EXHIBIT 10.23
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AGREEMENT AND PLAN OF MERGER
by and among
TURBOWORX, INC.
and
ARGENTYS CORPORATION
and
THE SHAREHOLDERS OF ARGENTYS CORPORATION
and
AMPERSAND 1999 LIMITED PARTNERSHIP,
as Shareholders' Representative
Dated as of April 15, 2003
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TABLE OF CONTENTS
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PAGE
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RECITALS ...............................................................................1
ARTICLE I THE MERGER.....................................................................1
1.1 THE MERGER...........................................................................1
1.2 THE CLOSING..........................................................................1
1.3 EFFECTIVE TIME.......................................................................1
1.4 EFFECT OF THE MERGER.................................................................1
1.5 EFFECT ON CAPITAL STOCK..............................................................2
1.6 SURRENDER OF SECURITIES; RESTRICTIONS ON TRANSFER; STOCK TRANSFER BOOKS..............3
1.7 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION................................4
1.8 BYLAWS OF THE SURVIVING CORPORATION..................................................4
1.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION..................................4
1.10 EXEMPTION FROM REGISTRATION..........................................................4
1.11 SHAREHOLDERS' REPRESENTATIVE.........................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ARGENTYS.....................................6
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; CAPITALIZATION.........................6
2.2 CORPORATE POWER AND AUTHORITY........................................................7
2.3 VALIDITY, ETC........................................................................7
2.4 FINANCIAL STATEMENTS.................................................................8
2.5 ABSENCE OF UNDISCLOSED LIABILITIES...................................................8
2.6 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS.......................................8
2.7 INVENTORIES..........................................................................9
2.8 RECEIVABLES.........................................................................10
2.9 TAXES...............................................................................10
2.10 LITIGATION..........................................................................10
2.11 CERTAIN PRACTICES...................................................................10
2.12 COMPLIANCE WITH LAW.................................................................11
2.13 LICENSES AND PERMITS................................................................11
2.14 LABOR AND EMPLOYEE RELATIONS........................................................11
2.15 CERTAIN EMPLOYEES...................................................................12
2.16 EMPLOYEE BENEFITS...................................................................12
2.17 TANGIBLE PROPERTIES.................................................................12
2.18 OWNED PREMISES......................................................................12
2.19 LEASED PREMISES.....................................................................13
2.20 INSURANCE...........................................................................13
2.21 OUTSTANDING COMMITMENTS.............................................................13
2.22 INTELLECTUAL PROPERTY...............................................................13
2.23 PROPRIETARY INFORMATION OF THIRD PARTIES............................................16
2.24 GOVERNMENTAL APPROVALS..............................................................16
2.25 DISCLOSURE..........................................................................17
2.26 ENVIRONMENTAL MATTERS...............................................................17
2.27 CUSTOMERS...........................................................................18
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............................18
3.1 INVESTMENT..........................................................................19
3.2 NO REGISTRATION.....................................................................19
3.3 SOPHISTICATION......................................................................19
3.4 FINANCIAL CAPABILITY................................................................19
3.5 "ACCREDITED INVESTOR"...............................................................19
3.6 ACCESS..............................................................................19
3.7 RESIDENCE...........................................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......................................19
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; CAPITALIZATION........................19
4.2 CORPORATE POWER AND AUTHORITY.......................................................20
4.3 VALIDITY, ETC.......................................................................21
4.4 FINANCIAL STATEMENTS................................................................21
4.5 ABSENCE OF UNDISCLOSED LIABILITIES..................................................22
4.6 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS......................................22
4.7 INVENTORIES.........................................................................23
4.8 RECEIVABLES.........................................................................23
4.9 TAXES...............................................................................23
4.10 LITIGATION..........................................................................24
4.11 CERTAIN PRACTICES...................................................................24
4.12 COMPLIANCE WITH LAW.................................................................24
4.13 LICENSES AND PERMITS................................................................24
4.14 LABOR AND EMPLOYEE RELATIONS........................................................25
4.15 CERTAIN EMPLOYEES...................................................................25
4.16 EMPLOYEE BENEFITS...................................................................25
4.17 TANGIBLE PROPERTIES.................................................................26
4.18 OWNED PREMISES......................................................................26
4.19 LEASED PREMISES.....................................................................26
4.20 INSURANCE...........................................................................26
4.21 OUTSTANDING COMMITMENTS.............................................................26
4.22 INTELLECTUAL PROPERTY...............................................................27
4.23 PROPRIETARY INFORMATION OF THIRD PARTIES............................................29
4.24 GOVERNMENTAL APPROVALS..............................................................29
4.25 DISCLOSURE..........................................................................29
4.26 ENVIRONMENTAL MATTERS...............................................................30
4.27 CUSTOMERS...........................................................................30
ARTICLE V CONDITIONS TO BUYER'S OBLIGATIONS.............................................30
5.1 CONSENTS............................................................................30
5.2 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT...............................30
5.3 PERFORMANCE.........................................................................31
5.4 NO ADVERSE CHANGE...................................................................31
5.5 NO ACTIONS, SUITS OR PROCEEDINGS....................................................31
5.6 EMPLOYMENT OFFERS...................................................................31
5.7 TERMINATION OF EMPLOYEES............................................................31
5.8 CLOSING DOCUMENTS...................................................................32
5.9 STOCKHOLDERS' AGREEMENT.............................................................32
5.10 BRIDGE LOANS........................................................................32
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5.11 CERTIFICATE OF PRINCIPAL SHAREHOLDERS...............................................32
ARTICLE VI CONDITIONS TO ARGENTYS' AND THE SHAREHOLDERS' OBLIGATIONS.....................32
6.1 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT...............................32
6.2 PERFORMANCE.........................................................................33
6.3 NO ADVERSE CHANGE...................................................................33
6.4 NO ACTIONS, SUITS OR PROCEEDINGS....................................................33
6.5 CLOSING DOCUMENTS...................................................................33
6.6 STOCKHOLDERS' AGREEMENT.............................................................33
ARTICLE VII INDEMNIFICATION...............................................................33
7.1 SURVIVAL............................................................................33
7.2 INDEMNIFICATION OF BUYER BY THE SHAREHOLDERS........................................34
7.3 INDEMNIFICATION OF SHAREHOLDERS BY BUYER............................................34
7.4 CLAIMS FOR INDEMNIFICATION..........................................................35
ARTICLE VIII MISCELLANEOUS.................................................................35
8.1 NOTICES.............................................................................35
8.2 ENTIRE AGREEMENT....................................................................36
8.3 MODIFICATIONS AND AMENDMENTS........................................................36
8.4 WAIVERS AND CONSENTS................................................................36
8.5 ASSIGNMENT..........................................................................37
8.6 PARTIES IN INTEREST.................................................................37
8.7 GOVERNING LAW.......................................................................37
8.8 SEVERABILITY........................................................................37
8.9 INTERPRETATION......................................................................37
8.10 HEADINGS AND CAPTIONS...............................................................37
8.11 RELIANCE............................................................................38
8.12 EXPENSES............................................................................38
8.13 NO BROKER OR FINDER.................................................................38
8.14 PUBLICITY...........................................................................38
8.15 COUNTERPARTS........................................................................38
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INDEX TO EXHIBITS
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Exhibit 1.3 Certificate of Merger
Exhibit 1.5 Warrant
Exhibit 1.7 Surviving Charter
Exhibit 1.8 Surviving Bylaws
Exhibit 1.9 Directors
Exhibit 5.9 Stockholders' Agreement
Exhibit 7.11 Principal Shareholders' Certificate
Schedule 1 Shareholders
Disclosure Schedule of Argentys
Disclosure Schedule of Buyer
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made as of
April ___, 2003, by and among TurboWorx, Inc., a Delaware corporation ("BUYER"),
Argentys Corporation, a Delaware corporation ("ARGENTYS"), the shareholders of
Argentys listed on SCHEDULE 1 hereto (each a "SHAREHOLDER" and, collectively,
the "Shareholders"), and Ampersand 1999 Limited Partnership ("AMPERSAND"), as
Shareholders' Representative.
RECITALS
This Agreement contemplates a merger of Argentys with and into Buyer,
with Buyer being the surviving corporation. In such merger, shares of capital
stock of Argentys held by the Shareholders will be tendered by the Shareholders
for exchange and will be converted into the right to receive certain
consideration in the merger, on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties intending to be legally bound agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Argentys shall be merged with and into Buyer (the "MERGER") at the
Effective Time (as defined in Section 1.3 hereof). From and after the Effective
Time, the separate corporate existence of Argentys shall cease and Buyer shall
continue as the surviving corporation (the "SURVIVING CORPORATION") under the
name "TURBOWORX, INC." and shall succeed to and assume all the rights and
obligations of Argentys and Buyer in accordance with the DGCL.
1.2 THE CLOSING. The closing of the Merger (the "CLOSING") will take
place at 10:00 a.m. Eastern Time at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. on April ___, 2003 (the "CLOSING DATE").
1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties shall file a certificate of merger substantially in the form attached
hereto as EXHIBIT 1.3 (the "CERTIFICATE OF MERGER") executed in accordance with
the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL as soon as practicable on or after the
Closing Date. The Merger shall become effective at such time as the Certificate
of Merger is duly filed with the Delaware Secretary of State, or at such later
time as the parties shall agree should be specified in the Certificate of Merger
(the "EFFECTIVE TIME").
1.4 EFFECT OF THE MERGER. From and after the Effective Time, the
Surviving Corporation shall possess all the property, rights, privileges, powers
and franchises and be
subject to all of the restrictions, debts, liabilities, disabilities,
obligations and duties of Buyer and Argentys, and the Merger shall otherwise
have the effects set forth in Section 259 of the DGCL.
1.5 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any further action on the part of Buyer, Argentys, the
Surviving Corporation or any holder of any shares of capital stock Argentys or
Buyer:
(a) BUYER COMMON STOCK. Each share of common stock, par value $.001
per share, of Buyer issued and outstanding immediately prior to the Effective
Time shall be converted into one fully paid and nonassessable share of common
stock, par value $.001 per share of the Surviving Corporation.
(b) BUYER PREFERRED STOCK. Each share of Series A Preferred Stock,
par value $.001 per share, of Buyer issued and outstanding immediately prior to
the Effective Time shall be converted into one fully paid and nonassessable
share of Series A Preferred Stock, par value $.001 per share of the Surviving
Corporation (the "BUYER SERIES A PREFERRED STOCK").
(c) CANCELLATION OF CERTAIN CAPITAL STOCK OF ARGENTYS. Each share
of capital stock of Argentys that is held by Argentys (as treasury stock or
otherwise) or held by any direct or indirect wholly-owned subsidiary of
Argentys, shall automatically be canceled and retired and shall cease to exist,
and no cash or other consideration shall be delivered in exchange therefor.
(d) ARGENTYS COMMON STOCK. Each share of common stock, $.001 par
value per share, of Argentys ("ARGENTYS COMMON STOCK") issued and outstanding
immediately prior to the Effective Time (other than shares of Argentys Common
Stock to be canceled in accordance with Section 1.5(c) and Dissenting Shares (as
defined below)) shall be canceled, extinguished and converted into and become a
right to receive (i) 1.308407 shares of Buyer Series A Preferred Stock (rounded
to the nearest whole share); and (ii) a warrant, in the form set forth as
EXHIBIT 1.5 (the "Warrant") to purchase an additional 0.327102 shares of Buyer
Series A Preferred Stock (rounded to the nearest whole share).
(e) ARGENTYS PREFERRED STOCK. Each share of Series A Convertible
Preferred Stock, $.001 par value per share, of Argentys ("ARGENTYS PREFERRED
STOCK") issued and outstanding immediately prior to the Effective Time (other
than shares of Argentys Preferred Stock to be canceled in accordance with
Section 1.5(c) and Dissenting Shares (as defined below)) shall be canceled,
extinguished and converted into and become a right to receive 1.308407 shares of
Buyer Series A Preferred Stock (rounded to the nearest whole share); and (ii) a
Warrant to purchase an additional 0.327102 shares of Buyer Series A Preferred
Stock (rounded to the nearest whole share).
