AGREEMENT AND PLAN OF MERGER by and among BRIDGELINE SOFTWARE, INC., TENTH FLOOR, INC. AUSTIN J. MULHERN ANTHONY G. PIETROCOLA and MATTHEW D. GLAZE January 31, 2008
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
by
and among
TENTH
FLOOR, INC.
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
P.
▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
January
31, 2008
AGREEMENT
AND PLAN OF MERGER
This
Agreement and Plan of Merger (the “Agreement”) is made
as of this 31st
day of January, 2008 by and among Bridgeline Software, Inc., a Delaware
corporation, with a principal place of business at ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Bridgeline Software”), Tenth
Floor, Inc. (the “Seller”), a Delaware
corporation, with a principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P. ▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (together, the
“Shareholders”).
Recitals
WHEREAS,
the Shareholders own 100% of the issued and outstanding shares of the capital
stock of Seller (the “Shares”);
WHEREAS,
the
Boards of
Directors of each of Bridgeline Software and Seller have, in accordance with
the
laws of the State of Delaware, approved the merger of Seller with and into
Bridgeline Software, pursuant to which all of the Shares will be converted
into
common stock of Bridgeline Software, $0.001 par value per share (the
“Bridgeline Software Common Stock”) and Seller will
merge with and into Bridgeline Software, with Bridgeline Software being the
surviving corporation;
WHEREAS,
it
is the
intention of the parties that the merger shall qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986,
as amended (the “Code”) and that this Agreement shall
constitute a “plan of reorganization” for the purposes of Section 368 of the
Code; and
WHEREAS,
each
of the
parties to the Agreement desires to make certain representations, warranties,
and agreements in connection with the transaction between the parties and to
prescribe various conditions thereto.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger. Subject to and upon the terms and conditions of this
Agreement, at the effective time of the merger of the Seller with and into
Bridgeline Software, and pursuant to the Delaware General Corporation Law
(“DGCL”), the Seller will be merged with and into
Bridgeline Software (the “Merger”) and the separate
existence of the Seller shall thereupon cease, in accordance with the applicable
provisions of the DGCL. As a result of the Merger, Bridgeline
Software will be the surviving corporation and shall survive as a going concern
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(sometimes
referred to herein as the “Surviving Company” or
“Bridgeline Software”). The Certificate of
Incorporation and By-laws of the Surviving Company shall be those of Bridgeline
Software as they are in existence immediately prior to the
Merger. The separate corporate existence of Seller with all its
rights, privileges, powers, assets, liabilities, operations, intellectual
property, contract rights, employees, and franchises shall be extinguished
in
the Merger. The name of the Surviving Company shall be
“Bridgeline Software, Inc.” On the Closing Date (as such
term is defined below), the parties shall cause a Certificate of Merger, meeting
the requirements of Section 251 of the DGCL (the “Certificate of
Merger”), to be promptly executed and filed with the Secretary of
State of the State of Delaware. The Merger shall become effective
(the “Effective Time”) upon the close of business on the
date that the filing of the Certificate of Merger with the Secretary of State
of
the State of Delaware has been completed or at such other time or date than
may
otherwise be indicated in the Certificate of Merger.
1.2. Conversion
of Shares; Exchange Procedures and Boot.
(a) By
virtue
of the Merger, automatically and without any action on the part of the holder
thereof, the Shares outstanding immediately prior to the Effective Time (other
than any shares held as treasury stock by the Seller, which shall be cancelled,
retired and cease to exist, and for which no payment hereunder shall be made)
shall become and be converted into (i) the number of shares of Bridgeline
Software Common Stock as is equal to the quotient obtained by
dividing $2,200,000 by the Effective Price (as defined below) (the
“Bridgeline Software Stock”);
(ii) $600,000 in immediately available funds (the “Cash
Consideration” and together with the Bridgeline Software
Stock, the “Initial Merger Consideration”), and (iii)
the Earn-Out Consideration (as defined below) (together with the
Initial Merger Consideration, the “Merger
Consideration”). At Seller’s option, the Cash
Consideration shall be reduced by an amount sufficient to satisfy in full the
outstanding balance of Seller’s line of credit with Fifth Third Bank not to
exceed $96,000 (the “Bank Indebtedness”) and Bridgeline
Software shall pay the Bank Indebtedness at the Closing. The Initial
Merger Consideration shall be subject to adjustment as set forth in Section
1.2(b). The term “Effective Price” shall mean
the average closing price for Bridgeline Software Common Stock as reflected
on
the Nasdaq Capital Market exchange for the 90-day trading period ending on
the
trading day immediately preceding the date hereof.
(b) At
Closing (as defined in Section 1.5 below),if the Seller Net Working Capital
(as
defined below) is less than $650,000 (the
“Target Amount”), the aggregate dollar value of
the Cash
Consideration shall be decreased by the amount by which the Seller Net Working
Capital is less than the Target Amount, dollar for dollar. If the
Seller Net Working Capital exceeds the Target Amount, the aggregate value of
the
Initial Merger Consideration shall be increased by the amount by which the
Seller Net Working Capital exceeds the Target Amount, dollar for
dollar. “Seller Net Working Capital” shall
mean, as of the Closing Date, the dollar value of the difference between (x)
the
sum of accounts receivables of Seller, notes receivables of customers of Seller
and cash of Seller in an amount at least equal to $75,000 and (y) accounts
payable of Seller and accrued expenses of Seller (excluding deferred revenue
and
corporate income tax liabilities of Seller). Any adjustment to the
aggregate dollar value of the Cash Consideration shall be pro rated between
the
Bridgeline Software Stock and the Cash Consideration.
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(c) The
Seller and the Shareholders shall cause to be delivered to Bridgeline Software
on the Closing Date the certificates representing all of the Shares of Seller
issued and outstanding immediately prior to the Closing, as evidenced by the
stock ledger and stock transfer records of the Seller (collectively, the
“Seller
Certificates”), and stock powers separate from the
certificates transferring ownership to Bridgeline Software. Upon
surrender of the Seller Certificates for exchange and cancellation to Bridgeline
Software together with the stock powers, the Shareholders shall receive
certificates representing the Bridgeline Software Stock.
(d) No
dividend or other distribution payable after the Closing with respect to
Bridgeline Software Stock shall be paid to the holder of any unsurrendered
Seller Certificate until the holder thereof surrenders such Seller Certificate,
at which time such holder shall receive all dividends and distributions, without
interest thereon, previously payable but withheld from such holder pursuant
hereto.
(e) After
the
Closing, the holder of shares of the capital stock of the Seller shall cease
to
be, and shall have no rights as, a stockholder of the Seller, other than to
receive the Merger Consideration pursuant to the provisions hereof.
(f) Notwithstanding
the foregoing, neither Bridgeline Software nor the Seller or any other person
shall be liable to any former holder of shares of any capital stock of the
Seller for any shares or any dividends or distributions with respect thereto
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In
the
event any Seller Certificates shall have been lost, stolen or destroyed, upon
receipt of an affidavit of lost stock certificate as to such loss, theft or
destruction and to the ownership of such certificate by the person claiming
such
certificate to be lost, stolen or destroyed, and the receipt by Bridgeline
Software of appropriate indemnification, Bridgeline Software will cause to
be
delivered in exchange for such lost, stolen or destroyed certificate the shares
of Bridgeline Software Stock deliverable in respect thereof.
(h) If
any
certificate representing shares of Bridgeline Software Stock is to be issued
in
a name other than the name in which the Seller Certificates have been
surrendered and exchanged, it shall be a condition of the issuance thereof
that
the certificate(s) so surrendered shall be properly endorsed (or accompanied
by
an appropriate instrument of transfer) and otherwise in proper form for transfer
(including, but not limited to, that the signature of the transferor shall
be
properly guaranteed by a commercial bank, trust company, member firm of a
national or regional securities exchange or other eligible guarantor
institution), and that the person requesting such exchange shall pay to
Bridgeline Software in advance any transfer or other taxes required by reason
of
the issuance of certificate(s) representing shares of Bridgeline Software Stock
in any name other than that of the registered holder of the Seller
certificate(s) representing the Shares surrendered, or required for any other
reason, or shall establish to the satisfaction of Bridgeline Software that
such
tax has been paid or is not payable.
1.3. Earn-Out
Consideration.
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(a) The
Shareholders shall be entitled to earn additional consideration (the
“Earn-Out”) during the Complete Earn-Out Period (as
defined below), in an amount, up to $1,200,000 in the aggregate, payable in
cash
in accordance with the terms of this Section 1.3 (the “Earn-Out
Consideration”).
(b) The
followings terms shall have the following meanings for purposes of this
Agreement:
“Cleveland
Business Unit” shall mean the division of
Bridgeline Software in Cleveland, Ohio following the Merger (formerly the
business operations of Seller located in Cleveland, Ohio).
“Complete
Earn-Out Period” shall mean the Initial Earn-Out Period and the
Secondary Earn-Out Period (as defined below), if any, for a total of up to
sixteen (16) full calendar quarters.
“Earn-Out
Amount” shall mean the amount to be paid to Shareholders following
an Earn-Out Period or Additional Earn-Out Period, as the case may be, as
calculated in accordance with Section 1.3(c).
“Initial
Earn-Out Period” shall mean the period
beginning on the Closing Date (as defined below) and continuing for the twelve
(12) calendar quarters immediately following the Closing (each calendar quarter,
an “Earn-Out Period”), with the first Earn-Out Period to
include the pro rated period from the Closing Date to the last day of the first
calendar quarter following the Closing Date, based on a 90-day calendar
quarter. The Earn-Out Amount and Post-Merger EBITDA threshold in
accordance with Section 1.3(c) for the first calendar quarter shall be pro
rated
based on a factor determined as follows: the number of days from the
Closing Date to the last day of the first calendar quarter following the Closing
Date divided by ninety (90).
“Minneapolis
Business Unit” shall mean the division of
Bridgeline Software in Minneapolis, Minnesota following the Merger (formerly
the
business operations of Seller located in Minneapolis, Minnesota).
“New
York City/Washington DC Business Unit”
shall mean the business operations of
Bridgeline Software in New York City and
Washington DC following the Merger that were formerly the business operations
of
Seller located in such locations.
“Post-Merger
EBITDA” shall mean the sum of (a) net income of the Seller Business
(as defined below) earned during an Earn-Out Period or Additional Earn-Out
Period, as the case may be, and (b) interest expenses, taxes, depreciation
and
amortization of the Seller Business during such Earn-Out Period or Additional
Earn-Out Period, as determined in accordance with generally accepted accounting
principals consistently applied (“GAAP”).
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“Secondary
Earn-Out Period” shall mean the period beginning on the first day
of the first full calendar quarter following the Initial Earn-Out Period and
continuing for the four (4) calendar quarters immediately following the Initial
Earn-Out Period (each such calendar quarter, an “Additional Earn-Out
Period”).
“Seller
Business” shall mean (a) the business and operations (which include
revenues generated from the sale and licensing of software solutions, web
application development and hosting services in any state) associated
exclusively with the operations of the Cleveland Business Unit and the
Minneapolis Business Unit following the completion of the Merger independent
of
the remaining business and operations of Bridgeline Software and (b) the net
operating income derived from the customers of the New York City/Washington
DC
Business Unit set forth on Exhibit 1.3(b) following the completion
of the Merger independent of the remaining business and operations of Bridgeline
Software.
(c) The
Earn-Out shall be paid as follows: if the Post-Merger EBITDA of an
Earn-Out Period is at least equal to $125,000, each Shareholder shall receive
a
cash payment equal to the product of their percentage ownership interest of
all
the outstanding shares of Seller immediately prior to the Closing multiplied
by
$100,000.
(d) Within
forty-five (45) calendar days after the end of each calendar quarter (i.e.,
the
three (3) months ended March 31, June 30, September 30 and December 31 of each
relevant calendar year) or portion thereof that is included within an Earn-Out
Period, Bridgeline Software shall prepare an income statement reflecting the
Seller Business calculated in accordance with GAAP for such Earn-Out Period
or
Additional Earn-Out Period, as the case may be, and a related calculation of
Post-Merger EBITDA for such Earn-Out Period or Additional Earn-Out Period,
such
calculation of Post-Merger EBITDA to reflect as closely as reasonably possible
the Post-Merger EBITDA that would have been achieved by the Seller during such
Earn-Out Period or Additional Earn-Out Period, if the Merger had not occurred
(each such income statement and Post-Merger EBITDA calculation are collectively
referred to herein as the “Income
Statement”). Bridgeline Software shall provide to the
Shareholders a preliminary draft of the Income Statement within thirty (30)
days
after the end of each calendar quarter. For purposes of computing the
Post-Merger EBITDA of the Seller Business, the following rules shall apply:
(i)
there shall be no (A) allocations of any Bridgeline Software costs, expenses
or
other financial items charged to the Cleveland Business Unit or the Minneapolis
Business Unit except to the extent directly incurred by the Seller
Business or (B) compensation charge to the Cleveland Business Unit or the
Minneapolis Business Unit for issuance of stock options (regardless of whether
required by GAAP) and (ii) without the prior written consent of each Shareholder
(which shall not be unreasonably withheld, conditioned or delayed) there shall
be no (A) incurrence by Bridgeline Software of reimbursable expenditures on
behalf of the Cleveland Business Unit or the Minneapolis Business Unit, (B)
charge-offs against the Cleveland Business Unit or the Minneapolis Business
Unit
(other than charge-offs required by GAAP), or (C) other accounting adjustments
with respect to the Seller Business by Bridgeline Software that adversely affect
the Earn-Out or Additional Earn-Out, as the case may be (except as required
to
be made in accordance with GAAP). Promptly following Bridgeline
Software’s determination of such Post-Merger EBITDA for an Earn-Out Period or
Additional Earn-Out Period, Bridgeline Software shall deliver the Income
Statement to each Shareholder, which shall
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include
a
statement of the total amount owed to each Shareholder, if any, based on the
calculation set forth above (each Income Statement and each such accompanying
statement of the Earn-Out Amount, if any, are collectively referred to herein
as
the “Earn-Out Notice”).
