Exhibit 2.9
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DIGITAL ANGEL CORPORATION
A DELAWARE CORPORATION
DA ACQUISITION, INC.
A DELAWARE CORPORATION
AND
OUTERLINK CORPORATION
A DELAWARE CORPORATION
DATED
NOVEMBER 2, 2003
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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PAGE
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ARTICLE I. DEFINITIONS....................................................1
1.1 Affiliate......................................................1
1.2 Articles of Merger.............................................1
1.3 Assets.........................................................1
1.4 Best Knowledge.................................................1
1.5 Business.......................................................1
1.6 Business Condition.............................................1
1.7 Claim..........................................................2
1.8 Closing........................................................2
1.9 Closing Date...................................................2
1.10 COBRA..........................................................2
1.11 Code...........................................................2
1.12 Company Capital Stock..........................................2
1.13 Company Facility...............................................2
1.14 Company Products...............................................2
1.15 Company Software Products......................................2
1.16 Company Tax....................................................2
1.17 Company Tax Returns............................................2
1.18 Contracts......................................................2
1.19 DGCL...........................................................2
1.20 Digital Angel Series A Preferred Stock.........................2
1.21 Disposal Site..................................................2
1.22 Effective Time.................................................3
1.23 Encumbrance....................................................3
1.24 Environmental Laws.............................................3
1.25 Environmental Permit...........................................3
1.26 Equity Securities..............................................3
1.27 ERISA..........................................................3
1.28 ERISA Benefit Plan.............................................3
1.29 Escrow Agreement...............................................3
1.30 Escrow Assets..................................................3
1.31 Escrow Trustee.................................................3
1.32 GAAP...........................................................3
1.33 Governmental Entity............................................3
1.34 Hazardous Materials............................................3
1.35 Hazardous Materials Activity...................................4
1.36 Intellectual Property Rights...................................4
1.37 Laws...........................................................4
1.38 Leased Real Property...........................................4
1.39 Liabilities....................................................4
1.40 Losses.........................................................4
1.41 Majority Stockholders..........................................4
1.42 Majority Stockholders' Representative..........................4
1.43 Material Adverse Effect........................................4
1.44 Merger.........................................................4
1.45 Merger Consideration...........................................5
1.46 Non-ERISA Benefit Arrangement..................................5
1.47 Obligations....................................................5
1.48 Ordinary Course................................................5
1.49 Permitted Encumbrance..........................................5
1.50 Person.........................................................5
1.51 Personal Property..............................................5
1.52 Records........................................................5
1.53 Related Party..................................................5
1.54 Return Date....................................................5
1.55 Software.......................................................6
1.56 Stock..........................................................6
1.57 Stock Options..................................................6
1.58 Subsidiary.....................................................6
1.59 Surviving Corporation..........................................6
1.60 Tax or Taxes...................................................6
1.61 Tax Agreement..................................................6
1.62 Tax Return.....................................................6
1.63 Third Party Software...........................................6
1.64 Transaction....................................................6
1.65 Transfer Agent.................................................7
1.66 Warrants.......................................................7
ARTICLE II THE MERGER.....................................................7
2.1 The Merger.....................................................7
2.2 Consummation of the Merger.....................................7
2.3 Effects of the Merger..........................................7
2.4 Certificate of Incorporation and Bylaws........................7
2.5 Directors and Officers.........................................7
2.6 Conversion/Cancellation of Stock...............................8
2.7 Effect on Stock of DA Acquisition..............................8
2.8 Acknowledgement................................................8
ARTICLE III EXCHANGE OF STOCK FOR MERGER CONSIDERATION....................8
3.1 Exchange and Conversion of Stock...............................8
3.2 Delivery of the Merger Consideration...........................8
3.3 Closing of Company Transfer Books.............................10
3.4 Escrow Agreement..............................................10
3.5 Majority Stockholders' Representative.........................10
3.6 Company Series A Preferred Stock, Common Stock, Stock Options
and Warrants................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY.....................13
4.1 Authority, Validity of Agreement..............................13
4.2 No Violations.................................................13
4.3 Consents and Approvals of Governmental Authorities............13
4.4 Other Consents................................................14
4.5 Organization and Good Standing of Company.....................14
4.6 Capital Stock of Company......................................14
4.7 Ownership and Transfer of Shares to be Transferred............15
4.8 Minute Books; Books, Records and Accounts Officers and
Directors...................................................15
4.9 Financial Statements..........................................15
4.10 Absence of Undisclosed Liabilities............................16
4.11 Absence of Certain Changes....................................16
4.12 Title to, and Sufficiency of, Assets..........................17
4.13 Plant, Property, and Equipment................................18
4.14 Accounts and Notes Receivable.................................18
4.15 Accounts and Notes Payable; Interest-Bearing Debt.............18
4.16 Orders, Commitments, Warranty Claims and Returns..............19
4.17 Defects in Products; Warranties...............................19
4.18 Real Property.................................................19
4.19 Contracts.....................................................20
4.20 Litigation....................................................22
4.21 Compliance with Laws..........................................23
4.22 Computer Software and Intellectual Property...................23
4.23 No Subsidiaries...............................................25
4.24 Environmental Matters.........................................26
4.25 Employee Plans and Arrangements...............................26
4.26 Employees.....................................................29
4.27 Compensation Plans............................................30
4.28 Insurance.....................................................30
4.29 Taxes.........................................................30
4.30 Bank Accounts.................................................32
4.31 Affiliate Transactions........................................32
4.32 Powers of Attorney; Guarantees, Suretyships...................32
4.33 No Brokerage or Other Fees....................................33
4.34 Disclosure....................................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF DIGITAL ANGEL AND
DA ACQUISITION...............................................33
5.1 Authority, Validity of Agreement..............................33
5.2 Organization and Good Standing of Digital Angel and
DA Acquisition..............................................33
5.3 No Violations.................................................34
5.4 Consents and Approvals of Governmental Authorities............34
5.5 Digital Angel Shares..........................................34
5.6 SEC Documents.................................................35
5.7 FCC Compliance................................................35
ARTICLE VI CERTAIN AGREEMENTS............................................35
6.1 Tax Matters. Further Assurances..............................35
6.2 FCC Application...............................................37
6.3 Further Assurances............................................37
6.4 Employment Offers.............................................38
ARTICLE VII OBLIGATIONS PRIOR TO CLOSING.................................38
7.1 Covenants and Agreements of Company...........................38
7.2 Satisfaction of Conditions....................................40
ARTICLE VIII CONDITIONS TO CLOSING.......................................40
8.1 Conditions Precedent to the Obligation of Company.............40
8.2 Conditions Precedent to the Obligations of Digital Angel
and DA Acquisition..........................................41
ARTICLE IX THE CLOSING...................................................43
9.1 Time and Place, Effective Time................................43
9.2 Company's Obligations at Closing..............................43
9.3 Digital Angel's Obligations at Closing........................44
9.4 Instruments...................................................44
ARTICLE X TERMINATION....................................................44
10.1 Termination...................................................44
10.2 Effect of Termination.........................................45
ARTICLE XI SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES....45
11.1 Survival......................................................45
ARTICLE XII INDEMNIFICATION..............................................46
12.1 Indemnification by Majority Stockholders......................46
12.2 Defense Against Asserted Claims...............................46
12.3 Sole Remedy...................................................47
ARTICLE XIII GENERAL PROVISIONS..........................................47
13.1 Publicity, Advertisement, Prior Consultation..................47
13.2 Severability..................................................47
13.3 Article, Section, Schedule, and Exhibit Headings..............47
13.4 Counterparts and Facsimile....................................47
13.5 Gender and Number.............................................47
13.6 Expenses......................................................47
13.7 Notices.......................................................47
13.8 No Third Party Beneficiaries..................................48
13.9 Governing Law.................................................49
13.10 Modifications, Amendments or Waivers..........................49
13.11 Remedies of Parties Cumulative................................49
13.12 Assignment, Successors and Assigns............................49
13.13 Remedies......................................................49
13.14 Joint Preparation.............................................49
13.15 Schedules and Exhibits........................................49
13.16 Attorneys Fees................................................49
13.17 Entire Agreement..............................................50
EXHIBITS
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Exhibit A Articles of Merger
Exhibit B Series A Preferred Stock Terms
Exhibit C Escrow Trust Agreement
Exhibit D Transmittal Letter
Exhibit E Opinion of Xxxxx Xxxxxxx LLP
Exhibit F Opinion of Winthrop & Weinstine, P.A.
SCHEDULES
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Schedule I Majority Stockholders/Capital Stock of OuterLink
Corporation/Consideration to be Received
Schedule 4.2 No Violations
Schedule 4.3 Consents and Approvals of Governmental Authorities
Schedule 4.5(c) Organization and Good Standing of the Company
Schedule 4.6(a) Capital Stock of the Company
Schedule 4.6(b) Commitments/Obligations Against Capital Stock of the
Company
Schedule 4.8 Officers and Directors
Schedule 4.9 Financial Statements
Schedule 4.10(c) Liabilities
Schedule 4.11 Absence of Certain Changes
Schedule 4.14 Aging of Accounts and Notes Receivable
Schedule 4.15(b) Interest-Bearing Debt
Schedule 4.17 Defects in Products; Warranties
Schedule 4.18(b) Leased Real Property
Schedule 4.19(a)(i) Current Customers
Schedule 4.19(a)(ii) Outstanding But Unaccepted Written and Oral Proposals
Schedule 4.19(a)(iii) Canceled/Terminated Contracts
Schedule 4.19(b) Suppliers $5,000/$30,000
Schedule 4.19(c) Written Contracts or Written or Binding Oral Agreements
Schedule 4.19(d) Defaults
Schedule 4.20 Litigation
Schedule 4.21(b) Governmental Approvals, Permits, Licenses,
Certifications or Other Authorizations
Schedule 4.21(c) Outstanding Judgments, Orders, Injunctions, Decrees,
Stipulations, Awards or Private Settlement Agreements
Schedule 4.22(a) Company Software Products
Schedule 4.22(b) Third Party Software
Schedule 4.22(c) Source Code Escrow
Schedule 4.22(d) Intellectual Property Rights
Schedule 4.22(e)(iii) Creators of Company Software Product not acting as
employees or who have not executed assignment of
rights of ownership
Schedule 4.22(e)(vi) Non-maintenance of Intellectual Property Rights/
Confidential Information
Schedule 4.23 Subsidiaries
Schedule 4.24(b) Environmental Permits
Schedule 4.25(a) Company ERISA Benefit Plan
Schedule 4.25(b) Non-ERISA Benefit Arrangement
Schedule 4.25(d) Unwritten Company Non-ERISA Benefit Arrangement or
Employee Agreement
Schedule 4.26(a) Multi-Employer/Collective Bargaining Group
Schedule 4.26(g) Non-Company Employees
Schedule 4.26(h) Employees
Schedule 4.26(i) Resignation of Key Employee
Schedule 4.27 Compensation Plans
Schedule 4.28 Insurance
Schedule 4.29(b) Taxes
Schedule 4.30 Bank Accounts
Schedule 4.31 Affiliate Transactions
Schedule 4.32(a) Powers of Attorney
Schedule 4.32(b) Guarantees, Suretyships
Schedule 4.33 No Brokerage or Other Fees
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered into
as of this 2nd day of November, 2003, by and among Digital Angel
Corporation, a Delaware corporation ("Digital Angel"); DA Acquisition, Inc.,
a Delaware corporation ("DA Acquisition"); and OuterLink Corporation, a
Delaware corporation ("Company").
INTRODUCTION
A. The parties hereto wish to consummate a transaction whereby DA
Acquisition will merge with and into the Company, with Company
surviving as a wholly-owned subsidiary of Digital Angel, and
whereby all of the issued and outstanding stock of Company will be
either converted into shares of Digital Angel Series A Preferred
Stock or cancelled pursuant to the terms and conditions contained
in the Articles of Merger substantially in the form attached hereto
as Exhibit A and this Agreement.
B. The parties hereto wish to make and receive certain
representations, warranties, covenants and agreements in connection
with the merger of DA Acquisition with and into Company, and also
to prescribe various conditions to such transaction.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
The following terms have the following meanings when used in this Agreement,
unless the context expressly or by necessary implication otherwise requires:
1.1. "Affiliate" shall have the meaning assigned to such term in Rule
405, as presently promulgated under the Securities Act of 1933, as
amended.
1.2. "Articles of Merger" means the Articles of Merger substantially in
the form attached hereto as Exhibit A to be executed and filed at
the Effective Time with the Secretary of State of Delaware in
accordance with the DGCL.
1.3. "Assets" means all properties and assets (real, personal or mixed,
tangible or intangible).
1.4. "Best Knowledge" means knowledge, after reasonable inquiry, of a
responsible officer of Company.
1.5. "Business" means the business and operations of Company.
1.6. "Business Condition" means, with respect to any corporation,
association or other business entity, the business, financial
condition, operations, assets and liabilities of such entity and
its Subsidiaries taken as a whole.
1.7. "Claim" shall have the meaning assigned thereto in the Escrow
Agreement.
1.8. "Closing" means the completion of the Transaction upon the
satisfaction or waiver of all the conditions set forth in Article
VIII of this Agreement.
1.9. "Closing Date" shall be December 31, 2003, or such other date as
the parties may agree.
1.10. "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985,
as amended.
1.11. "Code" means the Internal Revenue Code of 1986, as amended.
1.12. "Company Capital Stock" means all of the outstanding capital stock
of the Company.
1.13. "Company Facility" means any property, including the land, the
improvements thereon, and the ground water and surface water
thereof, that Company (a) has at any time owned, or operated, or
controlled or (b) currently occupies or leases.
1.14. "Company Products" means all products, software, services and
technology which are material to the Business as presently
conducted.
1.15. "Company Software Products" means all of Company's proprietary
Software that is included in Company Products or has been offered
or provided by Company under license for use by Company's
customers. Company Software Products does not include Third Party
Software.
1.16. "Company Tax" means all liability for any Tax imposed on, relating
or attributable to, or otherwise payable by or with respect to
Company, any of its Subsidiaries, or their assets or the Business.
1.17. "Company Tax Returns" means all Tax Returns filed or required to be
filed by or with respect to any Company Tax.
1.18. "Contracts" means all contracts and agreements currently in effect,
contract rights, executory commitments, license agreements,
purchase and sales orders, whether written or oral, relating to
Company and material to the operation of the Business, including,
without limitation, the agreements disclosed on Schedules to
Section 4.19.
1.19. "DGCL" means Delaware General Corporation Law.
1.20. "Digital Angel Series A Preferred Stock" means shares of Digital
Angel Series A Preferred Stock with the rights and preferences set
forth in that certain Certificate of Designation attached hereto as
Exhibit B.
1.21. "Disposal Site" means a facility that treats, stores, or disposes
of Hazardous Materials.
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1.22. "Effective Time" means December 31, 2003, or such later time that
the Articles of Merger are filed with the Delaware Secretary of
State in accordance with the DGCL.
