AGREEMENT AND PLAN OF MERGER by and among CAPITAL GROWTH SYSTEMS, INC., as Parent, CGSI MERGERCO, INC., as MergerCo, and CENTREPATH, INC., as the Company November 22, 2006
AGREEMENT
AND PLAN OF MERGER
by
and
among
CAPITAL
GROWTH SYSTEMS, INC.,
as
Parent,
CGSI
MERGERCO, INC.,
as
MergerCo,
and
CENTREPATH,
INC.,
as
the
Company
November
22, 2006
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
dated as of November 22, 2006 by and among CentrePath, Inc., a Delaware
corporation (the “Company”),
CAPITAL GROWTH SYSTEMS, INC., a Florida corporation (“Parent”),
and
CGSI MERGERCO, Inc., a Delaware corporation (“MergerCo”).
WHEREAS,
the parties wish to effect a business combination through a merger (the
“Merger”)
of
MergerCo with and into the Company on the terms and conditions set forth in
this
Agreement and in accordance with the Delaware General Corporation Law, as
amended (the “DGCL”);
WHEREAS,
the Board of Directors of the Company (the “Company
Board”)
has
approved this Agreement, the Merger and the other transactions contemplated
by
this Agreement and determined that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best
interest of its stockholders;
WHEREAS,
the Boards of Directors of Parent and MergerCo have determined that this
Agreement, the Merger and the other transactions contemplated by this Agreement
are in the best interest of their respective stockholders, and Parent has
approved this Agreement as the sole stockholder of MergerCo; and
NOW
THEREFORE, in consideration of the mutual agreements and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Article
I - THE MERGER
Section
1.1. The
Merger.
Subject
to the terms and conditions of this Agreement, at the Effective Time (as
defined
in Section 1.2 below), the Company and MergerCo shall consummate the Merger
pursuant to which (a) MergerCo shall be merged with and into the Company
and the
separate corporate existence of MergerCo shall thereupon cease, (b) the
Company
shall be the surviving corporation in the Merger (the “Surviving
Corporation”)
and
shall continue to be governed by the laws of the State of Delaware, and
(c) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger.
The
Merger shall have the effects specified in the DGCL.
Section
1.2. Effective
Time.
On the
Closing Date (as defined in Section 1.4 below), MergerCo and the Company
shall
duly execute a certificate of merger (the “Certificate
of Merger”)
and
file such Certificate of Merger with the Secretary of State of the State
of
Delaware in accordance with the DGCL. The Merger shall become effective
at such
time as the Certificate of Merger, accompanied by payment of the filing
fee (as
provided in the DGCL), has been examined by and received the endorsed approval
of the Secretary of State of the State of Delaware (the “Effective
Time”).
Section
1.3. Certificate
of incorporation and Bylaws.
The
certificate of incorporation of the Surviving Corporation shall be amended
at
the Effective Time to be identical to the certificate of incorporation
of
MergerCo (except for those provisions dealing with the incorporator and
initial
directors, which shall be omitted and the name of the Surviving Corporation
which shall be as set forth in the last sentence of this Section 1.3) until
thereafter amended as provided by law and the terms of such certificate
of
incorporation. The by-laws of MergerCo, as in effect immediately prior
to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, by the terms of the certificate
of
incorporation of the Surviving Corporation and by the terms of such by-laws.
Notwithstanding the foregoing, the name of the Surviving Corporation shall
be
“CentrePath, Inc.” and the certificate of incorporation and by-laws of the
Surviving Corporation shall so provide.
Section
1.4. Time
and Place of Closing.
The
closing (the “Closing”)
of the
Merger shall be held at the offices of ▇▇▇▇▇▇▇ Procter LLP,
Exchange Place, Boston, Massachusetts, on the earlier of (a) November 30,
2006
and (b) such other time as Parent and the Company may mutually determine.
The
date on which the Closing actually occurs is sometimes referred to herein
as the
“Closing
Date.”
Section
1.5. Directors
and Officers.
The
directors of MergerCo immediately prior to the Effective Time shall be
the
initial directors of the Surviving Corporation and the officers of MergerCo
immediately prior to the Effective Time shall be the initial officers of
the
Surviving Corporation, each to hold office in accordance with the certificate
of
incorporation and by-laws of the Surviving Corporation.
Section
1.6. ▇▇▇▇▇▇▇
Money Deposit.
(a) Parent
has deposited $1,000,000 with the Company concurrently with the execution
and
delivery of this Agreement (the “▇▇▇▇▇▇▇
Money Deposit”).
(b) If
the
transactions contemplated hereby are consummated, the ▇▇▇▇▇▇▇ Money Deposit
shall be applied in payment of the Merger Consideration, and the Company
shall
transfer the ▇▇▇▇▇▇▇ Money Deposit to the Exchange Agent (as defined below)
at
the Effective Time.
(c) The
Company shall return the ▇▇▇▇▇▇▇ Money Deposit to Parent if Parent terminates
this Agreement pursuant to Section 9.1(c) below.
(d) The
Company shall have the right to retain the ▇▇▇▇▇▇▇ Money Deposit if the
transactions contemplated by this Agreement are not consummated for any
reason
other than those described in Section 1.6(c) above.
Article
II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE
CONSTITUENT CORPORATIONS
Section
2.1. Effect
on the Capital Stock.
As of
the Effective Time, by virtue of the Merger and without any action on the
part
of the holder of any shares of the capital stock of the Company (the
“Company
Stock”)
or any
shares of the capital stock of MergerCo:
(a) Each
share of common stock, par value $0.01 per share, of MergerCo issued and
outstanding immediately prior to the Effective Time shall be converted
into one
fully paid and nonassessable share of common stock, par value $0.01 per
share,
of the Surviving Corporation following the Merger.
(b) Each
share of Company Stock that is owned by the Company immediately prior to
the
Closing Date shall automatically be canceled and retired and shall cease
to
exist, and no cash or other consideration shall be delivered or deliverable
in
exchange therefor.
(c) Each
share of Company Stock issued and outstanding immediately prior to the
Effective
Time (other than shares to be canceled in accordance with Section 2.1(b)
and the
Dissenting Shares as defined in Section 3.2 below) shall be converted into
the
right to receive that portion of the Merger Consideration (as defined below)
applicable to such share, calculated as of the Effective Time in accordance
with
the amounts set forth on Exhibit
A
hereto,
with the amounts set forth in the column entitled “Closing Amount” to be payable
as of the Effective Time and the amounts set forth in the column entitled
“Escrow Amount” to be payable in accordance with the terms hereof and of the
Escrow Agreement, net to the holder thereof in cash, payable to the holder
thereof, without any interest thereon, upon surrender and exchange of the
Certificate (as defined below) representing such share of Company Stock
or the
delivery of an affidavit as described in Section 3.1(h).
(i) The
“Merger
Consideration”
shall
be an amount equal to Six Million Seven Hundred Fifty Thousand Dollars
($6,750,000) plus
or
minus,
as and
if applicable, the Net Asset Position Adjustment Amount (as defined and
determined in accordance with Section 2.3). As described above, the ▇▇▇▇▇▇▇
Money Deposit is deemed to be a portion of, and shall be applied in payment
of,
the Merger Consideration.
(ii) At
the
Closing, the Company shall update Exhibit
A
to
reflect the amounts of Merger Consideration applicable to each Person who
is a
stockholder of the Company at the Closing, and shall deliver such updated
Exhibit
A
to
Parent with wire transfer instructions, if applicable, for each such
stockholder.
(d) All
shares of Company Stock, when converted as provided in Section 2.1(c),
shall no
longer be outstanding and shall automatically be canceled and retired and
shall
cease to exist, and each certificate (“Certificate”)
previously evidencing such shares shall thereafter represent only the right
to
receive that portion of the Merger
Consideration
applicable to the shares underlying such Certificate, as set forth on
Exhibit A
hereto.
The holders of Certificates previously evidencing shares of Company Stock
outstanding immediately prior to the Effective Time shall cease to have
any
rights with respect to the Company Stock except as otherwise provided herein
or
by law and, upon the surrender of Certificates in accordance with the provisions
of Section 3.1, shall only represent the right to receive the applicable
Merger
Consideration in exchange for their shares of Company Stock.
Section
2.2. Company
Stock Options.
Any
option to purchase shares of Company Stock that is outstanding immediately
prior
to the Effective Time shall terminate as of the Effective Time.
Section
2.3. Adjustment
to Merger Consideration.
(a) Prior
to
the Closing Date, the Company shall in good faith prepare, with the assistance
of Parent, an estimated balance sheet of the Company as of the Closing
Date (the
“Estimated
Closing Date Balance Sheet”),
which
shall include a determination of the Net Asset Position (as defined below)
as of
the Closing Date. The Estimated Closing Date Balance Sheet shall be prepared
in
accordance with GAAP consistently applied, and otherwise consistent with
the
methodology used to prepare the Company’s Base Balance Sheet (as defined in
Section 4.5). Not later than two (2) business days prior to the Closing
Date,
the Company shall deliver to Parent the Estimated Closing Date Balance
Sheet,
together with worksheets and data that support the Estimated Closing Date
Balance Sheet and any other information that Parent may reasonably request
in
order to verify the amounts reflected on the Estimated Closing Date Balance
Sheet.
(b) As
soon
as practical after the Closing Date, Parent shall review the Estimated
Closing
Date Balance Sheet in accordance with GAAP consistently applied and otherwise
consistent with the methodology used to prepare the Base Balance Sheet
and make
any adjustments necessary thereto, including, if necessary, to the determination
of the Net Asset Position as of the Closing Date, consistent with the provisions
of this Section 2.3 (the “Post-Closing
Balance Sheet”).
Parent shall, within twenty (20) days of the Closing Date, deliver the
Post-Closing Balance Sheet to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (the “Stockholders’
Representative”),
together with worksheets which detail any adjustments and the basis thereof.
The
Post-Closing Balance Sheet, and the Net Asset Position at the Closing reflected
thereon, shall be binding upon the parties upon approval of such Post-Closing
Balance Sheet by the Stockholders’ Representative. If the Stockholders’
Representative does not agree with the Post-Closing Balance Sheet and the
calculation of the Net Asset Position at the Closing stated thereon, and
Parent
and the Stockholders’ Representative cannot mutually agree on the same, then
within the later of (i) thirty (30) days after the Closing Date and (ii)
ten
(10) days following receipt by the Stockholders’ Representative of the
Post-Closing Balance Sheet, Parent and the Stockholders’ Representative shall
select a nationally recognized independent accounting firm mutually satisfactory
to Parent and the Stockholders’ Representative to resolve such dispute (the
“Neutral
Auditor”).
