeeding
business day.
(c) Currency.
Any
reference in this Agreement to $ means U.S. dollars.
(d) Section
and Similar References.
Unless
the context otherwise requires, all references in this Agreement to any
“Section,” “Schedule” or “Exhibit” are to the corresponding Section, Schedule or
Exhibit of this Agreement.
(e) Mutual
Drafting.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement and have been represented by their own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity
to
seek advice as to their legal rights from such counsel. In the event an
ambiguity or question of intent or interpretation arises, this Agreement is
to
be construed as jointly drafted by the parties hereto and no presumption or
burden of proof is to arise favoring or disfavoring any party by virtue of
the
authorship of any provision of this Agreement or by reason of the extent to
which any such provision is inconsistent with any prior draft
hereof.
17.4. Counterparts.
This
Agreement may be executed in two or more counterparts and by the different
parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which together shall constitute
one
and the same instrument.
17.5. Facsimile.
The
exchange of signature pages to this Agreement (in counterparts or otherwise)
by
facsimile transmission or other electronic transmission shall be sufficient
to
bind the parties to the terms and conditions of this Agreement.
17.6. Severability.
In the
event that any one or more of the provisions contained herein is held invalid,
illegal or unenforceable in any respect for any reason in any jurisdiction,
the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected (so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party), it being intended that each of parties’ rights and privileges shall be
enforceable to the fullest extent permitted by applicable Legal Requirements,
and any such invalidity, illegality and unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction (so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party). If any court of competent jurisdiction determines that any provision
of
this Agreement is invalid, illegal or unenforceable, such court has the power
to
fashion and enforce another provision (instead of the provision held to be
invalid, illegal or unenforceable) that is valid, legal and enforceable and
carries out the intentions of the parties hereto under this Agreement and,
in
the event that such court does not exercise such power, the parties hereto
shall
negotiate in good faith in an attempt to agree to another provision (instead
of
the provision held to be invalid, illegal or unenforceable) that is valid,
legal
and enforceable and carries out the parties’ intentions to the greatest lawful
extent under this Agreement.
17.7. Third
Parties.
Except
as specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any Person,
other than the parties hereto and their permitted successors and assigns, any
rights or remedies under or by reason of this Agreement or any other
certificate, document, instrument or agreement executed in connection herewith
nor be relied upon other than the parties hereto and their permitted successors
or assigns. The Parent Indemnified Persons not party hereto are entitled to
the
rights and remedies of Section 13 hereof. The present and former directors
and
officers of the Company are intended to be third party beneficiaries of Section
15 hereof.
17.8. Certain
Definitions.
For
purposes of this Agreement, (a) an individual will be deemed to have “Knowledge”
of a particular fact or other matter if such individual is actually aware of
such fact or other matter and (b) the Company will be deemed to have “Knowledge”
of a particular fact or other matter if Xxxxx Xxxxx, is actually aware of such
fact or other matter or such individual would reasonably be expected to discover
or otherwise become aware of such fact or other matter by reason of his position
as a senior officer of the Company or by reason of the duties that a Person
in a
similar role would customarily perform, (c) “affiliate” means, with respect to
any Person, any other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person, and the term “control” (including the terms “controlled by” and
“under common control with”) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities, by contract or
otherwise, and (d) “Business Day” means any day of the year on which national
banking institutions in The Commonwealth of Massachusetts and the State of
New
York are open to the public for conducting business and are not required or
authorized to close.
39
17.9. Governing
Law.
This
Agreement, and all matters arising out of or relating to this Agreement and
any
of the transactions contemplated hereby, including, without limitation, the
validity hereof and the rights and obligations of the parties hereunder, shall
be construed in accordance with and governed by the laws of the State of
Delaware (without giving effect to the conflicts of laws provisions
thereof).
17.10. Entire
Agreement, Not Binding Until Executed.
This
Agreement, including the Disclosure Schedule, Schedules and Exhibits, is
complete, and all promises, representations, understandings, warranties and
agreements with reference to the subject matter hereof, and all inducements
to
the making of this Agreement relied upon by all the parties hereto, have been
expressed herein or in such Disclosure Schedule, Schedules, and Exhibits and
this Agreement, including such Disclosure Schedule, Schedules, and Exhibits
supersede any prior understandings, negotiations, agreements or representations
by or among the parties, written or oral, to the extent they related in any
way
to the subject matter hereof or thereof. Neither this Agreement nor any of
the
terms or provisions hereof are binding upon or enforceable against any party
hereto unless and until the same is executed and delivered by all of the parties
hereto.
17.11. Amendments;
No Waiver.
Subject
to applicable Legal Requirements, any provision of this Agreement may be amended
or waived prior to the Effective Time if, but only if, such amendment or waiver
is in writing and is signed, in the case of an amendment, by each of the parties
hereto, or, in the case of a waiver, by each party against whom the waiver
is to
be effective; provided
that,
after approval and adoption of this Agreement and the Merger by the Company
Stockholders and without their further approval, no amendment or waiver shall
reduce the amount or change the kind of consideration to be received in exchange
for any share of Company Stock. No course of dealing and no failure or delay
on
the part of any party hereto in exercising any right, power or remedy conferred
by this Agreement shall operate as a waiver thereof or otherwise prejudice
such
party’s rights, powers and remedies. The failure of any of the parties to this
Agreement to require the performance of a term or obligation under this
Agreement or the waiver by any of the parties to this Agreement of any breach
hereunder shall not prevent subsequent enforcement of such term or obligation
or
be deemed a waiver of any subsequent breach hereunder. No single or partial
exercise of any right, power or remedy conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
17.12. Waiver
of Jury Trial.
EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY
PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY BREACH.
[Remainder
of page intentionally blank]`
40
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement under
seal
as of the day and year first above written.
|
By:
/s/ Xxxxxx
Xxxx
|
|
|
Name:
Xxxxxx Xxxx
|
|
|
Title:
Chief Financial Officer
|
|
|
JEODE
INC.
|
|
|
By:
/s/ Xxxxxx
Xxxx
|
|
|
Name:
Xxxxxx Xxxx
|
|
|
Title:
Chief Financial Officer
|
|
|
DOLLARDAYS
INTERNATIONAL, INC.
|
|
|
By:
/s/ Xxxxx
Xxxxx
|
|
|
Name:
Xxxxx Xxxxx
|
|
|
Title:
President
|
|
|
REPRESENTATIVE
|
|
|
/s/
Xxxxx
Xxxxx
|
|
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Name: Xxxxx
Xxxxx
|