(f) TOTAL MERGER CONSIDERATION. The shares of Buyer Series A
Preferred Stock and Warrants issuable pursuant to Sections 1.5(d) and (e) hereof
are hereinafter sometimes referred to as the "MERGER CONSIDERATION." Assuming
that there are no Dissenting Shares, (i) the aggregate number of shares of Buyer
Series A Preferred Stock to be issued pursuant to Sections 1.5(d) and (e) hereof
shall be 1,600,000 and, based on the conversion ratios set forth in Sections
1.5(d) and (e) above, the Shareholders shall each be entitled to the number of
shares of Buyer Series A Preferred Stock as is set forth opposite their names on
SCHEDULE 1 hereto; and (ii)
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the aggregate number of shares of Buyer Series A Preferred Stock to be issued
upon exercise of the Warrants issued pursuant to Sections 1.5(d) and (e) hereof
shall be 400,000 and, based on the conversion ratios set forth in Sections
1.5(d) and (e) above, the Shareholders shall each be entitled to a Warrant for
the number of shares of Buyer Series A Preferred Stock as is set forth opposite
their names on SCHEDULE 1 hereto.
(g) DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, the shares of Argentys Common Stock and Argentys Preferred
Stock outstanding immediately prior to the Effective Time (the "ARGENTYS
SHARES") held by a holder (if any) who is entitled to demand, and who properly
demands, appraisal for such shares in accordance with Section 262 of the DGCL
("DISSENTING SHARES") shall not be converted into a right to receive the Merger
Consideration unless such holder fails to perfect or otherwise loses such
holder's right to appraisal, if any. Such shareholders shall be entitled to
receive payment of the appraised value of such Argentys Shares held by such
holder in accordance with the provisions of such Section 262. If, after the
Effective Time, such holder fails to perfect or loses any such right to
appraisal, such Argentys Shares shall be treated as if they had been converted
as of the Effective Time into the right to receive the Merger Consideration
pursuant to Sections 1.5(d) and 1.5(e).
1.6 SURRENDER OF SECURITIES; RESTRICTIONS ON TRANSFER; STOCK TRANSFER
BOOKS.
(a) EXCHANGE OF CERTIFICATES; RESTRICTIONS ON TRANSFER. After the
Effective Time, each of the holders of Argentys Shares immediately prior to the
Effective Time whose Argentys Shares were converted into the right to receive
Buyer Series A Preferred Stock and Warrants under Section 1.5 hereof shall be
entitled to receive the shares of Buyer Series A Preferred Stock and Warrants
into which such Argentys Shares have been converted, provided, that for the
purpose of securing the obligations of the Shareholders pursuant to Article VII,
fifty percent (50%) of the shares of Buyer Preferred Stock issued to each of the
Shareholders shall be subject to a prohibition on transfer for the twelve (12)
month period immediately following the Closing and the certificates evidencing
such shares shall bear a legend to that effect. Such shares of Buyer Preferred
Stock subject to such prohibition on transfer are sometimes referred to herein
as the "RESTRICTED SHARES."
(b) ISSUANCE TO REGISTERED HOLDERS. If any portion of the Merger
Consideration is to be issued to a person other than the person in whose name a
certificate for Argentys Shares is registered, it shall be a condition to such
payment that such certificate shall be surrendered and shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not payable.
(c) STOCK TRANSFER BOOKS CLOSED. At the Effective Time, the stock
transfer books of Argentys shall be closed and there shall not be any
registration of transfers of Argentys Shares thereafter on the records of
Argentys.
(d) NO DIVIDENDS. After the Effective Time, no dividends, interest
or other distributions shall be paid to the holder of any Argentys Shares.
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(e) NO FURTHER RIGHTS. After the Effective Time, holders of
Certificates shall cease to have any rights as shareholders of Argentys, except
as provided herein or under the DGCL.
1.7 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. At the
Effective Time, the certificate of incorporation of Buyer, as in effect
immediately prior to the Effective Time, which shall be in the form attached
hereto as EXHIBIT 1.7, shall be the certificate of incorporation of the
Surviving Corporation (the "SURVIVING CHARTER") until thereafter amended as
provided by the DGCL and such certificate of incorporation.
1.8 BYLAWS OF THE SURVIVING CORPORATION. At the Effective Time, the
bylaws of Buyer, as in effect immediately prior to the Effective Time, which
shall be in the form attached hereto as EXHIBIT 1.8, shall be the bylaws of the
Surviving Corporation (the "SURVIVING BYLAWS") until thereafter amended as
provided by the DGCL and such bylaws.
1.9 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The Directors of the Surviving Corporation shall be the persons
listed on EXHIBIT 1.9, each to hold office in accordance with the Surviving
Charter and the Surviving Bylaws.
(b) The officers of Buyer immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, each to hold office in
accordance with the laws of the State of Delaware, the Surviving Charter and the
Surviving Bylaws.
1.10 EXEMPTION FROM REGISTRATION. The Merger Consideration will be
issued in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), by reason of section 4(2) thereof.
1.11 SHAREHOLDERS' REPRESENTATIVE. The Shareholders hereby appoint
Ampersand as the true and lawful agent and attorney-in-fact of the Shareholders
(the "SHAREHOLDERS' REPRESENTATIVE") with full power of substitution to act in
the name, place and stead of the Shareholders with respect to the surrender of
the stock certificates owned by the Shareholders to Buyer in accordance with the
terms and provisions of this Agreement, and to act on behalf of the Shareholders
in any litigation or arbitration involving this Agreement, do or refrain from
doing all such further acts and things, and execute all such documents as the
Shareholders' Representative shall deem necessary or appropriate in connection
with the transactions contemplated by this Agreement, including, without
limitation, the power:
(a) to act for the Shareholders with regard to matters pertaining
to indemnification referred to in this Agreement, including the power to
compromise any indemnity claim on behalf of the Shareholders and to transact
matters of litigation;
(b) to execute and deliver all ancillary agreements, certificates
and documents that the Shareholders' Representative deems necessary or
appropriate in connection with the consummation of the transactions contemplated
by this Agreement;
(c) to do or refrain from doing any further act or deed on behalf
of the Shareholders that the
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Shareholders' Representative deems necessary or appropriate in his sole
discretion relating to the subject matter of this Agreement as fully and
completely as the Shareholders could do if personally present; and
(d) to receive service of process in connection with any claims
under this Agreement.
The appointment of the Shareholders' Representative shall be deemed
coupled with an interest and shall be irrevocable, and Buyer may conclusively
and absolutely rely, without inquiry, upon any action of the Shareholders'
Representative in all matters referred to herein.
If Ampersand resigns or is otherwise unable to serve as the
Shareholders' Representative, the successor Shareholders' Representative shall
be designated in writing by the Shareholders who hold a majority of the shares
of Buyer Series A Preferred Stock issued pursuant hereto.
If any individual Shareholders should die or become incapacitated, if
any trust or estate should terminate or if any other such event should occur,
any action taken by the Shareholders' Representative pursuant to this Section
1.11 shall be as valid as if such death or incapacity, termination or other
event had not occurred, regardless of whether or not the Shareholders'
Representative or Buyer shall have received notice of such death, incapacity,
termination or other event.
All notices required to be made or delivered by Buyer to the
Shareholders shall be made to the Shareholders' Representative for the benefit
of the Shareholders and shall discharge in full all notice requirements of Buyer
to the Shareholders with respect thereto. The Shareholders hereby confirm all
that the Shareholders' Representative shall do or cause to be done by virtue of
its appointment as the Shareholders' Representative.
The Shareholders' Representative shall act for the Shareholders on all
of the matters set forth in this Agreement in the manner the Shareholders'
Representative believes to be in the best interest of the Shareholders and
consistent with the obligations under this Agreement, but the Shareholders'
Representative shall not be responsible to the Shareholders for any loss or
damages the Shareholders may suffer by the performance by the Shareholders'
Representative of its duties under this Agreement, other than loss or damage
arising from willful violation of the law by the Shareholders' Representative of
its duties under this Agreement. The Shareholders' Representative and its legal
representatives shall be held harmless by the Shareholders from and indemnified
against any loss or damages arising out of or in connection with the performance
of its obligations in accordance with the provisions of this Agreement, except
for any of the foregoing arising out of the willful violation of the law by the
Shareholders' Representative of its duties hereunder. The foregoing indemnity
shall survive the resignation or substitution of the Shareholders'
Representative.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ARGENTYS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Argentys hereby represents and
warrants to Buyer as follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; CAPITALIZATION.
(a) Argentys is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction listed on SCHEDULE 2.1(A), such
jurisdictions being the only jurisdictions in which the nature of Argentys'
business or the character of the properties owned or leased by Argentys with
respect to such business requires such licensing or qualification, except where
failure to be so qualified would not have a material adverse effect on Argentys.
(b) Argentys does not have any Subsidiaries, whether direct or
indirect. As used herein, the term "Subsidiary" or "Subsidiaries" of a specified
party shall mean any other person (which shall include any entity), whether or
not capitalized, in which such party owns, directly or indirectly, more than
fifty percent (50%) of the stock or other equity interests of such other person
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such other person, or which may
effectively be controlled, directly or indirectly, by such person.
(c) The authorized capital stock of Argentys is as set forth on
SCHEDULE 2.1(C). The number of Argentys Shares issued and outstanding or held in
treasury as of the date hereof are as set forth on SCHEDULE 2.1(C). All
outstanding Argentys Shares are, and all Argentys Shares subject to issuance
under outstanding options, warrants or convertible securities are, duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, Argentys'
certificate of incorporation or bylaws or any agreement to which Argentys is a
party or by which it is otherwise bound. All of the issued and outstanding
securities of Argentys have been offered, issued and sold by Argentys in
compliance in all material respects with applicable Federal and state securities
laws.
(d) Except as set forth on SCHEDULE 2.1(D): (i) there are no
issued, reserved for issuance or outstanding subscriptions, options, warrants,
puts, calls, rights, exchangeable or convertible securities or other
commitments, obligations or agreements of any kind or character (oral or
written, contingent or otherwise) to purchase or acquire from Argentys any
shares of capital stock or other securities of Argentys, (ii) Argentys has no
obligation (direct or indirect, contingent or otherwise) to issue any such
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments, obligations or agreements of any
kind or character (oral or written, contingent or otherwise), (iii) Argentys has
no obligation to issue or distribute to holders of any shares of its capital
stock or other securities any evidences of indebtedness or assets of Argentys,
(iv) Argentys has no obligation (direct or indirect, contingent
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or otherwise) to purchase, redeem or otherwise acquire, or cause to be
purchased, redeemed or otherwise acquired, any shares of capital stock or other
securities of Argentys or any interest therein or to pay any dividend or make
any other distribution in respect thereof; (v) there are no bonds, debentures,
notes or other indebtedness of Argentys with voting rights (or convertible into,
or exchangeable for, securities with voting rights) on any matters on which
shareholders of Argentys may vote and (vi) no other shares of capital stock or
other securities of Argentys are issued, reserved for issuance or outstanding.
(e) True and complete copies of all agreements and instruments
relating to or issued under any Argentys equity incentive plan ("ARGENTYS STOCK
PLANS") have been made available to Buyer, and such agreements and instruments
have not been amended, modified or supplemented, and there are no agreements,
oral or written, to amend, modify or supplement such agreements or instruments.
SCHEDULE 2.1(E) sets forth the number of shares of capital stock reserved for
issuance pursuant to the Argentys Stock Plans and the maximum number of shares
of capital stock or securities of Argentys to be issued upon the exercise of all
outstanding options, warrants or similar rights or the conversion of convertible
securities.
(f) To the knowledge of Argentys, except as set forth in SCHEDULE
2.1(F), there are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of or other
securities of Argentys.
2.2 CORPORATE POWER AND AUTHORITY. Argentys has the corporate power and
authority to own and hold its properties and to carry on its business as
presently conducted and as currently intended to be conducted. Argentys has the
corporate power and authority to execute, deliver and perform this Agreement and
the other documents and instruments contemplated hereby. The execution, delivery
and performance of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by Argentys. This Agreement, and each of the other
agreements, documents and instruments to be executed and delivered by Argentys
have been duly executed and delivered by, and constitute the legal, valid and
binding obligation of, Argentys enforceable against Argentys in accordance with
their terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3 VALIDITY, ETC. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, the consummation of
the transactions contemplated hereby or thereby, nor the performance of this
Agreement and such other agreements in compliance with the terms and conditions
hereof and thereof will (i) violate, conflict with or result in any breach of
any trust agreement, certificate of incorporation, bylaw, judgment, decree,
order, statute or regulation applicable to Argentys, (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except for the filing of the Certificate
of Merger and except as set forth in SCHEDULE 2.3, (iii) violate, conflict with
or result in a breach, default or termination or give rise to any right of
termination, cancellation or acceleration of the maturity of any payment date of
any of the obligations of Argentys or increase or otherwise affect the
obligations of Argentys under
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any law, rule, regulation or any judgment, decree, order, governmental permit,
license or order or any of the terms, conditions or provisions of any material
mortgage, indenture, note, license, agreement or other instrument or obligation
applicable to Argentys or to Argentys' ability to consummate the transactions
contemplated hereby or thereby, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing and provided to Buyer, or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Argentys.