The
Neutral Auditor shall review the Post-Closing Balance Sheet and, within
ten (10)
days of its appointment, shall make any adjustments necessary
thereto,
and, upon completion of such review, such Post-Closing Balance Sheet and
the Net
Asset Position at the Closing (the “Closing
Net Asset Position”)
as
determined by the Neutral Auditor shall be binding upon the parties. If
such a
review is conducted, then the party (i.e., Parent, on the one hand, or
the
stockholders of the Company, on the other hand) whose last proposed offer
for
the settlement of the items in dispute, taken as a whole, was farther away
from
the final determination by the Neutral Auditor pursuant to the preceding
sentence, shall pay all fees and expenses associated with such review (with
any
such stockholder obligation, if applicable, payable out of the NAP Escrow
Amount
(as defined in Section 3.1(a))).
(c) Within
three (3) business days following determination of the Closing Net Asset
Position in accordance with Section 2.3(b), (i) in the event the Closing
Net
Asset Position is less than zero dollars ($0), (A) up to the first $75,000
(less
any amounts payable out of the NAP Escrow Amount pursuant to the last sentence
of Section 2.3(b)) of the positive difference between such amounts shall
be paid
to Parent out of the NAP Escrow Account and (B) any portion of the positive
difference between such amounts in excess of $75,000 (less any amounts
payable
out of the NAP Escrow Amount pursuant to the last sentence of Section 2.3(b))
shall be paid by each stockholder of the Company to Parent, based on its
pro
rata share (as set forth opposite such stockholder’s name in column 6 of
Exhibit
A
attached
hereto) of such portion, provided that in no event shall the stockholders
of the
Company be liable to or obligated to pay Parent for any amount under this
Section 2.3(c), together with any amount payable to the holders of Dissenting
Shares under Section 3.2(c) below, in excess of the aggregate Merger
Consideration, and (ii) in the event the Closing Net Asset Position is
greater
than zero dollars ($0), Parent shall pay to the Exchange Agent (as defined
below) the difference between such amounts, and the Exchange Agent shall
distribute such amount proportionally to the stockholders of the Company
based
on each such stockholder’ pro rata share (as set forth opposite such
stockholder’s name in column 6 of Exhibit
A
attached
hereto). All payments under this Section 2.3(c) shall be made by wire transfer
of immediately available funds or check. The difference between the Closing
Net
Asset Position and zero dollars ($0) is referred to herein as the “Net
Asset Position Adjustment Amount.”
Subject to any Reserved Receivables (as defined in Section 2.3(d) below),
that
may be in the NAP Escrow Amount, on the date of payment of the Net Asset
Position Adjustment Amount, if any, to the extent there remains any portion
of
the NAP Escrow Amount, the Escrow Agent shall distribute such remaining
portion
to the stockholders of the Company based on each such stockholder’ pro rata
share (as set forth opposite such stockholder’s name in column 6 of Exhibit
A
attached
hereto).
(d) As
used
in this Section 2.3 “Net
Asset Position”
means
Current Assets minus Liabilities; “Current
Assets”
means
and includes all accounts receivable, cash, cash equivalents, prepaid expenses
and all other current assets of the Company, in each case as determined
in
accordance with GAAP, consistently applied, but does not include any accrued
interest payable to the Company pursuant to certain promissory notes made
by
officers of the Company as of February 14, 2004 in connection with the
purchase
by such officers of restricted shares of the capital stock of the Company
or any
accounts relating to non-cash amortization of up-front setup costs relating
to
the Company’s remote management customers; and “Liabilities”
means
and includes all
accounts
payable, accrued expenses, accrued but unpaid taxes, deferred revenue (only
cost
to fulfill deferred revenues for professional services contracts in process),
indebtedness pursuant to that certain Loan and Security Agreement No. 4131,
dated July 28, 2004, as amended, by and between Lighthouse Capital Partners
V,
L.P.
(“Lighthouse”)
and
the Company (the “Credit
Facility”),
expected lease obligations relating to the second floor of the Company’s Waltham
office space pursuant to the terms of that certain lease described on Schedule
4.11(a), net of $234,000, and all other current liabilities of the Company,
in
each case as determined in accordance with GAAP, consistently applied,
but does
not include any accounts relating to non-cash amortization for that portion
of
the Company’s business referred to as the “GLCC Business” and up-front setup
fees relating to the Company’s remote management customers, or any liability
relating to the Oracle matter disclosed on Schedule
4.8
or the
Master Lease Agreement with Sun MicroSystems disclosed on Schedule
4.11.
Further, in determining Current Assets, accounts receivable that have been
disputed by the customer and/or are over 90 days past due shall be included
in
the calculation (the “Reserved
Receivables”);
provided, however, a reserve for the amount of such Reserved Receivables
shall
be established from the NAP Escrow Amount, and the escrow agent shall pay
to the
stockholders of the Company based on each such stockholder’ pro rata share (as
set forth opposite such stockholder’s name in column 6 of Exhibit
A
attached
hereto) an amount equal to the Reserved Receivable subsequently collected.
If
the Reserved Receivables are not collected within a year of the Effective
Date,
the escrow agent shall pay such reserve to the Surviving Company. For purposes
of clarity, both the Estimated Closing Date Balance Sheet and the Post-Closing
Balance Sheet shall assume completion of the transactions contemplated
hereby.
Additionally, for illustration purposes only, an example of the calculation
of
Net Asset Position is attached hereto as Exhibit
B.
Article
III - PAYMENT FOR SHARES; DISSENTING SHARES
Section
3.1. Payment
for Shares of Company Stock.
(a) At
the
Effective Time, (i) Parent shall deposit, or shall cause to be deposited,
with a
bank or trust company, or one or more other Persons as shall be mutually
acceptable to Parent and the Company (such Person or Persons, the “Exchange Agent”),
for
the benefit of the holders of shares of Company Stock for exchange through
the
Exchange Agent, the aggregate Merger Consideration as provided pursuant
to
Section 2.1(c) less (A) the ▇▇▇▇▇▇▇ Money Deposit and (B) less the Escrow
Amount
(as defined below), and (ii) the Company shall deposit with the Exchange
Agent,
for the benefit of the holders of shares of Company Stock for exchange
through
the Exchange Agent, the ▇▇▇▇▇▇▇ Money Deposit (the amounts described in
clauses
(i) and (ii), in the aggregate, the “Exchange
Fund”).
At
the Effective Time, Parent shall cause to be delivered to a mutually acceptable
nationally recognized escrow agent (the “Escrow
Agent”)
an
aggregate amount of cash equal to $399,000 (the “Escrow
Amount”),
such
deposit to constitute an escrow fund (the “Escrow
Fund”).
The
Escrow Fund shall be governed by the terms of an escrow agreement to be
entered
into by and among Parent, the Stockholders’ Representative and the Escrow Agent
(the “Escrow
Agreement”).
The
Escrow Fund shall be held in escrow and shall be available to satisfy certain
obligations
of
the
Company and the stockholders of the Company as set forth in Sections 2.3,
3.2
and 6.9 of this Agreement. Each of the parties to this Agreement hereby
acknowledges and agrees that (i) $30,000 of the Escrow Fund will be available
solely for the payment to Parent of any Total Dissenting Share Amount due
to the
holders of Dissenting Shares, if any, under Section 3.2 (the “Dissenter
Escrow Amount”),
(ii)
$75,000 of the Escrow Fund will be available solely for the payment to
Parent of
any amounts due to Parent, if any, under Section 2.3 (the “NAP
Escrow Amount”),
(iii)
$60,000 of the Escrow Fund will be available solely for the payment to
Parent of
any Oracle Losses (as defined in Section 6.9) due to Parent, if any (the
“Oracle
Escrow Amount”),
and
(iv) $234,000 of the Escrow Fund will be available solely for the payment
to
Parent of any Sublease Losses (as defined in Section 6.9) due to Parent,
if any
(the “Sublease
Escrow Amount”).
No
interest shall be paid or shall accrue on any amount pursuant to this Article
III except as earned from the Escrow Fund ▇▇▇▇▇▇.▇▇ or prior to the Effective
Time, Parent shall cause the Exchange Agent to deliver or mail to each
holder of
record of a Certificate or Certificates that immediately prior to the Effective
Time represented (or will represent) outstanding shares of Company Stock
(i) a
form of letter of transmittal reasonably acceptable to the Company which
shall
specify that delivery shall be effected, and risk of loss and title to
the
Certificates shall pass, only upon proper delivery of the Certificates
to the
Exchange Agent and (ii) instructions for use in surrendering the Certificates
in
exchange for the applicable Merger Consideration.
(b) Upon
surrender of a Certificate for cancellation to the Exchange Agent together
with
such letter of transmittal, properly completed and duly executed, and such
other
documents as may be required pursuant to such instructions, at the Effective
Time the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration as calculated in accordance with Section
2.1(c) that such holder has the right to receive in respect of the shares
of
Company Stock formerly represented by such Certificate, and the Certificate
so
surrendered shall forthwith be canceled at the Effective Time. No interest
will
be paid or accrued on any Merger Consideration payable to holders of
Certificates.
(c) Until
surrendered in accordance with this Section 3.1, each such Certificate
(other
than Certificates representing shares of Company Stock to be canceled in
accordance with Section 2.1(b) and Dissenting Shares (as defined in Section
3.2)) shall represent solely the right to receive the Merger Consideration
relating thereto. If the Merger Consideration (or any portion thereof)
is to be
delivered to any person other than the person in whose name the Certificate
formerly representing shares of Company Stock surrendered therefor is
registered, it shall be a condition to such right to receive such Merger
Consideration that the Certificate so surrendered shall be properly endorsed
or
otherwise be in proper form for transfer and that the person surrendering
such
shares of Company Stock shall pay to the Exchange Agent any transfer or
other
taxes required by reason of the payment of the Merger Consideration to
a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid
or is not applicable.
(d) Promptly
following the date that is ninety (90) days after the Effective Time, the
Exchange Agent shall deliver to the Surviving Corporation all cash, 7
Certificates
and other documents in its possession relating to the Merger, and the Exchange
Agent’s duties shall terminate. Thereafter, each holder of a Certificate
formerly representing shares of Company Stock may surrender such Certificate
to
the Surviving Corporation and (subject to applicable abandoned property,
escheat
and similar laws) receive in consideration therefor the Merger Consideration
relating thereto.
(e) At
the
Effective Time, the stock transfer books of the Company shall be closed
and,
thereafter, there shall be no further registration of transfers of shares
of
Company Stock on the stock transfer books of the Surviving Corporation
of any
shares of Company Stock that were outstanding immediately prior to the
Effective
Time. On or after the Effective Time, any Certificates formerly representing
shares of Company Stock presented to the Surviving Corporation or the Exchange
Agent shall be surrendered and canceled in return for the payment of the
Merger
Consideration relating thereto, as provided in this Article III.
(f) None
of
Parent, the Surviving Corporation or the Exchange Agent or any of their
respective subsidiaries or Affiliates shall be liable to any person in
respect
of any cash from the Exchange Fund delivered to a public official pursuant
to
any applicable abandoned property, escheat or similar law.
(g) If
any
Certificate shall have been lost, stolen or destroyed, upon the making
of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed, the Exchange Agent will issue the applicable Merger
Consideration in exchange for such lost, stolen or destroyed Certificate.