(e) The
Shareholders shall have fourteen (14) days from the date of receipt of an
Earn-Out Notice to either (i) accept the calculations and conclusions made
in
the Earn-Out Notice or (ii) give notice to Bridgeline Software in writing that
the Shareholders intend to dispute the amounts included in the Earn-Out Notice,
and such notice shall set forth in reasonable detail the disputed amount and
the
basis for such dispute. Any such dispute by the Shareholders must be
reasonable and made in good faith. If the Shareholders accept the
Earn-Out or Additional Earn-Out computation, Bridgeline Software shall pay
the
Earn-Out Amount no later than five (5) days following acceptance of such
computation.
(f) If,
within the fourteen (14) day period provided for in Section 1.3(e), the
Shareholders either affirmatively notify Bridgeline Software that they
accept the calculations and conclusions made in the Earn-Out Notice or do not
otherwise give notice to Bridgeline Software in writing that they intend to
dispute the amounts included in the Earn-Out Notice, then within five (5)
business days following the expiration of such fourteen (14) day period provided
for in Section 1.3(e) or, if earlier, the date of Bridgeline Software’s receipt
of such affirmative notice of the Shareholders’ acceptance of the calculations
and conclusions made in the Earn-Out Notice, Bridgeline Software shall pay
to
each Shareholder the Earn-Out Amount.
(g) If
the Shareholders notify Bridgeline Software that they intend to dispute the
amounts included in the Earn-Out Notice in accordance with Section 1.3(e)(ii)
above, then Bridgeline Software and the Shareholders shall negotiate in good
faith to resolve the dispute. If Bridgeline Software and the
Shareholders are unable to reach a resolution within ten (10) business days
after receipt by Bridgeline Software of the Shareholders’ written notice of
dispute, then Bridgeline Software and the Shareholders shall submit the matter
to a mutually acceptable independent public accounting firm registered with
the
Public Company Accounting Oversight Board (PCAOB) (the “Independent
Accounting Firm”), which shall, within thirty (30) calendar days
after such submission, determine the Earn-Out Amount, if any. The
determination of the Earn-Out Amount by the Independent Accounting Firm shall
be
final, non-appealable and binding on the parties.
(ii) In
the event that the Independent Accounting Firm determines that the Earn-Out
Amount stated by Bridgeline Software under Section 1.3(d) is accurate and
correct in all material respects, then (A) the Shareholders shall pay all costs
and expenses charged by the Independent Accounting Firm (the
“Earn-Out IAF Fee”) and (B) if an Earn-Out Amount is due
under such Earn-Out Notice, within five (5) business days of the parties’
receipt of such report by the Independent Accounting Firm, Bridgeline Software
shall pay such Earn-Out Amount to each Shareholder (which payment may be in
an
amount net of the Earn-Out IAF Fee otherwise due from the Shareholders to the
Independent Accounting Firm, if Bridgeline Software chooses in its sole
discretion to pay directly to the Independent Accounting Firm the Earn-Out
IAF
Fee due from the Shareholders).
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(iii) In
the
event that the Independent Accounting Firm determines that Bridgeline Software’s
calculations and conclusions made in the Earn-Out Notice are inaccurate or
misstated such that the Earn-Out Notice includes no Earn-Out Amount, then (A)
Bridgeline Software shall pay the Earn-Out IAF Fee and (B) within five (5)
business days of the parties’ receipt of such report by the Independent
Accounting Firm, Bridgeline Software shall pay to each Shareholder the Earn-Out
Amount determined by the Independent Accounting Firm.
(h) Each
of the Earn-Out and Additional Earn-Out is computed on a quarter-by-quarter
basis and is not cumulative.
(i) In
the event that the Shareholders have not earned the Earn-Out Amount for any
individual Earn-Out Period (a “Deficient Period”) and
the Cleveland Business Unit and Minneapolis Business Unit have generated a
cumulative aggregate Post-Merger EBITDA of at least $800,000 during the previous
twelve (12) calendar quarters, then the Shareholders shall be entitled to earn
additional consideration (the “Additional
Earn-Out”), in an amount equal to the Earn-Out Amount in the
aggregate with respect to each Deficient Period during the Secondary Earn-Out
Period, payable in cash in accordance with the terms of this Section
1.3(i). The Additional Earn-Out shall be paid as follows: to the
extent that the Post-Merger EBITDA for each applicable Additional Earn-Out
Period is at least equal to $125,000, each Shareholder shall receive a cash
payment equal to the product of their percentage ownership interest of all
the
outstanding shares of Seller immediately prior to the Closing multiplied by
the
Earn-Out Amount, as defined in Section 1.3(c), for each applicable Deficient
Period.
(j) In
the event of (x) a sale of the Seller Business by any means, (y) the
consolidation of the Seller Business with or into any other existing or future
business unit or affiliate of Bridgeline Software or (z) any other
recapitalization, reorganization or other event, in each case the consequences
of which are that the operation of the Seller Business are no longer able to
be
clearly separated from those of the other businesses or business units of
Bridgeline Software, then the provisions of this Section 1.3 shall be modified
to provide that each Shareholder shall receive a cash payment equal to the
product of their percentage ownership interest of all the outstanding shares
of
Seller immediately prior to the Closing multiplied by the Earn-Out Amount for
the remaining Earn-Out Periods, as they become otherwise payable.
1.4. Tax-Free
Reorganization. It is the intention of the parties
hereto that the Merger shall qualify as a “reorganization” within the meaning of
Section 368(a) of the Code and that this Agreement shall constitute a “plan of
reorganization” for the purposes of Section 368 of the Code. All
aspects of the transactions contemplated by this Agreement shall be implemented
in a manner consistent with this intent.
1.5. Closing. The
closing (the “Closing”) of the transactions contemplated
by this Agreement shall take place at 10:00 a.m. Eastern time, on January 31,
2008 or on such other date agreed to in writing by Bridgeline Software and
Seller (the “Closing Date”), at the offices of ▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
“Closing Agent”). The Seller and the Shareholders need not be
physically present at the Closing in order to consummate the transaction
contemplated herein. The parties agree that the execution
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and
delivery of this Agreement and all ancillary agreements may take place by means
of facsimile signature pages with original signature pages to
follow.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE SHAREHOLDERS
In
order
to induce Bridgeline Software to enter into this transaction, the Seller and
the
Shareholders represent and warrant to Bridgeline Software that, except as set
forth in the disclosure schedules of Seller (the “Disclosure
Schedules”), the statements made in this Article II are true and
correct as of the date hereof, except to the extent such representations and
warranties are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such
date). The Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered sections contained in this Article
II
and the disclosure in any paragraph shall qualify other sections in this Article
II to the extent that it is apparent from a reading of such disclosure that
it
also qualifies or applies to such other sections. Whenever in
this Article II the term “to the knowledge of the Seller” is used, it shall mean
the actual knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P. ▇▇▇▇▇
▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ after reasonable inquiry.
THE
SELLER AND BRIDGELINE SOFTWARE
AGREE THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE II, SELLER IS MAKING
NO
OTHER REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, WARRANTY OF INCOME
POTENTIAL, OPERATING EXPENSES, USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND SELLER HEREBY DISCLAIMS AND RENOUNCES ANY SUCH REPRESENTATION OR
WARRANTY, EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS
AGREEMENT. BRIDGELINE SOFTWARE SPECIFICALLY ACKNOWLEDGES THAT, EXCEPT
AS PROVIDED FOR IN THIS ARTICLE II, BRIDGELINE SOFTWARE IS NOT RELYING AND
SHALL
NOT RELY ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, WHETHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, FROM SELLER AS TO ANY MATTER
CONCERNING SELLER’S BUSINESS OR ANY ASSETS USED IN THE
BUSINESS. Disclosure of an item on one section of the Disclosure
Schedules shall be deemed disclosure on other relevant sections of the
Disclosure Schedules so long as such disclosure with respect to other relevant
sections is readily apparent.
2.1. Organization
and Corporate Power. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of
the
State of Delaware and has the power and authority to carry on its business
as
presently conducted. Seller is duly licensed or qualified to do
business as a foreign corporation in the states of Ohio, Minnesota, Connecticut,
Virginia and Maryland and there is no other jurisdiction wherein the character
of its property, or the nature of the activities presently conducted by it,
makes such qualification necessary, except where the failure to be so qualified
will not have a Material Adverse Effect on the Seller. For purposes
of this Agreement, the term “Material Adverse
Effect”, when used with respect to
any
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party
to
this Agreement, means a material adverse effect upon the results of operations,
financial condition, assets, liabilities, intellectual property, tangible
properties or business of such entity, taken as a whole.
2.2. Authorization. Seller
has the right, power and legal capacity and has taken all necessary legal
director and shareholder action required for the due and valid authorization,
execution, delivery and performance by Seller of this Agreement and any other
agreement or instrument executed by Seller in connection herewith (collectively,
the “Transaction Documents”) and the consummation of the
transactions contemplated herein or therein. This Agreement is, and
to the extent that Seller is a party thereto, each of the Transaction Documents
is, a valid and binding obligation of Seller enforceable in accordance with
its
respective terms, except to the extent that such enforcement may be subject
to
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance or
other laws affecting creditors’ rights generally and to the application of
general equitable principles.
2.3. No
Conflicts. Except as set forth on the Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby by Seller does not and will not violate, conflict with,
result in a breach of or constitute a default under (or which with notice or
lapse of time, or both, would constitute a breach of or default under), or
result in the creation of any lien, security interest or other encumbrance
under
(a) any note, agreement, contract, license, instrument, lease or other
obligation to which Seller is a party or by which Seller is bound, and for
which
Seller has not previously obtained a written waiver of such breach or default,
which waiver has been delivered to Bridgeline Software, except where such
violation would not have Material Adverse Effect on Seller, (b) any judgment,
order, decree, ruling or injunction known and applicable to Seller, (c) any
statute, law, regulation or rule of any governmental agency or authority, or
(d)
the certificate of incorporation, by-laws, organizational documents or
equivalent documents of Seller (collectively, the “Seller Charter
Documents”). This Agreement and the transactions
contemplated hereby have been unanimously approved by Seller’s Board of
Directors and approved by the Shareholders, as required by the Seller Charter
Documents, and do not require any further legal action or authorization, and
are
not and will not be subject to any right of first refusal, put, call or similar
right.
2.4. Government
Approvals. Except for filing with and acceptance by the Delaware
Secretary of State of the Certificate of Merger, no consent, approval, license,
order or authorization of, or registration, qualification, declaration,
designation, or filing (each a “Consent”) with any
court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory agency (each a “Governmental
Entity”), is or will be required on the part of the Seller in
connection with the execution, delivery and performance of this Agreement,
the
other Transaction Documents and any other agreements or instruments executed
by
Seller in connection herewith or therewith, the failure of which would have
a
Material Adverse Effect on Seller.
2.5. Authorized
and Outstanding Equity Interests. The Disclosure
Schedule sets forth the issued and outstanding capital stock of Seller, all
of
which is held by the Shareholders
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and
is
validly issued and outstanding, and all options and warrants to acquire capital
stock of Seller. Such equity interests are all of the issued and
outstanding equity interests, actual or contingent, in Seller and are validly
issued and free from any restrictions on transfer, except for restrictions
imposed by federal or state securities laws. Except as set forth in
the Seller Charter Documents, there are no voting agreements, voting trusts,
registration rights, rights of first refusal, preemptive rights, buy-sell
agreements, co-sale rights, or other restrictions applicable to any capital
stock or equity interests in Seller. All of the issued and
outstanding capital stock in Seller was issued in transactions complying with
or
exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”) and any applicable state
“blue sky” laws. Any equity interests in Seller that consist of
contractual or so-called “phantom” equity interests are separately identified on
the Disclosure Schedule, and all of such interests have been effectively
terminated prior to the Closing without any direct or indirect payment by Seller
in respect thereof.
2.6. Subsidiaries. Seller
does not have, and at no time during its existence has it had, any
subsidiaries. Except as set forth on the Disclosure Schedule, Seller
does not have any investment or other interest in, or any outstanding loan
or
advance to or from, any person or entity, including, without limitation, any
officer, director or shareholder.
2.7. Financial
Information. Seller has previously delivered to
Bridgeline Software the unaudited balance sheets of Seller as of December 31,
2006 and December 31, 2007 and the profit and loss statements for the years
then
ended (collectively, the “Annual Seller Financial
Statements”). In addition, Seller has previously
delivered to Bridgeline Software related statements of earnings and cash flows
for the twelve months ended December 31, 2007 (the “Interim
Seller Financial
Statements”). The Annual and Interim Seller Financial
Statements present fairly, in all material respects, the financial condition
and
results of operations of Seller as of and for the relevant periods recorded
under unaudited cash basis accounting applied on a basis consistent with prior
periods. Except as set forth on the Disclosure Schedule, Seller has
no liability, contingent or otherwise, which is not adequately reflected in
or
reserved against in the Annual or Interim Seller Financial Statements that
is
reasonably likely to materially and adversely affect the financial condition
of
Seller. Except as set forth in the Interim Seller Financial
Statements or on the Disclosure Schedule, since December 31, 2007 (the
“Balance Sheet Date”), (i) there has been no change in
the business, property, assets, liabilities, condition (financial or otherwise),
operations, results of operations, affairs or prospects of Seller except for
changes in the ordinary course of business which, in the aggregate, would not
have a Material Adverse Effect, and (ii) none of the business, property, assets,
liabilities, condition (financial or otherwise), operations, results of
operations, affairs or prospects of Seller have been materially adversely
affected by any occurrence or development, in the aggregate, whether or not
insured against. Seller is solvent and the Pre-Merger EBITDA (as defined below)
of Seller would have been at least $600,000 but for the extraordinary expenses
and investment expenses set forth on the Disclosure
Schedule. “Pre-Merger EBITDA” shall mean net
income increased by interest expense, taxes, depreciation and amortization
on a
cash basis.
