AGREEMENT AND PLAN OF MERGER by and among MOBILEPRO CORP., NEOREACH, INC., NEOREACH WIRELESS, INC., EVERGREEN OPEN BROADBAND INC., AND MARTIN LEVETIN, RICHARD EDMISTON, JOSEPH JEROME BARNELL, III AND ROBERT WEBER Dated as of June 22, 2005
AGREEMENT
AND PLAN OF MERGER
by
and among
NEOREACH,
INC.,
NEOREACH
WIRELESS, INC.,
EVERGREEN
OPEN BROADBAND INC., AND
▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III AND ▇▇▇▇▇▇
▇▇▇▇▇
Dated
as of June 22, 2005
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER,
dated
as of June 22, 2005 (this “Agreement”),
is
made by and among Mobilepro Corp., a Delaware corporation (“Parent”),
NeoReach, Inc., a Delaware corporation (“Buyer”) and a direct wholly owned
subsidiary of Parent (“Buyer”),
NeoReach Wireless, Inc., a Delaware corporation and directly wholly owned
subsidiary of Buyer (“”Buyer
Sub”),
and
Evergreen Open Broadband, Inc., a Delaware corporation (the “Company”)
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III and ▇▇▇▇▇▇ ▇▇▇▇▇
(the “Principals”).
WHEREAS,
the
Board of Directors of Parent, Buyer, Buyer Sub and the Company have determined
that it is in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided
for
herein in which the Company will, subject to the terms and conditions set
forth
herein, merge with and into Buyer Sub, with Buyer Sub being the surviving
entity
(the “Merger”);
and
WHEREAS,
the
parties desire to make certain representations, warranties and agreements
in
connection with the Merger and also to prescribe certain conditions to the
Merger.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants, warranties and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE
I
The
Merger
Section
1.1 The
Merger.
Subject
to the terms and conditions of this Agreement, in accordance with the General
Corporation Law of the State of Delaware (the “Delaware
Law”),
upon
the execution of this Agreement and concurrent with the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
(the
“Certificate
of Merger”)
(in
accordance with the relevant provision of Delaware Law), the Company shall
merge
with and into Buyer Sub. The separate corporate existence of the Company
will
cease upon the filing of the Certificate of Merger (the “Effective
Time”),
and
Buyer Sub will continue as the surviving corporation (hereinafter sometimes
referred to as the “Surviving
Corporation”)
in the
Merger. Buyer Sub, as the surviving corporation after the Merger, will be
governed by the laws of the State of Delaware.
For
purposes of this Agreement, the date of the filing of the Certificate of
Merger
shall be known as the “Closing
Date”
and the
actions taken on such date and at such time, the “Closing.”
Section
1.2 Effect
of the Merger; Closing.
At and
after the Effective Time, the Merger shall have the effects set forth in
this
Agreement and the applicable provisions of Delaware Law. At the Effective
Time
all the property, rights, privileges, powers and franchises of the Company
and
Buyer Sub will vest in the Surviving Corporation, and all debts, liabilities
and
duties of the Company and Buyer Sub not paid by the Company at or before
Closing
will become the debts, liabilities and duties of the Surviving
Corporation.
Section
1.3 Certificate
of Incorporation.
At the
Effective Time, the Certificate of Incorporation of Buyer Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation.
Section
1.4 Bylaws.
At the
Effective Time, the bylaws of Buyer Sub, as in effect immediately prior to
the
Effective Time, shall be the Bylaws of the Surviving Corporation.
Section
1.5 Board
of Directors and Officers.
The
directors and corporate officers of Buyer Sub immediately prior to the Effective
Time, shall be the directors and corporate officers of the Surviving
Corporation.
Section
1.6 Conversion
of Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
the Buyer Sub, the Company or the holder of any shares of capital stock of
the
Company or Buyer Sub
each
share of common stock of the Company issued and outstanding immediately before
the Effective Time will be converted into and become the right to receive
the
following:
(a) Each
share of Company Stock (as defined in Section
2.2(a))
issued
and outstanding immediately prior to the Effective Time, shall be converted
into
and become the right to receive .275 shares of Parent’s $0.001 par value common
stock for a total of 1,505,363 shares (“Closing Merger
Consideration”)
at
closing and in addition, when and if earned a pro rata portion of The Earnout
Consideration (as defined in Section 1.11).The Closing Merger Consideration
and
the Earnout Consideration (if earned and as defined in Section 1.11) are
collectively referred to herein as the “Merger
Consideration”.
(b) All
shares of Company Stock that are held by the Company as treasury stock (the
“Company
Treasury Stock”)
shall
cease to exist and no cash, Buyer common stock, $0.001 par value per share
(“Buyer
Common
Stock”)
or
other consideration shall be delivered in exchange therefore.
(c) The
shares of Parent Common Stock that comprise the Merger Consideration will
not
have been registered and will be deemed to be “restricted securities” under
federal securities laws and may not be resold without registration under
or
exemption from the Securities Act of 1933, as amended (the “Securities
Act”).
Each
certificate evidencing shares of Parent Common Stock that comprise the Merger
Consideration will bear the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT EXEMPTION UNDER THE
SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO MOBILEPRO
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
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Section
1.7 Surrender
of Shares; Stock Transfer Books.
(a) At
the
Closing, all holders of Company Stock (the “Selling
Shareholders”)
will
surrender all Certificates representing shares of Company Stock to Buyer
(each,
a “Certificate”).
Until
so surrendered, such Certificates will represent solely the right to receive
the
Merger Consideration relating thereto.
(b) At
the
Effective Time, the stock transfer books of the Company will be closed and
there
will not be any further registration of transfers of any Company Stock, options
or warrants thereafter on the records of the Company. If, at or after the
Effective Time, Certificates are presented to the Surviving Corporation for
transfer, they will be canceled and exchanged for Merger Consideration as
provided in Section
1.6.
(c) In
the
event any Certificate that has 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, Buyer will issue in exchange for such lost, stolen or
destroyed Certificate, the Merger Consideration deliverable in respect thereof
as determined in accordance with Section
1.6
if the
Person to whom the Merger Consideration is paid will, as a condition precedent
to the payment thereof, indemnify the Surviving Corporation in a manner
reasonably satisfactory to it against any claim that may be made against
the
Surviving Corporation with respect to the Certificate claimed to have been
lost,
stolen or destroyed.
Section
1.8 General
Escrow Shares and General Escrow Cash.
(a) General
Escrow Shares.
At the
Effective Time, Buyer shall withhold from the Closing Merger Consideration,
500,000 shares of Parent Common Stock (the “General
Escrow Shares”)
which
shall be allocated among the Principals on a pro-rata basis based upon the
number of shares each such stockholder is entitled to receive pursuant to
Section
1.6(a)
(“Pro
Rata Share”).
Any
such General Escrow Shares will be delivered by Parent to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
P.A. (the “Escrow
Agent”),
as
escrow agent, to be held pursuant to the terms of the escrow agreement attached
hereto as Exhibit “A” (the “Escrow
Agreement”).
The
payment of any General Escrow Shares in satisfaction of any indemnification
obligations under Section VI shall be made on a pro rata basis based upon
each
Principals’ Pro Rata Share. Escrow Agent shall hold the General Escrow Shares
for one year following the Effective Time (the “General
Escrow Period”)
as
security for the Company indemnification obligations for Damages under Section
VI.
(b) Distributions
on General Escrow Shares.
Any
dividends or distributions payable in shares of Parent Common Stock or other
equity securities or issued upon a stock split made in respect of any General
Escrow Shares shall be considered General Escrow Shares hereunder. Cash
dividends and any other dividends or distributions in kind paid during the
General Escrow Period on the General Escrow Shares (“General
Escrow Dividends”)
shall
be placed into escrow and shall be distributed to the Prinicpals in accordance
with their respective Pro Rata Shares within fifteen (15) business days
following the expiration of the General Escrow Period.
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(c) Voting
of General Escrow Shares.
The
Principals on whose behalf General Escrow Shares are held by Escrow Agent
shall
be entitled to vote such shares.
(d) Release
of General Escrow Shares.
As soon
as reasonably practicable (but in any event within ten (10) business days)
following the expiration of the General Escrow Period, Escrow Agent shall
release to the Principals, at their respective addresses and in accordance
with
their respective Pro Rata Shares, the General Escrow Dividends and all of
the
remaining General Escrow Shares, if any, in excess of (i) any General Escrow
Shares delivered by Escrow Agent in satisfaction of Claims (as defined in
Section VI) for Damages (as defined in Section VI) by Buyer Indemnified Persons
(as defined Section VI) and (ii) any amount of General Escrow Shares that
is
necessary to satisfy all unresolved, unsatisfied or disputed Claims for Damages
specified in any Notice of Claim (as defined in Section VI) delivered to
the
representative before the expiration of the General Escrow Period. If any
Claims
are unresolved, unsatisfied or disputed as of the expiration of the General
Escrow Period, then Escrow Agent shall retain possession of that number of
General Escrow Shares determined by dividing the total maximum amount of
Damages
then being claimed by Buyer Indemnified Persons in all such unresolved,
unsatisfied or disputed Claims by the Effective Current Price, and as soon
as
reasonably practicable (but in any event within ten (10) business days)
following resolution of all such Claims, Escrow Agent shall release to the
Principals, at their respective addresses and in accordance with their
respective Pro Rata Shares of the General Escrow Shares, all remaining General
Escrow Shares, if any, not required to satisfy such Claims. Such releases
of
General Escrow Dividends shall be made by check. If the number of General
Escrow
Shares to be distributed to any Principal is not evenly divisible by one,
Buyer
shall round to the nearest whole number.
For
purposes of this Agreement, the “Effective
Current Price”
shall
mean the average of the closing prices of the Buyer Common Stock on the OTC
Bulletin Board market on the ten trading days ending the day before the date
of
a Claim is paid.
(e) No
Transfer or Encumbrance.
