Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VOIP, INC.,
CAERUS, INC.
AND
VOLO ACQUISITION CORP.
DATED AS OF MAY 31, 2005
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER..........................................................1
Section 1.1 The Merger...............................................1
Section 1.2 Effective Time...........................................1
Section 1.3 Effects of the Merger....................................1
Section 1.4 Charter and Bylaws; Directors and Officers...............2
Section 1.5 Conversion of Securities.................................2
Section 1.6 Exchange of Certificates.................................4
Section 1.7 No Further Ownership Rights in Company Common Stock......5
Section 1.8 Closing of Company Transfer Books........................5
Section 1.9 Lost Certificates........................................5
Section 1.10 Further Assurances....................................5
Section 1.11 Dissenting Shares.....................................6
Section 1.12 Closing...............................................6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................6
Section 2.1 Organization, Standing and Power.........................6
Section 2.2 Authority................................................7
Section 2.3 Consents and Approvals; No Violation.....................7
Section 2.4 Brokers..................................................8
Section 2.5 Operations of Sub........................................8
Section 2.6 SEC Documents; Financial Statements; Other Documents.....8
Section 2.7 Absence of Certain Changes or Events.....................9
Section 2.8 Accounting and Disclosure Controls; SOXA Compliance......9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................10
Section 3.1 Organization, Standing and Power........................10
Section 3.2 Capital Structure.......................................11
Section 3.3 Authority...............................................12
Section 3.4 Consents and Approvals; No Violation....................12
Section 3.5 Financial and Other Information.........................13
Section 3.6 Absence of Certain Changes..............................13
Section 3.7 Absence of Undisclosed Liabilities......................15
Section 3.8 Permits and Compliance..................................15
Section 3.9 Tax Matters.............................................15
Section 3.10 Actions and Proceedings..............................16
Section 3.11 Employees; Employee Benefits.........................17
Section 3.12 Labor Matters........................................20
Section 3.13 Title of Property and Assets.........................20
Section 3.14 Real Property........................................21
Section 3.15 Insurance............................................21
Section 3.16 Business Relations...................................22
Section 3.17 Intellectual Property................................22
Section 3.18 Material Company Contracts...........................24
Section 3.19 Investment Securities................................25
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TABLE OF CONTENTS
(continued)
Section 3.20 Environmental Liability........................................25
Section 3.21 State Takeover Statutes........................................25
Section 3.22 Required Vote of Company Stockholders..........................25
Section 3.23 Brokers........................................................25
Section 3.24 Accounting and Disclosure Controls.............................26
ARTICLE 4 COVENANTS RELATING TO COMPANY CONDUCT OF BUSINESS............................26
Section 4.1 Company Conduct of Business Pending the Merger....................26
ARTICLE 5 ADDITIONAL AGREEMENTS........................................................28
Section 5.1 Additional Equity.................................................28
Section 5.2 Stock Options and Stock Plan; Options.............................28
Section 5.3 Access to Information; Meetings with Company Officers.............28
Section 5.4 Certain Payments, Fees and Expenses...............................29
Section 5.5 Reasonable Best Efforts...........................................29
Section 5.6 Public Announcements..............................................30
Section 5.7 State Takeover Laws...............................................30
Section 5.8 Indemnification; Directors and Officers Insurance.................30
Section 5.9 Notification of Certain Matters...................................30
Section 5.10 Cedar Boulevard Lease Funding..................................30
Section 5.11 Employment Agreements..........................................31
Section 5.12 Opinion of Counsel.............................................31
Section 5.13 Secretary's Certificate........................................31
Section 5.14 Filings by Affiliates..........................................31
Section 5.15 Board Seat.....................................................31
Section 5.16 Piggyback Registration Rights..................................31
ARTICLE 6 CONDITIONS PRECEDENT TO THE MERGER...........................................32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger........32
Section 6.2 Conditions to Obligation of the Company to Effect the Merger......32
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger..33
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER............................................34
Section 7.1 Termination.......................................................34
Section 7.2 Effect of Termination.............................................34
ARTICLE 8 SURVIVAL.....................................................................35
Section 8.1 Survival of Representations.......................................35
ARTICLE 9 GENERAL PROVISIONS...........................................................35
Section 9.1 Notices...........................................................35
Section 9.2 Interpretation....................................................36
Section 9.3 Amendment.........................................................36
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TABLE OF CONTENTS
(continued)
Section 9.4 Waiver..................................................36
Section 9.5 Counterparts............................................36
Section 9.6 Entire Agreement; No Third Party Beneficiaries..........36
Section 9.7 Governing Law...........................................36
Section 9.8 Assignment..............................................37
Section 9.9 Severability............................................37
Exhibits
Exhibit A Representation Letter
Exhibit B Form of Employment Agreement
Exhibit C Form of Opinion of Pillsbury Winthrop, LLP
Exhibit D Registration Rights
Exhibit E Escrow Agreement
Exhibit F Parent Common Stock
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TABLE OF DEFINED TERMS
Defined Term Section
Affiliate..........................................................3.6
Agreement.................................................... Preamble
Benefit Plans..................................................3.11(c)
Blue Sky Laws......................................................2.3
Certificate of Merger..............................................1.2
Certificates....................................................1.6(b)
Claim.............................................................3.10
Closing...........................................................1.12
Code............................................................1.6(c)
Company...................................................... Preamble
Company Bylaws....................................................3.20
Company Charter.................................................1.4(a)
Company Common Stock............................................1.5(b)
Company Disclosure Letter.........................................3.20
Company Financial Statements.......................................3.5
Company Permits....................................................3.8
Company Preferred Stock.........................................1.5(c)
Company Series A Preferred Stock................................1.5(c)
Company Series B Preferred Stock................................1.5(c)
Company Stock Options.............................................3.20
Constituent Corporations......................................Preamble
DGCL...............................................................1.1
Dissenting Shares.................................................1.11
Effective Time.....................................................1.2
Employees......................................................3.11(a)
Environmental Laws................................................3.20
ERISA..........................................................3.11(c)
ERISA Affiliate................................................3.11(d)
Escrowed Shares.................................................1.5(g)
Exchange Act.......................................................2.3
Exchange Amount.................................................1.4(c)
Financing..........................................................5.1
Former Employees...............................................3.11(a)
GAAP............................................................2.6(b)
Governmental Approvals..........................................6.1(c)
Governmental Entity................................................2.3
Indemnified Party..................................................8.3
Indemnifying Party.................................................8.3
Intellectual Property..........................................3.17(a)
Intellectual Property Agreements...............................3.17(a)
IRCA...........................................................3.11(b)
IRS............................................................3.11(d)
Knowledge of the Company..........................................3.10
iv
Leased Real Property...........................................3.14(a)
▇▇▇▇▇ Shares....................................................1.5(d)
Liens..............................................................2.1
Losses.............................................................8.2
Material Adverse Effect............................................3.1
Material Company Contracts........................................3.19
MCI.............................................................1.5(g)
MCI Dispute.....................................................1.5(g)
Merger........................................................Recitals
Merger Shares...................................................1.5(c)
Most Recent Balance Sheet..........................................3.5
Non-Employees..................................................3.11(a)
Notes.............................................................5.10
Other Intellectual Property....................................3.17(a)
Owned Intellectual Property....................................3.17(a)
Parent....................................................... Preamble
Parent Bylaws......................................................2.3
Parent Charter.....................................................2.3
Parent Common Stock.............................................1.5(c)
Person..........................................................4.1(d)
Personnel......................................................3.18(f)
Protection Program.............................................3.18(f)
Real Property Leases...........................................3.14(a)
SEC................................................................2.6
Securities Act.....................................................3.5
SOXA...............................................................2.8
Sub...........................................................Preamble
Sub Bylaws......................................................1.4(a)
Subsidiary.........................................................3.1
Surviving Corporation..............................................1.1
Tax Return......................................................3.9(a)
Taxing Authority................................................3.9(a)
Taxes...........................................................3.9(a)
Warrants........................................................1.5(c)
v
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 31, 2005 (this
"Agreement"), is by and among VoIP, Inc., a Texas corporation ("Parent"), Volo
Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary
of Parent ("Sub"), and Caerus, Inc., a Delaware corporation (the "Company," and
together with Sub, the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have determined that the merger of Sub with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth herein, is advisable and
fair to Parent, Sub or the Company, as applicable, and in the best interests of
their respective stockholders;
WHEREAS, the respective Boards of Directors of Sub and the Company have
each approved and adopted, at meetings of each such Board of Directors, this
Agreement and have authorized the execution hereof and the Board of Directors of
Parent has authorized the execution hereof;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with Section 251 of the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as hereinafter defined). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware at the time of the Closing (unless the Certificate of Merger
provides for a different effective time in accordance with the DGCL). When used
in this Agreement, the term "Effective Time" shall mean the date and time that
the Merger is effective under applicable law. The filing of the Certificate of
Merger shall be made on the date of the Closing (as defined in Section 1.12).
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in this Agreement and in the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the
Effective Time, the Certificate of Incorporation of the Company (the "Company
Charter"), as in effect at the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until amended as provided by
applicable law. At the Effective Time, the Bylaws of Sub (the "Sub Bylaws") as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended in accordance with
applicable law.
(b) The directors of Sub at the Effective Time shall, immediately
after the Effective Time, be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
The officers of the Sub at the Effective Time shall, immediately after the
Effective Time, be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value
$0.01 per share, of Sub shall be converted into one (1) validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Each issued and outstanding share of common stock, par value
$0.01 per share, of the Company (the "Company Common Stock") that is held
in the treasury of the Company or by any Subsidiary (as defined in Section
3.1) of the Company, and any shares of Company Common Stock owned by
Parent or by any Subsidiary of Parent, shall be cancelled and no payment,
capital stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
in accordance with Section 1.5(b), and any Dissenting Shares (as
hereinafter defined)) shall be converted into the right to receive a pro
rata portion (the "Common Exchange Amount") of 15,000,000 shares, less the
Liquidation Shares (the "Common Merger Shares") of the Parent's common
stock, par value $0.001 per share (the "Parent Common Stock"). Each share
of Series A Convertible Preferred Stock, par value $0.01 per share (the
"Company Series A Preferred Stock") and each share of Series B Convertible
Preferred Stock, par value $0.01 per share (the "Company Series B
Preferred Stock," together with the Company Series A Preferred Stock, the
"Company Preferred Stock") issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with
Section 1.5(b) and any Dissenting Shares) shall be converted into the
right to receive the applicable Liquidation Amount (as defined in the
applicable Certificate of Designations for such series of Company
Preferred Stock) of Parent Common Stock (the "Preferred Merger Shares" and
together with the Common Merger Shares, the "Merger Shares"). The Merger
Shares will be unregistered under the Securities Act, will constitute
restricted securities within the meaning of the Securities Act and will
contain restrictive legends reciting prohibitions on the transfer of such
shares to the extent required by the Securities Act and applicable state
2
law. All such shares of Company Common Stock, and Company Preferred Stock
when so converted, shall no longer be outstanding and shall automatically
be cancelled and retired and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except
the right to receive, as applicable, the Common Exchange Amount or the
applicable Liquidation Amount pursuant to this Section 1.5(c). The Common
Exchange Amount shall be appropriately adjusted for any stock dividend,
stock split or like transaction affecting the Company Common Stock or
Parent Common Stock prior to the Effective Time.