(h) Parent
and the Company shall cooperate to determine the amount of Taxes (as defined
in
Section 4.9(b)(i)) required to be withheld with respect to any payments
to be
made pursuant to this Agreement that will be treated as compensation income
to
the recipient thereof for any relevant tax purposes, determined as if the
Company was the payor of such amounts. Parent shall withhold such amounts
from
the portion of the Merger Consideration otherwise due to the recipient
with
respect to which such withholding is required, and shall instead pay such
amount
to the Company for payment to the applicable Tax authority. In addition,
the
Exchange Agent, Parent and the Surviving Corporation shall be entitled
to deduct
and withhold from the Merger Consideration or other amounts payable pursuant
to
this Agreement to any holder of shares of Company Stock such amounts as
the
Exchange Agent, Parent or the Surviving Corporation is required to deduct
and
withhold with respect to the making of such payment under the Internal
Revenue
Code of 1986, as amended (the “Code”),
or
any provision of United States federal, state or local tax laws. To the
extent
that amounts are so withheld by the Exchange Agent, Parent or the Surviving
Corporation, such amounts withheld shall be treated for all purposes of
this
Agreement as having been paid to the holder of the shares of Company Stock
in
respect of which such deduction and withholding was made by the Exchange
Agent,
Parent or the Surviving Corporation.
Section
3.2. Appraisal
Rights.
(a) Notwithstanding
anything in this Agreement to the contrary, any shares of Company Stock
(collectively, the “Dissenting
Shares”)
that
are issued and outstanding immediately prior to the Effective Time and
that are
held by stockholders of the Company who have not adopted and approved,
or
consented in favor of the adoption and approval, of this Agreement and
who shall
have demanded properly in writing appraisal for such shares in accordance
with
Section 262 of the DGCL (the “Appraisal Rights
Provisions”)
will
not be converted as described in Section 2.1, but will thereafter constitute
only the right to receive payment of the fair value of such shares of Company
Stock in accordance with the Appraisal Rights Provisions; provided,
however,
that
all shares of Company Stock held by stockholders who shall have failed
to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Stock under the Appraisal Rights Provisions
shall thereupon be deemed to have been canceled and retired and to have
been
converted, as of the Effective Time, into the right to receive the applicable
Merger Consideration, without interest, in the manner provided in Section
2.1.
Persons who have perfected statutory rights with respect to Dissenting
Shares as
aforesaid will not be paid by the Surviving Corporation as provided in
this
Agreement and will have only such rights as are provided by the Appraisal
Rights
Provisions with respect to such Dissenting Shares. Notwithstanding anything
in
this Agreement to the contrary, if Parent, MergerCo or the Company abandon
or
are finally enjoined or prevented from carrying out, or the stockholders
rescind
their adoption and approval of, this Agreement, the right of each holder
of
Dissenting Shares to receive the fair value of such Dissenting Shares in
accordance with the Appraisal Rights Provisions will terminate, effective
as of
the time of such abandonment, injunction, prevention or rescission. Prior
to the
Effective Time, (i) the Company shall give Parent and MergerCo prompt notice
of
any demands received by the Company for the exercise of appraisal rights
with
respect to shares of Company Stock and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demands,
and (ii) the Company shall not, except with the prior written consent of
Parent
(which consent shall not be unreasonably withheld), make any payment with
respect to, or settle or offer to settle, any such demands. On and after
the
Effective Time, (i) Parent or the Surviving Company shall give the Stockholders’
Representative prompt notice of any demands received by Parent or the Surviving
Company for the exercise of appraisal rights with respect to shares of
Company
Stock and the Stockholders’ Representative shall have the right to participate
in all negotiations and proceedings with respect to such demands, and (ii)
neither Parent nor the Surviving Company shall, except with the prior written
consent of the Stockholders’ Representative (which consent shall not be
unreasonably withheld), make any payment with respect to, or settle or
offer to
settle, any such demands.
(b) The
costs
incurred by the Surviving Company in connection with the exercise by holders
of
Dissenting Shares in accordance with the Appraisal Rights Provisions, if
any
(the “Appraisal
Costs”),
will
be payable as follows: (i) up to the first $30,000 shall be paid by the
Escrow
Agent to the Surviving Company out of the Dissenter Escrow Amount and (ii)
any
remainder shall be paid by the Surviving Company. On the date that is the
later
of (x) twenty (20) days following notice to the stockholder of the Company
of
the Appraisal Rights Provisions and (y) the date on which
payment
for Appraisal Costs, if any, has been satisfied, the Escrow Agent shall
distribute any remaining Dissenter Escrow Amount to the stockholders of
the
Company based on each such stockholder’ pro rata share (as set forth opposite
such stockholder’s name in column 6 of Exhibit
A
attached
hereto).
(c) Each
dissenting stockholder who becomes entitled under the DGCL to payment for
Dissenting Shares shall receive payment therefor after the Effective Time
(but
only after the amount to be paid for such Dissenting Shares shall have
been
agreed upon or finally determined pursuant to the DGCL): (i) first, from
the
stockholders of the Company based on each such stockholder’ pro rata share (as
set forth opposite such stockholder’s name in column 6 of Exhibit
A
attached
hereto) of the aggregate amount to be paid for such Dissenting Shares pursuant
to the DGCL, provided that in no event shall the stockholders of the Company
be
liable to or obligated to pay any amount to the holders of Dissenting Shares
under this Section 3.2(c), together with any amounts payable to Parent
under
Section 2.3(c), in excess of the aggregate Merger Consideration, and (ii)
thereafter, from the Surviving Company; and such shares of Company Stock
shall
thereupon be canceled.
Article
IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company hereby makes to Parent and MergerCo the representations and warranties
contained in this Article IV.
Section
4.1. Existence;
Good Standing; Authority.
(a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. The Company has all requisite
corporate power and authority to own, operate, lease and encumber its properties
and carry on its business as currently conducted. The Company is duly licensed
or qualified to do business as a foreign corporation under the laws of
each
other jurisdiction in which the character of its properties or in which
the
transaction of its business makes such qualification necessary, except
where the
failure to be so licensed or qualified would not, individually or in the
aggregate, have a Material Adverse Effect. The copies of the Company’s Sixth
Amended and Restated Certificate of Incorporation as in effect on the date
hereof (the “Charter”)
and
by-laws, each as amended to date and made available to Parent’s counsel, are
complete and correct, and no amendments thereto are pending.
(b) The
Company has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement, the performance by the Company of its obligations hereunder
and the consummation of the transactions contemplated hereby have been
duly
authorized by all requisite corporate action on the part of the Company.
This
Agreement has been duly executed and delivered by the Company and, assuming
the
due authorization, execution and delivery of this Agreement by Parent,
this
Agreement
constitutes
a legal, valid and binding obligation of the Company, enforceable against
the
Company in accordance with its terms, except as such enforceability may
be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws
affecting creditors’ rights generally and by general equitable principles.
Section
4.2. Capitalization.
As of
the date of this Agreement, the authorized, issued and outstanding capital
stock
of the Company is set forth on Schedule
4.2.
All of
the issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable. As of the date
of this
Agreement, except as set forth on Schedule
4.2,
there
are no outstanding options, warrants or other rights of any kind to acquire
any
additional shares of capital stock of the Company or securities convertible
into
or exchangeable for, or which otherwise confer on the holder thereof any
right
to acquire, any such additional shares, nor is the Company committed to
issue
any such option, warrant, right or security. Except as set forth on Schedule
4.2,
there
are no agreements or understandings to which the Company is a party with
respect
to the voting of any shares of capital stock of the Company or which restrict
the transfer of any such shares. Except as set forth on Schedule
4.2,
there
are no outstanding contractual obligations of the Company to repurchase,
redeem
or otherwise acquire any shares of capital stock, other equity interests
or any
other securities of the Company. Except as set forth on Schedule
4.2,
the
Company is not under any obligation by reason of any agreement to register
the
offer and sale or resale of any of its securities under the Securities
Act of
1933, as amended, and the rules and regulations promulgated thereunder
(the
“Securities
Act”).
Section
4.3. Subsidiaries.
The
Company has no subsidiaries, and does not own any interest or investment
(whether equity or debt) in any Person (other than investments in short-term
investment securities).
Section
4.4. No
Conflict.
Neither
the execution and delivery by the Company of this Agreement and the other
agreements, documents and instruments contemplated hereby to which the
Company
is a party, nor the consummation by the Company of the transactions in
accordance with the terms hereof and thereof, conflicts with or results
in a
breach of any provisions of the Charter or by-laws of the Company. Except
as set
forth on Schedule
4.4,
and
assuming the consents, approvals and authorizations contemplated by Section
4.7
are obtained, the execution and delivery by the Company of this Agreement
and
the other agreements, documents and instruments contemplated hereby to
which the
Company is a party and the consummation by the Company of the transactions
in
accordance with the terms hereof and thereof will not violate, or conflict
with,
or result in a breach of any provision of, or constitute a default (or
an event
which, with notice or lapse of time or both, would constitute a default)
under
any of the terms, conditions or provisions of any material note, bond,
mortgage,
indenture, deed of trust, lease, contract or other agreement to which the
Company is a party or by which the or any of its properties is bound, except,
in
each case, as would not, individually or in the aggregate, have a Material
Adverse Effect or would become applicable as a result of the business or
activities in which Parent proposes to be engaged or as a result of any
acts or
omissions by, or the status of any facts pertaining to, Parent.
Section
4.5. Financial
Statements.
(a) The
Company has delivered to Parent the following financial statements, copies
of
which are attached hereto as Schedule
4.5
(collectively, the “Financial
Statements”):
(i) Audited
balance sheet of the as of December 31, 2005, and statements of income
and
retained earnings and statements of cash flows the year then ended;
(ii) Unaudited
adjusted balance sheet of the as of September 30, 2006 (the “Base
Balance Sheet”);
and
(iii)Unaudited
adjusted statements of income of the Company as of September 30, 2006.
Subject
to the absence of footnotes and year-end audit adjustments with respect
to any
unaudited Financial Statements, the Financial Statements have been prepared
using the Company’s past practices and procedures in accordance with GAAP
consistently applied, and present fairly in all material respects the
consolidated financial condition of the Company.
(b) As
of the
date hereof, all liabilities of the Company of a type that would be required
to
be shown on the Financial Statements in accordance with GAAP have been
(i)
stated or adequately reserved against on the Base Balance Sheet or the
notes
thereto, (ii) reflected on Schedule
4.5
or the
other Schedules furnished to Parent hereunder, or (iii) incurred after
the date
of the Base Balance Sheet in the ordinary course of business consistent
with
past practices, except for liabilities which are not reasonably likely
to have,
individually or in the aggregate, a Material Adverse Effect.
Section
4.6. Absence
of Certain Changes.