To the
extent permitted by applicable law, no General Escrow Shares or General Escrow
Dividends or any beneficial interest therein may be pledged, encumbered,
sold,
assigned or transferred (including any transfer by operation of law), by
Buyer
or a Principal or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of Buyer or such Principal or
used
for any reason, prior to (i) in the case of Buyer, the retention of General
Escrow Shares in satisfaction of a resolved Claim for Damages to address
any
post-closing Merger Adjustment in accordance with this Agreement or (ii)
in the
case of the Selling Shareholders, the release by Escrow Agent to the Selling
Shareholders of General Escrow Shares or General Escrow Dividends in accordance
with this Agreement, except that Selling Shareholders shall be entitled to
assign their rights to the General Escrow Shares or General Escrow Dividends
by
will, by the laws of intestacy or by other operation of law.
(f) No
Liability of the Escrow Agent.
In
holding and administering the General Escrow Shares or General Escrow Dividends,
the Escrow Agent will incur no liability with respect to any action taken
by it
in reliance upon any written notice, direction, instruction, consent, statement
or other document believed by it to be genuine and to have been signed by
the
representative (and shall have no responsibility to determine the authenticity
thereof), nor for any other action or inaction, except the Escrow Agent’s own
willful misconduct or gross negligence. In all questions arising under this
Agreement with respect to the General Escrow Shares or General Escrow Dividends,
the Escrow Agent may rely on the advice of counsel, and the Escrow Agent
will
not be liable to anyone for anything done, omitted or suffered in good faith
by
the Escrow Agent based on such advice, except for the Escrow Agent’s own willful
misconduct or gross negligence.
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Section
1.10 Parent’s
Repurchase Option.
The
Parent or its assignees shall have the option to repurchase all of the Unvested
Shares (as defined below) from a Principal and/or each Principal on the terms
and conditions set forth in this Section (the "Repurchase Option") if a
Principal ceases to be Engaged or Employed by the Parent (as defined herein)
due
to Cause (as defined below) or because the Principal voluntarily terminates
his
engagement or employment with the Parent without Good Reason. Definition
of “Engaged or Employed by the Parent”; “Termination Date”; “Cause”; and “Good
Reason”.
For
purposes of this Agreement, a Principal will be considered to be "Engaged
or
Employed by the Parent" if he is rendering services as an officer, employee,
consultant, advisor or independent contractor to the Parent or to any parent,
subsidiary or affiliate of the Parent pursuant to a written agreement.
“Termination Date” shall mean the date (i) a Principal voluntarily terminates
his Engagement or Employment with the Parent for any reason other than for
Good
Reason or (ii) the date a Principal’s relationship with the Parent is terminated
for “Cause”. “Cause” shall mean a termination of the engagement or employment
that is based upon (i) an act of fraud, embezzlement, misappropriation or
acceptance of a bribe or kickback; (ii) wilfull and material neglect by
Principal of his duties, chronic absenteeism, or any material or intentional
breach of the Principal’s obligations hereunder including, without limitation,
any intentional failure to abide by material policies and/or procedures
established by the Parent and known by the Principal which is not rectified
to
the reasonable satisfaction of Parent by the Principal within ten (10) days
after written notification to the Principal of said neglect, absenteeism,
breach
or violation; (iii) the conviction or a plea of nolo contendere, by the
Principal of a felony or of a crime involving fraud, dishonesty or moral
turpitude or (iv) material breach of any employment, advisor or consulting
agreement between a Principal (and/or its affiliate entity entering into
such an
agreement) and Buyer Sub and the failure to remedy such material breach
following receipt of notice and a reasonable opportunity to cure. “Good Reason”
shall exist upon (i) mutual written agreement by the Principal and the Parent
that Good Reason exists; (ii) the relocation of the Parent such that such
Principal Shareholder’s daily commute is increased by at least 60 miles
without the written consent of the Principal Shareholder; (iii) reduction
of the Principal’s annual base salary without the prior consent of the Principal
except is a case of a general reduction in salary of all employees of the
same
level; (iv) material demotion of the Principal to a position with
responsibilities substantially less than such Principal’s position immediately
following the Effective Time without the prior consent of the Principal;
(v)
Parent breaches its obligations under the Consulting or Employment written
agreement(s) or under this Merger Agreement.
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(b) Unvested
and Vested Shares.
Shares
of Parent’s common stock (that are a Principal’ part of the Closing Merger
Consideration) that are vested pursuant to the schedule set forth herein
are
"Vested Shares". Shares of Parent’s common stock (that are a Principals’ part of
the Closing Merger Consideration) that are not vested pursuant to the schedule
set forth herein are "Unvested Shares". Unvested Shares may not be sold or
otherwise transferred by a Principal without the Parent's prior written consent.
On the Effective Date all of the Closing Merger Consideration held by the
Principals will be Unvested Shares. If a Principal has continuously been
Engaged
or Employed by the Parent or any subsidiary or parent entity of the Parent,
at
all times from the Effective Date until June 22, 2005 (the "First Vesting
Date"), then on the First Vesting Date 1/24th
of the
such Principals’ Merger Consideration will become Vested Shares; and thereafter,
for so long (and only for so long) as such Principal remains Engaged or Employed
by the Parent or any subsidiary or parent of the Parent, at all times after
the
First Vesting Date, an additional 1/24th
of such
Principals’ Merger Consideration will become Vested Shares upon the expiration
of each full month elapsed after the First Vesting Date. No Shares will become
Vested Shares after the Termination Date. If the application of the vesting
percentage results in a fractional share, such share shall be rounded up
to the
nearest whole share for each month except for the last month in such vesting
period, at the end of which last month the balance of Unvested Shares shall
become fully Vested Shares.
(c)
Exercise
of Repurchase Option.
At any
time within ninety (90) days after the Termination Date, the Parent may elect
to
repurchase any or all of the Unvested Shares by giving such Principal written
notice of exercise of the Repurchase Option. The Parent and/or its assignee(s)
will then have the option to repurchase from such Principal all of the Unvested
Shares for the sum of $1.00 (the "Repurchase Option Price").
(d) Right
of Termination Unaffected.
Nothing
in this Agreement will be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Parent (or any parent, subsidiary or
affiliate of the Parent) to terminate a Principal’ engagement or employment with
the Parent (or any parent, subsidiary or affiliate of the Parent) at any
time
for any reason or no reason, with or without cause. However, in the event
of
such a termination by the Parent without Cause, all remaining Unvested Shares
shall immediately become Vested Shares.
Section
1.11 Earnout
Consideration.
Notwithstanding Sections 1.10 (a) through (d) Shares of Parent’s common stock
comprising the Earnout Consideration shall vest as described within this
Section
(1.10 (e)).
(a)
The
Earnout Consideration shall consist of one million shares of Parent’s common
stock as follows (a) 500,000 shares for the establishment of EarthLink as
a
retail partner and (b) 500,000 shares for the establishment of AOL as a retail
partner (collectively, “Earnout Consideration”).
(b)
The
Earnout Consideration (or parts thereof) shall vest upon satisfaction of
the
Earnout Triggers. Notwithstanding Sections 1.10 (a) through (d), Parent’s
Repurchase Option shall not apply to the Earnout Shares.
(c) The
EarthLink Earnout Trigger is as follows: The execution of an Agreement between
Mobilepro and EarthLink describing the terms under which EarthLink will offer
retail service over a specific (eg municipal) Mobilepro wholesale wireless
network deployment, provided such terms are generally applicable to subsequent
Mobilepro wholesale wireless network deployments in which EarthLink elects
to
participate. Upon the EarthLink Earnout Trigger being met, the 500,000 shares
of
Parent’s common stock shall be distributed pursuant to Section 1.6 herein.
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(d) The
AOL
trigger is as follows: The execution of an Agreement between Mobilepro and
AOL
describing the terms under which AOL will offer retail service over a specific
(eg municipal) Mobilepro wholesale wireless network deployment, provided
such
terms are generally applicable to subsequent Mobilepro wholesale wireless
network deployments in which AOL elects to participate. Upon the AOL Earnout
Trigger being met, the 500,000 shares of Parent’s common stock shall be
distributed pursuant to Section 1.6 herein.
Section
1.12 Further
Assurances.
The
Company agrees that if, at any time before or after the Effective Time, Buyer
considers or is advised that any further deeds, assignments or assurances
are
reasonably necessary or desirable to vest, perfect or confirm in Buyer title
to
any property or rights of Company, Buyer and its proper officers and directors
may execute and deliver all such proper deeds, assignments and assurances
and do
all other things necessary or desirable to vest, perfect or confirm title
to
such property or rights in Buyer and otherwise to carry out the purpose of
this
Agreement, in the name of Company or otherwise.
Section
1.13 Securities
Law Issues.
Based
in part on the representations of the Selling Shareholders made herein, Parent
Common Stock to be issued in the Merger will be issued pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the “Securities
Act”)
and/or
Rule 506 under Regulation D promulgated under the Securities Act and applicable
state securities laws.
ARTICLE
II
Representations
and Warranties of Company and
Principals
Except
as
set forth in the Company Disclosure Letter attached to this Agreement (the
“Company
Disclosure Letter”),
the
Company and the Principals, jointly and severally, represent and warrant
to the
Buyer as follows. The disclosures in any section or subsection of the Company
Disclosure Letter shall qualify other sections and subsections in this Article
II to the extent it is clear from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections. For purposes
of
this Article II, the phrase “to the knowledge of the Company” or any phrase of
similar import shall be deemed to refer to the actual knowledge, after
reasonable inquiry, of the Principals.
Section
2.1 Organization,
Qualification and Corporation Power.
The
Company (a) is a corporation 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 own, operate or lease its properties
and to carry on its business as is now being conducted and proposed to be
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not reasonably be expected
to
have, individually or in the aggregate, a Material Adverse Effect (as defined
below) on the Company, and (b) is duly qualified and in good standing
to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
other
than in such jurisdictions where the failure so to qualify or to be in good
standing would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company has furnished
to Buyer true, correct and complete copies of its Certificate of Incorporation
and By-Laws.