2.4 FINANCIAL STATEMENTS. Argentys has previously furnished to Buyer,
and attached hereto as SCHEDULE 2.4 are, the balance sheet relating to Argentys
as at March 31, 2003 (the "ARGENTYS BALANCE SHEET"), and the related statement
of income for the period from October 1, 2002 through March 31, 2003. All such
financial statements for Argentys (collectively, the "ARGENTYS FINANCIAL
STATEMENTS") were prepared from the books and records of Argentys, which books
and records are complete and correct in all material respects. The Argentys
Financial Statements fairly present the financial position of Argentys as of the
date thereof. The Argentys Financial Statements reflect reserves appropriate and
adequate for all known material liabilities and reasonably anticipated losses.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent of
the amounts specifically reflected or reserved against in the Argentys Balance
Sheet, Argentys does not have any liabilities or obligations of any nature
whatsoever, due or to become due, accrued, absolute, contingent or otherwise,
except for liabilities and obligations incurred in the ordinary course of
business and consistent with past practice.
2.6 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS. Since March 31,
2003, there has been no material adverse change in the business of Argentys and
there is no condition or development or contingency of any kind existing which,
so far as reasonably can be foreseen by Argentys, may result in any such
material adverse change. Without limiting the foregoing, except as disclosed on
SCHEDULE 2.6, since March 31, 2003 there has not been, occurred or arisen:
(i) Any damage, destruction or loss to any asset
(whether or not covered by insurance) that,
individually or in the aggregate, would have
a material adverse effect on the business or
prospects of Argentys;
(ii) Any change in the business or operations of
Argentys or in the manner of conducting such
business or sale or other disposition of any
right, title or interest in or to any assets
or properties used in its business or any
revenues derived therefrom other than in the
ordinary course of business;
(iii) Any general increase in any compensation or
benefits payable to any class or group of
employees of Argentys other than normal merit
increases or any increase in the compensation
payable or to become payable to any employees
whose total compensation after such increase
would exceed $50,000 per annum (collectively
"ARGENTYS KEY EMPLOYEES") or any bonus,
service, pension,
8
award, percentage compensation or other
benefit paid, granted or accrued to or for
the benefit of any Argentys Key Employee;
(iv) Any material adverse change in the working
capital, financial condition, assets,
liabilities, business or prospects of
Argentys;
(v) Any loan, advance, agreement, arrangement or
transaction between Argentys and any
employees of Argentys, except for
compensation at rates not exceeding the rates
of compensation in effect as of March 31,
2003 and advances made to employees of
Argentys for ordinary and customary business
expenses in reasonable amounts in the
ordinary course of such business consistent
with past practice;
(vi) Any sale, assignment or transfer of any of
the tangible assets used by Argentys in its
business, except for sales of inventories in
the ordinary course of business consistent
with past practice, or cancellation of any
debt or claim owing to or owed by Argentys;
(vii) Any sale, assignment, transfer or grant of
any license or sublicense with respect to any
patent, trademark, trade name, service ▇▇▇▇,
copyright, trade secret or other intangible
asset used or useful to Argentys in its
business, other than licenses granted to
customers in the ordinary course of business
consistent with past practice;
(viii) Any material change in the manner of business
or operations of Argentys;
(ix) Any material transaction except in the
ordinary course of business;
(x) Any acceleration of ▇▇▇▇▇▇▇▇ to customers of
Argentys, acceleration of any collections of
receivables in exchange for discounted
products or services or other consideration
or concessions or as a result of increased
efforts, failure to pay accounts payable of
Argentys in the ordinary course of business
or any change in the method of accounting or
accounting practice or policy of Argentys;
(xi) Any amendment or modification of any material
contract, agreement, franchise, permit, or
license; or
(xii) Any commitment (contingent or otherwise) to
do any of the foregoing.
2.7 INVENTORIES. All of Argentys' inventory reflected on the Argentys
Balance Sheet or thereafter acquired (and not subsequently sold in the ordinary
course of business) consist of items of a quality and quantity usable or
saleable in the ordinary course of business as first quality goods. Each item of
such inventory is valued on the Argentys Balance Sheet at the lower of cost or
market, by the first-in, first-out method. The inventories and supplies of
Argentys are
9
at normal and adequate levels for the continuation of such business in the
ordinary course. Argentys is not under any obligation or liability with respect
to accepting returns of items of inventory or merchandise in the possession of
its customers, other than in the ordinary course of business consistent with
past practice.
2.8 RECEIVABLES. All receivables (whether notes, accounts or otherwise)
of Argentys (a) have arisen only from bona fide transactions in the ordinary
course of business, (b) to the knowledge of Argentys represent valid
obligations, and (c) are owned by Argentys free of all claims. No discount or
allowance from any receivable has been made or agreed to, and none represents
▇▇▇▇▇▇▇▇ prior to actual sale of goods or provision of services.
2.9 TAXES. Except as set forth on SCHEDULE 2.9, all material Federal,
state, local and foreign tax returns and tax reports required to be filed by
Argentys on or before the date hereof have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed and all amounts shown as owing thereon have
been paid. All material taxes (including, without limitation, income,
accumulated earnings, property, sales, use, franchise, value added, employees'
income withholding and social security taxes) which have become due or payable
or required to be collected by Argentys or as otherwise attributable to any
periods ending on or before the date hereof and the Effective Time and all
interest and penalties thereon, whether disputed or not, have been paid or will
be paid in full on or prior to the Effective Time. Regarding employees of
Argentys, all deposits required by law to be made by Argentys with respect to
withholding taxes have been duly made, and as of the Effective Time all such
deposits will have been made. Except as reflected on the Argentys Balance Sheet,
Argentys is not on the date hereof, and will not be at the Effective Time,
liable for the payment of any taxes, and the Surviving Corporation shall have no
liability for any taxes related to the ownership or operation of the business
prior to the Effective Time. Argentys has not taken or failed to take any action
which action or failure to act could create any tax lien on any of its
properties or assets.
2.10 LITIGATION. Except as set forth on SCHEDULE 2.10, there is no (a)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
Argentys, threatened against Argentys, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding to which Argentys is a party, or (c) governmental inquiry pending or,
to the knowledge of Argentys, threatened in writing against Argentys. There are
no outstanding orders, writs, judgments, injunctions or decrees of any court,
governmental agency or arbitration tribunal against or naming Argentys. Argentys
is not in default with respect to any order, writ, injunction or decree naming
it from any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by Argentys pending or threatened against
others. To the knowledge of Argentys, there are no facts or circumstances which
may result in institution of any action, suit, claim or legal, administrative or
arbitration proceeding or investigation against Argentys with respect to its
business or the transactions contemplated hereby.
2.11 CERTAIN PRACTICES. Neither Argentys nor any of its officers or
employees have directly given or agreed in writing to give any significant
rebate, gift or similar benefit to any supplier, customer, governmental employee
or other person who was, is or may be in a position
10
to help or hinder Argentys with respect to its business or operations (or assist
in connection with any actual or proposed transaction) which (i) could subject
Argentys, Buyer or the Surviving Corporation to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, or (ii) if not
continued in the future, could have a material adverse effect on its business.
2.12 COMPLIANCE WITH LAW. To the knowledge of Argentys, Argentys is not
subject to any judgment, order, writ, injunction, or decree that materially
adversely affects, individually or in the aggregate, its business or its
operations, properties, assets or condition (financial or otherwise). With
respect to its business, Argentys has complied in all material respects with
all, and is not in material default under any, laws, ordinances, legal
requirements, rules, regulations and orders applicable to it, its operations,
properties, assets, products and services. There is no existing law, rule,
regulation or order, and Argentys is not aware of any proposed law, rule,
regulation or order, whether Federal or state, which would prohibit or
materially restrict the Surviving Corporation from, or otherwise materially
adversely affect the Surviving Corporation in, conducting such business in any
jurisdiction in which such business is now conducted.
2.13 LICENSES AND PERMITS. SCHEDULE 2.13 lists all material licenses,
permits, pending applications, consents, approvals and authorizations of or from
any public or governmental agency, used in the conduct of the business of
Argentys (collectively, the "ARGENTYS PERMITS") each of which will be duly and
validly transferred to the Surviving Corporation. Argentys has complied with all
conditions and requirements imposed by the Argentys Permits and Argentys has not
received any notice, and has no reason to believe, that any appropriate
authority intends to cancel or terminate any of the Argentys Permits or that
valid grounds for such cancellation or termination exist. Except as set forth on
SCHEDULE 2.13, no other material permits are necessary to operate the business
of Argentys. Argentys owns or has the right to use the Argentys Permits in
accordance with the terms thereof and such Argentys Permits are subject to no
claim, and each Argentys Permit is valid and in full force and effect, and will
not be terminated or adversely affected by the transactions contemplated hereby.
2.14 LABOR AND EMPLOYEE RELATIONS. Argentys is not is a party to or
bound by any collective bargaining agreement with any labor organization, group
or association covering any of its employees, and Argentys has no knowledge of
any attempt to organize any of its employees by any person, unit or group
seeking to act as their bargaining agent. There are no charges pending or, to
the knowledge of Argentys, threatened (by employees, their representatives or
governmental authorities) of unfair labor practices or of employment
discrimination or of any other wrongful action with respect to any aspect of
employment of any person employed or formerly employed by Argentys. To the
knowledge of Argentys, no union representation elections relating to employees
of Argentys have been scheduled by any governmental agency or authority, no
organizational effort is being made with respect to any of such employees, and
there is no investigation of Argentys' employment policies or practices by any
governmental agency or authority pending or, to the knowledge of Argentys,
threatened. Argentys is not currently, has not since its incorporation been,
involved in labor negotiations with any unit or group seeking to become the
bargaining unit for any employees of Argentys. Argentys has not experienced any
work stoppages since its incorporation, and to the knowledge of Argentys, no
work stoppage is planned.
11
2.15 CERTAIN EMPLOYEES. Set forth in SCHEDULE 2.15 is a list of the
names of Argentys' employees and consultants who perform work for Argentys,
together with the title or job classification of each such person and the base
annual and the total compensation paid in fiscal year 2003. Except as set forth
on SCHEDULE 2.15, none of such persons has an employment agreement with Argentys
which is not terminable on notice by Argentys without cost or other liability to
Argentys. No person listed on SCHEDULE 2.15 has indicated that he or she intends
to terminate his or her employment with Argentys or seek a material change in
his or her duties or status.
2.16 EMPLOYEE BENEFITS. Set forth on SCHEDULE 2.16 is a list of all
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance, fringe benefit, welfare and
other employee benefit plans, programs or arrangements to which employees of
Argentys may be entitled.
Each "Employee Welfare Benefit Plan" (as defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
covering any present or former employee of Argentys subject to the requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") has
complied with all requirements for continuation coverage under group health
benefit plans under COBRA and there are no claims against Argentys for a failure
or alleged failure to comply with the COBRA continuation requirements.
Each employee plan of Argentys which is subject to ERISA conforms
to, and its operation and administration are in compliance with, all applicable
requirements of ERISA. To Argentys' knowledge, there are no actions, suits or
claims pending (other than routine claims for benefits) or threatened against
any employee plan or against the assets of any employee plan of Argentys.
2.17 TANGIBLE PROPERTIES. SCHEDULE 2.17 contains a true and complete
list of all material tangible personal property owned by or leased to Argentys
(the "ARGENTYS TANGIBLE PERSONAL PROPERTY"). Argentys has good and marketable
title free and clear of all claims to the Argentys Tangible Personal Property
owned by Argentys. With respect to Argentys Tangible Personal Property leased by
Argentys as lessee, all leases, conditional sale contracts, franchises or
licenses pursuant to which Argentys may hold or use (or permit others to hold or
use) such Argentys Tangible Personal Property are valid and in full force and
effect, and there is not under any of such instruments any existing default or
event of default by Argentys or, to the knowledge of Argentys, by any third
party, or event which with notice or lapse of time or both would constitute such
a default. Possession and use of such property by Argentys has not been
disturbed and no claim has been asserted against Argentys adverse to its rights
in such leasehold interests. All Argentys Tangible Personal Property is adequate
and usable for the purposes for which it is currently used, is in good operating
condition, and has been properly maintained and repaired. Since the date of
incorporation of Argentys, there has not been any interruption of the operations
of the business of Argentys due to the condition of any of the Argentys Tangible
Personal Property.
