AGREEMENT AND PLAN OF MERGER AND REORGANIZATION AMONG GOFISH CORPORATION (f/k/a Unibio Inc.), GF ACQUISITION CORP., GOFISH TECHNOLOGIES, INC., ITD ACQUISITION CORP., AND INTERNET TELEVISION DISTRIBUTION INC. October 27, 2006
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
AMONG
GOFISH
CORPORATION
(f/k/a
Unibio Inc.),
GF
ACQUISITION CORP.,
GOFISH
TECHNOLOGIES, INC.,
ITD
ACQUISITION CORP.,
AND
INTERNET
TELEVISION DISTRIBUTION INC.
October
27, 2006
TABLE
OF
CONTENTS
ARTICLE
I
|
THE
MERGERS
|
2
|
|||
1.1
|
The
Mergers
|
2
|
|||
1.2
|
The
Closing
|
2
|
|||
1.3
|
Actions
at the Closing
|
2
|
|||
1.4
|
Additional
Actions
|
3
|
|||
1.5
|
Conversion
of Securities
|
4
|
|||
1.6
|
Dissenting
Shares
|
6
|
|||
1.7
|
Fractional
Shares
|
7
|
|||
1.8
|
Options
and Warrants
|
7
|
|||
1.9
|
Escrow
|
9
|
|||
1.10
|
Articles
of Incorporation and Bylaws
|
9
|
|||
1.11
|
No
Further Rights
|
9
|
|||
1.12
|
Closing
of Transfer Books
|
9
|
|||
1.13
|
Post-Closing
Adjustment
|
9
|
|||
1.14
|
Exemption
From Registration; California Permit
|
11
|
|||
ARTICLE
IIA
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
11
|
|||
2.1A
|
Organization,
Qualification and Corporate Power
|
11
|
|||
2.2A
|
Capitalization
|
12
|
|||
2.3A
|
Authorization
of Transaction
|
12
|
|||
2.4A
|
Noncontravention
|
13
|
|||
2.5A
|
Subsidiaries
|
14
|
|||
2.6A
|
Financial
Statements
|
15
|
|||
2.7A
|
Absence
of Certain Changes
|
15
|
|||
2.8A
|
Undisclosed
Liabilities
|
15
|
|||
2.9A
|
Tax
Matters
|
15
|
|||
2.10A
|
Assets
|
17
|
|||
2.11A
|
Owned
Real Property
|
17
|
|||
2.12A
|
Real
Property Leases
|
17
|
|||
2.13A
|
Contracts
|
18
|
|||
2.14A
|
Accounts
Receivable
|
20
|
|||
2.15A
|
Powers
of Attorney
|
20
|
2.16A
|
Insurance
|
20
|
|||
2.17A
|
Litigation
|
21
|
|||
2.18A
|
Employees
|
21
|
|||
2.19A
|
Employee
Benefits
|
22
|
|||
2.20A
|
Environmental
Matters
|
24
|
|||
2.21A
|
Legal
Compliance
|
25
|
|||
2.22A
|
Customers
and Suppliers
|
25
|
|||
2.23A
|
Permits
|
25
|
|||
2.24A
|
Certain
Business Relationships With Affiliates
|
26
|
|||
2.25A
|
Brokers’
Fees
|
26
|
|||
2.26A
|
Books
and Records
|
26
|
|||
2.27A
|
Intellectual
Property
|
26
|
|||
2.28A
|
Disclosure
|
27
|
|||
2.29A
|
Duty
to Make Inquiry
|
27
|
|||
2.30A
|
Board
Actions
|
27
|
|||
2.31A
|
Permit
Application
|
27
|
|||
ARTICLE
IIB
|
REPRESENTATIONS
AND WARRANTIES OF ITD
|
28
|
|||
2.1B
|
Organization,
Qualification and Corporate Power
|
28
|
|||
2.2B
|
Capitalization
|
28
|
|||
2.3B
|
Authorization
of Transaction
|
29
|
|||
2.4B
|
Noncontravention
|
29
|
|||
2.5B
|
Subsidiaries
|
30
|
|||
2.6B
|
Financial
Statements
|
31
|
|||
2.7B
|
Absence
of Certain Changes
|
31
|
|||
2.8B
|
Undisclosed
Liabilities
|
31
|
|||
2.9B
|
Tax
Matters
|
31
|
|||
2.10B
|
Assets
|
32
|
|||
2.11B
|
Owned
Real Property
|
33
|
|||
2.12B
|
Real
Property Leases
|
33
|
|||
2.13B
|
Contracts
|
33
|
|||
2.14B
|
Accounts
Receivable
|
35
|
|||
2.15B
|
Powers
of Attorney
|
35
|
2.16B
|
Insurance
|
35
|
|||
2.17B
|
Litigation
|
35
|
|||
2.18B
|
Employees
|
35
|
|||
2.19B
|
Employee
Benefits
|
36
|
|||
2.20B
|
Environmental
Matters
|
38
|
|||
2.21B
|
Legal
Compliance
|
38
|
|||
2.22B
|
Customers
and Suppliers
|
38
|
|||
2.23B
|
Permits
|
38
|
|||
2.24B
|
Certain
Business Relationships With Affiliates
|
39
|
|||
2.25B
|
Brokers’
Fees
|
39
|
|||
2.26B
|
Books
and Records
|
39
|
|||
2.27B
|
Intellectual
Property
|
39
|
|||
2.28B
|
Disclosure
|
39
|
|||
2.29B
|
Duty
to Make Inquiry
|
39
|
|||
2.30B
|
Board
Actions
|
39
|
|||
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF THE PARENT AND THE ACQUISITION
SUBSIDIARIES
|
40
|
|||
3.1
|
Organization,
Qualification and Corporate Power
|
40
|
|||
3.2
|
Capitalization
|
40
|
|||
3.3
|
Authorization
of Transaction
|
41
|
|||
3.4
|
Noncontravention
|
41
|
|||
3.5
|
Subsidiaries
|
42
|
|||
3.6
|
Exchange
Act Reports
|
43
|
|||
3.7
|
Compliance
with Laws
|
43
|
|||
3.8
|
Financial
Statements
|
44
|
|||
3.9
|
Absence
of Certain Changes
|
44
|
|||
3.10
|
Litigation
|
44
|
|||
3.11
|
Undisclosed
Liabilities
|
44
|
|||
3.12
|
Tax
Matters
|
44
|
|||
3.13
|
Assets
|
46
|
|||
3.14
|
Owned
Real Property
|
46
|
|||
3.15
|
Real
Property Leases
|
46
|
3.16
|
Contracts
|
47
|
|||
3.17
|
Accounts
Receivable
|
48
|
|||
3.18
|
Powers
of Attorney
|
48
|
|||
3.19
|
Insurance
|
48
|
|||
3.20
|
Warranties
|
49
|
|||
3.21
|
Employees
|
49
|
|||
3.22
|
Employee
Benefits
|
49
|
|||
3.23
|
Environmental
Matters
|
51
|
|||
3.24
|
Permits
|
52
|
|||
3.25
|
Certain
Business Relationships With Affiliates
|
52
|
|||
3.26
|
Tax-Free
Reorganization
|
52
|
|||
3.27
|
Split-Off
|
54
|
|||
3.28
|
Brokers’
Fees
|
54
|
|||
3.29
|
Disclosure
|
54
|
|||
3.30
|
Interested
Party Transactions
|
54
|
|||
3.31
|
Duty
to Make Inquiry
|
55
|
|||
3.32
|
Accountants
|
55
|
|||
3.33
|
Minute
Books
|
55
|
|||
3.34
|
Board
Action
|
55
|
|||
ARTICLE
IV
|
COVENANTS
|
55
|
|||
4.1
|
Closing
Efforts
|
55
|
|||
4.2
|
Governmental
and Thirty Party Notices and Consents
|
56
|
|||
4.3
|
Current
Report
|
56
|
|||
4.4
|
Operation
of Business
|
56
|
|||
4.5
|
Access
to Information
|
59
|
|||
4.6
|
Operation
of Business
|
60
|
|||
4.7
|
Access
to Information
|
62
|
|||
4.8
|
Expenses
|
62
|
|||
4.9
|
Indemnification
|
62
|
|||
4.10
|
Listing
of Merger Shares
|
63
|
|||
4.11
|
Stock
Split
|
63
|
|||
4.12
|
Name
Change
|
63
|
4.13
|
Split-Off
|
63
|
|||
4.14
|
Stock
Option Plan
|
63
|
|||
4.15
|
Permit
Application
|
63
|
|||
4.16
|
No
Registration
|
64
|
|||
ARTICLE
V
|
CONDITIONS
TO CONSUMMATION OF MERGERS
|
64
|
|||
|
5.1
|
Conditions
to Each Party’s Obligations
|
64
|
||
5.2
|
Conditions
to Obligations of the Parent and the Acquisition
Subsidiaries
|
65
|
|||
5.3
|
Conditions
to Obligations of the Company
|
67
|
|||
5.4
|
Conditions
to Obligations of ITD
|
69
|
|||
ARTICLE
VI
|
INDEMNIFICATION
|
70
|
|||
6.1
|
Indemnification
by the Company Stockholders
|
70
|
|||
6.2
|
Indemnification
by the Parent
|
71
|
|||
6.3
|
Indemnification
Claims by the Parent
|
72
|
|||
6.4
|
Survival
of Representations and Warranties
|
75
|
|||
6.5
|
Limitations
on Parent’s Claims for Indemnification
|
75
|
|||
ARTICLE
VII
|
DEFINITIONS
|
76
|
|||
ARTICLE
VIII
|
TERMINATION
|
79
|
|||
8.1
|
Termination
by Mutual Agreement
|
79
|
|||
8.2
|
Termination
for Failure to Close
|
79
|
|||
8.3
|
Termination
by Operation of Law
|
79
|
|||
8.4
|
Termination
for Failure to Perform Covenants or Conditions
|
80
|
|||
8.5
|
Effect
of Termination or Default; Remedies
|
80
|
|||
8.6
|
Remedies;
Specific Performance
|
80
|
|||
ARTICLE
IX
|
MISCELLANEOUS
|
81
|
|||
9.1
|
Press
Releases and Announcements
|
81
|
|||
9.2
|
No
Third Party Beneficiaries
|
81
|
|||
9.3
|
Entire
Agreement
|
81
|
|||
9.4
|
Succession
and Assignment
|
81
|
|||
9.5
|
Counterparts
and Facsimile Signature
|
81
|
|||
9.6
|
Headings
|
81
|
|||
9.7
|
Notices
|
81
|
|||
9.8
|
Governing
Law
|
83
|
|||
9.9
|
Amendments
and Waivers
|
83
|
9.10
|
Severability
|
83
|
|||
9.11
|
Submission
to Jurisdiction
|
83
|
|||
9.12
|
Construction
|
84
|
EXHIBITS | ||
Exhibit
A
|
Form
Split-Off Agreement
|
|
Exhibit
B
|
Form
Escrow Agreement
|
|
Exhibit
C
|
Opinion
of Counsel to the Company
|
|
Exhibit
D
|
Opinion
of Counsel to the Parent and the Acquisition
Subsidiaries
|
|
Exhibit
E
|
Opinion
of Counsel to ITD
|
AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION
THIS
AGREEMENT AND PLAN OF MERGER
(this
“Agreement”), dated as of October 27, 2006, is entered into by and among GoFish
Corporation (f/k/a Unibio Inc.), a Nevada corporation (the “Parent”), GF
Acquisition Corp., a California corporation (the “GF Acquisition Subsidiary”),
GoFish Technologies, Inc., a California corporation (the “Company”), ITD
Acquisition Corp., a Delaware corporation (“ITD Acquisition Subsidiary,”
together with GF Acquisition Subsidiary referred to as the “Acquisition
Subsidiaries”) and Internet Television Distribution Inc., a Delaware corporation
(“ITD”). The Parent, the Acquisition Subsidiaries, the Company and ITD are each
a “Party” and referred to collectively herein as the “Parties.”
WHEREAS,
this Agreement contemplates (i) a merger of the GF Acquisition Subsidiary with
and into the Company, with the Company remaining as the surviving entity after
the merger (the “GF Merger”), whereby the stockholders of the Company will
receive common stock of the Parent in exchange for their capital stock of the
Company; and (ii) a merger of the ITD Acquisition Subsidiary with and into
ITD
with ITD remaining as the surviving entity after the merger (the “ITD Merger,”
together with the GF Merger, referred to as the “Mergers”), whereby the
stockholders of ITD will receive common stock of the Parent in exchange for
their capital stock of ITD.
WHEREAS,
simultaneously with the closing of the Mergers, the Parent shall complete a
private placement of up to 6,666,667 units of securities of the Parent, with
the
right,
in its
discretion, to sell an additional 1,333,334 units
(the
“Private Placement Offering”), at the purchase price of $1.50 per unit (the “PPO
Price”), each unit consisting of one share of the Parent’s common stock and a
five year warrant to purchase one half of a share of Parent common stock for
an
exercise price of $1.75 per whole share;
WHEREAS,
contemporaneously with the closing of the Mergers, the Parent intends to
split-off its wholly owned subsidiary, GF Leaseco, Inc., a Nevada corporation
(“Leaseco”), through the sale of all of the outstanding capital stock of Leaseco
(the “Split-Off”) upon the terms and conditions of a split-off agreement by and
among Parent, Dianxiang
Wu,
Xxxxxxx
Xxx
(Messrs.
Wu and Xue are collectively referred to as “Buyer”), the Company and Leaseco,
substantially in the form of Exhibit
A
attached
hereto (the “Split-Off Agreement”); and
WHEREAS,
the Parent, the Acquisition Subsidiaries, and the Company desire that each
of
the Mergers qualifies as a “plan of reorganization” under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the “Code”) and not subject the
holders of equity securities of the Company or ITD to tax liability under the
Code.
NOW,
THEREFORE, in consideration of the representations, warranties and covenants
herein contained, and for other good and valuable consideration the receipt,
adequacy and sufficiency of which are hereby acknowledged, the Parties hereto,
intending legally to be bound, agree as follows:
ARTICLE
I
THE
MERGERS
1.1 The
Mergers.
Upon
and subject to the terms and conditions of this Agreement, the GF Acquisition
Subsidiary shall merge with and into the Company at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the GF Acquisition Subsidiary shall cease and the Company shall
continue as the surviving corporation in the GF Merger (the “GF Surviving
Corporation”).
Upon
and
subject to the terms and conditions of this Agreement, the ITD Acquisition
Subsidiary shall merge with and into ITD at the Effective Time (as defined
below). From and after the Effective Time, the separate corporate existence
of
the ITD Acquisition Subsidiary shall cease and ITD shall continue as the
surviving corporation in the ITD Merger (the “ITD Surviving Corporation,”
together with the GF Surviving Corporation referred to as the “Surviving
Corporations”).
The
“Effective Time” shall be the later to occur of the time at which (i) the
Agreement of Merger and other appropriate or required documents prepared and
executed in accordance with the relevant provisions of the California
Corporations Code (the “Agreement of Merger”) are filed with the Secretary of
State of the State of California in connection with the GF Merger; and (ii)
the
certificate
of merger (the “Certificate of Merger”) and other appropriate or required
documents prepared and executed in accordance with the Delaware General
Corporation Law (the “GCL”) are filed with the Secretary of State of the State
of Delaware in connection with the ITD Merger.
The GF
Merger shall have the effects set forth in Section 1107 of the California
General Corporation Law (the “California Corporations Code”) The
ITD
Merger shall have the effects set forth in Section 259 of the GCL.
1.2 The
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Gottbetter & Partners, LLP in New York, New
York commencing at 10:00 a.m. local time on October 27, 2006, or, if all of
the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby have not been satisfied or waived by such date, on such
mutually agreeable later date as soon as practicable (and in any event not
later
than three (3) business days) after the satisfaction or waiver of all conditions
(excluding the delivery of any documents to be delivered at the Closing by
any
of the Parties) set forth in Article V hereof (the “Closing Date”).
1.3 Actions
at the Closing.
At the
Closing:
(a) the
Company and ITD shall deliver to the Parent and the Acquisition Subsidiaries,
the various certificates, instruments and documents referred to in Section
5.2;
(b) the
Parent, the Acquisition Subsidiaries and ITD shall deliver to the Company the
various certificates, instruments and documents referred to in Section
5.3;
-2-
(c) the
Parent, the Acquisition Subsidiaries and the Company shall deliver to ITD the
various certificates, instruments and documents referred to in Section
5.4;
(d) the
GF
Surviving Corporation shall file the Agreement of Merger with the Secretary
of
State of the State of California;
(e) the
ITD
Surviving Corporation shall file the Certificate of Merger with the Secretary
of
State of the State of Delaware;
(f) each
of
the stockholders of record of the Company immediately prior to the Effective
Time (collectively, the “Company Stockholders”) shall deliver to the Parent the
certificate(s) representing his, her or its Company Shares (as defined
below);
(g) each
of
the stockholders of record of ITD immediately prior to the Effective Time
(collectively, the “ITD Stockholders”) shall deliver to the Parent the
certificate(s) representing his, her or its ITD Shares (as defined
below);
(h) the
Parent shall deliver certificates for the Initial Shares (as defined below)
to
each Company Stockholder and ITD Stockholder in accordance with Section
1.5;
(i) the
Parent shall deliver to the Company (i) evidence that the Parent’s board of
directors is authorized to consist of five individuals, (ii) the resignations
of
all individuals who served as directors and officers of the Parent prior to
the
Closing Date, which resignations shall be effective as of the Closing Date,
(iii) evidence of the appointment of five directors to serve immediately upon
the Closing Date, one of whom shall have been designated by the Company, three
of whom shall have been designated by ITD and one of whom shall have been
designated by the Parent, and (v) evidence of the appointment of such executive
officers of the Parent to serve immediately upon the Closing Date as shall
have
been designated by the Company; and
(j) the
Parent, Xxxxxxx Xxxxxxx, and Xxxx Xxxxxx (Messrs. Xxxxxxx, and Xxxxxx
collectively referred to as the “Indemnification Representatives”) and
Gottbetter & Partners, LLP (the “Escrow Agent”) shall execute and deliver
the Escrow Agreement in substantially the form attached hereto as Exhibit
B
(the
“Escrow Agreement”) and the Parent shall deliver to the Escrow Agent a
certificate for the Escrow Shares (as defined below) being placed in escrow
on
the Closing Date pursuant to Section 1.9.
1.4 Additional
Actions.
If
at any
time after the Effective Time either of the Surviving Corporations shall
consider or be advised that any deeds, bills of sale, assignments or assurances
or any other acts or things are necessary, desirable or proper (a) to vest,
perfect or confirm, of record or otherwise, in the respective Surviving
Corporation, its right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of either the Company
or
any Acquisition Subsidiary or (b) otherwise to carry out the purposes of this
Agreement, such Surviving Corporation and its proper officers and directors
or
their designees shall be authorized (to the fullest extent allowed under
applicable law) to execute and deliver, in the name and on behalf of either
the
Company or any Acquisition Subsidiary, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company
or
any Acquisition Subsidiary, all such other acts and things necessary, desirable
or proper to vest, perfect or confirm its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets
of
the Company or any Acquisition Subsidiary, as applicable, and otherwise to
carry
out the purposes of this Agreement.
-3-
1.5 Conversion
of Securities.
(a) Conversion
of Company Securities.
Prior
to the Effective Time, each issued and outstanding share of the Series A
Preferred Stock of the Company (the “Series A Preferred Stock”) shall convert,
on a one-for-one basis, into shares of common stock of the Company (“Company
Shares”), as provided in the Company’s articles of incorporation, as amended to
date. At the Effective Time, by virtue of the GF Merger and without any action
on the part of any Party or the holder of any of the following
securities:
(i) Each
Company Share issued and outstanding (other than Company Shares owned
beneficially by the Parent or the GF Acquisition Subsidiary and Dissenting
Shares (as defined below)) shall be converted into and represent the right
to
receive (subject to the provisions of Section 1.6) such number of shares of
common stock, $0.001 par value per share, of the Parent (“Parent Common Stock”)
as is equal to the GF Common Conversion Ratio (as defined below). An aggregate
of 4,500,000 shares of Parent Common Stock shall be issuable to the stockholders
of the Company and the holders of warrants (“Warrants”) and options (“Options”)
to acquire Company Shares, of which 3,615,302 shares shall be issued to Company
Stockholders upon conversion of their Company Shares, as described above, and
an
aggregate of 884,698 shares
shall be reserved for issuance upon the exercise of the Parent Options and
New
Warrants (defined below). Notwithstanding the foregoing, the number of shares
of
Parent Common Stock issuable to the Company Stockholders upon conversion of
their Company Shares, and the number of shares reserved for issuance upon the
exercise of Parent Options and New Warrants may be adjusted in accordance with
Section 1.8(e).
(ii) The
“GF
Common Conversion Ratio” shall be obtained by dividing (i) 4,500,000 shares
of
Parent Common Stock by (ii) the total number of outstanding Company Shares
immediately prior to the Effective Time on a fully diluted basis after giving
effect to the exercise of all outstanding Options, Warrants and other rights
to
acquire Company Shares. Stockholders
of record of the Company as of the Closing Date (the “GF Indemnifying
Stockholders”) shall be entitled to receive immediately 95%
of
the shares of Parent Common Stock into which their Company Shares were converted
pursuant to this Section 1.5(a) (the “GF Initial Shares”); the
remaining 5% of
the
shares of Parent Common Stock into which their Company Shares were converted
pursuant to this Section 1.5(a), rounded to the nearest whole number (with
0.5 shares rounded upward to the nearest whole number) (the “GF Escrow Shares”),
shall be deposited in escrow pursuant to Section 1.9 and shall be held and
disposed of in accordance with the terms of the Escrow Agreement. The GF Initial
Shares and the GF Escrow Shares shall together be referred to herein as the
“GF
Merger Shares.”
-4-
(b) Conversion
of ITD Securities.
At the
Effective Time, by virtue of the ITD Merger and without any action on the part
of any Party or the holder of any of the following securities:
(i) Each
share of common stock, no par value per share, of ITD (“ITD Shares”) issued and
outstanding immediately prior to the Effective Time (other than ITD Shares
owned
beneficially by the Parent or the ITD Acquisition Subsidiary and Dissenting
Shares (as defined below)) shall be converted into and represent the right
to
receive (subject to the provisions of Section 1.9) such number of shares of
Parent Common Stock as is equal to the ITD Common Conversion Ratio (as defined
below), subject to ITD Share Adjustment described below. An aggregate of
3,500,000 shares of Parent Common Stock (“ITD Maximum”) shall be issued to the
stockholders of ITD in connection with the ITD Merger, subject to the ITD Share
Adjustment.
(ii) The
“ITD
Common Conversion Ratio” shall be obtained by dividing (i) the ITD Maximum,
subject to the ITD Share Adjustment, by (ii) the total number of outstanding
ITD
Shares immediately prior to the Effective Time on a fully diluted basis after
giving effect to the exercise of all outstanding options, warrants and other
rights to acquire ITD Shares. Stockholders
of record of ITD as of the Closing Date (the “ITD Indemnifying Stockholders,”
together with the GF Indemnifying Stockholders being referred to as the
“Indemnifying Stockholders”) shall be entitled to receive
immediately 95%
of
the shares of Parent Common Stock into which their ITD Shares were converted
pursuant to this Section 1.5(b) (the “ITD Initial Shares,” together with the GF
Initial Shares referred to as the “Initial Shares”); the remaining 5% of
the
shares of Parent Common Stock into which their ITD Shares were converted
pursuant to this Section 1.5(b), rounded to the nearest whole number (with
0.5
shares rounded upward to the nearest whole number) (the “ITD Escrow Shares,”
together with the GF Escrow Shares referred to as the “Escrow Shares”), shall be
deposited in escrow pursuant to Section 1.9 and shall be held and disposed
of in
accordance with the terms of the Escrow Agreement. The ITD Initial Shares and
the ITD Escrow Shares shall together be referred to herein as the “ITD Merger
Shares.” The GF Merger Shares and the ITD Merger Shares are collectively
referred to as the “Merger Shares.”