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For
purposes of this Agreement, the term “Material
Adverse Effect”
when
used in connection with an entity means any change, event, circumstance or
effect whether or not such change, event, circumstance or effect is caused
by or
arises in connection with a breach of a representation, warranty, covenant
or
agreement of such entity in this Agreement that is or is reasonably likely
to be
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations,
employees or prospects of such entity taken as a whole with its subsidiaries,
except to the extent that any such change, event, circumstance or effect
is
caused by results from (i) changes in general economic conditions,
(ii) changes affecting the industry generally in which such entity
operates
(provided that such changes do not affect such entity in a substantially
disproportionate manner) or (iii) changes in the trading prices for
such
entity’s capital stock.
Section
2.2 Capitalization;
Subsidiaries.
(a) The
authorized Company Stock consists of 10,000,000 shares, of which 5,478,500
shares are issued and outstanding (the “Company
Stock”)
to the
individuals listed in Section
2.2(a)
of the
Company Disclosure Letter. Other than common stock, there are no other classes,
series or types of stock for the Company. The Selling Shareholders holds
good
and marketable title to such Company Stock, free and clear of all liens,
agreements, voting trusts, proxies and other arrangements or restrictions
of any
kind whatsoever (other than normal restrictions on transfer under applicable
federal and state securities laws). All issued and outstanding Company Stock
have been duly authorized and were validly issued, are fully paid and
nonassessable, are not subject to any right of rescission, are not subject
to
preemptive rights by statute, the Certificate of Incorporation or By-Laws
of
Company, or any agreement or document to which Company is a party or by which
it
is bound and have been offered, issued, sold and delivered by Company in
compliance with all registration or qualification requirements (or applicable
exemptions therefrom) of applicable federal and state securities laws. The
Company is not under any obligation to register under the Securities Act
any of
its presently outstanding securities or any securities that may be subsequently
issued. There is no liability for dividends accrued but unpaid with respect
to
the Company’s outstanding securities.
(b) Except
as
disclosed in Section
2.2(b)
of the
Company Disclosure Letter, there are no existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating the Company to issue,
transfer or sell any shares of capital stock or other equity interest in,
the
Company or securities convertible into or exchangeable for such shares or
equity
interests, (ii) contractual obligations of the Company to repurchase, redeem
or
otherwise acquire any capital stock of the Company or (iii) voting trusts
or
similar agreements to which the Company is a party with respect to the voting
of
the capital stock of the Company.
The
Company has delivered to the Buyer, a correct and complete list of each Company
Option and Company Warrant outstanding as of the date hereof, including the
name
of the holder of such Company Option or Company Warrant, the Company Plan
pursuant to which such Company Option was issued, the number of shares covered
by such Company Option or Company Warrant, the per share exercise price of
such
Company Option or Company Warrant and the vesting commencement date and vesting
schedule applicable to each such Company Option, including the number of
shares
vested as of the date of this Agreement. The terms of the Company Plans permit
the assumption or substitution of options to purchase Company Common Stock
provided in this Agreement, without the consent or approval of the holders
of
such securities, the Selling Shareholders, or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for
those
options. No other outstanding options, whether under the Company Plans or
otherwise, will be accelerated in connection with the Merger.
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(c) The
Company does not have any direct or indirect Subsidiaries or any interest,
direct or indirect, in any corporation, partnership, joint venture or other
business entity.
For
purposes of this Agreement, the term “Subsidiary”
of a
Person means any corporation or other legal entity of which such Person (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, more than 50% 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 or other legal entity.
Section
2.3 Ownership
of Stock.
(a) The
Selling Shareholders are the record and beneficial owner of, and have good
and
valid title to, all of the Company Stock, which Company Stock (i) are free
and
clear of all liens, mortgages, encumbrances, pledges, claims, options, charges,
easements, restrictions, covenants, conditions of record, encroachments,
security interests and claims of every kind and character (each, a “Lien”)
and
(ii) are free of any other restriction (including any restriction on the
right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests).
(b) There
are
no outstanding existing (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character to which the Selling Shareholders is a party obligating
the
Selling Shareholders to issue, transfer or sell any Company Stock or other
equity interest in the Company or securities convertible into or exchangeable
for such shares or equity interests or (ii) voting trusts, stockholders’
agreements or similar agreements to which the Selling Shareholders are a
party
with respect to the voting of the Company Stock owned by such Selling
Shareholders.
Section
2.4 Authority
Relative to this Agreement.
The
Company has the necessary corporate power and authority to enter into this
Agreement and, subject to the filing of the Certificate of Merger as required
by
Delaware Law, to carry out its obligations hereunder. 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 and the Selling Shareholders
and,
subject to the filing of the Certificate of Merger as required by Delaware
Law,
no other corporate proceeding is necessary for the execution and delivery
of
this Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and,
assuming the due authorization, execution and delivery of this Agreement
by
Buyer and Buyer Sub, constitutes a legal, valid and binding obligation of
the
Company, enforceable against it in accordance with its terms, except that
(a)
the enforceability hereof may be subject to applicable bankruptcy, insolvency
or
other similar laws, now or hereinafter in effect, affecting creditors’ rights
generally, and (b) the general principles of equity (regardless of whether
enforceability is considered at a proceeding at law or in equity).
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Section
2.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by the Company and the Selling
Shareholders does not, and the consummation by the Company and the Selling
Shareholders of the transactions contemplated hereby will not, (i) conflict
with or violate any law, court order, judgment or decree applicable to the
Company, its Subsidiaries or the Selling Shareholders or by which any of
their
property is bound, (ii) violate or conflict with the Certificate of
Incorporation or By-Laws (or comparable organizational documents) of the
Company
or (iii) result in any breach of or constitute a default (or an event
which
with notice or lapse of time of both would become a default) under, or give
to
others any rights of termination or cancellation of, or result in the creation
of a Lien on any of the properties or assets of the Company or its Subsidiaries
pursuant to, any contract, instrument, Permit or license to which the Company
or
its Subsidiaries is a party or by which the Company or its Subsidiaries or
any
of their property is bound, except in the case of clauses (i) and (iii) for
conflicts, violations, breaches or defaults which, individually or in the
aggregate, would not have or result in a Material Adverse Effect on the
Company.
(b) Except
for the filing of the Certificate of Merger and any applicable requirements,
if
any, under “takeover” or “blue sky” laws of various states, neither the Company
nor any of its subsidiaries is required to submit any notice, report or other
filing with any federal, state or local or foreign government, political
subdivision thereof, any court, administrative, regulatory or other governmental
agency, commission or authority or any non-governmental United States or
foreign
self-regulatory agency, commission or authority or any arbitral tribunal
(each,
a “Governmental
Entity”)
in
connection with the execution, delivery or performance of this Agreement
or the
consummation of the transactions contemplated hereby the failure of which
to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on the Company. No waiver, consent, approval or authorization
of
any Governmental Entity or any third party is required to be obtained or
made by
the Company or its Subsidiaries in connection with its execution, delivery
or
performance of this Agreement the failure of which to obtain or make,
individually or in the aggregate, would have or result in a Material Adverse
Effect on the Company.
Section
2.6 Financial
Statements; Debt.
(a) Attached
as Section
2.6(a)
of the
Company Disclosure Letter are the Company’s unaudited balance sheet dated as of
December 31, 2004, income statement and statement of cash flows for the year
then ended and (ii) the Company’s unaudited balance sheet (the “Company
Balance Sheet”),
statement of cash flows and income statement each dated as of March 31, 2005
(the “Balance
Sheet Date”)
(all
such financial statements being collectively referred to herein as the
“Company
Financial Statements”).
The
Company Financial Statements (a) are in accordance with the books and records
of
the Company, (b) fairly present the financial condition of the Company at
the
date therein indicated and the results of operation for the period therein
specified and (c) have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis (other than
the
absence of footnotes and subject to normal recurring adjustments) (“GAAP”).
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(b) The
Company has no material debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become
due,
that is not reflected or reserved against in the Company Financial Statements
in
the ordinary course of its business, consistent with past practice and that
are
not material in amount either individually or collectively.
Section
2.7 Absence
of Certain Changes.
Since
the Balance Sheet Date, there has not been with respect to the Company or
any
Subsidiary:
(a) any
change in the financial condition, properties, assets, liabilities, business
or
operations thereof which change by itself or in conjunction with all other
such
changes, whether or not arising in the ordinary course of business, has had
or
will have a material adverse effect thereon;
(b) any
material loss of customers. Set forth on Section
2.7(b)
of the
Company Disclosure Letter is a true, correct and complete list of all customers
lost in the preceding twelve (12) months, including all revenue generated
from
any customer generating at least $40 per month in
revenue for the Company for the twelve (12) months preceding the date on
which
they were no longer customers;
(c) any
contingent liability incurred thereby as guarantor or otherwise with respect
to
the obligations of others;
(d) any
mortgage, encumbrance or lien placed on any of the properties
thereof;
(e) any
material obligation or liability incurred thereby other than obligations
and
liabilities incurred in the ordinary course of business;
(f) any
purchase or sale or other disposition, or any agreement or other arrangement
for
the purchase, sale or other disposition, of any of the properties or assets
thereof other than in the ordinary course of business;
(g) any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the properties, assets or business thereof;
(h) any
declaration, setting aside or payment of any dividend on, or the making of
any
other distribution in respect of, the capital stock thereof, any split,
combination or recapitalization of the capital stock thereof or any direct
or
indirect redemption, purchase or other acquisition of the capital stock
thereof;
(i) any
labor
dispute or claim of unfair labor practices, any change in the compensation
payable or to become payable to any of its officers, employees or agents,
or any
bonus payment or arrangement made to or with any of such officers, employees
or
agents;
(j) any
change with respect to the management, supervisory or other key personnel
thereof;
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(k) any
payment or discharge of a material lien or liability thereof which lien was
not
either shown on the Company Balance Sheet or incurred in the ordinary course
of
business thereafter; or
(l) any
obligation or liability incurred thereby to any of its officers, directors
or
stockholders or any loans or advances made thereby to any of its officers,
directors or stockholders except normal compensation and expense allowances
payable to officers.
