Exhibit 2.1 Agreement and Plan of Merger with Blubat, Inc.
dated November 21, 2005
EXECUTION DRAFT
NOVEMBER 21, 2005
______________________________________________________________________________
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
DATALOGIC INTERNATIONAL, INC.,
IPN COMMUNICATIONS, INC.,
BLUBAT, INC.
and
▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
as Trustees of the ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Family Trust,
and ▇▇▇ ▇▇▇▇▇▇
November 21, 2005
______________________________________________________________________________
______________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS; INTERPRETATION AND ACCOUNTING TERMS ...........1
1.1 Definitions..................................................1
1.2 Interpretation and Accounting Terms..........................8
ARTICLE 2 GENERAL......................................................9
2.1 Merger.......................................................9
2.2 The Closing.................................................10
2.3 Effective Time of the Merger................................10
2.4 Effect of the Merger........................................10
ARTICLE 3 THE SURVIVING CORPORATION...................................10
3.1 Certificate of Incorporation................................10
3.2 Bylaws......................................................11
3.3 Board of Directors..........................................11
3.4 Officers....................................................11
ARTICLE 4 STATUS OF STOCK.............................................11
4.1 Status of Merger Subsidiary Stock...........................11
4.2 Status of Company Stock.....................................11
ARTICLE 5 MERGER CONSIDERATION; OTHER MERGER OBLIGATIONS..............11
5.1 Delivery by Shareholders of Company Common Stock at Closing.11
5.2 Delivery of Consideration by Merger Subsidiary at Closing...12
5.3 Additional Consideration....................................12
5.4 Payoff of Blubat Obligations to Shareholders................15
5.5 Payment of Finder's Fees....................................15
5.6 Security for Obligations....................................15
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS.........................16
6.1 Corporate Existence and Power...............................16
6.2 Valid and Enforceable Agreement; Authorization;
Non-contravention...........................................16
6.3 Capitalization and Ownership................................17
6.4 Company Financial Statements................................17
6.5 Events Subsequent to December 31, 2004......................17
6.6 Undisclosed Liabilities.....................................19
6.7 Taxes.......................................................19
6.8 Accounts Receivable.........................................21
6.9 Inventories; Consignment....................................21
6.10 No Breach of Law or Governing Document......................21
6.11 Litigation..................................................21
6.12 Owned and Leased Real Property..............................22
6.13 Personal Property; Title to Assets..........................23
6.14 Personal Property Leases....................................23
6.15 Necessary Property..........................................23
6.16 Use and Condition of Property; Location.....................24
6.17 Licenses and Permits........................................24
6.18 Environmental Matters.......................................24
6.19 Contracts and Commitments...................................25
6.20 Validity of Contracts.......................................26
6.21 Intellectual Property.......................................26
6.22 Insurance...................................................28
6.23 Employees, Officers, Directors and Consultants..............28
6.24 Bank Accounts of the Company................................29
6.25 Labor Matters...............................................29
6.26 Employee Benefit Matters....................................30
6.27 Product and Service Warranties..............................30
6.28 Product Liability Claims....................................30
6.29 Books and Records and Financial Controls....................31
6.30 Customers and Suppliers.....................................31
6.31 Propriety of Past Payments..................................31
6.32 Change in Ownership ........................................32
6.33 Guarantees..................................................32
6.34 Accuracy of Information.....................................32
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
REGARDING MERGER SUBSIDIARY.................................32
7.1 Corporate Existence and Power...............................32
7.2 Valid and Enforceable Agreement; Authorization..............33
7.3 Capitalization and Ownership................................33
7.4 Consents and Approvals......................................33
7.5 Investment Company..........................................33
7.6 Broker's Fees...............................................33
7.7 Financial Ability...........................................34
7.8 Solvency....................................................34
7.9 Litigation..................................................34
7.10 Accuracy of Information.....................................34
ARTICLE 8 REPRESENTATIONS AND WARRANTIES REGARDING DATALOGIC..........34
8.1 Corporate Existence and Power...............................34
8.2 Valid and Enforceable Agreement; Authorization..............35
8.3 Authorization and Validity, Issuance of Closing Shares......35
8.4 Consents and Approvals......................................35
8.5 Broker's Fees...............................................35
8.6 Representations Relating to Qualification of the Merger
as a Tax-Free Reorganization................................35
8.7 Financial Ability...........................................36
8.8 Solvency....................................................36
8.9 Litigation..................................................36
8.10 Accuracy of Information.....................................36
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..........37
9.1 Authorization...............................................37
9.2 No Violation................................................37
9.3 Title to the Company Shares.................................37
9.4 Independent Representation..................................37
9.5 Securities Matters..........................................37
ARTICLE 10 ADDITIONAL COVENANTS OF THE PARTIES.........................38
10.1 Confidentiality.............................................38
10.2 Public Disclosures..........................................39
10.3 Due Diligence Review........................................39
10.4 Further Assurances; Cooperation.............................39
ARTICLE 11 CONDITIONS PRECEDENT TO OBLIGATIONS
OF MERGER SUBSIDIARY AND DATALOGIC..........................39
11.1 Accuracy of Representations and Warranties
and Performance of Obligations..............................39
11.2 Consents and Approvals......................................40
11.3 No Litigation or Contrary Judgment..........................40
11.4 No Material Adverse Effect..................................40
11.5 Management of Company.......................................40
11.6 Deliveries of the Company and the Shareholders at Closing...40
ARTICLE 12 CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SHAREHOLDERS.........................42
12.1 Accuracy of Representations and Warranties
and Performance of Obligations..............................42
12.2 Consents and Approvals......................................42