-5-
(iii) Notwithstanding
the foregoing, in the event the maximum number of units (6,666,667 units) is
not
sold in the Private Placement Offering and the Company elects to repay existing
indebtedness, the ITD Maximum shall be reduced by the number of shares equal
to
the quotient obtained by dividing (x) the difference between the amount of
existing debt repaid minus the amount of subscriptions in the Private Placement
Offering identified in writing by ITD, or its Affiliates, to the Parent as
such
prior to the Effective Time, by (y) the PPO Price. Further, in the event that
the maximum number of units (6,666,667 units) is sold in the Private Placement
Offering, and the Company elects to repay existing indebtedness in excess of
$1,000,000, the ITD Maximum shall be reduced by the number of shares equal
to
the quotient obtained by dividing (x) the difference between the amount of
existing indebtedness repaid in excess of $1,000,000 minus the amount of
subscriptions in the Private Placement Offering identified in writing by ITD,
or
its Affiliates, to the Parent as such prior to the Effective Time by (y) the
PPO
Price (the adjustments described in this paragraph referred to as the “ITD Share
Adjustment”).
(c) Each
issued and outstanding share of common stock, par value $0.001 per share, of
the
GF Acquisition Subsidiary shall be converted into one validly issued, fully
paid
and nonassessable share of common stock of the GF Surviving
Corporation.
(d) Each
issued and outstanding share of common stock, par value $0.001 per share, of
the
ITD Acquisition Subsidiary shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the ITD Surviving
Corporation.
1.6 Dissenting
Shares.
(a) For
purposes of this Agreement, “Dissenting Shares” means (i) Company Shares held as
of the Effective Time by a Company Stockholder who has not voted such Company
Shares in favor of the adoption of this Agreement and the GF Merger and with
respect to which appraisal shall have been duly demanded and perfected in
accordance with Chapter
13 of the California Corporations Code
and not
effectively withdrawn or forfeited prior to the Effective Time; and (i) ITD
Shares held as of the Effective Time by an ITD Stockholder who has not voted
such ITD Shares in favor of the adoption of this Agreement and the ITD Merger
and with respect to which appraisal shall have been duly demanded and perfected
in accordance with Section 262 of the GCL and not effectively withdrawn or
forfeited prior to the Effective Time. Dissenting Shares shall not be converted
into or represent the right to receive shares of Parent Common Stock unless
(i)
such Company Stockholder’s right to appraisal shall have ceased in accordance
with Section
1309 of the California Corporations Code, or (ii) such ITD Stockholder’s right
of appraisal shall
have been duly demanded and perfected in accordance with Section 262 of the
GCL,
and not effectively withdrawn or forfeited prior to the Effective Time. If
such
Company Stockholder or ITD Stockholder has so forfeited or withdrawn his, her
or
its right to appraisal of Dissenting Shares, then, (i) as of the occurrence
of such event, such holder’s Dissenting Shares shall cease to be Dissenting
Shares and shall be converted into and represent the right to receive the GF
Merger Shares or ITD Merger Shares issuable in respect of such Company Shares
or
ITD Shares, respectively, pursuant to Section 1.5, and (ii) promptly
following the occurrence of such event, the Parent shall deliver to such Company
Stockholder or ITD Stockholder a certificate representing 95% of such Merger
Shares to which such holder is entitled pursuant to Section 1.5 (which
shares shall be considered Initial Shares for all purposes of this Agreement)
and shall deliver to the Escrow Agent a certificate representing the remaining
5% of the Merger Shares to which such holder is entitled pursuant to
Section 1.5 (which shares shall be considered Escrow Shares for all
purposes of this Agreement).
-6-
(b) The
Company and ITD shall give the Parent prompt notice of any written demands
for
appraisal of any Company Shares or ITD Shares, respectively, withdrawals of
such
demands, and any other instruments that relate to such demands received by
the
Company or ITD. The Company and ITD shall not, except with the prior written
consent of the Parent, make any payment with respect to any demands for
appraisal of Company Shares or ITD Shares or offer to settle or settle any
such
demands.
1.7 Fractional
Shares.
No
certificates or scrip representing fractional Initial Shares shall be issued
to
Company Stockholders or ITD Stockholders on the surrender for exchange of
certificates that immediately prior to the Effective Time represented Company
Shares or ITD Shares converted into Merger Shares pursuant to Section 1.5
(“Certificates”) and such Company Stockholders or ITD Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Parent with respect to any fractional
Initial Shares that would have otherwise been issued to such Company
Stockholders or ITD Stockholders. In lieu of any fractional Initial Shares
that
would have otherwise been issued, each former Company Stockholder or ITD
Stockholder that would have been entitled to receive a fractional Initial Share
shall, on proper surrender of such person’s Certificates, receive such whole
number of Initial Shares as is equal to the precise number of Initial Shares
to
which such Company Stockholder or ITD Stockholder would be entitled, rounded
up
or down to the nearest whole number (with a fractional interest equal to 0.5
rounded upward to the nearest whole number); provided that each such Company
Stockholder or ITD Stockholder shall receive at least one Initial
Share.
1.8 Options
and Warrants.
(a) As
of the
Effective Time, all Options to purchase Company Shares issued by the Company,
whether vested or unvested, (the “Old Options”) shall automatically become
options to purchase shares of Parent Common Stock (“Parent Options”) without
further action by the holder thereof. The Parent Option shall constitute an
option to acquire such number of shares of Parent Common Stock as is equal
to
the number of Company Shares subject to the unexercised portion of the Old
Option multiplied by the GF Common Conversion Ratio (with
any
fraction resulting from such multiplication to be rounded down to the nearest
whole number).
The
exercise price per share of each Parent Option shall be equal to the exercise
price of the Old Option divided by the GF Common Conversion Ratio (with any
fraction resulting from such division to be rounded up to the nearest whole
number) and the terms of such Parent Options shall otherwise remain the same.
The Parent Options shall be granted under the 2004 Plan (as defined herein),
which shall be adopted and assumed in writing by the Parent in connection with
the GF Merger, and the 2004 Plan’s terms, exercisability, vesting schedule, and
status as an “incentive stock option” under Section 422 of the Code, if
applicable. It is the intention of the Parties that any Old Options intended
to
be “incentive stock options” under Section 422 of the Code shall remain
incentive stock options as Parent Options.
-7-
(b) As
soon
as practicable after the Effective Time, the Parent or the GF Surviving
Corporation shall take appropriate actions to collect the Options and the
agreements evidencing the Options, which shall be deemed to be canceled and
shall entitle the holder to exchange the Options for Parent Options in the
Parent.
(c) 804,188
shares of Parent Common Stock shall be reserved for issuance under the 2004
Plan
and shall be issued upon the exercise of the Parent Options in accordance with
this Section 1.8. No additional Options shall at any time hereafter be granted
under the 2004 Plan.
(d) Prior
to
the Effective Time, the Company will solicit the approval of the holders of
the
Warrants granted pursuant to those certain Warrant Purchase Agreements dated
as
of October 21, 2004 and those certain Consulting Agreements dated as of May
1,
2003 (collectively referred to as the “Old Warrants”) to amend their Warrant
rights on the following terms: upon the Closing of the GF Merger, a new Warrant
(the “New Warrants”) to purchase shares of Parent Common Stock will be granted
to each holder of the Old Warrants that has consented in writing to such
amendment representing the number of Company Shares subject to the unexercised
portion of the Old Warrant multiplied by the GF Common Conversion Ratio, and
otherwise on substantially the same terms as the Old Warrants; provided, that
the exercise price of the New Warrants shall be equal to the exercise price
of
the Old Warrants, divided by the GF Common Conversion Ratio. 80,510 shares
of
Parent Common Stock shall be reserved for issuance upon the exercise of the
New
Warrants. As of the Effective Time, any and all outstanding Warrants to purchase
capital stock of the Company, whether vested or unvested, shall be
canceled.
(e) In
the
event that any issued and outstanding Old Options or Old Warrants are exercised
prior to the Effective Time, the number of outstanding Company Shares shall
be
increased by the number of Company Shares issued upon exercise of Old Options
or
Old Warrants, and the number of outstanding Old Options and Old Warrants shall
be reduced by the same number, as applicable. Further, the GF Common Conversion
Ratio shall be adjusted accordingly, resulting in a decrease in the aggregate
number of shares of Parent Common Stock reserved for issuance upon exercise
of
the Parent Options and New Warrants, and a proportionate increase in the number
of shares of Parent Common Stock issuable to Company Stockholders at the
Effective Time. Accordingly, regardless of the exercise of any Old Option or
Old
Warrant, the total number of shares of Parent Common Stock issuable to Company
Stockholders, and, upon exercise, to the holders of Parent Options and New
Warrants, in connection with the Merger (in accordance with Section 1.5 and
this
Section 1.8) shall remain 4,500,000 shares of Parent Common Stock.
-8-
(f) There
are
no outstanding options, warrants or other rights to acquire ITD
Shares.
1.9 Escrow.
On the
Closing Date, the Parent shall deliver to the Escrow Agent a certificate
representing the Escrow Shares, as described in Section 1.5, for the
purpose of securing the indemnification obligations of the Indemnifying
Stockholders set forth in this Agreement. The Escrow Shares shall be held by
the
Escrow Agent pursuant to the Escrow Agreement, in substantially the form set
forth in Exhibit B attached hereto. The Escrow Shares shall be held as a trust
fund and shall not be subject to any lien, attachment, trustee process or any
other judicial process of any creditor of any Party, and shall be held and
disbursed solely for the purposes and in accordance with the terms of the Escrow
Agreement.
1.10 Articles
of Incorporation and Bylaws.
(a) The
articles of incorporation of the Company in effect immediately prior to the
Effective Time shall be the articles of incorporation of the GF Surviving
Corporation until duly amended or repealed. The bylaws of the Company in effect
immediately prior to the Effective Time shall be the bylaws of the GF Surviving
Corporation until duly amended or repealed.
(b) The
certificate of incorporation of ITD in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the ITD Surviving Corporation
until duly amended or repealed. The bylaws of ITD in effect immediately prior
to
the Effective Time shall be the bylaws of the ITD Surviving Corporation until
duly amended or repealed.
1.11 No
Further Rights.
From
and after the Effective Time, no Company Shares nor ITD Shares shall be deemed
to be outstanding, and holders of Certificates shall cease to have any rights
with respect thereto, except as provided herein or by law.
1.12 Closing
of Transfer Books.
At the
Effective Time, the stock transfer books of the Company and ITD shall be closed
and no transfer of Company Shares nor ITD Shares shall thereafter be made.
If,
after the Effective Time, Certificates are presented to the Parent or either
of
the Surviving Corporations, they shall be cancelled and exchanged for Initial
Shares in accordance with Section 1.5, subject to Section 1.9 and to
applicable law in the case of Dissenting Shares.
1.13 Post-Closing
Adjustment.
(a) In
the
event that, during the period commencing from the Closing Date and ending on
the
second anniversary of the Closing Date, the Company (or its controlling
stockholders immediately prior to the GF Merger) incurs any Loss with respect
to, in connection with, or arising from any Parent Liabilities, then promptly
following the filing by the Parent with the Securities and Exchange Commission
(the “SEC”) of a quarterly report relating to the most recent completed quarter
for which such determination has been made, the Parent shall issue to the
Company Stockholders and/or their designees such number of shares of Parent
Common Stock as would result from dividing (x) the whole dollar amount
representing such Losses by (y) the PPO Price. The limit on the aggregate number
of shares of Parent Common Stock issuable under this Section 1.13(a) shall
be
1,125,000 shares.
-9-
(b) In
the
event that, during the period commencing from the Closing Date and ending on
the
second anniversary of the Closing Date, ITD (or its controlling stockholders
immediately prior to the ITD Merger) incurs any Loss with respect to, in
connection with, or arising from any Parent Liabilities, then promptly following
the filing by the Parent with the SEC of a quarterly report relating to the
most
recent completed quarter for which such determination has been made, the Parent
shall issue to the ITD Stockholders and/or their designees such number of shares
of Parent Common Stock as would result from dividing (x) the whole dollar amount
representing such Losses by (y) the PPO Price. The limit on the aggregate number
of shares of Parent Common Stock issuable under this Section 1.13(b) shall
be
875,000 shares.
(c) As
used
in this Section 1.13: (a) “Loss” shall mean any and all costs and expenses,
including reasonable attorneys’ fees, court costs, reasonable accountants’ fees,
and damages and losses, net of any insurance proceeds actually received by
the
Party suffering the Loss with respect thereto; (b) “Claims” shall include, but
are not limited to, any claim, notice, suit, action, investigation, other
proceedings (whether actual or threatened); and (c) “Parent Liabilities” shall
mean all Claims against and liabilities, obligations or indebtedness of any
nature whatsoever of Leaseco, whenever accruing, and of the Parent, accruing
on
or before the Closing Date (whether primary, secondary, direct, indirect,
liquidated, unliquidated or contingent, matured or unmatured), including, but
not limited to (i) any breach by the Parent or either of the Acquisition
Subsidiaries of any of their respective representations or warranties set forth
in Article III herein, (ii) any litigation threatened, pending or for which
a
basis exists, that has resulted or may result in the entry of judgment in
damages or otherwise against the Parent or any Parent Subsidiary (as defined
in
this Agreement); (iii) any and all outstanding debts owed by the Parent or
any
Parent Subsidiary; (iv) any and all internal or employee related disputes,
arbitrations or administrative proceedings threatened, pending or otherwise
outstanding, (v) any and all liens, foreclosures, settlements, or other
threatened, pending or otherwise outstanding financial, legal or similar
obligations of the Parent or any Parent Subsidiary, (vi) any and all Taxes
for
which Parent or any of its direct or indirect assets may be liable or subject,
for any taxable period (or portion thereof) ending on or before the Closing
Date, including, without limitation, any and all Taxes resulting from or
attributable to Parent’s ownership or operation of the Leaseco assets, (vii) any
and all Taxes for which Parent or its assets may be liable or subject
(including, without limitation, the interests and assets of the Surviving
Corporations and any Parent Subsidiary) as a consequence of Parent’s
acquisition, formation, capitalization, ownership, and Split-Off of Leaseco,
whether related to a taxable period (or portion thereof) ending on or after
the
Closing Date, and (vii) all fees and expenses incurred in connection with
effecting the adjustments contemplated by this Section 1.13, as such Parent
Liabilities are determined by the Parent’s independent auditors, on a quarterly
basis.
-10-
1.14 Exemption
From Registration; California Permit.
The
Parent, the Company and ITD intend that the shares of Parent Common Stock to
be
issued pursuant to Section 1.5 or upon exercise of Parent Options and New
Warrants granted pursuant to Section 1.8, in each case in connection with the
Mergers will be issued in a transaction exempt from registration under the
Securities Act of 1933, as amended (“Securities Act”), by reason of section 4(2)
of the Securities Act and/or Rule 506 of Regulation D promulgated by the SEC
thereunder.
Subject
to the provisions of Section 4.15, the shares of Parent Common Stock to be
issued pursuant to Section 1.5 in connection with the GF Merger will be
qualified by permit under the California Corporations Code, pursuant to Section
25121 thereof. The Parent shall use Reasonable Best Efforts, with the
cooperation of the Company, (i) to file, as promptly as practicable following
the execution and delivery of this Agreement, an application for issuance of
a
permit pursuant to Section 25121 of the California Corporations Code to issue
such securities (the "California Permit") and (ii) to obtain the California
Permit as promptly as practicable.
ARTICLE
IIA
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Parent that the statements contained
in
this Article IIA are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Parent on the date hereof
and
accepted in writing by the Parent (the “Disclosure Schedule”). The Disclosure
Schedule prepared by the Company shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article IIA, and
except to the extent that it is clear from the context thereof that such
disclosure also applies to any other paragraph, the disclosures in any paragraph
of the Disclosure Schedule shall qualify only the corresponding paragraph in
this Article IIA. For
purposes of this Article IIA, the phrase “to the knowledge of the Company”
or any phrase of similar import shall be deemed to refer to the actual knowledge
of the executive officers of the Company, as well as any other knowledge which
such executive officers would have possessed had they made reasonable inquiry
with respect to the matter in question.
2.1A Organization,
Qualification and Corporate Power.
The
Company is a corporation duly organized, validly existing and in corporate
and
tax good standing under the laws of the State of California. The Company is
duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except
where
the failure to be so qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect (as defined below). The Company has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Company has
furnished or made available to the Parent complete and accurate copies of its
articles of incorporation and bylaws. The Company is not in default under or
in
violation of any provision of its articles of incorporation, as amended to
date,
or its bylaws, as amended to date. For purposes of this Agreement, “Company
Material Adverse Effect” means a material adverse effect on the assets,
business, condition (financial or otherwise), results of operations or future
prospects of the Company.
-11-
2.2A Capitalization.
The
authorized capital stock of the Company consists of 24,905,000 shares of which
21,000,000 shares are designated as common stock (Company Shares) and 3,905,000
shares are designated as Series A Preferred Stock. As of the date of this
Agreement, 10,477,551 shares were issued and outstanding of which 3,905,000
were
shares of Series A Preferred Stock which will convert, on a one for one basis,
into Company Shares prior to the Effective Time, and no Company Shares were
held
in the treasury of the Company. Section 2.2A of the Disclosure Schedule
sets forth a complete and accurate list of (i) all stockholders of the
Company, indicating the number and class of Company Shares held by each
stockholder, (ii) all outstanding Options and Warrants, indicating
(A) the holder thereof, (B) the number of Company Shares subject to
each Option and Warrant, (C) the exercise price, date of grant, vesting
schedule and expiration date for each Option or Warrant, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of the Company. All of the issued and
outstanding Company Shares, and all Company Shares that may be issued upon
exercise of Options or Warrants will be (upon issuance in accordance with their
terms), duly authorized, validly issued, fully paid, nonassessable and free
of
all preemptive rights. Other than the Options and Warrants listed in
Section 2.2A of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance or redemption of any of its capital stock. There are no outstanding
or
authorized stock appreciation, phantom stock or similar rights with respect
to
the Company. Except as set forth in Section 2.2A of the Disclosure Schedule,
there are no agreements to which the Company is a party or by which it is bound
with respect to the voting (including without limitation voting trusts or
proxies), registration under the Securities Act, or sale or transfer (including
without limitation agreements relating to pre-emptive rights, rights of first
refusal, co-sale rights or “drag-along” rights) of any securities of the
Company. Except as set forth in Section 2.2A of the Disclosure Schedule, to
the
knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including without limitation voting trusts or proxies) or sale or
transfer (including without limitation agreements relating to rights of first
refusal, co-sale rights or “drag-along” rights) of any securities of the
Company. All of the issued and outstanding Company Shares were issued in
compliance with applicable federal and state securities laws.
2.3A Authorization
of Transaction.
The
Company has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by the Company of this Agreement and, subject to the adoption of this Agreement
and the approval of the GF Merger by no less than a majority of the votes
represented by the outstanding Company Shares entitled to vote on this Agreement
and the GF Merger, the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. Without limiting the generality
of
the foregoing, the board of directors of the Company (i) determined that
the GF Merger is fair and in the best interests of the Company and the Company
Stockholders, (ii) adopted this Agreement in accordance with the provisions
of the California
Corporations Code,
and
(iii) directed that this Agreement and the GF Merger be submitted to the
Company Stockholders for their adoption and approval and resolved to recommend
that the Company Stockholders vote in favor of the adoption of this Agreement
and the approval of the GF Merger. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
-12-
2.4A Noncontravention.
Except
as set forth in Section 2.4A of the Disclosure Schedule and subject to the
filing of the Agreement
of Merger as required by the California Corporations Code,
neither
the execution and delivery by the Company of this Agreement, nor the
consummation by the Company of the transactions contemplated hereby, will
(a) conflict with or violate any provision of the articles of incorporation
or bylaws of the Company, as amended to date, bylaws or other organizational
document of any Subsidiary (as defined below), (b) require on the part of
the Company or any Subsidiary any filing with, or any permit, authorization,
consent or approval of, any court, arbitrational tribunal, administrative agency
or commission or other governmental or regulatory authority or agency (a
“Governmental Entity”), except for the State of California and such permits,
authorizations, consents and approvals for which the Company is obligated to
use
its Reasonable Best Efforts to obtain pursuant to Section 4.2(a),
(c) 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
obligations under, create in any Party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument
to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, except for
(i)
any conflict, breach, default, acceleration, termination, modification or
cancellation in any contract or instrument set forth in Section 2.4A of the
Disclosure Schedule, for which the Company is obligated to use its Reasonable
Best Efforts to obtain waiver, consent or approval pursuant to Section 4.2(b),
(ii) any conflict, breach, default, acceleration, termination, modification
or cancellation which, individually or in the aggregate, would not have a
Company Material Adverse Effect and would not adversely affect the consummation
of the transactions contemplated hereby or (iii) any notice, consent or
waiver the absence of which, individually or in the aggregate, would not have
a
Company Material Adverse Effect and would not adversely affect the consummation
of the transactions contemplated hereby, (d) result in the imposition of
any Security Interest (as defined below) upon any assets of the Company or
any
Subsidiary or (e) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company, any Subsidiary or any of their
properties or assets. For purposes of this Agreement: “Security Interest” means
any mortgage, pledge, security interest, encumbrance, charge or other lien
(whether arising by contract or by operation of law), other than
(i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising
under worker’s compensation, unemployment insurance, social security,
retirement, and similar legislation, and (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in
the
Ordinary Course of Business (as defined below) of the Company and not material
to the Company; and “Ordinary Course of Business” means the ordinary course of
the company’s business, consistent with past custom and practice (including with
respect to frequency and amount).
-13-
2.5A Subsidiaries.
(a) Section 2.5A
of the Disclosure Schedule sets forth: (i) the name of each Company
Subsidiary; (ii) the number and type of outstanding equity securities of
each Subsidiary and a list of the holders thereof; (iii) the jurisdiction
of organization of each Subsidiary; (iv) the names of the officers and
directors of each Company Subsidiary; and (v) the jurisdictions in which
each Company Subsidiary is qualified or holds licenses to do business as a
foreign corporation or other entity. For purposes of this Agreement, a
“Subsidiary” shall mean any corporation, partnership, joint venture or other
entity in which a Party has, directly or indirectly, an equity interest
representing 50% or more of the equity securities thereof or other equity
interests therein (collectively, the “Subsidiaries”).
(b) Each
Subsidiary is an entity duly organized, validly existing and in corporate and
tax good standing under the laws of the jurisdiction of its incorporation.
Each
Subsidiary is duly qualified to conduct business and is in corporate and tax
good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires qualification
to do business, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Each Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Company has
delivered or made available to the Parent complete and accurate copies of the
charter, bylaws or other organizational documents of each Subsidiary. No
Subsidiary is in default under or in violation of any provision of its charter,
bylaws or other organizational documents. All of the issued and outstanding
equity securities of each Subsidiary are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. All equity securities of
each
Subsidiary that are held of record or owned beneficially by either the Company
or any Subsidiary are held or owned free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company or
any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any equity securities of any Subsidiary.
There are no outstanding stock appreciation, phantom stock or similar rights
with respect to any Subsidiary. To the knowledge of the Company, there are
no
voting trusts, proxies or other agreements or understandings with respect to
the
voting of any equity securities of any Subsidiary.
(c) Except
as
set forth in Section 2.5A(c) of the Disclosure Schedule, the Company does not
control directly or indirectly or have any direct or indirect equity
participation or similar interest in any corporation, partnership, limited
liability company, joint venture, trust or other business association which
is
not a Subsidiary.
-14-
2.6A Financial
Statements.
The
Company has provided or made available to the Parent (i) the audited balance
sheet of the Company (the “Company Balance Sheet”) at December 31, 2005 (the
“Company Balance Sheet Date”), and the related statements of operations and cash
flows for the period from inception through December 31, 2005 (the “Year-End
Financial Statements”); and (ii) the unaudited balance sheet of the Company (the
“Company Interim Balance Sheet”) at September 30, 2006 (the “Company Interim
Balance Sheet Date”) and the related statement of operations and cash flows for
the nine months then ended (collectively, the “Company Interim Financial
Statements,” and together with the Year-End Financial Statements, the “Company
Financial Statements”). The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods covered thereby, fairly
present the financial condition, results of operations and cash flows of the
Company and the Subsidiaries as of the respective dates thereof and for the
periods referred to therein, comply as to form with the applicable rules and
regulations of the SEC for inclusion of such Company Financial Statements in
the
Parent’s filings with the SEC as required by the Securities Exchange Act of 1934
(the “Exchange Act”) and are consistent with the books and records of the
Company and the Subsidiaries.