(d) Parent shall assume each Company Stock Option issued and
outstanding as described in Section 5.2. Each Company Stock Option shall
be converted into an option for Parent Common Stock in accordance with the
formula set forth in Section 5.2(a), other than Company Stock Options to
purchase (i) 1,000,000 shares of Company Common Stock held by ▇▇▇▇▇ ▇.
▇▇▇▇▇, which will be converted at Closing into 350,000 shares of Parent
Common Stock (the "▇▇▇▇▇ Shares"); (ii) 368,211 shares of Company Common
Stock held by ▇▇▇ ▇▇▇▇▇▇, which will be converted at Closing into 118,137
shares of Parent Common Stock; and (iii) 417,545 shares of Company Common
Stock held by ▇▇▇▇ ▇▇▇▇▇▇, which will be converted at Closing into 133,966
shares of Parent Common Stock. Such amounts shall be appropriately
adjusted for any stock dividend, stock split or like transaction affecting
the Company Common Stock or Parent Common Stock prior to the Effective
Time.
(e) Each outstanding warrant to purchase shares of Company Common
Stock or Company Series A Preferred Stock (the "Warrants") shall be
converted into the right to receive shares of Parent Common Stock on an
as-if-exercised, "net exercise" basis, based on the closing price of the
Parent Common Stock on May 27, 2005 of $1.18.
(f) At the Closing, Parent shall cause 2 million shares of Parent
Common Stock from the Common Exchange Amount (the "Escrowed Shares") to be
deposited with Wachovia Bank as escrow agent (the "Escrow Agent"), to be
held by the Escrow Agent pursuant to the terms of an escrow agreement (the
"Escrow Agreement"), in substantially the form attached hereto as Exhibit
E. The Escrowed Shares shall be held for the benefit of the Escrow Holders
(as defined below) pending the outcome of the dispute between the
Company's Subsidiary Volo Communications, Inc. and MCI Worldcom Network
Services, Inc. d/b/a UUNET ("MCI") with respect to ▇▇▇▇▇▇▇▇ in the amount
of approximately $10.6 million (the "MCI Dispute"). The Escrowed Shares
will be released to the Company Common Stock holders as of immediately
prior to the Effective Time (other than holders of shares of Company
Common Stock to be cancelled in accordance with Section 1.5(b), and any
Dissenting Shares) (the "Escrow Holders") on a pro rata basis, upon the
earlier of the (x) conclusion of the MCI Dispute and (y) upon the
following schedule: (i) one-third of the Escrowed Shares on November 30,
2006, (ii) one-third of the Escrowed Shares on August 31, 2007, and (iii)
one-third of the Escrowed Shares on May 31, 2008. The number of Escrowed
Shares released to the stockholders will be reduced by a number of shares
3
equal to amounts, in excess of $1 million, payable by the Company to MCI
with respect to any judgments or settlements as a result of any final,
non-appealable outcome in the MCI Dispute (such number of Escrowed Shares
to be reduced to be determined by dividing (i) the amount of such excess
by (ii) the average closing price of the Parent Common Stock on the
Over-the-Counter Bulletin Board (or, if trading on NASDAQ, the AMEX or the
NYSE, thereon) for the 30 trading days immediately preceding the
determination of such excess amount. Such withheld Escrowed Shares will be
cancelled and the Escrow Holders shall forfeit the right to receive such
Escrowed Shares. During the term of the escrow, Parent and ▇▇▇▇▇ ▇. ▇▇▇▇▇,
as representative of the Escrow Holders (the "Representative") shall
jointly make all decisions regarding the handling of the litigation. Both
parties agree to effect any settlement requiring payment by Parent of $1
million or less that does not cause any cancellation of any of the
Escrowed Shares. Parent shall have exclusive authority to effect a
settlement greater than $1 million that does not cause any cancellation of
any of the Escrowed Shares. Parent agrees to use best efforts to
vigorously defend and pursue the MCI Dispute, and to cooperate with and
assist the Representative in connection therewith.
(g) A table of all Parent Common Stock to be issued hereby is set
forth on Exhibit F.
Section 1.6 Exchange of Certificates.
(a) The Transfer Agent shall act as the exchange agent hereunder.
(b) Parent shall cause the Transfer Agent, as soon as practicable
after the Effective Time, to mail to each holder of a Warrant and to each
record holder (including nominee holders for distribution to beneficial
holders) of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock or
Company Preferred Stock (the "Certificates") a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates or Warrant shall pass, only upon actual delivery
of the Certificates or Warrant to the Transfer Agent, and shall contain
instructions for use in effecting the surrender of the Certificates or
Warrant in exchange for the Merger Shares and a Form W-9 to establish
available exemptions from back-up withholding). Upon surrender for
cancellation to the Transfer Agent of one or more Certificates or Warrants
held by any record holder of a Certificate or holder of a Warrant,
together with such letter of transmittal, duly executed, the holder of
such Certificate or Warrant shall be entitled to receive in exchange
therefor that number of shares of Parent Common Stock to which such holder
is entitled in respect of the shares represented by such Certificate or
Certificates or in respect of such Warrant or Warrants, as applicable,
pursuant to this Article 1 , and any Certificate or Warrant so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the
Merger Shares payable to the holder of the Certificates.
(c) If any Merger Shares are to be issued in a name other than that
in which the Certificate surrendered is registered, it shall be a
condition of such payment that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
4
Person requesting such payment shall pay to the Transfer Agent any taxes
required by reason of payment or shall establish to the satisfaction of
the Transfer Agent that such tax has been paid or is not applicable.
Parent or the Transfer Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock and Company Preferred Stock such
amounts as Parent or the Transfer Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code
of 1986, as amended (the "Code"), or under any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by Parent
or the Transfer Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares
of Company Common Stock and/or Company Preferred Stock in respect of which
such deduction and withholding was made by Parent or the Transfer Agent.
(d) Each record holder must, as a condition to receiving Merger
Shares, execute a Representation Letter, in the form attached as Exhibit
A.
Section 1.7 No Further Ownership Rights in Company Common Stock. The
Merger Shares paid upon the surrender of Certificates shall be deemed to have
been paid and made in full satisfaction of all rights pertaining to the shares
of Company Common Stock and Company Preferred Stock represented by such
Certificates.
Section 1.8 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock or Company Preferred Stock shall thereafter be made on the
records of the Company. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, the Transfer Agent or the Parent, such
Certificates shall, subject to the issuance in accordance herewith of the Merger
Shares to which the holder thereof is entitled to in respect of the shares
represented thereby, be cancelled as provided in this Article 1.
Section 1.9 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, and, if required by
Parent or the Transfer Agent, the posting by such Person of a bond, in such
reasonable amount as Parent or the Transfer Agent may direct as indemnity
against any Claim (as defined in Section 3.10) that may be made against them
with respect to such Certificate, the Transfer Agent will issue the Merger
Shares to which such Person is entitled in respect of the shares represented by
such lost, stolen or destroyed Certificate.
Section 1.10 Further Assurances. If at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
5
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.11 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock and Company Preferred Stock
issued and outstanding immediately prior to the Effective Time held by a holder
(if any), who has the right to demand, and who properly demands, an appraisal of
such shares of Company Common Stock or Company Preferred Stock in accordance
with Section 262 of the DGCL (or any successor provision) ("Dissenting Shares")
shall not be converted into a right to receive Merger Shares unless such holder
fails to perfect or otherwise loses such holder's right to such appraisal, if
any. If, after the Effective Time, such holder fails to perfect or loses any
such right to appraisal, each such share of Company Common Stock or Company
Preferred Stock of such holder shall be treated as a share of Company Common
Stock or Company Preferred Stock that had been converted as of the Effective
Time into the right to receive the Merger Shares in accordance with this Article
1. At the Effective Time, any holder of Dissenting Shares shall cease to have
any rights with respect thereto, except the rights provided in Section 262 of
the DGCL (or any successor provision) and as provided in the immediately
preceding sentence. The Company shall give prompt notice to Parent of any
demands received by the Company for appraisal of shares of Company Common Stock
or Company Preferred Stock, and Parent shall have the right to participate in
and direct all negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or compromise or offer to settle or
compromise, any such demands. Parent shall be responsible for all payments with
respect to the Dissenting Shares, including all expenses associated with any
negotiations and proceedings with respect to demands for appraisal under the
DGCL.
Section 1.12 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, no later than
the second business day following the fulfillment or waiver (if permitted by
law) of the conditions set forth in Article 6, or at such other time and place
as Parent and the Company shall agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant, as of the date hereof and as of the
date of Closing, to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Sub is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
6
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, materially impair the ability of Parent or Sub to perform
their respective obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. Upon issuance pursuant to this Agreement, the
Parent Common Stock constituting the Merger Shares shall be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all security
interests, liens, Claims, pledges, third party rights or restrictions, options,
mortgages, title imperfections, defects, objections, easements, encroachments,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever (collectively, "Liens") other than
restrictions under applicable federal and state securities laws.
Section 2.2 Authority. On or prior to the date of this Agreement, (a) the
Boards of Directors of Parent and Sub have unanimously declared the Merger and
this Agreement advisable and fair to and in the best interest of Parent and Sub,
respectively, and their respective stockholders, (b) the Board of Directors of
Parent has unanimously approved the execution of this Agreement in accordance
with applicable law and (c) the Board of Directors of Sub has approved and
adopted this Agreement in accordance with the DGCL. Each of Parent and Sub has
all requisite corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement and the consummation of the
transactions contemplated hereby have been approved by Parent as the sole
stockholder of Sub. This Agreement has been duly executed and delivered by
Parent and Sub, and (assuming the valid authorization, execution and delivery of
this Agreement by the Company and the validity and binding effect of this
Agreement on the Company) this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms except as the same may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other laws or
equitable principles in effect relating to creditors' rights and remedies and
general principles of equity.