12.3 No Litigation or Contrary Judgment..........................42
12.4 Deliveries of the Merger Subsidiary and Datalogic
at Closing..................................................42
ARTICLE 13 SURVIVAL; INDEMNIFICATION...................................44
13.1 Survival of Representations and Warranties..................44
13.2 No Special Damages..........................................44
13.3 Indemnification By Each Shareholder.........................44
13.4 Indemnification By Merger Subsidiary and Datalogic..........45
13.5 Minimum Threshold For Indemnification.......................45
13.6 Claim Notice................................................46
13.7 Third Party Claims..........................................46
13.8 Dispute Resolution..........................................48
13.9 Mitigation..................................................49
13.10 Insurance...................................................49
13.11 Limitations.................................................49
13.12 Subrogation.................................................49
ARTICLE 14 MISCELLANEOUS PROVISIONS....................................49
14.1 Notices.....................................................49
14.2 Termination.................................................50
14.3 Entire Agreement............................................50
14.4 Amendment and Modification..................................50
14.5 Assignment; Binding Agreement...............................50
14.6 Waiver of Compliance; Consents..............................50
14.7 Expenses....................................................50
14.8 Counterparts, Facsimiles....................................51
14.9 Severability................................................51
14.10 Governing Law; Venue........................................51
14.11 WAIVER OF JURY TRIAL........................................51
14.12 No Third Party Beneficiaries or Other Rights................52
14.13 Further Assurances..........................................52
SCHEDULES
Schedule 1.1.56 Company Permitted Liens
Schedule 6.3.1 Company Capitalization and Ownership
Schedule 6.3.2 Capital Stock or Equity Interests held by Company in
Third Parties
Schedule 6.4 Company Financial Statements
Schedule 6.5 Company Events Subsequent to December 31, 2004
Schedule 6.6 Company Undisclosed Liabilities
Schedule 6.7 Company Taxes
Schedule 6.8 Company Accounts Receivable
Schedule 6.11 Company Litigation
Schedule 6.12.2 Company Leased Real Property
Schedule 6.13 Company Personal Property
Schedule 6.14 Company Personal Property Leases
Schedule 6.19 Company Contracts and Commitments
Schedule 6.21 Company Intellectual Property
Schedule 6.21.1 Company Registered Intellectual Property
Schedule 6.21.2 Company Contracts Regarding Intellectual Property
Schedule 6.22 Company Insurance
Schedule 6.23.1 Company Directors, Officers and Employees
Schedule 6.23.2 Company Consultants, Retirees and Terminated Employees
Schedule 6.23.3 Company Indebtedness to Insiders
Schedule 6.23.6 Agreements of Company Employees, Officers or Directors
with Potential Adverse Impact on Company
Schedule 6.24 Company Bank Accounts
Schedule 6.26 Company Employee Benefit Plans
Schedule 6.27 Company Product and Service Warranties
Schedule 6.30 Company Five-Largest Suppliers and Customers
EXHIBITS
Exhibit 2.3 Agreement of Merger
Exhibit 5.4.2(i) Datalogic ▇▇▇▇▇▇▇▇▇ Note to ▇▇▇ ▇▇▇▇▇▇▇▇▇
Exhibit 5.4.2(ii) Datalogic ▇▇▇▇▇▇ Note to ▇▇▇ ▇▇▇▇▇▇
Exhibit 5.5 Datalogic McDonald Note to ▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit 5.6 Datalogic Pledge Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered into
as of the 21st day of November, 2005, by and among DATALOGIC INTERNATIONAL,
INC., a corporation organized and existing under the laws of the State of
Delaware ("Datalogic"), IPN COMMUNICATIONS, INC., a corporation organized and
existing under the laws of the State of California ("Merger Subsidiary"),
BLUBAT, INC., a corporation organized and existing under the laws of the State
of California (the "Company"), and ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as
Trustees of the ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Family Trust, and ▇▇▇ ▇▇▇▇▇▇, a married
individual ("▇▇▇") (each individually a "Shareholder", and collectively, the
"Shareholders").
RECITALS
WHEREAS, Shareholders own and hold all of the issued and outstanding
shares of the capital stock of the Company; and
WHEREAS, the parties hereto desire that the Company merge with and into
the Merger Subsidiary, a wholly-owned subsidiary of Datalogic, upon the terms
and subject to the conditions provided herein (the "Merger"); and
WHEREAS, the parties intend that the transaction contemplated under this
Agreement will qualify as a reorganization pursuant to Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:
ARTICLE 1
DEFINITIONS; INTERPRETATION
AND ACCOUNTING TERMS
1.1 Definitions. The following words shall have the respective meanings
given to them in this Article 1.
1.1.2 "Accounts Receivable" has the meaning set forth in Section 6.8.
1.1.2 "Action" has the meaning set forth in Section 6.11.
1.1.3 "Affiliate" means with respect to any Person, any other Person
which is controlling, controlled by, or under common control with, directly or
indirectly, the Person referred to, and, if the Person referred to is a
natural Person, any member of such Person's immediate family. The term
"control" (including, with correlative meaning, the terms "controlled by" and
"under common control with") as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
1.1.4 "Agreement" means this Agreement as executed on the date hereof
and as amended or supplemented in accordance with the terms hereof, including
all Schedules and Exhibits attached hereto.
1.1.5 "Business" means any and all business activities in which the
Company is engaged, as such business has been and is conducted by the Company
on the date hereof and as of the Effective Time.
1.1.6 "California Agreement of Merger" has the meaning set forth in
Section 2.3.
1.1.7 "California Corporations Code" means the Corporations Code of the
State of California, as referenced in Section 2.3.
1.1.8 "Closing" means the consummation of the transactions contemplated
by this Agreement, as provided for in Section 2.2.
1.1.9 "Closing Date" means the date on which the Closing occurs in
accordance with this Agreement, as provided for in Section 2.2.
1.1.10 "Closing Shares" means the shares of Datalogic Restricted Stock
issued to the Shareholders in connection with the Merger, as soon as
reasonably practicable after the Closing Date, in accordance with Section 5.2.
1.1.11 "Code" means the Internal Revenue Code of 1986, as amended from
time to time."
1.1.12 "Company" has the meaning set forth in the Preamble to this
Agreement.
1.1.13 "Company Common Stock" means the common stock, no par value, of
the Company.
1.1.14 "Company Financial Statements" means (a) the Company's unaudited
2004 profit and loss statement (January through December 2004); and (b) the
unaudited balance sheet of the Company as of November 14, 2005.
1.1.15 "Company Shares" means the issued and outstanding shares of
Company Common Stock, all of which are held by the Shareholders.
1.1.16 "Confidential Information" has the meaning set forth in Section
10.1.
1.1.17 "Contract" means any written contract, agreement, arrangement,
understanding, lease, indenture, mortgage, deed of trust, evidence of
indebtedness, commitment or instrument, open purchase order or offer, to which
the Company is a party or by which it or any of its assets is bound.
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1.1.18 "Datalogic" has the meaning set forth in the Preamble to this
Agreement.