12
2.18 OWNED PREMISES. There is no real estate owned by Argentys.
2.19 LEASED PREMISES. SCHEDULE 2.19 sets forth a true and complete list
and description of each parcel of real property leased by Argentys (the
"ARGENTYS LEASED PARCELS"). Each lease covering an Argentys Leased Parcel is in
full force and effect (there existing no default under any such lease which,
with the lapse of time or notice or otherwise, would entitle the lessor to
terminate the same), conveys the leased real estate purported to be conveyed
thereunder, is enforceable by Argentys and will be enforceable by the Surviving
Corporation in accordance with its terms. Argentys has the right to use the
Argentys Leased Parcels in accordance with the terms of such leases free and
clear of all claims or other interests or rights of third parties, except those
which do not or would not have a material adverse effect on the Argentys Leased
Parcels as used in its business. To the knowledge of Argentys, there are no
pending or threatened condemnation or similar proceedings or assessments
affecting any of the Argentys Leased Parcels, nor is any such condemnation or
assessment contemplated by any governmental authority.
2.20 INSURANCE. SCHEDULE 2.20 correctly describes (by type, carrier,
policy number, limits, premium, and expiration date) the insurance coverage
carried by Argentys.
2.21 OUTSTANDING COMMITMENTS. SCHEDULE 2.21 sets forth a description of
all material existing written or oral contracts, agreements, commitments,
licenses and franchises to which Argentys is a party (the "ARGENTYS
AGREEMENTS"). Argentys has delivered to Buyer true, correct and complete copies
of all of the Argentys Agreements specified on SCHEDULE 2.21. Except as set
forth on SCHEDULE 2.21, Argentys has paid in full all amounts due from Argentys
as of the date hereof under each Argentys Agreement identified in SCHEDULE 2.21
and as of the Effective Time will have satisfied in full all of its liabilities
and obligations thereunder due in the ordinary course of business prior to the
Effective Time. All of the Argentys Agreements described in SCHEDULE 2.21 are in
full force and effect. Argentys and, to the knowledge of Argentys, each other
party thereto have performed all the obligations required to be performed by
them to date, have received no notice of default and are not in default (with
due notice or lapse of time or both) under any Argentys Agreement. Argentys has
no a present expectation or intention of not fully performing all its
obligations under each Argentys Agreement, and Argentys has no knowledge of any
breach or anticipated breach by the other party to any contract or commitment to
which Argentys is a party. None of such Argentys Agreements has been terminated,
no written notice has been given by any party thereto of any alleged default by
any party thereunder, and Argentys is not aware of any intention or right of any
party to default another party to any such Argentys Agreement. There exists no
actual or, to the knowledge of Argentys, threatened termination, cancellation or
material limitation of the business relationship of Argentys with any party to
any such Argentys Agreement.
2.22 INTELLECTUAL PROPERTY.
(a) As used in this Agreement, the capitalized term "INTELLECTUAL
PROPERTY" shall mean trademarks, service marks, trade names, trade dress, logos,
symbols, designs, slogans and registrations and applications therefor (and all
interest therein), and general intangibles of like nature (collectively,
"TRADEMARKS"); patents and patent applications, (including any registrations,
continuations, continuations in part, divisionals, reissues, and renewals for
any of the foregoing) (collectively, "PATENTS"); copyrights (including any
registrations, applications and renewals) (collectively, "COPYRIGHTS"); computer
programs and other computer software,
13
including source codes, object codes, related documentation and instructions;
databases; domain names; marketing materials; trade secrets and other
confidential information, including know-how, proprietary technologies,
processes, formulae, algorithms, models, customer lists, inventions,
methodologies, architectures, development tools, templates (collectively, "TRADE
SECRETS"); and all documentation and media constituting, describing or relating
to the foregoing.
(b) SCHEDULE 2.22 sets forth a complete and accurate list of all
(a) Trademarks; (b) domain name registrations; (c) registered Copyrights
indicating for each the applicable jurisdiction, registration number (or
application number), and date issued (or date filed); (d) registered Patents
indicating for each the registration number (or application number), and date
issued (or date filed); and (e) Software (as defined below), in each case owned
by Argentys.
(c) All registrations of Copyrights, Patents and Trademarks that
are part of the Intellectual Property owned by Argentys have been maintained in
compliance with all legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications with
respect to such Trademarks), are valid and enforceable, and are not subject to
any maintenance fees or actions falling due within ninety (90) days after the
Effective Time. To the knowledge of Argentys, there are no conflicting
Copyrights, Patents or Trademarks of any third party.
(d) SCHEDULE 2.22 sets forth a complete and accurate list of all
material license agreements granting any right to use or practice any rights
under any Intellectual Property, whether Argentys is the licensee or licensor
thereunder, and any assignments, consents, term, forbearances to ▇▇▇, judgments,
orders, settlements or similar obligations relating to any Intellectual Property
to which Argentys is a party or otherwise bound (collectively, the "ARGENTYS
LICENSE AGREEMENTS"), indicating for each the title, the parties, date executed,
whether or not it is exclusive and the Intellectual Property covered thereby.
The Argentys License Agreements are valid and binding obligations of Argentys,
enforceable in accordance with their terms, and there exists no event or
condition which will result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default by Argentys under any
such Argentys License Agreement.
(e) No royalties, honoraria or other fees are payable to any third
parties on SCHEDULE 2.22.
(f) Argentys owns, free and clear of all claims and encumbrances,
or has a valid and enforceable right to use, all Intellectual Property used by
it in the conduct of its business.
(g) Argentys has taken commercially reasonable efforts to protect
its Intellectual Property, including all reasonable steps to protect its
Intellectual Property from third party infringement. To the knowledge of
Argentys, all of such Intellectual Property is valid and enforceable and no
third party has challenged the ownership, use, validity or enforceability of any
of such Intellectual Property, except where such invalidity and unenforceability
would not have a material adverse effect.
14
(h) To the knowledge of Argentys, the conduct of Argentys' business
as currently conducted does not infringe upon any Intellectual Property rights
of any third party. Argentys has not been notified by any third party of any
allegation that Argentys' activities or the conduct of its business infringes
upon, violates or constitutes the unauthorized use of the Intellectual Property
rights of any third party.
(i) There is no litigation pending or, to the knowledge of
Argentys, threatened alleging that Argentys' conduct of its business infringes
upon, violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party nor has any third party brought or, to the knowledge
of Argentys, threatened any litigation challenging the ownership, use, validity
or enforceability of any Intellectual Property of Argentys.
(j) To the knowledge of Argentys, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
of Argentys and no such claims have been brought against any third party by
Argentys.
(k) The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of the Surviving
Corporation's right to own or use any of the Intellectual Property of Argentys,
nor will the approval of any governmental authority or third party in respect of
the transfer of any such Intellectual Property be required.
(l) SCHEDULE 2.22 lists all Software (as defined below) (other than
off-the-shelf software applications programs having an acquisition price of less
than $5,000) which is owned, licensed to or by Argentys, leased to or by
Argentys, or otherwise used by Argentys, and identifies which Software is owned,
licensed, leased or otherwise used, as the case may be. SCHEDULE 2.22 lists all
Software sold, licensed, leased or otherwise distributed by Argentys to any
third party, and identifies which Software is sold, licensed, leased, or
otherwise distributed as the case may be. The Software set forth in SCHEDULE
2.22 which Argentys purports to own was either developed (i) by employees of
Argentys or any of its subsidiaries within the scope of their employment; (ii)
by independent contractors who have assigned their rights to Argentys pursuant
to enforceable written agreements; or (iii) by third parties and irrevocably
assigned to Argentys.
For purposes of this Agreement, "SOFTWARE" means any and all of the
following that form a part of the Intellectual Property (i) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, (iv)
the technology supporting any internet site(s), and (v) all documentation,
including user manuals and training materials, relating to any of the foregoing.
(m) All Trademarks that are part of Argentys' Intellectual Property
have been in continuous use by Argentys. To the knowledge of Argentys, there has
been no prior use of such Trademarks or other action taken by any third party
which would confer upon said third party superior rights in such Trademarks.
15
(n) The Copyrights that are part of Argentys' Intellectual Property
relate to works of authorship (i) created by employees of Argentys within the
scope of their employment or independent contractors who have assigned their
rights to Argentys pursuant to enforceable written agreements, or (ii) acquired
from the original author(s) or subsequent assignees. To the knowledge of
Argentys, the works covered by its Copyrights were not copies of nor derived
from any work for which Argentys does not own the Copyrights, and no third party
has any claim to authorship or ownership of any part thereof.
(o) Argentys has and enforces a policy of requiring each employee,
consultant, contractor and potential business partner or investor who will
receive access to any Trade Secrets to execute proprietary information,
confidentiality and assignment agreements substantially consistent with
Argentys' standard forms thereof (complete and current copies of which have been
delivered to Buyer). Except under confidentiality obligations, there has been no
material disclosure of Argentys confidential information or Trade Secrets.
(p) Argentys has a valid registration for the domain name
"▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇." To the knowledge of Argentys, Argentys' registration of such
domain name is free and clear of any claims and is in full force and effect.
Argentys has paid all fees required to maintain such registration through the
period ending ninety (90) days after the Effective Time. None of Argentys'
registrations or use of the domain name has been disturbed or placed "on hold"
and no claim (oral or written) has been asserted against Argentys adverse to its
rights to such domain name.
2.23 PROPRIETARY INFORMATION OF THIRD PARTIES. To the knowledge of
Argentys, no third party has claimed or has reason to claim that any person
employed by or affiliated with Argentys has (a) violated or may be violating any
of the terms or conditions of such person's employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
Argentys which suggests that such a claim might be contemplated. To the
knowledge of Argentys, no person employed by or affiliated with Argentys has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer and, no person employed by or
affiliated with Argentys has violated any confidential relationship which such
person may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
sale of any service or proposed service of Argentys, and Argentys has no reason
to believe there will be any such employment or violation. To the knowledge of
Argentys, neither the execution or delivery of this Agreement, nor the carrying
on of the business of Argentys as officers, employees or agents by any officer,
director, employee or consultant of Argentys, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any such person is obligated.
2.24 GOVERNMENTAL APPROVALS. Except for the filing of the Certificate
of Merger or as explicitly set forth in SCHEDULE 2.24, no registration or filing
with, or consent or approval of or
16
other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by Argentys of this Agreement.
2.25 DISCLOSURE. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which made, not misleading.
2.26 ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, the following terms shall have the
meanings set forth below:
(i) "ENVIRONMENT" means surface waters,
groundwaters, soil, subsurface strata and
air.
(ii) "ENVIRONMENTAL CLAIMS" means any and all
administrative, regulatory or judicial
actions or proceedings, suits, demands,
demand letters, claims, liens, notices of
non-compliance or violation, investigations,
consent orders, consent judgments or consent
agreements relating in any way to any
Environmental Law or any Environmental Permit
(hereafter in this definition, "claims"),
including, without limitation, (a) any and
all claims by governmental authorities
pursuant to any Environmental Law, and (b)
any and all claims by any person seeking
damages, contribution, indemnification, cost
recovery, compensation or injunctive relief
pursuant to any Environmental Law or relating
to Hazardous Materials or arising from any
alleged injury or threat of injury to health,
safety or the environment.
(iii) "ENVIRONMENTAL CONDITION" means a condition
relating to or arising or resulting from the
application of, or a failure to comply with,
any Environmental Law or Environmental Permit
or a release or threat of release of any
Hazardous Material into the Environment.
(iv) "ENVIRONMENTAL LAW" shall mean any law
pertaining to: (i) the protection of health,
safety and the indoor or outdoor environment;
(ii) the conservation, management or use of
natural resources and wildlife; (iii) the
protection or use of surface water and ground
water; (iv) the management, manufacture,
possession, presence, use, generation,
transportation, treatment, storage, disposal,
emission, discharge, release, threatened
release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous
Material; or (v) pollution (including any
emission, discharge or release to air, land,
surface water and ground water); and
includes, without limitation, the
Comprehensive
17
Environmental, Response, Compensation, and
Liability Act of 1980, as amended, and the
Regulations promulgated thereunder and the
Solid Waste Disposal Act, as amended, 42
U.S.C. ▇▇.▇▇. 6901 et seq.
(v) "ENVIRONMENTAL PERMITS" means all permits
required under any applicable Environmental
Law.
(vi) "HAZARDOUS MATERIAL" shall mean any
substance, chemical, compound, product,
solid, gas, liquid, waste, by-product,
pollutant, contaminant or material regulated
under any Environmental Law, and includes
without limitation, asbestos or any substance
containing asbestos, polychlorinated
biphenyls and petroleum (including crude oil
or any fraction thereof).