Section
2.8 Tax
Matters.
(a) The
Company and its Subsidiaries have timely filed all Tax Returns that each
was
required to file, and all such Tax Returns were correct and complete in all
material respects. All Tax liabilities of the Company and its Subsidiaries
for
all taxable periods or portions thereof ending on or prior to the Effective
Time
have been, or will be prior to the Effective Time, timely paid or are adequately
reserved for in the Company Financial Statements, other than such Tax
liabilities as are being contested in good faith by the Company or its
Subsidiaries. There are no ongoing federal, state, local or foreign audits
or
examination of any Tax Return of the Company or its Subsidiaries. Neither
the
Company nor any of its Subsidiaries has waived any statute of limitations
in
respect of Taxes or agreed to any extension of time, nor has any such waiver
or
extension been required with respect to a Tax assessment or deficiency. No
claim
has ever been made by an authority in a jurisdiction where the Company and
its
Subsidiaries do not file Tax Returns that it is or may be subject to taxation
by
that jurisdiction. There are no Liens on any of the assets of the Company
or its
Subsidiaries that arose in connection with any failure (or alleged failure)
to
pay any Tax.
(b) The
Company and its Subsidiaries have withheld or collected and paid or deposited
in
accordance with law all Taxes required to have been withheld or collected
and
paid or deposited by the Company or its Subsidiaries in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder,
or
other third party.
(c) There
is
no dispute or claim concerning any Tax liability of the Company or its
Subsidiaries either (i) claimed or raised by any authority in writing or
(ii) as
to which the Company has Knowledge.
(d) For
purposes of this Agreement:
(i) “Taxes”
means
all taxes, charges, fees, levies or other similar assessments or liabilities,
including income, gross receipts, ad valorem, premium, value-added, excise,
real
property, personal property, sales, use, transfer, withholding, employment,
payroll and franchise taxes imposed by a Governmental Entity, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof,
and
any amounts of Taxes of a third Person that a Person or any Subsidiary of
such
Person is liable to pay by law or otherwise; and
(ii) “Tax
Returns”
means
all reports, returns, declarations, statements or other information supplied
or
required to be supplied to a taxing authority in connection with Taxes including
any schedules, attachments or amendments thereto.
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Section
2.9 Title
to Properties.
The
Company has good and marketable title to all of its assets as shown on the
Company Balance Sheet, free and clear of all liens, charges, restrictions
or
encumbrances (other than for taxes not yet due and payable). All machinery
and
equipment included in such properties is in good condition and repair, normal
wear and tear excepted, and all leases of real or personal property to which
the
Company or any its Subsidiaries is a party are fully effective and afford
the
Company or its Subsidiaries peaceful and undisturbed possession of the subject
matter of the lease. Neither the Company nor any of its Subsidiaries is in
violation of any zoning, building, safety or environmental ordinance, regulation
or requirement or other law or regulation applicable to the operation of
owned
or leased properties (the violation of which would have a material adverse
effect on its business), or has received any notice of violation with which
it
has not complied.
Section
2.10 Environmental
Matters.
(a) During
the period that the Company has leased or owned its properties or owned or
operated any facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under such
properties or facilities. The Company has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on, from
or
under any of such properties or facilities, which may have occurred prior
to the
Company having taken possession of any of such properties or facilities.
For the
purposes of this Agreement, the terms “disposal,”“release,”
and
“threatened
release”
shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.,
as amended (“CERCLA”).
For
the purposes of this Agreement “Hazardous
Materials”
shall
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing regulated under, or defined as a “hazardous substance,”“pollutant,”“contaminant,”“toxic chemical,”“hazardous materials,”“toxic
substance” or “hazardous chemical” under (1) CERCLA; (2) any similar
federal, state or local law; or (3) regulations promulgated under
any of
the above laws or statutes.
(b) None
of
the properties or facilities of the Company is in violation of any federal,
state or local law, ordinance, regulation or order relating to industrial
hygiene or to the environmental conditions on, under or about such properties
or
facilities, including, but not limited to, soil and ground water condition.
During the time that the Company has owned or leased its properties and
facilities, to the Company’s knowledge, no third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous
Materials.
(c) During
the time that the Company has owned or leased its properties and facilities,
there has been no litigation brought or threatened against the Company by,
or
any settlement reached by the Company with, any party or parties alleging
the
presence, disposal, release or threatened release of any Hazardous Materials
on,
from or under any of such properties or facilities.
Section
2.11 Intellectual
Property.
(a) The
term
“Intellectual
Property”
means
any (i) patents, (ii) trademarks, service marks, trade names, brand names,
trade
dress, slogans, logos and internet domain names, (iii) inventions, discoveries,
ideas, processes, formulae, designs, models, industrial designs, know-how,
proprietary information, trade secrets, and confidential information (including
customer lists, training materials and related matters, research and marketing
and sales plans), whether or not patented or patentable, (iv) copyrights,
writings and other copyrightable works and works in progress, databases and
software, (v) all other intellectual property rights and foreign equivalent
or
counterpart rights and forms of protection of a similar or analogous nature
or
having similar effect in any jurisdiction throughout the world, (vi) all
registrations and applications for registration of any of the foregoing,
(vii)
all common law trademarks and service marks used by the Company or its
Subsidiaries and (viii) any renewals, extensions, continuations, divisionals,
reexaminations or reissues or equivalent or counterpart of any of the foregoing
in any jurisdiction throughout the world. The term “Company
IP”
means
any Intellectual Property used or held for use by the Company or its
Subsidiaries, in the conduct of their businesses as currently conducted and
currently proposed to be conducted.
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(b) Section
2.11(b)
of the
Company Disclosure Letter sets forth a true, correct and complete list
(including, the owner, title, registration or application number and country
of
registration or application, as applicable) of all of the following Company
IP:
(i) registered trademarks, (ii) applications for trademark registration,
(iii)
domain names, (iv) patents, (v) applications for patents, (vi) registered
copyrights (vii) applications for copyright registration and (viii) licenses
of
all Intellectual Property (other than off-the-shelf business productivity
software that is the subject of a shrink wrap or click wrap software license
agreement (“Desktop
Software”))
to or
from the Company. The Company has delivered or made available to Buyer prior
to
the execution of this Agreement true, complete and correct copies of all
licenses of Company IP both to and from the Company and its Subsidiaries,
except
Desktop Software.
(c) The
Company IP set forth on Section
2.11(b)
of the
Company Disclosure Letter constitutes all of the Intellectual Property used
by
and necessary for the Company and its Subsidiaries to operate their respective
business as currently conducted. The Company or its Subsidiaries owns all
legal
and beneficial right, title and interests in the Company IP or has the rights
to
use the Company IP to the extent used in the Company’s business as currently
conducted, and the Company or its Subsidiaries has the valid, sole and exclusive
right to use, assign, transfer and license all such Company IP for any purpose,
free from (i) any Liens, and (ii) any requirement of any past,
present
or future royalty payments, license fees, charges or other payments, or
conditions or restrictions whatsoever.
(d) All
patent, trademark, service ▇▇▇▇, copyright, patent and domain name registrations
or applications set forth on Section
2.11(b)
of the
Company Disclosure Letter are in full force and effect and have not been
abandoned, dedicated, disclaimed or allowed to lapse for non-payment of fees
or
taxes or for any other reason.
(e) None
of
the Company IP owned by the Company or its Subsidiaries has been declared
or
adjudicated invalid, null or void, unpatentable or unregistrable in any judicial
or administrative proceeding. To the Knowledge of the Company, none of the
Company IP used (but not owned) by the Company or its Subsidiaries has been
declared or adjudicated invalid, null or void, unpatentable or unregistrable
in
any judicial or administrative proceeding.
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(f) Neither
the Company nor its Subsidiaries has received any written notices of, or
has
Knowledge of, any infringement or misappropriation by or of, or conflict
with,
any third party with respect to the Company IP or Intellectual Property owned
by
any third party. To the knowledge of the Company, the Company has not infringed,
misappropriated or otherwise violated or conflicted with any Intellectual
Property of any third party.
(g) The
transactions contemplated by this Agreement will not affect the right, title
and
interest of the Company or its Subsidiaries in and to the Company IP, and
each
of the Company and its Subsidiaries has taken all necessary action to maintain
and protect the Company IP set forth on Section
2.11(b)
of the
Company Disclosure Letter and, until the Effective Time, will continue to
maintain and protect such Company IP so as to not materially adversely affect
the validity or enforceability of such Company IP.
(h) To
the
Knowledge of the Company, no officer, employee or director or the Company
or its
Subsidiaries is obligated under any contract (including any license, covenant
or
commitment of any nature) or other agreement, or subject to any judgment,
decree
or order of any court or administrative agency, that would conflict or interfere
with the performance of such person’s duties as an officer, employee or director
of the Company or its Subsidiaries, the use of such person’s best efforts to
promote the interests of the Company and its Subsidiaries or the Company’s or
its Subsidiary’s business as conducted or as currently proposed to be conducted
by the Company and its Subsidiaries. To the knowledge of the Company, no
prior
employer of any current or former employee of the Company or its Subsidiaries
has any right, title or interest in the Company IP. It is not and will not
be
with respect to the business as currently proposed to be conducted necessary
for
the Company or its Subsidiaries to use any inventions of any of its employees
made prior to their employment by the Company or its Subsidiaries that have
not
already been assigned to the Company.
Section
2.12 Material
Agreements.