2.7A Absence
of Certain Changes.
Since
the
Company Interim Balance Sheet Date, and except as set forth in Section 2.7A
of
the Disclosure Schedule, (a) there has occurred no event or development
which, individually or in the aggregate, has had, or could reasonably be
expected to have in the future, a Company Material Adverse Effect, and
(b) neither the Company nor any Subsidiary has taken any of the actions set
forth in paragraphs (i) through (xiii) of Section 4.4(a).
2.8A Undisclosed
Liabilities.
None
of
the Company and its Subsidiaries has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), except for (a) liabilities shown on the Company
Interim Balance Sheet referred to in Section 2.6A, (b) liabilities
which have arisen since the Company Interim Balance Sheet Date in the Ordinary
Course of Business and (c) contractual and other liabilities incurred in
the Ordinary Course of Business which are not required by GAAP to be reflected
on a balance sheet. The indebtedness of the Company owed in the principal amount
of $800,000 is valid and subsisting, and accurately reflects funds advanced
to
the Company by ITD or its affiliates.
2.9A Tax
Matters.
(a) For
purposes of this Agreement, the following terms shall have the following
meanings:
(i) “Taxes”
means all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise and other taxes imposed
by the United States of America or any state, local or foreign government,
or
any agency thereof, or other political subdivision of the United States or
any
such government, and any interest, fines, penalties, assessments or additions
to
tax resulting from, attributable to or incurred in connection with any tax
or
any contest or dispute thereof.
-15-
(ii) “Tax
Returns” means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) Each
of
the Company and the Subsidiaries has filed on a timely basis all Tax Returns
that it was required to file, and all such Tax Returns were complete and
accurate in all material respects. Neither the Company nor any Subsidiary is
or
has ever been a member of a group of corporations with which it has filed (or
been required to file) consolidated, combined or unitary Tax Returns, other
than
a group of which only the Company and the Subsidiaries are or were members.
Each
of the Company and the Subsidiaries has paid on a timely basis all Taxes that
were due and payable. The unpaid Taxes of the Company and the Subsidiaries
for
tax periods through the Company Interim Balance Sheet Date do not exceed the
accruals and reserves for Taxes (excluding accruals and reserves for deferred
Taxes established to reflect timing differences between book and Tax income)
set
forth on the Company Interim Balance Sheet. Neither the Company nor any
Subsidiary has any actual or potential liability for any Tax obligation of
any
taxpayer (including without limitation any affiliated group of corporations
or
other entities that included the Company or any Subsidiary during a prior
period) other than the Company and the Subsidiaries. All Taxes that the Company
or any Subsidiary is or was required by law to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Entity.
(c) The
Company has delivered or made available to the Parent complete and accurate
copies of all federal income Tax Returns, examination reports and statements
of
deficiencies assessed against or agreed to by the Company or any Subsidiary
since the Organization Date. The federal income Tax Returns of the Company
and
each Subsidiary have been audited by the Internal Revenue Service or are closed
by the applicable statute of limitations for all taxable years through the
taxable year specified in Section 2.9A(c) of the Disclosure Schedule. No
examination or audit of any Tax Return of the Company or any Subsidiary by
any
Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. Neither the Company nor any Subsidiary
has
been informed by any jurisdiction that the jurisdiction believes that the
Company or Subsidiary was required to file any Tax Return that was not filed.
Neither the Company nor any Subsidiary has waived any statute of limitations
with respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(d) Neither
the Company nor any Subsidiary: (i) is a “consenting corporation” within
the meaning of Section 341(f) of the Code, and none of the assets of the
Company or the Subsidiaries are subject to an election under Section 341(f)
of the Code; (ii) has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(l)(A)(ii) of the Code;
(iii) has made any payments, is obligated to make any payments, or is a
party to any agreement that could obligate it to make any payments that may
be
treated as an “excess parachute payment” under Section 280G of the Code;
(iv) has any actual or potential liability for any Taxes of any person
(other than the Company and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of federal, state, local, or
foreign law), or as a transferee or successor, by contract, or otherwise; or
(v) is or has been required to make a basis reduction pursuant to Treasury
Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
-16-
(e) None
of
the assets of the Company or any Subsidiary: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is
“tax-exempt use property” within the meaning of Section 168(h) of the Code;
or (iii) directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code.
(f) Neither
the Company nor any Subsidiary has undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to
Section 481 of the Code.
(g) No
state
or federal “net operating loss” of the Company determined as of the Closing Date
is subject to limitation on its use pursuant to Section 382 of the Code or
comparable provisions of state law as a result of any “ownership change” within
the meaning of Section 382(g) of the Code or comparable provisions of any
state law occurring
prior to the Closing Date.
2.10A Assets.
Each of
the Company and the Subsidiaries owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted and as presently
proposed to be conducted. Except as set forth in Section 2.10A of the Disclosure
Schedule, each such tangible asset is free from material defects, has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is suitable for
the
purposes for which it presently is used. Except as set forth in Section 2.10A
of
the Disclosure Schedule, no asset of the Company or any Subsidiary (tangible
or
intangible) is subject to any Security Interest.
2.11A Owned
Real Property.
Neither
the Company nor any Subsidiary owns any real property, except as otherwise
listed in Section 2.11A of the Disclosure Schedule.
2.12A Real
Property Leases.
Section 2.12A of the Disclosure Schedule lists all real property leased or
subleased to or by the Company or any Subsidiary and lists the term of such
lease, any extension and expansion options, and the rent payable thereunder.
The
Company has delivered or made available to the Parent complete and accurate
copies of the leases and subleases listed in Section 2.12A of the
Disclosure Schedule. Except as set forth in Section 2.12A of the Disclosure
Schedule, with respect to each lease and sublease listed in Section 2.12A
of the Disclosure Schedule:
(a) the
lease
or sublease is legal, valid, binding, enforceable and in full force and
effect;
-17-
(b) the
lease
or sublease will continue to be legal, valid, binding, enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing;
(c) neither
the Company nor any Subsidiary nor, to the knowledge of the Company, any other
party, is in breach or violation of, or default under, any such lease or
sublease, and no event has occurred, is pending or, to the knowledge of the
Company, is threatened, which, after the giving of notice, with lapse of time,
or otherwise, would constitute a breach or default by the Company or any
Subsidiary or, to the knowledge of the Company, any other party under such
lease
or sublease;
(d) neither
the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
and
(e) to
the
knowledge of the Company, there is no Security Interest, easement, covenant
or
other restriction applicable to the real property subject to such lease, except
for recorded easements, covenants and other restrictions which do not materially
impair the current uses or the occupancy by the Company or a Subsidiary of
the
property subject thereto.
2.13A Contracts.
(a) Section
2.13A of the Disclosure Schedule lists the following agreements (written or
oral) to which the Company or any Subsidiary is a party as of the date of this
Agreement:
(i) any
agreement (or group of related agreements) for the lease of personal property
from or to third parties providing for lease payments in excess of $25,000
per
annum or having a remaining term longer than 12 months;
(ii) any
agreement (or group of related agreements) for the purchase or sale of products
or for the furnishing or receipt of services (A) which calls for
performance over a period of more than one year, (B) which involves more
than the sum of $25,000, or (C) in which the Company or any Subsidiary has
granted manufacturing rights, “most favored nation” pricing provisions or
exclusive marketing or distribution rights relating to any products or territory
or has agreed to purchase a minimum quantity of goods or services or has agreed
to purchase goods or services exclusively from a certain party;
-18-
(iii) any
agreement which, to the knowledge of the Company, establishes a partnership
or
joint venture;
(iv) any
agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more than $25,000 or under
which it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any
agreement concerning confidentiality or noncompetition;
(vi) any
employment or consulting agreement;
(vii) any
agreement involving any officer, director or stockholder of the Company or
any
affiliate, as defined in Rule 12b-2 under the Exchange Act (an
“Affiliate”);
(viii) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Company Material Adverse Effect;
(ix) any
agreement which contains any provisions requiring the Company or any Subsidiary
to indemnify any other party thereto (excluding indemnities contained in
agreements for the purchase, sale or license of products entered into in the
Ordinary Course of Business); and
-19-
(x) any
other
agreement (or group of related agreements) either involving more than $25,000
or
not entered into in the Ordinary Course of Business.
(b) The
Company has delivered or made available to the Parent a complete and accurate
copy of each agreement listed in Section 2.13A of the Disclosure Schedule.
With respect to each agreement so listed, and except as set forth in Section
2.13A of the Disclosure Schedule: (i) the agreement is legal, valid,
binding and enforceable and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding and enforceable and in full force
and
effect immediately following the Closing in accordance with the terms thereof
as
in effect immediately prior to the Closing; and (iii) neither the Company
nor any Subsidiary nor, to the knowledge of the Company, any other party, is
in
breach or violation of, or default under, any such agreement, and no event
has
occurred, is pending or, to the knowledge of the Company, is threatened, which,
after the giving of notice, with lapse of time, or otherwise, would constitute
a
breach or default by the Company or any Subsidiary or, to the knowledge of
the
Company, any other party under such contract.
2.14A Accounts
Receivable.
All
accounts receivable of the Company and the Subsidiaries reflected on the Company
Interim Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date
on
which it first became due and payable), net of the applicable reserve for bad
debts on the Company Interim Balance Sheet. All accounts receivable reflected
in
the financial or accounting records of the Company that have arisen since the
Company Balance Sheet Date are valid receivables subject to no setoffs or
counterclaims and are collectible (within 90 days after the date on which it
first became due and payable), net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Company Interim Balance
Sheet.
2.15A Powers
of Attorney.
Except
as set forth in Section 2.15A of the Disclosure Schedule, there are no
outstanding powers of attorney executed on behalf of the Company or any
Subsidiary.
2.16A Insurance.
Section 2.16A of the Disclosure Schedule lists each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company or any
Subsidiary is a party. Such insurance policies are of the type and in amounts
customarily carried by organizations conducting businesses or owning assets
similar to those of the Company and the Subsidiaries. There is no material
claim
pending under any such policy as to which coverage has been questioned, denied
or disputed by the underwriter of such policy. All premiums due and payable
under all such policies have been paid, neither the Company nor any Subsidiary
may be liable for retroactive premiums or similar payments, and the Company
and
the Subsidiaries are otherwise in compliance in all material respects with
the
terms of such policies. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any such policy.
Each such policy will continue to be enforceable and in full force and effect
immediately following the Effective Time in accordance with the terms thereof
as
in effect immediately prior to the Effective Time.
-20-
2.17A Litigation. As
of the
date of this Agreement, there is no action, suit, proceeding, claim, arbitration
or investigation before any Governmental Entity or before any arbitrator (a
“Legal Proceeding”) which is pending or has been threatened in writing against
the Company or any Subsidiary which (a) seeks either damages in excess of
$25,000 or equitable relief or (b) if determined adversely to the Company
or such Subsidiary, could have, individually or in the aggregate, a Company
Material Adverse Effect.
2.18A Employees.
(a) Section
2.18A of the Disclosure Schedule contains a list of all employees of the Company
and each Subsidiary whose annual rate of compensation exceeds $50,000 per
year,
along with the position and the annual rate of compensation of each such person.
Section 2.18A of the Disclosure Schedule contains a list of all employees of
the
Company or any Subsidiary who are a party to a non-competition agreement with
the Company or any Subsidiary; copies of such agreements have previously been
delivered to the Parent. To the knowledge of the Company, no key employee or
group of employees has any plans to terminate employment with the Company or
any
Subsidiary.
(b) Neither
the Company nor any Subsidiary is a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. To
the
knowledge of the Company, no organizational effort has been made or threatened,
either currently or within the past two years, by or on behalf of any labor
union with respect to employees of the Company or any Subsidiary. To the
knowledge of the Company there are no circumstances or facts which could
individually or collectively give rise to a suit based on discrimination of
any
kind.
-21-
2.19A Employee
Benefits.
(a) For
purposes of this Agreement, the following terms shall have the following
meanings:
(i) “Employee
Benefit Plan” means any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in
Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation.
(ii) “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
(iii) “ERISA
Affiliate” means any entity which is, or at any applicable time was, a member of
(1) a controlled group of corporations (as defined in Section 414(b)
of the Code), (2) a group of trades or businesses under common control (as
defined in Section 414(c) of the Code), or (3) an affiliated service
group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the Company
or a Subsidiary.
(b) Section 2.19A(b)
of the Disclosure Schedule contains a complete and accurate list of all Employee
Benefit Plans maintained, or contributed to, by the Company, any Subsidiary
or
any ERISA Affiliate. Complete and accurate copies, or summaries, of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last five plan years for each Employee
Benefit Plan, have been delivered or made available to the Parent. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company, the Subsidiaries and the ERISA Affiliates
has
in all material respects met its obligations with respect to such Employee
Benefit Plan and has made all required contributions thereto. The Company,
each
Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are in
compliance in all material respects with the currently applicable provisions
of
ERISA and the Code and the regulations thereunder (including without limitation
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601 through 608 and Section 701 et seq. of ERISA). All
filings and reports as to each Employee Benefit Plan required to have been
submitted to the Internal Revenue Service or to the United States Department
of
Labor have been duly submitted.
(c) To
the
knowledge of the Company, there are no Legal Proceedings (except claims for
benefits payable in the normal operation of the Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders) against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
-22-
(d) All
the
Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code,
no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date
of
its most recent determination letter or application therefor in any respect,
and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required
to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of,
Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year
ending prior to the Closing Date.
(e) Neither
the Company, any Subsidiary, nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(f) At
no
time has the Company, any Subsidiary or any ERISA Affiliate been obligated
to
contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA).
(g) There
are
no unfunded obligations under any Employee Benefit Plan providing benefits
after
termination of employment to any employee of the Company or any Subsidiary
(or
to any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law. The assets
of each Employee Benefit Plan which is funded are reported at their fair market
value on the books and records of such Employee Benefit Plan.
(h) No
act or
omission has occurred and no condition exists with respect to any Employee
Benefit Plan maintained by the Company, any Subsidiary or any ERISA Affiliate
that would subject the Company, any Subsidiary or any ERISA Affiliate to (i)
any
material fine, penalty, tax or liability of any kind imposed under ERISA or
the
Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(i) No
Employee Benefit Plan is funded by, associated with or related to a “voluntary
employee’s beneficiary association” within the meaning of Section 501(c)(9)
of the Code.
(j) Each
Employee Benefit Plan is amendable and terminable unilaterally by the Company
at
any time without liability to the Company as a result thereof and no Employee
Benefit Plan, plan documentation or agreement, summary plan description or
other
written communication distributed generally to employees by its terms prohibits
the Company from amending or terminating any such Employee Benefit
Plan.
-23-
(k) Section
2.19A(k) of the Disclosure Schedule discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of the Company
or
any Subsidiary (A) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
the
Company or any Subsidiary of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive
payments from the Company or any Subsidiary that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of
such person’s “parachute payment” under Section 280G of the Code; and
(iii) agreement or plan binding the Company or any Subsidiary, including
without limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Employee
Benefit Plan, any of the benefits of which will be increased, or the vesting
of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. The accruals for vacation, sickness and disability expenses
are accounted for on the Company Interim Balance Sheet and are adequate and
properly reflect the expenses associated therewith in accordance with generally
accepted accounting principles.
2.20A Environmental
Matters.
(a) Each
of
the Company and the Subsidiaries has complied with all applicable Environmental
Laws (as defined below), except for violations of Environmental Laws that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. There is no pending or,
to
the knowledge of the Company, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Company or any Subsidiary, except for litigation, notices
of
violations, formal administrative proceedings or investigations, inquiries
or
information requests that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
For
purposes of this Agreement, “Environmental Law” means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage,
disposal, generation and transportation of industrial, toxic or hazardous
materials or substances or solid or hazardous waste; (ii) air, water and
noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous materials or substances, or solid or hazardous waste, including
without limitation emissions, discharges, injections, spills, escapes or dumping
of pollutants, contaminants or chemicals; (v) the protection of wild life,
marine life and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels, containers, abandoned or
discarded barrels, and other closed receptacles; (vii) health and safety of
employees and other persons; and (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above and in Section 2.20B, the terms “release” and
“environment” shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(“CERCLA”).
-24-
(b) Set
forth
in Section 2.20A(b) of the Disclosure Schedule is a list of all documents
(whether in hard copy or electronic form) that contain any environmental
reports, investigations and audits relating to premises currently or previously
owned or operated by the Company or a Subsidiary (whether conducted by or on
behalf of the Company or a Subsidiary or a third party, and whether done at
the
initiative of the Company or a Subsidiary or directed by a Governmental Entity
or other third party) which were issued or conducted during the past five years
and which the Company has possession of or access to. A complete and accurate
copy of each such document has been provided to the Parent.
(c) To
the
knowledge of the Company there is no material environmental liability with
respect to any solid or hazardous waste transporter or treatment, storage or
disposal facility that has been used by the Company or any
Subsidiary.
2.21A Legal
Compliance.
Each of
the Company and the Subsidiaries, and the conduct and operations of their
respective businesses, are in compliance with each applicable law (including
rules and regulations thereunder) of any federal, state, local or foreign
government, or any Governmental Entity, except for any violations or defaults
that, individually or in the aggregate, have not had and would not reasonably
be
expected to have a Company Material Adverse Effect.
2.22A Customers
and Suppliers.
Section 2.22A of the Disclosure Schedule sets forth a list of each customer
that accounted for more than 5% of the consolidated revenues of the Company
during the last full fiscal year or the interim period through the Company
Interim Balance Sheet Date and the amount of revenues accounted for by such
customer during such period. No such customer has notified the Company in
writing within the past year that it will stop buying services from the Company
or any Subsidiary.
2.23A Permits.
Section
2.23A of the Disclosure Schedule sets forth a list of all permits, licenses,
registrations, certificates, orders or approvals from any Governmental Entity
(including without limitation those issued or required under Environmental
Laws
and those relating to the occupancy or use of owned or leased real property)
(“Permits”) issued to or held by the Company or any Subsidiary. Such listed
Permits are the only Permits that are required for the Company and the
Subsidiaries to conduct their respective businesses as presently conducted
except for those the absence of which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material Adverse
Effect. Each such Permit is in full force and effect and, to the knowledge
of
the Company, no suspension or cancellation of such Permit is threatened and
there is no basis for believing that such Permit will not be renewable upon
expiration. Each such Permit will continue in full force and effect immediately
following the Closing.
-25-
2.24A Certain
Business Relationships With Affiliates.
Except
as listed in Section 2.24A of the Disclosure Schedule, no Affiliate of the
Company or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Company or any Subsidiary,
(b) has any claim or cause of action against the Company or any Subsidiary,
or (c) owes any money to, or is owed any money by, the Company or any
Subsidiary. Section 2.24A of the Disclosure Schedule describes any
transactions involving the receipt or payment in excess of $25,000 in any fiscal
year between the Company or a Subsidiary and any Affiliate thereof which have
occurred or existed since the Organization Date, other than employment
agreements.
2.25A Brokers’
Fees.
Neither
the Company nor any Subsidiary has any liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, except as listed in Section 2.25A of the
Disclosure Schedule.
2.26A Books
and Records.
The
minute books and other similar records of the Company and each Subsidiary
contain complete and accurate records of all actions taken at any meetings
of
the Company’s or such Subsidiary’s stockholders, board of directors or any
committees thereof and of all written consents executed in lieu of the holding
of any such meetings. The books and records of the Company and each Subsidiary
accurately reflect in all material respects the assets, liabilities, business,
financial condition and results of operations of the Company or such Subsidiary
and have been maintained in accordance with good business and bookkeeping
practices.
2.27A Intellectual
Property.
Each
of
the Company and the Subsidiaries owns or has the right to use all Intellectual
Property (as defined below) necessary (i) to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and to provide
the services provided, by the Company or the Subsidiaries to other parties
(together, the “Customer Deliverables”) and (ii) to operate the internal
systems of the Company or the Subsidiaries that are material to its business
or
operations, including, without limitation, computer hardware systems, software
applications and embedded systems (the “Internal Systems”; the Intellectual
Property owned by or licensed to the Company or the Subsidiaries and
incorporated in or underlying the Customer Deliverables or the Internal Systems
is referred to herein as the “Company Intellectual Property”). Each item of
Company Intellectual Property will be owned or available for use by the GF
Surviving Corporation immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing.
The
Company or the appropriate Subsidiary has taken all reasonable measures to
protect the proprietary nature of each item of Company Intellectual Property.
To
the knowledge of the Company, (a) no other person or entity has any rights
to
any of the Company Intellectual Property owned by the Company or a Subsidiary
except pursuant to agreements or licenses entered into by the Company and such
person in the ordinary course, and (b) no other person or entity is infringing,
violating or misappropriating any of the Company Intellectual Property. For
purposes of this Agreement, “Intellectual Property” means all (i) patents and
patent applications, (ii) copyrights and registrations thereof, (iii) computer
software, data and documentation, (iv) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced
to
practice, know-how, manufacturing and production processes and techniques,
research and development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (v) trademarks, service marks,
trade names, domain names and applications and registrations therefor and (vi)
other proprietary rights relating
to
any of the foregoing.
-26-
2.28A Disclosure.
No
representation or warranty by the Company contained in this Agreement, and
no
statement contained in the Company’s Disclosure Schedule or any other document,
certificate or other instrument delivered or to be delivered by or on behalf
of
the Company pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in
order to make the statements herein or therein not misleading. The Company
has
disclosed to the Parent all material information relating to the business of
the
Company or any Subsidiary or the transactions contemplated by this
Agreement.
2.29A Duty
to Make Inquiry.
To the
extent that any of the representations or warranties in this Article IIA are
qualified by “knowledge” or “belief,” the Company represents and warrants that
it has made due and reasonable inquiry and investigation concerning the matters
to which such representations and warranties relate, including, but not limited
to, diligent inquiry by its directors, officers and key personnel.
2.30A Board
Actions.
The
Company’s board of directors (a) has unanimously determined that the GF Merger
is fair and in the best interests of the Company Stockholders and is on terms
that are fair to the Company Stockholders and has recommended the GF Merger
to
the Company Stockholders, and (b) shall submit the GF Merger and this Agreement
to the vote and approval of the Company Stockholders or the approval of the
Company Stockholders by written consent.
2.31A Permit
Application; Information Provided to Company Stockholders.
The
information supplied in writing to Parent by the Company for inclusion in the
application for issuance of a California Permit pursuant to which the shares
of
Parent Common Stock are to be issued in the GF Merger under the California
Corporations Code (the "Permit Application") shall not, at the time the
qualification of such securities is effective under Section 25122 of the
California Corporations Code, contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by the Company to
be
sent to the holders of Company Shares and holders of Series A Preferred Stock
in
connection with receiving their approval of the GF Merger and related
transactions shall not, on the date such information is first mailed to such
holders, at the time of such holders’ consent and at the Effective Time, contain
any statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the
statements made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary
to
correct any statement in any earlier communication with respect to the holders’
approval which has become false or misleading. Notwithstanding the foregoing,
the Company makes no representation, warranty or covenant with respect to any
information supplied by the Parent or any of the Acquisition Subsidiaries that
is contained in the information sent to the Company’s stockholders.
-27-
ARTICLE
IIB
REPRESENTATIONS
AND WARRANTIES OF ITD
ITD
represents and warrants to the Parent that the statements contained in this
Article IIB are true and correct, except as set forth in the Disclosure
Schedule provided by ITD to the Parent on the date hereof and accepted in
writing by the Parent. The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Article IIB, and except to the extent that it is clear from the context
thereof that such disclosure also applies to any other paragraph, the
disclosures in any paragraph of the Disclosure Schedule shall qualify only
the
corresponding paragraph in this Article IIB. For
purposes of this Article IIB, the phrase “to the knowledge of ITD” or any
phrase of similar import shall be deemed to refer to the actual knowledge of
the
executive officers of ITD, as well as any other knowledge which such executive
officers would have possessed had they made reasonable inquiry with respect
to
the matter in question.