(b) Except as described in SCHEDULE 2.26, to the knowledge of
Argentys, and except as would not, individually or in the aggregate, have a
material adverse effect: (i) Argentys has obtained all Environmental Permits
which are required under Environmental Laws; (ii) Argentys is in full compliance
with all terms and conditions of such Environmental Permits; (iii) Argentys is
in full compliance with all Environmental Laws and/or any Environmental Claim
applicable to Argentys; (iv) as of the date hereof, there has not been any
Environmental Condition or any other event, condition, circumstance, activity,
practice, incident, action or plan which is reasonably likely to interfere with
or prevent continued compliance with the terms of such Environmental Permits or
which could reasonably be expected to give rise to any liability pursuant to any
Environmental Law with respect to Argentys, or, otherwise form the basis of any
Environmental Claim against Argentys; and (v) Argentys has taken all actions
necessary under any Environmental Law to register any products or materials
required to be registered by Argentys (or any of its agents) thereunder. Except
as set forth in SCHEDULE 2.26, there is no Environmental Claim pending or, to
the knowledge of Argentys, threatened against Argentys relating in any way to
any Environmental Condition or Environmental Laws or any code, plan, order,
notice or demand letter issued, entered, promulgated or approved thereunder.
2.27 CUSTOMERS. Listed in SCHEDULE 2.27 are the names and addresses of
the twenty (20) most significant customers (by revenue) of Argentys for the
six-month period ended March 31, 2003 and the amount for which each such
customer was invoiced during such period. Except as disclosed in SCHEDULE 2.27,
Argentys has not received any notice or has any reason to believe that any
significant customer listed on SCHEDULE 2.27 has ceased, or will cease, to use
the products, equipment, goods or services or has substantially reduced, or will
substantially reduce, the use of such products, equipment, goods or services at
any time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, each Shareholder hereby
represents and warrants to Buyer as follows:
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3.1 INVESTMENT. Such Shareholder is acquiring the Merger Consideration
for investment for its or his own account and not with a view to the
distribution or public offering thereof within the meaning of the Securities
Act.
3.2 NO REGISTRATION. Such Shareholder understands that the Merger
Consideration has not been registered under the Securities Act and may not be
sold or transferred without such registration or an exemption therefrom.
3.3 SOPHISTICATION. Such Shareholder is sufficiently experienced in
financial and business matters to be capable of evaluating the risk of
investment in the Merger Consideration and to make an informed decision relating
thereto.
3.4 FINANCIAL CAPABILITY. Such Shareholder has the financial capability
for making the investment decision described herein, can afford a complete loss
of the investment, and the investment is a suitable one for each such party.
3.5 "ACCREDITED INVESTOR". Such Shareholder is an "accredited investor"
as defined in Regulation D under the Securities Act.
3.6 ACCESS. Prior to the execution and delivery of this Agreement, such
Shareholder has had the opportunity to ask questions of and receive answers from
representatives of Buyer.
3.7 RESIDENCE. Such Shareholder is a resident of the state set forth
opposite his, her or its name on SCHEDULE 3.7.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Argentys and the Shareholders as
follows:
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; CAPITALIZATION.
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction listed on SCHEDULE 4.1(A), such
jurisdictions being the only jurisdictions in which the nature of Buyer's
business or the character of the properties owned or leased by Buyer with
respect to such business requires such licensing or qualification, except where
the failure to be so qualified would not have a material adverse effect on
Buyer.
(b) Buyer does not have any Subsidiaries, whether direct or
indirect.
(c) The authorized capital stock of Buyer is as set forth on
SCHEDULE 4.1(C). The number of shares of each class of capital stock of Buyer
(the "BUYER SHARES") issued and
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outstanding or held in treasury as of the date hereof are as set forth on
SCHEDULE 4.1(C). All Buyer Shares are, and all Buyer Shares subject to issuance
under outstanding options, warrants or convertible securities are, duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, Buyer's certificate
of incorporation or bylaws or any agreement to which Buyer is a party or by
which it is otherwise bound. All of the issued and outstanding securities of
Buyer have been offered, issued and sold by Buyer in compliance in all material
respects with applicable Federal and state securities laws.
(d) Except as set forth on SCHEDULE 4.1(D): (i) there are no
issued, reserved for issuance or outstanding subscriptions, options, warrants,
puts, calls, rights, exchangeable or convertible securities or other
commitments, obligations or agreements of any kind or character (oral or
written, contingent or otherwise) to purchase or acquire from Buyer any shares
of capital stock or other securities of Buyer, (ii) Buyer has no obligation
(direct or indirect, contingent or otherwise) to issue any such subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments, obligations or agreements of any kind or character (oral
or written, contingent or otherwise), (iii) Buyer has no obligation to issue or
distribute to holders of any shares of its capital stock or other securities any
evidences of indebtedness or assets of Buyer, (iv) Buyer has no obligation
(direct or indirect, contingent or otherwise) to purchase, redeem or otherwise
acquire, or cause to be purchased, redeemed or otherwise acquired, any shares of
capital stock or other securities of Buyer or any interest therein or to pay any
dividend or make any other distribution in respect thereof; (v) there are no
bonds, debentures, notes or other indebtedness of Buyer with voting rights (or
convertible into, or exchangeable for, securities with voting rights) on any
matters on which shareholders of Buyer may vote and (vi) no other shares of
capital stock or other securities of Buyer are issued, reserved for issuance or
outstanding.
(e) True and complete copies of all agreements and instruments
relating to or issued under any Buyer equity incentive plan ("BUYER STOCK
PLANS") have been made available to Argentys, and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements, oral or written, to amend, modify or supplement such agreements or
instruments. SCHEDULE 4.1(E) sets forth the number of shares of capital stock
reserved for issuance pursuant to the Buyer Stock Plans and the maximum number
of shares of capital stock or securities of Buyer to be issued upon the exercise
of all outstanding options, warrants or similar rights or the conversion of
convertible securities.
(f) To the knowledge of Buyer, except as set forth in SCHEDULE
4.1(F), there are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of or other
securities of Buyer.
4.2 CORPORATE POWER AND AUTHORITY. Buyer has the corporation power and
authority to own and hold its properties and to carry on its business as
presently conducted and as currently intended to be conducted. Buyer has the
corporate power and authority to execute, deliver and perform this Agreement and
the other documents and instruments contemplated hereby. The execution, delivery
and performance of this Agreement and the documents
20
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by Buyer. The issuance, sale
and delivery of the Buyer Series A Preferred Shares in accordance with this
Agreement have been, or will be prior to the Effective Time, duly authorized by
all necessary corporate action on the part of Buyer. This Agreement, and each of
the other agreements, documents and instruments to be executed and delivered by
Buyer have been duly executed and delivered by, and constitute the legal, valid
and binding obligation of, Buyer enforceable against Buyer in accordance with
their terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 VALIDITY, ETC. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, the consummation of
the transactions contemplated hereby or thereby, nor the performance of this
Agreement and such other agreements in compliance with the terms and conditions
hereof and thereof will (i) conflict with or result in any breach of any trust
agreement, certificate of incorporation, bylaw, judgment, decree, order, statute
or regulation applicable to Buyer, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except for the filing of the Certificate of Merger and
except as set forth in SCHEDULE 4.3, (iii) violate, conflict with or result in a
breach, default or termination or give rise to any right of termination,
cancellation or acceleration of the maturity of any payment date of any of the
obligations of Buyer or increase or otherwise affect the obligations of Buyer
under any law, rule, regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
material mortgage, indenture, note, license, agreement or other instrument or
obligation applicable to Buyer or to Buyer's ability to consummate the
transactions contemplated hereby or thereby, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing and provided to Argentys, or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Buyer.
4.4 FINANCIAL STATEMENTS. Buyer has previously furnished to Argentys,
and attached hereto as SCHEDULE 4.4 are, the unaudited balance sheet relating to
Buyer as at December 31, 2002 (the "BUYER BALANCE SHEET"), and the related
unaudited statements of income and cash flow and notes thereto for the fiscal
year ended December 31, 2002. In addition, Buyer has previously furnished to
Argentys, and attached hereto as SCHEDULE 4.4 is, the balance sheet relating to
Buyer as at December 31, 2001, and the related statements of income and cash
flow and notes thereto for the fiscal year ended December 31, 2001. All such
financial statements for Buyer (collectively, the "BUYER FINANCIAL STATEMENTS")
have been prepared in accordance with generally accepted accounting principles
consistently applied and were prepared from the books and records of Buyer,
which books and records are complete and correct in all material respects. The
Buyer Financial Statements fairly present the financial position of Buyer as of
the dates thereof and the results of its operations and cash flows for the
periods ended on the dates thereof. The Buyer Financial Statements reflect
reserves appropriate and adequate for all known material liabilities and
reasonably anticipated losses as required by generally accepted accounting
principles.
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4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent of
the amounts specifically reflected or reserved against in the Buyer Balance
Sheet, Buyer does not have any liabilities or obligations of any nature
whatsoever, due or to become due, accrued, absolute, contingent or otherwise,
except for liabilities and obligations incurred in the ordinary course of
business and consistent with past practice.
4.6 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS. Since December 31,
2002, there has been no material adverse change in the business of Buyer and
there is no condition or development or contingency of any kind existing which,
so far as reasonably can be foreseen by Buyer, may result in any such material
adverse change. Without limiting the foregoing, except as disclosed on SCHEDULE
4.6, since December 31, 2002 there has not been, occurred or arisen:
(i) Any damage, destruction or loss to any asset
(whether or not covered by insurance) that,
individually or in the aggregate, would have
a material adverse effect on the business or
prospects of Buyer;
(ii) Any change in the business or operations of
Buyer or in the manner of conducting such
business or sale or other disposition of any
right, title or interest in or to any assets
or properties used in its business or any
revenues derived therefrom other than in the
ordinary course of business;
(iii) Any general increase in any compensation or
benefits payable to any class or group of
employees of Buyer other than normal merit
increases or any increase in the compensation
payable or to become payable to any employees
whose total compensation after such increase
would exceed $50,000 per annum (collectively
"BUYER KEY EMPLOYEES") or any bonus, service,
pension, award, percentage compensation or
other benefit paid, granted or accrued to or
for the benefit of any Buyer Key Employee;
(iv) Any material adverse change in the working
capital, financial condition, assets,
liabilities, business or prospects of Buyer;
(v) Any loan, advance, agreement, arrangement or
transaction between Buyer and any employees
of Buyer, except for compensation at rates
not exceeding the rates of compensation in
effect as of December 31, 2002 and advances
made to employees of Buyer for ordinary and
customary business expenses in reasonable
amounts in the ordinary course of such
business consistent with past practice;
(vi) Any sale, assignment or transfer of any of
the tangible assets used by Buyer in its
business, except for sales of inventories in
the ordinary course of business consistent
with past practice, or cancellation of any
debt or claim owing to or owed by Buyer;
22
(vii) Any sale, assignment, transfer or grant of
any license or sublicense with respect to any
patent, trademark, trade name, service ▇▇▇▇,
copyright, trade secret or other intangible
asset used or useful to Buyer in its
business, other than licenses granted to
customers in the ordinary course of business
consistent with past practice;
(viii) Any material change in the manner of business
or operations of Buyer;
(ix) Any material transaction except in the
ordinary course of business;
(x) Any acceleration of ▇▇▇▇▇▇▇▇ to customers of
Buyer, acceleration of any collections of
receivables in exchange for discounted
products or services or other consideration
or concessions or as a result of increased
efforts, failure to pay accounts payable of
Buyer in the ordinary course of business or
any change in the method of accounting or
accounting practice or policy of Buyer;
(xi) Any amendment or modification of any material
contract, agreement, franchise, permit, or
license; or
(xii) Any commitment (contingent or otherwise) to
do any of the foregoing.
4.7 INVENTORIES. All of Buyer's inventory reflected on the Buyer
Balance Sheet or thereafter acquired (and not subsequently sold in the ordinary
course of business) consist of items of a quality and quantity usable or
saleable in the ordinary course of business as first quality goods. Each item of
such inventory is valued on the Buyer Balance Sheet at the lower of cost or
market, by the first-in, first-out method. The inventories and supplies of Buyer
are at normal and adequate levels for the continuation of such business in the
ordinary course. Buyer is not under any obligation or liability with respect to
accepting returns of items of inventory or merchandise in the possession of its
customers, other than in the ordinary course of business consistent with past
practice.
4.8 RECEIVABLES. All receivables (whether notes, accounts or otherwise)
of Buyer (a) have arisen only from bona fide transactions in the ordinary course
of business, (b) to the knowledge of Buyer represent valid obligations, and (c)
are owned by Buyer free of all claims. No discount or allowance from any
receivable has been made or agreed to, and none represents ▇▇▇▇▇▇▇▇ prior to
actual sale of goods or provision of services.