Except
as set forth on Schedule
4.6,
from
the date of the Base Balance Sheet to the date of this Agreement, the Company
has operated only in the ordinary course of business consistent with past
practices and there has not been any:
(a) change
in
the Company’s authorized or issued capital stock; grant of any option, right to
purchase or similar right regarding the capital stock of the Company; purchase,
redemption, retirement, or other acquisition by the Company of any such
capital
stock; or declaration or payment of any dividend or other distribution
or
payment in respect of the capital stock of the Company;
(b) amendment
to the Charter or by-laws of the Company;
(c) payment
of any bonuses, or material increase in salaries or othercompensation,
by the Company to any of their respective directors, officers, or employees,
except for bonus awards and increases in salaries made in the ordinary
course of
business consistent with past practices;
(d) damage
to
or destruction or loss of any asset or property of the Company, whether
or not
covered by insurance, which has had a Material Adverse Effect;
(e) incurrence
of indebtedness or guarantee of debt or other liability of any third party
by
the Company other than in the ordinary course of business;
(f) material
change in the accounting methods or principles used by the Company, other
than
(A) write-downs or write-offs in the value of assets as required by GAAP,
or (B)
such adjustments as may be required by GAAP as a result of the transactions
contemplated by this Agreement; or
(g) entering
into any written agreement to do any of the actions described in clauses
(a)
through (f).
Section
4.7. Consents
and Approvals.
(a) To
the
Company’s knowledge, except as set forth on Schedule 4.7(a),
the
execution, delivery and performance of this Agreement by the Company will
not,
as of the Closing Date, require any consent, approval, authorization or
other
action by, or filing with or notification to, any federal, state, local,
or any
foreign government, governmental, regulatory or administrative authority,
agency
or commission or any court, tribunal, or judicial or arbitral body (a
“Governmental
Authority”),
except (i) where failure to obtain such consent, approval, authorization
or
action, or to make such filing or notification, would not, individually
or in
the aggregate, have (A) a Material Adverse Effect or (B) a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement, and (ii) as may be necessary as a result of any facts or
circumstances relating solely to Parent (including, without limitation,
its
sources of financing).
(b) To
the
Company’s knowledge, except as set forth on Schedule 4.7(b),
the
execution, delivery and performance of this Agreement by the Company will
not,
as of the Closing Date, require any third-party consents, approvals,
authorizations or actions, except where failure to obtain such consents,
approvals, authorizations or actions would not, individually or in the
aggregate, have (i) a Material Adverse Effect or (ii) a material adverse
effect
on the ability of the Company to perform its obligations under this Agreement.
Section
4.8. Litigation.
Except
as set forth on Schedule
4.8,
as of
the date of this Agreement there is no litigation, action, suit, proceeding,
claim, arbitration or investigation pending or, to the Company’s knowledge,
threatened in writing against the Company, as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined,
individually or in the aggregate, with all such other litigation, actions,
suits, proceedings, claims, arbitrations or investigations, would have
a
Material Adverse Effect.
Section
4.9. Taxes.
(a) Except
as
set forth on Schedule
4.9
or as
would not reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect:
(i) The
Company has timely filed or been included in, or will timely file or be
included
in, all material Tax Returns required to be filed by it or in which it
is to be
included with respect to Taxes for any period ending on or before the date
of
this Agreement, taking into account any extension of time to file granted
to or
obtained on behalf of the Company;
(ii) The
Company has paid or caused to be paid all Taxes shown on such Tax Returns
prior
to the date of this Agreement and has made provision, in accordance with
GAAP,
for all Taxes owed or accrued through the date of this Agreement;
(iii)Neither
the Internal Revenue Service (the “IRS”)
nor
any other Governmental Authority is asserting as of the date of this Agreement
by written notice to the Company or, to the Company’s knowledge, threatening as
of the date of this Agreement to assert against the Company, any deficiency
or
claim for any material amount of additional Taxes; and
(iv)To
the Company’s knowledge, no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are pending as of the date
of
this Agreement with regard to any Taxes or Tax Returns of the Company and
the
Company has not received a written notice prior to the date of this Agreement
of
any actual or threatened audits or proceedings or is otherwise aware of
any such
audits or proceedings.
(b) For
the
purposes of this Agreement:
(i)
“Taxes”
shall
mean any and all taxes, charges, fees, levies or
other
assessments, imposed by the IRS or any taxing authority, and such term
shall
include any interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such
taxes,
charges, fees, levies or other assessments; and
(ii) “Tax
Returns”
shall
mean any report, return, document or other filing required to be supplied
to any
taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes.
(c) The
representatives and warranties set forth in this Section 4.9 shall constitute
the only representations and warranties by the Company with respect to
Taxes.
Section
4.10. Employee
Benefit Plans.
With
respect to all the employee benefit plans, programs and arrangements currently
maintained for the benefit of any current or former employee, officer or
director of the Company (the “Benefit
Plans”),
except for such matters as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, (a) each Benefit
Plan
and any related trust intended to be qualified under Sections 401(a) and
501(a)
of the Code, has received a favorable determination letter from the IRS
that it
is so qualified, (b) each Benefit Plan has been operated in accordance
with the
terms and requirements of applicable law, (c) no Benefit Plan is subject
to
Title IV of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”),
or is
a multiemployer plan within the meaning of Section 3(37) of ERISA. The
representations and warranties set forth in this Section 4.10 shall constitute
the only representations and warranties by the Company with respect to
Benefit
Plans.
Section
4.11. Real
and Personal Property.
(a) Schedule
4.11(a)
sets
forth a list and description of all real property owned by the Company
(the
“Owned
Real Property”)
and
all real properties leased by the Company (the “Leased
Real Property”).
All
leases relating to Leased Real Property are identified on Schedule
4.11(a)
(the
“Leases”)
and
true and complete copies thereof have been delivered to Parent. Except
as set
forth on Schedule
4.11(a)
or as
would not, individually or in the aggregate, have a Material Adverse Effect,
the
Company has good and marketable title to all of the Owned Real Property.
With
respect to each Lease listed on Schedule
4.11(a),
except
as would not, individually or in the aggregate, have a Material Adverse
Effect:
(i) the
Company has good, valid and enforceable leasehold interests to the leasehold
estate in the Leased Real Property granted to the Company pursuant to each
pertinent Lease, subject to applicable bankruptcy, insolvency, moratorium
or
other similar laws relating to creditors’ rights and general principles of
equity;
(ii) each
of
said Leases has been duly authorized and executed by the Company and is
in full
force and effect; and
(iii)to
the Company’s knowledge, the Company is not in default under any of said Leases,
nor, to the Company’s knowledge, has any event occurred which, with notice or
the passage of time, or both, would give rise to such a default by the
Company.
(b) To
the
Company’s knowledge, except as set forth on Schedule 4.11(b)
or as
specifically disclosed in the Base Balance Sheet, and except with respect
to
leased personal property, the Company has good title to all of its tangible
personal property and assets shown on the Base Balance Sheet or acquired
after
the date of the Base Balance Sheet, free and clear of any mortgage, pledge,
lien, conditional sale
agreement,
security title, encumbrance or other charge (collectively, “Encumbrances”),
except for (i) assets which have been disposed of to nonaffiliated third
parties
since December 31, 2005 in the ordinary course of business, (ii) Encumbrances
reflected in the Base Balance Sheet, (iii) Encumbrances of record or
imperfections of title which are not, individually or in the aggregate,
material
in character, amount or extent and which do not materially detract from
the
value or materially interfere with the present or presently contemplated
use of
the assets subject thereto or affected thereby or which would not otherwise,
individually or in the aggregate, have a Material Adverse Effect, and (iv)
Encumbrances for current Taxes not yet due and payable.
(c) The
representations and warranties set forth in this Section 4.11 shall constitute
the only representations and warranties by the Company with respect to
Real
Property.
Section
4.12. Labor
and Employment Matters.
(a) To
the
Company’s knowledge, and as otherwise would not, individually or in the
aggregate, have a Material Adverse Effect, the Company is, as of the date
hereof, in compliance with all federal and state laws respecting employment
and
employment practices, terms and conditions of employment, and wages and
hours,
including but not limited to ERISA, the Code, Title VII of the Civil Rights
Act
of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age
Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act, as amended, and the related rules and regulations adopted
by
those federal agencies responsible for the administration of such laws,
and
there are no arrearages in the payment of wages, social security tax or
any
other employment related levy or tax
(b) The
Company is not a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union
or
labor organization. Except as otherwise would not, individually or in the
aggregate, have a Material Adverse Effect, as of the date of this Agreement,
the
Company is not subject to any charge, demand, petition or representation
proceeding seeking to compel, require or demand it to bargain with any
labor
union or labor organization nor, as of the date of this Agreement, is there
pending or, to the Company’s knowledge, threatened, any material labor strike,
dispute, walkout, work stoppage, slowdown or lockout involving the Company.
(c) The
representations and warranties set forth in this Section 4.12 shall constitute
the only representations and warranties of the Company with respect to
employment and labor matters.
Section
4.13. Contracts
and Commitments.
Except
as set forth in Schedule
4.13,
the
Company is not a party to:
(a) any
partnership agreements or joint venture agreements which requires a payment,
or
delivery of assets or services, in excess of $50,000 per year;
(b) any
employment, severance or consulting agreements with any director, officer
or
employee requiring an annual payment of cash compensation in excess of
$10,000;
(c) any
agreements with another Person materially limiting or restricting the ability
of
the Company to enter into or engage in any market or line of business;
and
(d) any
other
material agreement (or group of related agreements) the performance of
which
involves consideration in excess of $50,000 other than agreements entered
into
in the ordinary course of business.
Section
4.14. Intellectual
Property.
To the
Company’s knowledge, except as set forth on Schedule
4.14,
the
Company is the owner of, or has the right to use, all items of intangible
property, including, without limitation, patents, registered trademarks
and
service marks, trade names, unregistered trademarks and service marks,
copyrights and other intellectual property rights (collectively, the
“Intellectual
Property Rights”),
as
are necessary in connection with the business of the Company as currently
conducted taken as a whole, except where the failure to own or have the
right to
use such Intellectual Property Rights would not, individually or in the
aggregate, have a Material Adverse Effect. The representations and warranties
set forth in this Section 4.14 shall constitute the only representations
and
warranties by the Company with respect to Intellectual Property Rights.
Section
4.15. Environmental
Matters.
(a) To
the
Company’s knowledge, the Company is in material compliance with Environmental
Laws, except for such noncompliance as would not, individually or in the
aggregate, have a Material Adverse Effect. To the Company’s knowledge, the
Company has not received any written notice, report or other information
regarding any actual or alleged material violation of Environmental Laws,
or any
material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to the Company or its facilities
arising under Environmental Laws, the subject of which would have a Material
Adverse Effect.