1.23. "Encumbrance" means any security interest, mortgage, lien, charge,
assessment, adverse claim, restriction, easement or other
encumbrance of any kind, including, but not limited to, with
respect to real property, any exceptions to title, recorded and
unrecorded.
1.24. "Environmental Laws" means any federal, state, foreign or local
law, statute, ordinance, rule, regulation, authorization, decree,
or requirement of any Governmental Entity regulating or otherwise
concerning the environment (including the effect of the environment
on human health), including without limitation, those relating to
Hazardous Materials.
1.25. "Environmental Permit" means any approval, permit, license,
clearance or consent required to be obtained from any private
Person or any Governmental Entity with respect to a Hazardous
Materials Activity which is or was conducted by Company, or any of
its predecessors, or otherwise with respect to the Business.
1.26. "Equity Securities" shall have the meaning assigned to such term in
Rule 3a11-1 as presently promulgated under the Securities Exchange
Act of 1934, as amended.
1.27. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.28. "ERISA Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA, that is subject to any provision of
ERISA.
1.29. "Escrow Agreement" means the Escrow Trust Agreement substantially
in the form attached as Exhibit C, dated as of the Closing Date,
among Digital Angel, Majority Stockholders' Representative, and
Escrow Trustee.
1.30. "Escrow Assets" means the 20,000 shares of Digital Angel Series A
Preferred Stock to be delivered at Closing to the Escrow Trustee
pursuant to the Escrow Agreement.
1.31. "Escrow Trustee" means Xxxxx Fargo Shareowner ServicesSM or such
other Person as may be designated by mutual agreement of Digital
Angel and Majority Stockholders' Representative.
1.32. "GAAP" means generally accepted accounting principles in effect in
the United States at the time when and for the period as to which
such accounting principles are to be applied.
1.33. "Governmental Entity" means any local, state, provincial, federal,
foreign or international governmental authority, agency or other
entity, including, but not limited to, any court, tribunal or
panel.
1.34. "Hazardous Materials" means any hazardous materials, hazardous or
toxic substances, or hazardous wastes that are defined as such or
regulated by any Environmental Law.
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1.35. "Hazardous Materials Activity" means the possession,
transportation, transfer, recycling, storage, use, treatment,
manufacture, investigation, removal, remediation, release, sale, or
distribution of, any Hazardous Material.
1.36. "Intellectual Property Rights" means all of Company's rights, title
and interest in and to all: (a) United States and foreign patents
and patent applications; (b) copyrights in computer programs and
other works of authorship; (c) trade secrets and proprietary or
confidential business and technical information; (d) proprietary
"know-how," whether or not protectable by patent, copyright or
trade secret right; and (e) United States and foreign trademarks,
service marks, trade names and associated goodwill, and
registrations or applications for registration of any such marks or
names; Company Software Products; and Third-Party Software.
1.37. "Laws" means all laws, statutes, ordinances, rules, regulations,
judgments, injunctions, stipulations, decrees and orders of any
Governmental Entity.
1.38. "Leased Real Property" means all real property currently leased,
occupied, operated or controlled by Company or otherwise related to
or used in the Business.
1.39. "Liabilities" means any and all claims, assessments, charges,
indebtedness or obligations of any nature whatsoever, whether
absolute, accrued, contingent or otherwise, and whether due or to
become due.
1.40. "Losses" means all liabilities, losses, damages (which liabilities,
losses, and damages shall be related to or arising from the event
indemnified against), costs and out-of-pocket expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
expenses) incurred in connection with the investigation,
evaluation, settlement, defense or prosecution of Liabilities for
which indemnification is available under Article XII hereof.
1.41. "Majority Stockholders" means the persons or entities listed in
Schedule I attached hereto.
1.42. "Majority Stockholders' Representative" means the Person(s) named
as such in the Escrow Trust Agreement.
1.43. "Material Adverse Effect" means an event, circumstance, fact, or
condition which would: individually or in the aggregate (a) have a
material adverse effect on the Business Condition of the entity to
which reference is being made, or (b) would prevent a party hereto
from performing its obligations under this Agreement.
1.44. "Merger" means the merger of DA Acquisition into and with Company,
with Company as the surviving corporation.
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1.45. "Merger Consideration" means the 100,000 shares of Digital Angel
Series A Preferred Stock distributed as described in Section 3.1
hereof.
1.46. "Non-ERISA Benefit Arrangement" means any policy, practice, program,
arrangement, agreement, plan, trust or other method of contribution or
compensation that (a) provides benefits, perquisites or remuneration,
other than current cash compensation, to an employee, former employee
or other individual who provides or provided personal services other
than as an employee or to the dependent or beneficiary of such an
employee, former employee or other individual and (b) is not an ERISA
Benefit Plan. Non-ERISA Benefit Arrangement includes, without
limitation, any policy, practice, program, arrangement, agreement,
plan, trust or other method of contribution or compensation providing
for the grant, award or sale of stock, stock options, phantom stock or
stock appreciation or depreciation rights; direct or indirect
extensions of credit; health, life or disability benefits; retirement,
profit sharing or deferred compensation benefits; severance and
separation benefits; workers' compensation; vacation and other paid
time off; cafeteria and flexible benefits; and incentive and fringe
benefits.
1.47. "Obligations" means all liabilities, indebtedness and obligations
of the Company as of the most recent balance sheet included within
Schedule 4.9.
1.48. "Ordinary Course" means the ordinary course of business, consistent
with past practice of Company.
1.49. "Permitted Encumbrance" means (a) mechanics', carriers', workers'
and other similar liens arising in the Ordinary Course; or (b)
liens with respect to purchase money security interests which do
not exceed the current fair market value of the property or assets
which are subject thereto.
1.50. "Person" means any natural person, firm, corporation, partnership,
association, trust, or governmental entity.
1.51. "Personal Property" means all inventory, machinery, parts,
equipment, supplies, furniture, computer hardware, automobiles and
vehicles and other tangible personal property whether owned or
leased.
1.52. "Records" means originals or duplicate copies in paper, electronic,
or other form, of all books of account, general ledgers, sales
invoices, accounts payable and payroll records, personnel records,
corporate legal records, customer lists, supplier lists, internal
reports, correspondence, and sales and promotional literature, and
other documents related to Company or the Business and in the
possession of Company, its employees, or agents.
1.53. "Related Party" means any company (whether or not incorporated)
which is considered a single employer with Company under ERISA.
1.54. "Return Date" shall have the meaning assigned thereto in the Escrow
Agreement.
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1.55. "Software" means computer programs in any form (including source
code and binary code), and in any stage of development, test and
release, together with all related technical documentation, user
manuals, data files, databases and other works of authorship, and
all information and materials necessary or required for the
effective installation, maintenance, use and support of such
computer programs.
1.56. "Stock" means all of the issued and outstanding shares of capital
stock of Company, including the Company Common Stock.
1.57. "Stock Options" means all options to purchase Company Stock which
have been issued and are outstanding and unexercised as of the date
hereof.
1.58. "Subsidiary" means any corporation or other entity of which
securities (or other ownership interests) having ordinary voting
power to elect a majority of the board of directors (or other
persons performing similar functions) are at the time directly or
indirectly owned by the designated entity.
1.59. "Surviving Corporation" means Company, from and after the
consummation of the Merger at the Effective Time.
1.60. "Tax" or "Taxes" means any tax or other similar liability imposed
or collected by any Governmental Entity, including, without
limitation, all federal, state, county, local, and foreign income,
profits, franchise, gross receipts, payroll, sales, employment,
use, occupation, property, excise, value added, withholding and
other taxes, duties or assessments (including the recapture of any
tax items such as investment tax credits), together with any
related interest, penalties and additions and shall include any
transferee or secondary liability for a Tax and any liability
arising as a result of being (or ceasing to be) a member of any
affiliated, consolidated, combined, or unitary group or being
included (or required to be included) in any Tax Return relating
thereto.
1.61. "Tax Agreement" means any sharing, allocation, indemnity or other
agreement or arrangement (written or unwritten) relating to Taxes
(other than this Agreement).
1.62. "Tax Return" means any return, report, information return or other
documents (including any related or supporting schedules,
statements or information) filed or required to be filed with any
Tax authority or Governmental Entity in connection with the
determination, assessment or collection of any Taxes of any Person
or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
1.63. "Third Party Software" means all Software licensed, leased or
loaned by third party vendors or contractors for use by Company in
connection with its internal business operations, or for
distribution by Company under sublicense for use by customers,
either on a stand-alone basis or in combination with Company
Software Products.
1.64. "Transaction" means the transactions contemplated by this
Agreement, including but not limited to the Merger.
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1.65. "Transfer Agent" means Xxxxx Fargo Shareowner ServicesSM.
1.66. "Warrants" means all warrants to purchase Company Stock which have
been issued and are outstanding and exercised as of the date
hereof.
ARTICLE II
THE MERGER
2.1. The Merger. As of the Effective Time, upon the terms and subject to
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the conditions hereof and the Agreement of Merger, and in accordance
with applicable law, and the certificate of incorporation and bylaws
of the Company and DA Acquisition, DA Acquisition shall be merged
with and into the Company. Following the Merger, Company shall
continue as the Surviving Corporation and shall continue its
existence under the laws of the State of Delaware, and the
separate corporate existence of DA Acquisition shall cease.
Digital Angel shall issue 100,000 shares of Digital Angel Series A
Preferred Stock to the Majority Stockholders in the Merger at
Closing solely in exchange for their Stock, and no other
transaction other than the Transaction represents, provides for or
is intended to be an adjustment to the consideration paid for the
Majority Stockholders' Stock. All other shares of Stock, if any,
held in the treasury of Company or otherwise and any Stock Options
or Warrants shall be canceled and retired and no Merger
Consideration shall be paid with respect thereto.
2.2. Consummation of the Merger. As soon as practicable after the
--------------------------
satisfaction or waiver of the conditions set forth in Article VIII,
the parties hereto will cause the Articles of Merger to be filed
with the Delaware Secretary of State as of the Effective Time. The
parties hereto shall take all such other and further actions as may
be required by law to make the Merger effective.
2.3. Effects of the Merger. The Merger shall have the effects set forth
---------------------
in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of DA Acquisition shall vest in
Company, and all debts, liabilities and duties of DA Acquisition
shall become the debts, liabilities and duties of Company.
2.4. Certificate of Incorporation and Bylaws. The certificate of
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incorporation and bylaws of DA Acquisition in effect at the
Effective Time shall be the certificate of incorporation and bylaws
of the Surviving Corporation until amended in accordance with
applicable law, and the name of Company, as the Surviving
Corporation, shall be OuterLink Corporation.
2.5. Directors and Officers. From and after the Closing, Company shall
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take all actions necessary to elect as directors of Company and
appoint as officers of Company such persons as Digital Angel shall
designate in writing. The directors of DA Acquisition at the
Effective Time shall be the directors of the Surviving Corporation
and the officers of
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DA Acquisition shall be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected
(or appointed in the case of officers) and qualified.
2.6. Conversion/Cancellation of Stock. At the Closing, by virtue of the
--------------------------------
Merger and without any action on the part of any holder thereof,
all Stock issued and outstanding as of the Closing and held by the
Majority Stockholders, shall in accordance with Article III, by
virtue of the Merger, be exchanged for and converted into the
Merger Consideration. The Company shall take any action required to
cancel and retire all other Stock, including any shares held in the
treasury of the Company or otherwise and any Series A Preferred
Stock, any Common Stock and any Stock Options or Warrants and,
except as set forth in Schedule I, no Merger Consideration shall be
paid with respect thereto.
2.7. Effect on Stock of DA Acquisition. All issued and outstanding
---------------------------------
shares of capital stock of DA Acquisition shall be converted into
1,000 issued and outstanding shares of common stock, $.01 par
value, of the Company which, as of the Closing, will be the only
issued and outstanding shares of the Company and there will be no
outstanding rights of any kind to acquire shares of the Company.
2.8. Acknowledgement. Digital Angel, DA Acquisition, Company and the
---------------
Majority Stockholders each acknowledge that the knowledge of the
existence of Losses indemnified by Company in this Agreement,
including without limitation, any breach by Company of a
representation or warranty set forth in this Agreement, would have
led to a reduction in the consideration Digital Angel would have
agreed to pay, and Company and the Majority Stockholders would have
agreed to have paid, in the Merger.
ARTICLE III
EXCHANGE OF STOCK FOR MERGER CONSIDERATION
3.1. Exchange and Conversion of Stock. At the Closing, and effective as
--------------------------------
of the Effective Time, each share of outstanding Company Stock held
by the Majority Stockholders will, by virtue of the Merger and
without any further action on the part of any holder thereof, be
automatically exchanged for and converted into an aggregate of
100,000 shares of Digital Angel Series A Preferred Stock. All other
Stock, if any, held in the treasury of the Company or otherwise and
any Stock Options or Warrants shall be cancelled and retired and no
Merger Consideration shall be paid with respect thereto.
3.2. Delivery of the Merger Consideration.
------------------------------------
(a) At Closing, the portion of the Merger Consideration
represented by the Escrow Assets will be delivered by
Digital Angel for delivery to the Escrow Trustee
pursuant to the Escrow Agreement. The balance of the
Merger Consideration will be delivered to the Majority
Stockholders pursuant to this Section 3.2. Subject to
the Escrow Agreement, each Majority Stockholder will be
entitled to receive (subject to the obligations for
deposit of the Escrow Assets under the Escrow
Agreement), upon surrender to DA Acquisition of one or
more such certificates for cancellation as set forth
below, the number of shares of Digital Angel Series A
-8-
Preferred Stock set forth opposite each of the Majority
Stockholders' names on Schedule I, attached hereto.
Certificates which prior to the Closing represented
shares of Stock owned by the Majority Stockholders
shall, at and after the Effective Time, be deemed to
represent only the right to receive, without interest,
upon surrender of such certificates, the Merger
Consideration as set forth in Section 3.1.
(b) As soon as practicable following the Effective Time, and in
no event later than five (5) business days after the
Effective Time, Digital Angel shall mail or cause to be
mailed to the Majority Stockholders as holders of record
of certificates formerly representing the Stock (the
"Certificates"), as identified on Schedule I, letters
advising them of the effectiveness of the Merger and
instructing them to tender the Certificates to the
Transfer Agent, or in lieu thereof, such evidence of
lost, stolen or mutilated Certificates and such surety
bond or other security as the Transfer Agent may
reasonably require (the "Required Documentation").
(c) After the Effective Time, each Majority Stockholder that
surrenders a Certificate or in lieu thereof, the
Required Documentation to the Transfer Agent, with a
properly completed and executed letter of transmittal
with respect to such Certificate, will be entitled to
the Merger Consideration (subject to the obligations for
deposit of the Escrow Assets, under the Escrow
Agreement) into which the Certificate so surrendered
shall have been converted pursuant to this Agreement as
set forth on Schedule I. The Merger Consideration
(subject to the obligations for deposit of the Escrow
Assets under the Escrow Agreement) shall be delivered by
the Transfer Agent to each such Majority Stockholder as
promptly as practicable after such surrender. Digital
Angel agrees to instruct the Transfer Agent to deliver
such Merger Consideration (subject to the obligations
for deposit of the Escrow Assets under the Escrow
Agreement) immediately following the Effective Time.