Section 2.3 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in clauses (i)
through (iv) of this Section 2.3 have been obtained and all filings and
obligations described in clauses (i) through (iv) of this Section 2.3 have been
made, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation under or cause the
loss of a material benefit under, or result in the creation of any Lien (as
defined in Section 3.2(b)) upon or default on any of the properties or assets of
Parent or any of its Subsidiaries under, any provision of (a) the Articles of
Incorporation of Parent (the "Parent Charter") or the Bylaws of Parent (the
"Parent Bylaws") or the Sub Charter or Sub Bylaws, (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or Sub
or (c) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of their respective properties or assets,
other than, in the case of clauses (b) or (c), any such violation, default,
right, loss or Lien that would not, individually or in the aggregate, materially
impair the ability of Parent or Sub to perform their respective obligations
7
hereunder or prevent the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any domestic (federal, state or local), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent or Sub or
is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) the Securities Exchange Act of
1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate related
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) applicable
requirements, if any, of state securities or "blue sky" laws ("Blue Sky Laws"),
and (iv) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, materially impair the ability of Parent or Sub
to perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 2.4 Brokers. No broker, investment banker or other Person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
Section 2.5 Operations of Sub. Sub is a direct, wholly-owned Subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, and has engaged in no other business activities other than
those necessary to consummate the transactions contemplated hereby.
Section 2.6 SEC Documents; Financial Statements; Other Documents. (a)
Parent has timely filed all required documents with the U.S. Securities and
Exchange Commission (the "SEC") since May 2004, including all certifications and
statements required by (i) the SEC's order dated June 27, 2002 pursuant to
Section 21(a)(1) of the Exchange Act (File No. 4-460), (ii) Rule 13a-14 or
15d-14 under the Exchange Act or (iii) 18 U.S.C. Section 1350 (Section 906 of
SOXA (as defined in Section 2.8(c)) with respect to such documents
(collectively, the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), SOXA or the Exchange Act, as the
case may be, and, at the respective times they were filed, none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Parent has made available to the Company accurate and complete
copies of all (x) Parent SEC Documents, and (y) comment letters received by
Parent from the SEC since December 31, 2002 and all responses to such comment
letters by or on behalf of the Company.
(b) The consolidated financial statements (including, in each case,
any notes thereto) of Parent included in the Parent SEC Documents complied
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted U.S.
accounting principles ("GAAP") and SEC Regulation S-X (except, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) applied
8
on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements,
to normal year end audit adjustments and to any other adjustments
described therein). Except as disclosed in the Parent SEC Documents filed
with the SEC prior to the date of this Agreement or as required by GAAP,
the Company has not, since the date of its last Parent Quarterly Report
(as defined in Section 2.7) , made any material change in the accounting
practices or policies applied in the preparation of financial statements.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
Parent's Quarterly Reports on Form 10-Q for the quarter ended March 31, 2005
filed with the SEC (the "Parent Quarterly Reports"), since May 2004: (a) Parent
and its Subsidiaries have not incurred any material liability or obligation
(indirect, direct or contingent) that would result in a Material Adverse Effect
on Parent; (b) Parent and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had a
Material Adverse Effect on Parent; (c) there has been no dividend or
distribution of any kind declared, paid or made by Parent on any class of its
stock except as disclosed in the Parent Quarterly Reports or any Reports on Form
8-K filed with the SEC by Parent since December 31, 2004 and prior to the date
of this Agreement; and (d) there has been no Material Adverse Effect with
respect to Parent.
Section 2.8 Accounting and Disclosure Controls; SOXA Compliance. (a)
Parent maintains a system of accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of the consolidated financial statements of
Parent in conformity with GAAP and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; (iv) the reporting of assets is compared with existing
assets at regular intervals and appropriate action is taken with respect to any
differences; (v) material information relating to Parent is promptly made known
to the officers responsible for establishing and maintaining the system of
internal control over financial reporting; and (vi) any significant deficiencies
or material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to materially and adversely
affect the ability to record, process, summarize and report financial
information, and any fraud whether or not material that involves management or
other employees who have a significant role in respect of internal control over
financial reporting, are adequately and promptly disclosed to the independent
auditors and the audit committee of the Board of Directors of Parent.
(b) Parent maintains adequate disclosure controls and procedures as
described in Rule 13a-15 or 15d-15 under the Exchange Act; such controls
and procedures are effective to ensure that all material information
concerning Parent is made known on a timely basis to the individuals
responsible for the preparation of Parent's filings with the SEC and other
public disclosure documents.
9
(c) Parent is in compliance in all material respects with all
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, including all rules and
regulations relating thereto ("SOXA") applicable to Parent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, as of the date
hereof and at Closing, except as otherwise set forth in the Company Disclosure
Letter with specific reference to the qualified sections of the representations
and warranties in Article 3 or disclosure in such a way or of such nature as to
make its relevance to a section of this Article 3 readily apparent:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary (as hereinafter defined)
of the Company is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power or authority would not, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined) on the Company. The Company and
each of its Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their respective
properties owned or held under lease or the nature of their respective
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. For purposes of this Agreement (a) "Material Adverse
Effect" means, when used with respect to Parent, the Company or the Surviving
Corporation, as the case may be, any event, change or effect that individually
or when taken together with all other such events, changes or effects is or is
reasonably expected to be materially adverse to the business, assets, financial
condition, or results of operations of Parent and its Subsidiaries, taken as a
whole, the Company and its Subsidiaries, taken as a whole, or the Surviving
Corporation and its Subsidiaries, taken as a whole, as the case may be;
provided, however, that none of the following shall be considered when
determining whether there has been or will be a Material Adverse Effect: (i) any
effect that results from changes affecting any of the industries in which
Parent, the Company or the Surviving Corporation, as the case may be, operates
generally or the United States economy generally, (ii) any effect that results
from changes affecting general worldwide economic conditions, (iii) any effect
resulting from the execution, announcement or performance of this Agreement,
(iv) whether an effect results in the failure by a Parent, the Company or the
Surviving Corporation, as the case may be, to meet its internal revenue or
earnings projections, (v) any effect resulting from an outbreak or escalation of
hostilities involving the United States, the declaration of the United States of
a national emergency or war, or the occurrence of any acts of terrorism or (vi)
any effect that results from changes in law or GAAP or any interpretations of
law or GAAP, and (b) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Parent, the
Company or the Surviving Corporation, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
10
50% or more of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation, partnership, limited liability company,
joint venture or other legal entity. For purposes of this Article 3,
"Subsidiary" shall include the subsidiaries of Volo Communications, Inc.
Section 3.2 Capital Structure. (a) As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of Company Common
Stock and 25,000,000 shares of preferred stock, par value $0.01 per share (the
"Company Preferred Stock"), of which 5,944,669 shares have been designated as
Company Series A Preferred Stock and 3,125,000 of which have been designated
Company Series B Preferred Stock. On the date hereof, (i) 7,546,932 shares of
Company Common Stock are issued and outstanding; (ii) 5,944,669 shares of
Company Series A Preferred Stock are issued and outstanding; (iii) 531,550
shares of Company Series B Preferred Stock are issued and outstanding; (iv)
2,234,969 shares of Company Common Stock are reserved for issuance pursuant to
options to purchase shares of Company Common Stock ("Company Stock Options")
issued and outstanding pursuant to the Plan; and (v) 2,534,324 shares of Company
Common Stock are reserved for issuance upon exercise of the Warrants. All of the
issued and outstanding shares of Company Common Stock and Company Preferred
Stock were validly issued, fully paid and nonassessable and free of preemptive
rights, and all of the Company Common Stock and Company Series A Preferred Stock
issuable upon exercise of the Warrants will be validly issued, fully paid and
nonassessible and free of preemptive rights upon such exercise. Except as set
forth in Section 3.2 of the disclosure letter dated the date hereof and
delivered on the date hereof by the Company to Parent, which letter relates to
this Agreement and is designated the Company Disclosure Letter (the "Company
Disclosure Letter"), the Plan is the only benefit plan, programs, policies,
arrangements or agreements of the Company or its Subsidiaries under which any
securities of the Company are issuable. As of the date of this Agreement, except
as set forth above and except for the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. As of the date of this Agreement, except (i) as set forth above and
(ii) as set forth in Section 3.2 of the Company Disclosure Letter, there are no
options, warrants, calls, rights, puts or agreements to which the Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver, sell, purchase or redeem,
or cause to be issued, delivered, sold, purchased or redeemed, any additional
shares of capital stock (or other voting securities or equity equivalents) of
the Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, put or agreement. True, complete and correct copies of the Company
Charter and the Bylaws of the Company, as amended (the "Company Bylaws"), have
been delivered to Parent.
(b) Except as set forth in the Company Disclosure Letter, each
outstanding share of capital stock (or other voting security or equity
equivalent) of each Subsidiary of the Company is duly authorized, validly
issued, fully paid and nonassessable, and each such share (or other voting
security or equity equivalent) is owned by the Company or another
wholly-owned Subsidiary of the Company, free and clear of all Liens.
Except as set forth in the Company Disclosure Letter, other than the
Company Stock Options and the Warrants, the Company does not have any
outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company
on any matter.
11
Section 3.3 Authority. On or prior to the date of this Agreement, the
Board of Directors of the Company has unanimously (a) declared the Merger and
this Agreement advisable and fair to and in the best interests of the Company
and its stockholders, (b) approved and adopted this Agreement in accordance with
the DGCL, (c) resolved to recommend the approval and adoption of this Agreement
by the Company's stockholders and (d) directed that this Agreement be submitted
to the Company's stockholders for approval and adoption. The Company has all
requisite corporate power to enter into this Agreement and, subject to approval
by the stockholders of the Company of this Agreement, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to approval of this Agreement by the
stockholders of the Company. This Agreement has been duly executed and delivered
by the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub and the validity and binding effect of this
Agreement on Parent and Sub) this Agreement constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other laws or equitable
principles in effect relating to creditors' rights and remedies and general
principles of equity.
Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in clauses (i)
through (iii) of this Section 3.4 have been obtained and all filings and
obligations described in clauses (i) through (iii) of this Section 3.4 have been
made, except as set forth in Section 3.4(a) of the Company Disclosure Letter,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation under or cause the loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (a) the Company Charter or the Company Bylaws, (b) any provision of
the comparable charter or organization documents of any of the Company's
Subsidiaries or any off-balance sheet trusts or other entities of the Company or
any of its Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage,
indenture, securitization agreement, lease or other agreement, instrument,
permit, concession, franchise or license to which the Company or any of its
Subsidiaries is a party or is subject or (d) any judgment, order or decree or
any statute, law, ordinance, rule or regulation applicable to the Company or any
of its Subsidiaries or any of their respective properties or assets, other than,
in the case of clauses (b), (c) or (d), any such violation, default, right, loss
or Lien that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate related documents
12
with the relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (ii) items set forth in Section 3.4(b)
of the Company Disclosure Letter (other than pursuant to Real Property Leases
(as defined in Section 3.14(a)) which are addressed in Section 3.14) and (iii)
such other consents, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not, individually or
in the aggregate materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 3.5 Financial and Other Information. The Company has provided the
Parent with (a) an audited balance sheet of the Company and the audited
statement of operations and cash flow for the year ended December 31, 2003, (b)
an unaudited balance sheet of the Company and the unaudited statement of
operations and cash flow for the year ended December 31, 2004, and (b) an
unaudited balance sheet of the Company as of March 31, 2005 ("Most Recent
Balance Sheet") and the related statements of operations and cash flows for the
period then ended. All such financial statements (including the notes thereto)
("Company Financial Statements") have, but for the non-accrual of liabilities as
identified in Section 3.5 of the Company Disclosure Statement, been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated in the notes thereto) and present
fairly in all material respects the financial condition of the Company and its
results of operations as of the dates and for the periods indicated (except as
may be indicated in the notes thereto), subject in the case of the unaudited
financial statements only to normal year-end adjustments (none of which are
expected to be material in amount) and the omission of footnotes.
Section 3.6 Absence of Certain Changes. Except as set forth on Section 3.6
of the Company Disclosure Letter, since the date of the Most Recent Balance
Sheet, there has not been:
(a) any (i) acquisition (by purchase, lease as lessee, license as
licensee, or otherwise) or disposition (by sale, lease as lessor, license
as licensor, or otherwise) by the Company of any material assets, or (ii)
other transaction by, or any agreement or commitment on the part of, the
Company, other than those in the ordinary course of business;
(b) any material change in the condition (financial or otherwise),
properties, assets, liabilities, investments, revenues, expenses, income,
operations, business or prospects of the Company, or in any of its
relationships with any suppliers, customers, or other third parties with
whom it has financial, commercial, or other business relationships;
(c) any transaction by the Company with any of its Affiliates (as
hereinafter defined), other than the payment of compensation and
reimbursement of reasonable employee travel and other business expenses in
accordance with existing employment arrangements and usual past practices;
(d) any damage, destruction, or loss affecting its properties or
assets, whether or not covered by insurance;
13
(e) any declaration, setting aside, or payment of any dividend or
any other distribution (in cash, stock, and/or property or otherwise) in
respect of any shares of the capital stock or other securities of the
Company;
(f) any issuance of any shares of Company Common Stock or other
securities of the Company, or any direct or indirect redemption, purchase,
or other acquisition by the Company of any shares of its capital stock or
other securities;
(g) any change in the officers, directors, key employees or
independent contractors of the Company;
(h) any labor trouble or claim or unfair labor practices involving
the Company, any increase in the compensation or other benefits payable or
to become payable by the Company to any of its Affiliates, or to any of
the respective officers, employees, or independent contractors of the
Company, or any bonus payments or arrangements make to or with any of such
officers, employees, or independent contractors in each case other than in
the ordinary course of business or as required by applicable law or by any
plan, contract or other arrangement disclosed on Schedule 3.6(h) of the
Company Disclosure Letter hereto and made available to Parent for review;
(i) any forgiveness or cancellation of any debt or claim by the
Company or any waiver by the Company or any right of material value, other
than compromises of accounts receivable in the ordinary course of
business;
(j) any incurrence or any payment, discharge, or satisfaction by the
Company of any other Indebtedness or any material obligations or material
liabilities, whether absolute, accrued, contingent, or otherwise
(including, liabilities, as guarantor or otherwise, with respect to
obligations of others), other than current liabilities to persons other
than Affiliates of the Company incurred since the date of such balance
sheet in the ordinary course of business;
(k) any incurrence, discharge, or satisfaction of any encumbrance on
any of the Company Assets or on any of the Company Common Stock;
(l) any change in the financial or tax accounting principles,
practices, or methods of the Company; or
(m) any agreement, understanding, or commitment by or on behalf of
the Company, or by or on behalf of its respective Affiliates, directors,
officers, employees, agents, or representatives, whether in writing or
otherwise, to do or permit any of the things referred to in this Section
3.6.
For purpose of this Agreement, "Affiliate" means, with respect to any
Person: (x) any Person directly or indirectly owning, controlling, or holding
with power to vote 10% or more of the outstanding voting securities of such
other Person (other than passive or institutional investors); (y) any Person,
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person; (z) any
14
Person directly or indirectly controlling, controlled by, or under common
control with such other Person. "Control" for the foregoing purposes shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
Section 3.7 Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against in the Most Recent Balance Sheet, or incurred
after the date of such balance sheet in the ordinary course of business, or as
set forth of Section 3.7 of the Company Disclosure Letter, and other than in
connection with the transactions with Affiliates, the Company has no material
liabilities or obligations of any nature, whether accrued, absolute, contingent,
or otherwise (including, liabilities as guarantor or otherwise with respect to
obligations of others), and whether due or to become due, that would be required
by GAAP to be disclosed on a balance sheet of the Company.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as would not
have a Material Adverse Effect on the Company, neither the Company nor any of
its Subsidiaries is in violation of (a) its charter, bylaws or other
organizational documents, (b) any applicable law, ordinance, administrative or
governmental rule or regulation or (c) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries.
Section 3.9 Tax Matters. (a) For purposes of this Agreement, (i) "Taxes"
shall mean all federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, excise, withholding
and other taxes, duties or assessments, together with all interest, penalties
and additions imposed with respect to such amounts; (ii) "Taxing Authority"
shall mean any domestic, foreign, federal, national, state, county or municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body exercising tax regulatory authority and
(iii) "Tax Return" means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including any
information return, claim for refund, amended return or declaration of estimated
Tax.
(b) All material federal, state, local, foreign and other Tax
Returns of the Company and its Subsidiaries (including any consolidated
Tax Returns that include the income or loss of the Company or any of its
Subsidiaries) required by law to be filed or sent as of the Effective Time
[have been or will be duly filed or sent,] and such returns are or will be
true, complete and correct in all material respects. All material Taxes
imposed upon the Company or any of its Subsidiaries or any of the
properties, assets or income of the Company or any of its Subsidiaries
which are due and payable through the Effective Time or claimed by any
Taxing Authority to be due and payable through the Effective Time have
been or will be paid or reserved for, or adequate provision will be made
therefor in accordance with GAAP, as of the Effective Time, other than
Taxes being contested in good faith by the Company or any of its
15
Subsidiaries concerning an aggregate amount which is not material to the
business of the Company or any of its Subsidiaries.
(c) Except as set forth in Section 3.9 of the Company Disclosure
Letter, there are: (i) no material Tax Claims pending against the Company
or any of its Subsidiaries and neither the Company nor any of its
Subsidiaries knows of any threatened Claim for Tax deficiencies or any
basis for such Claims; (ii) no Tax Returns for the Company or any of its
Subsidiaries that have been or are currently being examined by any Taxing
Authority; and (iii) not now in force any waivers or agreements by the
Company or any of its Subsidiaries for the extension of time for the
assessment of any material Tax, nor has any such waiver or agreement been
requested by any Taxing Authority.
(d) The Company and each of its Subsidiaries have paid or are
withholding and will pay when due to the proper Taxing Authorities all
material withholding amounts required to be withheld with respect to all
Taxes, including sales and use Taxes and Taxes on income or benefits and
taxes for unemployment, social security or other similar programs with
respect to salary and other compensation of directors, officers and
employees of the Company and its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has any
liability for any material federal, state, local, foreign or other Taxes
of any corporation or entity other than the Company and its Subsidiaries,
including any liability arising from the application of U.S. Treasury
Regulation ss. 1.1502-6 or any analogous provision of state, local or
foreign law.
(f) Neither the Company nor any of its Subsidiaries is or has been a
party to any material Tax sharing agreement with any corporation other
than the Company and its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries is or has been a
"United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code and neither Parent nor Sub is
required to withhold Tax on the purchase of Company Common Stock pursuant
to the Merger by reason of Section 1445 of the Code.
Section 3.10 Actions and Proceedings. Except as set forth in Section 3.10
of the Company Disclosure Letter, there are no outstanding and unsatisfied
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company or any of its Subsidiaries, or against or
involving any of the present or former directors, officers or employees of the
Company or any of its Subsidiaries, solely in their respective capacities as
such, or any of its or their properties, assets or business or any Benefit Plan
that, individually or in the aggregate, (a) would involve the potential for loss
in the aggregate in excess of $10,000 or (b) materially impair the ability of
the Company to perform its obligations hereunder. Except as set forth in Section
3.10 of the Company Disclosure Letter, there are no actions, suits, claims,
litigation or legal, administrative or arbitration proceedings or investigations
pending or, to the Knowledge (as hereinafter defined) of the Company, threatened
against or involving the Company or any of its Subsidiaries or any of its or
their present or former directors, officers or employees, solely in their
16
respective capacities as such, or any of its or their properties, assets or
business or any Benefit Plan that would materially impair the ability of the
Company to perform its obligations hereunder or consummate the transactions
contemplated hereby. As of the date hereof, there are no actions, suits, claims,
litigation or legal, administrative, governmental or arbitration proceedings or
investigations ("Claims") pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any of its or their
present or former officers, directors or employees or any of its or their
properties, assets or business or any Benefit Plan, in each case relating to the
transactions contemplated by this Agreement. Section 3.10 of the Company
Disclosure Letter sets forth a list of all outstanding actions, suits,
litigation or legal, administrative, governmental or arbitration proceedings or
formal investigations to which the Company or any of its Subsidiaries is a
party, excluding bankruptcies and deficiency collection matters other than
deficiency collection matters where the Company is a defendant. For purposes of
this Agreement, "Knowledge of the Company" means the actual knowledge of the
individuals identified on Section 3.10 of the Company Disclosure Letter.
Section 3.11 Employees; Employee Benefits. (a) Copies of all material
written agreements with, concerning or relating to all current employees of the
Company and its Subsidiaries (the "Employees") and former employees of the
Company and its Subsidiaries ("Former Employees"), including union and
collective bargaining agreements, and all material employment policies, and all
amendments and supplements thereto, have been made available to Parent, and a
list of all such agreements and policies is set forth on Section 3.11(a) of the
Company Disclosure Letter. The Company does not currently offer or provide
retiree health and other welfare benefits to Former Employees or their
dependents, survivors or beneficiaries, and neither the Company nor any of its
Subsidiaries has any known liabilities (contingent or otherwise) with respect
thereto except as otherwise required by Section 4980B of the Code, Part 6 of
title I of ERISA (as defined in Section 3.11(c)) or similar provisions of
applicable state law. Except as set forth in Section 3.11(a) of the Company
Disclosure Letter, there are no outstanding loans from the Company or any of its
Subsidiaries to any Employees or Former Employees other than loans from a
Benefit Plan (as defined in Section 3.11(c)) described in Section 401(k) of the
Code. There are no outstanding loans to any executive officer of the Company.