2.8. Events
Subsequent to the Date of the Financial
Statements. Except as set forth on the Disclosure
Schedule, or in the Seller Financial Statements, since the Balance Sheet Date,
Seller has not, in excess of $5,000 (i) issued any equity interest except (a)
the initial
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issuance
of the stock of Seller to the Shareholders, and (b) the conversion of ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇’▇ outstanding debt to stock, (ii) borrowed any amount or incurred or
become subject to any material liability (absolute, accrued or contingent),
except liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred
or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Seller Financial Statements and incurred in
the
ordinary course of business, except payment of the Bank Indebtedness, as
described in Sections 1.2, (iv) declared or made any payment, other than
ordinary payments of compensation in amounts consistent with the historic
levels, or distribution to shareholders or purchased or redeemed any Shares
or
other equity interests, except for the exercise of stock options or similar
rights, (v) mortgaged, pledged or subjected to lien any of its assets, tangible
or intangible, other than liens of current real property taxes not yet due
and
payable or such liabilities or obligations which would not have a Material
Adverse Effect on Seller, (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any material
debt
or claim, except in the ordinary course of business, in an individual amount
in
excess of $2,500, or $7,500 in the aggregate, (vii) sold, assigned, transferred
or granted any license with respect to any patent, trademark, trade name,
service ▇▇▇▇, copyright, trade secret or other intangible asset, except pursuant
to license or other agreements entered into in the ordinary course of business,
in an individual amount in excess of $2,500, or $7,500 in the aggregate, (viii)
suffered any material loss of property or knowingly waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation, (x) made any material change in the manner
of business or operations of Seller, (xi) entered into any transaction except
in
the ordinary course of business or as otherwise contemplated hereby, or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.9. Litigation. Except
as otherwise set forth on the Disclosure Schedule, there is no litigation or
governmental proceeding or investigation, pending or, to the knowledge of the
Seller, threatened, against Seller or affecting any of Seller’s properties or
assets, or against any director, officer, key employee, present or former
shareholder of Seller in his capacity as such, nor to the knowledge of Seller
has there occurred any event or does there exist any condition on the basis
of
which any litigation, proceeding or investigation might properly be
instituted. Except as set forth on the Disclosure Schedule, each
incident or proceeding described on the Disclosure Schedule is fully covered
by
insurance except to the extent of applicable insurance
deductibles. Seller is not in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board
or
other government agency, except for such order, writ, injunction, decree, ruling
or decision which would not have a Material Adverse Effect on
Seller.
2.10. Compliance
with Laws and Other Instruments. Except as set forth on
the Disclosure Schedule, the Seller is in compliance with the Seller Charter
Documents, and in all material respects with the provisions of each mortgage,
indenture, lease, license, other agreement or instrument, judgment, decree,
judicial order, statute and regulation by which it is bound or to which its
properties are subject and where non-compliance would not have a Material
Adverse Effect on Seller.
2.11. Taxes.
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(a) The
term “Taxes” as used in this Agreement means all
federal, state, local, foreign net income, alternative or add-on minimum tax,
estimated, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, capital profits, lease, service, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term “Tax” means any one
of the foregoing Taxes. The term “Tax
Returns” as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term “Tax Return” means any one of the foregoing Tax
Returns. “Tax Authority” means any
governmental authority responsible for the imposition of any Tax.
(b) The
Seller has timely filed all Tax Returns required to be filed by it and has
paid
all Taxes owed (whether or not shown as due on such returns), including, without
limitation, all Taxes which the Seller is obligated to withhold for amounts
paid
or owing to employees, creditors and third parties. All Tax Returns
filed by the Seller were complete and correct in all material
respects. Except as set forth on the Disclosure Schedule, none of the
Tax Returns filed by the Seller or Taxes payable by the Seller have been the
subject of an audit, action, suit, proceeding, claim, examination, deficiency
or
assessment by any governmental authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the knowledge of the Seller, threatened. Except as set forth
on the Disclosure Schedule, the Seller is not currently the beneficiary of
any
extension of time within which to file any Tax Return, and the Seller has not
waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. All
material elections with respect to Taxes with respect to the Seller, as of
the
Closing Date, are set forth in the Seller Financial Statements or in the
Disclosure Schedule.
(c) To
the knowledge of the Seller, no circumstances exist or have existed which would
constitute grounds for assessment against the Seller of any tax liability with
respect to the transactions contemplated by this Agreement or any period for
which Tax Returns have been filed, including, but not limited to, any
circumstances relating to the Seller’s existence as a limited liability company
during any such period, Seller’s conversion from a limited liability company to
a corporation, or the existence of a valid subchapter S corporation election
for
the Seller for any such period. The Seller’s election to be taxed as
a subchapter S corporation under Section 1361 of the Code has been in effect
throughout the existence of the Seller as a corporation and, accordingly, the
Seller has never been subject to any federal income tax by reason of being
a “C
Corporation” ( as that term is defined in the Code). No shareholder
is a nonresident alien for purposes of U.S. income taxation, including for
purposes of Section 897 of the Code.
(d) The
conversion by the Seller from a limited liability company to a corporation
was
executed for a valid business purpose independent of the transactions
contemplated by this Agreement, was not part of the Merger or plan of
reorganization and qualified as a tax-deferred transaction under Section 351
of
the Code.
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(e) The
Seller is not a party to any Tax sharing agreement or similar
arrangement. The Seller has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent
of
which was the Seller), and the Seller does not have any liability for the
Taxes of any Person. “Person” shall mean an individual or entity,
including a partnership, limited liability company, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
Governmental Entity (or any department, agency, or political subdivision
thereof).
(f) There
are no liens for Taxes upon any of the assets, other than for ad valorem Taxes
not yet due and payable. The unpaid Taxes of the Seller did not, as
of December 31, 2007, exceed by any material amount the reserve for actual
Taxes
(as opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) as shown on the Annual Seller Financial
Statements, and will not exceed by any material amount such reserve as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Seller in filing its Tax Returns. The
Seller has not incurred any liability for Taxes from January 1, 2008 through
the
Closing Date other than in the ordinary course of business consistent with
past
practice. The Seller is not obligated to file any Tax Return in any
jurisdiction (whether foreign or domestic) other than those jurisdictions in
which it currently files Tax Returns.
(g) Each
Plan (as defined in Section 2.20) that is a non-qualified deferred compensation
plan subject to Section 409A of the Code has been operated in good faith
compliance with Section 409A of the Code and IRS Notice 2005-1 since January
1,
2005 and the Seller does not have, and does not expect to have any future,
Tax
withholding obligation in respect of Section 409A under any Plan.
(h) The
Seller is not a party to any agreement, contract, arrangement or plan that
has resulted or would result, separately or in the aggregate, in the payment
of
(i) any “excess parachute payments” within the meaning of Section 280G of the
Code (without regard to the exceptions set forth in Sections 280G(b)(4) and
280G(b)(5) of the Code).
(i) The
Seller has not been a United States real property holding corporation within
the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(2) of the Code.
2.12.
Real
Property.
(a) The
Disclosure Schedule sets forth the addresses and uses of all real property
that
Seller owns, leases or subleases, and any lien or encumbrance on any such owned
real property or Seller’s leasehold interest therein, specifying in the case of
each such lease or sublease, the name of the lessor or sublessor, as the case
may be, the lease term and the rental obligations of the lessee
thereunder.
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(b) There
are no defaults by Seller under any existing leases, subleases or other
contractual obligations pertaining to real property that Seller owns, leases
or
subleases, and to the best knowledge of Seller, by any other party, which might
curtail in any material respect the present use of Seller’s property listed on
the Disclosure Schedule.
2.13.
Personal Property
& Capital Equipment. The Disclosure Schedule sets
forth a full and complete list of all personal property, including capital
equipment, owned or leased by Seller. Except as set forth on the
Disclosure Schedule, and except for property sold or otherwise disposed of
in
the ordinary course of business, Seller has good and marketable title, free
and
clear of any lien, charge, restriction or encumbrance, to all of such personal
property. All material items of such personal property used in the
operation of the business of Seller are in good operating condition, normal
wear
and tear accepted.
2.14.
Intellectual
Property.
(a) The
“Seller Intellectual Property” consists of all trade
secrets, copyrights, patents, trademarks, service marks, trade dress, all
registrations and applications with respect thereto and all licenses or rights
under the same, that are owned or used by the Seller and are necessary or
incidental to the operation of the business, including without limitation,
any
of the foregoing embodied or contained in any of the following: net lists;
domain names and URLs and textual information contained in web sites;
schematics; processes; customer and supplier lists; know-how and show-how;
computer software programs, source code and object code; complete system build
software; development and test tools, documentation, specifications, programmer
and user manuals used by the Seller to install, operate, maintain, correct,
test, repair enhance, extend, modify, prepare derivative works based upon,
design, develop, reproduce and package software; all license and other rights
in
any third-party product, intellectual property, proprietary or personal rights,
documentation, or tangible or intangible property; all documents, record and
electronic files relating to the design, end user documentation, manufacturing,
quality control, sales, marketing, or customer support; and all products of
the
Seller currently being licensed or sold or that are currently being developed,
including all hardware products and tools, software products and tools, and
services that are currently licensed, offered or under development by the Seller
(the “Seller Products & Services”).
As
used in this Agreement “software”
means any and all current and prior and currently under development versions
and
releases, and predecessors of the software and computer programs and
applications of the Seller to the extent related to the business as currently
being conducted or as currently required or as reasonably can be anticipated
to
be conducted in the future, including all such software and computer programs
in
machine readable source code forms and in machine executable object code forms
and all related specifications (including all logic architectures, algorithms
and logic flows and all physical, functional, operating and design parameters),
any data used by or related to software, work in progress relating to
corrections, modifications, revisions, upgrades, translations or enhancements,
all Seller and third party development and test tools used to develop or test
the software, third party application program interfaces to the software written
by them and all methods of implementation and packaging,
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15
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together
with all associated know-how and show-how and all related
Documentation. As used in this Agreement,
“Documentation” means all documentation, specifications,
manuals and other materials relating to the software, including programmer
and
user manuals which are used by the Seller to install, operate, maintain,
correct, test, repair, enhance, extend, modify, prepare derivative works based
upon, design, develop, reproduce and package such software.
(b) The
Disclosure Schedule lists: (i) all patents, copyright registrations, mask works,
trademarks, service marks, trade dress, any renewal rights for any of the
foregoing, and any applications and registrations for any of the foregoing,
which are included in the Seller Intellectual Property and owned or licensed
by
or on behalf of the Seller and are necessary to its business (except for
standard off-the-shelf software such as Microsoft Office); (ii) all Seller
Products & Services; and (iii) all licenses, sublicenses and other
agreements to which the Seller is a party and pursuant to which the Seller
or
any other person is authorized to use the Seller Intellectual Property or
exercise any other right with regard thereto. The Seller has
delivered to Bridgeline Software true and complete copies of the agreements
described in (iii) hereof.
(c) The
Seller Intellectual Property consists solely of items and rights which are
either: (i) owned by the Seller; (ii) in the public domain; or (iii) rightfully
used and authorized for use by the Seller and its successors pursuant to a
valid
license. All Seller Intellectual Property which consists of licenses
or other rights to third party intellectual property is set forth on the
Disclosure Schedule. The Seller has all rights in the Seller
Intellectual Property necessary to commercially exploit the same in connection
with the Seller’s current, former, and planned or scheduled (whether for release
or development) activities in all geographic locations and fields of use in
which the Seller currently operates or is scheduled to operate, and to
sublicense any or all such rights to third parties, including the right to
grant
further sublicenses. All software created by the Seller is as
described in the Documentation and performs in all material respects in
accordance with the specifications included in the Documentation (subject to
software errors or bugs which do not interfere with the operation of the
software). The Seller has taken all reasonable measures to protect
the proprietary nature of each item of Seller Intellectual
Property. No other person or entity has any rights to any of the
Seller Intellectual Property (except pursuant to agreements or licenses
specified on the Disclosure Schedule), and to the knowledge of the Seller,
no
other person or entity is infringing, violating or misappropriating any of
Seller Intellectual Property. The Seller owns or has the right to use
all Intellectual Property necessary (i) to use, market and distribute the
products, marketed, sold or licensed, and to provide the services provided,
by
the Seller to other parties, or (ii) to operate the Seller’s internal systems
that are material to the business or operations of the Seller, including,
without limitation, computer hardware systems, software applications and
embedded systems (the “Seller Internal
Systems”). Each item of Seller Intellectual Property
will be owned or available for use by Bridgeline Software immediately following
the Closing on substantially identical terms and conditions as it was
immediately prior to the Closing, except for any changes that do not, either
individually or on the aggregate, have a Material Adverse Effect on the
Seller. Except as set forth on the Disclosure Schedule, the Seller’s
software and the Seller Internal Systems are free from significant defects
or programming errors which interfere with the operation and use of the software
and Seller Internal Systems and conform in all material respects to the written
documentation and specifications therefor.