4.9 TAXES. All material Federal, state, local and foreign tax returns
and tax reports required to be filed by Buyer on or before the date hereof have
been timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed and all
amounts shown as owing thereon have been paid. All material taxes (including,
without limitation, income, accumulated earnings, property, sales, use,
franchise, value added, employees' income withholding and social security taxes)
which have become due or payable or required to be collected by Buyer or as
otherwise attributable to any periods ending on or before the date hereof and
the Effective Time and all interest and penalties thereon,
23
whether disputed or not, have been paid or will be paid in full on or prior to
the Effective Time. Regarding employees of Buyer, all deposits required by law
to be made by Buyer with respect to withholding taxes have been duly made, and
as of the Effective Time all such deposits will have been made. Except as
reflected on the Buyer Balance Sheet, Buyer is not on the date hereof, and will
not be, at the Effective Time, liable for the payment of any taxes, and the
Surviving Corporation shall have no liability for any taxes related to the
ownership or operation of the business prior to the Effective Time. Buyer has
not taken or failed to take any action which action or failure to act could
create any tax lien on any of its properties or assets.
4.10 LITIGATION. Except as set forth on SCHEDULE 4.10, there is no (a)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
Buyer, threatened against Buyer, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding to which Buyer is a party, or (c) governmental inquiry pending or, to
the knowledge of Buyer, threatened in writing against Buyer. There are no
outstanding orders, writs, judgments, injunctions or decrees of any court,
governmental agency or arbitration tribunal against or naming Buyer. Buyer is
not in default with respect to any order, writ, injunction or decree naming it
from any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by Buyer pending or threatened against
others. To the knowledge of Buyer, there are no facts or circumstances which may
result in institution of any action, suit, claim or legal, administrative or
arbitration proceeding or investigation against Buyer with respect to its
business or the transactions contemplated hereby.
4.11 CERTAIN PRACTICES. Neither Buyer nor any of its officers or
employees have directly given or agreed in writing to give any significant
rebate, gift or similar benefit to any supplier, customer, governmental employee
or other person who was, is or may be in a position to help or hinder Buyer with
respect to its business or operations (or assist in connection with any actual
or proposed transaction) which (i) could subject Buyer or the Surviving
Corporation to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (ii) if not continued in the future, could have a
material adverse effect on its business.
4.12 COMPLIANCE WITH LAW. To the knowledge of Buyer, Buyer is not
subject to any judgment, order, writ, injunction, or decree that materially
adversely affects, individually or in the aggregate, its business or its
operations, properties, assets or condition (financial or otherwise). With
respect to its business, Buyer has complied in all material respects with all,
and is not in material default under any, laws, ordinances, legal requirements,
rules, regulations and orders applicable to it, its operations, properties,
assets, products and services. There is no existing law, rule, regulation or
order, and Buyer is not aware of any proposed law, rule, regulation or order,
whether Federal or state, which would prohibit or materially restrict the
Surviving Corporation from, or otherwise materially adversely affect the
Surviving Corporation in, conducting such business in any jurisdiction in which
such business is now conducted.
4.13 LICENSES AND PERMITS. SCHEDULE 4.13 lists all material licenses,
permits, pending applications, consents, approvals and authorizations of or from
any public or governmental agency, used in the conduct of the business of Buyer
(collectively, the "BUYER PERMITS") each of which will be duly and validly
transferred to the Surviving Corporation. Buyer has complied
24
with all conditions and requirements imposed by the Buyer Permits and Buyer has
not received any notice, and has no reason to believe, that any appropriate
authority intends to cancel or terminate any of the Buyer Permits or that valid
grounds for such cancellation or termination exist. Except as set forth on
SCHEDULE 4.13, no other material permits are necessary to operate the business
of Buyer. Buyer owns or has the right to use the Buyer Permits in accordance
with the terms thereof and such Buyer Permits are subject to no claim, and each
Buyer Permit is valid and in full force and effect, and will not be terminated
or adversely affected by the transactions contemplated hereby.
4.14 LABOR AND EMPLOYEE RELATIONS. Buyer is not is a party to or bound
by any collective bargaining agreement with any labor organization, group or
association covering any of its employees, and Buyer has no knowledge of any
attempt to organize any of its employees by any person, unit or group seeking to
act as their bargaining agent. There are no charges pending or, to the knowledge
of Buyer, threatened (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by Buyer. To the knowledge of Buyer, no union
representation elections relating to employees of Buyer have been scheduled by
any governmental agency or authority, no organizational effort is being made
with respect to any of such employees, and there is no investigation of Buyer's
employment policies or practices by any governmental agency or authority pending
or, to the knowledge of Buyer, threatened. Buyer is not currently, has not since
its incorporation been, involved in labor negotiations with any unit or group
seeking to become the bargaining unit for any employees of Buyer. Buyer has not
experienced any work stoppages since its incorporation, and to the knowledge of
Buyer, no work stoppage is planned.
4.15 CERTAIN EMPLOYEES. Set forth in SCHEDULE 4.15 is a list of the
names of Buyer's employees and consultants who perform work for Buyer, together
with the title or job classification of each such person and the base annual and
the total compensation anticipated to be paid in fiscal year 2003. Except as set
forth on SCHEDULE 4.15, none of such persons has an employment agreement with
Buyer which is not terminable on notice by Buyer without cost or other liability
to Buyer. No person listed on SCHEDULE 4.15 has indicated that he or she intends
to terminate his or her employment with Buyer or seek a material change in his
or her duties or status.
4.16 EMPLOYEE BENEFITS. Set forth on SCHEDULE 4.16 is a list of all
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance, fringe benefit, welfare and
other employee benefit plans, programs or arrangements to which employees of
Buyer may be entitled.
Each "Employee Welfare Benefit Plan" (as defined in Section 3(1) of
ERISA) covering any present or former employee of Buyer subject to the
requirements of COBRA has complied with all requirements for continuation
coverage under group health benefit plans under COBRA and there are no claims
against Buyer for a failure or alleged failure to comply with the COBRA
continuation requirements.
25
Each employee plan of Buyer which is subject to ERISA conforms to,
and its operation and administration are in compliance with, all applicable
requirements of ERISA. To Buyer's knowledge, there are no actions, suits or
claims pending (other than routine claims for benefits) or threatened against
any employee plan or against the assets of any employee plan of Buyer.
4.17 TANGIBLE PROPERTIES. SCHEDULE 4.17 contains a true and complete
list of all material tangible personal property owned by or leased to Buyer (the
"BUYER TANGIBLE PERSONAL PROPERTY"). Buyer has good and marketable title free
and clear of all claims to the Buyer Tangible Personal Property. With respect to
Buyer Tangible Personal Property leased by Buyer as lessee, all leases,
conditional sale contracts, franchises or licenses pursuant to which Buyer may
hold or use (or permit others to hold or use) such Buyer Tangible Personal
Property are valid and in full force and effect, and there is not under any of
such instruments any existing default or event of default by Buyer or, to the
knowledge of Buyer, by any third party, or event which with notice or lapse of
time or both would constitute such a default. Possession and use of such
property by Buyer has not been disturbed and no claim has been asserted against
Buyer adverse to its rights in such leasehold interests. All Buyer Tangible
Personal Property is adequate and usable for the purposes for which it is
currently used, is in good operating condition, and has been properly maintained
and repaired. Since the date of incorporation of Buyer, there has not been any
interruption of the operations of the business of Buyer due to the condition of
any of the Buyer Tangible Personal Property.
4.18 OWNED PREMISES. There is no real estate owned by Buyer.
4.19 LEASED PREMISES. SCHEDULE 4.19 sets forth a true and complete list
and description of each parcel of real property leased by Buyer (the "BUYER
LEASED PARCELS"). Each lease covering a Buyer Leased Parcel is in full force and
effect (there existing no default under any such lease which, with the lapse of
time or notice or otherwise, would entitle the lessor to terminate the same),
conveys the leased real estate purported to be conveyed thereunder, is
enforceable by Buyer and will be enforceable by the Surviving Corporation in
accordance with its terms. Buyer has the right to use the Buyer Leased Parcels
in accordance with the terms of such leases free and clear of all claims or
other interests or rights of third parties, except those which do not or would
not have a material adverse effect on the Buyer Leased Parcels as used in its
business. To the knowledge of Buyer, there are no pending or threatened
condemnation or similar proceedings or assessments affecting any of the Buyer
Leased Parcels, nor is any such condemnation or assessment contemplated by any
governmental authority.
4.20 INSURANCE. SCHEDULE 4.20 correctly describes (by type, carrier,
policy number, limits, premium, and expiration date) the insurance coverage
carried by Buyer.
4.21 OUTSTANDING COMMITMENTS. SCHEDULE 4.21 sets forth a description of
all material existing written or oral contracts, agreements, commitments,
licenses and franchises to which Buyer is a party (the "BUYER AGREEMENTS").
Buyer has made available to Argentys true, correct and complete copies of all of
the Buyer Agreements specified on SCHEDULE 4.21. Except as set forth on SCHEDULE
4.21, Buyer has paid in full all amounts due from Buyer as of the date hereof
under each Buyer Agreement identified in SCHEDULE 4.21 and as of the Effective
Time will have satisfied in full all of its liabilities and obligations
thereunder due in the ordinary course of
26
business prior to the Effective Time. All of the Buyer Agreements described in
SCHEDULE 4.21 are in full force and effect. Buyer and, to the knowledge of
Buyer, each other party thereto have performed all the obligations required to
be performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any Buyer Agreement.
Buyer has no a present expectation or intention of not fully performing all its
obligations under each Buyer Agreement, and Buyer has no knowledge of any breach
or anticipated breach by the other party to any contract or commitment to which
Buyer is a party. None of such Buyer Agreements has been terminated, no written
notice has been given by any party thereto of any alleged default by any party
thereunder, and Buyer is not aware of any intention or right of any party to
default another party to any such Buyer Agreement. There exists no actual or, to
the knowledge of Buyer, threatened termination, cancellation or material
limitation of the business relationship of Buyer with any party to any such
Buyer Agreement.
4.22 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.22 sets forth a complete and accurate list of all
(a) Trademarks; (b) domain name registrations; (c) registered Copyrights
indicating for each the applicable jurisdiction, registration number (or
application number), and date issued (or date filed); (d) registered Patents
indicating for each the registration number (or application number), and date
issued (or date filed); and (e) Software, in each case owned by Buyer.
(b) All registrations of Copyrights, Patents and Trademarks that
are part of the Intellectual Property owned by Buyer have been maintained in
compliance with all legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications with
respect to such Trademarks), are valid and enforceable, and are not subject to
any maintenance fees or actions falling due within ninety (90) days after the
Effective Time. To the knowledge of Buyer, there are no conflicting Copyrights,
Patents or Trademarks of any third party.
(c) SCHEDULE 4.22 sets forth a complete and accurate list of all
material license agreements granting any right to use or practice any rights
under any Intellectual Property, whether Buyer is the licensee or licensor
thereunder, and any assignments, consents, term, forbearances to ▇▇▇, judgments,
orders, settlements or similar obligations relating to any Intellectual Property
to which Buyer is a party or otherwise bound (collectively, the "BUYER LICENSE
AGREEMENTS"), indicating for each the title, the parties, date executed, whether
or not it is exclusive and the Intellectual Property covered thereby. The Buyer
License Agreements are valid and binding obligations of Buyer, enforceable in
accordance with their terms, and there exists no event or condition which will
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default by Buyer under any such Buyer License
Agreement.
(d) Except as set forth on SCHEDULE 4.22, no royalties, honoraria
or other fees are payable to any third parties on SCHEDULE 4.22.
(e) Buyer owns, free and clear of all claims and encumbrances, or
has a valid and enforceable right to use, all Intellectual Property used by it
in the conduct of its business.
27
(f) Buyer has taken commercially reasonable efforts to protect its
Intellectual Property, including all reasonable steps to protect its
Intellectual Property from third party infringement. To the knowledge of Buyer,
all of such Intellectual Property is valid and enforceable and no third party
has challenged the ownership, use, validity or enforceability of any of such
Intellectual Property, except where such invalidity and unenforceability would
not have a material adverse effect.
(g) To the knowledge of Buyer, the conduct of Buyer's business as
currently conducted does not infringe upon any Intellectual Property rights of
any third party. Buyer has not been notified by any third party of any
allegation that Buyer's activities or the conduct of its business infringes
upon, violates or constitutes the unauthorized use of the Intellectual Property
rights of any third party.
(h) There is no litigation pending or, to the knowledge of Buyer,
threatened alleging that Buyer's conduct of its business infringes upon,
violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party nor has any third party brought or, to the knowledge
of Buyer, threatened any litigation challenging the ownership, use, validity or
enforceability of any Intellectual Property of Buyer.