2.1B Organization,
Qualification and Corporate Power.
ITD is
a corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. ITD is duly qualified to
conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have an ITD Material Adverse
Effect (as defined below). ITD has all requisite corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. ITD has furnished or made available to the
Parent complete and accurate copies of its certificate of incorporation and
bylaws. ITD is not in default under or in violation of any provision of its
articles of incorporation, as amended to date, or its bylaws, as amended to
date. For purposes of this Agreement, “ITD Material Adverse Effect” means a
material adverse effect on the assets, business, condition (financial or
otherwise), results of operations or future prospects of ITD.
2.2B Capitalization.
The
authorized capital stock of ITD consists of 1,000 ITD Shares and as of the
date
of this Agreement 100 ITD shares were issued and outstanding, and no ITD Shares
were held in the treasury of the ITD. Section 2.2B of the Disclosure
Schedule sets forth a complete and accurate list of all stockholders of ITD,
indicating the number and class of ITD Shares held by each stockholder and
all
stock option plans and other stock or equity-related plans of ITD. All of the
issued and outstanding ITD Shares are duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. There are no outstanding
or authorized options, warrants, rights, agreements or commitments to which
ITD
is a party or which are binding upon ITD providing for the issuance or
redemption of any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to ITD. There
are no agreements to which ITD is a party or by which it is bound with respect
to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act, or sale or transfer (including without
limitation agreements relating to pre-emptive rights, rights of first refusal,
co-sale rights or “drag-along” rights) of any securities of ITD. To the
knowledge of ITD, there are no agreements among other parties, to which ITD
is
not a party and by which it is not bound, with respect to the voting (including
without limitation voting trusts or proxies) or sale or transfer (including
without limitation agreements relating to rights of first refusal, co-sale
rights or “drag-along” rights) of any securities of ITD. All of the issued and
outstanding ITD Shares were issued in compliance with applicable federal and
state securities laws.
-28-
2.3B Authorization
of Transaction.
ITD has
all requisite power and authority to execute and deliver this Agreement and
to
perform its obligations hereunder. The execution and delivery by ITD of this
Agreement and, subject to the adoption of this Agreement and the approval of
the
GF Merger by no less than a majority of the votes represented by the outstanding
ITD Shares entitled to vote on this Agreement and the ITD Merger, the
consummation by ITD of the transactions contemplated hereby have been duly
and
validly authorized by all necessary corporate action on the part of ITD. Without
limiting the generality of the foregoing, the board of directors of ITD
(i) determined that the ITD Merger is fair and in the best interests of ITD
and the ITD Stockholders, (ii) adopted this Agreement in accordance with
the provisions of the GCL,
and
(iii) directed that this Agreement and the ITD Merger be submitted to ITD
Stockholders for their adoption and approval and resolved to recommend that
ITD
Stockholders vote in favor of the adoption of this Agreement and the approval
of
the ITD Merger. This Agreement has been duly and validly executed and delivered
by ITD and constitutes a valid and binding obligation of ITD, enforceable
against ITD in accordance with its terms.
2.4B Noncontravention.
Subject
to the filing of the Certificate
of Merger as required by the GCL,
neither
the execution and delivery by ITD of this Agreement, nor the consummation by
ITD
of the transactions contemplated hereby, will (a) conflict with or violate
any provision of the articles of incorporation or bylaws of ITD, as amended
to
date, bylaws or other organizational document of any Subsidiary (as defined
below); (b) require on the part of ITD or any Subsidiary any filing with,
or any permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other Governmental Entity,
except for such permits, authorizations, consents and approvals for which ITD
is
obligated to use its Reasonable Best Efforts to obtain pursuant to Section
4.2(a); (c) 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 obligations under, create in any Party the right to terminate,
modify or cancel, or require any notice, consent or waiver under, any contract
or instrument to which ITD or any Subsidiary is a party or by which ITD or
any
Subsidiary is bound or to which any of their assets is subject, except for
(i)
any conflict, breach, default, acceleration, termination, modification or
cancellation in any contract or instrument set forth in Section 2.4B of the
Disclosure Schedule, for which ITD is obligated to use its Reasonable Best
Efforts to obtain waiver, consent or approval pursuant to 4.2(c), (ii) any
conflict, breach, default, acceleration, termination, modification or
cancellation which, individually or in the aggregate, would not have an ITD
Material Adverse Effect and would not adversely affect the consummation of
the
transactions contemplated hereby or (iii) any notice, consent or waiver the
absence of which, individually or in the aggregate, would not have an ITD
Material Adverse Effect and would not adversely affect the consummation of
the
transactions contemplated hereby; (d) result in the imposition of any
Security Interest (as defined below) upon any assets of ITD or any Subsidiary;
or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ITD, any Subsidiary or any of their properties or
assets.
-29-
2.5B Subsidiaries.
(a) Section 2.5B
of the Disclosure Schedule sets forth: (i) the name of each ITD Subsidiary;
(ii) the number and type of outstanding equity securities of each
Subsidiary and a list of the holders thereof; (iii) the jurisdiction of
organization of each Subsidiary; (iv) the names of the officers and
directors of each ITD Subsidiary; and (v) the jurisdictions in which each
ITD Subsidiary is qualified or holds licenses to do business as a foreign
corporation or other entity.
(b) Each
Subsidiary is an entity duly organized, validly existing and in corporate and
tax good standing under the laws of the jurisdiction of its incorporation.
Each
Subsidiary is duly qualified to conduct business and is in corporate and tax
good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires qualification
to do business, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have an ITD Material Adverse Effect. Each Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. ITD has delivered or
made available to the Parent complete and accurate copies of the charter, bylaws
or other organizational documents of each Subsidiary. No Subsidiary is in
default under or in violation of any provision of its charter, bylaws or other
organizational documents. All of the issued and outstanding equity securities
of
each Subsidiary are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. All equity securities of each Subsidiary that
are
held of record or owned beneficially by either ITD or any Subsidiary are held
or
owned free and clear of any restrictions on transfer (other than restrictions
under the Securities Act and state securities laws), claims, Security Interests,
options, warrants, rights, contracts, calls, commitments, equities and demands.
There are no outstanding or authorized options, warrants, rights, agreements
or
commitments to which ITD or any Subsidiary is a party or which are binding
on
any of them providing for the issuance, disposition or acquisition of any equity
securities of any Subsidiary. There are no outstanding stock appreciation,
phantom stock or similar rights with respect to any Subsidiary. To the knowledge
of ITD, there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any equity securities of any
Subsidiary.
-30-
(c) Except
as
set forth in Section 2.5B(c) of the Disclosure Schedule, ITD does not control
directly or indirectly or have any direct or indirect equity participation
or
similar interest in any corporation, partnership, limited liability company,
joint venture, trust or other business association which is not a
Subsidiary.
2.6B Financial
Statements.
ITD was
incorporated on September 27, 2006 (the “Organization Date”) and has not
prepared any financial statements to date.
2.7B Absence
of Certain Changes.
Since
ITD’s Organization Date, and except as set forth in Section 2.7B of the
Disclosure Schedule, (a) there has occurred no event or development which,
individually or in the aggregate, has had, or could reasonably be expected
to
have in the future, an ITD Material Adverse Effect, and (b) neither ITD nor
any Subsidiary has taken any of the actions set forth in paragraphs (i)
through (xiii) of Section 4.4(b).
2.8B Undisclosed
Liabilities.
None of
ITD and its Subsidiaries has any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due
or to
become due), except for (a) which have arisen since ITD’s Organization
Date in the Ordinary Course of Business and (b) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet.
2.9B Tax
Matters.
(d) Intentionally
omitted.
(e) Each
of
ITD and the Subsidiaries has filed on a timely basis all Tax Returns that it
was
required to file, and all such Tax Returns were complete and accurate in all
material respects. Neither ITD nor any Subsidiary is or has ever been a member
of a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns, other than a group of which
only
ITD and the Subsidiaries are or were members. Each of ITD and the Subsidiaries
has paid on a timely basis all Taxes that were due and payable. Neither ITD
nor
any Subsidiary has any actual or potential liability for any Tax obligation
of
any taxpayer (including without limitation any affiliated group of corporations
or other entities that included ITD or any Subsidiary during a prior period)
other than ITD and the Subsidiaries. All Taxes that ITD or any Subsidiary is
or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental
Entity.
(f) ITD
has
delivered or made available to the Parent complete and accurate copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by ITD or any Subsidiary since the Organization
Date. The federal income Tax Returns of ITD and each Subsidiary have been
audited by the Internal Revenue Service or are closed by the applicable statute
of limitations for all taxable years through the taxable year specified in
Section 2.9B(c) of the Disclosure Schedule. No examination or audit of any
Tax Return of ITD or any Subsidiary by any Governmental Entity is currently
in
progress or, to the knowledge of ITD, threatened or contemplated. Neither ITD
nor any Subsidiary has been informed by any jurisdiction that the jurisdiction
believes that ITD or Subsidiary was required to file any Tax Return that was
not
filed. Neither ITD nor any Subsidiary has waived any statute of limitations
with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
-31-
(g) Neither
ITD nor any Subsidiary: (i) is a “consenting corporation” within the
meaning of Section 341(f) of the Code, and none of the assets of ITD or the
Subsidiaries are subject to an election under Section 341(f) of the Code;
(ii) has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has made any
payments, is obligated to make any payments, or is a party to any agreement
that
could obligate it to make any payments that may be treated as an “excess
parachute payment” under Section 280G of the Code; (iv) has any actual
or potential liability for any Taxes of any person (other than ITD and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise; or (v) is or has been required to
make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b)
or Treasury Regulation Section 1.337(d)-2(b).
(h) None
of
the assets of ITD or any Subsidiary: (i) is property that is required to be
treated as being owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Code; (ii) is “tax-exempt use property”
within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code.
(i) Neither
ITD nor any Subsidiary has undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of
the Code.
(j) No
state
or federal “net operating loss” of ITD determined as of the Closing Date is
subject to limitation on its use pursuant to Section 382 of the Code or
comparable provisions of state law as a result of any “ownership change” within
the meaning of Section 382(g) of the Code or comparable provisions of any
state law occurring prior to the Closing Date.
2.10B Assets.
Each of
ITD and the Subsidiaries owns or leases all tangible assets necessary for the
conduct of its businesses as presently conducted and as presently proposed
to be
conducted. Except as set forth in Section 2.10B of the Disclosure Schedule,
each
such tangible asset is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it presently is used. No asset of ITD or any Subsidiary (tangible or
intangible) is subject to any Security Interest.
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2.11B Owned
Real Property.
Neither
ITD nor any Subsidiary owns any real property, except as otherwise listed in
Section 2.11B of the Disclosure Schedule.
2.12B Real
Property Leases.
Section 2.12B of the Disclosure Schedule lists all real property leased or
subleased to or by ITD or any Subsidiary and lists the term of such lease,
any
extension and expansion options, and the rent payable thereunder. ITD has
delivered or made available to the Parent complete and accurate copies of the
leases and subleases listed in Section 2.12B of the Disclosure Schedule.
With respect to each lease and sublease listed in Section 2.12B of the
Disclosure Schedule:
(k) the
lease
or sublease is legal, valid, binding, enforceable and in full force and
effect;
(l) the
lease
or sublease will continue to be legal, valid, binding, enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing;
(m) neither
ITD nor any Subsidiary nor, to the knowledge of ITD, any other party, is in
breach or violation of, or default under, any such lease or sublease, and no
event has occurred, is pending or, to the knowledge of ITD, is threatened,
which, after the giving of notice, with lapse of time, or otherwise, would
constitute a breach or default by ITD or any Subsidiary or, to the knowledge
of
ITD, any other party under such lease or sublease;
(n) neither
ITD nor any Subsidiary has assigned, transferred, conveyed, mortgaged, deeded
in
trust or encumbered any interest in the leasehold or subleasehold;
and
(o) to
the
knowledge of ITD, there is no Security Interest, easement, covenant or other
restriction applicable to the real property subject to such lease, except for
recorded easements, covenants and other restrictions which do not materially
impair the current uses or the occupancy by ITD or a Subsidiary of the property
subject thereto.
2.13B Contracts.
(p) Section
2.13B of the Disclosure Schedule lists the following agreements (written or
oral) to which ITD or any Subsidiary is a party as of the date of this
Agreement:
(i) any
agreement (or group of related agreements) for the lease of personal property
from or to third parties providing for lease payments in excess of $25,000
per
annum or having a remaining term longer than 12 months;
(ii) any
agreement (or group of related agreements) for the purchase or sale of products
or for the furnishing or receipt of services (A) which calls for
performance over a period of more than one year, (B) which involves more
than the sum of $25,000, or (C) in which ITD or any Subsidiary has granted
manufacturing rights, “most favored nation” pricing provisions or exclusive
marketing or distribution rights relating to any products or territory or has
agreed to purchase a minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain party;
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(iii) any
agreement which, to the knowledge of ITD, establishes a partnership or joint
venture;
(iv) any
agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more than $25,000 or under
which it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any
agreement concerning confidentiality or noncompetition;
(vi) any
employment or consulting agreement;
(vii) any
agreement involving any officer, director or stockholder of ITD or any
Affiliate, as defined in Rule 12b-2 under the Exchange Act;
(viii) any
agreement under which the consequences of a default or termination would
reasonably be expected to have an ITD Material Adverse Effect;
(ix) any
agreement which contains any provisions requiring ITD or any Subsidiary to
indemnify any other party thereto (excluding indemnities contained in agreements
for the purchase, sale or license of products entered into in the Ordinary
Course of Business); and
(x) any
other
agreement (or group of related agreements) either involving more than $25,000
or
not entered into in the Ordinary Course of Business.
(q) ITD
has
delivered or made available to the Parent a complete and accurate copy of each
agreement listed in Section 2.13B of the Disclosure Schedule. With respect
to each agreement so listed, and except as set forth in Section 2.13B of the
Disclosure Schedule: (i) the agreement is legal, valid, binding and
enforceable and in full force and effect; (ii) the agreement will continue
to be legal, valid, binding and enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing; and (iii) neither ITD nor any
Subsidiary nor, to the knowledge of ITD, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of ITD, is threatened, which, after the giving
of notice, with lapse of time, or otherwise, would constitute a breach or
default by ITD or any Subsidiary or, to the knowledge of ITD, any other party
under such contract.
-34-
2.14B Accounts
Receivable.
ITD has
no accounts receivable.
2.15B Powers
of Attorney.
Except
as set forth in Section 2.15B of the Disclosure Schedule, there are no
outstanding powers of attorney executed on behalf of ITD or any
Subsidiary.
2.16B Insurance.
Section 2.16B of the Disclosure Schedule lists each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which ITD or any Subsidiary is
a
party. Such insurance policies are of the type and in amounts customarily
carried by organizations conducting businesses or owning assets similar to
those
of ITD and the Subsidiaries. There is no material claim pending under any such
policy as to which coverage has been questioned, denied or disputed by the
underwriter of such policy. All premiums due and payable under all such policies
have been paid, neither ITD nor any Subsidiary may be liable for retroactive
premiums or similar payments, and ITD and the Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies. ITD has
no
knowledge of any threatened termination of, or material premium increase with
respect to, any such policy. Each such policy will continue to be enforceable
and in full force and effect immediately following the Effective Time in
accordance with the terms thereof as in effect immediately prior to the
Effective Time.
2.17B Litigation. As
of the
date of this Agreement, there is no Legal Proceeding which is pending or has
been threatened in writing against ITD or any Subsidiary which (a) seeks either
damages in excess of $25,000 or equitable relief or (b) if determined
adversely to ITD or such Subsidiary, could have, individually or in the
aggregate, an ITD Material Adverse Effect.
2.18B Employees.
(r) Section
2.18B of the Disclosure Schedule contains a list of all employees of ITD and
each Subsidiary whose annual rate of compensation exceeds $50,000 per
year,
along with the position and the annual rate of compensation of each such person.
Section 2.18B of the Disclosure Schedule contains a list of all employees of
ITD
or any Subsidiary who are a party to a non-competition agreement with ITD or
any
Subsidiary; copies of such agreements have previously been delivered to the
Parent. To the knowledge of ITD, no key employee or group of employees has
any
plans to terminate employment with ITD or any Subsidiary.
(s) Neither
ITD nor any Subsidiary is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims
of
unfair labor practices or other collective bargaining disputes. To the knowledge
of ITD, no organizational effort has been made or threatened, either currently
or within the past two years, by or on behalf of any labor union with respect
to
employees of ITD or any Subsidiary. To the knowledge of ITD there are no
circumstances or facts which could individually or collectively give rise to
a
suit based on discrimination of any kind.
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2.19B Employee
Benefits.
(t) Intentionally
omitted.
(u) Section 2.19B(b)
of the Disclosure Schedule contains a complete and accurate list of all Employee
Benefit Plans maintained, or contributed to, by ITD, any Subsidiary or any
ERISA
Affiliate. Complete and accurate copies of (i) all Employee Benefit Plans
which have been reduced to writing, (ii) written summaries of all unwritten
Employee Benefit Plans, (iii) all related trust agreements, insurance
contracts and summary plan descriptions, and (iv) all annual reports filed
on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial
statements for the last five plan years for each Employee Benefit Plan, have
been delivered or made available to the Parent. Each Employee Benefit Plan
has
been administered in all material respects in accordance with its terms and
each
of ITD, the Subsidiaries and the ERISA Affiliates has in all material respects
met its obligations with respect to such Employee Benefit Plan and has made
all
required contributions thereto. ITD, each Subsidiary, each ERISA Affiliate
and
each Employee Benefit Plan are in compliance in all material respects with
the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including without limitation Section 4980 B of the Code,
Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and
Section 701 et seq. of ERISA). All filings and reports as to each Employee
Benefit Plan required to have been submitted to the Internal Revenue Service
or
to the United States Department of Labor have been duly submitted.
(v) To
the
knowledge of ITD, there are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material
liability.
(w) All
the
Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code,
no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date
of
its most recent determination letter or application therefor in any respect,
and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required
to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of,
Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year
ending prior to the Closing Date.
(x) Neither
ITD, any Subsidiary, nor any ERISA Affiliate has ever maintained an Employee
Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
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(y) At
no
time has ITD, any Subsidiary or any ERISA Affiliate been obligated to contribute
to any “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA).
(z) There
are
no unfunded obligations under any Employee Benefit Plan providing benefits
after
termination of employment to any employee of ITD or any Subsidiary (or to any
beneficiary of any such employee), including but not limited to retiree health
coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law. The assets
of each Employee Benefit Plan which is funded are reported at their fair market
value on the books and records of such Employee Benefit Plan.
(aa) No
act or
omission has occurred and no condition exists with respect to any Employee
Benefit Plan maintained by ITD, any Subsidiary or any ERISA Affiliate that
would
subject ITD, any Subsidiary or any ERISA Affiliate to (i) any material fine,
penalty, tax or liability of any kind imposed under ERISA or the Code or (ii)
any contractual indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any Employee Benefit
Plan.
(bb) No
Employee Benefit Plan is funded by, associated with or related to a “voluntary
employee’s beneficiary association” within the meaning of Section 501(c)(9)
of the Code.
(cc) Each
Employee Benefit Plan is amendable and terminable unilaterally by ITD at any
time without liability to ITD as a result thereof and no Employee Benefit Plan,
plan documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits ITD
from
amending or terminating any such Employee Benefit Plan.
(dd) Section
2.19B(k) of the Disclosure Schedule discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of ITD or any
Subsidiary (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving ITD
or
any Subsidiary of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee
or (C) providing severance benefits or other benefits after the termination
of employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive
payments from ITD or any Subsidiary that may be subject to the tax imposed
by
Section 4999 of the Code or included in the determination of such person’s
“parachute payment” under Section 280G of the Code; and
(iii) agreement or plan binding ITD or any Subsidiary, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan or Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
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2.20B Environmental
Matters.
(ee) Each
of
ITD and the Subsidiaries has complied with all applicable Environmental Laws
(as
defined below), except for violations of Environmental Laws that, individually
or in the aggregate, have not had and would not reasonably be expected to have
an ITD Material Adverse Effect. There is no pending or, to the knowledge of
ITD,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request
by
any Governmental Entity, relating to any Environmental Law involving ITD or
any
Subsidiary, except for litigation, notices of violations, formal administrative
proceedings or investigations, inquiries or information requests that,
individually or in the aggregate, have not had and would not reasonably be
expected to have an ITD Material Adverse Effect.
(ff) Set
forth
in Section 2.20B(b) of the Disclosure Schedule is a list of all documents
(whether in hard copy or electronic form) that contain any environmental
reports, investigations and audits relating to premises currently or previously
owned or operated by ITD or a Subsidiary (whether conducted by or on behalf
of
ITD or a Subsidiary or a third party, and whether done at the initiative of
ITD
or a Subsidiary or directed by a Governmental Entity or other third party)
which
were issued or conducted during the past five years and which ITD has possession
of or access to. A complete and accurate copy of each such document has been
provided to the Parent.
(gg) To
the
knowledge of ITD there is no material environmental liability with respect
to
any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by ITD or any Subsidiary.
2.21B Legal
Compliance.
Each of
ITD and the Subsidiaries, and the conduct and operations of their respective
businesses, are in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government,
or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have an ITD Material Adverse Effect.
2.22B Customers
and Suppliers.
Section 2.22B of the Disclosure Schedule sets forth a list of each customer
that accounted for more than 5% of the consolidated revenues of ITD and the
amount of revenues accounted for by such customer during such period. No such
customer has notified ITD in writing within the past year that it will stop
buying services from ITD or any Subsidiary.
2.23B Permits.
Section
2.23B of the Disclosure Schedule sets forth a list of all Permits issued to
or
held by ITD or any Subsidiary. Such listed Permits are the only Permits that
are
required for ITD and the Subsidiaries to conduct their respective businesses
as
presently conducted except for those the absence of which, individually or
in
the aggregate, have not had and would not reasonably be expected to have an
ITD
Material Adverse Effect. Each such Permit is in full force and effect and,
to
the knowledge of ITD, no suspension or cancellation of such Permit is threatened
and there is no basis for believing that such Permit will not be renewable
upon
expiration. Each such Permit will continue in full force and effect immediately
following the Closing.
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2.24B Certain
Business Relationships With Affiliates.
Except
as listed in Section 2.24B of the Disclosure Schedule, no Affiliate of ITD
or of
any Subsidiary (a) owns any property or right, tangible or intangible,
which is used in the business of ITD or any Subsidiary, (b) has any claim
or cause of action against ITD or any Subsidiary, or (c) owes any money to,
or is owed any money by, ITD or any Subsidiary. Section 2.24B of the
Disclosure Schedule describes any transactions involving the receipt or payment
in excess of $25,000 in any fiscal year between ITD or a Subsidiary and any
Affiliate thereof which have occurred or existed since the Organization Date,
other than employment agreements.
2.25B Brokers’
Fees.
Neither
ITD nor any Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, except as listed in Section 2.25B of the
Disclosure Schedule.
2.26B Books
and Records.
The
minute books and other similar records of ITD and each Subsidiary contain
complete and accurate records of all actions taken at any meetings of ITD’s or
such Subsidiary’s stockholders, board of directors or any committees thereof and
of all written consents executed in lieu of the holding of any such meetings.
The books and records of ITD and each Subsidiary accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of ITD or such Subsidiary and have been maintained in
accordance with good business and bookkeeping practices.
2.27B Intellectual
Property.
Intentionally
omitted.
2.28B Disclosure.
No
representation or warranty by ITD contained in this Agreement, and no statement
contained in ITD’s Disclosure Schedule or any other document, certificate or
other instrument delivered or to be delivered by or on behalf of ITD pursuant
to
this Agreement, contains or will contain any untrue statement of a material
fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. ITD has disclosed to the Parent
all
material information relating to the business of ITD or any Subsidiary or the
transactions contemplated by this Agreement.