1.1.19 "Datalogic Common Stock" means the common stock, $.001 par value,
of Datalogic.
1.1.20 "Datalogic ▇▇▇▇▇▇ Note" has the meaning set forth in Section
5.4.2(ii).
1.1.21 "Datalogic ▇▇▇▇▇▇▇▇▇" has the meaning set forth in Section
5.4.2(i).
1.1.22 "Datalogic McDonald Note" has the meaning set forth in Section
5.5.
1.1.23 "Datalogic Pledge Agreement" has the meaning set forth in Section
5.6.
1.1.24 "Datalogic Restricted Stock" means Datalogic Common Stock the
sale of which is restricted pursuant to applicable state and federal
securities laws, and whose share certificates evidence the restricted nature
of such shares.
1.1.25 "Effective Time" means the time at which the Merger becomes
effective, as provided for in Section 2.3.
1.1.26 "Employment Agreements" means certain employment agreements for
Shareholders.
1.1.27 "Environmental Claim(s)" means all Actions, Liens, or Orders
asserted by a Person other than Merger Subsidiary, Datalogic, any of the
Shareholders, or any of their respective Affiliates, and arising out of any
violation or alleged violation of any Environmental Laws or Environmental
Permits, including, but not limited to, (i) any and all Actions, Liens, or
Orders asserted by a Government for enforcement, cleanup, removal, response,
closure, remedial or other actions, or damages pursuant to any applicable
Environmental Laws or Environmental Permits, and (ii) any and all Actions,
Liens, or Orders asserted by a Person other than Merger Subsidiary, Datalogic,
any of Shareholders, or any of their respective Affiliates, arising out of any
violation or alleged violation of any Environmental Laws or Environmental
Permits, seeking damages, contribution, indemnification, cost recovery,
compensation, private or Governmental enforcement, or injunctive relief
resulting from Hazardous Materials.
1.1.28 "Environmental Law" means all applicable laws, statutes,
enactments, orders, regulations, rules and ordinances of any Government
relating to pollution or protection of human health, safety, the environment,
natural resources or laws relating to releases or threatened releases of
Hazardous Materials into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, generation,
processing, distribution, use, treatment, storage, release, transport,
disposal or handling of Hazardous Materials.
1.1.29 "Environmental Permits" means all permits, registrations,
approvals, licenses, filings and submissions to any Government or other
authority required by or made by or on behalf of the Company under or pursuant
to any Environmental Law.
3
1.1.30 "Environmental Property" means any assets or real property
currently or previously owned, leased, operated or used by the Company or any
Affiliate thereof to the extent liability for an Environmental Claim could be
asserted against the Company under any applicable Environmental Law."
1.1.31 ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.1.32 "GAAP" means the accounting principles generally accepted in the
United States, including as set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, applied consistently throughout the periods involved.
1.1.33 "Government" means the United States of America, any state, any
possession, territory, local, county, district, city or other governmental
unit or subdivision, and any branch, entity, agency, or judicial body of any
of the foregoing.
1.1.34 "Hazardous Materials" means any chemicals, materials, other
substances or wastes, in any amount or concentration, which are "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, and/or which are defined or regulated as
dangerous, toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous or as a pollutant or
contaminant, in each case under any applicable Environmental Law.
1.1.35 "Income Taxes" means any Tax imposed upon or measured by net
income or gross income (excluding any Tax based solely on gross receipts)
including any interest, penalty, or additions thereto, whether disputed or
not.
1.1.36 "Indemnified Person" means a person entitled to indemnification
pursuant to Article 13 of this Agreement.
1.1.37 "Indemnifying Party" means the party required to indemnify and
hold harmless such Indemnified Person.
1.1.38 "Intellectual Property" means all intellectual property owned or
used by the Company, including, without limitation, all:
(a) inventions, models, designs, developments, ideas, concepts,
shop rights, proprietary processes and formulae, and items of proprietary
know-how, information or data whether or not patentable, whether or not
reduced to practice or whether or not yet made the subject of a pending patent
application or applications;
(b) ideas and conceptions of potentially patentable subject
matter, including, without limitation, any patent disclosures, whether or not
reduced to practice and whether or not yet made the subject of a pending
patent application or applications;
4
(c) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by multinational treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application;
(d) trademarks, service marks, trade dress, logos, trade names,
domain names, business names and corporate names, whether or not registered,
including all common law rights and registrations and applications for
registration thereof, including, but not limited to, all marks registered in
the United States Patent and Trademark Office, and the trademark offices of
other nations throughout the world, and all rights therein provided by
multinational treaties or conventions,
(e) copyrights (registered or otherwise), copyrighted works, mask
works, derivative works, and registrations and applications for registration
thereof, and all rights therein provided by multinational treaties or
conventions;
(f) computer software, including, without limitation, source code,
operating systems and specifications, data, data bases, files, programs,
documentation and other materials related thereto;
(g) trade secrets and confidential, technical or business
information (including ideas, formulas, compositions, inventions, and
conceptions of inventions whether patentable or unpatentable and whether or
not reduced to practice);
(h) whether or not confidential, technology (including know-how
and show-how), manufacturing and production process and techniques, research
and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, projections, market studies, pricing and cost information,
business and marketing plans and prospects, customer and supplier lists and
information;
(i) copies and tangible embodiments of all of the foregoing, in
whatever form or medium;
(j) rights to obtain and rights to apply for patents, to claim
priority to earlier-filed patent applications, and to register trademarks and
copyrights;
(k) rights to ▇▇▇ and recover and retain damages and costs and
attorneys' fees for any present or past infringement of any of the
intellectual property rights set forth above;
(l) all intangible rights, in whatever form, recognized as
protectable intellectual property under the laws of any country; and
(m) all the goodwill associated with any of the foregoing, and
licenses, sublicenses, assignments, and agreements in respect of any of the
foregoing, in each case which are owned, used, licensed or assigned by or to
the Company.
5
1.1.39 "IRS" means the United States Internal Revenue Service.
1.1.40 "Knowledge" or "best knowledge" means, with respect to the
Company, actual knowledge by ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ only
of facts or other information, and in the case of Datalogic or Merger
Subsidiary, actual knowledge by ▇▇▇▇▇ ▇▇▇▇▇ only of facts or other
information, in each case after having made (a) due inquiry of any other
Person who is primarily responsible for, and/or the primary custodian of
records pertaining to, the subject matter as to which such knowledge is being
asserted, and (b) due investigation of all files and records in their
possession or control and pertaining to the subject matter as to which such
Knowledge is being asserted. The words "know," "knowing" and "known" shall be
construed accordingly.