(b) “Environmental
Laws”
means
all applicable federal, state and local statutes or laws, judgments, orders,
regulations, licenses, permits, rules and ordinances relating to pollution
or
protection of health, safety or the environment, including, but not limited
to
the Federal Water Pollution Control Act (33 U.S.C. §1251 et
seq.),
Resources Conservation and Recovery Act (42 U.S.C. §6901 et.
seq.),
Safe
Drinking Water Act (42 U.S.C. §3000(f) et.
seq.),
Toxic
Substances Control Act (15 ▇.▇.▇. §▇▇▇▇ et
seq.),
Clean
Air Act (42 ▇.▇.▇. §▇▇▇▇ et.
seq.),
Comprehensive Environmental Response, Compensation and Liability Act (42
▇.▇.▇.
§▇▇▇▇ et
seq.),
and
other similar state and local statutes.
(c) The
representations and warranties set forth in this Section 4.15 shall constitute
the only representations and warranties by the Company with respect to
environmental matters.
Section
4.16. Insurance.
Schedule
4.16
sets
forth a true and correct summary of the insurance policies held by, or
for the
benefit of, the Company including the underwriter of such policies and
the
amount of coverage thereunder.
Section
4.17. Brokers.
The
Company has not incurred or become liable for any broker’s commission or
finder’s fee relating to or in connection with the transactions contemplated by
this Agreement.
Section
4.18. Compliance
with Laws.
The
Company is not in default or violation of any law, statute, ordinance,
regulation, rule, order, judgment or decree applicable to the Company or
by
which any property or asset of the Company is bound, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect. Notwithstanding the foregoing,
the
representations and warranties in this Section 4.18 do not apply to matters
covered by Sections 4.9 (“Taxes”), 4.10 (“Employee Benefit Plans”), 4.12
(“Employment and Labor Matters”), 4.14 (“Intellectual Property”), and 4.15
(“Environmental Matters”), which matters are covered exclusively in such
Sections.
Section
4.19. Disclaimer
of Other Representations and Warranties;
Knowledge; Disclosure.
(a) NEITHER
THE COMPANY NOR ANY OF ITS REPRESENTATIVES HAVE MADE ANY REPRESENTATIONS
OR
WARRANTIES,
EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO THE COMPANY OR
THE
BUSINESS OF THE COMPANY OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED
HEREBY, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH
IN
THIS ARTICLE IV HEREOF.
(b) Without
limiting the generality of the foregoing, none of the Company or such
representatives of the Company has made, and shall not be deemed to have
made,
any representations or warranties in the materials relating to the business
of
the Company made available to Parent or MergerCo, including due diligence
materials, or in any presentation of the business of the Company in connection
with the transactions contemplated hereby, and no statement contained in
any of
such materials or made in any such presentation shall be deemed a representation
or warranty hereunder or otherwise or deemed to be relied upon by Parent
or
MergerCo in executing, delivering and performing this Agreement and the
transactions contemplated hereby. It is understood that any cost estimates,
projections or other predictions, any data, any financial information or
any
memoranda or offering materials or presentations made available by the
Company
and its representatives are not and shall not be deemed to be or to include
representations or warranties of the Company, and are not and shall not
be
deemed to be relied upon by
Parent
or
MergerCo in executing, delivering and performing this Agreement and the
transactions contemplated hereby.
(c) Whenever
a representation or warranty made by the Company herein refers to the knowledge
of the Company, such knowledge shall be deemed to consist only of the actual
knowledge on the date hereof and on the Closing Date, as applicable, of
the
senior management of the Company.
(d) Notwithstanding
anything to the contrary contained in this Agreement or in any of the Schedules,
any information disclosed in one Schedule shall be deemed to be disclosed
in all
Schedules.
Article
V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
Parent
and MergerCo hereby jointly and severally make to the Company the
representations and warranties in this Article V.
Section
5.1. Existence;
Good Standing; Authority.
(a) Parent
is
a corporation validly existing and in good standing under the laws of the
State
of Florida. MergerCo is a corporation validly existing and in good standing
under the laws of the State of Delaware. Each of Parent and MergerCo is
duly
licensed or qualified to do business as a foreign corporation under the
laws of
any other jurisdiction in which the character of its properties or in which
the
transaction of its business makes such qualification necessary, except
where the
failure to be so licensed or qualified would not, individually or in the
aggregate, have a material adverse effect on the ability of Parent or MergerCo
to perform its obligations under this Agreement. Each of Parent and MergerCo
has
all requisite corporate power and authority to own, operate, lease and
encumber
its properties and carry on its business as currently conducted.
(b)
Each of
Parent and MergerCo has the corporate power and authority to execute and
deliver
this Agreement and each agreement, document and instrument to be executed
and
delivered by or on behalf of Parent or MergerCo, as applicable, pursuant
to this
Agreement and to carry out the transactions contemplated hereby and thereby.
The
execution and delivery of this Agreement, the performance by each of Parent
and
MergerCo of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action
on the part of Parent and MergerCo, as applicable. This Agreement has been
duly
executed and delivered by each of Parent and MergerCo and, assuming the
due
authorization, execution and delivery of this Agreement by the Company,
this
Agreement constitutes a legal, valid and binding obligation of each of
Parent
and MergerCo, enforceable against Parent and MergerCo, as applicable, in
accordance with its terms, except as such enforceability may be limited
by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles.
Section
5.2. No
Conflict.
Neither
the execution and delivery by Parent and MergerCo of this Agreement and
the
other agreements, documents and instruments contemplated hereby, nor the
consummation by Parent and MergerCo of the transactions in accordance with
the
terms hereof and thereof, conflicts with or results in a breach of any
provisions of Parent’s or MergerCo’s respective certificates of incorporation or
by-laws or other organizational documents. Except as set forth on Schedule
5.2,
the
execution and delivery by Parent and MergerCo of this Agreement and the
other
agreements, documents and instruments contemplated hereby, and the consummation
by Parent and MergerCo of the transactions in accordance with the terms
hereof
and thereof, will not violate, or conflict with, or result in a breach
of any
provision of, or constitute a default (or an event which, with notice or
lapse
of time or both, would constitute a default) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, lease,
contract or other agreement to which either Parent or MergerCo is a party,
or by
which Parent, MergerCo or any of their respective properties is bound,
except,
in each case, as would not have a material adverse effect on the ability
of
either Parent or MergerCo to perform its obligations under this Agreement.
Section
5.3. Consents
and Approvals.
(a) Except
as
set forth on Schedule
5.3(a),
the
execution, delivery and performance of this Agreement by Parent and MergerCo
will not, as of the Closing Date, require any consent, approval, authorization
or other action by, or filing with or notification to, any Governmental
Authority, except (i) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would
not have
a material adverse effect on the ability of either Parent or MergerCo to
perform
its obligations under this Agreement, and (ii) as may be necessary as a
result
of any facts or circumstances relating solely to the Company.
(b) To
Parent’s knowledge, except as set forth on Schedule
5.3(b),
the
execution, delivery and performance of this Agreement by Parent and MergerCo
will not, as of the Closing Date, require any third-party consents, approvals,
authorizations or actions, except where failure to obtain such consents,
approvals, authorizations or actions would not have a material adverse
effect on
the ability of either Parent or MergerCo to perform its obligations under
this
Agreement.
Section
5.4. Litigation.
As of
the date of this Agreement, there is no litigation, action, suit, proceeding,
claim, arbitration or investigation pending or, to Parent’s knowledge,
threatened in writing, against Parent or MergerCo, as to which there is
a
reasonable likelihood of an adverse determination and which, if adversely
determined (a) would delay, hinder or prevent the consummation of the
transactions contemplated by this Agreement by Parent or MergerCo, or (b)
would
not have in the aggregate a material adverse effect on the ability of Parent
or
MergerCo to perform its obligations under this Agreement.
Section
5.5. Financing.
Parent
and MergerCo have sufficient funds to pay the Merger Consideration on the
terms
and conditions contemplated by this Agreement. Parent and MergerCo have
heretofore furnished the Company with sufficient evidence, including true
and
complete copies of balance sheets of Parent, MergerCo and/or a financing
commitment from Parent’s third party financing sources as are attached hereto as
Schedule 5.5, of their ability to
pay
the
Merger Consideration on the terms and conditions contemplated by this Agreement.
Each of Parent and MergerCo acknowledges and agrees that the performance
of its
obligations under this Agreement is not in any way contingent upon the
availability of financing to Parent or MergerCo.
Section
5.6. Brokers.
Neither
Parent nor MergerCo has incurred or become liable for any broker’s commission or
finder’s fee relating to or in connection with this Agreement or the
transactions contemplated hereby.
Section
5.7. Inspection;
No Other Representations.
Each of
Parent and MergerCo is an informed and sophisticated purchaser, and has
engaged
expert advisors, experienced in the evaluation and purchase of companies
such as
the Company as contemplated hereunder. Each of Parent and MergerCo has
undertaken such investigation and has been provided with and has evaluated
such
documents and information as it has deemed necessary to enable it to make
an
informed and intelligent decision with respect to the execution, delivery
and
performance of this Agreement and the transactions contemplated hereby.
Each of
Parent and MergerCo has received all materials relating to the business
of the
Company which it has requested and has been afforded the opportunity to
obtain
any additional information necessary to verify the accuracy of any such
information or of any representation or warranty made by the Company hereunder
or to otherwise evaluate the merits of the transactions contemplated hereby.
Each of Parent and MergerCo acknowledges that the Company has given each
of
Parent and MergerCo complete and open access to the key employees, documents
and
facilities of the Company. The Company and its representatives have answered
to
each of Parent’s and MergerCo’s satisfaction all inquiries that Parent, MergerCo
or any of their representatives have made concerning the business of the
Company
or otherwise relating to the transactions contemplated hereby. Each of
Parent
and MergerCo agrees to accept the Company in the condition it is in at
the
Closing based upon its own inspection, examination and determination with
respect thereto as to all matters, and without reliance upon any express
or
implied representations or warranties of any nature, whether in writing,
orally
or otherwise, made by or on behalf of or imputed to the Company, except
as
expressly set forth in this Agreement. Without limiting the generality
of the
foregoing, each of Parent and MergerCo acknowledges that the Company makes
no
representation or warranty with respect to (a) any projections, estimates
or
budgets delivered to or made available to Parent and MergerCo of future
revenues, future results of operations (or any component thereof), future
cash
flows or future financial condition (or any component thereof) of the Company
or
the future business and operations of the Company or (b) any other information
or documents made available to Parent, MergerCo or their counsel, accountants
or
advisors with respect to the Company or any of its businesses, assets,
liabilities or operations, except as expressly set forth in this
Agreement.
Article
VI - CERTAIN COVENANTS OF PARENT, MERGERCO AND THE
COMPANY
Section
6.1. Conduct
of Business Prior to Closing.