2.29B Duty
to Make Inquiry.
To the
extent that any of the representations or warranties in this Article IIB are
qualified by “knowledge” or “belief,” ITD represents and warrants that it has
made due and reasonable inquiry and investigation concerning the matters to
which such representations and warranties relate, including, but not limited
to,
diligent inquiry by its directors, officers and key personnel.
2.30B Board
Actions.
ITD’s
board of directors (a) has unanimously determined that the ITD Merger is fair
and in the best interests of the ITD Stockholders and is on terms that are
fair
to the ITD Stockholders and has recommended the ITD Merger to the ITD
Stockholders, and (b) shall submit the ITD Merger and this Agreement to the
vote
and approval of the ITD Stockholders or the approval of the ITD Stockholders
by
written consent.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE PARENT
AND
THE ACQUISITION SUBSIDIARIES
Each
of
the Parent and the Acquisition Subsidiaries represents and warrants to the
Company and ITD that the statements contained in this Article III are true
and correct, except as set forth in the Parent
Disclosure Schedule
provided
by the Parent and the Acquisition Subsidiaries to the Company and ITD on the
date hereof and accepted in writing by the Parent (the “Parent Disclosure
Schedule”). The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Article III, and except to the extent that it is clear from the context
thereof that such disclosure also applies to any other paragraph, the
disclosures in any paragraph of the Parent Disclosure Schedule shall qualify
only the corresponding paragraph in this Article III. For
purposes of this Article III, the phrase “to the knowledge of the Parent”
or any phrase of similar import shall be deemed to refer to the actual knowledge
of the executive officers of the Parent, as well as any other knowledge which
such executive officers would have possessed had they made reasonable inquiry
with respect to the matter in question.
3.1 Organization,
Qualification and Corporate Power.
The
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, the GF Acquisition Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of California and the ITD Acquisition Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Parent is duly qualified to conduct business and is
in
corporate and tax good standing under the laws of each jurisdiction in which
the
nature of its businesses or the ownership or leasing of its properties requires
such qualification, except where the failure to be so qualified or in good
standing would not have a Parent Material Adverse Effect (as defined below).
The
Parent has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Parent has furnished or made available to the Company and ITD
complete and accurate copies of its certificate of incorporation and bylaws.
For
purposes of this Agreement, “Parent Material Adverse Effect” means a material
adverse effect on the assets, business, condition (financial or otherwise),
results of operations or future prospects of the Parent and its subsidiaries,
taken as a whole.
3.2 Capitalization.
The
authorized capital stock of the Parent consists of 300,000,000 shares of Parent
Common Stock, of which 16,666,666 shares were issued and outstanding as of
the
date of this Agreement, after giving effect to a 8.3333334 for one forward
stock
split in the form of a stock dividend (the “Stock Split”) to shareholders of
record on October 6, 2006, and 10,000,000 shares of preferred stock, $0.001
par
value per share, of which no shares are outstanding. The Parent Common Stock
is
presently eligible for quotation and trading on the NASD Over-the-Counter
Bulletin Board (the “OTCBB”) in all 00 xxxxxx xx xxx Xxxxxx Xxxxxx. All
of
the issued and outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights.
There are no outstanding or authorized options, warrants, rights, agreements
or
commitments to which the Parent is a party or which are binding upon the Parent
providing for the issuance or redemption of any of its capital stock. There
are
no outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Parent. There are no agreements to which the Parent is
a
party or by which it is bound with respect to the voting (including without
limitation voting trusts or proxies), registration under the Securities Act,
or
sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or “drag-along”
rights) of any securities of the Parent. To the knowledge of the Parent, there
are no agreements among other parties, to which the Parent is not a party and
by
which it is not bound, with respect to the voting (including without limitation
voting trusts or proxies) or sale or transfer (including without limitation
agreements relating to rights of first refusal, co-sale rights or “drag-along”
rights) of any securities of the Parent. All of the issued and outstanding
shares of Parent Common Stock were issued in compliance with applicable federal
and state securities laws. The aggregate of 4,500,000 shares
of
Parent Common Stock to be issued at the closing of the GF Merger and 3,500,000
shares of Parent Common Stock to be issued at the closing of the ITD Merger,
subject to the ITD Share Adjustment, and upon the exercise of the Parent Options
and New Warrants, pursuant to Sections 1.5 and 1.8 hereof, when issued and
delivered in accordance with the terms hereof and of the Agreement of Merger
and
the Certificate of Merger, shall be duly and validly issued, fully paid and
nonassessable and free of all preemptive rights. Immediately prior to the
Effective Time, after giving effect to (i) the Stock Split and (ii) the
surrender of 9,166,666 shares of Parent Common Stock by two former officers
of
the Parent (the “Share Contribution”) in connection with the Split-Off, there
will be 7,500,000 shares of Parent Common Stock issued and
outstanding.
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3.3 Authorization
of Transaction.
Each
of
the Parent and the Acquisition Subsidiaries has all requisite power and
authority to execute and deliver this Agreement and (in the case of the Parent)
the Escrow Agreement and to perform its obligations hereunder and thereunder.
The execution and delivery by the Parent and each of the Acquisition
Subsidiaries of this Agreement and (in the case of the Parent) the Split-Off
Agreement, and the agreements contemplated hereby and thereby (collectively,
the
“Transaction Documentation”) and the consummation by the Parent and each of the
Acquisition Subsidiaries of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on
the
part of the Parent and each of the Acquisition Subsidiaries, respectively.
This
Agreement has been duly and validly executed and delivered by the Parent and
each of the Acquisition Subsidiaries and constitutes a valid and binding
obligation of the Parent and the Acquisition Subsidiaries, enforceable against
them in accordance with its terms.
3.4 Noncontravention.
Subject
to compliance with the applicable requirements of the Securities Act and any
applicable state securities laws, the Exchange Act, the regulations of the
OTCBB
and the filing of the Agreement
of Merger as required by the California Corporations Code and the Certificate
of
Merger as required by the GCL,
neither
the execution and delivery by the Parent or either of the Acquisition
Subsidiaries of this Agreement or the Transaction Documentation , nor the
consummation by the Parent or either of the Acquisition Subsidiaries of the
transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the certificate of incorporation or bylaws of the
Parent or either of the Acquisition Subsidiaries, (b) require on the part
of the Parent or either of the Acquisition Subsidiaries any filing with, or
permit, authorization, consent or approval of, any Governmental Entity,
(c) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration
of
obligations under, create in any Party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument
to
which the Parent or either of the Acquisition Subsidiaries is a party or by
which either is bound or to which any of their assets are subject, except for
(i) any conflict, breach, default, acceleration, termination, modification
or cancellation which would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which would not adversely affect the consummation of the transactions
contemplated hereby, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Parent or either of the
Acquisition Subsidiaries or any of their properties or assets.
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3.5 Subsidiaries.
(a) Parent
has no Subsidiaries other than the Acquisition Subsidiaries and Leaseco. Each
of
the Acquisition Subsidiaries and Leaseco is a corporation duly organized,
validly existing and in corporate and tax good standing under the laws of the
jurisdiction of its incorporation. The Acquisition Subsidiaries were formed
solely to effectuate the Merger, Leaseco was formed solely to effectuate the
Split-Off, and none of them has conducted any business operations since its
organization. The Parent has delivered or made available to the Company and
ITD
complete and accurate copies of the charter, bylaws or other organizational
documents of the Acquisition Subsidiaries. The Acquisition Subsidiaries have
no
assets other than minimal paid-in capital, they have no liabilities or other
obligations, and they are not in default under or in violation of any provision
of their charter, bylaws or other organizational documents. All of the issued
and outstanding shares of capital stock of the Acquisition Subsidiaries are
duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. All shares of the Acquisition Subsidiaries are owned by Parent free
and
clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. There
are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Parent or either of the Acquisition Subsidiaries is
a
party or which are binding on any of them providing for the issuance,
disposition or acquisition of any capital stock of any Parent Subsidiary. There
are no outstanding stock appreciation, phantom stock or similar rights with
respect to the Acquisition Subsidiaries. There are no voting trusts, proxies
or
other agreements or understandings with respect to the voting of any capital
stock of the Acquisition Subsidiaries.
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(b) At
all
times from February 2, 2005, which was the date of incorporation of the Parent,
through the date of this Agreement, the business and operations of the Parent
have been conducted exclusively through Parent.
3.6 Exchange
Act Reports.
The
Parent has furnished or made available to the Company and ITD complete and
accurate copies, as amended or supplemented, of its (a) Registration
Statement on Form SB-2 containing audited financial statements for period
February 2, 2005 (inception) through November 30, 2005, as filed with the SEC,
(b) Quarterly Report on Form 10-QSB for the quarterly period ended August 31,
2006 and (c) all other reports filed by the Parent under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC since
February 16, 2006 (such reports are collectively referred to herein as the
“Parent Reports”). The Parent Reports constitute all of the documents required
to be filed by the Parent under Section 13 or subsections (a) or (c) of
Section 14 of the Exchange Act with the SEC from February 16, 2006 through
the date of this Agreement. The Parent Reports complied in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder when filed. As of their respective dates, the Parent Reports did
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
3.7 Compliance
with Laws.
Each of
the Parent and its Subsidiaries:
(a) and
the
conduct and operations of their respective businesses, are in compliance with
each applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, except for
any
violations or defaults that, individually or in the aggregate, have not had
and
would not reasonably be expected to have a Parent Material Adverse
Effect;
(b) has
complied with all federal and state securities laws and regulations, including
being current in all of its reporting obligations under such federal and state
securities laws and regulations;
(c) has
not,
and the past and present officers, directors and Affiliates of the Parent have
not, been the subject of, nor does any officer or director of the Parent have
any reason to believe that Parent or any of its officers, directors or
Affiliates will be the subject of, any civil or criminal proceeding or
investigation by any federal or state agency alleging a violation of securities
laws;
(d) has
not
been the subject of any voluntary or involuntary bankruptcy proceeding, nor
has
it been a party to any material litigation;
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(e) has
not,
and the past and present officers, directors and Affiliates have not, been
the
subject of, nor does any officer or director of the Parent have any reason
to
believe that the Parent or any of its officers, directors or affiliates will
be
the subject of, any civil, criminal or administrative investigation or
proceeding brought by any federal or state agency having regulatory authority
over such entity or person;
(f) does
not
and will not on the Closing, have any liabilities, contingent or otherwise,
including but not limited to notes payable and accounts payable, and is not
a
party to any executory agreements; and
(g) is
not a
“blank check company” as such term is defined by Rule 419 of the Securities
Act.
3.8 Financial
Statements.
The
audited financial statements and unaudited interim financial statements of
the
Parent included in the Parent Reports (collectively, the “Parent Financial
Statements”) (i) complied as to form in all material respects with applicable
accounting requirements and, as appropriate, the published rules and regulations
of the SEC with respect thereto when filed, (ii) were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case
of
quarterly financial statements, as permitted by Form 10-QSB under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Parent as of the respective dates thereof
and
for the periods referred to therein, and (iv) are consistent with the books
and
records of the Parent.
3.9 Absence
of Certain Changes.
Since
the date of the balance sheet contained in the most recent Parent Report, there
has occurred no event or development which, individually or in the aggregate,
has had, or could reasonably be expected to have in the future, a Parent
Material Adverse Effect.
3.10 Litigation.
Except
as disclosed in the Parent Reports, as of the date of this Agreement, there
is
no Legal Proceeding which is pending or, to the Parent’s knowledge, threatened
against the Parent or any subsidiary of the Parent which, if determined
adversely to the Parent or such subsidiary, could have, individually or in
the
aggregate, a Parent Material Adverse Effect or which in any manner challenges
or
seeks to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
3.11 Undisclosed
Liabilities.
None of
the Parent and its Subsidiaries has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), except for (a) liabilities shown on the balance
sheet contained in the most recent Parent Report, (b) liabilities which
have arisen since the date of the balance sheet contained in the most recent
Parent Report in the Ordinary Course of Business and (c) contractual and
other liabilities incurred in the Ordinary Course of Business which are not
required by GAAP to be reflected on a balance sheet.
3.12 Tax
Matters.
(a) Except
as
set forth in Section 3.12 of the Parent Disclosure Schedule, each of the Parent
and the Subsidiaries has filed on a timely basis all Tax Returns that it was
required to file, and all such Tax Returns were complete and accurate in all
material respects. Neither the Parent nor any Subsidiary is or has ever been
a
member of a group of corporations with which it has filed (or been required
to
file) consolidated, combined or unitary Tax Returns, other than a group of
which
only the Parent and the Subsidiaries are or were members. Each of the Parent
and
the Subsidiaries has paid on a timely basis all Taxes that were due and payable.
The unpaid Taxes of the Parent and the Subsidiaries for tax periods through
the
date of the balance sheet contained in the most recent Parent Report do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves
for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on such balance sheet. Neither the Parent nor any Subsidiary
has any actual or potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included the Parent or any Subsidiary during a prior period)
other
than the Parent and the Subsidiaries. All Taxes that the Parent or any
Subsidiary is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
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(b) The
Parent has delivered or made available to the Company and ITD complete and
accurate copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Parent or any
Subsidiary since July 31, 2005. The federal income Tax Returns of the Parent
and
each Subsidiary have been audited by the Internal Revenue Service or are closed
by the applicable statute of limitations for all taxable years through the
taxable year specified in Section 3.12(b) of the Parent Disclosure
Schedule. No examination or audit of any Tax Return of the Parent or any
Subsidiary by any Governmental Entity is currently in progress or, to the
knowledge of the Parent, threatened or contemplated. Neither the Parent nor
any
Subsidiary has been informed by any jurisdiction that the jurisdiction believes
that the Parent or Subsidiary was required to file any Tax Return that was
not
filed. Neither the Parent nor any Subsidiary has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to a Tax assessment or deficiency.
(c) Neither
the Parent nor any Subsidiary: (i) is a “consenting corporation” within the
meaning of Section 341(f) of the Code, and none of the assets of the Parent
or the Subsidiaries are subject to an election under Section 341(f) of the
Code; (ii) has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has
made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as
an
“excess parachute payment” under Section 280G of the Code; (iv) has
any actual or potential liability for any Taxes of any person (other than the
Parent and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
(d) None
of
the assets of the Parent or any Subsidiary: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is
“tax-exempt use property” within the meaning of Section 168(h) of the Code;
or (iii) directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code.
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(e) Neither
the Parent nor any Subsidiary has undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of
the Code.
(f) No
state
or federal “net operating loss” of the Parent determined as of the Closing Date
is subject to limitation on its use pursuant to Section 382 of the Code or
comparable provisions of state law as a result of any “ownership change” within
the meaning of Section 382(g) of the Code or comparable provisions of any
state law occurring prior to the Closing Date.
3.13 Assets.
Each of
the Parent and the Subsidiaries owns or leases all tangible assets necessary
for
the conduct of its businesses as presently conducted and as presently proposed
to be conducted. Each such tangible asset is free from material defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
for the purposes for which it presently is used. No asset of the Parent or
any
Subsidiary (tangible or intangible) is subject to any Security
Interest.
3.14 Owned
Real Property.
Neither
the Parent nor any Subsidiary owns any real property.
3.15 Real
Property Leases.
Section
3.15 of the Parent Disclosure Schedule lists all real property leased or
subleased to or by the Parent or any Subsidiary and lists the term of such
lease, any extension and expansion options, and the rent payable thereunder.
The
Parent has delivered or made available to the Company and ITD complete and
accurate copies of the leases and subleases listed in Section 3.15 of the
Parent Disclosure Schedule. With respect to each lease and sublease listed
in
Section 3.15 of the Parent Disclosure Schedule:
(a) the
lease
or sublease is legal, valid, binding, enforceable and in full force and
effect;
(b) the
lease
or sublease will continue to be legal, valid, binding, enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing;
(c) neither
the Parent nor any Subsidiary nor, to the knowledge of the Parent, any other
party, is in breach or violation of, or default under, any such lease or
sublease, and no event has occurred, is pending or, to the knowledge of the
Parent, is threatened, which, after the giving of notice, with lapse of time,
or
otherwise, would constitute a breach or default by the Parent or any Subsidiary
or, to the knowledge of the Parent, any other party under such lease or
sublease;
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(d) neither
the Parent nor any Subsidiary has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
and
(e) the
Parent is not aware of any Security Interest, easement, covenant or other
restriction applicable to the real property subject to such lease, except for
recorded easements, covenants and other restrictions which do not materially
impair the current uses or the occupancy by the Parent or a Subsidiary of the
property subject thereto.
3.16 Contracts.
(a) Section
3.16 of the Parent Disclosure Schedule lists the following agreements (written
or oral) to which the Parent or any Subsidiary is a party as of the date of
this
Agreement:
(i) any
agreement (or group of related agreements) for the lease of personal property
from or to third parties;
(ii) any
agreement (or group of related agreements) for the purchase or sale of products
or for the furnishing or receipt of services (A) which calls for
performance over a period of more than one year, (B) which involves more
than the sum of $5,000, or (C) in which the Parent or any Subsidiary has
granted manufacturing rights, “most favored nation” pricing provisions or
exclusive marketing or distribution rights relating to any products or territory
or has agreed to purchase a minimum quantity of goods or services or has agreed
to purchase goods or services exclusively from a certain party;
(iii) any
agreement establishing a partnership or joint venture;
(iv) any
agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more than $5,000 or under
which it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any
agreement concerning confidentiality or noncompetition;
(vi) any
employment or consulting agreement;
(vii) any
agreement involving any officer, director or stockholder of the Parent or any
Affiliate thereof;
(viii) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Parent Material Adverse Effect;
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(ix) any
agreement which contains any provisions requiring the Parent or any Subsidiary
to indemnify any other party thereto (excluding indemnities contained in
agreements for the purchase, sale or license of products entered into in the
Ordinary Course of Business); and
(x) any
other
agreement (or group of related agreements) either involving more than $5,000
or
not entered into in the Ordinary Course of Business.
(b) The
Parent has delivered or made available to the Company and ITD a complete and
accurate copy of each agreement listed in Section 3.16 of the Parent
Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following the Closing
in
accordance with the terms thereof as in effect immediately prior to the Closing;
and (iii) neither the Parent nor any Subsidiary nor, to the knowledge of
the Parent, any other party, is in breach or violation of, or default under,
any
such agreement, and no event has occurred, is pending or, to the knowledge
of
the Parent, is threatened, which, after the giving of notice, with lapse of
time, or otherwise, would constitute a breach or default by the Parent or any
Subsidiary or, to the knowledge of the Parent, any other party under such
contract.
3.17 Accounts
Receivable.
All
accounts receivable of the Parent and the Subsidiaries reflected on the Parent
Reports are valid receivables subject to no setoffs or counterclaims and are
current and collectible (within 90 days after the date on which it first became
due and payable), net of the applicable reserve for bad debts on the balance
sheet contained in the most recent Parent Report. All accounts receivable
reflected in the financial or accounting records of the Parent that have arisen
since the date of the balance sheet contained in the most recent Parent Report
are valid receivables subject to no setoffs or counterclaims and are collectible
(within 90 days after the date on which it first became due and payable), net
of
a reserve for bad debts in an amount proportionate to the reserve shown on
the
balance sheet contained in the most recent Parent Report.
3.18 Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of the Parent or any
Subsidiary.
3.19 Insurance.
Section 3.19 of the Parent Disclosure Schedule lists each insurance policy
(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Parent or any Subsidiary
is a party. Such insurance policies are of the type and in amounts customarily
carried by organizations conducting businesses or owning assets similar to
those
of the Parent and the Subsidiaries. There is no material claim pending under
any
such policy as to which coverage has been questioned, denied or disputed by
the
underwriter of such policy. All premiums due and payable under all such policies
have been paid, neither the Parent nor any Subsidiary may be liable for
retroactive premiums or similar payments, and the Parent and the Subsidiaries
are otherwise in compliance in all material respects with the terms of such
policies. The Parent has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
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3.20 Warranties.
No
service sold or delivered by the Parent or any Subsidiary is subject to any
guaranty, warranty, right of credit or other indemnity other than the applicable
standard terms and conditions of sale of the Parent or the appropriate
Subsidiary, which are set forth in Section 3.20 of the Parent Disclosure
Schedule.
3.21 Employees.
(a) Section
3.21 of the Parent Disclosure Schedule contains a list of all employees of
the
Parent and each Subsidiary whose annual rate of compensation exceeds $50,000
per
year, along with the position and the annual rate of compensation of each such
person. Each current or past employee of the Parent or any Subsidiary has
entered into a confidentiality/assignment of inventions agreement with the
Parent or such Subsidiary, a copy or form of which has previously been delivered
to the Company and ITD. Section 3.21 of the Parent Disclosure Schedule contains
a list of all employees of the Parent or any Subsidiary who are a party to
a
non-competition agreement with the Parent or any Subsidiary; copies of such
agreements have previously been delivered to the Company and ITD. To the
knowledge of the Parent, no key employee or group of employees has any plans
to
terminate employment with the Parent or any Subsidiary.
(b) Neither
the Parent nor any Subsidiary is a party to or bound by any collective
bargaining agreement, nor have any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Parent has no knowledge of any organizational effort made or threatened, either
currently or within the past two years, by or on behalf of any labor union
with
respect to employees of the Parent or any Subsidiary.
3.22 Employee
Benefits.
(a) Section 3.22(a)
of the Parent Disclosure Schedule contains a complete and accurate list of
all
Employee Benefit Plans maintained, or contributed to, by the Parent, any
Subsidiary or any ERISA Affiliate. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last five plan years for each Employee
Benefit Plan, have been delivered or made available to the Parent. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Parent, the Subsidiaries and the ERISA Affiliates
has
in all material respects met its obligations with respect to such Employee
Benefit Plan and has made all required contributions thereto. The Parent, each
Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are in
compliance in all material respects with the currently applicable provisions
of
ERISA and the Code and the regulations thereunder (including without limitation
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601 through 608 and Section 701 et seq. of ERISA). All
filings and reports as to each Employee Benefit Plan required to have been
submitted to the Internal Revenue Service or to the United States Department
of
Labor have been duly submitted.
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(b) To
the
knowledge of the Parent, there are no Legal Proceedings (except claims for
benefits payable in the normal operation of the Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders) against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(c) All
the
Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code,
no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date
of
its most recent determination letter or application therefor in any respect,
and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required
to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of,
Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year
ending prior to the Closing Date.
(d) Neither
the Parent, any Subsidiary, nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(e) At
no
time has the Parent, any Subsidiary or any ERISA Affiliate been obligated to
contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA).
(f) There
are
no unfunded obligations under any Employee Benefit Plan providing benefits
after
termination of employment to any employee of the Parent or any Subsidiary (or
to
any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law. The assets
of each Employee Benefit Plan which is funded are reported at their fair market
value on the books and records of such Employee Benefit Plan.
(g) No
act or
omission has occurred and no condition exists with respect to any Employee
Benefit Plan maintained by the Parent, any Subsidiary or any ERISA Affiliate
that would subject the Parent, any Subsidiary or any ERISA Affiliate to (i)
any
material fine, penalty, tax or liability of any kind imposed under ERISA or
the
Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
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(h) No
Employee Benefit Plan is funded by, associated with or related to a “voluntary
employee’s beneficiary association” within the meaning of Section 501(c)(9)
of the Code.
(i) Each
Employee Benefit Plan is amendable and terminable unilaterally by the Parent
at
any time without liability to the Parent as a result thereof and no Employee
Benefit Plan, plan documentation or agreement, summary plan description or
other
written communication distributed generally to employees by its terms prohibits
the Parent from amending or terminating any such Employee Benefit
Plan.