1.1.41 "Law" means any statute, law, ordinance, decree, order,
injunction, rule, directive, or regulation of any Government or
quasi-governmental authority, and includes rules and regulations of any
regulatory or self-regulatory authority compliance with which is required by
any such statute, law, ordinance, decree, order, injunction, rule, directive,
or regulation.
1.1.42 "Leased Real Property" has the meaning set forth in Section
6.12.2.
1.1.43 "Liabilities" or "Liability" means all debts, adverse claims,
liabilities and/or obligations, direct, indirect, absolute or contingent,
liquidated or unliquidated, whether accrued, vested or otherwise, and whether
or not reflected or required to be reflected on the financial statements of
the Party subject thereto.
1.1.44 "Lien" means any lien, security interest, mortgage, indenture,
deed of trust, pledge, charge, adverse claim, easement, restriction or other
encumbrance, including, without limitation, any Liens arising pursuant to any
Environmental Law or in respect of any Tax.
1.1.45 "Losses" means any damages, losses, charges, liabilities, claims,
demands, actions, suits, proceedings, payments, judgments, settlements,
assessments, deficiencies, taxes, interest, penalties, and costs and expenses,
including removal costs, remediation costs, closure costs, fines, penalties
and expenses of investigation, reasonable attorneys' fees and costs, and
reasonable out of pocket disbursements.
1.1.46 "Material Adverse Effect" means any material adverse effect on
(a) the Business, properties, assets, liabilities, profits, operations,
results of operations or condition (financial or otherwise) of the Company, or
(b) the authority or ability of the Company or the Shareholders to perform
their respective obligations under this Agreement, but shall not be deemed to
include (i) any adverse changes resulting from general economic, regulatory or
political conditions, (ii) circumstances that affect the telecommunications
industry in which the Company operates generally, or (iii) any other event or
occurrence which would customarily be considered to be force majeure in
contracts of this type.
1.1.47 "Material Contracts" has the meaning set forth in Section 6.19.1.
1.1.48 "Merger" has the meaning set forth in the Recitals to this
Agreement.
6
1.1.49 "Merger Subsidiary" has the meaning set forth in the Preamble to
this Agreement.
1.1.50 "Merger Subsidiary Common Stock" means the common stock, __ par
value, of Merger Subsidiary.
1.1.51 "Non-Compete Agreements" means certain non-compete agreements for
the Shareholders.
1.1.52 "Non-Income Taxes" means any Taxes other than Income Taxes.
1.1.53 "Order" means an order, writ, injunction, or decree of any court
or Government.
1.1.54 "Ordinary Course" means, with respect to the Business of the
Company, only the ordinary course of commercial operations customarily engaged
in by the Company consistent with industry norms and the Company's prior
practices, and specifically does not include (a) any activity (i) involving
the purchase or sale of the Company or of any product line or business unit of
the Company, (ii) involving modification or adoption of any Plan, or (iii)
which requires approval by the board of directors or shareholders of the
Company, or (b) the incurrence of any material Liability for any tort or any
breach or violation of or default under any Contract or Law.
1.1.55 "Party" or "Parties" means any one or more of the parties to this
Agreement, as the context may require.
1.1.56 "Permitted Liens" means, collectively, (a) Liens that are
disclosed in Schedule 1.1.56, (b) Liens for Taxes, fees, levies, duties or
other governmental charges of any kind which are not yet delinquent or are
being contested in good faith by appropriate proceedings, (c) Liens for
landlords, common carriers, warehousemen, mechanics, materialmen, laborers,
employees, suppliers or similar liens arising by operation of law for amounts
which are owed, but not yet delinquent, (d) purchase money security interests
relating to the acquisition of goods in the Ordinary Course equal to, or less
than, Five Thousand Dollars ($5,000) per individual acquisition, (e) in the
case of real property, any matters, restrictions, covenants, conditions,
limitations, rights, rights of way, encumbrances, encroachments, reservations,
easements, agreements and other matters of record, such state of facts of
which an accurate survey of the property would reveal, and (f) Liens arising
from or related to immaterial indebtedness or capital leases of the Company
equal to, or less than, Five Thousand Dollars ($5,000) in each case.
1.1.57 "Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a Government entity (or any department, agency
or political subdivision thereof).
1.1.58 "Plan" means any agreement, arrangement, plan, or policy, whether
or not written, that involves (a) any pension, retirement, profit sharing,
savings, deferred compensation, bonus, stock option, stock purchase, phantom
stock, health, welfare, or incentive plan; or (b) welfare or "fringe"
benefits, including without limitation vacation, holiday, severance,
disability, medical, hospitalization, dental, life and other insurance,
tuition, company car, club dues, sick leave, maternity, paternity or family
leave, or other benefits; or (c) any employment, consulting, engagement, or
retainer agreement.
7
1.1.59 "Shareholders" has the meaning set forth in the Preamble to this
Agreement.
1.1.60 "SEC" means the U.S. Securities and Exchange Commission.
1.1.61 "Securities Act" means the U.S. Securities Act of 1933 and the
rules and regulations promulgated thereunder.
1.1.62 "Sponsor" means any employer who is participating (or who has
participated) in any Plan.
1.1.63 "Tax" or "Taxes" means all taxes, charges, fees, levies, or other
like assessments, including without limitation, all federal, possession,
state, city, county and foreign (or governmental unit, agency, or political
subdivision of any of the foregoing) income, profits, employment (including
Social Security, unemployment insurance and employee income tax withholding),
franchise, gross receipts, sales, use, transfer, stamp, occupation, property,
capital, severance, premium, windfall profits, customs, duties, ad valorem,
value added and excise taxes; pension guaranty and other similar premiums; and
any other Government charges of the same or similar nature; including any
interest, penalty or addition thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the Tax
Liability of any other Person. Any one of the foregoing Taxes shall be
referred to sometimes as a "Tax."