The
Company agrees that, between the date hereof and the Closing Date, it shall
use
reasonable efforts to operate in the ordinary course of business, consistent
with past practices, except as described in Schedule
6.1
or
as
otherwise contemplated by this Agreement. In furtherance of the foregoing,
the
Company shall use reasonable efforts to refrain from:
(a) changing
or introducing any method of management or operations except in the ordinary
course of business and consistent with prior practices;
(b) making
any change to the Company’s Charter or by-laws, or changing the authorized or
issued capital stock or equity interests of the Company;
(c) (i)
declaring, setting aside or paying any dividend, making any other distribution
in respect of its capital stock, shares or ownership interests, (ii) making
any
direct or indirect redemption, purchase or other acquisition of its stock
or
ownership interests or (iii) issuing, granting, awarding, selling, pledging,
disposing of or encumbering or authorizing the issuance, grant, award,
sale,
pledge, disposition or encumbrance of any shares of, or securities convertible
or exchangeable for, or options, warrants, calls, commitments or rights
of any
kind to acquire, any shares of its capital stock of any class thereof;
(d) (i)
prepaying any loans (if any) from its stockholders, officers or directors
or any
Person affiliated with any of the foregoing, (ii) making any change in
its
borrowing arrangements, (iii) modifying, amending or terminating any of
its
material contracts except in as specifically provided in this Agreement
or in
the ordinary course of business, or (iv) waiving, releasing or assigning
any
material rights or claims, other than in the ordinary course of business;
(e) materially
changing accounting policies or procedures;
(f) increasing
the rates of direct compensation or bonus compensation payable
or to become payable to any officer, employee, agent or consultant of the
Company, except in the ordinary course of business or in accordance with
the
existing terms of contracts entered into prior to the date of this Agreement;
(g) making
any material acquisition or capital expenditure other than in the ordinary
course of business; or
(h) entering
into any executory agreement, commitment or undertaking to do any of the
activities prohibited by the foregoing provisions.
Notwithstanding
the foregoing, prior to the Closing the Company shall be permitted to pay
down
existing indebtednesses in the ordinary course of business.
Section
6.2. Access
to Information.
(a) Without
undue disruption of its business, between the date of this Agreement and
the
Closing Date, the Company shall give Parent and its representatives reasonable
access upon reasonable notice and during times mutually convenient to Parent
and
senior management of the Company to the facilities, properties, employees,
books, and records of the Company as from time to time may be reasonably
requested.
(b) Any
such
investigation by Parent shall not unreasonably interfere with any of the
businesses or operations of the Company. Neither Parent nor MergerCo shall,
prior to the Closing Date, have any contact whatsoever with respect to
the
Company or with respect to the transactions contemplated by this Agreement
with
any partner, lender, ground lessor, vendor, supplier, employee or consultant
of
the Company, except in consultation with the Company and then only with
the
express prior approval of the Company, which approval shall not be unreasonably
withheld. All requests by Parent and MergerCo for access or information
shall be
submitted or directed exclusively to an individual or individuals to be
designated by the Company. Neither Parent nor MergerCo shall be permitted
to
conduct any invasive tests on any Owned Real Property or Leased Real Property
without the prior written consent of the Company. Each of Parent and MergerCo
agrees to indemnify the Company from and against any and all Losses suffered
by
the Company as a result of any investigations or inspections made by Parent
or
MergerCo or any breach by Parent or MergerCo of this Section 6.2(b).
Section
6.3. Confidentiality.
The
parties shall adhere to the terms and conditions of that certain Confidentiality
Agreement by and between the Company and Parent (the “Confidentiality
Agreement”).
Section
6.4. Regulatory
and Other Authorizations; Consents.
(a) The
Company, Parent and MergerCo shall use their good faith commercially reasonable
efforts to obtain the authorizations, consents, orders and approvals necessary
for their execution and delivery of, and the performance of their obligations
pursuant to, this Agreement. The parties hereto will not take any action
that
will have the effect of delaying, impairing or impeding the receipt of
any
required approvals and shall promptly respond to any requests for additional
information from any Governmental Authority or filings in respect thereof.
(b) Each
of
Parent and MergerCo shall use its good faith commercially reasonable efforts
to
assist the Company in obtaining the consents of third parties listed in
Schedule
4.6(b),
including (i) providing to such third parties such financial statements
and
other financial information as such third parties may reasonably request,
(ii)
agreeing to commercially reasonable adjustments to the terms of the
agreements with
such
third parties (provided that neither party hereto shall be required to
agree to
any increase in the amount payable with respect thereto) and (iii) executing
agreements to effect the assumption of such agreements on or before the
Closing
Date.
Section
6.5. Further
Action.
Each of
the parties hereto shall use its respective commercially reasonable efforts
to
take or cause to be taken all appropriate action, do or cause to be done
all
things necessary, proper or advisable, and execute and deliver such documents
and other papers, as may be required to carry out the provisions of this
Agreement and consummate and make effective the transactions contemplated
by
this Agreement.
Section
6.6. Press
Releases.
The
parties hereto will, and will cause each of their Affiliates and representatives
to, maintain the confidentiality of this Agreement and will not, and will
cause
each of their Affiliates not to, issue or cause the publication of any
press
release or
other
public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties
hereto which consent shall not be unreasonably withheld; provided,
however,
that a
party may, without the prior consent of the other parties hereto, issue
or cause
publication of any such press release or public announcement to the extent
that
such party reasonably determines, after consultation with outside legal
counsel,
such action to be required by law or by the rules of any applicable
self-regulatory organization, in which event such party will use its
commercially reasonable efforts to allow the other parties hereto reasonable
time to comment on such press release or public announcement in advance
of its
issuance.
Section
6.7. No
Solicitation.
From
the date of this Agreement until the earlier of the Closing or one year
from the
date of this Agreement, neither Parent nor MergerCo shall, and each shall
ensure
that its directors, officers, employees, partners, agents, Affiliates,
advisors
or representatives shall not, directly or indirectly, (i) solicit for employment
or employ any officer, employee or consultant of the Company, (ii) encourage,
induce or attempt to induce any officer, employee or consultant of the
Company
to terminate his or her employment or consulting relationship with the
Company,
(iii) interfere with the business or operations of the Company, or (iv)
take or
fail to take any actions which could reasonably be expected to adversely
affect
the Company’s business relationships with its customers and suppliers or
goodwill.
Section
6.8. Notice
of Certain Facts.
From
the date of this Agreement until the Closing, Parent and MergerCo shall
promptly
notify and inform the Company of any material variance or incorrect statement
in
the representations and warranties contained in Article IV of this Agreement
discovered by Parent, MergerCo or their respective representatives or agents.
Section
6.9. Certain
Payments from the Escrow Fund.
Subject
to the other terms and conditions of this Agreement and the Escrow Agreement,
the Escrow Agent will deliver to Parent (or any successor or assign) (a)
on or
prior to the first anniversary of the Effective Time, that portion of the
Oracle
Escrow Amount equal to any losses (not to include any consequential, exemplary
or punitive damages or any multiple of damages) actually suffered by Parent,
MergerCo or their respective successors and assigns on or prior to the
first
anniversary of the Effective Time, if any, that arise from, relate to or
result
from the certain claims contained in that certain letter, dated as of February
2006, from Oracle to the Company, that the Company did not have sufficient
licenses to cover its use of Oracle’s products, net of any insurance proceeds
received by Parent, MergerCo or their respective successors and assigns
in
connection with such losses (such losses, “Oracle
Losses”),
such
portion not to exceed, in the aggregate, the Oracle Escrow Amount, (b)
beginning
on March 1, 2007 and on the first of each month thereafter until the earlier
of
(i) September 1, 2008 (the “End
of
Term”)
or
(ii) the date during the period between the Effective Time and the End
of Term
on which the Surviving Company, Parent or any Affiliate enters into a sublease
for rental income for that certain space on the second floor of the Company’s
Waltham office, $12,000 per month of the Sublease Escrow Amount (the “Monthly
Sublease Payments”), and (c) at the End of Term that portion of the Sublease
Escrow Amount equal to $234,000 less the total of all Monthly Sublease
Payments
actually delivered to Parent and less the aggregate sublease rental income
received by the Surviving Company, Parent or any Affiliate for that certain
space on the second floor of the Company’s Waltham office during the period
between the Effective Time and the End of Term (the “Sublease
Losses”).
On
the
first
anniversary of the Effective Time, any portion of the Oracle Escrow Amount
not
constituting Oracle Losses will be distributed by the Escrow Agent to the
stockholders of the Company based on each such stockholder’ pro rata share (as
set forth opposite such stockholder’s name in column 6 of Exhibit
A
attached
hereto). On any date during the period between the Effective Time and the
End of
Term on which the Surviving Company, Parent or any Affiliate enters into
a
sublease providing for sublease rental income for that certain space on
the
second floor of the Company’s Waltham office, an amount equal to the aggregate
amount of the aggregate scheduled lease payments will be distributed by
the
Escrow Agent to the stockholders of the Company based on each such stockholder’
pro rata share (as set forth opposite such stockholder’s name in column 6 of
Exhibit
A
attached
hereto). In addition, on such date, in the event that the amount of such
scheduled sub lease payments is greater than the remaining Sublease Escrow
Amount, the Surviving Company, Parent or any Affiliate shall pay the difference
to the stockholders of the Company based on each such stockholder’ pro rata
share (as set forth opposite such stockholder’s name in column 6 of Exhibit
A
attached
hereto).
For
purposes of clarification, any Oracle Losses and Sublease Losses will be
satisfied solely through the Oracle Escrow Amount and Sublease Escrow Amount,
respectively, and in no event shall any stockholder of the Company be directly
obligated to indemnify, defend, hold harmless, reimburse or otherwise pay
to
Parent, MergerCo or their respective successors and assigns for the amounts
of
any Oracle Losses or Sublease Losses.
Article
VII - EMPLOYEE MATTERS
Section
7.1. Employees;
Benefits.
(a) Except
for the persons set forth on Schedule
7.1,
each of
Parent and MergerCo shall ensure that all persons who were employed by
the
Company immediately preceding the Closing Date, including those on vacation,
leave of absence or disability (the “Company
Employees”),
will
remain employed by the Surviving Company in a comparable position on and
immediately after the Closing Date, at not less than the same base rate
of pay.
For purposes of this Agreement, “Company Employees” does not include the persons
set forth on Schedule
7.1.
Neither
Parent nor MergerCo shall, at any time prior to one hundred eighty (180)
days
after the Closing Date, effectuate a “mass layoff” as that term is defined in
the Worker Adjustment and Retraining Notification Act of 1988, as amended
(“WARN”),
or
comparable conduct under any applicable state law, affecting in whole or
in part
any facility, site of employment, operating unit or employee of the Company
without complying fully with the requirements of WARN or such applicable
state
law.
(b) To
the
extent that service is relevant for purposes of eligibility, vesting,
calculation of any benefit, or benefit accrual under any employee benefit
plan,
program or arrangement established or maintained by Parent or MergerCo
(other
than any defined benefit pension plan) following the Closing Date for the
benefit of Company Employees, such plan, program or arrangement shall credit
such Company Employees for service on or prior to the Closing Date that
was
recognized by the Company for purposes
of
employee benefit plans, programs or arrangements maintained by the Company.