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(d) The
Seller is not, nor as a result of the execution or delivery of this Agreement,
the other Transaction Documents and all other agreements contemplated hereby,
or
performance of the Seller’s obligations hereunder, will the Seller be, in
violation of any license, sublicense or other agreement to which the Seller
is a
party. The Disclosure Schedule lists all contracts or agreements
under which the Seller is obligated to provide any consideration (whether
financial or otherwise) to any third party, or under which any third party
otherwise would be entitled to any consideration, with respect to any exercise
of rights by the Seller or Bridgeline Software in the Seller Intellectual
Property. The Disclosure Schedule identifies each item of Seller
Intellectual Property that is owned by a party other than the Seller, and the
license or agreement pursuant to which the Seller uses it (excluding
off-the-shelf software programs licensed by the Seller pursuant to “shrink wrap”
or “click wrap” licenses, such exclusion only extending to programs used by the
Seller solely for non-revenue generating administrative functions).
(e) Except
as
set forth on the Disclosure Schedule, the use, reproduction, modification,
distribution, licensing, sublicensing, sale or any other exercise of rights
by
the Seller with respect to any of the Seller Products & Services does not
infringe any intellectual property right, right of privacy, or right in personal
data of any person or entity. No claims (i) challenging the validity,
effectiveness or ownership by the Seller of any of the Seller Intellectual
Property, or (ii) to the effect that the use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale or any other exercise
of rights by the Seller with respect to any of the Seller Products and Services
infringes or will infringe on any intellectual property or other proprietary
or
personal right of any person, have been asserted to the Seller or, to the
knowledge of the Seller, are threatened by any person, nor to the knowledge
of
the Seller, are there any valid grounds for any bona fide claim of any such
kind. All granted or issued patents and mask works and all registered
trademarks listed on the Disclosure Schedule and all registered copyrights
held
by the Seller are valid, enforceable and subsisting. To the knowledge
of the Seller, there are no pending or unissued patent rights which infringe
upon or impair the Seller Intellectual Property. To the knowledge of
the Seller, there is no unauthorized use, infringement or misappropriation
of
any of the Seller Intellectual Property by any third party, employee or former
employee.
(f) The
Seller has not disclosed the source code for any of the software owned by the
Seller or other confidential information constituting, embodied in or pertaining
to the software to any person or entity, except pursuant to the agreements
listed on the Disclosure Schedule, and the Seller has taken reasonable measures
to prevent disclosure of such source code. No parties other than the
Seller possess any current or contingent rights to any source code that is
part
of the Seller Intellectual Property.
(g) Except
as
set forth on the Disclosure Schedule, all of the copyrightable materials
(including software) incorporated in or bundled with the Seller’s Products &
Services have been created by employees of the Seller within the scope of their
employment by the Seller or by independent contractors of the Seller who have
executed agreements expressly assigning all right, title and interest in such
copyrightable materials to the Seller. No portion of such
copyrightable materials was jointly developed with any third
party. The Disclosure Schedule lists all parties who have created any
portion of, or otherwise have any rights in or to, the Seller Intellectual
Property, other than employees of the Seller who have no rights in or to any
Seller
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17
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Intellectual
Property. Except as set forth on the Disclosure Schedule, the Seller
has secured from all parties who have created any portion of, or otherwise
have
any rights in or to, the Seller Intellectual Property valid and enforceable
written assignments of any such work or other rights to Seller and has provided
true and complete copies of such assignments to Bridgeline
Software.
(h) The
Disclosure Schedule identifies each license or other agreement (or type of
license or other agreement) pursuant to which the Seller has licensed,
distributed or otherwise granted any rights to any third party with respect
to,
any Seller Intellectual Property. The Disclosure Schedule includes a
true and complete list of support and maintenance agreements relating to Seller
Intellectual Property including the identity of the parties entitled to receive
such service or maintenance, and the term of such agreements.
(i) Except
as
set forth on the Disclosure Schedule, the Seller has obtained written agreements
from all employees and third parties with whom Seller has shared confidential
proprietary information (i) of the Seller, or (ii) received from others which
the Seller is obligated to treat as confidential, which agreements require
such
employees and third parties to keep such information
confidential. The Seller has delivered or given access to all copies
of such written agreements, as executed, to Bridgeline Software, subject to
the
terms of that certain Confidentiality and Non-Disclosure Agreement dated October
25, 2007. None of the present or former employees, officers or
directors of the Seller owns directly or indirectly, in whole or in part, any
Seller Intellectual Property or application therefor.
(j) To
the
knowledge of the Seller, none of the Seller Internal Systems, or the use
thereof, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity. The Disclosure
Schedule lists any complaint, claim or notice, or written threat thereof,
received by the Seller alleging any such infringement, violation or
misappropriation; and the Seller has provided to Bridgeline Software complete
and accurate copies of all written documentation in the possession of the Seller
relating to any such complaint, claim, notice or threat. The Seller
has provided to Bridgeline Software complete and accurate copies of all written
documentation in the Seller’s possession relating to claims or disputes known to
the Seller concerning any Seller Intellectual Property.
2.15.
Agreements of
Directors, Officers, Employees and Consultants. Except
as set forth on the Disclosure Schedule, to the knowledge of the Seller, no
current or former officer or employee of or consultant to Seller is in violation
of any term of any employment contract, non-competition agreement,
non-disclosure agreement, patent disclosure or assignment agreement or other
contract or agreement containing restrictive covenants relating to the conduct
of any such current or former shareholder, officer, employee, or consultant
or
otherwise relating to the use of trade secrets or proprietary information of
others by any such person. The Disclosure Schedule sets forth the
name and address of each person currently serving as an officer or a director
of
Seller, and each person listed on the Disclosure Schedule was duly elected
and
is presently serving as such officer or director. Set forth on the
Disclosure Schedule is a list of all current and former officers, directors,
employees, and consultants of Seller. Each current and former
officer, employee and consultant of the Seller, other than the Shareholders,
has
executed a non-disclosure and non-competition agreement with Seller in the
form
provided to Bridgeline
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Software. Except
as disclosed on the Disclosure Schedule, since January 1, 2007, Seller has
not
paid or become committed to pay any bonus or similar additional compensation
to
any officer, director or employee of Seller.
2.16. Governmental
Licenses. The Seller has all the material permits,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or regulatory bodies necessary for Seller
to conduct its business as presently conducted. All such permits,
licenses, orders, franchises and other rights and privileges are in full force
and effect and, to the knowledge of the Seller, no suspension or cancellation
of
any of them is threatened, and none of such permits, licenses, orders,
franchises or other rights and privileges will be materially adversely affected
by the consummation of the transactions contemplated by this Agreement or any
of
the Transaction Documents.
2.17. List
of Material Contracts and Commitments. The Disclosure
Schedule sets forth a complete and accurate list of all material contracts
to
which Seller is a party or by or to which any of its assets or properties is
bound or subject. As used on the Disclosure Schedule, the phrase
“Seller Material
Contract” means and includes every material agreement or material
understanding of any kind, written or oral, which is legally enforceable by
or
against Seller, and specifically includes without limitation (a) contracts
and
other agreements with any current or former officer, director, employee,
consultant or shareholder or any partnership, company, joint venture or any
other entity in which any such person or entity has an interest; (b) agreements
with any labor union or association representing any Seller employee; (c)
contracts and other agreements for the provision of services other than by
employees of Seller which entail a reasonably foreseeable financial consequence
to any contracting party of at least $15,000; (d) bonds or other security
agreements provided by any party in connection with the business of Seller;
(e)
contracts and other agreements for the sale of any of the assets or properties
of Seller other than in the ordinary course of business or for the grant to
any
person or entity of any preferential rights to purchase any of said assets
or
properties; (f) joint venture agreements relating to the assets, properties
or
business of Seller or by or to which any of its assets or properties are bound
or subject; (g) contracts or other agreements under which Seller agrees to
indemnify any party, to share tax liability of any party, or to refrain from
competing with any party; (h) any contracts or other agreements with regard
to
any indebtedness of Seller; or (i) any other contract or other agreement whether
or not made in the ordinary course of business and involving a reasonably
foreseeable financial consequence to any contracting party of at least
$15,000. Seller has provided to Bridgeline Software true, correct and
complete copies of all such contracts, together with all modifications and
supplements thereto. Except as set forth on the Disclosure Schedule,
each of the contracts listed on the Disclosure Schedule is in full force and
effect. Seller is not in breach of any of the material provisions of
any such Seller Material Contract, nor is any other party to any such contract
in default thereunder, nor does any event or condition exist which with notice
or the passage of time or both would constitute a default of a material
provision thereunder, except for any such breach or default that individually
and in the aggregate would not have a Material Adverse Effect on
Seller. The Seller has performed in all material respects all
obligations required to be performed by it under each such contract as of the
Closing.
2.18. Accounts
Receivable. The Disclosure Schedule sets forth a full
and complete list
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of
Seller’s accounts receivable and accounts receivable reserve, if any, as of
close of business on the date immediately preceding the Closing
Date. Except as set forth on the Disclosure Schedule, all accounts
and notes receivable reflected on the Seller Financial Statements, and all
accounts and notes receivable arising subsequent to the date of such balance
sheets, have arisen in the ordinary course of business and represent valid
obligations owing to Seller. Except as set forth on the Disclosure
Schedule, to the knowledge of Seller, none of Seller’s receivables are subject
to any claim of offset, recoupment, setoff or counterclaim and, to the knowledge
of the Seller, there are no specific facts or circumstances (whether asserted
or
unasserted) that could give rise to any such claim. No material
amount of receivables are contingent upon the performance by Seller of any
obligation or contract other than normal warranty repair and
replacement. No person has any lien on any such receivables and no
agreement for deduction or discount has been made with respect to any such
receivables. Except as set forth on the Disclosure Schedule, to the
knowledge of the Seller, all of Seller’s accounts and notes receivable reflected
on the Seller Financial Statements and all accounts and notes receivable arising
subsequent to the date of such balance sheets are collectible in full by Seller
in the ordinary course of business.
2.19. Insurance
Coverage. The Disclosure Schedule hereto contains an
accurate summary of the insurance policies currently maintained by
Seller. Except as described on the Disclosure Schedule, there are
currently no claims pending against Seller pursuant to any insurance policy
currently in effect and covering the property, the business or the employees
of
Seller.
2.20. Employee
Matters. Except as set forth on the Disclosure Schedule,
neither the Seller nor any person that together with the Seller would be treated
as a single employer (an “ERISA Affiliate”) under
Section 414 of the Code has established or maintains or is obligated to
contribute to (a) any bonus, severance, stock option, or other type of incentive
compensation plan, program, agreement, policy, commitment, contract or
arrangement (written or oral), (b) any pension, profit-sharing, retirement
or
other plan, program or arrangement, or (c) any other employee benefit plan,
fund
or program, including, but not limited to, those described in Section 3(3)
of
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). All such plans (individually, a
“Plan” and collectively, the
“Plans”)
have been operated and administered in all
material respects in accordance with their terms, as applicable, with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. No act or failure to
act by the Seller has resulted in, nor does the Seller have knowledge of a
non-exempt “prohibited transaction” (as defined in ERISA) with respect to the
Plans. Neither the Seller nor any ERISA Affiliate maintains or has
ever maintained or contributed to any Plan subject to Title IV of
ERISA. With respect to the employees and former employees of the
Seller, there are no employee post-retirement medical or health plans in effect,
except as required by Section 4980B of the Code. The Seller has
funded, or made adequate reserves for, the full amounts of the employer
contributions that are required under the terms of said plan to be paid by
the
Seller with respect to the year ended December 31, 2007 and the period from
and
including January 1, 2008 through and including the Closing Date.
2.21. Customers. Except
as set forth on the Disclosure Schedule:
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(a) To
the knowledge of the Seller, the relationships of Seller with its significant
customers are good commercial working relationships and no material customer
of
Seller (defined as a customer from whom the Seller has received or reasonably
expects to receive revenues in excess of $15,000 in 2007) has canceled or
otherwise terminated, has notified Seller (orally or in writing) that it intends
to cancel or otherwise substantially modify its relationship with Seller or
to
the knowledge of Seller, threatened to cancel or otherwise to terminate its
relationship with Seller, or has during the last twelve (12) months decreased
materially, or threatened to decrease or limit materially, its usage or purchase
of the Seller Products & Services except for normal cyclical changes related
to customers’ businesses and except for changes which have not had a Material
Adverse Effect on Seller.
(b) To
the knowledge of the Seller, no material supplier (defined as a supplier to
whom
the Seller has made payments in excess of $15,000 in 2007) or material customer
of Seller has notified Seller that it intends to cancel or otherwise
substantially modify its relationship with Seller or to decrease materially
or
limit its services, supplies or materials to Seller, or its usage or purchase
of
the services of Seller, and, to the knowledge of Seller, the consummation of
the
transactions contemplated hereby will not materially adversely affect the
relationship of Bridgeline Software with any such supplier or
customer.
2.22. No
Brokers or Finders. Except as set forth on the
Disclosure Schedule, no person or entity has or will have, as a result of the
actions of Seller or the Shareholders, any right, interest or claim against
or
upon Seller or the Shareholders for any commission, fee or other compensation
as
a finder or broker arising from the transactions contemplated by this
Agreement.
2.23. Transactions
with Insiders. Except as set forth on the Disclosure
Schedule, there are no currently outstanding loans, leases or other contracts
between Seller and any officer or director of Seller, or any person or entity
owning five percent (5%) or more of the total number of Shares, or any
respective family member or affiliate of any such officer, director or
shareholder.
2.24. Guarantees. Except
as set forth on the Disclosure Schedule, Seller has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on or for any
indebtedness of any other person or entity, except guarantees by endorsement
of
negotiable instruments for deposit or collection or similar transactions in
the
ordinary course of business.
2.25. Bank
Accounts, Signing Authority, Powers of Attorney. Except
as set forth on the Disclosure Schedule, Seller has no account or safe deposit
box in any bank and no person or entity has any power, whether singly or
jointly, to sign any checks on behalf of Seller, to withdraw any money or other
property from any bank, brokerage or other account of Seller, or to act pursuant
to any power of attorney granted by Seller at any time for any
purpose.