1.1.64 "Tax Returns" means all reports, estimates, declarations, claims
for refund, information statements and returns relating to or required by Law
to be filed by the Company in connection with any Taxes, and all information
returns (e.g., Form W-2, Form 1099) and reports relating to Taxes and Taxes
payable by, pursuant to, or in connection with, any Plans, including any
amendment or supplement thereof. Any one of the foregoing Tax Returns shall
be referred to sometimes as a "Tax Return."
1.1.65 "Third Parties" means any Persons other than the Parties hereto.
1.2 Interpretation and Accounting Terms.
1.2.1 Interpretation.
(a) Whenever in this Agreement the terms "include," "includes,"
"including," and derivative or similar words, are used, they shall be
construed to be followed by the phrase "without limitation".
(b) Whenever in this Agreement the term "agreement" is used, it
shall be deemed to refer to binding agreements, commitments, leases,
contracts, contract rights, licenses and sublicense agreements, quotations,
purchase orders, customer orders, work orders and other executory rights.
(c) Wherever in this Agreement a statute or other piece of
legislation is referenced, such reference shall be deemed to include any and
all amendments thereto, as well as any successor legislation which may be
adopted subsequent to the date of this Agreement, and covering the same
subject matter or the referenced statute or legislation.
8
(d) Whenever in this Agreement the term "party to" is used in
regard to an agreement, it shall be construed as meaning "party to or bound
by".
(e) Wherever in this Agreement reference is made to a Schedule
"hereof", or "attached hereto", the contents of such Schedule shall be deemed
to be incorporated into this Agreement by reference, as an integral part of
this Agreement.
(f) The headings of the Articles, Sections and paragraphs of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
(g) Each reference in this Agreement to an Article, Paragraph,
Section, or Schedule, unless otherwise indicated, shall mean an Article,
Paragraph or Section of this Agreement or a Schedule attached to this
Agreement, respectively.
(h) Whenever in this Agreement the terms "hereof," "herein,"
"hereby", or derivative or similar words are used, such terms refer to this
entire Agreement.
(i) All references herein to "days" in this Agreement are to
consecutive calendar days unless Business Days are specified.
(j) The language in all parts of this Agreement shall in all cases
be construed as a whole according to its fair meaning, strictly neither for
nor against any Party hereto, and without implying a presumption that the
terms thereof shall be more strictly construed against one Party by reason of
the rule of construction that a document is to be construed more strictly
against the Person who itself or through its prepared the same, it being
agreed that representatives of both Parties have participated in the
preparation hereof.
(k) Whenever in this Agreement the singular is used, it shall
include the plural if the context so requires, and whenever the masculine
gender is used in this Agreement, it shall be construed as if the masculine,
feminine or neuter gender, respectively, has been used where the context so
dictates, with the rest of the sentence being construed as if the grammatical
and terminological changes thereby rendered necessary have been made.
1.2.2 Accounting Terms. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given
to them in accordance with GAAP.
ARTICLE 2
GENERAL
2.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company shall be merged with and into the Merger
Subsidiary and the separate existence of the Company shall thereupon cease,
and the Merger Subsidiary shall continue as the surviving corporation in the
Merger (the "Surviving Corporation") under the laws of the State of California
under the name "IPN Communications, Inc." as a wholly-owned subsidiary of
Datalogic. Throughout this Agreement, the term "Merger Subsidiary" shall
refer to the Merger Subsidiary prior to the Merger and the term "Surviving
Corporation" shall refer to the Merger Subsidiary in its status as the
surviving corporation in the Merger.
9
2.2 The Closing. The closing of the Merger (the "Closing") will take place
concurrently with the execution of this Agreement (the "Closing Date"). The
Closing shall take place not later than November 30, 2005, at 10:00 a.m.
Pacific time on the Closing Date, at the offices of Weed & Co., LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other time
or place as the Parties may mutually agree in writing. At or before the
Closing, Shareholder shall deliver or cause to be delivered to Merger
Subsidiary and Datalogic the documents identified in Section 11.6 and Merger
Subsidiary and Datalogic shall deliver or cause to be delivered to the Company
and the Shareholders the documents identified in Section 12.4, and shall make
the payments identified in Section 12.4.
2.3 Effective Time of the Merger. The Merger shall become effective upon
the filing of an agreement of merger by the Surviving Corporation with the
Secretary of State of the State of California (the "California Agreement of
Merger"), in the form of Exhibit 2.3 hereto, pursuant to and in compliance
with this Agreement and Section 1103 of the Corporations Code of the State of
California ("California Corporations Code"). When used in this Agreement, the
term "Effective Time" shall mean the time at which the California Agreement of
Merger shall have been filed and become effective in accordance with the
California Corporations Code.
2.4 Effect of the Merger. The merger shall, from and after the Effective
Time, have all the effects provided by the California Corporations Code. If
at any time after the Effective Time, the Surviving Corporation shall consider
or be advised that any further deeds, conveyances, assignments or assurances
in law or any other acts are necessary, desirable or proper to vest, perfect
or confirm, of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Company to be vested in the Surviving
Corporation, by reason of, or as a result of the Merger, or otherwise to carry
out the purposes of this Agreement, the Company agrees that the Surviving
Corporation and its proper officers and directors shall execute and deliver
all such deeds, conveyances, assignments and assurances in law and in all
things necessary, desirable or proper to best, perfect or confirm title to
such property or rights in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement, and that the proper officers and directors
of the Surviving Corporation are fully authorized in the name of each of the
Company and the Merger Subsidiary or otherwise to take any and all such
actions.
ARTICLE 3
THE SURVIVING CORPORATION
3.1 Certificate of Incorporation. The certificate of incorporation of the
Merger Subsidiary as in effect immediately prior to the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until
thereafter duly amended, except that the name of the Surviving Corporation
shall be "IPN Communications, Inc."
10
3.2 Bylaws. The Bylaws of the Merger Subsidiary as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until thereafter duly amended, copies of which Bylaws have been provided to
the Shareholders prior to the Closing.
3.3 Board of Directors. The directors of the Merger Subsidiary in office
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. Each director
shall serve until the earlier of their respective deaths, resignations or
removals and the time that their respective successors have been duly elected
or appointed and shall have qualified.
3.4 Officers. The officers of the Merger Subsidiary in office immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
immediately after the Effective Time. Each officer shall serve at the
pleasure of the Board of Directors of the Surviving Corporation.
ARTICLE 4
STATUS OF STOCK
4.1 Status of Merger Subsidiary Stock. At the Effective Time, each share of
Merger Subsidiary Common Stock that is issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding unchanged by
reason of the Merger as one fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation.