In
addition, with respect to any welfare benefit plan (as defined in Section
3(1)
of ERISA) established or maintained by Parent or MergerCo following the
Closing
Date for the benefit of Company Employees, such plan shall waive any
pre-existing condition exclusions and provide that any covered expenses
incurred
on or before the Closing Date by any Company Employee or by a covered dependent
shall be taken into account for purposes of satisfying applicable deductible
coinsurance and maximum out-of-pocket provisions after the Closing Date.
(c) This
Section 7.1 is intended for the irrevocable benefit of, and to grant third
party
rights to, the Company Employees and shall be binding on all successors
and
assigns of Parent and the Company. Each of the Company Employees shall
be
entitled to enforce the covenants contained in this Section 7.1. Notwithstanding
the foregoing, (i) nothing in this Agreement shall be interpreted or construed
to confer upon the Company Employees any right with respect to continuance
of
employment by the Surviving Company or Parent, nor shall this Agreement
interfere in any way with the right of the Surviving Company or Parent
to
terminate any employee’s employment at any time and (ii) nothing in this
Agreement shall interfere in any way with the right of Parent to amend,
terminate or otherwise discontinue any or all plans, practices or policies
of
Parent in effect from time to time.
Section
7.2. Conveyance
Taxes; Costs.
Parent
shall be liable for and shall hold the Company harmless against any transfer,
value added, excise, stock transfer, stamp, recording, registration and
any
similar taxes that become payable in connection with the Merger, and the
applicable parties shall file such applications and documents as shall
permit
any such tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure.
Section
7.3. Books
and Records; Insurance.
Parent
shall, and shall cause the Surviving Company to, until the seventh anniversary
of the Closing Date, retain all books, records and other documents pertaining
to
the business of the Company in existence on the Closing Date and to make
the
same available for inspection and copying by the stockholders of the Company
or
any representative of such Stockholders at the expense of the such stockholders
during the normal business hours of Parent or the Surviving Company, as
applicable, upon reasonable request and upon reasonable notice. No such
books,
records or documents shall be destroyed after the seventh anniversary of
the
Closing Date by Parent or the Surviving Company, without first advising
the
Stockholders’ Representative in writing and giving the Stockholders’
Representative, on behalf of the stockholders of the Company, a reasonable
opportunity to obtain possession thereof.
Section
7.4. Officers’
and Directors’ Indemnification .
The
Company, Parent and MergerCo agree that all rights to exculpation and
indemnification existing in favor of, and all limitations on the personal
liability of, the directors, officers, employees of the Company
(“Indemnified
Persons”)
provided for in its Charter and by-laws as in effect as of the date hereof
with
respect to matters occurring prior to and through the Closing, and specifically
including the transactions contemplated hereby, shall continue in full
force and
effect for a period of six (6) years from the Closing; provided,
however,
that
all rights to indemnification in respect of any
claims
(each a “Claim”)
asserted or made within such period shall continue until the disposition
of such
Claim. Following the Closing, Parent shall not, and shall not permit the
Surviving Company to, amend or modify its Charter or by-laws or other
organizational documents, as applicable, except as required by applicable
law,
if the effect of such amendment or modification would be to lessen or otherwise
adversely affect the indemnification rights of such Indemnified Persons
as
provided therein, and Parent shall cause the Surviving Company to advance
expenses to each such Indemnified Person in connection with any proceeding
involving such Indemnified Person to the fullest extent so permitted upon
receipt of any undertaking required by law or in the Charter or by-laws
of the
Company. In the event that the Company (or Surviving Company, as applicable)
transfers all or substantially all of its properties and assets to any
Person,
then and in each such case, proper provision shall be made so that the
transferee of such properties or assets shall assume the obligations of
the
Company (or the Surviving Company, as applicable) under this Section 7.4.
Prior
to the Closing, the Company shall purchase an extended reporting period
endorsement under the Company’s existing directors’ and officers’ liability
insurance coverage for the Company’s directors and officers in a form acceptable
to the Company which shall provide such directors and officers with coverage
for
six (6) years following the Closing of the lesser of (i) $10 million of
coverage
or (ii) such amount of coverage that would cost the Company $70,000 in
premiums
for the aggregate period under, and have other terms not materially less
favorable to, the insured persons than the directors’ and officers’ liability
insurance coverage presently maintained by the Company. This Section 7.4
is
intended to benefit each of the Indemnified Persons and their respective
heirs
and personal representatives, each whom shall be entitled to enforce the
provisions hereof.
Article
VIII - CONDITIONS TO CLOSING
Section
8.1. Conditions
to Obligations of the Company.
The
obligations of the Company to consummate the transactions contemplated
by this
Agreement for the Closing shall be subject to the satisfaction or waiver,
at or
prior to the Closing, of each of the following conditions, any one or more
of
which may be waived by the Company at or prior to the Effective Time:
(a) All
covenants contained in this Agreement to be complied with by Parent and
MergerCo
on or before the Closing shall have been complied with in all respects
except
where the failure to so comply would not have a material adverse effect
on
either of Parent’s and MergerCo’s ability to perform its obligations under this
Agreement, and the Company shall have received a certificate of each of
Parent
and MergerCo to such effect signed by a duly authorized officer of Parent
or
MergerCo, as applicable.
(b) Each
of
the representations and warranties of Parent and MergerCo contained in
Article V
shall be true and correct as of the Closing Date as though made on and
as of the
Closing Date; except as (i) would not, delay, hinder or prevent the consummation
of the transactions contemplated by this Agreement by Parent or MergerCo,
or
(ii) would not have in the aggregate a material adverse effect on Parent
or
MergerCo or Parent’s or MergerCo’s ability to perform its obligations under this
Agreement;
and each of Parent and MergerCo shall have delivered to the Company a
certificate of its President and Chief Financial Officer dated as of the
Closing
Date to the effect that the statements set forth in this Section 8.1(b)
above
are true and correct.
(c) No
Governmental Authority or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent)
that is
in effect and has the effect of making the transactions contemplated by
this
Agreement for the Closing illegal or otherwise restraining or prohibiting
consummation of such transactions.
(d) This
Agreement and the Escrow Agreement shall have been adopted and approved
by the
affirmative vote of the stockholders of the Company as required by the
DGCL, the
Charter and the bylaws of the Company.
(e) Each
of
Parent and MergerCo shall have executed a release of claims against the
Company
and its officers, directors and stockholders arising on or prior to the
Effective Time and relating directly to the business of the Company, except
for
claims arising from or in connection with this Agreement or the Escrow
Agreement.
Section
8.2. Conditions
to Obligations of Parent and MergerCo.
The
obligations of Parent and MergerCo to consummate the transactions contemplated
by this Agreement for the Closing shall be subject to the satisfaction
or
waiver, at or prior to the Closing, of each of the following conditions,
any one
or more of which may be waived by Parent at or prior to the Effective Time:
(a) All
covenants contained in this Agreement to be complied with by the Company
on or
before the Closing shall have been complied with in all material respects,
except where the failure to so comply would not, individually or in the
aggregate, have (A) a Material Adverse Effect or (B) a material adverse
effect
on the Company’s ability to perform their obligations under this Agreement, and
Parent shall have received a certificate of the Company to such effect
signed by
a duly authorized officer thereof.
(b) Each
of
the representations and warranties of the Company contained in Article
IV hereof
shall be true and correct as of the Closing Date as though made on and
as of the
Closing Date except for such inaccuracies as would not, in the aggregate,
have a
Material Adverse Effect; and the Company shall have delivered to Parent
a
certificate of the Company’s President and Chief Financial Officer dated as of
the Closing Date to the effect that the statements set forth in this Section
8.2(b) above are true and correct.
(c) No
Governmental Authority or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent)
which is
in effect and has the effect of making the transactions contemplated by
this
Agreement for the Closing illegal or otherwise restraining or prohibiting
consummation of such transactions.
(d) The
Company shall have paid all outstanding principal and accrued interest
under the
Credit Facility (as defined in Section 2.3(d)), and Lighthouse shall have
acknowledged the termination of the warrants issued by the Company to Lighthouse
in connection with the Credit Facility. Parent and MergerCo will cooperate
with
any reasonable request of the Company in connection with the repayment
of such
amounts and shall take such commercially reasonable actions as may be reasonably
requested to facilitate such repayment and to facilitate the release, in
connection with such repayment, of any mortgage, pledge, lien, conditional
sale
agreement, security title or other encumbrance securing such
amounts.
(e) Each
of
the following Persons shall have executed a release of claims against the
Company and its officers, directors and stockholders arising on or prior
to the
Effective Time except for claims arising from or in connection with (a)
if
applicable, any unpaid salary, bonuses and employee benefits earned by,
or
otherwise vested in, such Person as an employee of the Company and owed
by the
Company and (b) claims asserted against such Person by third parties for
which
such Person has rights to indemnification pursuant to the Charter or by-laws
of
the Company or any agreement with the Company or under applicable law:
each
senior manager of the Company named on Schedule
8.2(e)
attached
hereto, each member of the Company Board, and each stockholder of the Company
named on Schedule
8.2(e)
attached
hereto.
(f) The
Company shall have received the authorizations, orders, approvals and consents
of Governmental Authorities and third parties described in Schedules
4.7(a)
and
4.7(b)
in form
and substance reasonably satisfactory to Parent (subject to Section 6.4
above),
except where the failure to so receive would not have (A) a Material Adverse
Effect or (B) a material adverse effect on the Company’s ability to perform its
obligations under this Agreement.
(g) This
Agreement and the Escrow Agreement shall have been adopted and approved
by the
affirmative vote of the stockholders of the Company as required by the
DGCL, the
Charter and the bylaws of the Company.
Article
IX - TERMINATION
Section
9.1. Termination.
This
Agreement may be terminated:
(a)
at any time, by the mutual written consent of the Company, Parent
and
MergerCo;
(b) by
the
Company, if the Company is not then in material breach of any term of this
Agreement, upon written notice to Parent, upon a material breach of any
representation, warranty or covenant of Parent or MergerCo contained in
this
Agreement, provided that such breach is not capable of being cured or has
not
been cured within five (5) business days after the giving of notice thereof
by
the Company to Parent;
(c) by
Parent
or MergerCo, if neither Parent nor MergerCo is then in material breach
of any
term of this Agreement, upon written notice to Company, upon a material
breach
of any representation, warranty or covenant of the Company contained in
this
Agreement, provided that such breach is not capable of being cured or has
not
been cured within five (5) business days after the giving of notice thereof
by
Parent or MergerCo to the Company; and
(d) by
Parent, MergerCo or the Company at any time after November 28, 2006, if
the
Closing has not occurred as of such date and the party seeking termination
is
not then in breach of any of the terms of this Agreement; provided,
however,
that
notwithstanding anything to the contrary in this Agreement, if on November
28 ,
2006 any of the conditions to Closing set forth in Sections 8.2(d) - (g)
have
not been satisfied, then the Company shall have the right to extend such
date to
a date that is five (5) business days following the receipt of such agreements,
approvals or consents by providing written notice of such election to the
other
party; provided,
further,
that,
it is reasonably likely at such time that the Company will receive such
agreements, approvals or consents in the foreseeable future.