2.26. Books
and Records. The books and records of Seller made
available to Bridgeline Software for inspection include copies of the by-laws
and other governing documents as currently in effect and accurately record
therein in all material respects all actions,
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proceedings,
consents and meetings of the Seller’s Board of Directors and shareholders of
Seller and any committees thereof.
2.27.
Privacy and Data
Collection. The Seller has at all times complied, in all
material respects, with all laws and regulations relating or applicable to
privacy, publicity, data protection, collection, storage, transfer, release
and
use of personal information and user information gathered or accessed in the
course of the business and operations of the Seller. The Seller has
at all times complied, in all material respects, with all rules, policies and
procedures established by the Seller from time to time with respect to privacy,
publicity, data protection, collection, storage, transfer and use of personal
information and user information gathered or accessed in the course of the
business and operations of the Seller (collectively, the “Seller
Privacy Policies”), noncompliance with which would result in a
Material Adverse Effect on Seller. No claims have been asserted or,
to the knowledge of the Seller, threatened against the Seller by any Person
or
governmental entity alleging a violation of such Person’s, or any other
Person’s, privacy, publicity, personal or confidentiality rights under any such
laws, or a breach or other violation of any of the Seller Privacy Policies,
where such violation would have a Material Adverse Effect on
Seller. The Seller has taken commercially reasonable measures
(including but not limited to, implementing and monitoring compliance with
adequate measures with respect to technical and physical security) to ensure
that personal and consumer information is protected against loss and against
unauthorized access, use, modification, disclosure or other
misuse. To the knowledge of the Seller, there has been no
unauthorized access to, use, modification, disclosure or other misuse of such
information. Neither the execution, delivery nor performance of this
Agreement, or the consummation of the transactions contemplated hereby shall
result in any breach or violation of the Seller Privacy Policies or violate
any
Law with respect to such data or information.
2.28. Foreign
Corrupt Practices Act. The Seller has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations
thereunder. There is not now, and there has never been, any
employment by the Seller of, or record ownership in the Seller by, any
governmental or political official in any country in the world.
2.29. Disclosure. Neither
the representations or warranties made by the Seller in this Agreement, nor
the
Seller Disclosure Schedule or any other certificate executed and delivered
by
the Seller pursuant to this Agreement, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in
light
of the circumstances under which they were furnished.
ARTICLE
III
REPRESENTATIONS,
COVENANTS AND RIGHTS OF SHAREHOLDERS
In
order
to induce Bridgeline Software to enter into this transaction, the Shareholders
represent and warrant to Bridgeline Software that, except as set forth in the
disclosure schedules of the Shareholders (the
“Shareholders’
Disclosure Schedules”), the statements made in this
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Article
III are true and correct as of the date hereof, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties will be true and correct as
of
such date). The Shareholders’ Disclosure Schedules will be arranged
in paragraphs corresponding to the numbered and lettered sections contained
in
this Article III and the disclosure in any paragraph shall qualify other
sections in this Article III to the extent that it is apparent from a reading
of
such disclosure that it also qualifies or applies to such other
sections.
THE
SHAREHOLDERS AND BRIDGELINE SOFTWARE AGREE THAT, EXCEPT AS EXPRESSLY PROVIDED
IN
THIS ARTICLE III, THE SHAREHOLDERS ARE MAKING NO OTHER REPRESENTATION OR
WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF INCOME POTENTIAL, OPERATING EXPENSES,
USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND THE SHAREHOLDERS
HEREBY DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY, EXCEPT AS
EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. BRIDGELINE SOFTWARE
SPECIFICALLY ACKNOWLEDGES THAT, EXCEPT AS PROVIDED FOR IN THIS ARTICLE III,
BRIDGELINE SOFTWARE IS NOT RELYING AND SHALL NOT RELY ON ANY REPRESENTATIONS
OR
WARRANTIES OF ANY KIND WHATSOEVER, WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, FROM THE SHAREHOLDERS AS TO ANY MATTER CONCERNING THE SELLER’S
BUSINESS OR ANY ASSETS USED IN THE BUSINESS. Disclosure of an item on
one section of the Disclosure Schedules shall be deemed disclosure on other
relevant sections of the Disclosure Schedules so long as such disclosure with
respect to other relevant sections is readily apparent.
3.1. Ownership
of Shares. Each Shareholder has valid title to and owns
beneficially and of record all of the Shares set forth opposite his name on
Schedule 3.1 to the Shareholders’ Disclosure Schedules, and has good and
marketable title to such Shares, free and clear of any and all transfer
restrictions (other than those imposed by relevant securities laws and the
By-Laws, if any), options, liens, claims, pledges, voting trusts and agreements,
security interests, charges and other restrictions or encumbrances of any kind
or nature. Each Shareholder has the absolute and unconditional right,
power, authority and capacity to execute and perform this Agreement and any
of
the Transaction Documents to which he is a party and to consummate the
transactions contemplated hereby. Except as set forth on the
Shareholders’ Disclosure Schedules, the Shareholders have not granted any option
or other commitment or are not otherwise a party to or bound by any agreement
obligating such Shareholder to sell, pledge or otherwise grant any interest
in
the Shares to any person or entity.
3.2. Authorization. The
Transaction Documents shall include all documents executed and delivered at
the
Closing to which each Shareholder is a party. This Agreement and each
of the Transaction Documents to which each Shareholder is a party have been
duly
executed and delivered by such Shareholder and constitute the valid and binding
obligations of such Shareholder enforceable against such Shareholder in
accordance with their respective terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, reorganization, insolvency,
fraudulent conveyance or other laws affecting creditors’ rights
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generally
and to the application of general equitable principles.
3.3. No
Conflicts. Except as set forth on the
Shareholders’ Disclosure Schedule, the execution, delivery and performance of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby by the Shareholders do not and
will
not violate, conflict with, result in a breach of or constitute a default under
(or which with notice or lapse of time, or both, would constitute a breach
of or
default under), or result in the creation of any lien, security interest or
other encumbrance under (a) any note, agreement, contract, license, instrument,
lease or other obligation to which such Shareholder is a party or by which
such
Shareholder is bound, and for which such Shareholder has not previously obtained
a written waiver of such breach or default, which waiver has been delivered
to
Bridgeline Software, except where such violation would not have a Material
Adverse Effect on such Shareholder, (b) any judgment, order, decree, ruling
or
injunction known and applicable to such Shareholder, or (c) any statute, law,
regulation or rule of any governmental agency or authority.
3.4. Shareholders’
Investment Representations.
NOTWITHSTANDING
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 3.4 WHICH ARE
INTENDED TO COMPLY WITH THE REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS,
FOR PURPOSES OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE INDEMNITY
OBLIGATIONS OF BRIDGELINE SOFTWARE SET FORTH HEREIN, BRIDGELINE SOFTWARE
ACKNOWLEDGES AND AGREES THAT (1) EACH SHAREHOLDER IS RELYING ON
THE REPRESENTATIONS AND WARRANTIES OF BRIDGELINE SOFTWARE SET FORTH
IN THIS AGREEMENT, (2) SUCH REPRESENTATIONS AND WARRANTIES OF BRIDGELINE
SOFTWARE ARE A MATERIAL INDUCEMENT TO EACH SHAREHOLDER TO ENTER INTO THIS
AGREEMENT AND TO EFFECTUATE THE TRANSACTIONS CONTEMPLATED HEREIN AND (3) THE
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS IN THIS SECTION 3.4 SHALL NOT
LIMIT OR OTHERWISE ABROGATE IN ANY RESPECT THE REPRESENTATIONS AND WARRANTIES
OF
BRIDGELINE SOFTWARE IN THIS AGREEMENT.
Each
Shareholder represents individually that his present intention is to acquire
the
shares of Bridgeline Software Stock to be issued in connection with this
Agreement for his own account and that such Bridgeline Software Stock is being
and will be acquired for the purpose of investment and not with a view to
distribution or resale thereof. Each Shareholder represents that he
has had an opportunity to ask questions of and receive answers from the
authorized representatives of Bridgeline Software and to review any relevant
documents and records concerning the business of Bridgeline Software and the
terms and conditions of this investment and that any such questions have been
answered to such Shareholder’s satisfaction. Each Shareholder
acknowledges receipt of the Annual Report on Form 10-KSB for the fiscal year
ended September 30, 2007 of Bridgeline Software and all proxy statements
relating to meetings of stockholders of Bridgeline Software. Each
Shareholder acknowledges that it has been called to his attention that this
investment involves a high degree of risk and that Bridgeline Software has
a
limited operating history. Each Shareholder acknowledges that he can
bear the economic
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risks
of
his investment in the Bridgeline Software Stock and that he has such knowledge
and experience in financial or business matters that he is capable of evaluating
the merits and risks of this investment in the Bridgeline Software Stock and
protecting his own interests in connection with this
investment. Except as set forth on the Shareholders’ Disclosure
Schedules attached hereto, each Shareholder hereby represents and warrants
to
Bridgeline Software that he is an “accredited investor” as such term is defined
under Section 501(a) of Regulation D promulgated under the Securities
Act. Each Shareholder understands that the Bridgeline Software Stock
to be issued in connection with the transactions contemplated hereby has not
been registered under the Securities Act and that such shares must be held
indefinitely unless a subsequent disposition thereof is permitted under the
Securities Act or is exempt from such registration. Each Shareholder
further represents that he understands and agrees that until transferred as
herein provided, or transferred pursuant to the provisions of Rule 144 of the
Securities Act, all certificates evidencing the Bridgeline Software Stock to
be
issued in connection with the Closing, whether upon initial issuance or upon
transfer thereof, shall bear a legend (and Bridgeline Software will make a
notation on its transfer books to such effect) prominently stamped or printed
thereon reading substantially as follows:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND
APPLICABLE STATE SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION
UNDER
SUCH ACT IS AVAILABLE.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF BRIDGELINE SOFTWARE
In
order
to induce Seller and the Shareholders to enter into this transaction, Bridgeline
Software represents and warrants to Seller and the Shareholders that, except
as
set forth in the disclosure schedules of Bridgeline Software (the
“Bridgeline Software Disclosure
Schedules”), the statements made in this Article IV are true and
correct as of the date hereof, except to the extent such representations and
warranties are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such
date). The Bridgeline Software Disclosure Schedule will be arranged
in paragraphs corresponding to the numbered and lettered sections contained
in
this Article IV and the disclosure in any paragraph shall qualify other sections
in this Article IV to the extent that it is apparent from a reading of such
disclosure that it also qualifies or applies to such other
sections.
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THE
SHAREHOLDERS AND BRIDGELINE SOFTWARE AGREE THAT, EXCEPT AS EXPRESSLY PROVIDED
IN
THIS ARTICLE IV, BRIDGELINE SOFTWARE IS MAKING NO OTHER REPRESENTATION OR
WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, WARRANTY OF INCOME POTENTIAL, OPERATING EXPENSES,
USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND BRIDGELINE
SOFTWARE HEREBY DISCLAIMS AND RENOUNCES ANY SUCH REPRESENTATION OR WARRANTY,
EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT. THE SHAREHOLDERS
SPECIFICALLY ACKNOWLEDGE THAT, EXCEPT AS PROVIDED FOR IN THIS ARTICLE IV, THE
SHAREHOLDERS ARE NOT RELYING AND SHALL NOT RELY ON ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND WHATSOEVER, WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, FROM BRIDGELINE SOFTWARE AS TO ANY MATTER CONCERNING THE BRIDGELINE
SOFTWARE’S BUSINESS OR ANY ASSETS USED IN THE BUSINESS. Disclosure of
an item on one section of the Disclosure Schedules shall be deemed disclosure
on
other relevant sections of the Disclosure Schedules so long as such disclosure
with respect to other relevant sections is readily apparent.
4.1. Organization
and Qualification. Bridgeline Software is a corporation
duly organized, validly existing and in corporate good standing under the laws
of the State of Delaware and has the power and authority to carry on its
business as presently conducted. Bridgeline Software is duly licensed
or qualified to do business and is in good standing in all jurisdictions in
which its ownership of property or the character of its business requires such
qualification, except where the failure to be so qualified will not have a
Material Adverse Effect on Bridgeline Software. Each subsidiary of
Bridgeline Software is a corporation duly organized, validly existing and in
corporate good standing under the laws of its jurisdiction of
incorporation.
4.2. Authority. This
Agreement, and to the extent Bridgeline Software is a party to the Transaction
Documents, each of the Transaction Documents, has been duly authorized, executed
and delivered by Bridgeline Software and constitutes a legal, valid and binding
obligation of Bridgeline Software, enforceable against it in accordance with
its
terms except to the extent that such enforcement may be subject to applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance or other laws
affecting creditors’ rights generally and to the application of general
equitable principles. Bridgeline Software has the right, power and
authority to enter into this Agreement and to carry out the terms and provisions
of this Agreement, and to enter into and carry out the terms of all agreements
and instruments required to be delivered by Bridgeline Software by the terms
of
this Agreement, without obtaining the consent of any third parties or
authorities. This Agreement and the transactions contemplated hereby
have been unanimously approved by the Board of Directors of Bridgeline Software
and no additional corporate action or authorization is required by Bridgeline
Software in connection with the consummation of the transactions contemplated
by
this Agreement.
4.3. No
Conflicts. The execution, delivery and performance of
this Agreement and the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby by Bridgeline Software, and
compliance with the provisions hereof, do not and will not: (a) violate,
conflict with or result in a breach of any provision or constitute a default
under (i) the
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Certificate
of Incorporation or By-laws of Bridgeline Software (the “Bridgeline
Software Charter Documents”), or (ii) any contract or agreement to
which Bridgeline Software is a party or to which the assets or business of
Bridgeline Software may be subject, except where such violation would not have
a
Material Adverse Effect on Bridgeline Software; or (b) violate any judgment,
ruling, order, writ, injunction, award, decree, statute, law, ordinance, code,
rule or regulation of any court or foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to the assets, properties or business of
Bridgeline Software, except where such violation would not have a Material
Adverse Effect on Bridgeline Software.