(j) Section
3.22(j) of the Parent Disclosure Schedule discloses each: (i) agreement
with any stockholder, director, executive officer or other key employee of
the
Parent or any Subsidiary (A) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Parent or any Subsidiary of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other
benefits after the termination of employment of such director, executive officer
or key employee; (ii) agreement, plan or arrangement under which any person
may receive payments from the Parent or any Subsidiary that may be subject
to
the tax imposed by Section 4999 of the Code or included in the
determination of such person’s “parachute payment” under Section 280G of
the Code; and (iii) agreement or plan binding the Parent or any Subsidiary,
including without limitation any stock option plan, stock appreciation right
plan, restricted stock plan, stock purchase plan, severance benefit plan or
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of
any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The accruals for vacation, sickness and
disability expenses are accounted for on the Most Recent Balance Sheet and
are
adequate and properly reflect the expenses associated therewith in accordance
with generally accepted accounting principles.
3.23 Environmental
Matters.
(a) Each
of
the Parent and the Subsidiaries has complied with all applicable Environmental
Laws, except for violations of Environmental Laws that, individually or in
the
aggregate, have not had and would not reasonably be expected to have a Parent
Material Adverse Effect. There is no pending or, to the knowledge of the Parent,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request
by
any Governmental Entity, relating to any Environmental Law involving the Parent
or any Subsidiary, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or information requests
that, individually or in the aggregate, have not had and would not reasonably
be
expected to have a Parent Material Adverse Effect.
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(b) Set
forth
in Section 3.23(b) of the Parent Disclosure Schedule is a list of all
documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Parent or a Subsidiary (whether conducted
by or on behalf of the Parent or a Subsidiary or a third party, and whether
done
at the initiative of the Parent or a Subsidiary or directed by a Governmental
Entity or other third party) which were issued or conducted during the past
five
years and which the Parent has possession of or access to. A complete and
accurate copy of each such document has been provided to the
Parent.
(c) The
Parent is not aware of any material environmental liability of any solid or
hazardous waste transporter or treatment, storage or disposal facility that
has
been used by the Parent or any Subsidiary.
3.24 Permits.
Section
3.24 of the Parent Disclosure Schedule sets forth a list of all permits,
licenses, registrations, certificates, orders or approvals from any Governmental
Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) (“Parent Permits”) issued to or held by the Parent or any
Subsidiary. Such listed Permits are the only Parent Permits that are required
for the Parent and the Subsidiaries to conduct their respective businesses
as
presently conducted except for those the absence of which, individually or
in
the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect. Each such Parent Permit is in full force and
effect and, to the knowledge of the Parent, no suspension or cancellation of
such Parent Permit is threatened and there is no basis for believing that such
Parent Permit will not be renewable upon expiration. Each such Parent Permit
will continue in full force and effect immediately following the
Closing.
3.25 Certain
Business Relationships With Affiliates.
No
Affiliate of the Parent or of any Subsidiary (a) owns any property or
right, tangible or intangible, which is used in the business of the Parent
or
any Subsidiary, (b) has any claim or cause of action against the Parent or
any Subsidiary, or (c) owes any money to, or is owed any money by, the
Parent or any Subsidiary. Section 3.25 of the Parent Disclosure Schedule
describes any transactions involving the receipt or payment in excess of $5,000
in any fiscal year between the Parent or a Subsidiary and any Affiliate thereof
which have occurred or existed since the beginning of the time period covered
by
the Parent Financial Statements, other than employment agreements.
3.26 Tax-Free
Reorganization.
(a) The
Parent (i) is not an “investment company” as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code; (ii) has no present
plan or intention to liquidate the Surviving Corporations or to merge the
Surviving Corporations with or into any other corporation or entity, or to
sell
or otherwise dispose of the stock of the Surviving Corporations which Parent
will acquire in the Mergers, or to cause the Surviving Corporations to sell
or
otherwise dispose of its assets, all except in the ordinary course of business
or if such liquidation, merger, disposition is described in
Section 368(a)(2)(C) or Treasury Regulation Section 1.368-2(d)(4) or
Section 1368-2(k); and (iii) has no present plan or intention,
following the Mergers, to issue any additional shares of stock of either of
the
Surviving Corporations or to create any new class of stock of either of the
Surviving Corporations.
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(b) The
Acquisition Subsidiaries are wholly-owned subsidiaries of the Parent, formed
solely for the purposes of engaging in the GF Merger and ITD Merger, and will
carry on no business prior to such mergers.
(c) Immediately
prior to each of the GF Merger and the ITD Merger, the Parent will be in control
of GF Acquisition Subsidiary and ITD Acquisition Subsidiary, respectively,
within the meaning of Section 368(c) of the Code.
(d) Immediately
following (i) the GF Merger, the GF Surviving Corporation will hold at least
90%
of the fair market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Company immediately prior to the GF Merger
(for purposes of this representation, amounts used by the Company to pay
reorganization expenses, if any, will be included as assets of the Company
held
immediately prior to the GF Merger); and (ii) the ITD Merger, the ITD Surviving
Corporation will hold at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets held by ITD
immediately prior to the ITD Merger (for purposes of this representation,
amounts used by ITD to pay reorganization expenses, if any, will be included
as
assets of ITD held immediately prior to the ITD Merger).
(e) The
Parent has no present plan or intention to reacquire any of the Merger
Shares.
(f) The
GF
Acquisition Subsidiary and ITD Acquisition Subsidiary will have no liabilities
assumed by the GF Surviving Corporation and ITD Acquisition Subsidiary,
respectively, and will not transfer to such surviving corporations any assets
subject to liabilities in the GF Merger and the ITD Merger.
(g) Following
the Mergers, (i) the GF Surviving Corporation will continue the Company’s
historic business or use a significant portion of the Company’s historic
business assets in a business as required by Section 368 of the Code and
the Treasury Regulations promulgated thereunder; and (ii) the ITD Surviving
Corporation will continue ITD’s historic business or use a significant portion
of ITD’s historic business assets in a business as required by Section 368 of
the Xxx and the Treasury regulations provided thereunder.
(h) The Split-Off
Agreement will constitute a legally binding obligation between Parent and
Buyer prior to the Effective Time; immediately following consummation
of the Mergers, Parent will distribute the stock of Leaseco to Buyer
in cancellation of the Purchase Price Shares (as such term is defined in the
Split-Off Agreement); no property other than the capital stock of
Leaseco will be distributed by Parent to Buyer in connection with
or following the Mergers; upon execution of the Split-Off Agreement, Buyer
will have no right to sell or transfer the Purchased Shares to any person
without Parent's prior written consent, and Parent will not consent (nor
will it permit others to consent) to any such sale or transfer; upon execution
of the Split-Off Agreement, there will be no other plan, arrangement,
agreement, contract, intention, or understanding, whether written or verbal
and
whether or not enforceable in law or equity, that
would permit Buyer to vote the Purchased
Shares or receive any property or other distributions
from Parent with respect to the Purchased Shares other than the
capital stock of Leaseco.
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3.27 Split-Off
.
As
of the
Effective Time, the Parent will have discontinued all of its business operations
which it conducted prior to the Effective Time by closing the transactions
contemplated by the Split-Off Agreement. Upon the closing of the transactions
contemplated by the Split-Off Agreement, the Parent will have no material
liabilities, contingent or otherwise in any way related to its pre-Effective
Time business operations.
3.28 Brokers’
Fees.
Except
as set forth on Section 3.28 of the Parent Disclosure Schedule, neither the
Parent nor either of the Acquisition Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
3.29 Disclosure.
No
representation or warranty by the Parent contained in this Agreement or in
any
of the Transaction Documentation, and no statement contained in the any
document, certificate or other instrument delivered or to be delivered by or
on
behalf of the Parent pursuant to this Agreement or therein, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
or
will be made, in order to make the statements herein or therein not
misleading.
The
Parent has disclosed to the Company and ITD all material information relating
to
the business of the Parent or any Subsidiary or the transactions contemplated
by
this Agreement.
3.30 Interested
Party Transactions.
Except
for the Split-Off Agreement, to the knowledge of the Parent, no officer,
director or stockholder of Parent or any “affiliate” (as such term is defined in
Rule 12b-2 under the Exchange Act) or “associate” (as such term is defined
in Rule 405 under the Securities Act) of any such person has had, either
directly or indirectly, (a) an interest in any person that (i) furnishes or
sells services or products that are furnished or sold or are proposed to be
furnished or sold by Parent or any Parent Subsidiary or (ii) purchases from
or
sells or furnishes to Parent or any Parent Subsidiary any goods or services,
or
(b) a beneficial interest in any contract or agreement to which Parent or any
Parent Subsidiary is a party or by which it may be bound or affected. Neither
Parent or any Parent Subsidiary has extended or maintained credit, arranged
for
the extension of credit, or renewed an extension of credit, in the form of
a
personal loan to or for any director or executive officer (or equivalent
thereof) of the Parent or any Parent Subsidiary.
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3.31 Duty
to Make Inquiry.
To the
extent that any of the representations or warranties in this Article III are
qualified by “knowledge” or “belief,” Parent represents and warrants that it has
made due and reasonable inquiry and investigation concerning the matters to
which such representations and warranties relate, including, but not limited
to,
diligent inquiry by its directors, officers and key personnel.
3.32 Accountants.
Xxxx
Xxxxxxxx Xxxx-Xxxxxx XxXxxxx is and has been throughout the periods covered
by
such financial statements (a) a registered public accounting firm (as defined
in
Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act of 2002), (b) “independent” with
respect to Parent within the meaning of Regulation S-X and (c) in compliance
with subsections (g) through (l) of Section 10A of the Exchange Act and the
related rules of the Commission and the Public Company Accounting Oversight
Board. Schedule 3.32 lists all non-audit services performed by Xxxx Xxxxxxxx
Xxxx-Xxxxxx XxXxxxx for Parent and/or any Subsidiary since February 2, 2005.
The
report of Xxxx Xxxxxxxx Xxxx-Xxxxxx XxXxxxx on the financial statements of
Parent for the past fiscal year did not contain an adverse opinion or a
disclaimer of opinion, or was qualified as to uncertainty, audit scope, or
accounting principles. During Parent’s most recent fiscal year and the
subsequent interim periods, there were no disagreements with Xxxx Xxxxxxxx
Xxxx-Xxxxxx XxXxxxx on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures. None of the
reportable events listed in Item 304(a)(1)(iv) of Regulation S-B occurred with
respect to Xxxx Xxxxxxxx Xxxx-Xxxxxx XxXxxxx.
3.33 Minute
Books.
The
minute books, if any, of Parent and each Subsidiary contain, in all material
respects, a complete and accurate summary of all meetings of directors and
stockholders or actions by written resolutions since the time of organization
of
each such corporation through the date of this Agreement, and reflect all
transactions referred to in such minutes and resolutions accurately, except
for
omissions which are not material. Parent has provided true and complete copies
of all such minute books, if any, to the Company’s representatives.
3.34 Board
Action.
The
Parent’s Board of Directors (a) has unanimously determined that the Mergers are
advisable and in the best interests of the Parent’s stockholders and are on
terms that are fair to such Parent stockholders and (b) has caused the Parent,
in its capacity as the sole stockholder of each of the Acquisition Subsidiaries,
and the Board of Directors of each of the Acquisition Subsidiaries, to approve
the Mergers and this Agreement by written consent.
ARTICLE
IV
COVENANTS
4.1 Closing
Efforts.
Each of
the Parties shall use its best efforts, to the extent commercially reasonable
(“Reasonable Best Efforts”), to take all actions and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, including without limitation using its Reasonable Best Efforts to
ensure that (i) its representations and warranties remain true and correct
in all material respects through the Closing Date and (ii) the conditions
to the obligations of the other Parties to consummate the Mergers are
satisfied.
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4.2 Governmental
and Third-Party Notices and Consents.
(a) Each
Party shall use its Reasonable Best Efforts to obtain, at its expense, all
waivers, permits, consents, approvals or other authorizations from Governmental
Entities, and to effect all registrations, filings and notices with or to
Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement.
(b) The
Company shall use its Reasonable Best Efforts to obtain, at its expense, all
such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be listed in Section 2.4A of
the Disclosure Schedule.
(c) ITD
shall
use its Reasonable Best Efforts to obtain, at its expense, all such waivers,
consents or approvals from third parties, and to give all such notices to third
parties, as are required to be listed in Section 2.4B of the Disclosure
Schedule.
4.3 Current
Report.
As soon
as reasonably practicable after the execution of this Agreement, the Parties
shall prepare a current report on Form 8-K relating to this Agreement and the
transactions contemplated hereby (the “Current Report”). Each of the Company,
ITD and the Parent shall use its reasonable efforts to cause the Current Report
to be filed with the SEC within four business days of the execution of this
Agreement and to otherwise comply with all requirements of applicable federal
and state securities laws. Further, the Parties shall prepare and file with
the
SEC an amendment to the Current Report within four business days after the
Closing Date, if such Current Report was filed before the Closing
Date.
4.4 Operation
of Business.
(a) Except
as
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company shall (and shall cause each
Subsidiary to) conduct its operations in the Ordinary Course of Business and
in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees
and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not
be
impaired in any material respect. Without limiting the generality of the
foregoing, prior to the Effective Time, the Company shall not (and shall cause
each Subsidiary not to), without the written consent of the Parent:
(i) issue
or
sell, or redeem or repurchase, any stock or other securities of the Company
or
any Warrants, Options or other rights to acquire any such stock or other
securities (except pursuant to the conversion or exercise of convertible
securities or Options or Warrants outstanding on the earlier of October 21,
2006
and the date hereof), or amend any of the terms of (including without limitation
the vesting of) any such convertible securities or Options or
Warrants;
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(ii) split,
combine or reclassify any shares of its capital stock; declare, set aside or
pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(iii) create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to,
or
investments in, any other person or entity;
(iv) enter
into, adopt or amend any Employee Benefit Plan or any employment or severance
agreement or arrangement or (except for normal increases in the Ordinary Course
of Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay
any
bonus or other benefit to its directors, officers or employees;
(v) acquire,
sell, lease, license or dispose of any assets or property (including without
limitation any shares or other equity interests in or securities of any
Subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets
in
the Ordinary Course of Business;
(vi) mortgage
or pledge any of its property or assets or subject any such property or assets
to any Security Interest;
(vii) discharge
or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;
(viii) amend
its
charter, by-laws or other organizational documents;
(ix) change
in
any material respect its accounting methods, principles or practices, except
insofar as may be required by a generally applicable change in
GAAP;
(x) enter
into, amend, terminate, take or omit to take any action that would constitute
a
violation of or default under, or waive any rights under, any material contract
or agreement;
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(xi) institute
or settle any Legal Proceeding;
(xii) take
any
action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in (i) any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue or (ii) any of the conditions to the Mergers set forth in
Article V not being satisfied; or
(xiii) agree
in
writing or otherwise to take any of the foregoing actions.
(b) Except
as
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, ITD shall (and shall cause each Subsidiary
to)
conduct its operations in the Ordinary Course of Business and in compliance
with
all applicable laws and regulations and, to the extent consistent therewith,
use
its Reasonable Best Efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with
it to the end that its goodwill and ongoing business shall not be impaired
in
any material respect. Without limiting the generality of the foregoing, prior
to
the Effective Time, ITD shall not (and shall cause each Subsidiary not to),
without the written consent of the Parent:
(i) issue
or
sell, or redeem or repurchase, any stock or other securities of ITD or any
warrants, options or other rights to acquire any such stock or other securities
(except pursuant to the conversion or exercise of convertible securities or
options or warrants outstanding on the date hereof), or amend any of the terms
of (including without limitation the vesting of) any such convertible securities
or options or warrants;
(ii) split,
combine or reclassify any shares of its capital stock; declare, set aside or
pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(iii) create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to,
or
investments in, any other person or entity;
(iv) enter
into, adopt or amend any Employee Benefit Plan or any employment or severance
agreement or arrangement or (except for normal increases in the Ordinary Course
of Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay
any
bonus or other benefit to its directors, officers or employees;
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(v) acquire,
sell, lease, license or dispose of any assets or property (including without
limitation any shares or other equity interests in or securities of any
Subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets
in
the Ordinary Course of Business;
(vi) mortgage
or pledge any of its property or assets or subject any such property or assets
to any Security Interest;
(vii) discharge
or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;
(viii) amend
its
charter, by-laws or other organizational documents;
(ix) change
in
any material respect its accounting methods, principles or practices, except
insofar as may be required by a generally applicable change in
GAAP;
(x) enter
into, amend, terminate, take or omit to take any action that would constitute
a
violation of or default under, or waive any rights under, any material contract
or agreement;
(xi) institute
or settle any Legal Proceeding;
(xii) take
any
action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in (i) any of the
representations and warranties of ITD set forth in this Agreement becoming
untrue or (ii) any of the conditions to the Mergers set forth in
Article V not being satisfied; or
(xiii) agree
in
writing or otherwise to take any of the foregoing actions.
4.5 Access
to Information.
(a) Each
of
the Company and ITD shall (and shall cause each Subsidiary to) permit
representatives of the Parent to have full access (at all reasonable times,
and
in a manner so as not to interfere with the normal business operations of the
Company or ITD and their Subsidiaries) to all premises, properties, financial
and accounting records, contracts, other records and documents, and personnel,
of or pertaining to the Company and each Subsidiary.
(b) Each
of
the Parent and the Acquisition Subsidiaries (i) shall treat and hold as
confidential any Company Confidential Information (as defined below),
(ii) shall not use any of the Company Confidential Information except in
connection with this Agreement, and (iii) if this Agreement is terminated
for any reason whatsoever, shall return to the Company all tangible embodiments
(and all copies) thereof which are in its possession. For purposes of this
Agreement, “Company Confidential Information” means any confidential or
proprietary information of the Company or any Subsidiary that is furnished
in
writing to the Parent or either of the Acquisition Subsidiaries by the Company
or any Subsidiary in connection with this Agreement and is labeled confidential
or proprietary; provided,
however,
that it
shall not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Parent or either of the Acquisition Subsidiaries,
(C) which the Parent or either of the Acquisition Subsidiaries knew or to
which the Parent or either of the Acquisition Subsidiaries had access prior
to
disclosure, or (D) which the Parent or either of the Acquisition
Subsidiaries rightfully obtains from a source other than the Company or a
Subsidiary.
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(c) Each
of
the Parent and the Acquisition Subsidiaries (i) shall treat and hold as
confidential any ITD Confidential Information (as defined below),
(ii) shall not use any of the ITD Confidential Information except in
connection with this Agreement, and (iii) if this Agreement is terminated
for any reason whatsoever, shall return to ITD all tangible embodiments (and
all
copies) thereof which are in its possession. For purposes of this Agreement,
“ITD Confidential Information” means any confidential or proprietary information
of ITD or any Subsidiary that is furnished in writing to the Parent or either
of
the Acquisition Subsidiaries by ITD or any Subsidiary in connection with this
Agreement and is labeled confidential or proprietary; provided,
however,
that it
shall not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Parent or either of the Acquisition Subsidiaries,
(C) which the Parent or either of the Acquisition Subsidiaries knew or to
which the Parent or either of the Acquisition Subsidiaries had access prior
to
disclosure, or (D) which the Parent or either of the Acquisition
Subsidiaries rightfully obtains from a source other than ITD or a
Subsidiary.
4.6 Operation
of Business.
Except
as contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Parent shall (and shall cause each
Subsidiary to) conduct its operations in the Ordinary Course of Business and
in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees
and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not
be
impaired in any material respect. Without limiting the generality of the
foregoing, prior to the Effective Time, the Parent shall not (and shall cause
each Subsidiary not to), without the written consent of the Company and
ITD:
(a) issue
or
sell, or redeem or repurchase, any stock or other securities of the Parent
or
any rights, warrants or options to acquire any such stock or other securities,
except
as
contemplated by, and in connection with,
the
Private Placement Offering and the Mergers;
(b) split,
combine or reclassify any shares of its capital stock; declare, set aside or
pay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, except as contemplated
by,
and in connection with, the Stock Split;
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(c) create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to,
or
investments in, any other person or entity;
(d) enter
into, adopt or amend any Employee Benefit Plan or any employment or severance
agreement or arrangement or (except for normal increases in the Ordinary Course
of Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay
any
bonus or other benefit to its directors, officers or employees, except for
the
adoption of Parent’s 2006 Stock Option Plan (the “Parent Option Plan”) covering
2,000,000 shares of Parent Common Stock in connection with the Merger and the
Parent’s assumption of the Company’s 2004 Plan;
(e) acquire,
sell, lease, license or dispose of any assets or property (including without
limitation any shares or other equity interests in or securities of any Parent
Subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets
in
the Ordinary Course of Business, except as contemplated by, and in connection
with, the Split-Off;
(f) mortgage
or pledge any of its property or assets or subject any such property or assets
to any Security Interest;
(g) discharge
or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;
(h) amend
its
charter, by-laws or other organizational documents;
(i) change
in
any material respect its accounting methods, principles or practices, except
insofar as may be required by a generally applicable change in
GAAP;
(j) enter
into, amend, terminate, take or omit to take any action that would constitute
a
violation of or default under, or waive any rights under, any material contract
or agreement;
(k) institute
or settle any Legal Proceeding;
(l) take
any
action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in (i) any of the
representations and warranties of the Parent and/or either of the Acquisition
Subsidiaries set forth in this Agreement becoming untrue or (ii) any of the
conditions to the Mergers set forth in Article V not being satisfied;
or
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(m) agree
in
writing or otherwise to take any of the foregoing actions.
4.7 Access
to Information.
(a) The
Parent shall (and shall cause each of the Acquisition Subsidiaries to) permit
representatives of the Company and ITD to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Parent and the Acquisition Subsidiaries) to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to the Parent and the Acquisition
Subsidiaries.
(b) The
Company and ITD (i) shall treat and hold as confidential any Parent
Confidential Information (as defined below), (ii) shall not use any of the
Parent Confidential Information except in connection with this Agreement, and
(iii) if this Agreement is terminated for any reason whatsoever, shall
return to the Parent all tangible embodiments (and all copies) thereof which
are
in its possession. For purposes of this Agreement, “Parent Confidential
Information” means any confidential or proprietary information of the Parent or
any Subsidiary that is furnished in writing to the Company or ITD by the Parent
or either Acquisition Subsidiary in connection with this Agreement and is
labeled confidential or proprietary; provided,
however,
that it
shall not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Company or ITD, (C) which the Company or ITD knew
or to which the Company or ITD had access prior to disclosure or (D) which
the Company or ITD rightfully obtains from a source other than the Parent or
the
Acquisition Subsidiaries.
4.8 Expenses.
The
costs and expenses of the Parent and the Company (including legal fees and
expenses of the Parent and the Company) incurred in connection with this
Agreement and the transactions contemplated hereby shall be payable at Closing
from the proceeds of the Private Placement Offering.
4.9 Indemnification.
(a) The
Parent shall not, for a period of three years after the Effective Time, take
any
action to alter or impair any exculpatory or indemnification provisions now
existing in the articles of incorporation or bylaws of the Company or ITD for
the benefit of any individual who served as a director or officer of the Company
or ITD at any time prior to the Effective Time, except for any changes which
may
be required to conform with changes in applicable law and any changes which
do
not affect the application of such provisions to acts or omissions of such
individuals prior to the Effective Time.
(b) From
and
after the Effective Time, the Parent agrees that it will, and will cause the
Surviving Corporations to, indemnify and hold harmless each present and former
director and officer of the Company and ITD (the “Indemnified Executives”)
against any costs or expenses (including attorneys’ fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement incurred
in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under California or Delaware law (and the Parent and the
Surviving Corporations shall also advance expenses as incurred to the fullest
extent permitted under California or Delaware law, provided the Indemnified
Executive to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Indemnified Executive is
not
entitled to indemnification).
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4.10 Listing
of Merger Shares.
The
Parent shall take whatever steps are necessary to cause the Merger Shares to
be
eligible for quotation on the NASD’s OTC Bulletin Board.
4.11 Stock
Split.
The
Parent shall take whatever steps are necessary to enable it to effect the Stock
Split prior to or as of the Effective Time.
4.12 Name
Change.
As soon
as reasonably practicable after the Effective Time, the Parent shall take all
necessary steps to enable it to change its corporate name to such name as is
mutually agreeable by the Company and the Parent, if the Parent has not already
done so prior to the Effective Time.
4.13 Split-Off.
The
Parent shall take whatever steps are necessary to enable it to effect the
Split-Off as of the Effective Time.
4.14 Stock
Option Plans.