(d) Each outstanding Certificate, until duly surrendered to the
Transfer Agent, shall be deemed to evidence ownership of
the Merger Consideration into which the Stock previously
represented by such Certificate shall have been
converted pursuant to this Agreement, and until the
Majority Stockholder surrenders such Certificate (or the
Required Documentation) together with an executed letter
of transmittal as required pursuant to this Section 3.2,
the Majority Stockholder shall not receive the Merger
Consideration.
(e) After the Effective Time, Majority Stockholders, as holders
of Certificates, shall cease to have rights with respect
to the Stock previously represented by such
Certificates, and their sole rights shall be to exchange
such Certificates for the Merger Consideration to which
the holder may be entitled pursuant to the provisions of
Section 3.1. After the closing of the transfer books as
described in Section 3.3 hereof, there shall be no
further transfer of Certificates on the records of the
Company, and if such Certificates are presented to the
Company for transfer, they shall be cancelled against
delivery of the Merger Consideration.
-9-
Neither Digital Angel nor Transfer Agent shall be
obligated to deliver the Merger Consideration until such
holder surrenders the Certificates or furnishes the
Required Documentation as provided herein together with
the executed letter of transmittal required pursuant to
this Section 3.2. Neither Digital Angel, Transfer Agent
nor any party to this Agreement nor any affiliate
thereof shall be liable to any holder of Stock
represented by any Certificate for any Merger
Consideration payable in the Merger that is paid to a
public official pursuant to applicable abandoned
property, escheat, or similar laws.
3.3. Closing of Company Transfer Books. As of the Closing, the stock
---------------------------------
transfer books of Company shall be closed and no transfer of Stock
shall thereafter be made. If, after the Closing, certificates which
prior to the Closing represented shares of Stock are presented to
the Surviving Corporation, they shall be cancelled, or cancelled
and exchanged for the Merger Consideration as provided in
Section 3.1.
3.4. Escrow Agreement. At the Closing, Digital Angel will withhold the
----------------
Escrow Assets and deliver such Escrow Assets to the Escrow Trustee
as collateral for the Majority Stockholders' indemnity obligations
under Article XII and pursuant to the Escrow Agreement. The Escrow
Assets will be held by the Escrow Trustee in accordance with the
Escrow Agreement. By virtue of the Majority Stockholders' approval
of this Agreement, and pursuant to the transmittal letter received
or to be received from each Majority Stockholder, the Majority
Stockholders have consented to the use of the Escrow Assets as
collateral for the indemnity obligations under Article XII and in
the manner set forth in the Escrow Agreement.
3.5. Majority Stockholders' Representative. On or before the Closing, by
-------------------------------------
virtue of the Majority Stockholders' approval of this Agreement
and pursuant to the transmittal letter received or to be received
from each Majority Stockholder, without any further act of any
Majority Stockholder, the Majority Stockholders have consented to
and approved the appointment of the Majority Stockholders'
Representative as the attorney-in-fact for and on behalf of each
Majority Stockholder and the entering into the Escrow Agreement by
the Majority Stockholders' Representative and the taking by the
Majority Stockholders' Representative of any and all actions and
the making of any decisions required or permitted to be taken by
the Majority Stockholders' Representative under the Escrow
Agreement (including, without limitation, the exercise of the
power to authorize delivery to, agree to, negotiate, enter into
settlements and compromises of and conduct arbitration and
litigation and comply with orders of courts and awards of
arbitrators with respect to such claims; resolve any claim made
pursuant to Article XII, and take all actions necessary in the
judgment of the Majority Stockholders' Representative for the
accomplishment of the foregoing); and all of the other terms,
conditions, and limitations in the Escrow Agreement, including,
without limitation the following:
(a) The Majority Stockholders have, without any further act of
any Majority Stockholder, consented to: (i) the use of
the Escrow Assets as collateral and security for the
Majority Stockholders' indemnification obligations under
Article XII of this Agreement in the manner set forth
herein, (ii) the appointment of
-10-
Majority Stockholders' Representative as their
representative for purposes of this Agreement (and the
Escrow Agreement) and as the attorney-in-fact and agent
for and on behalf of each Majority Stockholder, and the
taking by the Majority Stockholders' Representative of
any and all actions and the making of any decisions
required or permitted to be taken under this Agreement
(and the Escrow Agreement), and (iii) all of the other
terms, conditions and limitations in this Agreement (and
the Escrow Agreement). Accordingly, Majority
Stockholders' Representative has unlimited authority and
power (subject to the terms of the Escrow Agreement and
subject to the fiduciary duties owed by the Majority
Stockholders' Representative to the Majority
Stockholders) to interpret all of the terms and
provisions of this Agreement (and the Escrow Agreement),
and to act on behalf of each Majority Stockholder with
respect to this Agreement (and the Escrow Agreement) and
the disposition, settlement, compromise or other
handling of all claims, rights or obligations arising
hereunder, and to authorize payments to be made with
respect thereto, and all action taken by the Majority
Stockholders' Representative hereunder shall be binding
upon each and all of the Majority Stockholders, and
their successors, as if expressly confirmed and ratified
in writing by each of them. The Majority Stockholders
will be bound by all actions taken by the Majority
Stockholders' Representative in connection with this
Agreement (and the Escrow Agreement), and the Escrow
Trustee and Digital Angel shall be entitled to rely on
any action or decision of the Majority Stockholders'
Representative. The Escrow Trustee and Digital Angel are
hereby relieved from any liability to any Majority
Stockholder for any acts done by them in accordance with
such decision, act, consent or instruction of the
Majority Stockholders' Representative.
(b) In the event the Majority Stockholders' Representative
resigns from such appointment, the holders of a majority
interest of the Escrow Assets shall name a successor
Majority Stockholders' Representative, who agrees to be
bound by the provisions hereof (and the Escrow
Agreement) and in Article XII of this Agreement. In
addition, the Majority Stockholders' Representative may
be replaced by the Majority Stockholders from time to
time upon not less than thirty (30) days prior written
notice to Digital Angel provided that the Majority
Stockholders' Representative may not be removed unless
holders of a two-thirds interest of the Escrow Assets
agree to such removal and to the identity of the
substituted Majority Stockholders' Representative. No
bond shall be required of the Majority Stockholders'
Representative, and the Majority Stockholders'
Representative shall not receive compensation for his or
her services. Notices or communications to or from the
Majority Stockholders' Representative shall constitute
notice to or from each of the Majority Stockholders.
(c) The Majority Stockholders' Representative shall not be liable
to the Majority Stockholders for any act done or omitted
hereunder as Majority Stockholders' Representative while
acting in good faith and in the exercise of reasonable
judgment. The Majority Stockholders' Representative may
consult with counsel, accountants, and other
professional advisors (which may not be advisors to
-11-
Digital Angel or Escrow Trustee) and shall be fully
protected from the Majority Stockholders in taking any
action in good faith in accordance with the opinion or
instructions of such advisors. The Majority Stockholders
on whose behalf Escrow Assets were contributed to the
Escrow Account, as defined in the Escrow Agreement,
shall severally indemnify the Majority Stockholders'
Representative and hold the Majority Stockholders'
Representative harmless against any loss, liability or
expense incurred without negligence or bad faith on the
part of the Majority Stockholders' Representative and
arising out of or in connection with the acceptance or
administration of the Majority Stockholders'
Representative duties hereunder (and the Escrow
Agreement), including the reasonable fees and expenses
of any advisor retained by the Majority Stockholders'
Representative.
(d) In the event that Majority Stockholders' Representative alone
funds, or certain but not all Majority Stockholders per
their respective interests in the assets held in the
Escrow Account, any reasonable advisors' fees and costs
pertaining to obtaining advice for Majority
Stockholders' Representative acting in that capacity
(whether or not in the context of a dispute with the
Indemnified Party with respect to a claim hereunder) or
defending or settling claims indemnified by Majority
Stockholders, Majority Stockholders' Representative
shall have the right to instruct the Escrow Trustee
(with a copy to Digital Angel) on the Return Date, as
defined in the Escrow Agreement, to reallocate the
Escrow Assets held in the Escrow Account among the
Majority Stockholders solely if and to the extent
necessary to cause such reasonable advisors' fees and
costs to have been paid pro rata by all Majority
Stockholders in accordance with their respective
interests in the Escrow Assets held in the Escrow
Account.
(e) The Majority Stockholders agree that, by acting as Majority
Stockholders' Representative, the Majority Stockholders'
Representative does not assume any liability for the
representations, warranties, covenants and agreements of
the Majority Stockholders in their respective individual
capacities and that the Majority Stockholders'
Representative retains the same rights, powers, and
obligations in his or her capacity as Majority
Stockholder as any other Majority Stockholder.
3.6. Company Series A Preferred Stock, Common Stock, Stock Options and
-----------------------------------------------------------------
Warrants. At the Closing, all Series A Preferred Stock and Common
--------
Stock of the Company and each unexpired, unexercised and
outstanding Stock Option or Warrant to purchase securities of the
Company shall be cancelled and the holders thereof shall be
entitled to receive no consideration therefore. All agreements,
plans, programs or arrangements of the Company that provide for
the issuance or grant of Stock Options or Warrants or any other
interests with respect to the Company Capital Stock shall
terminate as of the Closing and beneficiaries or parties to such
agreements, plans, programs or arrangements shall receive no
consideration in connection with such cancellation. The Company
shall take all permitted actions necessary to insure that,
following the Closing, no participant in any agreement, plan,
program or arrangement of the Company shall have any right
thereunder to acquire Equity Securities or other ownership
interests of the Company, or any
-12-
subsidiary thereof, and terminate all such plans. All outstanding
Series A Preferred Stock and Common Stock of the Company and all
Stock Options and Warrants shall be null and void and cancelled at
the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Digital Angel that the following
statements, each of which are acknowledged to be material and relied upon by
Digital Angel, are true and correct. Each Majority Stockholder, severally
and not jointly, has affirmed or will affirm the truth and accuracy of the
representations and warranties set forth in this Article IV by virtue of the
Majority Stockholder's execution and delivery of the transmittal letter
received or to be received from each Majority Stockholder.
4.1. Authority, Validity of Agreement. The Company has all requisite
--------------------------------
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby are duly authorized and no other approval is required for
the performance by Company of its obligations hereunder. This
Agreement has been duly executed and delivered by Company. This
Agreement constitutes a valid and binding obligation of Company,
enforceable in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors'
rights, and with respect to the remedy of specific performance,
equitable doctrines applicable thereto).
4.2. No Violations. Except as set forth on Schedule 4.2, neither the
-------------
execution and delivery of this Agreement by Company nor the
consummation of the transactions contemplated hereby will (a)
violate any provisions of the certificate of incorporation or
bylaws of Company, or (b) violate, or be in conflict with, or
constitute a default (or an event which, with or without due
notice or lapse of time, or both, would constitute a default)
under, or cause or permit the acceleration of the maturity of or
give rise to any right of termination, cancellation, imposition of
fees or penalties under, any note, debt, debt instrument,
indenture, security agreement, option to purchase, lease, deed of
trust or license, or any other material contract to which Company
is a party or by which Company or any of its Assets is or may be
bound, or (c) result in the creation of imposition of any
Encumbrance upon any Assets of Company under any debt, obligation,
contract or commitment to which Company or any stockholder is a
party or by which any of Company's Assets is or may be bound, or
(d) violate any Laws to which the Company may be subject, which
would have a Material Adverse Effect.
4.3. Consents and Approvals of Governmental Authorities. Except as set
--------------------------------------------------
forth on Schedule 4.3 or as contemplated by the Merger or this
Agreement, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by Company in connection with
the execution,
-13-
delivery and performance of this Agreement by Company or the
consummation of the transactions contemplated hereby.
4.4. Other Consents. No consent, waiver or approval of, or notice to,
--------------
any third party is required to be or necessary to be obtained by
Company in connection with the execution and delivery of this
Agreement and the performance of Company's obligations hereunder.
4.5. Organization and Good Standing of Company.
-----------------------------------------
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware.
(b) Company has all requisite corporate power and authority to
own, lease and operate its Assets and to carry on its
Business as now being conducted.
(c) Company is qualified to do business and in good standing
in each state set forth in Schedule 4.5(c) which is each
jurisdiction where the failure to be so qualified would
have a Material Adverse Effect on Company or the Business.
Company has not received notification from any
jurisdiction that Company is required to qualify or obtain
a license to do business in such jurisdiction or that it
is otherwise not in good standing in such jurisdiction.
(d) Complete and correct copies of the certificate of
incorporation, as amended (with such certificate and all
amendments thereto certified by the Secretary of State of
Delaware) and bylaws, as amended to the date hereof, of
Company have been provided to Digital Angel.
4.6. Capital Stock of Company.
------------------------
(a) Schedule 4.6(a) sets forth a true and complete list for
Company as of Closing of the number of all Stock
authorized and issued and outstanding (including a
description of the class or series of all such outstanding
shares and all Stock issued as a result of the exercise of
all Stock Options and Warrants), the record owners thereof
and the amount and percentage of ownership of such Stock
or equity interests.
(b) Except as disclosed on Schedule 4.6(b): (i) all outstanding
Stock of Company are duly authorized, validly issued,
fully paid and non-assessable and are owned of record as
set forth in Schedule 4.6(a); (ii) none of such Stock
are subject to any preemptive rights; (iii) neither
Company nor any Majority Stockholder has any commitment
or obligation, either firm or conditional, to issue,
deliver or sell, or cause to be issued, delivered or
sold, under offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation
plans, warrants, calls, conversion rights or otherwise,
any Stock or other securities including securities or
obligations outstanding which are convertible into or
exchangeable
-14-
for any Stock, other Equity Securities, or ownership
interests, upon payment of any consideration or
otherwise; and (iv) there are no voting trusts, voting
agreements, stockholder agreements, proxies or other
agreements or understandings with respect to the Stock
to which Company is a party.
(c) Company does not own, directly or indirectly, any equity,
capital (whether equity or debt) or profit interest in any
corporation, partnership, association, business trust,
joint venture or other business entity.
4.7. Ownership and Transfer of Shares to be Transferred. Except as
--------------------------------------------------
disclosed in Schedule 4.6(b), to the Company's Best Knowledge,
each Majority Stockholder has the absolute and unrestricted right,
power and authority to exchange, transfer and assign the Stock
owned by such Majority Stockholder pursuant to this Agreement, and
such Stock constitutes all of the issued and outstanding
securities of Company entitled to receive consideration in the
event of a sale of the Company; as of Closing, each circumstance
disclosed in Schedule 4.6(b) will be waived or modified such that
each Majority Stockholder has as of Closing such absolute and
unrestricted right, power and authority. To the Company's Best
Knowledge, all such Stock of Company is owned by each Majority
Stockholder free and clear of all Encumbrances. The Transaction
will not give rise to any preemptive rights, rights of first
refusal, warrants, dividends, or conversion rights, and will not
violate any Law applicable to Company or such Majority
Stockholder.