(i) To the knowledge of Buyer, no third party is misappropriating,
infringing, diluting, or violating any Intellectual Property of Buyer and no
such claims have been brought against any third party by Buyer.
(j) The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of the Surviving
Corporation's right to own or use any of the Intellectual Property of Buyer, nor
will the approval of any governmental authority or third party in respect of the
transfer of any such Intellectual Property be required.
(k) SCHEDULE 4.22 lists all Software (other than off-the-shelf
software applications programs having an acquisition price of less than $5,000)
which is owned, licensed to or by Buyer, leased to or by Buyer, or otherwise
used by Buyer, and identifies which Software is owned, licensed, leased or
otherwise used, as the case may be. SCHEDULE 4.22 lists all Software sold,
licensed, leased or otherwise distributed by Buyer to any third party, and
identifies which Software is sold, licensed, leased, or otherwise distributed as
the case may be. The Software set forth in SCHEDULE 4.22 which Buyer purports to
own was either developed (i) by employees of Buyer or any of its subsidiaries
within the scope of their employment; (ii) by independent contractors who have
assigned their rights to Buyer pursuant to enforceable written agreements; or
(iii) by third parties and irrevocably assigned to Buyer.
(l) All Trademarks that are part of Buyer's Intellectual Property
have been in continuous use by Buyer. To the knowledge of Buyer, there has been
no prior use of such Trademarks or other action taken by any third party which
would confer upon said third party superior rights in such Trademarks.
(m) The Copyrights that are part of Buyer's Intellectual Property
relate to works of authorship (i) created by employees of Buyer within the scope
of their employment or independent contractors who have assigned their rights to
Buyer pursuant to enforceable written
28
agreements, or (ii) acquired from the original author(s) or subsequent
assignees. To the knowledge of Buyer, the works covered by its Copyrights were
not copies of nor derived from any work for which Buyer does not own the
Copyrights, and no third party has any claim to authorship or ownership of any
part thereof.
(n) Buyer has and enforces a policy of requiring each employee,
consultant, contractor and potential business partner or investor who will
receive access to any Trade Secrets to execute proprietary information,
confidentiality and assignment agreements substantially consistent with Buyer's
standard forms thereof (complete and current copies of which have been made
available to Argentys). Except under confidentiality obligations, there has been
no material disclosure of Buyer confidential information or Trade Secrets.
(o) Buyer has a valid registration for the domain name
"▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇." To the knowledge of Buyer, Buyer's registration of such
domain name is free and clear of any claims and is in full force and effect.
Buyer has paid all fees required to maintain such registration through the
period ending ninety (90) days after the Effective Time. None of Buyer's
registrations or use of the domain name has been disturbed or placed "on hold"
and no claim (oral or written) has been asserted against Buyer adverse to its
rights to such domain name.
4.23 PROPRIETARY INFORMATION OF THIRD PARTIES. To the knowledge of
Buyer, no third party has claimed or has reason to claim that any person
employed by or affiliated with Buyer has (a) violated or may be violating any of
the terms or conditions of such person's employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
Buyer which suggests that such a claim might be contemplated. To the knowledge
of Buyer, no person employed by or affiliated with Buyer has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer and, no person employed by or affiliated with
Buyer has violated any confidential relationship which such person may have had
with any third party, in connection with the development, manufacture or sale of
any product or proposed product or the development or sale of any service or
proposed service of Buyer, and Buyer has no reason to believe there will be any
such employment or violation. To the knowledge of Buyer, neither the execution
or delivery of this Agreement, nor the carrying on of the business of Buyer as
officers, employees or agents by any officer, director, employee or consultant
of Buyer, will conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or instrument
under which any such person is obligated.
4.24 GOVERNMENTAL APPROVALS. Except for the filing of the Certificate
of Merger or as explicitly set forth in SCHEDULE 4.24, no registration or filing
with, or consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by Buyer of this Agreement.
4.25 DISCLOSURE. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits a
material fact necessary to
29
make the statements contained herein or therein, in light of the circumstances
in which made, not misleading.
4.26 ENVIRONMENTAL MATTERS. Except as described in SCHEDULE 4.26, to
the knowledge of Buyer, and except as would not, individually or in the
aggregate, have a material adverse effect: (i) Buyer has obtained all
Environmental Permits which are required under Environmental Laws; (ii) Buyer is
in full compliance with all terms and conditions of such Environmental Permits;
(iii) Buyer is in full compliance with all Environmental Laws and/or any
Environmental Claim applicable to Buyer; (iv) as of the date hereof, there has
not been any Environmental Condition or any other event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance with the terms of such
Environmental Permits or which could reasonably be expected to give rise to any
liability pursuant to any Environmental Law with respect to Buyer, or, otherwise
form the basis of any Environmental Claim against Buyer; and (v) Buyer has taken
all actions necessary under any Environmental Law to register any products or
materials required to be registered by Buyer (or any of its agents) thereunder.
Except as set forth in SCHEDULE 4.26, there is no Environmental Claim pending
or, to the knowledge of Buyer, threatened against Buyer relating in any way to
any Environmental Condition or Environmental Laws or any code, plan, order,
notice or demand letter issued, entered, promulgated or approved thereunder.
4.27 CUSTOMERS. Listed in SCHEDULE 4.27 are the names and addresses of
the twenty (20) most significant customers (by revenue) of Buyer for the
six-month period ended March 31, 2003 and the amount for which each such
customer was invoiced during such period. Except as disclosed in SCHEDULE 4.27,
Buyer has not received any notice or has any reason to believe that any
significant customer listed on SCHEDULE 4.27 has ceased, or will cease, to use
the products, equipment, goods or services or has substantially reduced, or will
substantially reduce, the use of such products, equipment, goods or services at
any time.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to deliver the Merger Consideration on the
Closing Date and to consummate the other transactions contemplated hereby is
subject to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by Buyer in its sole discretion:
5.1 CONSENTS. All requisite governmental approvals and consents of
third parties identified by Buyer as required to be received to prevent any
material license, permit or agreement relating to the business of Argentys from
terminating prior to its scheduled termination, as a result of the consummation
of the transactions contemplated hereby, shall have been obtained.
5.2 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. All of the
representations and warranties of Argentys and the Shareholders contained in
this Agreement or in any Schedules or other documents attached hereto or
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true, correct and
30
complete in all material respects on and as of the Closing Date. On the Closing
Date, Argentys shall have executed and delivered to Buyer a certificate, in form
and substance satisfactory to Buyer and its counsel, to such effect.
5.3 PERFORMANCE. Argentys shall have materially performed and complied
with all covenants and agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date. Argentys shall have
executed and delivered to Buyer a certificate, in form and substance
satisfactory to Buyer and its counsel, in writing to such effect and to the
further effect that all of the conditions set forth in this Article V have been
satisfied.
5.4 NO ADVERSE CHANGE. No change shall have occurred or be threatened
in the condition (financial or other) of the business of Argentys which has been
or is or is reasonably likely to be adverse to its operations, properties,
prospects, assets or condition (financial or other).
5.5 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date, no
action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity shall be pending or, to the knowledge of the
parties to this Agreement, threatened, before any court or governmental body (i)
to prohibit or materially restrain, restrict or delay, or to obtain damages or a
discovery order in respect of this Agreement or the consummation of the
transactions contemplated hereby, or (ii) which has had or may have a materially
adverse effect on the condition, financial or otherwise, or prospects of the
business. No order, decree or judgment of any court or governmental body shall
have been issued prohibiting or materially restraining, restricting or delaying,
the consummation of the transactions contemplated by this Agreement. No
insolvency proceeding of any character including without limitation, bankruptcy,
receivership, reorganization, dissolution or arrangement with creditors,
voluntary or involuntary, affecting Argentys shall be pending, and Argentys
shall not shall have taken any action in contemplation of, or which would
constitute the basis for, the institution of any such proceedings.
5.6 EMPLOYMENT OFFERS. Buyer may, but is not required to, extend offers
of employment or consultancy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ and any
other employees identified by Buyer within ten (10) days of the date hereof on
such terms and conditions as Buyer may determine, in its discretion.
5.7 TERMINATION OF EMPLOYEES.
(a) Argentys shall terminate or accept the resignation of ▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ (the "Terminated Argentys Employees") as
employees, directors and/or officers of Argentys;
(b) Argentys or any of the Shareholders shall pay in full any
amounts due to the Terminated Argentys Employees on or before such
termination or resignation, and all other fees or costs incurred in
connection with such termination or resignation;
(c) Argentys shall enter into a severance arrangement (a "Severance
Agreement") with each of the Terminated Argentys Employees that
requires, as a condition to receiving payments thereunder, that each
such Terminated Argentys
31
Employee provide consulting services to the Surviving Corporation for a
period of two months (the "Consulting Period"), as needed by the
Surviving Corporation during the Consulting Period; and
(d) Ampersand, by its execution hereof, agrees to pay to Buyer or
the Surviving Corporation, in advance, funds sufficient to pay all
amounts due under the Severance Agreements.
5.8 CLOSING DOCUMENTS. Argentys shall have delivered to Buyer: (a) a
certificate of its President or its Treasurer as to the truth and accuracy of
the representations and warranties of Argentys set forth in Article II and (b) a
certificate of its Secretary as to (i) the signing authority, incumbency and
specimen signature of the signatories of this Agreement and other documents
signed on behalf of Argentys in connection herewith, (ii) the resolutions
adopted by the board of directors of Argentys authorizing and approving the
execution, delivery and performance of this Agreement and the other documents
executed in connection herewith, (iii) the resolution adopted by the
Shareholders approving the Merger, and (iv) the charter documents and by-laws of
Argentys.
5.9 STOCKHOLDERS' AGREEMENT. All of the Shareholders shall have
executed a counterpart signature page to the Amended and Restated Stockholders'
Agreement attached hereto as EXHIBIT 5.9 (the "STOCKHOLDERS' AGREEMENT").
5.10 BRIDGE LOANS. Those various demand notes issued by Argentys to
Ampersand 1999 Limited Partnership and Ampersand 1999 Companion Fund Limited
Partnership in the aggregate principal amount of $655,000 (the "BRIDGE NOTES")
shall either be (i) cancelled and all outstanding principal and interest thereon
forgiven; or (ii) converted in full into equity securities of Argentys.
5.11 CERTIFICATE OF PRINCIPAL SHAREHOLDERS. Ampersand 1999 Limited
Partnership and Ampersand 1999 Companion Fund Limited Partnership shall have
delivered to Buyer a certificate regarding the representations and warranties of
Argentys set forth in Article II in the form attached hereto as EXHIBIT 5.11
(the "PRINCIPAL SHAREHOLDERS' CERTIFICATE").
ARTICLE VI
CONDITIONS TO ARGENTYS' AND THE SHAREHOLDERS' OBLIGATIONS
The obligation of Argentys and the Shareholders consummate the
transactions contemplated hereby is subject to the satisfaction, on or before
the Closing Date, of the following conditions, each of which may be waived by
Argentys (on its own behalf and on behalf of the Shareholders) in its sole
discretion:
6.1 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. All of the
representations and warranties of Buyer contained in this Agreement or in any
Schedules or other documents attached hereto or referred to herein or delivered
pursuant hereto or in connection with the transactions contemplated hereby shall
be true, correct and complete in all material respects on and as of the Closing
Date. On the Closing Date, Buyer shall have executed and
32
delivered to Argentys a certificate, in form and substance satisfactory to
Argentys and its counsel, to such effect.
6.2 PERFORMANCE. Buyer shall have materially performed and complied
with all covenants and agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date. Buyer shall have executed
and delivered to Argentys a certificate, in form and substance satisfactory to
Argentys and its counsel, in writing to such effect and to the further effect
that all of the conditions set forth in this Article VI have been satisfied.
6.3 NO ADVERSE CHANGE. No change shall have occurred or be threatened
in the condition (financial or other) of the business of Buyer which has been or
is reasonably likely to be adverse to its operations, properties, prospects,
assets or condition (financial or other).
6.4 NO ACTIONS, SUITS OR PROCEEDINGS. As of the Closing Date, no
action, suit, investigation or proceeding brought by any person, corporation,
governmental agency or other entity shall be pending or, to the knowledge of the
parties to this Agreement, threatened, before any court or governmental body (i)
to prohibit or materially restrain, restrict or delay, or to obtain damages or a
discovery order in respect of this Agreement or the consummation of the
transactions contemplated hereby, or (ii) which has had or may have a materially
adverse effect on the condition, financial or otherwise, or prospects of the
business. No order, decree or judgment of any court or governmental body shall
have been issued prohibiting or materially restraining, restricting or delaying,
the consummation of the transactions contemplated by this Agreement. No
insolvency proceeding of any character including without limitation, bankruptcy,
receivership, reorganization, dissolution or arrangement with creditors,
voluntary or involuntary, affecting Buyer shall be pending, and Buyer shall not
have taken any action in contemplation of, or which would constitute the basis
for, the institution of any such proceedings.