4.4. Government
Approvals. Except as set forth in the Bridgeline
Software Disclosure Schedules and except for filing with and acceptance by
the
Delaware Secretary of State of the Certificate of Merger and filings pursuant
to
Regulation D of the Securities Act, no Consent with any Governmental Entity,
is
or will be required on the part of the Bridgeline Software in connection with
the execution, delivery and performance of this Agreement, the other Transaction
Documents and any other agreements or instruments executed by Bridgeline
Software in connection herewith or therewith, the failure of which would have
a
Material Adverse Effect on Bridgeline Software.
4.5. Authorized
and Outstanding Stock. As of the date of this Agreement,
the authorized capital stock of Bridgeline Software consists of 20,000,000
shares of Common Stock and 1,000,000 shares of preferred stock. As of
December 11, 2007, 8,546,460 shares of Common Stock were validly issued and
no
shares of preferred stock were issued and outstanding. All of the
issued and outstanding shares of capital stock of Bridgeline Software were
issued (i) in transactions complying with or exempt from the registration
provisions of the Securities Act, and (ii) in compliance with or in transactions
exempt from the registration provisions of applicable state securities or
“blue-sky” laws. Bridgeline Software is the sole owner of all capital
stock of its subsidiaries. Except as set forth on the Bridgeline Software
Disclosure Schedules, as of the date of this Agreement, there are no outstanding
warrants, options, promissory notes, commitments, preemptive rights, rights
to
acquire or purchase, conversion rights or demands of any character relating
to
the capital stock or other securities of Bridgeline Software. There
are no voting trusts or voting agreements with respect to any shares of
Bridgeline Software Common Stock. Any equity interests in Bridgeline
Software that consist of contractual or so-called “phantom” equity interests are
separately identified on the Bridgeline Software Disclosure
Schedules.
4.6. SEC
Filings. Bridgeline Software has made available to the
Seller and the Shareholders a true and complete copy of its SB-2 Registration
Statement and its Annual Report on Form 10-KSB, and all amendments, supplements
and exhibits (including, without duplication, exhibits incorporated by
reference) to such documents (collectively, the “Bridgeline Software
SEC Reports”). The Bridgeline Software SEC Reports (i)
were prepared in compliance with the requirements of the Securities Act, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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4.7. No
Brokers or Finders. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.,
LLC, no person or entity has or will have, as a result of the actions of
Bridgeline Software, any right, interest or claim against or upon Bridgeline
Software for any commission, fee or other compensation as a finder or broker
arising from the transactions contemplated by this Agreement.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1. Legal
Conditions to the Merger. Each of
Bridgeline Software, Seller and the Shareholders will use all reasonable efforts
to take actions necessary to comply promptly with all legal requirements which
may be imposed on it with respect to the Merger. Each of Bridgeline
Software, Seller and the Shareholders will use all reasonable efforts to take
all actions to obtain (and to cooperate with the other parties in obtaining)
any
consent required to be obtained or made by Seller, Bridgeline Software or the
Shareholders in connection with the Merger, or the taking of any action
contemplated thereby or by this Agreement.
5.2. Employee
Matters. Nothing contained herein will be considered as
requiring Seller or Bridgeline Software to continue the employment of any
employee for any specified period, at any specified location or under any
specified job category, except as specifically provided for in an offer letter
or other agreement of employment. Except as otherwise set forth
herein, it is specifically understood that continued employment with Seller
or
employment with Bridgeline Software is not offered or implied for any employees
of Seller.
5.3. Additional
Agreements. In case at any time after the Closing Date
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
Seller, the parties will take all such necessary action. Without
limiting the foregoing, on or prior to the Closing Date, Seller will deliver
to
Bridgeline Software a properly executed statement satisfying the requirements
of
Treasury Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) in a form reasonably
acceptable to Bridgeline Software and any state Tax clearance certificates
required to relieve Seller of any withholding obligation.
5.4. Public
Announcements. Except as may be required by law or stock
market regulations, neither Bridgeline Software nor Seller will disseminate
any
press release or other announcement concerning this Agreement or the
transactions contemplated herein to any third party (except to the directors,
officers and employees of the parties to this Agreement whose direct involvement
is necessary for the consummation of the transactions contemplated under this
Agreement, or to the attorneys, advisors and accountants of the parties hereto)
without the prior written agreement of Bridgeline Software and
Seller.
5.5. Confidentiality.
Seller, Bridgeline Software and the Shareholders have previously entered into
a
Confidentiality and Non-Disclosure Agreement dated October 25, 2007 (the
“Confidentiality Agreement”), concerning each party’s
obligations to protect the
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confidential
information of the other party. Seller, the Shareholders and
Bridgeline Software each hereby affirm each of their obligations under such
Confidentiality Agreement.
5.6 Termination
of Seller 401(k) Plan. Seller shall
terminate its tax-qualified 401(k) plan (the “Seller 401(k)
Plan”) immediately prior to the Closing.
5.7 Benefit
Plans. As soon as administratively practicable after the
Closing Date and to the extent allowable under the Bridgeline Software Benefit
Plans (as defined below), Bridgeline Software shall take all reasonable action
so that employees of Seller shall be entitled to participate in each employee
benefit plan, program or arrangement of the Bridgeline Software of general
applicability (the “Bridgeline Software Benefits Plans”)
to the same extent as similarly-situated employees of Bridgeline Software and
its subsidiaries (it being understood that inclusion of the employees of Seller
in the Bridgeline Software Benefits Plans may occur at different times with
respect to different plans).
5.8 Lock
Up Agreement. Each Shareholder acknowledges and agrees
that he will not (1) offer, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, pledge, hypothecate,
grant
any option, right or warrant to purchase, or otherwise transfer or dispose
of,
directly or indirectly, the Bridgeline Software Stock; (2) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of
the
economic consequences of ownership of the Bridgeline Software Stock, whether
any
such transaction described in clause (1) or (2) above is to be settled by
delivery of the Bridgeline Software Stock, in cash or otherwise, or (3) make
any
demand for or exercise any right with respect to, the registration of the
Bridgeline Software Stock or any security convertible into or exercisable or
exchangeable for the Bridgeline Software Stock for a period of one (1) year
subsequent to the Closing Date. Each Shareholder further agrees not to
enter into any private transaction involving the Bridgeline Software Stock
unless (i) Bridgeline Software receives an opinion of counsel acceptable in
form
and substance to Bridgeline Software to the effect that the proposed transaction
is exempt from the registration requirements of the Act and (ii) the proposed
transferee agrees to be bound by all the provisions in this Section 5.8 prior
to
any such private transaction. Notwithstanding anything to the contrary
contained herein, the restrictions contained herein shall not apply to the
transfer of the Bridgeline Software Stock by the Shareholders to any trust,
partnership or limited liability company for the direct or indirect benefit
of
such Shareholder and/or the immediate family of such Shareholder for estate
planning purposes, provided that (i) the trustee of the trust, partnership
or
the limited liability company, as the case may be, agrees in writing to be
subject to the restrictions of this Section 5.8 and (ii) any such transfer
shall
not involve a disposition for value.
5.9 Restrictive
Undertakings.
(a) Noncompetition
Covenant. The restrictive covenants set forth in this
Section 5.9 are a material inducement for Bridgeline Software to enter into
this
Agreement.
(i) For
good and valuable consideration provided pursuant to this Agreement, the receipt
and sufficiency of which is hereby acknowledged, each of Austin J.
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▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ agrees that, during the Three-Year Restrictive Period
(as hereinafter defined), he shall not, directly or indirectly, (a) engage
in
any activities either on his own behalf or that of any other business
organization (whether as principal, partner, shareholder, member, officer,
director, stockholder, agent, joint venturer, consultant, creditor, investor
or
otherwise) which are in direct or indirect competition with or similar to the
business, products or services of the Seller in the area of web services, web
content management and design, whether for non-profit or for-profit
organizations, in the United States (the “Competitive
Services”), (b) undertake planning for an organization or offering
of Competitive Services, or (c) combine or collaborate with other employees
or
representatives of Bridgeline Software or any third party for the purpose of
organizing, engaging in, or offering Competitive Services.
(ii) For
good and valuable consideration provided pursuant to this Agreement, the receipt
and sufficiency of which is hereby acknowledged, each of P. ▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ agrees that, during the One-Year Restrictive Period (as
hereinafter defined), he shall not, directly or indirectly, (a) engage in any
Competitive Services, (b) undertake planning for an organization or offering
of
Competitive Services, or (c) combine or collaborate with other employees or
representatives of Bridgeline Software or any third party for the purpose of
organizing, engaging in, or offering Competitive Services.
(iii) The
restrictive covenant set forth in Section 5.9(a)(i) above shall terminate with
respect to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P. ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the
event such Shareholder’s employment by Bridgeline Software is terminated
following the Closing without “cause” or for “good reason” in accordance with
the terms of his Employment Agreement.
(b) Nonsolicitation
of Customers. Each Shareholder agrees that, during
the Three-Year Restrictive Period, he shall not directly or indirectly, either
for himself or for any other person, corporation, partnership, limited liability
company or any other business entity, service or supervise or assist the
servicing or supervision of, divert or take away or attempt to divert or take
away, or directly or indirectly call on or solicit or attempt to call on or
solicit any of the Clients (as hereinafter defined) of Bridgeline Software,
or
communicate, advise or consult with, write or respond to, or inform any such
Client for the purpose of soliciting, selling or recommending Competitive
Services, or otherwise attempt to induce any such Client to terminate, modify
or
reduce such Client’s relationship with Bridgeline Software.
(c) Nonsolicitation
of Employees. Each Shareholder
agrees that, during the Three-Year Restrictive Period, he shall not directly
or
indirectly (including but not limited to, through the use of “headhunters,”
recruiters or employment agencies, and whether on-line or off-line recruiting
activities) or by action in concert with others, hire, recruit or otherwise
induce or influence (or seek to induce or influence) any person who is or shall
be hereafter engaged (as an employee, agent, independent contractor or
otherwise) to terminate such Person’s employment or engagement, or employ or
engage, seek to employ or engage, or cause any other Person, corporation,
partnership, limited liability company or other business entity (whether
for-profit or non-profit) to employ or engage or seek to employ or engage any
such person. This restriction includes that such Shareholder shall
not (i) disclose to any third party the names, backgrounds or qualification
of
any of Bridgeline Software’s employees or otherwise identify them as potential
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candidates
for employment, or (ii) participate in any pre-employment interviews or
consultations with such employee.
(d) Restrictive
Periods. For purposes of this
Section, the term Bridgeline Software shall include Bridgeline Software and
any
of its subsidiaries, divisions or business units. For purposes of
this Section, the term “Three-Year Restrictive Period” shall mean
the period commencing on the Closing Date and ending on the three-year
anniversary thereof. For purposes of this Section, the term
“One-Year Restrictive Period” shall mean the period
commencing on the Closing Date and ending on the one-year anniversary
thereof. For the purposes of this Section, “Client” shall mean any
person or entity to which Bridgeline Software has provided services to or made
Proposals to at any time within the twelve (12) months preceding this Agreement
or thereafter. “Proposal” shall mean any Client-specific,
bona fide proposal for services that included a description of
services, time line and proposed fees for the project.
(e) Geographic
Restrictions Reasonable. Each Shareholder expressly
declares that the territorial and time limitations contained in this Section
are
entirely reasonable and are properly and necessarily required for the adequate
protection of the business, operations, trade secrets and goodwill of Bridgeline
Software and are given as an integral part of the merger, but for which
Bridgeline Software would not have entered into this Agreement. It is
the desire and intent of each Shareholder and Bridgeline Software that the
provisions of this Section shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of
this Section, including but not limited to, any territorial or time limitations
set forth in this Section, shall be adjudicated to be invalid or unenforceable
by a court of competent jurisdiction, whether due to passage of time, change
of
circumstances or otherwise, the provisions of this Section shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, or to reduce said territorial or time limitations to such areas
or periods of time as said court shall deem reasonable, such deletion or
reduction to apply only with respect to the operation of this Section in the
particular jurisdiction in which such adjudication is made.
(f) Rights
Cumulative. The non-competition and non-solicitation
provisions contained herein are in addition to, and not in limitation of, any
rights that Bridgeline Software may have under any other contract, law or
otherwise, including but not limited to, the Employment Agreements between
Bridgeline Software and each Shareholder. Each Shareholder
acknowledges that the remedy at law for any breach of this Section may be
inadequate. Each Shareholder agrees that upon any such breach of this
Section, Bridgeline Software or shall, in addition to all other available
remedies (including but not limited to, seeking an injunction or other equitable
relief), be entitled to injunctive relief.
(g) Computation
of Restrictive Period. All time periods in this Section
shall be computed by excluding from such computation any time during which
a
Shareholder is in violation of any provision of this Section and any time during
which there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) in which action Bridgeline
Software seeks to enforce the agreements and covenants in this Section
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or
in
which any person or entity contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement which is determined adversely against such Shareholder or such
other
party.
5.10 Payment
of Indebtedness. Prior to the Closing Date, Seller shall
have (i) paid and satisfied or converted to shares of capital stock of Seller,
Seller’s existing loan from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in an amount not to
exceed $135,000; (ii) at Seller’s election either (x) paid and satisfied the
Bank Indebtedness or (y) instructed Bridgeline Software to reduce the Cash
Consideration by such amount necessary to repay the Bank Indebtedness in full;
(iii) obtained the release of any liens related to the indebtedness described
in
subsections (i) and (ii); and (iv) provided to Bridgeline Software evidence
of
such payments and the release of such liens in a form reasonably acceptable
to
Bridgeline Software.