(a) Section
2.12
of the
Company Disclosure Letter sets forth a true, correct and complete list of
the
following agreements (whether written or oral and including all amendments
thereto) to which the Company or its Subsidiaries is a party or a beneficiary
or
by which the Company or its Subsidiaries or any of their respective assets
are
bound (collectively, the “Material
Agreements”):
(i) any
real
estate leases;
(ii) any
other
agreement for the provision of services by the Company or its Subsidiaries
that
have accounted for revenues of more than $1,000 per annum during any month
since
the Balance Sheet Date;
(iii) any
agreement creating, evidencing, securing, assuming, guaranteeing or otherwise
relating to any debt for which the Company or its Subsidiaries is liable
or
under which it has imposed (or may impose) a Lien on any of the assets, tangible
or intangible, of the Company or its Subsidiaries;
(iv) any
capital or operating leases or conditional sales agreements relating to personal
property of the Company or its Subsidiaries;
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(v) any
supply or manufacturing agreements or arrangements pursuant to which the
Company
or its Subsidiaries is entitled or obligated to acquire any assets from a
third
party with a fair market value in excess of $1,000;
(vi) any
insurance policies;
(vii) any
employment, consulting, noncompetition, or separation agreements or
arrangements;
(viii) any
agreement with or for the benefit of any Selling Shareholders, officer, director
or employee of the Company, or any Affiliate of the Company, or any Person
controlled by such individual or family member thereof;
(ix) any
license to which the Company or its Subsidiaries is a party;
(x) any
agreement in which the Company or its Subsidiaries has granted rights to
license, sublicense or copy, “most favored nation” pricing provisions or
exclusive marketing or distribution rights relating to any products
or territory or has agreed to purchase a minimum quantity of goods or services
or has agreed to purchase goods or services exclusively from a certain
party;
(xi) any
written arrangement establishing a partnership or joint venture;
(xii) a
list of
all parties to any written arrangement concerning confidentiality,
non-disclosure or noncompetition;
(xiii) any
written arrangement under which the consequences of a default or termination
could have a Material Adverse Effect on the Company; and
(xiv) any
other
agreement or arrangement pursuant to which the Company or its Subsidiaries
could
be required to make or be entitled to receive aggregate payments in excess
of
$1,000 or entered into outside of the ordinary course of business.
For
purposes of this Agreement, “Affiliate”
means
another Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, any
Person.
(b) The
Company has delivered to or made available to Buyer a true, correct and complete
copy of each Material Agreement and a written summary of each oral Material
Agreement. With respect to each Material Agreement:
(i) each
Material Agreement is legal, valid, binding and enforceable and in full force
and effect with respect to the Company or its Subsidiaries and, to the Knowledge
of the Company, the written arrangement is legal, valid, binding and is
enforceable and in full force and effect with respect to each other party
thereto (in each case except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting the enforcement of creditor’s rights generally, and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefore
may
be brought);
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(ii) each
Material Agreement will continue to be legal, valid, binding and enforceable
and
in full force and effect against the Company, and to the Knowledge of the
Company against each other party thereto, immediately following the Closing
in
accordance with the terms thereof (in each case except as enforceability
may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the enforcement of creditor’s rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any
proceeding therefore may be brought) as in effect prior to the Closing;
and
(iii) neither
the Company nor its Subsidiaries is in breach or default, and, to the Knowledge
of the Company, no other party thereto is in breach or default, and no event
has
occurred which with notice or lapse of time would constitute a breach or
default
or permit termination, modification, or acceleration, under the written
arrangement.
Section
2.13 Insurance.
(a) Section
2.13
of the
Company Disclosure Letter sets forth a true, correct and complete list of
each
insurance policy (including fire, theft, casualty, general liability, director
and officer, workers compensation, business interruption, environmental,
product
liability and automobile insurance policies and bond and surety arrangements)
to
which the Company is a party, a named insured, or otherwise the beneficiary
of
coverage at any time within the past year. Section
2.13
of the
Company Disclosure Letter sets forth a true, correct and complete list of
each
person or entity required to be listed as an additional insured under each
such
policy. Each such policy is in full force and effect and by its terms and
with
the payment of the requisite premiums thereon will continue to be in full
force
and effect following the Closing.
(b) The
Company is not in breach or default, and does not anticipate being in breach
or
default as of the Closing (including with respect to the payment of premiums
or
the giving of notices) under any such policy, and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default
or
permit termination, modification or acceleration, under such policy; and
the
Company has not received any written notice or, to the Knowledge of the Company,
oral notice, from the insurer disclaiming coverage or reserving rights with
respect to a particular claim or such policy in general. The Company has
not
incurred any material loss, damage, expense or liability covered by any such
insurance policy for which it has not properly asserted a claim under such
policy.
Section
2.14 Litigation.
(a) There
are
no claims, actions, suits, proceedings or investigations of any nature pending
or, to the Knowledge of the Company, threatened against the Company or any
properties or rights of the Company, before any court, administrative,
governmental or regulatory authority or body. The Company is not subject
to any
order, judgment, injunction or decree.
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(b) There
are
no agreements or other documents or instruments settling any material claim,
complaint, action, suit or other proceeding against the Company.
Section
2.15 Employees.
(a) Set
forth
on Section
2.15(a)
of the
Company Disclosure Letter is a true, correct and complete list of all current
employees of the Company and its Subsidiaries, including date of employment,
current title and compensation (including commissions, bonus and other
compensation), and date and amount of last increase in compensation. None
of the
Company’s employees are members of a labor union. The Company is not a party to
any collective bargaining, union or labor agreements, contracts or other
arrangements with any group of employees, labor union or employee representative
and to the Knowledge of the Company, there is no organization effort currently
being made by or on behalf of any labor union with respect to employees of
the
Company or its Subsidiaries. The Company has not experienced, and to the
Knowledge of the Company, there is no basis for, any strike, grievances,
claims
of unfair labor practices, material labor trouble, work stoppage, slow down
or
other interference with or impairment of the business of Company.
(b) To
the
Knowledge of the Company, no employee has any plans to terminate employment
with
the Company within six months of the date hereof.
(c) The
Company is in compliance in all material respects with all currently applicable
laws and regulations respecting wages, hours, occupational safety, or health,
fair employment practices, and discrimination in employment terms and
conditions, and is not engaged in any unfair labor practice. There are no
pending claims against the Company under any workers compensation plan or
policy
or for long term disability. There are no proceedings pending or, to the
Knowledge of the Company, threatened, between the Company and its
employees.
(d) Section
2.15(a)
of the
Company Disclosure Letter sets forth a true, correct and complete list of
Persons whose employment has been terminated by the Company in the 90 days
prior
to Closing.
Section
2.16 Employee
Benefits.
(a) Neither
the Company, its Subsidiaries nor any predecessor in interest thereof has
maintained, or currently maintains, any Employee Benefit Plan. At no time
has
the Company, its Subsidiaries or any ERISA Affiliate been obligated to
contribute to any “multi-employer plan” (as defined in Section 4001(a)(3) of
ERISA). Neither the Company, its Subsidiaries nor any predecessor in interest
thereof has any liabilities or obligations with respect to any Employee Benefit
Plan.
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(b) Section
2.16(b)
of the
Company Disclosure Letter discloses each: (i) agreement with any director,
executive officer or other key employee of the Company or its Subsidiaries,
including (A) the benefits of which are contingent, or the terms of which
are
altered, upon the occurrence of a transaction involving the Company or its
Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee
or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from the
Company
or its Subsidiaries that may be subject to the tax imposed by Section 4999
of the Code or included in the determination of such person’s “parachute
payment” under Section 280G(b)(1) of the Code; and (iii) agreement or plan
binding the Company or its Subsidiaries, including any option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which
will be
increased, or the vesting of the benefits of which will be accelerated, by
the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of
any of
the transactions contemplated by this Agreement.
(c) For
purposes of this Agreement:
(i) “Employee
Benefit Plan”
means
any “employee pension benefit plan” (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended), any “employee welfare
benefit plan” (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement involving direct or indirect compensation,
including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, options, or other forms of incentive compensation
or
post-retirement compensation; and
(ii) “ERISA
Affiliate”
means
any entity which is a member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code), (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (iii)
an
affiliated service group (as defined under Section 414(m) of the Code or
the
regulations under Section 414(o) of the Code), any of which includes the
Company
or its Subsidiaries.
Section
2.17 Permits.
Section
2.17
of the
Company Disclosure Letter sets forth a true, correct and complete list of
all
material permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including those issued or required under
applicable export laws or regulations) (“Permits”)
issued
to or held by the Company and its subsidiaries. Such listed Permits are the
only
Permits that are required for the Company and its subsidiaries to conduct
their
business as presently conducted. Each such Permit is in full force and effect
and to the Knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit
will
not be renewable upon expiration. Each such Permit will continue in full
force
and effect following the Closing.
Section
2.18 Broker’s
Fees.
Neither
the Company nor any of its subsidiaries has any liability or obligation to
pay
any fees or commissions to any broker, investment banking firm, finder or
agent
with respect to the transactions contemplated by this Agreement.
Section
2.19 Books
and Records.
(a) The
books, records and accounts of the Company (a) are in all material
respects
true, complete and correct, (b) have been maintained in accordance
with
good business practices on a basis consistent with prior years, (c) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of the assets of the Company, and (d) accurately
and
fairly reflect the basis for the Financial Statements. The Company has not
undertaken any steps to establish 404 compliance.
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Section
2.20 Banking
Relationships and Investments.
Section
2.20
of the
Company Disclosure Letter sets forth sets forth a true, correct and complete
list of all banks and financial institutions in which the Company has an
account, deposit, safe-deposit box or borrowing relationship, factoring
arrangement or other loan facility or relationship, including the names of
all
persons authorized to draw on those accounts or deposits, or to borrow under
loan facilities, or to obtain access to such boxes. Section
2.20
of the
Company Disclosure Letter sets forth a true, correct and complete list of
all
certificates of deposit, debt or equity securities and other investments
owned,
beneficially or of record, by the Company (the “Investments”).
The
Company has good and legal title to all Investments.
Section
2.21 Disclosure.
No
representation or warranty by the Company contained in this Agreement, including
any statement contained in the Company Disclosure Letter or any document
delivered in connection herewith, contains any untrue statement of a material
fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein
not misleading.
ARTICLE
III
Representations
and Warranties of Parent, Buyer and Buyer Sub
Except
as
set forth in the Buyer Disclosure Letter attached to this Agreement (the
“Buyer
Disclosure Letter”),
Buyer
and Buyer Sub, jointly and severally, represent and warrant to the Company
and
the Selling Shareholders as follows:
Section
3.1 Organization,
Qualification and Corporation Power.