Except as set forth on Section 3.11(a) of the Company Disclosure Letter, since
the date of the Most Recent Balance Sheet, the Company and its Subsidiaries have
not, in any material respect taken as a whole, except in the ordinary course of
business and consistent with past practice, (i) increased the salary or other
compensation payable or to become payable to or for the benefit of any of the
Employees or Former Employees, (ii) provided any of the Employees with any
increased security or tenure of employment, (iii) increased the amounts payable
to any of the Employees upon the termination of any such Employee's employment
or (iv) adopted, increased, augmented or improved benefits granted to or for the
benefit of any of the Employees or Former Employees under any Benefit Plan. To
the Knowledge of the Company, all individuals who, in the last 24 months, have
performed services for the Company or its Subsidiaries as a consultant or
independent contractor ("Non-Employees") are believed to be independent
contractors and not employees of the Company or its Subsidiaries and to the
Knowledge of the Company neither the Company nor any of its Subsidiaries is
believed to have any material liability to or with respect to such Non-Employees
for the withholding or payment of any income or social security taxes, the
provision of benefits under any Benefit Plans or for any other charges, taxes or
benefits with respect thereto. Copies of each agreement with any Non-Employee
pursuant to which the Company or any of its Subsidiaries may have any material
17
liability or which are not terminable upon less than 30 days notice have been
made available to Parent and a list of all such agreements is set forth on
Section 3.11(a) of the Company Disclosure Letter.
(b) To the Knowledge of the Company, the Company and each of its
Subsidiaries has complied in all material respects with all laws,
statutes, rules and regulations applicable with respect to any employees,
terms and conditions of employment and wages and hours in each of the
jurisdictions in which it operates or does business, and no Claims have
been made or are pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries arising out of or relating
to or alleging any violation of any of the foregoing. To the Knowledge of
the Company, the Company and each of its Subsidiaries has complied in all
material respects with the employment eligibility verification form
requirements under the Immigration Reform Control Act, as amended
("IRCA"), with respect to Employees and with the paperwork provisions and
anti-discrimination provisions of IRCA and has obtained and maintained the
employee records and I-9 forms with respect to the Employees in proper
order as required by law. To the Knowledge of the Company, the Company is
not currently employing any Employees who are not authorized to work in
the United States.
(c) Section 3.11(c) of the Company Disclosure Letter sets forth a
list of each material defined benefit and defined contribution plan,
retirement plan, stock ownership plan, executive compensation program or
arrangement, bonus plan, incentive compensation plan or arrangement,
deferred compensation agreement or arrangement, supplemental retirement
plan or arrangement, vacation pay, unemployment compensation plan or
program, sickness, disability or death benefit plan (whether provided
through insurance, on a funded or unfunded basis or otherwise), medical or
life insurance plan, cafeteria or flexible benefits plan, fringe benefit
plan, employee stock option or stock purchase plan, severance pay,
termination or salary continuation plan, change in control plan, program
or arrangement, retention plan or program and each other employee benefit
plan, program, policy, agreement or arrangement, including each "employee
benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is
sponsored or maintained by the Company or any of its ERISA Affiliates (as
defined in Section 3.11(d)), to which the Company or any of its ERISA
Affiliates is a party, in which the Company or any of its ERISA Affiliates
participates, which the Company or any of its ERISA Affiliates has a
commitment to create or under or with respect to which the Company or any
of its ERISA Affiliates may have any material liability or material
contingent liability, all of which are hereinafter referred to as the
"Benefit Plans." Except as set forth in Section 3.11(c) of the Company
Disclosure Letter, neither Parent nor the Company will incur any material
liability (including any materially increased liability) under any
severance agreement, deferred compensation agreement, employment
agreement, similar agreement or Benefit Plan solely as a result of the
consummation of the transactions contemplated by this Agreement.
(d) Except as set forth on Section 3.11(d) of the Company Disclosure
Letter, each Benefit Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to meet the
requirements for qualification under Section 401(a) of the Code and
exemption from federal Income Taxes under Section 501(a) of the Code meets
18
the requirements of Section 401(a) of the Code; the trust, if any, forming
part of such plan is exempt from U.S. Federal Income Tax under Section
501(a) of the Code; a favorable "GUST" determination letter has been
issued by the Internal Revenue Service (the "IRS") with respect to each
plan and trust, and since the date of such determination letter, if any,
there have been no circumstances to the Knowledge of the Company which are
likely to adversely affect the qualification of such plan. No Benefit Plan
is a "voluntary employees beneficiary association" (within the meaning of
Section 501(c)(9) of the Code) or a "multiple employer welfare
arrangement" (within the meaning of Section 3(40) of ERISA) and there have
been no other "welfare benefit funds" (within the meaning of Section 419
of the Code) relating to Employees or Former Employees. With respect to
each Benefit Plan, the Company has heretofore made available to Parent
complete and correct copies of the following documents, where applicable:
(i) the three most recent annual reports (Form 5500 series), together with
schedules, as required, filed with the IRS, and any financial statements
and opinions required by Section 103(a)(3) of ERISA, (ii) the most recent
determination letter issued by the IRS, (iii) the most recent summary plan
description and all modifications thereof, (iv) the text of the Benefit
Plan and of any trust, insurance or annuity contracts maintained in
connection therewith, (v) the most recent actuarial report, if any,
relating to the Benefit Plan and (vi) the most recent actuarial valuation,
study or estimate of any retiree medical and life insurance benefits plan
or supplemental retirement benefit plan. The term "ERISA Affiliate" means,
with respect to any Person, any corporation or other trade or business
under common control with such Person within the meaning of Section 414(b)
or (c) of the Code. All of the Subsidiaries of the Company are ERISA
Affiliates of the Company.
(e) Except as described in Section 3.11(e) of the Company Disclosure
Letter, none of the assets of any Benefit Plan is invested in employer
securities or employer real property (other than as permitted by Section
407 of ERISA). There have been no acts or omissions by the Company or any
of its ERISA Affiliates which have given rise to or, to the Knowledge of
the Company, may reasonably be expected to give rise to material fines,
penalties, taxes or related charges under section 502 of ERISA or Chapters
43, 47, 68 or 100 of the Code for which the Company or any of its ERISA
Affiliates may be liable.
(f) With respect to the five consecutive year period ending as of
the Effective Time, none of the Benefit Plans was or is a "multiemployer
plan" within the meaning of Section 3(37) or 4001(a)(3) of ERISA and no
Benefit Plan was or is subject to (i) Title IV of ERISA or (ii) Section
412 of the Code or parallel provision of ERISA. All contributions required
to be made to or with respect to each Benefit Plan prior to the date
hereof have been made or have been accrued for in the books and records of
the Company or its ERISA Affiliates for all periods through the date
hereof.
(g) Except as set forth on Section 3.11(g) of the Company Disclosure
Letter there have been no "prohibited transactions" within the meaning of
Section 4975 of the Code or Part 4 of Subtitle B of Title I of ERISA in
connection with any of the Benefit Plans that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the
Company or any ERISA Affiliate to a material Tax or penalty imposed by
19
either Section 4975 of the Code or Section 502(i) of ERISA; each Benefit
Plan has, in all material respects, been administered to date in
accordance with the applicable provisions of ERISA, the Code and other
applicable law and with the terms and provisions of all documents,
contracts or agreements pursuant to which such Benefit Plan is maintained;
there has been no correction of any defects with respect to a Benefit Plan
subject to Section 401(a) of the Code or its operation pursuant to any
procedures established, or program permitted, by the IRS or otherwise
within the 36-month period prior hereto; all reports and information
required to be filed with the Department of Labor or the IRS with respect
to any Benefit Plan have been timely filed or delivered; there is no Claim
pending or, to the Knowledge of the Company, threatened involving a
Benefit Plan (other than routine claims for benefits), and, to the
Knowledge of the Company, there is no basis for such a Claim; none of the
Benefit Plans nor any fiduciary thereof has been, to the Knowledge of the
Company, the direct or indirect subject of an order or investigation or
examination by a governmental or quasi-governmental agency and there are
no matters pending before the IRS, the Department of Labor or any other
Governmental Entity with respect to a Benefit Plan; and there has not been
and will be no "parachute payment" (as defined in Section 280G(b)(2) of
the Code) to any of the Employees prior to the Closing or as a result of
the transactions contemplated by this Agreement.
(h) Except as set forth in Section 3.11(h) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has received any
written notice from any Employee indicating that such Employee intends to
terminate its employment with the Company or any of its Subsidiaries and,
to the Knowledge of the Company, no Employee intends to terminate its
employment with the Company or any of its Subsidiaries.
Section 3.12 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or labor
contract. No labor union or other collective bargaining unit represents or has
ever represented any of the Employees in connection with their employment with
the Company or any of its Subsidiaries. There is no labor strike, dispute,
slowdown, work stoppage, picketing, filed grievance, unfair labor practice
charge, investigation, complaint or other proceeding relating to employment
pending or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries which may interfere with the respective
business activities of the Company or any of its Subsidiaries. No consent of any
labor union or other collective bargaining unit representing Employees is
required to consummate the transactions contemplated by this Agreement.
Section 3.13 Title of Property and Assets. Except as set forth in Section
3.13 of the Company Disclosure Letter or as would not have a Material Adverse
Effect on the Company, the Company or its Subsidiaries have good title to, or a
valid leasehold interest in or license to use, the property and assets (real,
personal, mixed, tangible and intangible, but not including the intellectual
property rights covered by Section 3.17) reflected in the Company Annual Report
or acquired since the date thereof, free and clear of all Liens, except such
Liens which do not materially impair the Company's or any such Subsidiary's
ownership or use of such property or assets. With respect to the property and
assets it leases, except as would not have a Material Adverse Effect on the
20
Company, each of the Company and its Subsidiaries are in compliance with such
leases and all leases to which the Company or any of its Subsidiaries are a
party are in full force and effect and constitute valid and binding obligations
of the Company or the Subsidiary, as the case may be. Except as would otherwise
not have a Material Adverse Effect on the Company or as set forth in Section
3.17 of the Company Disclosure Letter, the Company's and each of its
Subsidiaries' assets constitute all of the properties, interests, assets and
rights (real, personal, mixed, tangible and intangible) held for use or used in
connection with the business and operations of the Company and its Subsidiaries.