5.11 Rule
144 Reporting. With a view to making available to the
Shareholders the benefits of Rule 144 of the Securities Act, Bridgeline Software
agrees to use its best efforts to file with the SEC, in a timely manner, all
reports and other documents required of Bridgeline Software under the Securities
Exchange Act of 1934, as amended.
ARTICLE
VI
CONDITIONS
PRECEDENT
6.1. Conditions
to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger will be subject to
the
satisfaction prior to the Closing Date of the following conditions:
(a) Governmental
Approvals. Other than the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, all statutory requirements
and all Consents of Governmental Entities legally required for the consummation
of the Merger and the transactions contemplated by this Agreement will have
been
filed, occurred, or been obtained, other than such Consents for which the
failure to obtain would not have a material adverse effect on the consummation
of the Merger or the other transactions contemplated hereby.
(b) No
Restraints. No statute, rule or regulation, and no final and
nonappealable order, decree or injunction will have been enacted, entered,
promulgated or enforced by any court or Governmental Entity of competent
jurisdiction which enjoins or prohibits the consummation of the
Merger.
(c) Stockholder
Approval. This Agreement and the Merger shall have been approved
and adopted by the requisite stockholder approval in accordance with the DGCL
and the Seller Charter Documents.
6.2 Conditions
of Obligations of Bridgeline
Software. The obligations of Bridgeline
Software to effect the Merger are subject to the satisfaction of the following
conditions unless waived by Bridgeline Software:
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(a) Representations
and Warranties of Seller. The representations and warranties of
Seller set forth in this Agreement that are qualified as to materiality shall
be
true and correct in all respects, and all other representations and warranties
of Seller set forth in this Agreement shall be true and correct in all material
respects, in each case as of the date of the Closing, except (i) as otherwise
contemplated by this Agreement, (ii) as a result of actions taken or
not taken at the direction of or after consultation with and written concurrence
of Bridgeline Software and (iii) for representations and warranties specifically
limited to an earlier date(s) (in which case such representations and warranties
shall be true and correct as of such date). Bridgeline
Software will have received a certificate signed by the president of Seller
to
such effect on the Closing Date.
(b) Representations
and Warranties of the Shareholders. The representations
and warranties of the Shareholders set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects, and
all
other representations and warranties of the Shareholders set forth in this
Agreement shall be true and correct in all material respects, in each case
as of
the date of the Closing, except (i) as otherwise contemplated by this
Agreement, (ii) as a result of actions taken or not taken at the
direction of or after consultation with and written concurrence of Bridgeline
Software and (iii) for representations and warranties specifically limited
to an
earlier date(s) (in which case such representations and warranties shall be
true
and correct as of such date). Bridgeline Software will
have received a certificate signed by each Shareholder to such effect on the
Closing Date.
(c) Performance
of Obligations of Seller. Seller will have performed in all
material respects all agreements and covenants required to be performed by
it
under this Agreement prior to the Closing Date except (i) as otherwise
contemplated or permitted by this Agreement and (ii) as a result of actions
taken or not taken at the direction of or after consultation with and written
concurrence of Bridgeline Software, and Bridgeline Software will have received
a
certificate signed by the president of Seller to such effect on the Closing
Date.
(d) Performance
of Obligations of the Shareholders. The Shareholders will
have performed in all material respects all agreements and covenants required
to
be performed by it under this Agreement prior to the Closing Date except (i)
as
otherwise contemplated or permitted by this Agreement and (ii) as a result
of
actions taken or not taken at the direction of or after consultation with and
written concurrence of Bridgeline Software, and Bridgeline Software will have
received a certificate signed by each Shareholder to such effect on the Closing
Date.
(e) No
Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect that has not been disclosed in the Seller
Financial Statements or on the Disclosure Schedule shall
exist or have occurred or come to exist or been threatened that, individually
or
in the aggregate, has had or resulted in or could be expected to become or
result in a Material Adverse Effect on Seller, and Bridgeline Software will
have received from the Seller a certificate signed by the Seller to such effect
on the Closing Date.
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(f) Stockholder
Approval. The holders of not less than 100% of the outstanding
capital stock of Seller shall have executed a written consent to approve and
adopt this Agreement and the Merger, in accordance with the DGCL.
(g) Employment
Agreements. Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P. ▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered into an employment agreement
substantially in the forms attached hereto as Exhibit 9.2G (the
“Employment Agreements”),
effective as of the Closing Date, relating to his employment by the Surviving
Corporation or any successor entity after the Merger, which Employment
Agreements shall be in full force and effect in accordance with their
terms.
(h) Legal
Action. There will not be overtly threatened or pending any
action, proceeding or other application before any court or Governmental Entity
brought by any Person or Governmental Entity: (i) challenging or seeking to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain any material damages from Bridgeline Software
or
Seller as a result of such transactions; or (ii) seeking to prohibit or impose
any limitations on Bridgeline Software’s ownership or operation of all or any
portion of Seller’s business or assets, or to compel Bridgeline Software to
dispose of or hold separate all or any portion of its or Seller’s business or
assets as a result of the transactions contemplated by the Agreement which
if
successful would have a material adverse effect on Bridgeline Software’s ability
to receive the anticipated benefits of the Merger and the employment of the
individuals referenced in Section 9.2(g).
(i) Termination
of Rights and Certain Securities. Any registration rights, rights
of first refusal, voting rights, rights to any liquidation preference or
redemption rights relating to any security of Seller will have been terminated
or waived or satisfied as of the Closing.
(j) Calculation
of Net Working Capital. Seller shall deliver to Bridgeline
Software the calculation of the Seller Net Working Capital as of the Closing
Date. Seller and Bridgeline Software shall agree on the calculation
of Net Working Capital and, if necessary, pay amounts due to the Shareholders
or
Bridgeline Software, as the case may be, pursuant to Section 1.2(b) within
forty-five (45) days from the Closing Date.
(k) Termination
of Seller 401(k) Plan. The Seller 401(k) Plan shall have been
terminated in accordance with Section 5.6.
(l) Merger
Filing. Seller shall have executed and delivered to Bridgeline
Software a counterpart signature page of the Certificate of Merger to be filed
with the Secretary of State of the State of Delaware.
(m) Corporate
Proceedings Satisfactory. All corporate and other proceedings to
be taken by Seller in connection with the transactions contemplated hereby
and
all documents incident thereto will be satisfactory in form and substance to
Bridgeline Software and its counsel,
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and
Bridgeline Software and its counsel will have received all such counterpart
originals or certified or other copies of such documents and other closing
documents as they reasonably may request.
(n) Supporting
Documents. Seller shall have delivered to Bridgeline Software a
certificate (i) of the Secretary of State of the State of Delaware dated on
or
around the Closing Date, certifying as to the corporate legal existence and
good
standing of Seller, (ii) of the Secretary of State of Ohio, Minnesota,
Connecticut, Virginia and Maryland, certifying as to the good standing of
Seller, and (iii) of the Secretary of Seller, dated as of the Closing Date,
certifying on behalf of Seller (1) that attached thereto is a true and complete
copy of the Certificate of Incorporation of Seller, certified by the Secretary
of State of the State of Delaware, (2) that attached thereto is a true and
complete copy of the By-Laws of Seller as in effect on the date of such
certification, (3) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and the stockholders of Seller
authorizing the execution, delivery and performance of the Agreement and the
consummation of the Merger, and (4) to the incumbency and specimen signature
of
each officer of Seller executing on behalf of Seller this Agreement and the
other agreements related hereto.
(o) FIRPTA. Seller
shall have delivered to Bridgeline Software a properly executed statement
satisfying the requirements of Treasury Regulation Sections 1.897-2(h) and
1.1445-2(c)(3) in a form reasonably acceptable to Bridgeline Software and any
state Tax clearance certificates required to relieve Seller of any withholding
obligation relating to foreign ownership of U.S. real property
interests.
(p) Indebtedness. Seller
shall have delivered to Bridgeline Software the evidence of the repayment of
all
indebtedness and the release of the liens set forth in Section
5.10.
6.3. Conditions
of Obligation of Seller and the Shareholders. The
obligation of Seller and the Shareholders to effect the Merger is subject to
the
satisfaction of the following conditions unless waived by Seller and the
Shareholders:
(a) Representations
and Warranties of Bridgeline Software. The representations
and warranties of Bridgeline Software set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects, and
all
other representations and warranties of Bridgeline Software set forth in this
Agreement shall be true and correct in all material respects, in each case
as of
the date of the Closing, except (i) as otherwise contemplated by this
Agreement, (ii) as a result of actions taken or not taken at the
direction of or after consultation with and written concurrence of Seller and
(iii) for representations and warranties specifically limited to an earlier
date(s) (in which case such representations and warranties shall be true
and correct as of such date). Seller and the Shareholders
will have received a certificate signed by the chief executive officer of
Bridgeline Software to such effect on the Closing Date.
(b) Performance
of Obligations of Bridgeline Software. Bridgeline Software
will have performed in all material respects all agreements and covenants
required to be
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performed
by it under this Agreement prior to the Closing Date, and Seller and the
Shareholders will have received a certificate signed by the chief executive
officer of Bridgeline Software to such effect on the Closing Date.
(c) No
Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect that has not been disclosed on the Bridgeline
Software Disclosure Schedules shall exist or have occurred
or come to exist or been threatened that, individually or in the aggregate,
has
had or resulted in or could be expected to become or result in a Material
Adverse Effect on Bridgeline Software, and Seller will have received from
the Seller a certificate signed by the Seller to such effect on the Closing
Date.
(d) Merger
Filing. Bridgeline Software shall have executed and delivered to
Seller a counterpart signature page of the Certificate of Merger to be filed
with the Secretary of State of the State of Delaware.
(e) Delivery
of Initial Merger Consideration. On the Closing
Date, Bridgeline Software shall deliver to the Seller the Cash
Consideration by wire transfer of immediately available funds and shall deliver
to the transfer agent for the Bridgeline Software common stock instructions
to
issue the stock certificates representing the Bridgeline Software
Stock.
(f) Employment
Agreements. Bridgeline Software shall have entered into
the Employment Agreements effective as of the Closing Date.
(g) Bridgeline
Software Supporting Documents. Bridgeline Software
shall have delivered to Seller a certificate (i) of the Secretary of State
of
the State of Delaware dated on or around the Closing Date, certifying as to
the
corporate legal existence and good standing of Bridgeline Software, and (ii)
of
the Secretary of Bridgeline Software, dated as of the Closing Date, certifying
on behalf of Bridgeline Software: (1) that attached thereto is a true and
complete copy of the Certificate of Incorporation of Bridgeline Software,
certified by the Secretary of State of the State of Delaware; (2) that attached
thereto is a true and complete copy of the By-Laws of Bridgeline Software as
in
effect on the date of such certification; (3) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors of
Bridgeline Software authorizing the execution, delivery and performance of
the
Agreement and the consummation of the Merger; and (4) to the incumbency and
specimen signature of each officer of Bridgeline Software executing on behalf
of
Bridgeline Software this Agreement and the other agreements related
hereto.
(h) Indebtedness. If
instructed by Seller pursuant to Section 1.2(a), Bridgeline Software shall
have
made payment of the Bank Indebtedness pursuant to Section 5.10.
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ARTICLE
VII
FEES
AND EXPENSES
Except
as
set forth in this Article VII, all fees and expenses incurred in connection
with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees and expenses, whether or not the Merger is
consummated; provided, however, that if the Merger is consummated,
Bridgeline Software shall pay up to $35,000 for the reasonable legal expenses
of
counsel to the Seller incurred in connection with the Merger, it being
acknowledged and agreed to by the parties that the Shareholders shall be
personally responsible for any such expenses of Seller exceeding this
limit.
ARTICLE
VIII
GENERAL
RELEASE AND INDEMNIFICATIONS
8.1. Shareholders’
Release. The Shareholders, effective at the Closing,
hereby release and discharge Seller from and against any and all claims, demands
and liabilities which the Shareholders may have against Seller immediately
prior
to the Closing (other than reimbursable expenses incurred in the ordinary course
of business in an aggregate amount not to exceed $5,000) and the Shareholders
specifically agree to indemnify, defend and hold Seller and Bridgeline Software
harmless against any and all obligations, debts, bills, liabilities, causes
of
action and claims of every nature of the Shareholders against Seller which
accrue or have arisen prior to the Closing.
8.2. Shareholders’
Indemnification. Subject to the limitations set forth in
Section 8.5 below, the Shareholders agree to indemnify and hold harmless
Bridgeline Software and its officers, directors, agents and employees to the
fullest extent lawful, from and against any and all actions, suits, claims,
counterclaims, proceedings, costs, losses, liabilities, obligations, demands,
damages, judgments, amounts paid in settlement and reasonable expenses,
including, without limitation, reasonable attorneys’ fees and disbursements
(hereinafter collectively referred to as a “Claim,”
“Loss” or
“Losses”) suffered
or incurred by Bridgeline
Software to the extent relating to or arising out of any inaccuracy in or
breach, violation or nonobservance of the representations, warranties, covenants
or other agreements made by Seller or the Shareholders herein or in the
Transaction Documents or failure of any certificate, document or instrument
delivered by or on behalf of Seller or the Shareholders pursuant hereto or
in
connection herewith to be true and correct as of the
Closing. Notwithstanding the foregoing, to the extent that Bridgeline
Software receives and collects any insurance proceeds relating to a Claim or
Loss covered by insurance purchased by Seller prior to the Closing, then
Bridgeline Software’s claim for indemnification hereunder shall be reduced,
dollar-for-dollar, by the amount of such proceeds received by Bridgeline
Software for any insurable Claim or Loss.