4.2 Status of Company Stock
4.2.1 At the Effective Time, each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective Time, shall by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive such number of shares of Datalogic
Restricted Stock and cash as set forth in Section 5.2 and Section 5.3 hereof.
4.2.2 As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time, all shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and to exist and each holder of shares of Company Common Stock
shall thereafter cease to have any rights with respect to such Company Common
Stock, except the right to receive the consideration described in Section 5.2
and Section 5.3 hereof upon the surrender of stock certificates representing
such shares of Company Common Stock.
4.2.3 There shall be, at the Effective Time, no shares of Company
Common Stock issued and held in the Company's treasury.
ARTICLE 5
MERGER CONSIDERATION;
OTHER MERGER OBLIGATIONS
5.1 Delivery by Shareholders of Company Common Stock at Closing. In
reliance on the representations, warranties and covenants herein contained and
subject to the terms and conditions of this Agreement, on the Closing Date the
Shareholders (in the number set out below) will sell, convey, transfer and
deliver to the Merger Subsidiary an aggregate of One Thousand (1,000) shares
11
of Company Common Stock, representing all of the issued and outstanding shares
of capital stock of the Company. The Company Common Stock is allocated among
the Shareholders in the following fashion:
Shareholder Number of Shares of Company Common Stock
----------- -----------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇, as Trustees of
the ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Family Trust 670
▇▇▇ ▇▇▇▇▇▇ 330
Total 1,000
5.2 Delivery of Consideration by Merger Subsidiary at Closing. In reliance
on the representations, warranties and covenants herein contained and in
exchange for the sale, conveyance, transfer and delivery of the shares of
Company Common Stock described in Section 5.1 above, in each case subject to
the terms and conditions of this Agreement, on the Closing Date (with respect
to the consideration identified in Section 5.2.2 below) and as soon as
reasonably practicable after the Closing Date (with respect to the Closing
Shares) the Merger Subsidiary shall deliver or cause to be delivered an
aggregate number of shares of Datalogic Restricted equal in value to Two
Hundred Eighty Thousand Dollars ($280,000), based on a price per share equal
to the ten (10) day average closing bid price of Datalogic Common Stock on the
ten (10) days before after the Closing Date, which Datalogic Restricted Stock
shall be allocated among the Shareholders, according to the following dollar
value:
Shareholder Dollar Value of Datalogic Restricted Shares to
----------- be Delivered to Shareholder
---------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
as Trustees of the ▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇ Family Trust $ 187,600
▇▇▇ ▇▇▇▇▇▇ 92,400
Total $ 280,000
The shares of Datalogic Restricted Stock delivered pursuant to clause 5.2.1
hereof are sometimes referred to as "Closing Shares".
5.3 Additional Consideration.
5.3.1 The Shareholders shall participate in an Earn-Out Plan during the
two years following the Closing Date, as follows: The Shareholders, as a
group, may earn up to four hundred fifty thousand dollars ($450,000.00), (the
"Earn-Out Payment"), payable in shares of Datalogic Restricted Stock. All
Earn-Out payments shall be allocated among the Shareholders, according to the
following percentages:
12
Shareholder Percentage of Earn-Out Payments
----------- ------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
as Trustees of the ▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇ Family Trust 67%
▇▇▇ ▇▇▇▇▇▇ 33%
Total 100%
The Earn-Out Payment shall be made, if at all, within two years of the Closing
Date and upon the achievement by the Surviving Corporation of the post-closing
revenue and earnings before interest taxes amortization and depreciation
("EBITDA") milestones, as set forth below. All Parties understand and agree
that both revenue and EBITDA targets must be met to earn any portion of the
Earn-Out Payment. For purposes of the Earn-Out Payment, calculation of the
number of shares of Datalogic Restricted Stock to be delivered shall be based
on the ten (10) day average closing bid price of Datalogic Common Stock on the
five days before and five days after the Earn-Out Payment is earned and
delivered pursuant to the criteria as set forth below.
(a) If the Surviving Corporation reports both (i) revenue of
greater than $1,750,000 and (ii) EBITDA greater than $100,000 for any
consecutive four quarters following the Closing, but still within two (2)
years of Closing, then 25% of the Earn-Out Payment shall be earned and
delivered to the Shareholders in the proportions stated above.
(b) If the Surviving Corporation reports both (i) revenue of
greater than $1,900,000 and (ii) EBITDA greater than $120,000 for any
consecutive four quarters following the Closing, but still within two (2)
years of Closing, then 50% of the Earn-Out Payment shall be earned and
delivered to the Shareholders in the proportions stated above.
(c) If the Surviving Corporation reports both (a) revenue of
greater than $2,050,000 and (b) EBITDA greater than $140,000 for any
consecutive four quarters following the Closing, but still within two (2)
years of Closing, then 75% of the Earn-Out Payment shall be earned and
delivered to the Shareholders in the proportions stated above.
(d) If the Surviving Corporation reports both (a) revenue of
greater than $2,200,000 and (b) EBITDA greater than 160,000 for any
consecutive four quarters following the Closing, but still within two (2)
years of Closing, then 100% of the Earn-Out Payment shall be earned and
delivered to the Shareholders in the proportions stated above.
5.3.2 In addition to the Earn-Out Payment, as set for the Section 5.3.1
above, if the Surviving Corporation reports both (a) revenue of greater than
$4,400,000 and (b) EBITDA of greater than $320,000 in total for the two (2)
years following the Closing, then the Participants in the proportions stated
in Section 5.3.1, shall receive 50% of the amount that the Surviving
Corporations' EBITDA exceeds $320,000 payable in shares of Datalogic
Restricted Stock (the "Earn-Up Payment"). The Earn-Up Payment shall be made,
if at all, within three (3) months following the 2nd anniversary of the
Closing Date. For purposes of the Earn-Up Payment, calculation of the number
of shares of Datalogic Restricted Stock shall be based on the ten (10) day
average closing bid price of Datalogic Common Stock on the five days before
and five days after the 2d anniversary of the Closing Date.
13
5.3.3 There shall be no obligation for the Earn-Out or Earn-Up Payments
unless and until Datalogic meets the revenue and EBITDA targets set forth
above during the two years following the Closing.