Section 3.14 Real Property. (a) Set forth in Section 3.14 of the Company
Disclosure Letter is a list of all material leases, subleases, licenses and
other agreements (collectively, the "Real Property Leases") under which the
Company or any of its Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, any real property (the "Leased Real Property").
(b) Except as provided in Section 3.14 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries owns or holds, or
is obligated under or a party to, any option, right of first refusal or
other contractual right to purchase any Leased Real Property or any
portion thereof or interest therein.
Except as provided in Section 3.14 of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries owns any real property.
Except as set forth in Section 3.14 of the Company Disclosure Letter, as
to all of the Real Property Leases, (i) to the Knowledge of the Company, they
are enforceable in accordance with their respective terms and constitute valid
and binding obligations of the respective parties thereto, (ii) there have not
been and there currently are not any material defaults thereunder by the Company
or any of its Subsidiaries or, to the Knowledge of the Company, any other party
thereto, (iii) to the Knowledge of the Company, no event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default thereunder entitling the landlord
thereunder to terminate any of the Real Property Leases, (iv) all rent and
additional rent payable thereunder has been paid in full, (v) except as set
forth in the Real Property Leases made available to Parent, no waiver,
indulgence or postponement of any of the obligations of the Company or any of
its Subsidiaries thereunder has been granted, (vi) there are no oral agreements
with respect to any of the Real Property Leases, (vii) consummation of the
transactions contemplated by this Agreement will not enlarge or accelerate any
of the obligations of the Company or give additional rights to any other party
thereto, or cause the termination, lapse, or otherwise affect any of the Real
Property Leases and (viii) there are no material disputes or forbearance
programs in effect, as to any of the Real Property Leases.
Section 3.15 Insurance. Section 3.15 of the Company Disclosure Letter
contains a list of all policies of casualty, liability, theft, fidelity, life
and other forms of insurance held by the Company or any of its Subsidiaries. All
such insurance policies are in the name of the Company or its Subsidiaries, and
all premiums with respect to such policies have been paid when due. All such
policies are in full force and effect, and neither the Company nor any of its
Subsidiaries has received notice of cancellation or termination of any such
policy. To the Knowledge of the Company, since the date of the Most Recent
Balance Sheet, neither the Company nor any of its Subsidiaries has been denied
or had revoked or rescinded any policy of insurance, nor borrowed against any
21
such policies, other than the receipt of insurance industry standard
"non-renewal" letters (none of which have given rise to the revocation,
rescission or termination of any such policy prior to the end of the policy
term) or letters from insurance providers notifying the Company that such
providers are exiting certain risk markets. Except as set forth in Section 3.15
of the Company Disclosure Letter, no material claim under any such policy is
pending as of the date hereof.
Section 3.16 Business Relations. Except as set forth in Section 3.16 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has received any written notice from any lender, customer, consultant,
contractor, supplier or vendor indicating that it intends to terminate or modify
its business relationship with the Company or any of its Subsidiaries, which
termination or modification would have a Material Adverse Effect on the Company.
Section 3.17 Intellectual Property. (a) Section 3.17(a)(i) of the Company
Disclosure Letter contains a list of all material Intellectual Property (as
hereinafter defined) owned by the Company or any of its Subsidiaries (the "Owned
Intellectual Property"), indicating the owner of each item thereof and those
items that have been registered or are the subject of a pending application.
Section 3.17(a)(ii) of the Company Disclosure Letter contains a list of all
material Intellectual Property used by the Company or any of its Subsidiaries
other than the Owned Intellectual Property (the "Other Intellectual Property"),
indicating the licensee of each item thereof and those items that have been
registered or are the subject of a pending application. All material contracts,
sublicenses, assignments and indemnities which govern rights or obligations of
the Company or any of its Subsidiaries with respect to any Intellectual Property
(the "Intellectual Property Agreements") have been made available to Parent.
Correct and complete copies of all written items identified in Sections
3.17(a)(i) and (ii) of the Company Disclosure Letter have been made available to
Parent. "Intellectual Property" means any and all: United States and foreign
patents and patent applications (including continuations, continuations-in-part,
divisionals, provisionals, reissues and re-examinations thereof); registered and
unregistered trade names, trademarks, service names and service marks (and
applications for registration of the same) and all goodwill associated
therewith; copyrights and copyright registrations (and applications for the
same); trade secrets (including know how); computer data; computer programs and
software (in source code and object code form) and firmware and all related
programming, user manuals and systems documentation; proprietary inventions,
processes, designs (whether or not patentable or reduced to practice) and
formulae; and all other intellectual property rights and assets.
(b) Except as disclosed on Section 3.17(a)(i) of the Company
Disclosure Letter, the Company and its Subsidiaries own and have, and
immediately after the Effective Time the Surviving Corporation will own
and have, the same right, title and interest in and to the Owned
Intellectual Property and, to the Knowledge of the Company, the
unrestricted right, subject to the express provisions of the applicable
Intellectual Property Agreement, to use the Other Intellectual Property,
in each case free and clear of any Liens. The Owned Intellectual Property
and Other Intellectual Property comprise all of the Intellectual Property
22
necessary for, and the computer software and firmware included therein
have all of the performance capabilities, characteristics and functions
described in their documentation and specifications and as are necessary
for, the conduct and operation of the business of the Company and its
Subsidiaries as presently conducted. The Company possesses technical
documentation relating to computer software that is Owned Intellectual
Property or Other Intellectual Property and such technical documentation
relating to computer software that is Owned Intellectual Property includes
system documentation, statements of principles of operation, schematics,
tools and explanation necessary to render such materials understandable
and usable by a computer programmer of reasonable skill. To the Knowledge
of the Company, none of the Owned Intellectual Property or Other
Intellectual Property contains any virus, computer instructions, circuitry
or other technological means intended to disrupt, damage or interfere with
operation of applicable software.
(c) To the Knowledge of the Company, neither the Company nor any of
its Subsidiaries has infringed, misappropriated or otherwise conflicted
with any rights of any Person in respect of any Intellectual Property. To
the Knowledge of the Company, none of the Owned Intellectual Property or
Other Intellectual Property is being infringed or otherwise used or is
available for use by any other Person, except for software licensed by the
Company or any of its Subsidiaries from third parties that was not
developed for the exclusive use of the Company and its Subsidiaries. To
the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has used or incorporated within any of the Owned Intellectual
Property any software that contains or is derived in any manner from, in
whole or in part, any software distributed as free software, shareware,
open source software (e.g., Linux), or under similar licensing or
distribution models, including software licensed or distributed under any
of the following licenses or distribution models: (i) GNU's General Public
License (GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License
(e.g., PERL); (iii) the Mozilla Public License(s); (iv) the Netscape
Public License; (v) the Berkeley software design (BSD) license including
Free BSD or BSD-style license; (vi) the Sun Public License (SPL); (vii) an
Open Source Foundation License (e.g., CDE and Motif Unix user interfaces);
and (viii) the Apache Server License.
(d) The Intellectual Property Agreements (i) are valid, legal,
binding, enforceable and in full force and effect in accordance with their
terms, and no material default, violation or breach exists thereunder by
the Company or any of its Subsidiaries or, to the Knowledge of the
Company, by any other party thereto, and, to the Knowledge of the Company,
no event has occurred and is continuing that, with notice or the passage
of time or both, would constitute a default, violation or breach
thereunder by the Company or any of its Subsidiaries or, to the Knowledge
of the Company, any other party, and (ii) are free and clear of all Liens.
All royalties, license fees, charges or other amounts payable by, on
behalf of, to or for the account of the Company or any of its Subsidiaries
in respect of any Intellectual Property are disclosed or reflected in the
consolidated financial statements of the Company.
(e) No written Claim or demand of any Person has been made, nor is
there any Claim pending or, to the Knowledge of the Company, threatened,
which (i) challenges the rights of the Company or any of its Subsidiaries
in respect of any Intellectual Property, (ii) asserts that the Company or
23
any of its Subsidiaries is infringing, has misappropriated or is otherwise
in conflict with, or is, required to pay any royalty, license fee, charge
or other amount with regard to, any Intellectual Property, or otherwise
asserts that a license or other Intellectual Property right is necessary
or desirable for the Company or any of its Subsidiaries to conduct its
business, or (iii) claims that any default exists under any Intellectual
Property Agreement. Since the date of the Most Recent Balance Sheet, none
of the Owned Intellectual Property or the Other Intellectual Property has
been subject to any outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity or has been the subject of any claim,
demand, action, suit, litigation or legal, administrative or arbitration
proceeding or investigation.
(f) Except as set forth in Section 3.17(f) of the Company Disclosure
Letter, each of the Employees, agents, consultants, contractors and others
who has contributed to or participated in the discovery, creation or
development of any Intellectual Property on behalf of the Company or any
of its Subsidiaries ("Personnel"): (i) has assigned to the Company or one
of its Subsidiaries, or is under a valid obligation to assign to the
Company or one of its Subsidiaries (or to a Person who is obligated by
contract to assign the same to the Company or one of its Subsidiaries),
all right, title and interest in such Intellectual Property; (ii) is a
party to a valid "work-made-for-hire" agreement under which the Company or
one of its Subsidiaries is deemed be the original owner/author of all
subject matter included in such Intellectual Property; or (iii) to the
extent that Personnel do not have the ability to take any of the actions
described in the foregoing clauses (i) or (ii), has granted to the Company
or one of its Subsidiaries a license or other legally enforceable right
granting the Company or one of its Subsidiaries perpetual, unrestricted
and royalty-free rights to use such Intellectual Property. Immediately
after the Effective Time, the Surviving Corporation and its Subsidiaries
shall own all right, title and interest of the Company and its
Subsidiaries under all of the assignments, agreements, licenses and other
arrangements described in the foregoing clauses (i), (ii) and (iii). Each
of the Company and its Subsidiaries has taken all reasonable, customary
and usual precautions, including electronic and physical security
precautions, to protect the secrecy, confidentiality and value of its
trade secrets and confidential information and all third party
confidential information in its possession (the "Protection Program") and,
to the Knowledge of the Company, there has been no material violation of
the Protection Program by any Person.
Section 3.18 Material Company Contracts. Section 3.18 of the Company
Disclosure Letter sets forth a true and complete list of each material contract,
agreement, lease, indenture or other instrument (other than Real Property Leases
and Benefit Plans) to which the Company or any Subsidiary is a party or by or to
which the Company or any Subsidiary or its property may be bound or subject
(each a "Material Company Contract"). Except as set forth in Section 3.18 of the
Company Disclosure Statement:
(a) To the Knowledge of the Company, each Material Company Contract
is legal, valid, binding, enforceable and in full force and effect;
(b) Subject to obtaining any consent disclosed in Section 3.18 of
the Company Disclosure Letter, the transactions contemplated by this
Agreement will not prevent the Material Company Contract from continuing
to be legal, valid, binding, enforceable and in full force and effect on
24
identical terms following the consummation of the transactions
contemplated hereby; and
(c) To the Knowledge of the Company, neither the Company nor any
other party thereto, is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material
breach or default, or permit termination, modification or acceleration,
under the Material Company Contract.