Each of
Parent, Buyer and Buyer Sub (a) is a corporation 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 and any necessary
governmental authority to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted and proposed to be conducted, and (b) is duly qualified
as a
foreign corporation to do business, and is in good standing, in each other
jurisdiction where the character of its properties owned, operated or leased
or
the nature of its activities makes such qualification necessary, except in
the
case of clause (b) for failures which, when taken together with all
other
such failures, would not have a Material Adverse Effect on Buyer. Buyer is
a
wholly owned subsidiary of Parent. Buyer Sub is a wholly owned Subsidiary
of
Buyer.
Section
3.2 Capitalization.
(a) The
authorized capital stock of Parent consists of 600,000,000 shares of common
stock, $0.001 par value (the “Parent
Common Stock”),
5,000,000 shares of preferred stock, $0.001 par value (the “Parent
Preferred Stock”)
and
35,425 shares of Series A Convertible Preferred Stock, $0.001 par value (the
“Series
A Preferred Stock”).
As of
March 16, 2005, (i) 350,918,011 shares of Parent Common Stock were issued
and
outstanding and 35,425 shares of Series A Preferred Stock were issued and
outstanding and (ii) 6,000,000 shares of Buyer Common Stock were reserved
for issuance under the Company’s 2001 Equity Performance Plan; however this Plan
has not been approved by the stockholders of Parent. All of the issued and
outstanding shares of Parent Common Stock and Series A Preferred Stock (i)
have
been duly authorized and validly issued; (ii) are fully paid and nonassessable;
(iii) are free and clear of all Liens; and (iv) are free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). The certificates
representing the Parent Common Stock are in proper form for the enforcement
of
the rights and limitations of rights pertaining to such Shares which are
set
forth in Parent’s certificate of incorporation, as amended, and bylaws. There
are no declared or accrued but unpaid dividends with respect to any Parent
Common Stock. All shares of Parent Common Stock were issued in compliance
with
applicable law.
The
shares of Parent Common Stock that comprise the Merger Consideration have
been
have been duly authorized and, when issued in accordance with the terms of
this
Agreement, will be validly issued, fully paid and nonassessable, free and
clear
of all Liens and any other restriction (including any restriction on the
right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests).
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(b) Except
as
disclosed on Section
3.2(b)
of the
Parent Disclosure Letter, there are no existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating Buyer or any of its
subsidiaries to issue, transfer or sell any shares of capital stock or other
equity interest in, Buyer or any of its subsidiaries or securities convertible
into or exchangeable for such shares or equity interests, (ii) contractual
obligations of Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of Buyer or any of its Subsidiaries or
(iii)
voting trusts or similar agreements to which Parent or any of its Subsidiaries
is a party with respect to the voting of the capital stock of Buyer or any
of
its Subsidiaries.
(c) The
authorized capital stock of Buyer Sub consists of 1,000 shares of common
stock,
$0.001 par value (the “Buyer
Sub Common Stock”),
of
which 1,000 shares were issued and outstanding. Buyer owns all of the issued
and
outstanding shares of Buyer Common Stock. Buyer owns all of the issued and
outstanding shares of Buyer Sub Common Stock. All of the issued and outstanding
shares of Buyer and Buyer Sub Common Stock (i) have been duly authorized
and
validly issued; (ii) are fully paid and nonassessable; (iii) are free and
clear
of all Liens; and (iv) are free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). All shares of Buyer and Buyer Sub Common
Stock were issued in compliance with applicable law.
Section
3.3 Authority
Relative to this Agreement.
Each of
Parent, Buyer and Buyer Sub has the necessary corporate power and authority
to
enter into this Agreement and, subject to the filing of the Certificate of
Merger, to carry out its obligations hereunder. The execution and delivery
of
this Agreement by Buyer and Buyer Sub and the consummation by them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer and Buyer Sub and, subject to the filing
of the Certificate of Merger, no other corporate proceeding is necessary
for the
execution and delivery of this Agreement by Buyer and Buyer Sub, the performance
by them of their respective obligations hereunder and the consummation by
them
of the transactions contemplated hereby. As of the Effective Time this Agreement
has been duly executed and delivered by Parent, Buyer and Buyer Sub and,
assuming the due authorization, execution and delivery of this Agreement
by the
Company, constitutes a legal, valid and binding obligation of each of Parent,
Buyer and Buyer Sub, enforceable against each in accordance with its terms,
except that (a) the enforceability hereof may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereinafter in effect,
affecting creditors’ rights generally, and (b) the general principles of equity
(regardless of whether enforceability is considered at a proceeding at law
or in
equity).
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Section
3.4 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by each of Parent, Buyer and Buyer
Sub
do not, and the consummation by each of them of the transactions contemplated
hereby will not, (i) conflict with or violate any law, court order,
judgment or decree applicable to Parent, Buyer or Buyer Sub or by which any
of
their respective property is bound, (ii) violate or conflict with
the
Certificate of Incorporation or bylaws (or comparable organizational documents)
of any of Parent, Buyer or Buyer Sub, or (iii) result in any breach
of, or
constitute a default (or an event which with notice or lapse of time of both
would become a default) under, or give to others any rights of termination
or
cancellation of, or result in the creation of a Lien on any of the properties
or
assets of Parent or any of its Subsidiaries pursuant to, any contract,
instrument, Permit or license to which Buyer or any of its Subsidiaries is
a
party or by which Parent or any of its Subsidiaries or their respective property
is bound, except in the case of clauses (i) and (iii) for conflicts, violations,
breaches or defaults which, individually or in the aggregate, would not have
or
result in a Material Adverse Effect on Buyer.
(b) Except
for the filing of the Certificate of Merger, and applicable requirements,
if
any, under “takeover” or “blue sky” laws of various states, none of Parent,
Buyer or Buyer Sub is required to submit any notice, report or other filing
with
any Governmental Entity in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby the failure of which to submit would, individually or
in the
aggregate, have or result in a Material Adverse Effect on Buyer. No waiver,
consent, approval or authorization of any Governmental Entity or any third
party
is required to be obtained or made by Parent, Buyer or Buyer Sub in connection
with its execution, delivery or performance of this Agreement the failure
of
which to obtain or make, individually or in the aggregate, would have or
result
in a Material Adverse Effect on Buyer.
Section
3.5 SEC
Reports.
Buyer
has filed all forms, reports, schedules, registration statements, proxy
statements and other documents (including any document required to be filed
as
an exhibit thereto) required to be filed by Parent with the Securities and
Exchange Commission (“SEC”)
since
December 31, 2003. All such required forms, reports, schedules, registration
statements, proxy statements and other documents (including those that Buyer
may
file subsequent to the date hereof) are referred to herein as the “SEC
Reports.”
As of
their respective dates, the SEC Reports (including any financial statements
or
schedules included or incorporated by reference therein) (i) were prepared
in
all material respects in accordance with the requirements of the Securities
Act
or the Securities Exchange Act of 1934 (the “Exchange
Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such SEC Reports and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the
date
of such filing) contain any untrue statement of a material fact or omit to
state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. As of the date hereof, there has not been any Material Adverse
Effect with respect to Buyer that would require disclosure under the Securities
Act.
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Section
3.6 Buyer
Sub.
Buyer
Sub is not and has never been a party to any material agreement and has not
conducted any activities other than in connection with the organization of
Buyer
Sub, the negotiation and execution of this Agreement and the consummation
of the
transactions contemplated hereby. Buyer Sub has not incurred or assumed any
expenses or liabilities prior to the Closing.
Section
3.7 Broker’s
Fees.
Neither
Buyer nor Buyer Sub has any liability or obligation to pay any fees or
commissions to any broker, investment banking firm, finder or agent with
respect
to the transactions contemplated by this Agreement.
Section
3.8 Restrictions
on Transfer.
There
are no restrictions on the transfer of Parent Common Stock issuable under
this
Agreement, other than restrictions imposed by applicable securities laws
or as
set forth in the Merger Documents.
Section
3.9 Tax
Matters.
To the
Parent’s and the Buyer’s knowledge, after consulting with their respective
independent auditors and tax advisors, neither the Parent, the Buyer nor
any of
their respective Affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Code.
Section
3.10 Disclosure.
No
representation or warranty by Parent, Buyer or Buyer Sub contained in this
Agreement, including any statement contained in the Buyer Disclosure Letter
or
any document delivered in connection herewith, contains any untrue statement
of
a material fact or omits to state any material fact necessary, in light of
the
circumstances under which it was made, in order to make the statements herein
not misleading.
ARTICLE
IV
Further
Covenants and Assurances
Section
4.1 Securities
Laws.
(a) Parent,
Buyer, Buyer Sub and the Company will take such steps as may be necessary
to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with
the
Merger. The Company will use commercially reasonable efforts to assist Buyer
as
may be necessary to comply with such securities and blue sky laws.
(b) So
long
as Buyer or any successor entity is subject to the reporting requirements
of the
Exchange Act, Buyer or such successor entity will timely file all reports
required to be filed by it under the Securities Act and the Exchange Act,
all to
the extent required pursuant to Rule 144 to enable stockholders, who may
receive
Parent Common Stock under this Agreement, to sell Parent Common Stock pursuant
to Rule 144 under the Securities Act (as such rule may be amended from time
to
time) or any similar rule or regulation hereafter adopted by the Securities
and
Exchange Commission.
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Section
4.2 Public
Announcements.
Parent
and the Company will consult with each other before holding any press
conferences, analyst calls or other meetings or discussions and before issuing
any press release or other public announcements with respect to the transactions
contemplated by this Agreement, including the Merger. The parties will provide
each other the opportunity to review and comment upon any press release or
other
public announcement or statement with respect to the transactions contemplated
by this Agreement, including the Merger, and will not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement will be mutually
agreed upon prior to the issuance thereof. In addition, the Company will,
and
will cause its Subsidiaries to consult with Buyer regarding communications
with
customers, stockholders and employees relating to the transactions contemplated
by this Agreement.