5.3.4 Revenue and EBITDA of the Surviving Corporation shall be
calculated in accordance with GAAP, provided however, that EBITDA of the
Surviving Corporation shall not include as expenses of the Surviving
Corporation costs related to corporate overhead, corporate accounting, legal
or other services provided to the Business by Datalogic or any Affiliate of
Datalogic except for (1) an allocation of expenses for in-house counsel
consistent with standard policies and procedures of Datalogic with respect to
all subsidiaries, and (2) a charge of 2% of revenues for general overhead,
consistent with the charges made to other Datalogic subsidiaries. The final
accounting information relied upon in preparing the audited financial
statements of Datalogic and Surviving Corporation shall be determinative for
the purposes of this Agreement.
5.3.5 From the date hereof through the 2nd anniversary of the Closing
Date, (the "Earn-Out Period), Datalogic and the Merger Subsidiary or,
following the Effective Time, the Surviving Corporation, shall use their
respective best efforts to achieve both the revenue and EBITDA targets set
forth above, consistent with application of GAAP (collectively, the "Target
Amounts"). Neither Datalogic, Merger Subsidiary nor, following the Effective
Time, the Surviving Corporation shall modify their respective conduct of
operation in a manner which would cause a reduction in the Target Amounts. In
furtherance of the foregoing, the parties agree to the following guidelines
for the management and operation of the Merger Subsidiary or, following the
Effective Time, the Surviving Corporation during the Earn-Out Period:
(a) any and all arrangements governing the financial and
accounting controls of the Merger Subsidiary or, following the Effective Time,
the Surviving Corporation, including accounting methods and treatment, shall
not be modified from the past procedures of the Company so as to reduce the
amount of either the Earn-Out Payments or the Earn-Up Payment (collectively,
the "Earn-Outs") payable hereunder;
(b) any and all arrangements, methods, contracts, agreements,
sales procedures, and/or obligations governing the sale of services,
equipment, supplies, business opportunities, contractual adjustments and
allowances, which form the basis of gross revenues shall not be modified from
the past procedures of the Company so as to reduce the amount of Earn-Outs
payable hereunder, provided however that the approval of the Datalogic Chief
Financial Officer shall be required for any purchase over Five Thousand
Dollars ($5,000), and the signature of the Datalogic Chief Executive Officer
or Chief Financial Officer shall be required on any contract with a value of
over Five Thousand Dollars ($5,000);
(c) the Merger Subsidiary or, following the Effective Time, the
Surviving Corporation shall maintain all of the Leased Real Property and
tangible personal property of the Company in substantially the same amounts
and condition as such property is on the date hereof;
14
(d) the Merger Subsidiary or, following the Effective Time, the
Surviving Corporation shall use its best efforts to maintain the labor force
of the Company in substantially the same numbers and with substantially the
same qualifications as such labor force is on the date hereof;
(e) Datalogic shall provide the Merger Subsidiary or, following
the Effective Time, the Surviving Corporation with adequate capital and lines
of credit necessary to carry out the Business.
(f) the Merger Subsidiary or, following the Effective Time, the
Surviving Corporation shall otherwise conduct its business in good faith and
substantially the same manner as the Company has heretofore conducted the
Business.
5.4 Payoff of Blubat Obligations to Shareholders. Datalogic and Merger
Subsidiary recognize that Blubat has obligations to the following individuals
in the following amounts:
▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 52,747
▇▇▇ ▇▇▇▇▇▇ $ 12,253
In order to satisfy these obligations, the following shall occur at the
Closing:
5.4.1 Datalogic shall pay in immediately available funds (i) to ▇▇.
▇▇▇▇▇▇▇▇▇, Twenty Six Thousand Three Hundred Twenty Three Dollars and Fifty
Cents ($26,323.50), and (ii) to ▇▇. ▇▇▇▇▇▇, Six Thousand One Hundred Seventy
Six Dollars and Fifty Cents ($6,176.50); and
5.4.2 Datalogic shall execute and deliver promissory notes as follows
(i) to ▇▇. ▇▇▇▇▇▇▇▇▇, a promissory note in favor of ▇▇. ▇▇▇▇▇▇▇▇▇ in the
principal amount of Twenty Six Thousand Three Hundred Twenty Three Dollars and
Fifty Cents ($26,323.50) in the form of Exhibit 5.4.2(i) (the "Datalogic
▇▇▇▇▇▇▇▇▇ Note"); and (ii) to ▇▇. ▇▇▇▇▇▇, a promissory note in favor of ▇▇.
▇▇▇▇▇▇ in the principal amount of Six Thousand One Hundred Seventy Six Dollars
and Fifty Cents ($6,176.50) in the form of Exhibit 5.4.2(ii) (the "Datalogic
▇▇▇▇▇▇ Note").
5.5 Payment of Finder's Fees. In connection with the Merger, Datalogic
shall pay, for the benefit of the Company, a finder's fee due to ▇▇▇ ▇▇▇▇▇▇▇▇
as follows: At the Closing, Datalogic shall pay to ▇▇▇ ▇▇▇▇▇▇▇▇, in
immediately available funds, the sum of Seventeen Thousand Five Hundred
Dollars ($17,500) and shall execute and deliver to ▇▇. ▇▇▇▇▇▇▇▇ a promissory
note in favor of ▇▇. ▇▇▇▇▇▇▇▇ in the principal amount of Seventeen Thousand
Five Hundred Dollars ($17,500) in the form of Exhibit 5.5 (the "Datalogic
McDonald Note"). As soon as practicable after the Closing, Datalogic shall
issue to ▇▇▇ ▇▇▇▇▇▇▇▇, an aggregate number of shares of Datalogic Restricted
Stock equal in value to Twenty Thousand Dollars ($20,000), based on a price
per share equal to the ten (10) day average closing bid price of Datalogic
Common Stock on the ten (10) days before the Closing Date.
5.6 Security for Obligations. In order to secure the obligations of
Datalogic under the Datalogic Guaranty referenced in Section 5.4.3 in favor of
▇▇. ▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇, and the obligations of Datalogic under the
Datalogic Note referenced in Section 5.5 in favor of ▇▇. ▇▇▇▇▇▇▇▇, Datalogic
shall deliver to ▇▇. ▇▇▇▇▇▇▇▇▇, for the benefit of ▇▇. ▇▇▇▇▇▇▇▇▇, Mr.