4.8. Minute Books; Books, Records and Accounts; Officers and Directors.
-----------------------------------------------------------------
The minute books of Company contain legally sufficient records of
all corporate actions taken by the directors and Stockholders of
Company (except where the absence of such records would not
adversely affect either Company or Digital Angel), and true and
complete copies of such minute books have been furnished to
Digital Angel. All accounts, books, ledgers and official and other
records of whatsoever kind material to the Business have been
fully, properly and accurately kept and completed in all material
respects to the Company's Best Knowledge, there are no material
inaccuracies or material discrepancies of any kind contained or
reflected therein, and collectively they fairly present the
financial position of the Company. Schedule 4.8 sets forth a true
and complete list of each of the current officers and directors of
Company.
4.9. Financial Statements. Schedule 4.9 contains true, correct and complete
--------------------
copies of the following financial statements ("Financial
Statements") of Company: audited balance sheet as of December 31,
2001 and unaudited balance sheets as of December 31, 2002 and
September 30, 2003 (the latter being the "September 30, 2003
Balance Sheet"); audited income statement for the 12-month period
ended December 31, 2001; and unaudited income statements for the
periods ending December 31, 2002 and September 30, 2003.
(a) All of such Financial Statements are in accordance with
the books and records of Company.
-15-
(b) Each balance sheet (including any related notes) included
in the Financial Statements fairly presents the assets,
liabilities and financial condition of the Business as of
the respective dates thereof, and each of the statements
of operations contained in the Financial Statements are
complete and correct and fairly present the results of
operations for the periods referred to therein, all in
accordance with GAAP consistently applied throughout the
periods involved (except for the absence of footnotes and
year-end adjustments not material in amount).
Not later than the tenth (10th) business day of each month after
the date of this Agreement and prior to Closing, Company agrees to
supplement the financial statements of the Company set forth in
Schedule 4.9 with an unaudited monthly income statement and balance
sheet (the "Interim Balance Sheet"). Each such supplementally
provided financial statement shall be provided in accordance with
the terms of subsections (a) and (b) of this Section 4.9.
4.10. Absence of Undisclosed Liabilities. Company has no Liabilities,
----------------------------------
including Taxes, except:
(a) Liabilities that are fully accrued or reserved against in
the September 30, 2003 Balance Sheet (or any Interim
Balance Sheet), or reflected in the notes thereto;
(b) Liabilities (including those arising from the creation of
Contracts) incurred since the date of the September 30,
2003 Balance Sheet (or any Interim Balance Sheet) in the
Ordinary Course; and
(c) Liabilities disclosed in Schedule 4.10(c).
4.11. Absence of Certain Changes. Except as set forth on Schedule 4.11,
--------------------------
or as shown on the September 30, 2003 Balance Sheet (or any Interim
Balance Sheet), since January 1, 2003, Company has not:
(a) Suffered any change or changes which, individually or in
the aggregate, have had or would have, a Material Adverse
Effect on the Business Condition of Company or the Business;
(b) Paid, discharged, or satisfied any Liabilities other than
the payment, discharge or satisfaction in the Ordinary
Course;
(c) So far as Company is aware, become subject to any
newly-enacted or adopted Law which would reasonably be
expected to have a Material Adverse Effect on the Business
Condition of Company;
(d) Permitted or allowed any of its Assets to be subjected to
any Encumbrance, except Permitted Encumbrances;
-16-
(e) Written up the value of any inventory, any notes or accounts
receivable or any other Assets;
(f) Canceled or amended any debts or waived any claims or
rights of substantial value, or sold, transferred or
otherwise disposed of any of its Assets except in the
Ordinary Course;
(g) Licensed, sold, transferred, pledged, modified, disclosed,
disposed of or permitted to lapse any right to the use of
any Intellectual Property Right except in the Ordinary
Course;
(h) Granted any increase in the compensation of officers or
employees (other than normal increases to non-officer
employees in the Ordinary Course);
(i) Declared, paid or set aside for payment any dividend or
other distribution in respect of its Stock or other
Equity Securities or, directly or indirectly, redeemed,
purchased or otherwise acquired any Stock or other
Equity Securities;
(j) Made any change in any method of accounting or accounting
practice or any change in depreciation or amortization
policies or rates previously adopted;
(k) Paid, lent or advanced any amount to, or sold, transferred
or leased any Assets to, or entered into any agreement
or arrangement with, any of its Affiliates, except for
directors' fees, and employment compensation to officers
in the Ordinary Course;
(l) Sold, leased or otherwise disposed of any of its Assets,
except in the Ordinary Course;
(m) Made capital expenditures or commitments therefor exceeding,
in the aggregate, Ten Thousand Dollars ($10,000); or
(n) Agreed, whether in writing or otherwise, to take any action
described in this Section 4.11.
4.12. Title to, and Sufficiency of, Assets.
------------------------------------
(a) The September 30, 2003 Balance Sheet (or the most recent
Interim Balance Sheet) includes all material tangible
Assets owned or leased by Company, or otherwise used in
or pertaining to the Business as presently conducted,
with an indication of which such Assets are owned and
which are leased.
(b) Company has good and valid title to or a valid leasehold
interest in all of the Assets included on the September
30, 2003 Balance Sheet (or the most recent Interim
Balance Sheet). None of such Assets is subject to any
Encumbrance except for Permitted Encumbrances. The
Assets included on the September 30,
-17-
2003 Balance Sheet (or the most recent Interim Balance
Sheet) constitute all of the material tangible Assets
held for use or used in connection with the Business and
are sufficient for the operation of the Business as
presently conducted or planned to be conducted.
4.13. Plant, Property, and Equipment. The Leased Real Property, and other
------------------------------
plant, property, equipment, leasehold improvements, and other
tangible Assets of the Business are adequate in all respects for
the purposes for which they are being used and, to Company's Best
Knowledge, conform in all material respects with applicable Laws,
are structurally sound with no material defects, and are in good
operating condition and repair (ordinary wear and tear excepted).
4.14. Accounts and Notes Receivable. Except to the extent of applicable
-----------------------------
reserves for doubtful accounts shown on the September 30, 2003 Balance
Sheet (or any Interim Balance Sheet) all of the accounts, notes and
other receivables owed to Company as of the date hereof or thereafter
acquired or arising prior to the Closing Date, constitute, and as
of the Closing Date will constitute, valid and enforceable claims
arising from bona fide transactions in the Ordinary Course, and
Company has not received notice of any claims, refusals to pay or
other rights of set-off against any of the accounts receivable.
Schedule 4.14 contains an accurate aging of the accounts, notes and
other receivables of Company at September 30, 2003 or the date of
any Interim Balance Sheet.
4.15. Accounts and Notes Payable; Interest-Bearing Debt.
-------------------------------------------------
(a) There are no back Taxes owed by the Company.
(b) Schedule 4.15(b) reflects all interest-bearing debt of
Company, including the person or institution to whom the
debt is owed, the current amount of the debt, and any
instruments reflecting such debt.
(c) The Company has no long term debt, notes payable or other
long term obligations, other than capital lease
obligations which are disclosed on the September 30,
2003 Balance Sheet or the most recent Interim Balance
Sheet and the following balance sheet items which will
be paid off as of the Closing Date:
(i) $1,125,000.00 Note Payable - Massachusetts
Business Development Corporation
(ii) $80,000.00 Convertible Note Payable - Chevron
Venture Technologies, LLC, and accrued interest
(iii) $25,000.00 Convertible Note Payable - CMS PEP XIV
Co-Investment Subpartnership, and accrued
interest
(iv) $25,000.00 Convertible Note Payable - CMS Tech
Co-Investment Subpartnership, and accrued
interest
-18-
(v) $182,635.07 Convertible Notes Payable - Zero
Stage Capital VII, L.P., and accrued interest
(vi) $67,364.93 Convertible Notes Payable - Zero Stage
Capital (Cayman) VII, L.P., and accrued interest
(vii) $146,108.06 Convertible Notes Payable - Zero
Stage Capital VII, L.P., and accrued interest
(viii) $53,891.94 Convertible Notes Payable - Zero Stage
Capital (Cayman) VII, L.P., and accrued interest
(ix) $401,797.17 Convertible Notes Payable - Zero
Stage Capital VII, L.P., and accrued interest
(x) $148,202.84 Convertible Notes Payable - Zero
Stage Capital (Cayman) VII, L.P., and accrued
interest
(xi) $96,000.00 Notes Payable - Zero Stage Capital
VII, L.P., and accrued interest
4.16. Orders, Commitments, Warranty Claims and Returns.
------------------------------------------------
(a) All accepted and unfulfilled orders for the sale of Company
Products entered into by Company and all outstanding
Contracts for the purchase of supplies and materials
entered into by Company were made in the Ordinary
Course.
(b) To Company's Best Knowledge, and except as disclosed on
Schedule 4.17, there are no claims against Company to
return, or claims for refunds due to delivery of
defective or unsatisfactory Company Products, in excess
of an aggregate Five Thousand Dollars ($5,000), or
understanding that Company Products in the hands of
certain customers, retailers or distributors would be
returnable.
4.17. Defects in Products; Warranties. There are no defects in Company
-------------------------------
Products heretofore or currently being distributed or sold by Company
which would have a Material Adverse Effect. Except as disclosed on
Schedule 4.17, there are no express or implied warranties outstanding
with respect to Company Products, except as imposed by law.
4.18. Real Property.
-------------
(a) No Owned Real Property. Company does not have and has not
----------------------
had any fee or other direct or indirect ownership interest
in any real property.
(b) Leased Real Property Agreements. Schedule 4.18(b) sets
-------------------------------
forth a true and complete list of all Leased Real Property
and a copy of all of the agreements (as
-19-
amended) relating thereto (the "Lease Agreements"). To
Company's Best Knowledge, all the Lease Agreements are
in full force and effect and are valid and enforceable
against the other parties thereto in accordance with
their terms. To Company's Best Knowledge, none of the
Lease Agreements is in default by Company or by other
third parties thereto, and to Company's Best Knowledge,
no circumstance exists with respect to Company or to the
other parties thereto which, with notice, the passage of
time or both would (i) constitute a material default
under the Lease Agreements, (ii) provide a basis for
termination under such agreements prior to their normal
expiration dates, (iii) have a Material Adverse Effect
on the Business Condition of Company, or (iv) grant a
third party the right to occupy the premises. The
Closing will not affect the rights to the continued use
and possession of the Leased Real Property on the terms
and conditions specified in the Lease Agreements to the
extent and for the purposes for which such property is
now used in the Business.
(c) Leases of Real Property to Others. To Company's
---------------------------------
Best Knowledge, no Leased Real Property is subject to
any lease or other right of use or possession by any
Person other than Company.
(d) Utilities. To Company's Best Knowledge, all utilities
---------
necessary for the normal use and operation of the Leased
Real Property for the purposes for which they are used
by Company are available at such property.
(e) Former Facilities. No former Company Facility was ever used
-----------------
by Company for anything other than commercial office
space.
(f) Disputes. No third party has raised any claim, dispute or
--------
controversy with respect to any of the Lease Agreements
of Company, nor has Company received notice of alleged
nonperformance, delay in delivery or other noncompliance
by it with respect to its obligations under any such
Lease Agreements.
4.19. Contracts.
---------
(a) Schedule 4.19(a)(i) contains a complete list of all Current
Customers of the Business. For purposes of this
Agreement, "Current Customer" means any Person from whom
Company has recognized revenue in the past twelve months
or to whom Company has any obligation to complete work
or honor any contractual warranty. Schedule 4.19(a)(ii)
contains (i) a list of all currently outstanding but
unaccepted written proposals relating to proposed
contracts with customers, and (ii) a description of all
oral proposals relating to proposed contracts with
customers which either (i) or (ii) being materially
burdensome to Company or involving a material deviation
from past practice, to the extent such proposals are
enforceable upon acceptance by the offeree without
further action by Company. True and correct copies of
all standard form customer contracts used by Company
have been made available to Digital Angel. No contract
for any Current Customer, whether written or oral,
differs in any material respect from the
-20-
attached standard forms of customer contracts. True and
correct copies of all written Contracts with Current
Customers of the Business have been provided or made
available to Digital Angel. Except as disclosed on
Schedule 4.19(a)(iii), since August 31, 2002, no Current
Customers of the Business have canceled or terminated
their contracts, or notified Company of their intent to
cancel or terminate their contract.
(b) Schedule 4.19(b) contain a complete list of all suppliers
of Company who since September 30, 2003, have invoiced
Company for Thirty Thousand Dollars ($30,000) or more,
including the types of products and/or services provided
by each such supplier.
(c) Schedule 4.19(c) sets forth a true and complete
list of all of the currently effective written contracts
or written or binding oral agreements (the "Contracts")
to which Company is a party other than Contracts
disclosed in Sections 4.19(a) and (b), of the following
types:
(i) Employment agreements and any outstanding offers
of employment.
(ii) Royalty agreements.
(iii) Consulting agreements.
(iv) Agreements or commitments for capital
expenditures or the acquisition by purchase or
lease of fixed assets providing for payments in
excess of Thirty Thousand Dollars ($30,000)
individually or in the aggregate.
(v) Agreements for the purchase, sale, lease or other
transfer of any services, products, materials or
supplies in excess of Five Thousand Dollars
($5,000) individually or in the aggregate from a
single Person.
(vi) Joint venture or partnership agreements with any
other entity.
(vii) Non-competition or similar agreements which
prevent Company or any of its employees from
competing with any Person (other than Company).
(viii) Confidentiality or employee non-solicitation
agreements with any other Person (other than as
are contained in the customer Contracts).
(ix) Agreements relating to the research or
development by Company for others or by others
for Company.
(x) Agreements for the long-term borrowing or
long-term lending of money (including capitalized
leases).
(xi) Agreements for the short-term borrowing or
short-term lending of money.
-21-
(xii) Any Contract, not listed in other Schedules to
this Agreement, requiring the performance by
Company of any obligation for a period of time
extending more than one year from the date of
this Agreement or calling for Company to pay a
consideration or incur costs of more than Thirty
Thousand Dollars ($30,000).
Schedule 4.19(c) is organized by type of Contract and
briefly summarizes, with respect to each Contract, the
names of the parties thereto, the products and/or services
covered, the date of the Contract, and all amendments or
modifications thereto.
(d) Except as set forth in Schedule 4.19(d), Company has in all
material respects performed, and is now performing, the
obligations of, and Company is not in default (nor would
by the lapse of time or the giving of notice or both be
in default) in respect of any Contract referred to in
the Schedules to this Article IV. Each of the Contracts
or other instruments shown on the Schedules referred to
in this Agreement is in full force and effect and is a
valid and enforceable obligation against Company and, to
Company's Best Knowledge, against the other parties
thereto in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws
affecting creditors' rights, and, with respect to the
remedy of specific performance, equitable doctrines
applicable thereto). To Company's Best Knowledge, no
other parties to such Contracts or other instruments is
in default in any material respect (or would by the
lapse of time or the giving of notice or both be in
default in any material respect) thereunder or has
breached in any material respect any terms or provisions
thereof.