(d) No Material Contract included or incorporates any provision, the
effect of which may be to enlarge or accelerate any of the obligations of
the Company or to give additional rights to any other party thereto, or
will terminate, lapse, or in any other way be affected, by reason of the
transactions contemplated by this Agreement.
Section 3.19 Investment Securities. Except for its interests in any of the
Company's Subsidiaries, neither the Company nor any of its Subsidiaries (a)
owns, has any right to acquire or is involved in negotiations to acquire,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any Person or (b)
has the ability to control (whether through the ownership of voting securities
or otherwise) any other Person.
Section 3.20 Environmental Liability. There are no Claims or remediation
activities of any nature seeking to impose, or that could reasonably result in
the imposition, on the Company or any of its Subsidiaries of any material
liability or obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance relating to the
protection of the environment or human health including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("Environmental Laws"), pending or, to the Knowledge of the Company, threatened
against Company or any of its Subsidiaries. To the Knowledge of Company, there
is no reasonable basis for any such Claim or remediation activity that would
impose any material liability or obligation on the Company or any of its
Subsidiaries. To the Knowledge of the Company, the Company and each of its
Subsidiaries is, and has been, in compliance with all applicable Environmental
Laws in all material respects and has no material liability under any
Environmental Law.
Section 3.21 State Takeover Statutes. Other than dissenters rights
provided for under the DGCL, no state "fair price," "control share acquisition,"
"business combination moratorium" or other state takeover statute is applicable
to the Merger or the other transactions contemplated by this Agreement.
Section 3.22 Required Vote of Company Stockholders. The affirmative vote
of the holders of a majority of the outstanding shares of Company Common Stock
and each series of the Company Preferred stock, voting together as a single
class, is required to approve the Merger and adopt this Agreement. No other vote
of the securityholders of the Company is required by law, the Company Charter or
the Company Bylaws or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby.
Section 3.23 Brokers. No broker, investment banker or other Person is
entitled to any broker's, finder's or other similar fee or commission in
25
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.24 Accounting and Disclosure Controls. Each of the Company and
its Subsidiaries maintains a system of accounting controls sufficient to provide
reasonable assurances that: (a) transactions are executed in accordance with
management's general or specific authorization; (b) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of the
Company in conformity with GAAP and to maintain accountability for assets; (c)
access to assets is permitted only in accordance with management's general or
specific authorization; (d) the reporting of assets is compared with existing
assets at regular intervals and appropriate action is taken with respect to any
differences; (e) material information relating to the Company and its
Subsidiaries is promptly made known to the officers responsible for establishing
and maintaining the system of internal control over financial reporting; and (f)
any significant deficiencies or material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
materially and adversely affect the ability to record, process, summarize and
report financial information, and any fraud whether or not material that
involves management or other employees who have a significant role in respect of
internal control over financial reporting, are adequately and promptly disclosed
to the independent auditors and the Board of Directors of the Company.
ARTICLE 4
COVENANTS RELATING TO COMPANY CONDUCT OF BUSINESS
Section 4.1 Company Conduct of Business Pending the Merger. Except as
expressly permitted by this Agreement, during the period from the date of this
Agreement through the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, in all material respects carry on its business in the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable commercial efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it. Without limiting the generality of
the foregoing, and except as otherwise contemplated by this Agreement or as set
forth in Section 4.1 of the Company Disclosure Letter, the Company shall not,
and shall not permit any of its Subsidiaries to, without the prior written
consent of Parent, which consent shall not be unreasonably withheld or delayed:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, or otherwise
make any payments to its stockholders in their capacity as such other than
dividends and distributions by any Subsidiary to its parent, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities.
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
26
options to acquire, any such shares, voting securities, equity equivalents
or convertible securities, other than the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options;
(c) amend its charter or bylaws or other comparable charter or
organizational documents;
(d) merge or consolidate with or effect any business combination
with any person, business, corporation, limited liability company,
partnership, association or other business organization or entity (a
"Person") or division thereof;
(e) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any Person or division thereof or (ii) any
assets that are material, individually or in the aggregate, to the Company
and its Subsidiaries taken as a whole other than retail installment
contracts purchased in the ordinary course of business;
(f) sell, lease, license, mortgage, encumber or otherwise dispose of
material properties or assets, other than in connection with sales in the
ordinary course of business or in connection with the Company's
securitization program;
(g) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other Person, other than (i) indebtedness or
guarantees in the ordinary course of business and (ii) loans, advances,
capital contributions and other investments between the Company and any of
its Subsidiaries or between Subsidiaries of the Company;
(h) enter into, adopt or amend in any material respect any severance
plan, agreement or arrangement, Benefit Plan or employment or consulting
agreement, except as required by applicable law or by any plan, contract
or other arrangement disclosed on Schedule 4.1(g) of the Company
Disclosure Letter hereto and made available to Parent for review;
(i) other than in the ordinary course of business or as required by
applicable law or by any plan, contract or other arrangement disclosed on
a schedule hereto and made available to Parent for review, increase the
compensation (including bonuses, profit sharing and pension benefits)
payable or to become payable to any of its Employees;
(j) change the Company's independent public accountants or make any
change in accounting methods or policies of the Company except as required
by applicable law, GAAP or the Financial Accounting Standards Board, in
each case determined in consultation with the Company's independent public
accountants;
(k) make any tax election not in the ordinary course of business;
(l) change, in any material respect, any of the Company's credit
policies or hedging strategies; or
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(m) agree or commit to do any of the foregoing.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Additional Equity. Parent shall use reasonable best efforts to
arrange for a minimum of $3 million in equity or convertible debt investments in
the Company within thirty (30) days of the Closing (a "Financing"). In the event
the Parent fails to arrange a Financing within such 30-day period, the Company,
at its option, shall cause the stockholders that have received the Merger Shares
to return the Parent Common Stock to Parent and the Company shall, within sixty
(60) days after the Closing, return to Parent all sums heretofore advanced to
the Company (plus interest at the rate of 12% per annum), which the parties
acknowledge has been previously advanced by Parent to the Company. The parties
will use reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things, necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Section 5.1.
Section 5.2 Stock Options and Stock Plan; Options. (a) At the Effective
Time, each outstanding Company Stock Option, whether vested or unvested, will be
assumed by Parent. Each such outstanding Company Stock Option so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions as set forth in the Caerus, Inc. 2004 Stock Option Plan,
option agreements thereunder and other relevant documentation immediately prior
to the Effective Time, except (i) that such Company Stock Option will be
exercisable solely for that number of whole shares of Parent Common Stock equal
to the product of the number of shares of Company Common Stock that were
purchasable under such Company Stock Option immediately prior to the Effective
Time multiplied by the Common Exchange Amount, rounded down to the nearest whole
number of shares of Parent Common Stock, (ii) that the per-share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Stock Option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Stock
Option was exercisable immediately prior to the Effective Time by the Common
Exchange Amount, and rounding the resulting exercise price up to the nearest
whole cent and (iii) as such terms may be rendered inoperable by the
transactions contemplated hereby.
(b) Parent shall reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of Company Stock Options
assumed by Parent under this Agreement.
(c) Except as set forth in Section 5.2(c) of the Company Disclosure
Letter, the vesting of each Company Stock Option shall not accelerate as a
result of, or in connection with, the transactions contemplated hereby.
Section 5.3 Access to Information; Meetings with Company Officers. (a)
Subject to currently existing contractual and legal restrictions applicable to
the Company or any of its Subsidiaries, the Company shall, and shall cause each
of its Subsidiaries to, afford to the accountants, counsel, financial advisors
and other representatives of Parent reasonable access to, and permit them to
28
make such inspections as they may reasonably require, during normal business
hours during the period from the date of this Agreement through the Effective
Time, all of its properties, books, contracts, commitments and records
(including the work papers of independent accountants, if available and subject
to the consent of such independent accountants) and, during such period, the
Company shall, and shall cause each of its Subsidiaries to, furnish promptly to
Parent (i) a copy of each report, schedule, and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws; (ii) a copy of the unaudited financial statements of the Company for each
month ended during such period, in each case within fifteen (15) days after the
last day of each such month ended; and (iii) all other information concerning
its business, properties and personnel as Parent may reasonably request.
(b) During the period from the date of this Agreement through the
Effective Time, the Company shall permit Parent's officers and executives
to meet with officers and executives of the Company responsible for the
consolidated financial statements (including, in each case, any notes
thereto) of the Company, the internal controls of the Company and the
disclosure controls and procedures of the Company to discuss such matters
as Parent may deem reasonably necessary or appropriate for Parent or the
Company to satisfy obligations under Sections 302 and 906 of SOXA.
Section 5.4 Certain Payments, Fees and Expenses. Except as provided in
this Section 5.4 and Section 5.8, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby including the fees and disbursements of counsel
and accountants and all financing commitment fees, shall be paid by the party
incurring such costs and expenses.
Section 5.5 Reasonable Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including: (i) obtaining all
necessary actions or nonactions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and taking all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an action
or proceeding by, any Governmental Entity; (ii) obtaining all necessary
consents, approvals or waivers from third parties; (iii) defending any lawsuits
or other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed; and (iv) executing and delivering
any additional instruments necessary to consummate the transactions contemplated
by this Agreement. No party to this Agreement shall consent to any voluntary
delay of the consummation of the Merger at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent shall
not be unreasonably withheld.
(b) Each party hereto shall use its reasonable best efforts not to
take any action, or enter into any transaction, which would cause any of
its representations or warranties contained in this Agreement to be untrue
29
in any material respect or result in a material breach of any covenant
made by it in this Agreement or which could reasonably be expected to
impede, interfere with, prevent or delay in any material respect, the
Merger.
Section 5.6 Public Announcements. Parent and the Company shall not issue
any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law.
Section 5.7 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.8 Indemnification; Directors and Officers Insurance. From and
after the Effective Time, Parent and the Surviving Corporation shall indemnify
and hold harmless all past and present officers and directors of the Company and
of its Subsidiaries (the "Indemnified Parties") to the full extent such Persons
may be indemnified by the Company, for acts or omissions occurring at or prior
to the Effective Time, pursuant to the Company Charter and the Company Bylaws
and any indemnification agreement, as in effect immediately prior to the
Effective Time, and under applicable laws (including, without limitation,
payment of expenses in advance of the final disposition of any action, suit,
proceeding or investigation to the full extent permitted by law). Without
limiting the foregoing, if any claim, action, suit, proceeding or investigation
is brought against any Indemnified Party (whether arising before or after the
Effective Time), the Parent and Surviving Corporation shall retain counsel
reasonably satisfactory to the Indemnified Party, and the Parent and the
Surviving Corporation shall pay all reasonable fees and expenses of such
counsel. Parent will obtain "tail" coverage for 24 months under the Company's
policy of director and officer liability insurance.