Section
4.3 Audited
Financial Statements.
At the
sole cost and expense of the Surviving Corporation, promptly after the Effective
Time, a qualified certified public accountant shall be provided with access
to
the Books and Records and financial information of the Company and shall
prepare
an audited balance sheet dated as of the Closing Date (“Audited
Balance Sheet”)
and
balance sheet, income statement and statement of cash flows for the year
ended
December 31, 2004 within sixty (60) days of the Effective Time (the “Audited
Financial Statements”).
The
Audited Financial Statements shall (a) be prepared in accordance with the
books
and records of the Company, (b) fairly present the financial condition of
the
Company at the date therein indicated and the results of operation for the
period therein specified and (c) have been prepared in accordance with
GAAP.
Section
4.4 Adjustments
in Merger Consideration.
The
Merger Consideration due and payable to the Selling Shareholders in accordance
with Section
1.6
will be
adjusted as follows:
(a) Reductions
in Merger Consideration Prior to the Closing.
If the
Closing Balance Sheet reveals (i) trade payables and/or other debt in excess
of
$30,000 and/or (ii) cash and cash equivalents less than $0, the Merger
Consideration shall
be
reduced by one dollar for every dollar of trade payables and./or debt in
excess
of $30,000 and/or cash and cash equivalents less than $0 on the Closing Balance
Sheet.
Reductions
in Merger Consideration After Closing.
If the
Audited Balance Sheet reveals (i) trade payables and/or debt in excess of
$30,000 that was not reported on the Closing Balance Sheet and/or (ii) cash
and
cash equivalents less than $0 not reported on the Closing Balance Sheet,
the
Merger Consideration shall be reduced by one dollar for every dollar of trade
payables and/or debt in excess of $30,000 and/or cash and cash equivalents
less
than $0 reported on the Closing Balance Sheet.
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ARTICLE
V
Conditions
of Merger
Section
5.1 Conditions
to Obligations of Buyer and Buyer Sub to Effect the
Merger.
The
obligations of Parent, Buyer and Buyer Sub to effect the Merger will be subject
to the satisfaction or waiver of the following conditions prior to the Effective
Time:
(a) Representations
and Warranties.
Those
representations and warranties of the Company and Selling Shareholders set
forth
in this Agreement will be true and correct in all material respects as of
the
Closing Date (except to the extent such representations and warranties expressly
relate to a specific date in which case such representations and warranties
will
be true and correct as of such date). Buyer shall receive a certificate to
such
effect executed by the Company’s Chief Executive Officer.
(b) Agreements
and Covenants.
The
Company and Selling Shareholders shall have performed in all material respects
all obligations and complied in all material respects with all agreements
and
covenants of the Company and the Selling Shareholders required to be performed
or complied with by it under this Agreement. The Buyer shall receive a
certificate to such effect executed by the Company’s Chief Executive
Officer.
(c) Certificate
of Secretary.
Buyer
will have received from the corporate secretary of the Company a certificate
(i) certifying the Company Certificate of Incorporation and By-Laws,
(ii) certifying the resolutions of the board of directors of the Company,
(iii) certifying the resolutions of the stockholders of the Company
and
(v) attesting to the incumbency of the officers of the
Company.
(d) Required
Consents.
Any
consent, authorization, order or approval of (or filing or registration with)
any third party identified by Buyer on Schedule 5.1(d) will have been obtained
or made.
(e) Certificates.
The
Company shall have delivered to the Buyer (i) corporate good standing
certificates issued by the appropriate governmental authority, as of the
most
recent practicable date, which date shall be within five (5) days of the
Closing, as to the good standing of the Company in the Commonwealth of
Massachusetts and in each jurisdiction in which it is qualified to do business.
Nothing in this Section
5.1(e)
shall
relieve the Company disclosing any exceptions to the representation made
in
Section
2.1
of this
Agreement.
(f) Closing
Balance Sheet.
Buyer
will have received from the Company, a projected closing balance sheet, dated
as
of the Closing Date, attached hereto as Exhibit
B.
(g) Employment
Agreements.
The
Surviving Corporation and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed an Employment
Agreement in substantially the form of Exhibit
C
attached
hereto dated on or before the Closing Date (to become effective on the Closing
Date).
(h) Consulting
Agreements.
The
Surviving Corporation and Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (or their
affiliated entities) shall have executed Consulting Agreements, in substantially
the form of Exhibit
D,
attached hereto dated on or before the Closing Date (to become effective
on eh
Closing Date).
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Section
5.2 Conditions
to Obligations of the Company and the Selling Shareholders to Effect the
Merger.
The
obligations of the Company and the Selling Shareholders to effect the Merger
will be further subject to the satisfaction or waiver of the following
conditions prior to the Effective Time:
(a) Representations
and Warranties.
Those
representations and warranties of Parent, Buyer and Buyer Sub set forth in
this
Agreement will be true and correct in all material respects as of the Closing
Date (except to the extent such representations and warranties expressly
relate
to a specific date in which case such representations will be true and correct
as of such date). The Company shall receive a certificate to such effect
executed by the Buyer’s Chief Executive Officer.
(b) Agreements
and Covenants.
Parent,
Buyer and Buyer Sub shall have performed in all material respects all
obligations and complied in all material respects with all agreements and
covenants of Buyer and Buyer Sub required to be performed or complied with
by
them under this Agreement. The Company shall receive a certificate to such
effect executed by the Buyer’s Chief Executive Officer.
(c) Certificate
of Secretary.
The
Company will have received from the corporate secretary of each of Parent,
Buyer
and Buyer Sub a certificate (i) certifying Buyer’s Certificate of
Incorporation, Buyer’s Certificate of Incorporation and Buyer Sub’s Certificate
of Incorporation, (ii) certifying the bylaws of Buyer and Buyer Sub,
(iii) certifying the resolutions of the board of directors of Buyer
and
Buyer Sub and (iv) certifying the resolutions of the stockholder of
Buyer
Sub.
(d) Employment
Agreements.
The
Surviving Corporation and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed an Employment
Agreement in substantially the form of Exhibit
C
attached
hereto dated on or before the Closing Date (to become effective on the Closing
Date).
(e) Consulting
Agreements.
The
Surviving Corporation and Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (or their
affiliated entities) shall have executed Consulting Agreements, in substantially
the form of Exhibit
D,
attached hereto dated on or before the Closing Date (to become effective
on eh
Closing Date).
ARTICLE
VI
Survival
and Indemnification
Section
6.1 Survival
of Representations.
All
representations, warranties and covenants of the parties contained in this
Agreement will remain operative and in full force and effect, regardless
of any
investigation made by or on behalf of the other parties to this Agreement,
until
the earlier of the termination of this Agreement or one (1) year after the
Closing Date (the “Survival
Period”),
whereupon such representations, warranties and covenants will expire (except
for
covenants that by their terms survive for a longer period).
Section
6.2 Indemnification
of Buyer.
Subject
to the limitations set forth in this Article VI, the Company and Selling
Shareholders agree to jointly and severally indemnify and hold harmless Buyer
and its officers, directors, agents and employees, and each person, if any,
who
controls or may control Buyer within the meaning of the Securities Act from
and
against any and all claims, demands, actions, causes of actions, losses,
costs,
damages, liabilities and expenses including, without limitation, reasonable
legal fees (hereinafter referred to as “Damages”):
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(a) Arising
out of any misrepresentation or breach of or default in connection with any
of
the representations, warranties and covenants given or made by the Company
in
this Agreement or any certificate, document or instrument delivered by or
on
behalf of the Company pursuant hereto; or
(b) Resulting
from any failure of the Selling Shareholders to have good, valid and marketable
title to the issued and outstanding Company Stock held by them, free and
clear
of all liens, claims, pledges, options, adverse claims, assessments or charges
of any nature whatsoever, or to have full right, capacity and authority to
vote
such Company Stock in favor of the Merger and the other transactions
contemplated by the Merger Agreement.
The
foregoing are collectively referred to as the “Buyer
Indemnity Claims.”
Section
6.3 Indemnification
of Selling Shareholders and Company.
Subject
to the limitations set forth in this Article VI, the Buyer and Buyer Sub
agree
to jointly and severally indemnify and hold harmless the Selling Shareholders
and their respective heirs, successors and assigns, and Company and its
officers, directors, agents and employees, from and against any and all Damages:
(a) Arising
out of any misrepresentation or breach of or default in connection with any
of
the representations, warranties and covenants given or made by the Buyer
or
Buyer Sub in this Agreement or any certificate, document or instrument delivered
by or on behalf of the Buyer or Buyer Sub pursuant hereto; or
(b) Resulting
from any failure of Parent to deliver good, valid and marketable title to
the
fully paid nonassessable shares of Parent Common Stock constituting all or
any
part of the Merger Consideration, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature whatsoever,
or to
have full right, capacity and authority to cause all of the shares representing
such Parent Common Stock to be issued to the Selling Shareholders in connection
with the conversion of each share of the Company Stock as contemplated by
the
Merger Agreement.
The
foregoing are collectively referred to as the “Selling
Shareholders and Company Indemnity Claims.” The
Selling Shareholders and Company Indemnity Claims together with the Buyer
Indemnity Claims are collectively referred to as the “Indemnity
Claims.”
Section
6.4 General
Notice and Procedural Requirements for Indemnity Claims.
Notwithstanding the foregoing, the party or person having the indemnity
obligation under this Article VI (the “Indemnifying
Party”),
shall
be obligated to indemnify and hold harmless the party or person entitled
to
indemnity under this Article VI (the “Indemnified
Party”),
only
with respect to any Indemnity Claims of which the Indemnified Party notifies
with specificity the Indemnifying Party in accordance with Section
7.1
of this
Agreement and, if applicable, within the following time period: (i) with
regard
to any representation or warranty under this Agreement, prior to the end
of the
Survival Period of such representation or warranty; or (ii) with regard to
any
covenant under this Agreement which by its terms expires, prior to the end
of
the survival period relating to such covenant.
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Section
6.5 Notice
and Procedural Requirements for Third Party Claims.