(e) There are no Contracts to which Company is a party to or
bound by which either separately or in the aggregate has
or is likely to result in a loss to Company.
(f) No third party has raised any claim with respect to any of
the Contracts, nor has Company received notice of
alleged default by Company with respect to its
obligations under any such Contracts.
(g) No material part of the Customer Contracts or sales has
been won through small business or other set-aside
programs.
(h) Other than as provided in Section 4.19(a), true and complete
copies of all of the Contracts and instruments referred
to in the Schedules delivered under this Article IV have
been delivered to Digital Angel.
4.20. Litigation. Except as set forth in Schedule 4.20, there are no
----------
suits, claims, actions, arbitrations, litigation, legal,
administrative or other proceedings (including without limitation
permit revocations, permit amendments, or administrative complaints
of discrimination) or governmental investigations of which it has
notice, pending, or, to
-22-
Company's Best Knowledge, threatened against Company or its Assets.
Schedule 4.20 sets forth, with respect to each such suit, claim,
action, arbitration, litigation, proceeding or investigation, the
forum, the parties thereto, the subject matter thereof, the amount
of damages claimed or relief sought and the status as of a recent date.
4.21. Compliance with Laws.
--------------------
(a) To the Company's Best Knowledge, the operations and Business
of Company have been conducted, and are being conducted,
in compliance with all applicable Laws. Company has not
received any notification that it is in violation of any
Laws.
(b) Schedule 4.21(b) hereto sets forth a list of all governmental
approvals, permits, licenses, certifications or other
authorizations of which the failure to obtain or
maintain would have a Material Adverse Effect. All
approvals, permits, licenses, certifications or other
authorizations have been obtained and are in full force
and effect and are being complied with in all material
respects.
(c) Except as set forth in Schedule 4.21(c), there are no
outstanding judgments, orders, injunctions, decrees,
stipulations, awards (whether rendered by a Governmental
Entity or by arbitration) or private settlement
agreements to which Company is a party. All of the
foregoing set forth in Schedule 4.21(c) are being
complied with in all material respects.
(d) Neither Company nor any director, officer, employee or agent
thereof has, directly or indirectly, given or agreed to
give any gift or similar benefit to any customer,
supplier, competitor or governmental employee or
official which would subject Company or any Assets of
the Business, to any damage or penalty under any Law in
any civil, criminal or governmental litigation or
proceeding.
4.22. Computer Software and Intellectual Property.
-------------------------------------------
(a) Company Software Products. Schedule 4.22(a) contains a list
-------------------------
of all Company Software Products.
(b) Third Party Software. Schedule 4.22(b) contains a list of all
--------------------
material Third Party Software under which any rights to
use or distribute Third Party Software have been granted
to Company. Company has delivered to Digital Angel
copies of all such license agreements.
(c) Source Code Escrow. Schedule 4.22(c) contains a list of all
------------------
agreements under which Company has delivered source code
for any Company Software Product to be held in escrow
and released upon the occurrence of certain events or
conditions. Company has made available to Digital Angel
copies of all such source code escrow agreements.
-23-
(d) Certain Intellectual Property Rights. Schedule 4.22(d)
------------------------------------
contains a complete list of the following items included
in the Intellectual Property Rights: (i) United States
and foreign patents and patent applications, and, in the
case of patent applications, a description of the
current status of each of the applications; (ii)
copyrights in computer programs and other works of
authorship which are registered with any Governmental
Entity; or for which registration applications have been
filed; (iii) United States and foreign trademarks,
service marks and trade names, for which registrations
have been received or applications for registration have
been filed; and (iv) a list of unregistered trade names
used by Company.
(e) Miscellaneous.
-------------
(i) Company owns good and marketable title to, and has
the right to possess, use, modify, and prepare
derivative works based on, manufacture, reproduce,
license, and distribute, all Company Software
Products and Intellectual Property Rights in the
United States and throughout the world in Company's
Business as currently conducted and Company has
done nothing to cause such rights to be owned or
possessed by any third party other than the license
of object code pursuant to any of the Contracts.
Company has received no claim that any Company
Software Product or any Intellectual Property Right
is in whole or in part invalid, unenforceable,
ineffective or in violation of the rights
of others. All Company Software Products and all
Intellectual Property Rights developed by Company
employees and/or independent contractors are owned
exclusively by the Company.
(ii) There is no pending claim or litigation and, to
Company's Best Knowledge, there is no threatened
claim or litigation contesting the right to use,
sell, license or dispose of any Company Software
Product or Intellectual Property right, nor, to
Company's Best Knowledge, is there any fact or
alleged fact which would reasonably serve as a
basis for any such claim that could materially
limit the protection afforded by the Intellectual
Property Rights to the use, sale, license, or
disposition of Company Software Products.
(iii) Except as disclosed on Schedule 4.22(e)(iii),
each Person who participated in the creation of
Company's Software Products and/or Intellectual
Property Rights either has executed a valid, binding
and enforceable assignment of rights of ownership
to Company or was an employee of Company acting
within the scope of his or her employment at the
time of such creation, and in all cases all
incidents of ownership thereto are held
exclusively by the Company.
(iv) Except as disclosed on Schedule 4.10(c) and
Schedule 4.22(e)(iv), Company is in material
compliance with the terms and conditions of
all license agreements governing the use of
Third Party Software.
-24-
(v) All Third Party Software used by Company for its
internal business operations (including product
development and testing) is licensed for use only
on computer equipment located at Company's sites
or on computers under control of Company's employees
or independent contractors.
(vi) Except as disclosed on Schedule 4.22(e)(vi),
Company has taken reasonable steps to safeguard
and maintain the secrecy and confidentiality of
all trade secrets and proprietary or confidential
business and technical information included in the
Intellectual Property Rights, including, without
limitation, entering to appropriate confidentiality
or disclosure agreements with employees, officers,
consultants, independent contractors and
licensees that serve Company, the forms of which
have been made available to Digital Angel.
(vii) All documents and materials containing trade
secrets or proprietary or confidential business
or technical information of Company (including
without limitation all source code for Company
Software Products) are presently located at one
of the premises identified as Leased Real Property
in Schedule 4.18(b) and, as applicable, at
escrow agents' sites listed on Schedule 4.22(c),
and, to Company's Best Knowledge, have not been
used, divulged, or appropriated for the benefit
of any Person other than Company, or to the
detriment of Company.
(viii) To Company's Best Knowledge, no third party is
infringing on any Intellectual Property Right in
a manner that could materially limit the protection
afforded by the Intellectual Property Rights to the
use, sale, license or disposition of Company
Software Products in the Business as currently
conducted.
(ix) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby will not breach, violate or
conflict with any material instrument or material
agreement to which Company or to the Best Knowledge
of the Company any stockholder of the Company is a
party governing any Intellectual Property Right,
will not cause the forfeiture or termination or
give rise to a right of forfeiture or termination
of any Intellectual Property Right or in any way
materially impair the right of Company to use,
sell, license or dispose of or bring any action
for the infringement of any Intellectual
Property Right or any Company Software Product.
4.23. No Subsidiaries. Except as set forth on Schedule 4.23, the Company
---------------
does not have any Subsidiaries.
-25-
4.24. Environmental Matters.
---------------------
(a) To Company's Best Knowledge, there are no underground storage
tanks present on any Company Facility.
(b) Schedule 4.24(b) accurately describes all of the Environmental
Permits currently held by Company, and the Environmental
Permits listed on Schedule 4.24(b) are all of the
Environmental Permits necessary for the continued
conduct of any Hazardous Material Activity of Company as
such activities are currently being conducted.
(c) Company has not transferred or released Hazardous Materials
(except for standard office supplies used in the
ordinary course that may be considered to be Hazardous
Materials) to any Disposal Sites, and no action or
proceeding exists or, to Company's Best Knowledge, is
threatened against Company with respect to any transfer
or release of Hazardous Materials to a Disposal Site.
(d) Company has delivered to Digital Angel or made available for
inspection by Digital Angel any records concerning the
Hazardous Materials Activities of Company and all
environmental audits and environmental assessments of
any Company Facility conducted at the request of, or
otherwise available to, any Stockholder or Company.
(e) Company has never conducted any Hazardous Material Activity
in violation of any applicable Environmental Law.
(f) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to
Company's Best Knowledge, threatened concerning or
relating to any Environmental Permit or any Hazardous
Materials Activity of Company.
4.25. Employee Plans and Arrangements.
-------------------------------
(a) Neither Company nor any Related Party sponsors, maintains,
administers, contributes to or has or could reasonably
be expected to have any Liability with respect to any
ERISA Benefit Plan other than an ERISA Benefit Plan
specifically listed on Schedule 4.25(a) (a "Company
ERISA Benefit Plan"). No Company ERISA Benefit Plan is
subject to Code Section 412 or Part 3 of Subtitle B of
Title I of ERISA or Title IV of ERISA. Neither Company
nor any Related Party has or could reasonably be
expected to have any Liability to any Person in
connection with any "voluntary employees' beneficiary
association" within the meaning of Code Section
501(c)(9), "welfare benefit fund" within the meaning of
Code Section 419, "qualified asset account" within the
meaning of Code Section 419A or "multiple employer
welfare arrangement" within the meaning of ERISA
Section 3(40).
-26-
(b) Except as disclosed on Schedule 4.25(b), neither Company
nor any Related Party sponsors, maintains, administers,
contributes to, is a party to or has or could reasonably
be expected to have any Liability with respect to (i)
any Non-ERISA Benefit Arrangement other than a Non-ERISA
Benefit Arrangement specifically listed on Schedule
4.25(b) (a "Company Non-ERISA Benefit Arrangement"), or
(ii) employment agreement, collective bargaining
agreement, consulting agreement, confidentiality
agreement, agreement not to compete or other labor
agreement between either Company or a Related Party and
any individual who provides or provided personal
services to either Company or a Related Party as an
employee or otherwise or such individual's employer or
agent.
(c) True and complete copies of each of the following documents
have been made available to Digital Angel: (i) each
Company Non-ERISA Benefit Arrangement or a complete
description of any Non-ERISA Benefit Arrangement that is
not in writing and a complete and accurate description
of the individuals covered by each such arrangement;
(ii) all written documents of any nature reflecting
contractual terms and conditions of any person's
employment with the Company (an "Employee Agreement") or
a complete description of any Employee Agreement that is
not in writing; (iii) all written documents of any
nature establishing the terms and conditions of each
Company ERISA Benefit Plan and related trust or
insurance agreements or contracts evidencing any funding
vehicle with respect thereto; (iv) the three most recent
annual reports on Treasury Form 5500, including all
schedules and attachments, with respect to any plan for
which such a report is required; (v) the form of summary
plan description, including any summary of material
modifications thereto or other modifications
communicated to participants; and (vi) the most recent
determination letter with respect to each Company ERISA
Benefit Plan intended to qualify under Section 401(a) of
the Code and the full and complete application therefor
submitted to the Internal Revenue Service.
(d) Each Company ERISA Benefit Plan and Company Non-ERISA Benefit
Arrangement and Employee Agreement is and has been
maintained and administered in accordance in all
material respects with the documents or instruments
governing the plan, arrangement or agreement (or in
accordance with the written descriptions thereof
provided in Schedule 4.25(d) in the case of an unwritten
Company Non-ERISA Benefit Arrangement or Employee
Agreement), except in the case of any change in
applicable governing Laws that are not yet required to
be incorporated into the instruments or documents
governing the plan, arrangement or agreement, in which
case the plan, arrangement or agreement has in operation
been maintained and administered in accordance with
applicable Laws at all times on and after the effective
date of such change. Each Company ERISA Benefit Plan
that is intended to be qualified under Code Section
401(a) is and has at all times been so qualified in form
and, in all material respects, in operation.
-27-
(e) There are no facts or circumstances relating to any ERISA
Benefit Plan or Company Non-ERISA Benefit Arrangement
that could, directly or indirectly, subject Company or
any Related Party to (i) any excise tax or other
liability under Chapters 43 or 47 of Subtitle D of the
Code, (ii) any penalty, tax or other liability under
Code Sections 6651, 6652 and 6690 or (iii) any civil
penalty or other liability under Section 502(c) of
ERISA.
(f) No payment made or benefit provided pursuant to any Company
ERISA Benefit Plan, Company Non-ERISA Benefit
Arrangement or Employee Agreement will be nondeductible
to Company or any Related Party because of the
applicability of Code Section 280G, nor will either
Company or any Related Party be required to gross up or
otherwise compensate any recipient in connection with
the imposition of any excise tax (including any interest
or penalties related thereto) pursuant to Code Section
4999. Neither Company nor any Related Party will incur
any Liability in connection with severance benefits
which become payable solely by reason of the
Transaction. Other than as expressly provided herein,
the Transaction will not result in the acceleration of
accruals, funding, vesting or payment of any
contribution or benefit under any Company ERISA Benefit
Plan, Company Non-ERISA Benefit Arrangement or Employee
Agreement.
(g) Other than as required by COBRA, Company does not provide or
maintain, or provide nor is it obligated to maintain or
provide, post-retirement or post-termination health,
medical, life or other welfare benefits for employees or
former employees of Company. No promise or other
commitment exists that would prevent either Digital
Angel or Company from amending or terminating any
arrangement providing health, medical, life, or other
welfare benefits in respect of any current or former
employee of Company without liability therefor. Except
as set forth in the applicable government instruments or
as required by law, neither Company nor any other Person
has created any impediment to the amendment,
termination, merger of or transfer of assets and
liabilities with respect to any Company ERISA Benefit
Plan, Company Non-ERISA Benefit Arrangement or Employee
Agreement.
(h) All contributions or benefit obligations in connection with
any ERISA Benefit Plan, Company Non-ERISA Benefit
Arrangement or Employee Agreement have been fully paid
or properly accrued in accordance with GAAP in the
Financial Statements of Company. All obligations to
provide medical, dental, vision, life, accidental death
and dismembership or long-term disability benefits
pursuant to any Company ERISA Benefit Plan, Company
Non-ERISA Benefit Arrangement or Employee Agreement are
either fully insured (except for amounts not covered by
reason of co-payments, deductibles, participant
contributions or similar allowances) or will be provided
by an HMO with respect to which Company's sole Liability
is to pay premiums.
(i) There are no pending or, to Company's Best Knowledge,
threatened audits or investigations by any Governmental
Entity, claims (other than undisputed claims
-28-
for benefits arising in the ordinary course), suits,
grievances or other proceedings, and Company is unaware
of any facts or circumstances that could give rise
thereto, involving, directly or indirectly, any Company
ERISA Benefit Plan, Company Non-ERISA Benefit
Arrangement, or Employment Agreement.
4.26. Employees.
---------
(a) Except as set forth on Schedule 4.26(a), Company (i) is not
a member of any multi-employer bargaining group; (ii) has
not withdrawn from any multi-employer bargaining group
within the past five years, and (iii) within the past
three years not defeated any collective bargaining
representation petition, removed any existing collective
bargaining authority, or defeated any multi-employer
bargaining group or other third party with respect to
employees of the Business.