The
Board of Directors and shareholders of Parent shall adopt the Parent Option
Plan
reserving for issuance 2,000,000 shares of Parent Common Stock prior to or
as of
the Effective Time. Parent shall also assume the Company’s 2004
Plan.
4.15 Permit
Application; Information Provided to Company Stockholders.
(a) The
Company shall prepare, with the cooperation of the Parent, information to be
sent to the holders of Company Shares and the holders of Series A Preferred
Stock in connection with receiving their approval of the GF Merger, this
Agreement and related transactions. Such information shall constitute a
disclosure of the offer and issuance of the shares of Parent Common Stock to
be
received by the Company Stockholders, and the holders of Options and Warrants
upon their exercise of such Parent Options and New Warrants, in connection
with
the GF Merger, as well as the terms and conditions of the ITD Merger. The Parent
and the Company shall each use Reasonable Best Efforts to cause the information
provided to such holders to comply with applicable federal and state securities
laws requirements. Each of the Parent and the Company agrees to provide promptly
to the other such information concerning its business and financial statements
and affairs as, in the reasonable judgment of the providing party or its
counsel, may be required or appropriate for inclusion in the information sent,
or in any amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the preparation
of the information to be sent to the holders of Company Shares and holders
of
Series A Preferred Stock. The Company will promptly advise the Parent, and
the
Parent will promptly advise the Company, in writing if at any time prior to
the
Effective Time either the Company or the Parent shall obtain knowledge of any
facts that might make it necessary or appropriate to amend or supplement the
information sent in order to make the statements contained or incorporated
by
reference therein not misleading or to comply with applicable law. The
information sent shall contain
the recommendation of the Board of Directors of the Company that the holders
of
Company Shares and holders of Series A Preferred Stock approve the GF Merger
and
this Agreement and the conclusion of the Board of Directors of the Company
that
the terms and conditions of the GF Merger are advisable and fair and reasonable
to such holders.
Anything to the contrary contained herein notwithstanding, the Company shall
not
include in the information sent to such holders any information with respect
to
the Parent or its affiliates or associates, the form and content of which
information shall not have been approved by the Parent prior to such
inclusion.
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(b) As
soon
as practicable after the execution of this Agreement, the Parent shall prepare,
with the cooperation of the Company, the Permit Application. The Parent and
the
Company shall each use Reasonable Best Efforts to cause the Permit Application
to comply with the requirements of applicable federal and state laws. Each
of
the Parent and the Company agrees to provide promptly to the other such
information concerning its business and financial statements and affairs as,
in
the reasonable judgment of the providing party or its counsel, may be required
or appropriate for inclusion in the Permit Application, or in any amendments
or
supplements thereto, and to cause its counsel and auditors to cooperate with
the
other's counsel and auditors in the preparation of the Permit Application.
The
Company will promptly advise the Parent, and the Parent will promptly advise
the
Company, in writing if at any time prior to the Effective Time either the
Company or the Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Permit Application in order
to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. Anything to the contrary contained
herein notwithstanding, the Parent shall not include in the Permit Application
any information with respect to the Company or its affiliates or associates,
the
form and content of which information shall not have been approved by the
Company prior to such inclusion.
4.16 No
Registration. For
a
period of two years following the Effective Time, the Parent shall not register,
nor shall it take any action to facilitate registration, under the Securities
Act, the Merger Shares, including the Parent Common Stock issuable upon exercise
of Parent Options and New Warrants issued pursuant to Section 1.8 of this
Agreement.
ARTICLE
V
CONDITIONS
TO CONSUMMATION OF MERGERS
5.1 Conditions
to Each Party’s Obligations.
The
respective obligations of each Party to consummate the Mergers are subject
to
the satisfaction of the following conditions:
(a) this
Agreement and the GF Merger shall have received the approval of at least 90%
of
the votes represented by the outstanding Company Shares, entitled to vote on
this Agreement and the GF Merger;
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(b) this
Agreement and the ITD Merger shall have received the approval of at least 90%
of
the votes represented by the outstanding ITD Shares, entitled to vote on this
Agreement and the ITD Merger;
(c) the
completion of the offer and sale of the Private Placement Offering;
(d) the
California Permit shall have been issued by the State of California;
and
(e) satisfactory
completion by Parent, Company and ITD of all necessary legal due
diligence.
5.2 Conditions
to Obligations of the Parent and the Acquisition Subsidiaries.
The
obligation of each of the Parent and the Acquisition Subsidiaries to consummate
the Mergers is subject to the satisfaction (or waiver by the Parent) of the
following additional conditions:
(a) the
number of Dissenting Shares shall not exceed 2% of the number of outstanding
Company Shares as of the Effective Time;
(b) the
number of Dissenting Shares shall not exceed 2% of the number of outstanding
ITD
Shares as of the Effective Time;
(c) at
least
a majority of the holders of the issued and outstanding Series A Preferred
Stock
of the Company immediately prior to the Effective time shall have delivered
to
the Company a written request for the conversion of such shares of Series A
Preferred Stock into Company Shares, and all of the issued and outstanding
Series A Preferred Stock of the Company shall have converted into shares of
Common Stock of the Company prior to the Effective Time;
(d) each
holder of notes representing Company indebtedness immediately prior to the
Effective time shall have elected to, as of the Effective Time and in
consideration for the cancellation of the notes, (i) receive units of the
Parent’s securities in the Private Placement Offering and on the terms of the
Private Placement Offering representing the value of the principal of such
notes
plus any accrued interest thereon (upon the terms of such notes); or (ii) accept
cash payment for the principal amount of the notes plus any accrued interest
thereon (upon the terms of such notes);
(e) the
Company, ITD and their Subsidiaries shall have obtained (and shall have provided
copies thereof to the Parent) the California Permit and all of the other
waivers, permits, consents, approvals or other authorizations, and effected
all
of the registrations, filings and notices, referred to in Section 4.2 which
are required on the part of the Company, ITD or their Subsidiaries,
respectively, except for any the failure of which to obtain or effect would
not,
individually or in the aggregate, have a Company Material Adverse Effect or
an
ITD Material Adverse Effect or a material adverse effect on the ability of
the
Parties to consummate the transactions contemplated by this
Agreement;
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(f) the
representations and warranties of the Company and ITD set forth in this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct as of the Effective Time as though made as of the Effective
Time, except to the extent that the inaccuracy of any such representation or
warranty is the result of events or circumstances occurring subsequent to the
date of this Agreement and any such inaccuracies, individually or in the
aggregate, would not have a Company Material Adverse Effect or an ITD Material
Adverse Effect, respectively, or a material adverse effect on the ability of
the
Parties to consummate the transactions contemplated by this Agreement (it being
agreed that any materiality qualifications in particular representations and
warranties shall be disregarded in determining whether any such inaccuracies
would have a Company Material Adverse Effect or an ITD Material Adverse Effect
for purposes of this Section 5.2(f));
(g) the
Company and ITD shall have performed or complied in all material respects with
its agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Effective Time;
(h) no
Legal
Proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) have, individually or in the aggregate, a Company
Material Adverse Effect or an ITD Company Material Adverse Effect, and no such
judgment, order, decree, stipulation or injunction shall be in
effect;
(i) the
Company shall have delivered to the Parent and the Acquisition Subsidiaries
a
certificate (the “Company Certificate”) to the effect that each of the
conditions specified in clauses (a), (d) and (e) of Section 5.1 and
clauses (e) through (h) (insofar as such clauses relate to the Company or a
Subsidiary of the Company) of this Section 5.2 is satisfied in all
respects;
(j) ITD
shall
have delivered to the Parent and the Acquisition Subsidiaries a certificate
(the
“ITD Certificate”) to the effect that each of the conditions specified in
clauses (b), (d) and (e) of Section 5.1 and clauses (e) through (h)
(insofar as such clauses relate to ITD or a Subsidiary of ITD) of this
Section 5.2 is satisfied in all respects;
(k) ITD
Stockholders and Xxxxxxx Xxxxxxx shall have entered into agreements with the
Parent pursuant to which they shall have agreed to certain restrictions on
the
sale or other disposition of the Parent Common Stock received by them in
connection with the Mergers for a period of 24 months following the Closing
Date;
(l) the
Company shall have waived all of its rights and obligations related to rights
of
first refusal, share repurchase rights, option repurchase rights and lock-up
rights to which the Company was entitled in connection with those certain
Warrant Purchase Agreements, Warrants, Investors’ Rights Agreements, Common
Stock Purchase Agreements, Stock Purchase Agreements, Restricted Stock Purchase
Agreements, Stock Restriction Agreements, Stock Option Agreements, Voting
Agreements and all other pertinent agreements to which the Company was a party
prior to the Effective Time.
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(m) ITD
shall
have entered into written consulting agreements with each of Xxxx Xxxxxx and
Xxxxxxx Xxxxxx;
(n) Xxxxxxx
Xxxxxxx and the Parent shall have entered into an employment agreement
reasonably satisfactory to Xxxxxxx Xxxxxxx, the Parent and the Company relating
to the employment of Xx. Xxxxxxx by the Parent;
(o) the
Parent and ITD shall have completed the ITD Merger;
(p) the
Parent shall have received from McGuireWoods LLP, special counsel to the
Company, an opinion with respect to the matters set forth in Exhibit C
attached
hereto, addressed to the Parent and dated as of the Closing Date;
and
(q) the
Parent shall have received from Xxxxxxxx
& Xxxxxxxx,
counsel
to ITD, an opinion with respect to the matters set forth in Exhibit D attached
hereto, addressed to the Parent and dated as of the Closing Date.
5.3 Conditions
to Obligations of the Company.
The
obligation of the Company to consummate the GF Merger is subject to the
satisfaction of the following additional conditions:
(a) the
Parent and ITD shall have obtained (and shall have provided copies thereof
to
the Company and its Subsidiaries) all of the waivers, permits, consents,
approvals or other authorizations, and effected all of the registrations,
filings and notices, referred to in Section 4.2 which are required on the
part of the Parent, except for any the failure of which to obtain or effect
would not, individually or in the aggregate, have a Parent Material Adverse
Effect or an ITD Material Adverse Effect, respectively, or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated
by this Agreement;
(b) the
representations and warranties of the Parent, any Subsidiary of the Parent,
and
ITD set forth in this Agreement shall be true and correct as of the date of
this
Agreement and shall be true and correct as of the Effective Time as though
made
as of the Effective Time, except to the extent that the inaccuracy of any such
representation or warranty is the result of events or circumstances occurring
subsequent to the date of this Agreement and any such inaccuracies, individually
or in the aggregate, would not have a Parent Material Adverse Effect or an
ITD
Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement (it being
agreed that any materiality qualifications in particular representations and
warranties shall be disregarded in determining whether any such inaccuracies
would have a Parent Material Adverse Effect or an ITD Material Adverse Effect
for purposes of this Section 5.3(b));
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(c) each
of
the Parent, the Acquisition Subsidiaries and ITD shall have performed or
complied with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Effective Time;
(d) no
Legal
Proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) have, individually or in the aggregate, a Parent
Material Adverse Effect or an ITD Material Adverse Effect, and no such judgment,
order, decree, stipulation or injunction shall be in effect;
(e) the
Parent shall have delivered to the Company a certificate (the “Parent
Certificate”) to the effect that each of the conditions specified in clauses
(c), (d) and (e) of Section 5.1 and clauses (a) through (d) (insofar as
such clauses relate to the Parent and/or either of the Acquisition
Subsidiaries) of this Section 5.3 is satisfied in all
respects;
(f) ITD
shall
have delivered to the Company the ITD Certificate to the effect that each of the
conditions specified in clauses (b), (d) and (e) of Section 5.1 and
clauses (a) through (d) (insofar as such clauses relate to ITD) of this
Section 5.3 is satisfied in all respects;
(g) the
Company shall have received from Gottbetter & Partners, LLP, counsel to the
Parent and the Acquisition Subsidiaries, an opinion with respect to the matters
set forth in Exhibit
D
attached
hereto, addressed to the Company and dated as of the Closing Date;
(h) the
total
number of shares of Parent Common Stock issued and outstanding immediately
prior
to the Effective Time shall equal 7,500,000 shares, after giving effect to
the
Stock Split and the Share Contribution, but excluding (i) the shares of Parent
Common Stock to be issued to accredited investors in the Private Placement
Offering, (ii) 300,000 shares of Parent Common Stock to be issued to financial
advisors in connection with the Private Placement Offering, (iii) 4,500,000
shares of Parent Common Stock to be issued to Company Stockholders and to
holders of the Parent Options and New Warrants (upon the exercise of such Parent
Options and New Warrants) in connection with the GF Merger; and (iv) the ITD
Maximum, subject to the ITD Share Adjustment, which shall be issued to ITD
Stockholders in connection with the ITD Merger;
(i) Xxxxxxx
Xxxxxxx and the Parent shall have entered into an employment agreement
reasonably satisfactory to Xxxxxxx Xxxxxxx, the Parent and the Company relating
to the employment of Xx. Xxxxxxx by the Parent;
(j) the
Parent shall have adopted the Parent Option Plan;
(k) the
Parent shall have assumed and adopted the Company’s 2004 Stock Plan, as amended
(the “2004 Plan”);
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(l) the
Company shall have received a certificate of Parent’s transfer agent and
registrar certifying that as of the Closing Date there are approximately
16,666,666 shares of Parent Common Stock issued and outstanding (without giving
effect to the 9,166,666 shares of Parent Common Stock to be retired in
connection with the Split-Off, after which retirement there will be 7,500,000
shares of Parent Common Stock issued and outstanding); and
(m) contemporaneously
with the closing of the Mergers, the Parent, Leaseco, and the Buyer shall
execute the Split-Off Agreement, which Split-Off is effective simultaneous
with
the Mergers.
5.4 Conditions
to Obligations of ITD.
The
obligation of ITD to consummate the ITD Merger is subject to the satisfaction
of
the following additional conditions:
(a) the
Parent and the Company shall have obtained (and shall have provided copies
thereof to ITD) all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
referred to in Section 4.2 which are required on the part of the Parent,
except for any the failure of which to obtain or effect would not, individually
or in the aggregate, have a Parent Material Adverse Effect or a Company Material
Adverse Effect or a material adverse effect on the ability of the Parties to
consummate the transactions contemplated by this Agreement;
(b) the
representations and warranties of the Parent, any Subsidiary of the Parent
and
the Company set forth in this Agreement shall be true and correct as of the
date
of this Agreement and shall be true and correct as of the Effective Time as
though made as of the Effective Time, except to the extent that the inaccuracy
of any such representation or warranty is the result of events or circumstances
occurring subsequent to the date of this Agreement and any such inaccuracies,
individually or in the aggregate, would not have a Parent Material Adverse
Effect or a Company Material Adverse Effect or a material adverse effect on
the
ability of the Parties to consummate the transactions contemplated by this
Agreement (it being agreed that any materiality qualifications in particular
representations and warranties shall be disregarded in determining whether
any
such inaccuracies would have a Parent Material Adverse Effect or a Company
Material Adverse Effect for purposes of this Section 5.4(b));
(c) each
of
the Parent, the Acquisition Subsidiaries and the Company shall have performed
or
complied with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Effective Time;
(d) no
Legal
Proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) have, individually or in the aggregate, a Parent
Material Adverse Effect or a Company Material Adverse Effect, and no such
judgment, order, decree, stipulation or injunction shall be in
effect;
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(e) the
Parent shall have delivered to ITD the Parent Certificate to the effect that
each of the conditions specified in clauses (c), (d) and (e) of Section 5.1
and
clauses (a) through (d) (insofar as such clauses relate to the Parent
and/or either of the Acquisition Subsidiaries) of this Section 5.4 is
satisfied in all respects;
(f) the
Company shall have delivered to ITD the Company Certificate to the effect that
each of the conditions specified in clauses (a), (d) and (e) of
Section 5.1 and clauses (a) through (d) (insofar as such clauses relate to
the Company) of this Section 5.4 is satisfied in all respects;
(g) ITD
shall
have received from Gottbetter & Partners, LLP, counsel to the Parent and the
Acquisition Subsidiaries, an opinion with respect to the matters set forth
in
Exhibit
D
attached
hereto, addressed to the Company and dated as of the Closing Date;
(h) the
total
number of shares of Parent Common Stock issued and outstanding immediately
prior
to the Effective Time shall equal 7,500,000 shares, after giving effect to
the
Stock Split and the Share Contribution, but excluding (i) the shares of Parent
Common Stock to be issued to accredited investors in the Private Placement
Offering, (ii) 300,000 shares of Parent Common Stock to be issued to financial
advisors in connection with the Private Placement Offering, (iii) 4,500,000
shares of Parent Common Stock to be issued to Company Stockholders and to
holders of the Parent Options and New Warrants (upon the exercise of such Parent
Options and New Warrants) in connection with the GF Merger; and (iv) the ITD
Maximum, subject to the ITD Share Adjustment, which shall be issued to ITD
Stockholders in connection with the ITD Merger;
(i) the
Company shall have received a certificate of Parent’s transfer agent and
registrar certifying that as of the Closing Date there are approximately
16,666,666 shares of Parent Common Stock issued and outstanding (without giving
effect to the 9,166,666 shares of Parent Common Stock to be retired in
connection with the Split-Off, after which retirement there will be 7,500,000
shares of Parent Common Stock issued and outstanding); and
(j) the
Parent and the Company shall have completed the GF Merger.
ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification
by the Indemnifying Stockholders.
The
Indemnifying Stockholders receiving the Merger Shares pursuant to
Section 1.5 shall indemnify the Parent in respect of, and hold it harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due
or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators,
fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) (“Damages”) incurred or suffered by either of
the Surviving Corporations or the Parent or any Affiliate thereof (excluding
ITD
or any Affiliate of ITD) resulting from, relating to or
constituting:
(a) any
misrepresentation, breach of warranty or failure by the Company or ITD to
perform any covenant or agreement of the Company or ITD contained in this
Agreement or the Company Certificate, or the ITD Certificate,
respectively;
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(b) any
failure of any Company Stockholder or ITD Stockholder to have good, valid and
marketable title to the issued and outstanding Company Shares or ITD Shares
issued in the name of such Company Stockholder or ITD Stockholder, respectively,
free and clear of all Security Interests; or
(c) any
claim
by a stockholder or former stockholder of the Company or ITD, or any other
person or entity, seeking to assert, or based upon: (i) ownership or rights
to ownership of any shares of stock of the Company or ITD; (ii) any rights
of a stockholder (other than the right to receive the Merger Shares pursuant
to
this Agreement or appraisal rights under the applicable provisions of the
California Corporations Code or GCL), including any option, preemptive rights
or
rights to notice or to vote; (iii) any rights under the articles of
incorporation or bylaws of the Company or ITD; or (iv) any claim that his,
her or its shares were wrongfully acquired by the Company or ITD.
(d) Notwithstanding
the foregoing, GF Indemnifying Stockholders shall have no liability for Damages
resulting from (i) any misrepresentation, breach of warranty or failure by
ITD
to perform any covenant or agreement contained in this Agreement; (ii) any
failure of any ITD Stockholder to have good, valid and marketable title to
the
issued and outstanding ITD Shares issued in the name of such ITD Stockholder,
respectively, free and clear of all Security Interests; or (iii) or any claim
by
a stockholder or former stockholder of ITD, or any other person or entity,
seeking to assert, or based upon (A) ownership or rights to ownership of any
shares of stock of ITD, (B) any rights of a stockholder, including any option,
preemptive rights or rights to notice or to vote; (C) any rights under the
articles of incorporation or bylaws of ITD; or (D) any claim that his, her
or its shares were wrongfully acquired by ITD.
6.2 Indemnification
by the Parent.
(a) The
Parent shall indemnify the Indemnifying Stockholders in respect of, and hold
them harmless against, any and all Damages incurred or suffered by the
Indemnifying Stockholders resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Parent or either of the Acquisition Subsidiaries contained
in
this Agreement or the Parent Certificate.
(b) The
post-Closing adjustment mechanism set forth in Section 1.13 is intended to
secure the indemnification obligations of the Parent under this Agreement and
shall be the exclusive means for the Indemnifying Stockholders to collect any
Damages for which they are entitled to indemnification under this Article VI.
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6.3 Indemnification
Claims by the Parent.
(a) In
the
event the Parent is entitled, or seeks to assert rights, to indemnification
under Section 6.1, Parent shall give written notification to the Indemnifying
Stockholders of the commencement of any suit or proceeding relating to a third
party claim for which indemnification pursuant to this Article VI may be
sought. Such notification shall be given within 20 business days after receipt
by the Parent of notice of such suit or proceeding, and shall describe in
reasonable detail (to the extent known by the Parent) the facts constituting
the
basis for such suit or proceeding and the amount of the claimed damages;
provided, that no delay on the part of the Parent in notifying the Indemnifying
Stockholders shall relieve the Indemnifying Stockholders of any liability or
obligation hereunder except to the extent of any damage or liability caused
by
or arising out of such failure. Within 20 days after delivery of such
notification, the Indemnifying Stockholders may, upon written notice thereof
to
the Parent, assume control of the defense of such suit or proceeding with
counsel reasonably satisfactory to the Parent; provided, that (i) the
Indemnifying Stockholders may only assume control of such defense if (A) it
acknowledges in writing to the Parent that any damages, fines, costs or other
liabilities that may be assessed against the Parent in connection with such
suit
or proceeding constitute Damages for which the Parent shall be indemnified
pursuant to this Article VI and (B) the ad damnum is less than or equal to
the amount of Damages for which the Indemnifying Stockholders are liable under
this Article VI and (ii) the Indemnifying Stockholders may not assume
control of the defense of a suit or proceeding involving criminal liability
or
in which equitable relief is sought against the Parent. If the Indemnifying
Stockholders do not so assume control of such defense, the Parent shall control
such defense. The party not controlling such defense (the “Non-Controlling
Party”) may participate therein at its own expense; provided, that if the
Indemnifying Stockholders assume control of such defense and the Parent
reasonably concludes that the Indemnifying Stockholders and the Parent have
conflicting interests or different defenses available with respect to such
suit
or proceeding, the reasonable fees and expenses of counsel to the Parent shall
be considered “Damages” for purposes of this Agreement. The party controlling
such defense (the “Controlling Party”) shall keep the Non-Controlling Party
advised of the status of such suit or proceeding and the defense thereof and
shall consider in good faith recommendations made by the Non-Controlling Party
with respect thereto. The Non-Controlling Party shall furnish the Controlling
Party with such information as it may have with respect to such suit or
proceeding (including copies of any summons, complaint or other pleading which
may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such suit
or
proceeding. The Indemnifying Stockholders shall not agree to any settlement
of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Parent, which shall not be unreasonably
withheld or delayed; provided, that the consent of the Parent shall not be
required if the Indemnifying Stockholders agree in writing to pay any amounts
payable pursuant to such settlement or judgment and such settlement or judgment
includes a complete release of the Parent from further liability and has no
other materially adverse effect on the Parent. The Parent shall not agree to
any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnifying Stockholders,
which shall not be unreasonably withheld or delayed.
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(b) In
order
to seek indemnification under this Article VI, Parent shall give written
notification (a “Claim Notice”) to the Indemnification Representatives, who will
then provide such Claim Notice to the Indemnifying Stockholders, which contains
(i) a description and the amount (the “Claimed Amount”) of any Damages incurred
or reasonably expected to be incurred by the Parent, (ii) a statement that
the
Parent is entitled to indemnification under this Article VI for such
Damages and a reasonable explanation of the basis therefor, and (iii) a demand
for payment (in the manner provided in paragraph (c) below) in the amount
of such Damages. The Indemnifying Stockholders shall deliver a copy of the
Claim
Notice to the Escrow Agent.