If a
complaint, claim or legal action is brought by a third party (a “Third
Party Claim”)
as to
which an Indemnified Party is entitled to indemnification, the Indemnified
Party
shall give written notice of such Third Party Claim to the Indemnifying Party
in
accordance with Section
7.1
of this
Agreement promptly after the Indemnified Party receives notice thereof, which
notice shall include a copy of any letter, complaint or similar writing received
by the Indemnified Party; provided however, that any failure to provide or
delay
in providing such information shall not constitute a bar or defense to
indemnification except to the extent the Indemnifying Party has been prejudiced
thereby.
The
Indemnifying Party shall have the right to assume the defense of such Third
Party Claim with counsel reasonably satisfactory to the Indemnified Party.
After
notice from the Indemnifying Party to the Indemnified Party of the Indemnifying
Party’s election so to assume the defense of such Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or
other expenses subsequently incurred by the Indemnified Party in connection
with
the defense of such Third Party Claim except as hereinafter provided. If
the
Indemnifying Party elects to assume such defense and select counsel, the
Indemnified Party may participate in such defense through its own separate
counsel, but the fees and expenses of such counsel shall be borne by the
Indemnified Party unless: (i) otherwise specifically agreed by the Indemnifying
Party, or (ii) counsel selected by the Indemnifying Party determines that
because of a conflict of interest between the Indemnifying Party and the
Indemnified Party such counsel for the Indemnifying Party cannot adequately
represent both parties in conducting the defense of such action. In the event
the Indemnified Party maintains separate counsel because counsel selected
by the
Indemnifying Party has determined that such counsel cannot adequately represent
both parties because of a conflict of interest between the Indemnifying Party
and the Indemnified Party, then the Indemnifying Party shall not have the
right
to direct the defense of such Third Party Claim on behalf of the Indemnified
Party.
The
failure of the Indemnifying Party to notify an Indemnified Party of its election
to defend such Third Party Claim within thirty (30) days after notice thereof
was given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its rights to defend such Third Party Claim.
If
the
Indemnifying Party assumes the defense of a Third Party Claim, the obligations
of the Indemnifying Party shall include taking all steps reasonably necessary
in
the defense of such Third Party Claim and holding the Indemnified Party harmless
from and against any and all Damages caused or arising out of any settlement
approved by the Indemnified Party or any judgment in connection with the
claim
or litigation.
If
the
Indemnifying Party does not assume the defense of such Third Party Claim
in
accordance with this Section, the Indemnified Party may defend against such
claim or litigation in such manner as it deems appropriate; provided, however,
that the Indemnified Party may not settle such Third Party Claim without
the
prior written consent of the Indemnifying Party; provided that the Indemnifying
Party may not withhold such consent unless it has provided security of a
type
and in an amount reasonably acceptable to the Indemnified Party for the payment
of its indemnification obligations with respect to such Third Party Claim.
The
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount
of Damages caused or arising out of any judgment rendered with respect to
such
Third Party Claim, and for all costs and expenses incurred by the Indemnified
Party in the defense of such claim.
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The
Indemnifying Party may settle any Third Party Claim in its sole discretion
without the prior written consent of the Indemnified Party, provided that
such
settlement involves only the payment of cash by the Indemnifying Party to
the
claimant and does not impose any other obligation on the Indemnifying Party
or
any liability or obligation on the Indemnified Party.
Section
6.6 Notice
and Procedural Requirements for Direct Claims.
Any
claim for indemnification by an Indemnified Party on account of Damages which
do
not result from a Third Party Claim (a “Direct
Claim”)
shall
be asserted by giving the Indemnifying Party reasonably prompt notice thereof
in
accordance with Section 7.1 of this Agreement; provided, however, that any
failure to provide, or delay in providing, such notification shall not
constitute a bar or defense to indemnification except to the extent the
Indemnifying Party has been prejudiced thereby. After receiving notice of
a
Direct Claim, the Indemnifying Party will have a period of thirty (30) days
within which to respond in writing to such Direct Claim. If the Indemnifying
Party rejects such claim or does not respond within such thirty (30) day
period
(in which case the Indemnifying Party will be deemed to have rejected such
claim), the Indemnified Party will be free to pursue such remedies as may
be
available to the Indemnified Party on the terms and subject to the provisions
of
this Article VI.
Section
6.7 Limitations.
Notwithstanding anything to the contrary herein, (i) the aggregate
liability of the Selling Shareholders for Damages under this Article VI
shall not exceed the Fair Market Value (as defined below) of the General
Escrow
Shares and the General Escrow Dividends and (ii) each Selling
Shareholder shall only be liable for his, her or its Pro Rata Share of the
Damages for which the Selling Shareholders are liable under this Article
VI. For
purposes hereof, the Fair Market Value of the General Escrow Shares shall
be the
equal to the the average of the last reported sale prices per share of the
Parent Common Stock on the Over the Counter Market (or other applicable exchange
at the relevant time) over the five consecutive trading days ending on the
trading day that is two trading days prior to the date on which the Claim
in
question is resolved.
Section
6.8 Escrow.
The
Escrow Agreement shall be the exclusive means for the Buyer to collect any
Damages for which it is entitled to indemnification under this
Article VI.
Section
6.9 Exclusive
Remedy. Except
with respect to claims based on fraud, after the Closing, the rights of the
Indemnified Parties under this Article VI and the Escrow Agreement
shall be
the exclusive remedy of the Indemnified Parties with respect to claims resulting
from or relating to any misrepresentation, breach of warranty or failure
to
perform any covenant or agreement contained in this Agreement.
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ARTICLE
VII
General
Provisions
Section
7.1 Notices.
All
notices and other communications given or made pursuant hereto will be in
writing and will be deemed to have been duly given or made (a) as
of the
date delivered, if delivered personally or by overnight courier, (b) on
the
third Business Day after deposit in the U.S. mail, if mailed by registered
or
certified mail (postage prepaid, return receipt requested), or (c) when
successfully transmitted by facsimile (with a confirming copy of such
communication to be sent as provided in clauses (a) or (b) above), and, in
each
case to the parties at the following addresses or facsimile number (or at
such
other address for a party as will be specified by like notice, except that
notices of changes of address will be effective upon receipt):
(a) If
to
Parent, Buyer or Buyer Sub:
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇
▇.
▇▇▇▇▇▇, President and CEO
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
With
a
copy (which will not constitute notice) to:
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇. Esq.
▇▇▇
▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
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(b) If
to the
Company or the Principals:
By
overnight courier
▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇
▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
By
US
mail
▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇
▇▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
▇▇▇ ▇▇▇ ▇▇▇▇
With
a
copy (which will not constitute notice) to:
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile:
781-966-2100
For
purposes of this Agreement, a “Business Day” shall mean any day that is not a
Saturday, a Sunday or other day on which banking organizations in Washington,
D.C. are authorized or required by law to close.
Section
7.2 Expenses.
All
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such
fees,
costs and expenses.
Section
7.3 Amendment.
This
Agreement may not be amended except by an instrument in writing signed by
the
parties hereto.
Section
7.4 Entire
Agreement.
This
Agreement and the schedules and exhibits attached hereto, constitute the
entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to
the
subject matter hereof.
Section
7.5 No
Third-Party Beneficiaries.
Except
for the parties hereto, this Agreement is not intended to confer upon any
other
Person any rights or remedies hereunder.
Section
7.6 Assignment.
This
Agreement will not be assigned by operation of law or otherwise, except that
Buyer and Buyer Sub may assign all or any of their rights hereunder to any
Affiliate of Buyer; provided,
however,
that no
such assignment will relieve the assigning party of its obligations hereunder.
This Agreement will be binding upon, and will be enforceable by and inure
to the
benefit of the parties hereto and their respective successors and
assigns.
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31
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Section
7.7 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 conditions
and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the maximum extent possible.
Section
7.8 Governing
Law.
This
Agreement will be governed by, and construed in accordance with, the Laws
of the
State of Delaware applicable to contracts executed in and to be performed
entirely within that State.
Section
7.9 Headings;
Interpretation.
The
headings contained in this Agreement are for reference purposes only and
will
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 will be understood to be followed by the words
“without
limitation.”
Section
7.10 Construction.
In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or disfavoring any party
by
virtue of the authorship of any provisions of this Agreement.
Section
7.11 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed will
be
deemed to be an original but all of which will constitute one and the same
agreement.
Section
7.12 Confidentiality.
The
Company and Buyer each recognize that they have received and will receive
confidential information concerning the other during the course of the Merger
negotiations and preparations. Accordingly, the Company and Buyer each agrees
(a) to use its respective best efforts to prevent the unauthorized
disclosure of any confidential information concerning the other that was
or is
disclosed during the course of such negotiations and preparations, and is
clearly designated in writing as confidential at the time of disclosure,
and
(b) to not make use of or permit to be used any such confidential
information other than for the purpose of effectuating the Merger and related
transactions. The obligations of this section will not apply to information
that
(i) is or becomes part of the public domain, (ii) is disclosed
by the
disclosing party to third parties without restrictions on disclosure,
(iii) is received by the receiving party from a third party without
breach
of a nondisclosure obligation to the other party or (iv) is required
to be
disclosed by law.
*
*
*
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IN
WITNESS WHEREOF,
Parent,
Buyer, Buyer Sub, the Company and the Selling Shareholders have executed
this
Agreement as of the date first written above.
By:
Name: ▇▇▇
▇.
▇▇▇▇▇▇
Title: President
and CEO
NEOREACH,
INC.
By:
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Title: President
NEOREACH
WIRELESS, INC.
By:
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Title: President
EVERGREEN
OPEN BROADBAND, INC.
By:
PRINCIPALS
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇ ▇▇▇▇▇
[Signature
Page to Agreement and Plan of Merger]
EXHIBIT
A
ESCROW
AGREEMENT
A-1
EXHIBIT
B
CLOSING
BALANCE SHEET
B-1
EXHIBIT
C
EMPLOYMENT
AGREEMENT
C-1
EXHIBIT
D
CONSULTING
AGREEMENT
D-1