(b) Company has complied in all material respects with all
applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and
hours.
(c) There is no strike, labor dispute, work slowdown or work
stoppage actually pending or threatened against Company.
No collective bargaining representation petition or
collective bargaining agreement grievance is pending or
threatened against Company.
(d) Except as set forth on Schedule 4.26(d), as of the Closing
Date, Company will have paid or reserved on its books
any and all obligations for vacation pay, severance pay,
layoff or termination, or other amounts that may be due
any Person including, but not limited to, by reason of
any action taken under this Agreement; excluded from
this representation shall be any sick days or vacation
days accrued by employees during 2003 and disclosed on
Schedule 4.26(h).
(e) Company is not a joint employer with any other legal entity
and does not control labor relations or operations of
any other legal entity.
(f) Company does not employ or otherwise obtain the services
of any "leased employee" (as such term is defined in the
Code).
(g) Except as disclosed on Schedule 4.26(g), all employees of the
Business are employees of Company.
(h) Schedule 4.26(h) lists the names, titles, date of employment,
current base compensation rates, and estimated vacation
and sick time accrued for each employee of Company as of
a recent date, and the amount of bonuses paid (or due)
during the most recent full fiscal year to each
employee.
-29-
(i) Except as set forth on attached Schedule 4.26(i), no Key
Employee of the Company has resigned since January 1,
2003 and to the Company's Best Knowledge, no Key
Employee plans to retire or resign during the
twelve-month period following the Closing Date or
otherwise be unavailable as an employee of the Company
at compensation substantially similar to such employee's
present rate of compensation. For purposes hereof, "Key
Employee" shall mean any Company employee whose total
compensation during the prior year exceeds $50,000.
4.27. Compensation Plans. Except as disclosed on Schedule 4.27, Company
------------------
is not a party, nor is it subject, to any plan, contract or
understanding providing for any bonuses, commissions, stock
options, stock warrants, deferred compensation, profit sharing,
annuity, or similar obligations of any kind, including any
incentive compensation bonus, retention bonus, sale bonus, or
similar obligations specifically relating to the consummation of
the Transaction.
4.28. Insurance. Schedule 4.28 contains a description of the policies of
---------
general liability, theft, fire, flood, windstorm, earthquake,
workers' compensation, life, health, dental, disability, business
travel accident, directors and officers, and other forms of
insurance owned or held by Company.
4.29. Taxes.
-----
(a) For purposes of this Section 4.29, references to Company
include all predecessors thereof or any transferee with
respect thereto.
(b) Except as set forth in Schedule 4.29(b):
(i) All Company Tax Returns have been properly and
timely filed, and Taxes shown thereon as due have
been timely paid. There exists no factual basis
or event which would make Digital Angel or Company
liable for Company Taxes other than those which
have been paid or accrued. As of the time of each
filing, the foregoing Tax Returns correctly
reflected the facts regarding the income, business,
assets, operations, activities, status, or other
matters of the Business and any other information
required to be shown thereon.
(ii) All Company Taxes arising in, or attributable to,
the pre-Closing period have been (or will be) paid
or fully accrued or established as a deferred
liability on the books, records and financial
statements of Company (whether or not such Taxes
are due and payable). The September 30, 2003
Balance Sheet (and any Interim Balance Sheet)
fully accrues or establishes all liability for
Company Taxes as of the date thereof.
(iii) There is no (nor has there been any requirement
for an) agreement, waiver or consent providing for
an extension of time with respect to the
-30-
assessment or collection of, or statute of
limitations regarding, any Taxes or the filing of
any Tax Returns and no power of attorney granted
by or with respect to Company with respect to any
Tax matter is currently in force.
(iv) There is no pending or, to Company's Best Knowledge,
threatened audit, examination or investigation with
respect to any Company Tax Returns or Company
Taxes or any Company Tax matters, nor has any
written or, to Company's Best Knowledge, other
notice of the initiation thereof been received by
Company; there is (and there has been) no action,
suit, proceeding, claim, demand, deficiency or
additional assessment pending, or threatened with
respect to any Company Tax Returns or any Company
Taxes.
(v) There are no Encumbrances, except for Permitted
Encumbrances, on any Asset of Company arising out
of, connected with, or related to Taxes (other
than for Taxes that are not delinquent).
(vi) Other than elections made on the face of Tax Returns
provided to Digital Angel, no agreement, consent,
or election for foreign, federal, state or local
Tax purposes which would affect or be binding on
Company after the Closing has been filed or entered
into with respect to Company or any of its Assets
or operations.
(vii) Company is not a party to, bound by, or under any
obligation (or potential obligation) under any
Tax Agreement.
(viii) Company is not a party to any agreement relating to
a foreign sales corporation within the meaning of
Section 922 of the Code, or a domestic international
sales corporation within the meaning of Section 991
of the Code.
(ix) Company is not and has never been subject to
Section 999 of the Code. Company is not (and has
not been) a United States real property holding
corporation within the meaning of Section 897(c)(2)
of the Code;
(x) Company is not nor has it been a partner in any
partnership or any entity treated as a partnership
for Federal income tax purposes.
(xi) No Tax years (or periods) with respect to the
Federal income Tax liabilities of Company and its
Assets and operations have been extended.
(xii) Company has filed all necessary clearance
certificates or similar documents which may be
required by any governmental entity upon
withdrawal from doing business in such
governmental jurisdiction.
-31-
(xiii) Company has withheld and paid all Taxes required
to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or third party.
(xiv) Company is unaware of any facts or circumstances
which would make it likely that any tax authority
will assess any additional Taxes for any period
for which Tax Returns have been filed.
(c) There have been delivered to Digital Angel copies of all
Company Tax Returns for the last three years and all open
years and all Revenue agent (or other) reports, findings,
proposed assessments, deficiency (or other) notices,
agreements (including any Tax Agreement), elections, claims
or demands and all other items relating to Taxes.
4.30. Bank Accounts. Schedule 4.30 sets forth a true and complete list of
-------------
all of the (a) names and locations of all banks, trust companies,
savings and loan associations, brokerage firms, and other financial
institutions at which Company maintains accounts of any nature,
lock boxes, or safety deposit boxes, and the names of all persons
authorized to draw thereon or make withdrawals therefrom and (b)
the account number for each account identified in clause (a).
4.31. Affiliate Transactions. Except as set forth in Schedule 4.31, to
----------------------
Company's Best Knowledge, no director or officer of Company and no
Person related to any of them has any interest in (a) any Asset used
in connection with or pertaining to the Business, or (b) any creditor,
supplier, customer, manufacturer, distributor or reseller of products
of Company; provided, however, that (i) no such director or officer or
other Person shall be deemed to have such an interest solely by virtue
of the ownership of less than 1% of the outstanding voting stock or
debt securities of any publicly held company, the stock or debt
securities of which are traded on a recognized stock exchange or quoted
on the National Association of Securities Dealers Automated Quotation
System, and (ii) no such director or officer or other Person shall be
deemed to have such an interest solely by virtue of the ownership by a
partnership in which he is a partner of less than 5% of the outstanding
voting stock or debt securities of any privately-held company.
4.32. Powers of Attorney; Guarantees, Suretyships.
-------------------------------------------
(a) Except as disclosed on Schedule 4.32(a), no stockholder of
the Company nor Company has granted, and there are not
outstanding, any general or special powers of attorney or
comparable delegations of authority, which would be binding
upon Digital Angel or Company, or any of its Assets, after
the Closing. The Company's representation regarding
stockholders in this Section 4.32 is made to the Company's
Best Knowledge.
(b) Except (i) as set forth in Schedule 4.32(b), (ii) as may be
contained in instruments associated with Company bank debt,
Lease Agreements, equipment leases and customer Contracts,
and (iii) for endorsements for collections of deposits in the
-32-
Ordinary Course, Company has no Liability as guarantor,
surety, co-signer, endorser, co-maker, indemnitor, or obligor
in respect of the obligation, indebtedness or potential
Liability of any Person.
4.33. No Brokerage or Other Fees. Except as set forth on Schedule 4.33,
--------------------------
no broker or finder has acted for Company in connection with this
Agreement or the transactions contemplated hereby, and no Person is
entitled to any brokerage or finder fee or commission from Digital
Angel or Company in respect to this Agreement by virtue of any
action by Company. The fees and expenses of any broker or finder
acting for the Company in this transaction, including the fees and
expenses of CityLab Advisors, shall be paid in full by the Majority
Stockholders at or prior to the Closing.
4.34. Disclosure. No representation or warranty by Company in this
----------
Agreement and no statement or information contained in the
Financial Statements, the Exhibits and the Schedules attached
hereto, when read together and taken as a whole, contains any
untrue statement of material fact or omits to state any material
fact necessary in order to make the statements herein or therein,
in light of the circumstances under which they were made, not false
or misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DIGITAL ANGEL AND DA ACQUISITION
Digital Angel and DA Acquisition hereby represent and warrant to Company
that the following statements, each of which are acknowledged to be material
and relied upon by Company, are true and correct.
5.1. Authority, Validity of Agreement. Each of Digital Angel and DA
--------------------------------
Acquisition has all requisite corporate power and authority to
enter into this Agreement and to perform the obligations hereunder
and to consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized
by all necessary action, if any, on the part of Digital Angel and
DA Acquisition, their respective boards of directors and
stockholders, and no other approval is required for the
performance by Digital Angel or DA Acquisition of their respective
obligations hereunder. This Agreement has been, and at Closing
will be, duly executed and delivered by Digital Angel and DA
Acquisition. This Agreement constitutes, and at Closing will
constitute, assuming execution and delivery by the other parties
thereto, a valid and binding obligation of Digital Angel and DA
Acquisition, enforceable in accordance with its terms (subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting
creditors' rights, and with respect to the remedy of specific
performance, equitable doctrines applicable thereto).
5.2. Organization and Good Standing of Digital Angel and DA Acquisition.
------------------------------------------------------------------
Each of Digital Angel and DA Acquisition:
-33-
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(b) has all requisite power and authority to own, lease and
operate its material properties and assets and to carry on
its business as now being conducted, and DA Acquisition has
no debts, liabilities, or obligations apart from those
incurred through this Agreement;
(c) is qualified to do business and in good standing in each
state and jurisdiction where such qualification is required,
except in those states where the failure to be so qualified
would not have a Material Adverse Effect on Digital Angel, in
the case of Digital Angel, or DA Acquisition, in the case of
DA Acquisition; and
(d) have delivered complete and correct copies of their respective
Certificate of Incorporation and bylaws, as amended to the
date hereof, to Company.
5.3. No Violations. Neither the execution and delivery of this Agreement
-------------
by Digital Angel or DA Acquisition nor the consummation of the
transactions contemplated hereby will (a) violate any provisions
of the certificate of incorporation or bylaws of Digital Angel or
DA Acquisition, or (b) violate, or be in conflict with, or
constitute a default (or an event which, with or without due
notice or lapse of time, or both, would constitute a default)
under, or cause or permit the acceleration of the maturity of or
give rise to any right of termination, cancellation, imposition of
fees or penalties under, any note, debt, debt instrument,
indenture, security agreement, option to purchase, lease, deed of
trust or license, or any other material contract to which Digital
Angel or DA Acquisition is party or by which Digital Angel or DA
Acquisition or any of their respective Assets is or may be bound,
or (c) violate any Laws to which Digital Angel or DA Acquisition
may be subject, which would have a Material Adverse Effect.
5.4. Consents and Approvals of Governmental Authorities. Except as
--------------------------------------------------
contemplated by this Agreement, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by Digital
Angel or DA Acquisition in connection with the execution, delivery
and performance of this Agreement by Digital Angel or DA
Acquisition or the consummation of the transactions contemplated
hereby.
5.5. Digital Angel Shares. Upon issuance to the Majority Stockholders
--------------------
pursuant to Section 3.1 of this Agreement, the Digital Angel Series
A Preferred Stock shall have been duly authorized, duly and validly
issued and fully paid and nonassessable. The shares of common stock
into which the Digital Angel Series A Preferred Stock are
convertible will be duly and validly issued and fully paid and
nonassessable when issued and delivered upon conversion of the
shares of Digital Angel Series A Preferred Stock, and such number
of shares of common stock shall be reserved and kept available for
issuance upon conversion of the Digital Angel Series A Preferred
Stock. The Digital Angel Series A Preferred Stock shall be either
registered under the Securities Act of 1933, as amended or issued
under an exemption from registration.
-34-
5.6. SEC Documents. The common stock of Digital Angel is registered
-------------
pursuant to Section 12(b) or 12(g) of the Exchange Act and since
January 1, 2002, and except for Digital Angel's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2002, Digital Angel
has timely filed all proxy statements, reports, schedules, forms,
statement and other documents required to be filed by it under the
Exchange Act. Digital Angel has furnished Company with copies of
(i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and (ii) its Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 2003 and June 30, 2003 (the
"SEC Reports"). Each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective
form, and none of the SEC Reports, nor the financial statements
(and the notes thereto) included in the SEC Reports, as of their
respective filing dates, contained any untrue statement of a
material fact or omitted 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. The financial statements of Digital Angel included in
the SEC Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared
in accordance with GAAP applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed) and fairly present in all material
respects the financial position of Digital Angel and its
subsidiaries on a consolidated basis as of the dates thereof and
the results of operations and cash flows of Digital Angel and its
subsidiaries on a consolidated basis for the period then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments).
5.7. FCC Compliance. The their Best Knowledge, Digital Angel and DA
--------------
Acquisition are in compliance in all respects with the
Communications Act and with all applicable Federal Communications
Commission ("FCC") rules, regulations and policies. The their Best
Knowledge, Digital Angel and DA Acquisition have complied with all
FCC eligibility and basic qualifications requirements to effectuate
the transactions contemplated hereunder, including, but not limited
to, the non-U.S. ownership limits of Section 310(b) of the
Communications Act and Section 5301 of the Anti-Drug Abuse Act of
1988, 21 U.S.C. Section 862.
ARTICLE VI
CERTAIN AGREEMENTS
6.1. Tax Matters. Further Assurances.
-------------------------------
The following provisions shall govern the allocation of
responsibility as between Digital Angel, the Company and the Majority
Stockholders for certain tax matters following the Effective Time:
-35-
(a) Filing of Returns. Digital Angel shall prepare or cause to
-----------------
be prepared and file or cause to be filed all tax returns for
the Company for all periods ending on or prior to or
including the Effective Time that are due after the Effective
Time and all other tax returns due after the Effective Time.
Digital Angel shall permit the Majority Stockholders'
Representative to review and comment on all tax returns filed
for the Company for any period for which the Majority
Stockholders may have an indemnification obligation under
this Agreement, and shall make such revisions to such tax
returns as are reasonably requested by the Majority
Stockholders' Representative. The Majority Stockholders'
Representative shall be entitled to review and participate in
the preparation of such tax returns, such tax returns shall
be prepared consistent with past practices.
(b) Tax Controversies; Assistance and Cooperation.