Section 5.9 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or nonoccurrence, of any event of which it is aware and which
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect so as to cause
a failure of the condition provided for in Section 6.2(a) or Section 6.3(a), as
applicable; or (ii) any failure of Parent or the Company, as the case may be, to
comply in a timely manner with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder so as to cause a failure of the
condition provided for in Section 6.2(a) or Section 6.3(a), as applicable;
provided, however, that the delivery of any notice pursuant to this Section 5.9
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.10 Cedar Boulevard Lease Funding. The Company shall obtain
evidence satisfactory to Parent, in its sole discretion, of the consent to
and/or waiver of, any and all breaches of, or defaults under, any terms of any
30
documents between the Company and Cedar Boulevard Lease Funding, including, if
required, the consent of Cedar Boulevard Lease Funding to this Agreement, the
Merger and the other transactions contemplated hereby.
Section 5.11 Employment Agreements. The individuals identified in Section
6.3(e) of the Company Disclosure Letter shall enter into an Employment
Agreement, in substantially the form attached hereto as Exhibit B.
Section 5.12 Opinion of Counsel. Pillsbury Winthrop, LLP legal counsel to
the Company, shall provide an opinion to Parent, dated as of the date of
Closing, in substantially the form of Exhibit C hereto.
Section 5.13 Secretary's Certificate. The Company shall deliver to Parent
a certificate, dated as of the date of Closing, of the Secretary of the Company,
in form and substance reasonably satisfactory to Parent, certifying (a) the
Company Charter and the certificate of incorporation of each of the Company's
Subsidiaries, (b) the Company Bylaws and the bylaws of each of the Company's
Subsidiaries, (c) a certificate of good standing for each of the Company and its
Subsidiaries duly certified by the Secretary of State of the State of Delaware
and (d) the incumbency of each individual authorized to execute this Agreement
on behalf of the Company. The Parent shall deliver to Company a certificate,
dated as of the date of Closing, of the Secretary of the Parent, in form and
substance reasonably satisfactory to the Company, certifying (a) the Charter and
the certificate of incorporation of Parent and Sub, (b) the Bylaws of Parent and
Sub, (c) a certificate of good standing for each of the Parent and Sub duly
certified by the Secretary of State of the State of Texas or Delaware, as
applicable, and (d) the incumbency of each individual authorized to execute this
Agreement on behalf of the Parent and Sub.
Section 5.14 Filings by Affiliates. The Company shall, and shall make
reasonable efforts to cause ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, who will be
Affiliates of the Company upon completion of the Merger, to make all filings
required by the rules and regulations of the SEC, including, but not limited to,
(to the extent required) an Initial Statement of Beneficial Ownership on Form 3,
a Schedule 13D or 13G (as appropriate), and such other filings as are from time
to time required by applicable law.
Section 5.15 Board Seat. Prior to or at the Effective Time, ▇▇▇▇▇ ▇▇▇▇▇
shall have been appointed as a member of the Board of Directors of Parent, to
hold such office for a consecutive period not less than one year from the
Closing Date. Parent shall take any and all action required on its part to
effect the foregoing, including (without limitation) causing ▇▇. ▇▇▇▇▇ to be
nominated and appointed at its annual meeting of shareholders occurring prior to
the anniversary of the Closing Date. During the period commencing the Closing
Date and terminating as of the first anniversary thereof, all stock issuances by
Parent for the purpose of corporate acquisitions will require unanimous board
approval.
Section 5.16 Piggyback Registration Rights. Persons receiving Parent
Company Shares in the Merger shall be entitled to "piggyback" registration
rights, pursuant to a Registration Rights Agreement in substantially the form
attached hereto as Exhibit D.
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ARTICLE 6
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions, it being expressly understood and agreed that nothing herein shall
be deemed to require the receipt of any authorization, consent, declaration or
approval from, or filing with, any state public service commission or the FCC:
(a) Stockholder Approval. This Agreement shall have been duly
approved by the requisite vote of stockholders of the Company in
accordance with applicable law and the Company Charter and Company Bylaws.
(b) Authorizations and Consents. All authorizations, consents,
orders, declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity, which
the failure to obtain, make or occur would have the effect of making the
Merger or any of the transactions contemplated hereby illegal or would
have, individually or in the aggregate, a Material Adverse Effect on
Parent (assuming the Merger had taken place) ("Governmental Approvals"),
shall have been obtained, shall have been made or shall have occurred. All
necessary state securities or Blue Sky authorizations shall have been
received;
(c) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
under any law, rule, regulation, executive order, decree, injunction or
other order which is then in effect and makes the Merger or any of the
transactions contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
condition:
(a) Performance of Obligations; Representations and Warranties.
(i) Each of Parent and Sub shall have performed in all
material respects each of its agreements contained in this Agreement
required to be performed on or prior to the Effective Time.
(ii) The representations and warranties of Parent and Sub in
Section 2.2 shall be true and correct in all material respects as of
the Effective Time as if made on and as of such date.
(iii) The representations and warranties of the Parent and Sub
set forth in this Agreement, other than those set forth in Section
2.2, when read without any exception or qualification as to
materiality or Material Adverse Effect, shall be true and correct as
of the Effective Time, except where the failure to be so true and
correct would not, individually or in the aggregate with all such
failures, be reasonably likely to have a Material Adverse Effect on
Parent.
32
(b) Litigation. There shall not be instituted or pending any suit,
action or proceeding by any Governmental Entity relating to this Agreement
or any of the transactions contemplated hereby which is reasonably likely
to result in a Material Adverse Effect on the Company or Parent.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties.
(i) The Company shall have performed in all material respects
each of its agreements contained in this Agreement required to be
performed on or prior to the Effective Time.
(ii) The representations and warranties of the Company in
Section 3.3 shall be true and correct in all material respects as of
the Effective Time.
(iii) The representations and warranties of the Company set
forth in this Agreement, other than those set forth in Section 3.3,
when read without any exception or qualification as to materiality
or Material Adverse Effect, shall be true and correct as of the
Effective Time, except where the failure to be so true and correct
would not, individually or in the aggregate with all such failures,
be reasonably likely to have a Material Adverse Effect on the
Company.
(b) Consents. The Company shall have obtained (i) the consent or
approval of each Person that is not a Governmental Entity whose consent or
approval shall be required in connection with the transactions
contemplated hereby under any note, mortgage, indenture, lease or other
agreement or instrument by which the Company or any of its Subsidiaries is
bound, except as to which the failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, the Surviving Corporation or Parent and
(ii) each consent identified in Section 6.3(b) of the Company Disclosure
Letter, including without limitation, the consent of Cedar Boulevard Lease
Funding described in Section 5.10.
(c) Dissenting Shares. There shall be no Dissenting Shares in excess
of 5% of all Shares outstanding on a fully diluted basis.
(d) Litigation. There shall not be instituted or pending any suit,
action or proceeding by any Governmental Entity relating to this Agreement
or any of the transactions contemplated hereby which is reasonably likely
to result in a Material Adverse Effect on the Company or Parent.
(e) Material Adverse Effect. Since the date of this Agreement, there
shall have been no events, changes, circumstances or effects that are
continuing and that have a Material Adverse Effect on the Company or the
Surviving Corporation.
33
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. Subject to Section 5.5, this Agreement may be
terminated at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the Merger by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have
failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement required to be complied with prior
to the date of such termination, which failure to comply results in a
failure of the condition provided in Section 6.2(a)(i) or Section
6.3(a)(i), as applicable, and has not been cured within thirty business
days following receipt by such other party of written notice from the
non-breaching party of such failure to comply;
(c) by either Parent or the Company if there has been a breach by
the other party (in the case of Parent, including any breach by Sub) of
any representation or warranty that, together with all such other
breaches, causes a failure of the condition provided in Section 6.2(a)(ii)
or Section 6.2(a)(iii), or Section 6.3(a)(ii) or Section 6.3(a)(iii), as
applicable, and that has not been cured within thirty business days
following receipt by the breaching party from the non-breaching party of
written notice of the breach;
(d) by Parent or the Company if the Merger has not been effected on
or prior to the close of business on the date that is 180 days after the
date of this Agreement; provided, however, that the right to terminate
this Agreement pursuant to this Section 7.1(d) shall not be available to
any party whose failure to fulfill any of its obligations contained in
this Agreement has been the cause of, or resulted in, the failure of the
Merger to have occurred on or prior to the aforesaid date;
(e) by Parent or the Company if any court or other Governmental
Entity having jurisdiction over a party hereto shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable;
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for Section 5.4, Section 5.6 and Article 9, which shall
survive the termination); provided, however, that nothing contained in this
Section 7.2 shall relieve any party hereto from any liability for any willful
breach of a representation or warranty contained in this Agreement or willful
breach of any covenant contained in this Agreement.
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ARTICLE 8
SURVIVAL
Section 8.1 Survival of Representations. Article 9 and the agreements of
the Company, Parent and Sub contained herein that by their terms apply or that
are to be performed in whole or in part after the Effective Time shall survive
the consummation of the Merger. Article 9, the agreements of the Company, Parent
and Sub contained in Sections 5.4 (Expenses), 5.6 (Public Announcements), 7.2
(Effect of Termination and Abandonment) shall survive the termination of this
Agreement. All other representations, warranties, covenants and agreements in
this Agreement shall not survive the consummation of the Merger.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
VoIP, Inc.
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to:
Caerus, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
with a copy to:
Pillsbury ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.2 Interpretation. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of contents, list of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval by the Company's stockholders of the
transactions contemplated hereby in connection with the Merger, but, after any
such approval, no amendment shall be made which by law requires further approval
by such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
Section 9.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement, the Company Disclosure Letter and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. Except with respect to Section 5.8, Section 5.14 and
Section 5.15, this Agreement is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
Section 9.7 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Florida, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
36
(b) EACH OF THE PARTIES HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties.
Section 9.9 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
37
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
VOIP, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
CAERUS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
VOLO ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
38
Exhibit A
Representation Letter
Exhibit B
Employment Agreement
[See Exhibit 10.8 to this Form 8-K]
Exhibit C
Opinion of Pillsbury Winthrop, LLP
Exhibit D
Registration Rights Agreement
[See Exhibit 10.2 to this From 8-K]
Exhibit E
Escrow Agreement