6.5 CLOSING DOCUMENTS. Buyer shall have delivered the Merger
Consideration and (a) a certificate of its President or its Treasurer as to the
truth and accuracy of the representations and warranties of Buyer set forth in
Article IV and (b) a certificate of its Secretary as to (i) the signing
authority, incumbency and specimen signature of the signatories of this
Agreement and other documents signed on behalf of Buyer in connection herewith,
(ii) the resolutions adopted by the board of directors of Buyer authorizing and
approving the execution, delivery and performance of this Agreement and the
other documents executed in connection herewith, (iii) the resolutions adopted
by the shareholders of Buyer approving the Merger, and (iv) the charter
documents and by-laws of Buyer.
6.6 STOCKHOLDERS' AGREEMENT. Buyer shall have executed the
Stockholders' Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL. All representations and warranties in this Agreement, or
in any instrument or document furnished in connection with this Agreement or the
transactions contemplated hereby, shall survive the Closing and any
investigation at any time made by or on
33
behalf of any party for a period of twelve (12) months (the "SURVIVAL PERIOD").
All such representations and warranties shall expire at the end of the Survival
Period, except that (a) claims, if any, asserted in writing prior to the end of
the Survival Period identified as claims for indemnification pursuant to this
Article VII shall survive until finally resolved and satisfied in full, and (b)
claims, if any, which are based upon fraud, which relate to title or which
assert tax liability shall survive for the full period of the applicable statute
of limitations, and until finally resolved and satisfied in full and the
Survival Period shall be extended accordingly with respect to such claims.
7.2 INDEMNIFICATION OF BUYER BY THE SHAREHOLDERS. Each of the
Shareholders, jointly and severally, hereby agrees to indemnify and hold
harmless Buyer and Buyer's officers, directors, partners, employees, shareholder
and other owners (other than the Shareholders), and their successors and assigns
(collectively, the "BUYER INDEMNIFIED PARTIES"), from, against and with respect
to any and all losses, liabilities, damages and expenses, including, but not
limited to, reasonable attorneys' fees and expenses ("DAMAGES") actually
incurred by Buyer arising out of any breach of any representation, warranty,
covenant, or agreement of Argentys contained in this Agreement or any of the
certificates or other documents delivered in connection herewith (including
without limitation the Principal Shareholders' Certificate) ("ARGENTYS BREACH");
PROVIDED, HOWEVER, that (i) the Buyer Indemnified Parties shall not be entitled
to indemnification hereunder unless and until the aggregate amount of all
Damages suffered by the Buyer Indemnified Parties exceeds $10,000 (the "BUYER
INDEMNITY DEDUCTIBLE") where upon the Buyer Indemnified Parties shall be
entitled to indemnification hereunder for the entire aggregate amount of Damages
suffered by the Buyer Indemnified Parties or any Buyer Indemnified Party, less
the Buyer Indemnity Deductible of $10,000; (ii) any claim for indemnification
hereunder shall be asserted prior to the expiration of the Survival Period set
forth in Section 7.1, (iii) the indemnity set forth in this Section 7.2 shall be
limited to, and satisfied exclusively out of the surrender of Restricted Shares
(which shall be effected by the Shareholders on a pro rata basis); (iv) for
purposes hereof, the Restricted Shares shall be valued at $0.55 per share; and
(v) after the Closing, the rights of Buyer Indemnified Parties under this
Section 7.2 shall be the sole and exclusive remedy of the Buyer Indemnified
Parties for any Argentys. The parties hereto stipulate and agree that the value
set forth in clause (iv) of the previous sentence may not represent fair market
value, and that such value may be in excess of or below fair market value.
7.3 INDEMNIFICATION OF SHAREHOLDERS BY BUYER. Buyer hereby agrees to
indemnify and hold harmless the Shareholders, each of the Shareholders'
officers, directors, partners, employees, shareholders and other owners and each
of their respective successors and assigns (the "SHAREHOLDER INDEMNIFIED
PARTIES") against any and all Damages arising out of any breach of any
representation, warranty, covenant, or agreement of Buyer contained in this
Agreement or any of the certificates or other documents delivered herewith
("BUYER BREACH"), PROVIDED, HOWEVER, that (i) the Shareholder Indemnified
Parties shall not be entitled to indemnification hereunder unless and until the
aggregate amount of all Damages suffered by the Shareholder Indemnified Parties
exceeds $10,000 (the "SELLER INDEMNITY DEDUCTIBLE") where upon the Shareholder
Indemnified Parties shall be entitled to indemnification hereunder for the
entire aggregate amount of Damages suffered by the Shareholder Indemnified
Parties or any Shareholder Indemnified Party, less the Seller Indemnity
Deductible of $10,000; (ii) any claim for indemnification hereunder shall be
asserted prior to the expiration of the survival period set forth in Section
7.1, (iii) Buyer's liability for Damages hereunder shall not exceed $880,000,
and
34
(iv) after the Closing, the rights of the Shareholder Indemnified Parties under
this Section 7.3 shall be the sole and exclusive remedy of the Shareholder
Indemnified Parties for any Buyer Breach.
7.4 CLAIMS FOR INDEMNIFICATION. In the event any party asserts the
occurrence of an indemnifiable event pursuant to this Article VII, the party
claiming indemnification (the "INDEMNIFIED PARTY") shall provide prompt notice
to the party required to provide indemnification (the "INDEMNIFYING PARTY"),
specifying in reasonable detail the facts and circumstances with respect to such
claim and the basis for which indemnification is available hereunder. If such
event involves the claim of any third party, the Indemnifying Party shall have
the right to control the defense or settlement of such claim; provided, however,
that (a) the Indemnified Party shall be entitled to participate in the defense
of such claim at its own expense, (b) the Indemnifying Party shall obtain the
prior written approval of the Indemnified Party before entering into any
settlement of such claim if, pursuant to or as a result of such settlement,
injunctive or other non-monetary relief would be imposed against the Indemnified
Party, (c) the Indemnifying Party shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, and shall assume
all expense with respect to the defense or settlement of any claim to the extent
such claim seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party, provided that the Indemnified Party shall provide written
notice to the Indemnifying Party of its election to assume control over the
defense of such claim pursuant to this Section 7.4.
In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article VII, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the claim to which such indemnification
relates.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by recognized overnight courier,
or (iv) sent by registered or certified mail, return receipt requested, postage
prepaid.
If to Buyer: TurboWorx, Inc.
One Century Tower
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Connecticut Financial Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
35
If to Argentys,
the Shareholders
or the Shareholders'
Representative: Ampersand 1999 Limited Partnership
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Marc ▇.▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices, requests, consents and other communications hereunder shall be
deemed to have been (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
facsimile transmission, at the time that receipt thereof has been acknowledged
by electronic confirmation or otherwise, (iii) if sent by overnight courier, on
the next business day following the day such notice is delivered to the courier
service, or (iv) if sent by registered or certified mail, on the fifth business
day following the day such mailing is made.
8.2 ENTIRE AGREEMENT. This Agreement together with the Exhibits and
Schedules hereto and the other documents executed in connection herewith
(together, the "DOCUMENTS") embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings relating to
the subject matter hereof. No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in the Documents shall affect, or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement.
8.3 MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by Buyer
and Shareholders who hold a majority of the shares of Buyer Series A Preferred
Stock issued pursuant hereto.
8.4 WAIVERS AND CONSENTS. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party. No single or partial exercise of any right, power
or remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a
36
waiver of the right of such party to pursue other available remedies. No notice
to or demand on a party not expressly required under this Agreement shall
entitle the party receiving such notice or demand to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the party giving such notice or demand to any other or further action in any
circumstances without such notice or demand. The terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only by
written document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.
8.5 ASSIGNMENT. Neither this Agreement, nor any right hereunder, may be
assigned by any of the parties hereto without the prior written consent of the
other parties.
8.6 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their permitted assigns, and
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement. Nothing in this Agreement shall be construed to create any
rights or obligations except among the parties hereto, and no person or entity
shall be regarded as a third-party beneficiary of this Agreement.
8.7 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the
internal laws of the State of Delaware, without giving effect to the conflict of
law principles thereof.
8.8 SEVERABILITY. In the event that any court of competent jurisdiction
shall finally determine that any provision, or any portion thereof, contained in
this Agreement shall be void or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court determines it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
8.9 INTERPRETATION. The parties hereto acknowledge and agree that: (i)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement (except with respect to the schedules) and have contributed to
its revision; (ii) the rule of construction to the effect that any ambiguities
are resolved against the drafting party shall not be employed in the
interpretation of this Agreement; and (iii) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
8.10 HEADINGS AND CAPTIONS. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify, or affect, or be considered in construing or interpreting the
meaning or construction of any of the terms or provisions hereof.
37
8.11 RELIANCE. The parties hereto agree that, notwithstanding any right
of any party to this Agreement to investigate the affairs of any other party to
this Agreement, the party having such right to investigate shall have the right
to rely fully upon the representations and warranties of the other party
expressly contained in this Agreement and on the accuracy of any schedule or
other document attached hereto or referred to herein or delivered by such other
party or pursuant to this Agreement.
8.12 EXPENSES. Each of the parties hereto shall pay its own fees and
expenses including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
8.13 NO BROKER OR FINDER. Each of the parties hereto represents and
warrants to the other that no broker, finder or other financial consultant has
acted on its behalf in connection with this Agreement or the transactions
contemplated hereby in such a way as to create any liability on the other. Each
of the parties hereto agrees to indemnify and save the other harmless from any
claim or demand for commission or other compensation by any broker, finder,
financial consultant or similar agent claiming to have been employed by or on
behalf of such party and to bear the cost of legal expenses incurred in
defending against any such claim.
8.14 PUBLICITY. No party shall issue any press release or otherwise
make any public statement with respect to the execution of, or the transactions
contemplated by, this Agreement without the prior written consent of the other
party, except as may be required by law.
8.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURE PAGES FOLLOW]
38
[COUNTERPART SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, Buyer, Argentys, the Shareholders and the
Shareholders' Representative have executed this Agreement as of the day and year
first above written.
TURBOWORX, INC.
By:
-------------------------------------
Name:
Title:
ARGENTYS CORPORATION
By:
-------------------------------------
Name:
Title:
AMPERSAND 1999 LIMITED PARTNERSHIP
By: AMP-99 Management Company Limited
Liability Company, its General Partner
By:
-------------------------------------
Name:
Title:
AMPERSAND 1999 COMPANION FUND LIMITED
PARTNERSHIP
By: AMP-99 Management Company Limited
Liability Company, its General Partner
By:
-------------------------------------
Name:
Title:
GARFLY INVEST AG
By:
---------------------------------
Name:
Title:
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
AMPERSAND 1999 LIMITED PARTNERSHIP,
as Shareholders' Representative
By: AMP-99 Management Company Limited
Liability Company, its General Partner
By:
-------------------------------------
Name:
Title:
2
SCHEDULE 1
SHAREHOLDERS
------------------------------------ -------------------------- ------------------------------- -------------------------------
NAME STATE OF RESIDENCE NUMBER OF SHARES OF BUYER SHARES SUBJECT TO WARRANT
SERIES A PREFERRED STOCK
------------------------------------ -------------------------- ------------------------------- -------------------------------
Ampersand 1999 Limited Partnership Massachusetts 1,398,577 349,643
------------------------------------ -------------------------- ------------------------------- -------------------------------
Ampersand 1999 Companion Fund Massachusetts 28,543 7,136
Limited Partnership
------------------------------------ -------------------------- ------------------------------- -------------------------------
Garfly Invest AG Switzerland 132,934 33,234
------------------------------------ -------------------------- ------------------------------- -------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Massachusetts 18,128 4,532
------------------------------------ -------------------------- ------------------------------- -------------------------------
▇▇▇▇ ▇▇▇▇▇▇ United Kingdom 7,563 1,891
------------------------------------ -------------------------- ------------------------------- -------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Virginia 9,556 2,389
------------------------------------ -------------------------- ------------------------------- -------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Massachusetts 4,699 1,175
------------------------------------ -------------------------- ------------------------------- -------------------------------
TOTAL 1,600,000 400,000
------------------------------------ -------------------------- ------------------------------- -------------------------------
3
EXHIBIT 1.9
DIRECTORS
---------
▇▇▇▇▇▇▇ ▇. Augen
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
4