---------------------------------------------
(i) Notice. In the event any Tax authority informs
------
or is deemed to inform Digital Angel or the Company
of any notice of proposed audit, claim, assessment or
other dispute concerning any amount of Taxes with
respect to which the Majority Stockholders may
incur liability hereunder, the party so informed
shall promptly notify the Majority Stockholders'
Representative in writing of such matter. Such
notice shall contain factual information (to the
extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by
copies of any notice or other documents received
from any Tax authority with respect to such matter.
(ii) Control Rights. With respect to any examination,
--------------
audit, contest, appeal or other proceeding relating
to Taxes of the Company that could give rise to
indemnification obligations of the Majority
Stockholders hereunder, the Majority Stockholders'
Representative shall have the right to control the
contest and settlement of any such proceeding.
Digital Angel and the Company shall cooperate with
the Majority Stockholders' Representative and shall
provide the Majority Stockholders' Representative
with access to tax returns, books and records and
other relevant information and shall execute any
necessary powers of attorney relevant to the
Majority Stockholders' Representative's authority
hereunder. In the event that the Majority
Stockholders' Representative elects not to control
such contest and settlement, the Majority
Stockholders' Representative shall have the right
to participate in such contest and settlement and
neither Digital Angel nor the Company shall settle
any audit or proceeding without prior notice to the
Majority Stockholders' Representative.
(iii) Assistance and Cooperation. The Majority
--------------------------
Stockholders' Representative on the one hand, and
Digital Angel and the Company, on the other, shall
cooperate (and cause their affiliates to cooperate)
with each other and with each others' agents,
including accounting firms and legal counsel, in
connection with Tax matters relating to the
Company, including (i)
-36-
preparation and filing of tax returns, (ii)
determining the liability and amount of any Taxes
due or the right to and amount of any refund of
Taxes, (iii) examinations of tax returns, and (iv)
any administrative or judicial proceeding in
respect of Taxes assessed or proposed to be
assessed. Such cooperation shall include each party
making all information and documents in its
possession relating to the Company available to the
other party. The parties shall retain all tax
returns, schedules and work papers, and all
material records and other documents relating
thereto, until the expiration of the applicable
statute of limitations (including, to the extent
notified by any party, any extension thereof) of
the Tax period to which such tax returns and other
documents and information relate. Each of the
parties shall also make available to the other
party, as reasonably requested and available,
personnel (including officers, directors, employees
and agents) responsible for preparing, maintaining,
and interpreting information and documents relevant
to Taxes, and personnel reasonably required as
witnesses or for purposes of providing information
or documents in connection with any administrative
or judicial proceedings relating to Taxes.
(iv) For the purposes of this Agreement, the Indemnified
Party shall not be treated as having incurred any
damages related to Taxes until such time as there
has been a final disposition as to the Tax at
issue.
(c) Consolidated Tax Return. Digital Angel shall use reasonable
-----------------------
efforts to cause the Company to become a member of Digital
Angel's consolidated group immediately after the Effective
Time and, if includable, Digital Angel shall use reasonable
efforts to file a consolidated federal income tax return
within the meaning of Section 1501 of the Code with the
Company for the first taxable year ending after the
Effective Time.
(d) Post-Closing Transactions not in the Ordinary Course.
----------------------------------------------------
Digital Angel and the Company agree to report all
transactions not in the ordinary course of business
occurring after the Effective Time on Digital Angel's
federal income tax return to the extent permitted
by Treasury Regulation Section 1.1502-76(b)(1)(ii)(B).
6.2. FCC Application. Within five (5) business days following the date
---------------
of execution hereof, the parties shall jointly submit to the FCC
completed FCC Form 312 Application (the "Transfer Application")
seeking Commission consent to the transfer of control over Company
to Digital Angel, and for the FCC or the FCC International Bureau
to Grant the Transfer Application. For purposes of this Agreement,
"Grant" means an action or decision of the FCC or the FCC
International Bureau pursuant to delegated authority that is made
public by the FCC either pursuant to a written decision or public
notice.
6.3. Further Assurances. At or after the Closing Date, the parties
------------------
hereto shall prepare, execute and deliver, with each to bear its
own expenses thereof, such further instruments, and shall take or
cause to be taken such other or further action, as another party
shall
-37-
reasonably request at any time or from time to time in order
to perfect, confirm or evidence the Transaction or to give effect
to the provisions of this Agreement.
6.4. Employment Offers. At or after the Closing Date, Digital Angel
-----------------
shall, cause the Company to offer employment to the Company's
officers at their current compensation levels; provided, however,
that the Company shall not be required to offer employment to any
officer in a different position or at a compensation level in
excess of that which existed prior to the Closing Date.
ARTICLE VII
OBLIGATIONS PRIOR TO CLOSING
7.1. Covenants and Agreements of Company. Company covenants and agrees
-----------------------------------
as follows:
(a) Conduct of Company. From the date hereof until the Closing,
------------------
Company shall: (1) operate the Business in the Ordinary
Course in the continuing best interest of Company
(subject to the disclosures contained in Schedule 4.11);
(2) maintain, in accordance with past practices, its
properties and equipment in good repair, working order
and condition (except for ordinary wear and tear); (3)
use commercially reasonable efforts to preserve its work
force and the present goodwill and relationships between
Company and its principals, agents, lessors, licensors,
licensees, suppliers, customers and others having
business relationships with Company; (4) use
commercially reasonable efforts to keep in full force
and effect insurance relating to the Business at least
comparable in amount and scope of coverage to that now
maintained; (5) maintain its books and Records in the
Ordinary Course and; (6) replace equipment as necessary
to maintain the proper operation of the Business
(provided however, that capital expenditures in excess
of the limits identified in Section 4.11(m) shall be
made only with the consent of Digital Angel, which will
not be unreasonably withheld).
(b) Negative Covenants. From the date hereof until the Closing,
------------------
Company shall not undertake any transactions out of the
Ordinary Course or which would, individually or in the
aggregate, have a Material Adverse Effect on the
Business.
(c) Investigation. Upon reasonable notice, at reasonable hours,
-------------
and on reasonable terms, Digital Angel and its counsel,
accountants, and other representatives may, prior to the
Closing, make or cause to be made such investigation of
the Business and condition of Company and the Business
as Digital Xxxxx xxxxx reasonably necessary or
advisable, and Company shall fully cooperate with such
investigation, including, without limitation, permitting
Digital Angel and its authorized representatives to have
access to all of the premises, books and Records,
accounts, financial statements, Contracts, and other
commitments of the Business, employees, board members,
accountants, and customers, and such other Persons and
material as may be requested by Digital Angel relating
to the operation of the Business. Company shall cause
the officers and representatives of Company to furnish
Digital Angel with originals or copies of all the
foregoing
-38-
Records, documents, information and data and to
cooperate with and assist Digital Angel in compiling and
reviewing the foregoing. Notwithstanding anything in the
foregoing, all representations, warranties, covenants
and agreements provided for in this Agreement shall be
unaffected by any investigation made by or on behalf of
any party hereto.
(d) No Solicitation or Negotiation. Prior to the earlier
------------------------------
of Digital Angel's decision not to have Company complete
the Merger or the close of business on March 31, 2004,
neither the Company nor any of its, or its affiliates',
respective officers, agents, or other representatives,
will, directly or indirectly, (i) solicit, encourage,
initiate or participate in any negotiations or
discussions with respect to any offer or proposal to
acquire the Company or all or substantially all or a
significant portion of the Business and properties of
the Company whether by merger, purchase of assets or
otherwise, (ii) disclose any information not customarily
disclosed to any Person concerning the Company or afford
to any Person or entity access to the properties, books
or Records of the Company, or (iii) cooperate with any
Person to make any proposal to purchase all or any part
of the capital stock or Assets of the Company other than
inventory or non-essential or excess assets in the
Ordinary Course of business.
(e) Consents. Company shall use its reasonable efforts to obtain
--------
on or before the Closing all consents, approvals or
waivers from other parties to any Contract or other
instrument or document that is necessary to perform the
obligations set forth in this Agreement to consummate
the Transaction, or to make the representations and
warranties set forth in Article IV hereof true and
correct in all material respects.
(f) Stockholder Notification and Special Stockholder Meeting.
--------------------------------------------------------
Company shall cause all Company stockholders to timely
receive any notices and information statements
(including any notices related to dissenter's rights)
required in order to effect the purposes of this
Agreement. Digital Angel shall have the opportunity to
review the notification prior to delivery of the same to
the stockholders. The Company shall call a special
meeting of the Company stockholders to be held as
promptly as practicable for the purpose of voting upon
this Agreement, and the transaction, and for purposes of
appointing the Majority Stockholders' Representative and
approving the terms of the Escrow Agreement. The Company
shall, through its Board of Directors, recommend to the
Company's stockholders adoption of this Agreement and
the Transaction and approval of the foregoing matters,
and shall use its best efforts to hold the special
meeting as soon as practicable after the date hereof.
(g) No Issuance of Additional Options or Warrants. From the
---------------------------------------------
date hereof and until the Closing, the Company shall not
issue any Warrants, Options or other rights to purchase
Stock, and the Company shall not issue any Stock.
-39-
7.2. Satisfaction of Conditions. Each party shall use its respective
--------------------------
commercially reasonable efforts and cooperate with the others in
good faith to the extent required in order to satisfy the
conditions set forth in Article VIII and to fully accomplish the
Transaction in an expeditious fashion. No party shall take or fail
to take any action within such party's reasonable control, the
effect of which would be to prevent or unreasonably delay the
satisfaction of any condition to its or the other party's
obligations contained in Article VIII or the consummation of this
Agreement in accordance with its terms.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1. Conditions Precedent to the Obligation of Company. The obligation
-------------------------------------------------
of Company to complete the Transaction is subject to the satisfaction
(or waiver by Company) of all of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties contained in Article V shall be true and
correct in all material respects as of and at the Closing
Date with the same effect as though made on the Closing
Date.
(b) Performance of the Covenants. Digital Angel and DA
----------------------------
Acquisition shall have performed or complied in all
material respects with all agreements and covenants
required by this Agreement to be performed by each prior
to or on the Closing Date.
(c) Governmental Matters. No statute, ordinance or regulation,
--------------------
or order or injunction of any court or administrative
agency of competent jurisdiction shall be in effect that
restrains or prohibits the parties hereto from carrying
out the Transaction.
(d) No Litigation Pending or Threatened. There shall be no
-----------------------------------
action or proceeding pending or threatened which is
reasonably likely to have a material effect on the
Transaction by or before any court or governmental
authority challenging the Transaction or any transaction
related thereto or seeking to restrain, prevent, or change
the Transaction or seeking damages in conjunction with, or
by reason of, the Transaction.
(e) Approval by Company Stockholders. The stockholders of
--------------------------------
Company shall have approved the terms of this Agreement
(and the Escrow Agreement) and the Merger contemplated by
the Transaction by a majority vote and as required by
applicable law and Company's Certificate of Incorporation
and Bylaws, and stockholders of the Company shall not have
exercised, or indicated any intention to exercise
dissenters' rights that are greater than an amount which
exceeds five percent (5%) of the Merger Consideration.
(f) Securities Law Compliance. Company and its counsel shall
-------------------------
be satisfied that the issuance of the Digital Angel Series
A Preferred Stock shall qualify for an exemption from the
registration requirements of the Securities Act of 1933,
as
-40-
amended and any applicable state securities law and
that all acts as are necessary to perfect such
exemptions(s) shall have been taken.
(g) No Adverse Change. There shall not have been any Material
-----------------
Adverse Effect of Digital Angel or DA Acquisition from the
date of this Agreement through the Closing Date.
(h) Closing Items. Company shall have received the items
-------------
described in Section 9.3.
(i) FCC Approval. Company shall have received a Grant from the
------------
FCC.
8.2. Conditions Precedent to the Obligations of Digital Angel
--------------------------------------------------------
and DA Acquisition. The obligation of Digital Angel and DA
------------------
Acquisition to complete the Transaction is subject to the
satisfaction (or waiver by Digital Angel and Company) of
all the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties contained in Article IV shall be materially
true and correct in all respects as of and at the Closing
Date with the same effect as though made on the Closing
Date.
(b) Performance of Covenants. Company shall have performed or
------------------------
complied in all material respects with all agreements and
covenants required by this Agreement to be performed by it
prior to or on the Closing Date.
(c) Governmental Matters. No statute, ordinance or regulation,
--------------------
or order or injunction of any court or governmental agency
of competent jurisdiction shall be in effect which
restrains or prohibits the parties hereto from carrying
out the Transaction.
(d) No Litigation Pending or Threatened. There shall be no
-----------------------------------
action or proceeding pending or threatened which is
reasonably likely to have a material effect on the
Transaction by or before any court or governmental
authority challenging the Transaction or any transaction
related thereto or seeking to restrain, prevent, or change
the Transaction or seeking damages in conjunction with, or
by reason of, the Transaction.
(e) Receipt of Consents. Company shall have obtained all
-------------------
consents, approvals or waivers from other parties to any
material Contract or other instrument or document that is
necessary to perform the obligations set forth in this
Agreement to consummate the Transaction, or to make the
representations and warranties set forth in Article IV
hereof true and correct in all material respects.
(f) Company Stockholder Approval. Company's Stockholders shall
----------------------------
have authorized and approved by majority vote (i) the
terms of this Agreement and the Merger contemplated by the
Transaction as required by applicable law and Company's
Certificate of Incorporation and Bylaws, and (ii) the
appointment of the Majority Stockholder's Representative,
and (iii) the terms of the Escrow Agreement. No
-41-
stockholder of the Company shall have exercised, or
indicated any intention to exercise dissenters' rights
that are greater than an amount which exceeds five percent
(5%) of the Merger Consideration.
(g) Employment and Independent Contractor Arrangements.
--------------------------------------------------
Company shall have entered into employment arrangements or
independent contractor arrangements, as the case may be,
with such employees and independent contractors, as the
case may be, as Digital Xxxxx xxxxx appropriate in its
discretion, and the Company shall have terminated such
employment arrangements and independent contractor
arrangements as Digital Xxxxx xxxxx appropriate in its
discretion.
(h) Certain Releases. The Company shall have obtained releases
----------------
in form and substance acceptable to Digital Angel as
Digital Angel may reasonably require.
(i) Termination of Contracts. The Company shall have obtained
------------------------
and delivered evidence of termination, assignment or
waiver, as required by Digital Angel in its sole
limitation.
(j) Proprietary Rights Agreements. The Company shall have
-----------------------------
obtained proprietary rights agreements from such third
parties as Digital Angel may require pursuant to which
such third parties shall have assigned to the Company any
and all interest in all intellectual property, trade
secrets, software, and confidential information produced,
used or rising out of or related to the Business.
(k) Source Code Deliveries. The Company shall have delivered
----------------------
to Digital Angel all of the source code for all of the
Company Products and Company Software Products.
(l) Securities Law Compliance. Digital Angel and its counsel
-------------------------
shall be satisfied that the issuance of the Digital Angel
Series A Preferred Stock shall qualify for an exemption
from the registration requirements of the Securities Act
of 1933, as amended and any applicable state securities
law and that all acts as are necessary to perfect such
exemptions(s) shall have been taken.