Section
9.2. Effect
of Termination.
In the
event of termination of this Agreement as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no further liability
or
obligations hereunder on the part of any party hereto or their respective
Affiliates except for the obligations of the parties pursuant to this Section
9.2 and Sections 6.2(b), 6.3, 6.7 and 10.4; provided,
however,
that
nothing herein shall relieve either party from liability for any willful
breach
of this Agreement existing at the time of such termination.
Section
9.3. Waiver.
At any
time prior to the Effective Time, Parent, MergerCo and the Company may
(a)
extend the time for the performance of any of the obligations or other
acts of
the other party hereto, (b) waive any inaccuracies in the representations
and
warranties of the other party contained herein or in any document delivered
by
the other party pursuant hereto or (c) waive compliance with any of the
agreements of the other party or conditions to its own obligations contained
herein. Any such extension or waiver shall be valid only if set forth in
an
instrument in writing signed by the party to be bound thereby. Waiver of
any
term or condition of this Agreement by a party shall not be construed as
a
waiver of any subsequent breach or waiver of the same term or condition
by such
party, or a waiver of any other term or condition of this Agreement by
such
party.
Article
X - GENERAL PROVISIONS
Section
10.1. Disclosure
Schedules.
(a) Certain
information set forth in the schedules to this Agreement (the “Schedules”)
is
included solely for informational purposes and may not be required to be
disclosed pursuant to this Agreement. The disclosure of any information
shall
not be deemed to constitute an acknowledgment that such information is
required
to be disclosed in connection with the representations and warranties made
by
Parent, MergerCo or the Company, as applicable, in this Agreement or that
such
information is
material,
nor shall such information be deemed to establish a standard of materiality,
nor
shall it be deemed an admission of any liability of, or concession as to
any
defense available to, Parent, MergerCo or the Company, as applicable.
(b) From
time
to time prior to the Closing Date, Parent, MergerCo or the Company, as
applicable, shall amend or supplement the Schedules attached to this Agreement
relating to any representation or warranty contained in Article IV, in
the case
of the Company or Article IV, in the case of Parent or MergerCo, with respect
to
any matter that, if existing or occurring at or prior to the Closing Date,
would
have been required to be set forth or described on such a Schedule or that
is
necessary to complete or correct any information in any representation
or
warranty contained in Articles IV or V, as applicable.
Section
10.2. Non-Survival
of Representations, Warranties, Covenants and Agreements.
Except
for Sections 6.3, 7.1 and 7.4 and any covenant or agreement of the parties
that
by its terms contemplates performance after the Closing Date, none of the
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing Date, and thereafter there shall be no liability on
the part
of any of Parent, MergerCo or the Company or any of their respective officers,
directors or stockholders in respect thereof. Except as expressly set forth
in
this Agreement, there are no representations or warranties of any party
hereto,
express or implied.
Section
10.3. Notices.
All
notices, requests, claims, demands and other communications under this
Agreement
will be in writing and will be deemed given if delivered personally, sent
by
overnight courier (providing proof of delivery), or via facsimile to the
parties
at the following addresses (or at such other address for a party as specified
by
like notice):
(a) if
to the
Company, to:
CentrePath,
Inc.
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
General Counsel
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
with
copy
to:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
(b) If
to
Parent or MergerCo, to:
______________________________
______________________________
______________________________
Attn:
_________________________
Facsimile:
with
a
copy to:
______________________________
______________________________
______________________________
______________________________
Attn:
_________________________
Facsimile:
Section
10.4. Fees
and Expenses.
Except
as provided otherwise herein, each of Parent and MergerCo, on the one hand,
and
the Company, on the other hand, shall bear its own expenses in connection
with
the negotiation and the consummation of the transactions contemplated by
this
Agreement.
Section
10.5. Certain
Definitions.
For
purposes of this Agreement:
(a) An
“Affiliate”
of
any
Person means another Person that directly or indirectly, through one or
more
intermediaries, controls, is controlled by, or is under common control
with,
such first Person;
(b) “GAAP”
means
U.S. generally accepted accounting principles, consistently applied;
(c) “Losses”
of
a
Person means any and all losses, liabilities, damages, claims, awards,
judgments, costs and expenses (including, without limitation, reasonable
attorneys’ fees) actually suffered or incurred by such Person;
(d) “Material
Adverse Effect”
means
a
material adverse effect on the financial condition of the Company, taken
as a
whole, except
for any
such effects resulting from (i) this Agreement, the transactions contemplated
hereby or the announcement thereof, (ii) changes in general economic or
political conditions or the securities markets in general, (iii) changes,
after
the date of this Agreement, in conditions generally applicable to businesses
in
the same industries of the Company including (A) changes in laws generally
applicable to such businesses or industry and (B) changes in GAAP or its
application, or (iv) loss of business to Parent; and
(e) “Person”
means
an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other entity.
Section
10.6. Interpretation.
When a
reference is made in this Agreement to an Article, Section, Schedule or
Exhibit,
such reference will be to an Article or Section of, or a Schedule or Exhibit
to,
this Agreement unless otherwise indicated. The table of contents and 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
deemed to be followed by the words “without limitation.” The words “hereof,”
“herein” and “hereunder” and words of similar import when used in this Agreement
will refer to this Agreement as a whole and not to any particular provision
of
this Agreement. All terms used herein with initial capital letters have
the
meanings ascribed to them herein and all terms defined in this Agreement
will
have such defined meanings when used in any certificate or other document
made
or delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the
plural
forms of such terms and to the masculine as well as to the feminine and
neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein
means
such agreement, instrument or statute as from time to time amended, modified
or
supplemented, including (in the case of agreements or instruments) by waiver
or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
Section
10.7. Counterparts.
This
Agreement may be executed in one or more counterparts, including by facsimile,
all of which will be considered one and the same agreement and will become
effective when one or more counterparts have been signed by each of the
parties
and delivered to the other parties.
Section
10.8. Amendments.
This
Agreement may not be amended or modified, nor may compliance with any condition
or covenant set forth herein be waived, except by a writing duly and validly
executed by Parent, MergerCo and the Company, or in the case of a waiver,
the
party waiving compliance.
Section
10.9. Entire
Agreement; Severability.
This
Agreement (including the exhibits, schedules, documents and instruments
referred
to herein) and the Confidentiality Agreement constitute the entire agreement,
and supersede all prior agreements and understandings, both written and
oral,
among the parties with respect to the subject matter of this Agreement.
If any
term, condition or other provision of this Agreement is found to be invalid,
illegal or incapable of being enforced by virtue of any rule of law, public
policy or court determination, all other terms, conditions and provisions
of
this Agreement shall nevertheless remain in full force and effect.
Section
10.10. Third
Party Beneficiaries.
Except
as expressly provided in this Agreement, each party hereto intends that
this
Agreement shall not benefit or create any right or cause of action in or
on
behalf of any Person other than the parties hereto.
Section
10.11. Governing
Law.
This
Agreement will be governed by, and construed in accordance with, the internal
laws of the State of Delaware regardless of the laws that might otherwise
govern
under applicable principles of conflict of laws.
Section
10.12. Assignment.
Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement may be assigned, in whole or in part, by operation of law or
otherwise
by the parties hereto without the prior written consent of the Company,
Parent
and MergerCo. Any assignment in violation of the preceding sentence will
be
void. Subject to the preceding sentence, this Agreement will be binding
upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Section
10.13. Consent
to Jurisdiction.
Each of
the parties hereby consents to personal jurisdiction, service of process
and
venue in the federal or state courts of the State of Delaware for any claim,
suit or proceeding arising under this Agreement.
Section
10.14. Dispute
Resolution.
Any
dispute arising out of or relating to this Agreement or the breach, termination
or validity hereof shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources Rules
for
Nonadministered Arbitration of Business Disputes (the “CPR
Rules”).
The
Center for Public Resources shall appoint a neutral advisor from its National
CPR Panel. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. §§1-16, and judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof. The place of
arbitration shall be Boston, Massachusetts.
Such
proceedings shall be administered by the neutral advisor in accordance
with the
CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided
by the following agreed upon procedures:
(a) mandatory
exchange of all relevant documents, to be accomplished within forty-five
(45)
days of the initiation of the procedure;
(b) no
other
discovery;
(c) hearings
before the neutral advisor which shall not exceed three hours;
such hearings to take place in one or two days at a maximum; and
(d) decision
to be rendered not later than ten (10) days following such hearings.
Each
of
Parent, MergerCo and the Company (a) hereby unconditionally and irrevocably
submits to the jurisdiction of the United States District Court for the
District
of Delaware, for the purpose of enforcing the award or decision in any
such
proceeding and (b) hereby waives, and agrees not to assert in any civil
action
to enforce the award, any claim that it is not subject personally to the
jurisdiction of the above-named court, that its property is exempt or immune
from attachment or execution, that the civil action is brought in an
inconvenient forum, that the venue of the civil action is improper or that
this
Agreement or the subject matter hereof may not be enforced in or by such
court,
and (c) hereby waives and agrees not to seek any review by any court of
any
other jurisdiction which may be called upon to grant an enforcement of
the
judgment of any such court. Each of Parent, MergerCo and the Company hereby
consents to service of process by registered mail at the address to which
notices are to be given. Each of Parent, MergerCo and the Company agrees
that
its submission to jurisdiction and its consent to
service
of process by mail is made for the express benefit of the other parties
hereto.
Final judgment against Parent, MergerCo or the Company in any such action,
suit
or proceeding may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, or in any other manner provided by or pursuant
to
the laws of such other jurisdiction; provided,
however,
that
any party may at its option bring suit, or institute other judicial proceedings,
in any state or federal court of the United States or of any country or
place
where the other parties or their assets, may be found.
Section
10.15. Mutual
Drafting.
The
parties hereto are sophisticated and have been represented by attorneys
throughout the transactions contemplated hereby who have carefully negotiated
the provisions hereof. As a consequence, the parties do not intend that
the
presumptions of laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied to this
Agreement
or any agreement or instrument executed in connection herewith, and therefore
waive their effects.
Section
10.16. Remedies.
It is
specifically understood and agreed that any breach of the provisions of
this
Agreement or any other agreement executed and delivered pursuant to this
Agreement by any party hereto will result in irreparable injury to the
other
parties hereto, that the remedy at law alone will be an inadequate remedy
for
such breach, and that, in addition to any other remedies which they may
have,
such other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law).
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, the parties hereto have caused this Stock Purchase and
Sale
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
| COMPANY: | ||
| CENTREPATH, INC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ |
||
| Title: Vice President and General Counsel | ||
| PARENT: | ||
| CAPITAL GROWTH SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: Chief Executive Officer | ||
| MERGERCO: | ||
| CGSI MERGERCO, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ |
||
| Title: Chief Executive Officer | ||