(c) Within
20
days after delivery of a Claim Notice, the Indemnifying Stockholders shall
deliver to the Parent a written response (the “Response”) in which the
Indemnifying Stockholders shall: (i) agree that the Parent is entitled to
receive all of the Claimed Amount (in which case the Indemnifying Stockholders
and the Parent shall deliver to the Escrow Agent, within three days following
the delivery of the Response, a written notice executed by both parties
instructing the Escrow Agent to distribute to the Parent such number of Escrow
Shares as have an aggregate Value (as defined below) equal to the Claimed
Amount), (ii) agree that the Parent is entitled to receive part, but not
all, of the Claimed Amount (the “Agreed Amount”) (in which case the Indemnifying
Stockholders and the Parent shall deliver to the Escrow Agent, within three
days
following the delivery of the Response, a written notice executed by both
parties instructing the Escrow Agent to distribute to the Parent such number
of
Escrow Shares as have an aggregate Value (as defined below) equal to the Agreed
Amount) or (iii) dispute that the Parent is entitled to receive any of the
Claimed Amount. If the Indemnifying Stockholders in the Response disputes their
liability for all or part of the Claimed Amount, the Indemnifying Stockholders
and the Parent shall follow the procedures set forth in Section 6.3(d) for
the resolution of such dispute (a “Dispute”). For purposes of this
Article VI, the “Value” of any Escrow Shares delivered in satisfaction of
an indemnity claim shall be $1.50 per Escrow Share (subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Parent Common Stock since the Closing Date),
multiplied by the number of such Escrow Shares.
(d) During
the 60-day period following the delivery of a Response that reflects a Dispute,
the Indemnifying Stockholders and the Parent shall use good faith efforts to
resolve the Dispute. If the Dispute is not resolved within such 60-day period,
the Indemnifying Stockholders and the Parent shall discuss in good faith the
submission of the Dispute to a mutually acceptable alternative dispute
resolution procedure (which may be non-binding or binding upon the parties,
as
they agree in advance) (the “ADR Procedure”). In the event the Indemnifying
Stockholders and the Parent agree upon an ADR Procedure, such parties shall,
in
consultation with the chosen dispute resolution service (the “ADR Service”),
promptly agree upon a format and timetable for the ADR Procedure, agree upon
the
rules applicable to the ADR Procedure, and promptly undertake the ADR Procedure.
The provisions of this Section 6.3(d) shall not obligate the Indemnifying
Stockholders and the Parent to pursue an ADR Procedure or prevent either such
Party from pursuing the Dispute in a court of competent jurisdiction; provided,
that, if the Indemnifying Stockholders and the Parent agree to pursue an ADR
Procedure, neither the Indemnifying Stockholders nor the Parent may commence
litigation or seek other remedies with respect to the Dispute prior to the
completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnifying Stockholders and the Parent shall be considered a compromise
negotiation for purposes of federal and state rules of evidence, and all
statements, offers, opinions and disclosures (whether written or oral) made
in
the course of the ADR Procedure by or on behalf of the Indemnifying
Stockholders, the Parent or the ADR Service shall be treated as confidential
and, where appropriate, as privileged work product. Such statements, offers,
opinions and disclosures shall not be discoverable or admissible for any
purposes in any litigation or other proceeding relating to the Dispute
(provided, that this sentence shall not be construed to exclude from discovery
or admission any matter that is otherwise discoverable or admissible). The
fees
and expenses of any ADR Service used by the Indemnifying Stockholders and the
Parent shall be shared equally by the Indemnifying Stockholders and the Parent.
The Parent and the Indemnifying Stockholders shall deliver to the Escrow Agent,
promptly following the resolution of the Dispute (whether by mutual agreement,
pursuant to an ADR Procedure, as a result of a judicial decision or otherwise),
a written notice executed by both parties instructing the Escrow Agent as to
what (if any) portion of the Escrow Shares shall be distributed to the Parent
(which notice shall be consistent with the terms of the resolution of the
Dispute).
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(e) Notwithstanding
the other provisions of this Section 6.3, if a third party asserts (other
than by means of a lawsuit) that the Parent is liable to such third party for
a
monetary or other obligation which may constitute or result in Damages for
which
such Parent may be entitled to indemnification pursuant to this Article VI,
and the Parent reasonably determines that it has a valid business reason to
fulfill such obligation, then (i) Parent shall be entitled to satisfy such
obligation, with prior notice to but without prior consent from the Indemnifying
Stockholders, (ii) Parent may subsequently make a claim for
indemnification in accordance with the provisions of this Article VI, and
(iii) Parent shall be reimbursed, in accordance with the provisions of
this Article VI, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI (subject to the right of the
Indemnifying Stockholders to dispute the Parent’s entitlement to
indemnification, or the amount for which it is entitled to indemnification,
under the terms of this Section 6.3(d)).
(f) For
purposes of this Section 6.3 and the last two sentences of
Section 6.4, any references to the Indemnifying Stockholders (except
provisions relating to an obligation to make or a right to receive any payments
provided for in Section 6.3 or Section 6.4) shall be deemed to refer
to the Indemnification Representatives. The Indemnification Representatives
shall have full power and authority on behalf of each Indemnifying Stockholder
(of the respective company) to take any and all actions on behalf of, execute
any and all instruments on behalf of, and execute or waive any and all rights
of, the Indemnifying Stockholders under this Article VI. The
Indemnification Representatives shall have no liability to any Indemnifying
Stockholder for any action taken or omitted on behalf of the Indemnifying
Stockholders pursuant to this Article VI.
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6.4 Survival
of Representations and Warranties.
All
representations and warranties contained in this Agreement, the Company
Certificate, the ITD Certificate or the Parent Certificate shall
(a) survive the Closing and any investigation at any time made by or on
behalf of Parent or the Indemnifying Stockholders and (b) shall expire on
the date two years following the Closing Date. If Parent delivers to
Indemnifying Stockholders, before expiration of a representation or warranty,
either a Claim Notice based upon a breach of such representation or warranty,
or
a notice that, as a result a legal proceeding instituted by or written claim
made by a third party, the Parent reasonably expects to incur Damages as a
result of a breach of such representation or warranty (an “Expected Claim
Notice”), then such representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice
has
been given is definitively withdrawn or resolved in favor of the Parent, the
Parent shall promptly so notify the Indemnifying Stockholders; and if the Parent
has delivered a copy of the Expected Claim Notice to the Escrow Agent and Escrow
Shares have been retained in escrow after the Termination Date (as defined
in
the Escrow Agreement) with respect to such Expected Claim Notice, the
Indemnifying Stockholders and the Parent shall promptly deliver to the Escrow
Agent a written notice executed by both parties instructing the Escrow Agent
to
distribute such retained Escrow Shares to the Indemnifying Stockholders in
accordance with the terms of the Escrow Agreement.
6.5 Limitations
on Parent’s Claims for Indemnification.
(a) Notwithstanding
anything to the contrary herein, the Parent shall not be entitled to recover,
or
be indemnified for, Damages arising out of a misrepresentation or breach of
warranty set forth in Article IIA or Article IIB unless and until the aggregate
of all such Damages paid or payable by the Indemnifying Stockholders
collectively exceeds $50,000 (the “Damages Threshold”) and then, if such
aggregate threshold is reached, the Parent shall only be entitled to recover
for
Damages in excess of such respective threshold; and in no event shall any
Indemnifying Stockholder be liable under this Article VI for an aggregate
amount, whether paid in cash or in shares of Parent Common Stock, greater than
the product of the number of Escrow Shares held on account of such Indemnifying
Stockholder, pursuant to Section 1.5 above, multiplied by the Value. For
purposes of the preceding sentence, each Escrow Share delivered by a party
in
payment of his or its obligations under this Article VI shall be valued at
the
Value.
(b) The
Escrow Agreement is intended to secure the indemnification obligations of the
Indemnifying Stockholders under this Agreement and shall be the exclusive means
for the Parent to collect any Damages for which it is entitled to
indemnification under this Article VI.
(c) Except
with respect to claims based on fraud, after the Closing, the rights of the
Indemnified Stockholders and the Parent under this Article VI and the
Escrow Agreement shall be the exclusive remedy of the Indemnified Stockholders
and the Parent with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
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(d) No
Indemnifying Stockholder shall have any right of contribution against the
Surviving Corporations with respect to any breach by the Company or ITD of
any
of its representations, warranties, covenants or agreements. The amount of
Damages recoverable by Parent under this Article VI with respect to an
indemnity claim shall be reduced by (i) any proceeds received by Parent
with respect to the Damages to which such indemnity claim relates, from an
insurance carrier and (ii) the amount of any tax savings actually realized
by Parent, for the tax year in which such Damages are incurred, which are
clearly attributable to the Damages to which such indemnity claim relates (net
of any increased tax liability which may result from the receipt of the
indemnity payment or any insurance proceeds relating to such
Damages).
ARTICLE
VII
DEFINITIONS
For
purposes of this Agreement, each of the following defined terms is defined
in
the Section of this Agreement indicated below.
Defined
Term
|
Section
|
|
2004
Plan
|
5.3(k)
|
|
Acquisition
Subsidia(ry/ies)
|
Introduction
|
|
ADR
Procedure
|
6.3(d)
|
|
ADR
Service
|
6.3(d)
|
|
Affiliate
|
2.13A(a)(vii)
|
|
Agreed
Amount
|
6.3(c)
|
|
Agreement
|
Introduction
|
|
Agreement
of Merger
|
1.1
|
|
Buyer
|
Introduction
|
|
California
Corporations Code
|
1.1
|
|
California
Permit
|
1.14
|
|
CERCLA
|
2.20A(a)
|
|
Certificate
of Merger
|
1.1
|
|
Certificates
|
1.7
|
|
Claim
Notice
|
6.3(b)
|
|
Claimed
Amount
|
6.3(b)
|
|
Claims
|
1.13(c)
|
|
Closing
|
1.2
|
|
Closing
Date
|
1.2
|
|
Code
|
Introduction
|
|
Company
|
Introduction
|
-76-
Company
Balance Sheet
|
2.6A
|
|
Company
Balance Sheet Date
|
2.6A
|
|
Company
Certificate
|
5.2(i)
|
|
Company
Intellectual Property
|
2.27A
|
|
Company
Interim Balance Sheet
|
2.6A
|
|
Company
Interim Balance Sheet Date
|
2.6A
|
|
Company
Interim Financial Statements
|
2.6A
|
|
Company
Stockholders
|
1.3(f)
|
|
Company
Confidential Information
|
4.5(b)
|
|
Company
Financial Statements
|
2.6A
|
|
Company
Material Adverse Effect
|
2.1A
|
|
Company
Shares
|
1.5(a)
|
|
Company
Stockholder
|
1.3(f)
|
|
Contemplated
Transactions
|
8.3
|
|
Controlling
Party
|
6.3(a)
|
|
Current
Report
|
4.3
|
|
Damages
|
6.1
|
|
Damages
Threshold
|
6.5(a)
|
|
Defaulting
Party
|
8.6
|
|
Disclosure
Schedule
|
Article IIA
|
|
Dispute
|
6.3(c)
|
|
Dissenting
Shares
|
1.6(a)
|
|
Effective
Time
|
1.1
|
|
Employee
Benefit Plan
|
2.19A(a)(i)
|
|
Environmental
Law
|
2.20A(a)
|
|
ERISA
|
2.19A(a)(ii)
|
|
ERISA
Affiliate
|
2.19A(a)(iii)
|
|
Escrow
Agent
|
1.3(j)
|
|
Escrow
Agreement
|
1.3(j)
|
|
Escrow
Shares
|
1.5(b)
|
|
Exchange
Act
|
2.6A
|
|
Expected
Claim Notice
|
6.4
|
|
GAAP
|
2.6A
|
|
GCL
|
1.1
|
|
GF
Acquisition Subsidiary
|
Introduction
|
|
GF
Common Conversion Ratio
|
1.5(a)
|
|
GF
Escrow Shares
|
1.5(a)
|
|
GF
Indemnifying Stockholders
|
1.5(a)
|
|
GF
Initial Shares
|
1.5(a)
|
|
GF
Merger
|
Introduction
|
|
GF
Merger Shares
|
1.5(a)
|
|
GF
Surviving Corporation
|
1.1
|
|
Governmental
Entity
|
2.4A
|
|
Indemnification
Representatives
|
1.3(j)
|
-77-
Indemnified
Executives
|
4.9(b)
|
|
Indemnifying
Stockholders
|
1.5(b)
|
|
Initial
Shares
|
1.5(b)
|
|
Intellectual
Property
|
2.27A
|
|
Internal
Systems
|
2.27A
|
|
ITD
|
Introduction
|
|
ITD
Acquisition Subsidiary
|
Introduction
|
|
ITD
Certificate
|
5.2(j)
|
|
ITD
Common Conversion Ratio
|
1.5(b)
|
|
ITD
Confidential Information
|
4.5(c)
|
|
ITD
Escrow Shares
|
1.5(b)
|
|
ITD
Indemnifying Stockholders
|
1.5(b)
|
|
ITD
Initial Shares
|
1.5(b)
|
|
ITD
Material Adverse Effect
|
2.1B
|
|
ITD
Maximum
|
1.5(b)
|
|
ITD
Merger
|
Introduction
|
|
ITD
Merger Shares
|
1.5(b)
|
|
ITD
Share Adjustment
|
1.5(b)
|
|
ITD
Shares
|
1.5(b)
|
|
ITD
Stockholders
|
1.3(g)
|
|
ITD
Surviving Corporation
|
1.1
|
|
Leaseco
|
Introduction
|
|
Legal
Proceeding
|
2.17A
|
|
Loss
|
1.13(c)
|
|
Mergers
|
Introduction
|
|
Merger
Shares
|
1.5(b)
|
|
New
Warrants
|
1.8(d)
|
|
Non-Controlling
Party
|
6.3(a)
|
|
Non-Defaulting
Party
|
8.6
|
|
Old
Options
|
1.8(a)
|
|
Old
Warrants
|
1.8(d)
|
|
Options
|
1.5(a)
|
|
Ordinary
Course of Business
|
2.4A
|
|
Organization
Date
|
2.6B
|
|
OTCBB
|
3.2
|
|
Parent
|
Introduction
|
|
Parent
Certificate
|
5.3(e)
|
|
Parent
Common Stock
|
1.5(a)
|
|
Parent
Confidential Information
|
4.7(b)
|
|
Parent
Disclosure Schedule
|
Article
III
|
|
Parent
Financial Statements
|
3.8
|
|
Parent
Liabilities
|
1.13
|
|
Parent
Material Adverse Effect
|
3.1
|
|
Parent
Options
|
1.8(a)
|
-78-
Parent
Option Plan
|
4.6(d)
|
|
Parent
Permits
|
3.24
|
|
Parent
Reports
|
3.6
|
|
Part(y/ies)
|
Introduction
|
|
Permit
Application
|
2.31A
|
|
Permits
|
2.23A
|
|
PPO
Price
|
Introduction
|
|
Private
Placement Offering
|
Introduction
|
|
Reasonable
Best Efforts
|
4.1
|
|
Response
|
6.3(c)
|
|
SEC
|
1.13(a)
|
|
Securities
Act
|
1.14
|
|
Security
Interest
|
2.4A
|
|
Series
A Preferred Stock
|
1.5(a)
|
|
Share
Contribution
|
3.2
|
|
Split-Off
|
Introduction
|
|
Split-Off
Agreement
|
Introduction
|
|
Stock
Split
|
3.2
|
|
Subsidiar(y/ies)
|
2.5A(a)
|
|
Surviving
Corporations
|
1.1
|
|
Tax
Returns
|
2.9A(a)(ii)
|
|
Taxes
|
2.9A(a)(i)
|
|
Transaction
Documentation
|
3.3
|
|
Value
|
6.3(c)
|
|
Warrants
|
1.5(a)
|
|
Year-End
Financial Statements
|
2.6A
|
ARTICLE
VIII
TERMINATION
8.1 Termination
by Mutual Agreement.
This
Agreement may be terminated at any time by mutual consent of the parties hereto,
provided that such consent to terminate is in writing and is signed by each
of
the parties hereto.
8.2 Termination
for Failure to Close.
This
Agreement shall be automatically terminated if the Closing Date shall not have
occurred by December 20, 2006.
8.3 Termination
by Operation of Law.
This
Agreement may be terminated by any Party hereto if there shall be any statute,
rule or regulation that renders consummation of the transactions contemplated
by
this Agreement (the “Contemplated Transactions) illegal or otherwise prohibited,
or a court of competent jurisdiction or any government (or governmental
authority) shall have issued an order, decree or ruling, or has taken any other
action restraining, enjoining or otherwise prohibiting the consummation of
such
transactions and such order, decree, ruling or other action shall have become
final and nonappealable.
-79-
8.4 Termination
for Failure to Perform Covenants or Conditions.
This
Agreement may be terminated prior to the Effective Time:
(a) by
the
Parent and the Acquisition Subsidiaries if: (i) any of the representations
and warranties made in this Agreement by the Company shall not be materially
true and correct, when made or at any time prior to consummation of the
Contemplated Transactions as if made at and as of such time; (ii) any of
the conditions set forth in Section 5.2 hereof have not been fulfilled in all
material respects by the Closing Date; (iii) the Company shall have failed
to observe or perform any of its material obligations under this Agreement;
or
(iv) as otherwise set forth herein; or
(b) by
the
Company if: (i) any of the representations and warranties of the Parent or
either of the Acquisition Subsidiaries shall not be materially true and correct
when made or at any time prior to consummation of the Contemplated Transactions
as if made at and as of such time; (ii) any of the conditions set forth in
Section 5.3 hereof have not been fulfilled in all material respects by the
Closing Date; (iii) the Parent or either of the Acquisition Subsidiaries
shall have failed to observe or perform any of their material respective
obligations under this Agreement; or (iv) as otherwise set forth
herein.
8.5 Effect
of Termination or Default; Remedies.
In the
event of termination of this Agreement as set forth above, this Agreement shall
forthwith become void and there shall be no liability on the part of any Party
hereto, provided that such Party is a Non-Defaulting Party (as defined below).
The foregoing shall not relieve any Party from liability for damages actually
incurred as a result of such Party’s breach of any term or provision of this
Agreement.
8.6 Remedies;
Specific Performance.
In the
event that any Party shall fail or refuse to consummate the Contemplated
Transactions or if any default under or beach of any representation, warranty,
covenant or condition of this Agreement on the part of any Party (the
“Defaulting Party”) shall have occurred that results in the failure to
consummate the Contemplated Transactions, then in addition to the other remedies
provided herein, the non-defaulting Party (the “Non-Defaulting Party”) shall be
entitled to seek and obtain money damages from the Defaulting Party, or may
seek
to obtain an order of specific performance thereof against the Defaulting Party
from a court of competent jurisdiction, provided that the Non-Defaulting Party
seeking such protection must file its request with such court within forty-five
(45) days after it becomes aware of the Defaulting Party’s failure, refusal,
default or breach. In addition, the Non-Defaulting Party shall be entitled
to
obtain from the Defaulting Party court costs and reasonable attorneys’ fees
incurred in connection with or in pursuit of enforcing the rights and remedies
provided hereunder.
-80-
ARTICLE
IX
MISCELLANEOUS
9.1 Press
Releases and Announcements.
No
Party shall issue any press release or public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other
Parties; provided,
however,
that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide
them
with a copy of the proposed disclosure prior to making the
disclosure).
9.2 No
Third Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any person other than
the
Parties and their respective successors and permitted assigns; provided,
however,
that
(a) the provisions in Article I concerning issuance of the Merger
Shares and Article VI concerning indemnification are intended for the
benefit of the Company Stockholders and (b) the provisions in
Section 4.9 concerning indemnification are intended for the benefit of the
individuals specified therein and their successors and assigns.
9.3 Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior written or oral
understandings, agreements or representations, and any contemporaneous oral
understandings, agreements or representations, by or among the Parties, written
or oral, with respect to the subject matter hereof.
9.4 Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other Parties; provided
that
the Acquisition Subsidiaries may assign their rights, interests and obligations
hereunder to a wholly-owned subsidiaries of the Parent.
9.5 Counterparts
and Facsimile Signature.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the same
instrument. This Agreement may be executed by facsimile signature.
9.6 Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
-81-
9.7 Notices.
All
notices, requests, demands, claims, and other communications hereunder shall
be
in writing. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly delivered four business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent for next business day delivery via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
If
to the Company, or the Parent subsequent to the Closing:
GoFish
Technologies, Inc.
000
Xxxxx Xxxxxx Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxx, President and
Chief
Executive Officer
Facsimile:
(000) 000-0000
|
Copy
to (which copy shall not constitute notice
hereunder):
McGuireWoods
LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxx X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
|
If
to the Parent, or
the
GF Acquisition Subsidiary or ITD
Acquisition
Subsidiary prior to the Closing:
GoFish
Corporation
00
Xxxx 00xx Xxxxxx
Xxxxxxxxx,
XX X0X 0X0
Xxxxxx
Attn:
Xxxxxxx X. Xxxxxxx
|
Copy
to (which copy shall not constitute
notice
hereunder):
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
|
If
to ITD:
Internet
Television Distribution Inc.
000
Xxxxxxxxxx Xxx.
Xxxx
Xxxx, XX 00000
Attn:
Xxxx Xxxxxx
|
Copy
to (which copy shall not constitute
notice
hereunder):
Xxxxxxxx
& Xxxxxxxx
000
Xxxxxx Xxxxxx
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
|
If
to Indemnification Representatives:
Xxxxxxx
Xxxxxxx
c/o
GoFish Technologies, Inc.
000
Xxxxx Xxxxxx Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
|
Xxxx
Xxxxxx
c/o
Internet Television Distribution LLC
000
Xxxxxxxxxx Xxx.
Xxxx
Xxxx, XX 00000
|
Any
Party
may give any notice, request, demand, claim or other communication hereunder
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been
duly
given unless and until it actually is received by the Party for whom it is
intended. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
-82-
9.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York without giving effect to any choice or conflict
of
law provision or rule (whether of the State of New York or
any
other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of New York.
9.9 Amendments
and Waivers.
The
Parties may mutually amend any provision of this Agreement at any time prior
to
the Effective Time. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by all of the Parties.
No
waiver of any right or remedy hereunder shall be valid unless the same shall
be
in writing and signed by the Party giving such waiver. No waiver by any Party
with respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in
any
way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified.
9.11 Submission
to Jurisdiction.
Each of
the Parties (a) submits to the jurisdiction of any state or federal court
sitting in the County of New York in the State of New York in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that
all claims in respect of such action or proceeding may be heard and determined
in any such court, and (c) agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other security
that might be required of any other Party with respect thereto. Any Party may
make service on another Party by sending or delivering a copy of the process
to
the Party to be served at the address and in the manner provided for the giving
of notices in Section 9.7. Nothing in this Section 9.11, however,
shall affect the right of any Party to serve legal process in any other manner
permitted by law.
-83-
9.12 Construction.
(a) The
language used in this Agreement shall be deemed to be the language chosen by
the
Parties to express their mutual intent, and no rule of strict construction
shall
be applied against any Party.
(b) Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
[SIGNATURE
PAGE FOLLOWS]
-84-
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
PARENT
GOFISH
CORPORATION
|
||
|
|
|
By: | /s/ Xxxxxxx X. Xxxxxxx | |
Name: |
Xxxxxxx X. Xxxxxxx |
|
Title: | President & Secretary |
GF
ACQUISITION SUBSIDIARY
GF
ACQUISITION CORP.
|
||
|
|
|
By: | /s/ Xxxxxxx X. Xxxxxxx | |
Name: |
Xxxxxxx X. Xxxxxxx |
|
Title: | President, Chief Executive Officer & Secretary |
COMPANY
GOFISH
TECHNOLOGIES, INC.
|
||
|
|
|
By: | /s/ Xxxxxxx Xxxxxxx | |
Name: |
Xxxxxxx Xxxxxxx |
|
Title: | President, Chief Executive Officer& Secretary |
ITD
ACQUISITION SUBSIDIARY
ITD
ACQUISITION CORP.
|
||
|
|
|
By: | /s/ Xxxxxxx X. Xxxxxxx | |
Name: |
Xxxxxxx X. Xxxxxxx |
|
Title: | President, Chief Executive Officer& Secretary |
ITD
INTERNET
TELEVISION DISTRIBUTION INC.
|
||
|
|
|
By: | /s/ Xxxx Xxxxxx | |
Name: |
Xxxx Xxxxxx |
|
Title: | President & Secretary | |
-85-