(m) Notes Payable. The notes payable referred to in Section
-------------
4.15(c) shall have been paid prior to or at Closing and
such payment shall not be accomplished by using Company
assets or incurring Company debt.
(n) No Adverse Change. There shall not have been any Material
-----------------
Adverse Effect of the Company from the date of this
Agreement through the Closing Date.
(o) Closing Items. Digital Angel and DA Acquisition shall have
--------------
received the items described in Section 9.2.
(p) FCC Approval. Company shall have received a Grant from the
------------
FCC.
-42-
ARTICLE IX
THE CLOSING
9.1. Time and Place, Effective Time. The Closing shall take place on
------------------------------
January 2, 2004, at the offices of Winthrop & Weinstine, P.A., 000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000, or
such other date or place as the parties may agree. All actions
taken at the Closing shall be deemed to occur simultaneously.
9.2. Company's Obligations at Closing. At Closing, Company shall execute
--------------------------------
and/or deliver to Digital Angel, against execution and/or delivery
by Digital Angel of the items specified in Section 9.3:
(a) Certified copies of resolutions of the Board of Directors of
Company authorizing the Transaction and approving this
Agreement and the filing of the Articles of Merger;
(b) certified copies of the resolutions adopted by the
stockholders of Company authorizing the matters
described in Section 8.2(f) and the filing of the
Articles of Merger, together with a certificate from the
Company's Chief Executive Officer certifying that
dissenters' rights that have been exercised by Company
stockholders are equal to an amount not exceeding five
percent (5%) of the Merger Consideration;
(c) the minute books and stock transfer books of Company;
(d) the Articles of Merger;
(e) resignations from each of Company's officers and directors and
termination of authority of all Company officers, directors
and employees with respect to all Company bank accounts.;
(f) the Escrow Agreement;
(g) evidence that all Warrants have been canceled;
(h) evidence that all Stock Options have been canceled;
(i) all Common Stock and Series A Preferred Stock of the Company
shall have been canceled by operation of the filing of
the Certificate of Merger;
(j) the legal opinion of Xxxxx Xxxxxxx LLP in substantially the
form attached hereto as Exhibit E;
(k) evidence that all Company ERISA Benefit Plans and all Company
Non-ERISA Benefit Arrangements have been terminated by the
Company as of or prior to the Closing Date; and
-43-
(l) all other certificates, Schedules, Exhibits, and attachments,
in completed form, which are required by the provisions
of this Agreement.
9.3. Digital Angel's Obligations at Closing. At the Closing, Digital
--------------------------------------
Angel and DA Acquisition shall execute and/or deliver to Company,
against execution and/or delivery by Company of the items specified
in Section 9.2;
(a) a certified copy of resolutions of Digital Angel's Board of
Directors (or its authorized committee thereof)
authorizing the transactions and approving this
Agreement;
(b) a certified copy of resolutions of the Board of Directors
and/or sole stockholder of DA Acquisition authorizing
the Transaction and approving this Agreement and the
filing of the Articles of Merger;
(c) a certified copy of the Certificate of Designation filed by
Digital Angel with respect to the Series A Preferred
Stock;
(d) the Merger Consideration for delivery to the Majority
Stockholders and to the Escrow Agent;
(e) the Articles of Merger;
(f) the Escrow Agreement;
(g) Board resolution appointing Xxx Xxx as the Chief Executive
Officer of Digital Angel as of the Closing Date and a
letter from Digital Angel confirming the terms of such
employment which shall be consistent with the terms
communicated to Outerlink's counsel on October 31, 2003
as revised November 2, 2003;
(h) the legal opinion of Winthrop & Weinstine, P.A. in
substantially the form attached hereto as Exhibit F; and
(i) all other certificates, Schedules, Exhibits, and attachments,
in completed form, which are required by the provision
of this Agreement.
9.4. Instruments. All instruments delivered at Closing shall be dated as
-----------
of the Closing Date and shall be reasonably satisfactory to the
party receiving the benefit thereof.
ARTICLE X
TERMINATION
10.1. Termination. This Agreement, the Merger and the Transaction
-----------
contemplated hereby may be terminated:
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(a) by mutual consent of Digital Angel and the Company at any
time;
(b) by either Digital Angel or Company, if any court of competent
jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated
hereby and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) by either party (if such party is not then in breach of this
Agreement) if the Merger has not become effective by
March 31, 2004;
(d) by Digital Angel if there has been a material breach on the
part of Company of the representations, warranties or
covenants of Company; provided that Company shall first have
been provided notice of any curable breach and failed to cure
such breach within five (5) days of such notice;
(e) by Company if there has been a material breach on the part of
Digital Angel or DA Acquisition of the representations,
warranties or covenants of Digital Angel or DA
Acquisition; provided that Digital Angel and DA
Acquisition shall first have been provided notice of any
curable breach and failed to cure such breach within
three (3) days of such notice.
(f) by Digital Angel if, after the date hereof, there shall have
been a Material Adverse Effect on the Business or
prospects of the Company or if any information provided
in any updated Schedule is not satisfactory to Digital
Angel and such change, revision or new information is
material, or by Company if, after the date hereof, there
shall have been a Material Adverse Effect on the
Business of Digital Angel.
10.2. Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Sections 10.1(a), 10.1(b), 10.1(c) or 10.1(f), this Agreement shall
terminate and be of no further force and effect and neither Digital
Angel, nor Company, nor any of their Affiliates, nor any of their
respective directors, officer, or employees, shall have any
liability to any of the others pursuant to this Agreement. A
termination by the non-breaching party pursuant to Section 10.1(d)
or 10.1(e) shall not absolve the breaching party for any such
breach or to constitute a waiver of any remedy available for such
breach.
ARTICLE XI
SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES
11.1. Survival. The representations and warranties of the parties
--------
contained in Articles IV and V of this Agreement shall survive the
Closing and shall expire on the last business day of the eighteenth
(18th) full month following the Closing Date, except for those
representations and warranties contained in Sections 4.15, 4.20,
4.22 and 4.29 which shall expire on the last business day of the
thirty-sixth (36th) full month following the Closing Date. The
representations and warranties contained in Sections 4.6 and 4.7
and those
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representations made by the Majority Stockholders in the
Letters of Transmittal, a form of which is attached hereto as
Exhibit D, shall expire upon the expiration of applicable statute
of limitations.
ARTICLE XII
INDEMNIFICATION
12.1. Indemnification by Majority Stockholders. Majority Stockholders shall,
----------------------------------------
and hereby agree to defend, indemnify and hold Digital Angel and
DA Acquisition (and their directors, officers, employees, agents,
insurers, attorneys and stockholders) harmless at all times
against and in respect of any Liabilities and Losses arising out
of, relating to, or resulting from: (a) any breach of any
representation, warranty, covenant or agreement made by Company in
this Agreement or the Majority Stockholders in the Letters of
Transmittal; or (b) the nonperformance of any pre-Closing
obligations to be performed on the part of Company under this
Agreement or any agreement executed pursuant hereto or in
conjunction herewith or (c) any claim by any stockholder, debt
holder, option holder or warrant holder of the Company that such
person was entitled to receive a portion, or a greater amount, of
the Merger Consideration than as specified in Schedule I;
provided, however, that under no circumstances shall the
Indemnifying Party be liable for consequential, enhanced,
punitive, special or exemplary damages; provided, further that any
Liabilities or Losses arising out of Section 12.1(a) or (b)
indemnification shall be capped at the Escrow Assets, except for
Liabilities and Losses arising out of breaches of Sections 4.6,
4.7, 4.15, 4.20, 4.22 and 4.29 , any claim based on Section
12.1(c) and the representations in the Letter of Transmittal by
the Majority Stockholders which Section 12.1 indemnification shall
be capped at the Merger Consideration paid to each Majority
Stockholder as set forth on Schedule I.
12.2. Defense Against Asserted Claims. If any claim or assertion of
-------------------------------
liability is made or asserted by a party against a party
indemnified pursuant to Section 12.1 ("Indemnified Party") which
might give rise to a right to indemnification under this
Agreement, the Indemnified Party shall with reasonable promptness,
give to the Majority Stockholders' Representative, on behalf of
the Majority Stockholders ("Indemnifying Party"), written notice
of the claim or assertion of liability and request of the
Indemnifying Party to defend the same, provided that any delay or
failure to notify Majority Stockholders' Representative shall not
relieve the Indemnifying Party from any liability which it may
have to the Indemnified Party except to the extent of any
prejudice resulting directly from such delay or failure. The
Indemnifying Party shall, within ten days, at the Indemnifying
Party's expense, assume the defense of such claim or assertion
with counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but
the fees and expense of such counsel shall be at the expense of
the Indemnified Party unless (a) the employment thereof has been
specifically authorized by the Indemnifying Party in writing, or
(b) the Indemnifying Party has failed to assume the defense of
such action, or (c) due to a conflict of interest, the
Indemnifying Party's counsel is not able to adequately represent
the Indemnified Party. The Indemnifying Party shall not be
permitted to enter into any settlement or compromise involving
affirmative action or
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forbearance by the Indemnified Party unless the Indemnified Party
shall have been notified in writing of the proposed settlement or
compromise and shall have consented in writing thereto, which
consent shall not be unreasonably withheld. The parties will
cooperate with each other in the defense of any such action and
the relevant records of each shall be available to the other with
respect to such defense.
12.3. Sole Remedy. The Indemnified Party's rights to indemnification
-----------
under Article XII shall be the sole and exclusive remedy for the
Indemnified Party for any Liabilities or Losses arising out of
matters that are indemnifiable hereunder.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Publicity, Advertisement, Prior Consultation. Except with the
--------------------------------------------
consent of the other parties, no party shall (and each of the
parties shall use its commercially reasonable efforts to assure
that none of its officers, directors, employees, agents or advisors
shall) publicize, advertise, announce or describe to any government
authority or other third person, the terms of this Agreement,
except as required by Law or as required pursuant to this
Agreement.
13.2. Severability. Any portion or provision of this Agreement which is
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the
remaining portions or provisions hereof in such jurisdiction or, to
the extent permitted by law, rendering that or any other portion or
provision hereof invalid, illegal or unenforceable in any other
jurisdiction.
13.3. Article, Section, Schedule, and Exhibit Headings. The Article,
------------------------------------------------
Section, Schedule, and Exhibit headings included in this Agreement
are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
13.4. Counterparts and Facsimile. This Agreement and any documents
--------------------------
executed pursuant hereto may be executed in any number of
counterparts and by facsimile, each one of which shall be an
original and all of which shall constitute one and the same
documents.
13.5. Gender and Number. In this Agreement (unless the context requires
-----------------
otherwise), the masculine, feminine and neuter genders and the
singular and the plural include one another.
13.6. Expenses. Except as otherwise specifically set forth in this
--------
Agreement, the parties shall each bear their own fees and expenses
incurred in connection with this Agreement and the Transaction.
13.7. Notices. All notices given pursuant to this Agreement shall be in
-------
writing and be personally delivered or mailed with postage prepaid,
by registered or certified mail, return receipt requested to the
address indicated below or such other address as a party
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may from time to time specify in writing to the other party. If so
mailed and also sent by telegram or facsimile machine, the notice will
conclusively be deemed to have been received on the business day
next occurring 24 hours after the latest to occur of such mailing
and telegraphic or facsimile communication; otherwise, no notice
shall be deemed given until it actually arrives at the address in
question. The addresses to which notice are initially to be sent
are as follows:
(a) If to Digital Angel or DA Acquisition, to:
Digital Angel Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Winthrop & Weinstine, P.A.
Suite 3500
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) If to the Company or the Stockholders to:
OuterLink Corporation
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxxxxxx 00000
Attention: Xxx Xxx, Chief Executive Officer
with a copy to:
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
(c) If to Majority Stockholders' Representative, to:
Majority Stockholders' Representative named
in the Escrow Trust Agreement
c/o Nixon Peabody LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
13.8. No Third Party Beneficiaries. This Agreement shall be binding upon
----------------------------
and inure to the benefit only of the parties hereto and their
respective heirs, representative, successors,
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and permitted assigns. In no event shall this Agreement constitute
a third party beneficiary contract.
13.9. Governing Law. This Agreement is governed by and is to be construed
-------------
and interpreted in accordance with the laws of the State of
Minnesota, without giving effect to the conflict of law principles
thereof.
13.10. Modifications, Amendments or Waivers. Except as otherwise provided
------------------------------------
herein, provisions of this Agreement may be modified, amended or
waived only by a written document specifically identifying this
Agreement and signed by a duly authorized officer of each party.
13.11. Remedies of Parties Cumulative. Except as otherwise expressly
------------------------------
provided herein or in the Escrow Agreement, the remedies of the
parties hereto contained in this Agreement are cumulative with one
another and with any other remedies which the parties hereto may
have at law, in equity, under any agreements of any type or
otherwise, and the exercise or failure to exercise any remedy shall
not preclude the exercise of that remedy at another time or of any
other remedy at any time.
13.12. Assignment, Successors and Assigns. Without the other party's
----------------------------------
written consent, which consent shall not be unreasonably withheld
or delayed, this Agreement and the rights and obligations
hereunder, shall not be assignable by any party hereto. This
Agreement shall be binding upon, and inure to the benefit of, the
respective heirs, representatives, successors and permitted assigns
of the parties hereto.
13.13. Remedies. The obligations of Digital Angel, DA Acquisition and
--------
Company under this Agreement are unique. The parties acknowledge
that it would be extremely impracticable to measure damages
resulting from any default under this Agreement. Accordingly, it is
agreed that a party not in default under this Agreement may xxx in
equity for specific performance, in addition to any other available
rights and remedies.
13.14. Joint Preparation. For purposes of construction, this Agreement has
-----------------
been jointly prepared by the parties and the provisions of this
Agreement shall not be construed more strictly against any party
hereto as a result of its participation in such preparation.
13.15. Schedules and Exhibits. The Schedules and Exhibits referred to
----------------------
above are attached hereto and incorporated as an integral part of
this Agreement. Schedule I may be amended in writing prior to
Closing with the written consent of all parties hereto which shall
not be unreasonably withheld.
At least five (5) business days prior to Closing, the Company shall
deliver to Digital Angel any and all amendments to the Schedules
necessary to update the schedules from and after the date hereof.
13.16. Attorneys Fees. If any party to this Agreement initiates any
--------------
arbitration, legal action or lawsuit against any other party
relating to this Agreement or any agreement executed
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pursuant hereto, the prevailing party in such action or amount shall
be entitled to receive reimbursement from the other party for all
reasonable attorneys' fees, expert fees and other costs and
expenses incurred by the prevailing party in respect of such
proceeding.
13.17. Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements,
understandings and negotiations between the parties with respect to
the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been executed by each of the parties
hereto as of the day and year first above written.
DIGITAL ANGEL CORPORATION
By
------------------------------
Its
-----------------------------
DA ACQUISITION, INC.
By
------------------------------
Its
-----------------------------
OUTERLINK CORPORATION
By
------------------------------
Its
-----------------------------
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