8.3. Bridgeline
Software’s Indemnification. Subject to the limitations
set forth in Section 8.5 below, Bridgeline Software agrees to indemnify and
hold
harmless the Shareholders to the fullest extent lawful, from and against any
and
all Claims or Losses suffered or incurred by
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the
Shareholders to the extent relating to or arising out of any inaccuracy in
or
breach, violation or nonobservance of the representations, warranties, covenants
or other agreements made by Bridgeline Software herein or failure of any
certificate, document or instrument delivered by or on behalf of Bridgeline
Software pursuant hereto or in connection herewith to be true and correct as
of
the Closing.
8.4. Third
Party Claims. In the event that a party (the
“Indemnitee”) desires to make a claim against
another party (the “Indemnitor”) pursuant to Section 8.2
or Section 8.3 in connection with any action, suit, proceeding or demand at
any
time instituted against or made upon the Indemnitee by any third party for
which
the Indemnitee may seek indemnification hereunder (a “Third Party
Claim”), the Indemnitee shall promptly notify, in writing, the
Indemnitor of such Third Party Claim and of the Indemnitee’s claim of
indemnification with respect thereto. The Indemnitor shall have
thirty (30) days after receipt of such notice to notify the Indemnitee if he/she
or it has elected to assume the defense of such Third Party Claim. If
the Indemnitor elects to assume the defense of such Third Party Claim, the
Indemnitor shall be entitled at his/her or its own expense to conduct and
control the defense and settlement of such Third Party Claim through counsel
of
his or its own choosing; provided, however, that the Indemnitee may
participate in the defense of such Third Party Claim with his/her or its own
counsel at his/her or its own expense and the Indemnitor may not settle any
Third Party Claim without the Indemnitee’s consent, which shall not be
unreasonably withheld. If the Indemnitor fails to notify the
Indemnitee within thirty (30) days after receipt of the Indemnitee’s written
notice of a Third Party Claim, the Indemnitee shall be entitled to assume the
defense of such Third Party Claim at the expense of the Indemnitor;
provided, however, that the Indemnitee may not settle any
Third Party Claim without the Indemnitor’s consent, which shall not be
unreasonably withheld.
8.5. Limitations
of Liability.
(a) The
Shareholders and Bridgeline Software shall have no liability with respect to
the
matters described in Sections 8.2 and 8.3, respectively, for any individual
Claim or Loss less than $5,000 (the “Minimum Claim
Amount”) and until the total of all Claims or Losses, including
those less than the Minimum Claim Amount, exceeds $25,000 (the
“Basket”), at which point the Shareholders or Bridgeline
Software, as the case may be, shall be obligated to indemnify the other party
from and against all such Claims or Losses which shall exceed the Basket;
provided, however, that these limitations shall not apply to any Claims
or Losses incurred by Bridgeline Software as a result of or with respect to
any
breach of the representations contained in Sections 3.1 (Ownership of Shares),
2.11 (Taxes) and 2.14 (Intellectual Property). Notwithstanding
anything contained in this Agreement to the contrary, except for the
representations set forth in Sections 3.1 (Ownership of Shares), 2.11 (Taxes)
and 2.14 (Intellectual Property), which shall be uncapped, the other indemnity
obligations of the Shareholders, collectively, on the one hand and the indemnity
obligations of Bridgeline Software, on the other hand, under this Agreement
shall not exceed the sum of $1,000,000.
(b) In
any situation in which an indemnification payment is due from the Shareholders
hereunder, Bridgeline Software shall seek to satisfy such obligation, in whole
or in
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part,
in
the following manner: (i) first, by acceptance of a cash payment by the
Shareholders equal to the value of the Claim or Loss, and (ii) second, by
withholding or setting off the amount of the Earn-Out payments that may then
be
due or may subsequently become payable to the Shareholder, provided that
Bridgeline Software has delivered to the Shareholders not less than thirty
(30)
days’ prior written notice of its intention to withhold
same. In any situation in which an indemnification payment is
due from Bridgeline Software hereunder, the Shareholders shall seek to satisfy
such obligation, by acceptance of a cash payment by Bridgeline Software equal
to
the fair value of the Claim or Loss.
(c) No
action or claim for Losses pursuant to this Article VIII shall be brought or
asserted after the relevant date of survival referred to in Article IX hereof
(the “Representation Expiration Date”). The
amount of any Claims or Losses suffered by an Indemnitee shall be reduced by
any
tax benefit that has been realized or that is certain to be realized, and any
insurance benefits or claims against third parties which are actually received
by such party in respect of or as a result of such Claims or Losses, or the
facts or circumstances relating thereto. If any Losses for which
indemnification is made hereunder are subsequently reduced by any tax benefit
or
insurance payment, the value of such tax benefit or other benefit or the amount
of such payment or other recovery shall be remitted to the
Indemnitor.
(d) Bridgeline
Software and the Shareholders acknowledge and agree that, except as to Claims
or
Losses attributable to fraud, their sole remedy against the other for any matter
arising out of a breach, violation or nonobservance of any representation,
warranty, covenant or other agreement contained in this Agreement is set forth
in this Article VIII, and that except to the extent a party has asserted a
claim
for indemnification prior to the Representation Expiration Date, neither party
shall have any remedy against the other party for any breach, violation or
nonobservance of a representation, warranty, covenant or other agreement made
by
such other party in this Agreement. The parties acknowledge that this
Section 8.5 has been negotiated fully by the parties and that neither party
would have entered into this Agreement but for the inclusion of this Section
8.5.
8.6. Expenses;
Reimbursement. Subject to the limitations set forth in
Section 8.5 above, an Indemnitor hereunder promptly shall reimburse the
Indemnitee for all Losses constituting reasonable expenses (including reasonable
attorneys’ fees and disbursements) as they are incurred in connection with
investigating, preparing to defend or defending any third-party action, suit,
claim or proceeding (including any inquiry or investigation) for which indemnity
is available under either Section 8.2 or Section 8.3, as
applicable.
8.7. Notice. Each
party shall provide written notice to the other of any claim with respect to
which it seeks indemnification promptly after the discovery of any matters
giving rise to a claim for indemnification; provided, however, that the
failure of such party to give notice as provided herein shall not relieve the
Indemnitor of its obligations under this Article VIII, except if and to the
extent that the Indemnitor has been materially prejudiced thereby.
8.8. Survival. Subject
to the provisions and limitations set forth in Section 8.5(d) and in Article
IX
below, the obligations of Bridgeline Software and the Shareholders under this
Article VIII shall survive and continue in effect following the Closing until
all Claims or Losses are resolved.
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ARTICLE
IX
SURVIVAL;
WAIVER OF INDEMNITY OR CONTRIBUTION
9.1. Survival
of Representations and Warranties. Except as provided
herein, all representations, warranties, covenants and other agreements of
the
parties contained herein shall survive the execution and delivery of this
Agreement and continue in effect following the Closing for a period commencing
on the Closing Date and ending on the date that is eighteen (18) months after
the Closing Date. Notwithstanding the preceding sentence, the
representations set forth in Section 3.1 (Ownership of Shares) with respect
to
the Shareholders’ ownership of the Shares shall survive and continue in effect
indefinitely after the Closing, the representations set forth in Section 2.13
(Taxes) shall survive until the expiration of the applicable statute of
limitations and the representations set forth in Section 2.14 (Intellectual
Property) shall survive for a period commencing on the Closing Date and ending
on the date that is five (5) years after the Closing Date.
9.2. No
Indemnity or Contribution; Waiver. The Shareholders shall
not be entitled to make any claim for indemnity or contribution or any other
similar claim against Seller or Bridgeline Software with respect to any Claim
or
Losses for which the Shareholders are liable under Article VIII provided,
however, that the Shareholders may be entitled to assert a claim for
indemnification, contribution or reimbursement against each other under an
agreement amongst themselves. To the extent that the Shareholders may
now or in the future have the right to assert any such claim against Seller
or
Bridgeline Software, the Shareholders hereby waives any such right and hereby
release and forever discharge Seller and Bridgeline Software from any such
claim.
ARTICLE
X
TAX
MATTERS
Bridgeline
Software, Seller and the Shareholders shall use reasonable efforts to cause
the
Merger to be treated as a reorganization within the meaning of Section 368(a)
of
the Code and shall not knowingly take or fail to take any action which action
or
failure to act would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code. The
Seller and the Shareholders (a) without Bridgeline Software’s prior approval,
shall not file any Tax Return or take any position inconsistent with the
treatment of the Merger as a reorganization described in Section 368(a) of
the
Code and shall not settle any tax dispute with respect to any pre-Closing period
to the extent that the issue relates to the income, gain or losses of the
Seller, and (b) shall comply with the record keeping and information-reporting
requirements set forth in Treas. Reg. 1.368-3.
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ARTICLE
XI
MISCELLANEOUS
11.1. Parties
in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained
in
this Agreement shall be binding on and shall inure to the benefit of the
respective heirs, successors and assigns of the parties hereto (including
permitted transferees of any of the Shares or Bridgeline Software
Stock). Except as may be required to be disclosed by order of a court
or otherwise required by law, the parties agree to maintain in confidence the
terms of this Agreement, except that the parties hereto may disclose such terms
to their respective accountants, lawyers, bankers and advisors in the ordinary
course. Except as otherwise specifically provided herein, this
Agreement shall not confer any rights or remedies upon any person other than
the
parties hereto and their respective heirs, successors and
assigns. Notwithstanding anything to the contrary set forth herein,
the Shareholders are not intended third party beneficiaries of any of the
Seller’s representations and warranties contained in this
Agreement.
11.2. Notices. All
notices, requests, consents, reports and demands shall be in writing and shall
be hand delivered, sent by fax or other electronic medium, or sent by Federal
Express or other overnight courier service providing proof of delivery, to
Bridgeline Software or the Shareholder, at the addresses set forth below or
to
such other address for any such party as may be furnished in writing to the
other parties hereto:
Bridgeline
Software: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, President
▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax
No.: ▇▇▇-▇▇▇-▇▇▇▇
With
copy
to: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
P.C.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax
No.: ▇▇▇-▇▇▇-▇▇▇▇
Seller/Shareholders:
▇▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax
No.:
▇▇▇-▇▇▇-▇▇▇▇
With
copy
to: T.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
L.L.P.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇
Fax
No.: ▇▇▇-▇▇▇-▇▇▇▇
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11.3. Severability. All
agreements and covenants contained in this Agreement are severable, and in
the
event that any of them shall be held to be invalid or unenforceable by any
court
of competent jurisdiction, then this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein.
11.4. Counterparts. This
Agreement and any exhibit hereto may be executed in multiple counterparts,
each
of which shall constitute an original, but all of which shall constitute but
one
and the same instrument. One or more counterparts of this Agreement
or any exhibit hereto may be delivered via fax, with the intention that they
shall have the same effect as an original counterpart hereof.
11.5. Effect
of Headings/Gender References. The article and section
headings herein are for convenience only and shall not affect the construction
or interpretation hereof. The use of any gender in the Agreement
shall be deemed to include the other genders, and the use of the singular in
this Agreement shall be deemed to include the plural (and vice versa), wherever
appropriate.
11.6. Governing
Law. This Agreement shall be deemed a contract made
under the laws of the State of Delaware and together with the rights and
obligations of the parties hereunder, shall be construed under and governed
by
the laws of such state. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement or any
of
the transactions contemplated hereby, shall be brought against any of the
parties in the courts of the State of Delaware, and each of the parties
irrevocably submits to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding, waives any
objection to venue laid therein, agrees that all claims in respect of any action
or proceeding shall be heard and determined only in any such court and agrees
not to bring any action or proceeding arising out of or relating to this
Agreement or any transaction contemplated hereby in any other
court. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the
world.
11.7. Post-Closing
Tax Matters. Bridgeline Software agrees that it will
cooperate with the preparation of all tax returns of Seller for the period
up to
the Closing Date. The Shareholders agree that such tax returns shall
be prepared in a manner consistent with Seller’s historical
practices.
11.8. Non-Transferability
of Earn-Out Payments. Any rights of the Shareholders to
receive Earn-Out payments pursuant to this Agreement shall be non-transferable
without the prior written consent of Bridgeline
Software. Notwithstanding the foregoing, each Shareholder may
transfer all or any of such rights (a) as a gift to any member of his
family or to any trust for the benefit of any such family member or such
Shareholder, provided that any such transferee
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shall
agree in writing with Bridgeline Software, as a condition precedent to such
transfer, to be bound by all of the provisions of this Agreement relating to
the
Earn-Out payments, or (b) by will or the laws of descent and distribution,
in which event each such transferee shall be bound by all of the provisions
of
this Agreement relating to the Earn-Out payments or (c) by court order, in
which
event each such transferee shall be bound by all of the provisions of this
Agreement relating to the Earn-Out payments. As used herein, the word
"family" shall include any spouse, lineal ancestor or descendant, brother
or sister.
11.9. Disclosure. Certain
information set forth in the Schedules has been included and disclosed solely
for informational purposes and may not be required to be disclosed pursuant
to
the terms and conditions of the Agreement. The disclosure of any such
information shall not be deemed to constitute an acknowledgement or agreement
that the information is required to be disclosed in connection with the
representations and warranties made in the Agreement or that the information
is
material, nor shall any information so included and disclosed be deemed to
establish a standard of materiality or otherwise used to determine whether
any
other information is material.
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Signature
Page to Stock Purchase Agreement
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of
Merger on the date written above.
| BRIDGELINE SOFTWARE, INC. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Title: President and Chief Executive Officer | |||
| TENTH FLOOR, INC. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | |||
| Title: President | |||
| SHAREHOLDERS: | |||
| /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | |||
| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | |||
| /s/ P. ▇▇▇▇▇ ▇▇▇▇▇ | |||
| P. ▇▇▇▇▇ ▇▇▇▇▇ | |||
| /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|||
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