15
▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇, a pledge agreement in the form of Exhibit 5.6,
whereby Datalogic shall pledge all of its shares in Surviving Corporation as
security for payment and performance of the obligations of Datalogic under the
Datalogic Guaranty and the Datalogic Closing Note, subordinate to the lien of
(the "Datalogic Pledge Agreement").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and each Shareholder represents and warrants to the Merger
Subsidiary and Datalogic that the statements set forth in this Article 6 are
true, correct and complete, subject to the qualifications set forth in the
Schedules to this Article 6 (said Schedules are numbered corresponding to the
numbered Section contained in this Article 6 and the disclosures in any
Schedule shall qualify other Sections in this Article 6 to the extent that it
can be determined from a reasonable reading of the disclosure that such
disclosure is applicable to other Section):
6.1 Corporate Existence and Power.
6.1.1 The Company is a corporation validly existing and in good standing
under the laws of the State of California. The Company has made available to
Datalogic true, complete and correct copies of its Articles of Incorporation
and Bylaws, as currently in effect.
6.1.2 The Company has all requisite corporate power and authority to
own, lease and use its assets and to transact the Business, and holds all
authorizations, franchises, licenses and permits required therefor and all
such authorizations, franchises, licenses and permits are valid and
subsisting. The Company is in good standing in each of the jurisdiction(s)
where it is duly licensed or qualified to do business as a foreign corporation
and in any other jurisdiction where such license or qualification is required,
and is in good standing in each such jurisdiction, except for jurisdictions
where the failure to be so licensed or qualified would not, individually or in
the aggregate, have a Material Adverse Effect.
6.1.3 The Company has the corporate power, authority and capacity to
execute and deliver this Agreement, to perform the Company's obligations
hereunder and in each Exhibit hereto, and to consummate the transactions
contemplated hereby and thereby.
6.2 Valid and Enforceable Agreement; Authorization; Non-contravention.
6.2.1 This Agreement has been duly executed and delivered by the
Company, and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or other
laws affecting creditors rights.
6.2.2 The execution, delivery and performance by the Company of this
Agreement has been authorized and approved by all requisite corporate and
other action on the part of the Company and the Shareholders, and no other
corporate or other approval or authorization is required on the part of
Company or any other person by law or otherwise in order to make this
Agreement and any other such agreement the valid, binding and enforceable
obligations of the Company.
16
6.2.3 The Company is not a party to, subject to or bound by any
Contract, Law or Order which does or would (i) conflict with or be breached or
violated or its obligations thereunder accelerated or increased (whether or
not with notice or lapse of time or both) by the execution, delivery or
performance by the Company or the Shareholders of this Agreement, or (ii)
prevent the carrying out of the transactions contemplated hereby. No permit,
consent, waiver, approval or authorization of, or declaration to or filing or
registration with, any Government or third party is required in connection
with the execution, delivery or performance of this Agreement by the Company,
or the consummation by the Company of the transactions contemplated hereby,
except for any such permits, consents, waivers, approvals, authorizations,
declarations, filings or registrations the failure of which to obtain would
not have a Material Adverse Effect. The transactions contemplated hereby will
not result in the creation of any Lien against the Company or any of its
properties or assets, nor in the cancellation or modification of any license,
agreement or arrangement to which the Company is a party, except for any such
cancellations or modifications which would not, individually or in the
aggregate, produce a Material Adverse Effect.
6.3 Capitalization and Ownership.
6.3.1 The authorized capital stock of the Company, and the name, address
and holdings of the record holder thereof are set forth in Schedule 6.3.1
attached hereto. All of the Company Shares were duly authorized and validly
issued, and are fully paid and non-assessable without restriction on the right
of transfer thereof (other than restrictions on transfer solely pursuant to
applicable state and federal securities laws). Except for the rights of
Merger Subsidiary and Datalogic pursuant to this Agreement, or as otherwise
set forth on Schedule 6.3.1, (i) there are no authorized or outstanding (A)
securities of the Company other than the Company Shares, or (B) warrants,
preemptive rights, other rights, or options with respect to any securities of
the Company, and (ii) neither the Company nor any Shareholder is subject to
any obligation to issue, sell, deliver, redeem, exchange, convert, repurchase,
substitute or otherwise transfer, acquire or retire the Company Shares or any
other securities of the Company.
6.3.2 The Company does not have any subsidiaries. Except as set forth
on Schedule 6.3.2, the Company does not directly or indirectly own or have any
capital stock or other equity interest in any other Person (including, without
limitation, any contractual, joint venture, profit sharing or other similar
quasi-equity arrangement), and there are no Contracts to effect any of the
foregoing to which the Company is a party.
6.4 Company Financial Statements. Attached hereto as Schedule 6.4 are the
Company Financial Statements. To the Knowledge of the Shareholders, the
Company Financial Statements (i) have been prepared from, and are in
accordance with, the books and records of the Company consistently applied,
(ii) are complete and correct and in accordance with such books and records,
and (iii) present fairly the financial position and results of operations of
the Company in all material respects at the dates and for the periods
indicated.
6.5 Events Subsequent to December 31, 2004. Since December 31, 2004,
except as clearly reflected in the Company Financial Statements for the
periods ending March 31, June 30, and September 31, or as set forth on
Schedule 6.5 attached hereto, there has been no:
17
6.5.1 change in the business or condition (financial or otherwise),
operations or results of operations of the Company, or to the Knowledge of the
Shareholders, current prospects, other than changes in the Ordinary Course
(which changes have not, individually or in the aggregate, had a Material
Adverse Effect);
6.5.2 damage, destruction or loss, whether covered by insurance or not,
affecting the tangible assets of the Company which individually exceeds
$25,000 or in the aggregate exceeds $100,000;
6.5.3 material adverse change in the Company's relationship with any of
the suppliers, customers, distributors, employees, consultants, lessors,
licensors, licensees or other third parties;
6.5.4 declaration, setting aside, or payment of any dividend or any
distribution (in cash or in kind) with respect to any securities of the
Company;
6.5.5 sale or direct or indirect redemption, purchase or other
acquisition of securities of the Company;
6.5.6 increase in or commitment to increase compensation, benefits, or
other remuneration to or for the benefit of any employee, shareholder,
director, officer, or agent of the Company, or any benefits granted under any
Plan with or for the benefit of any such employee, director, officer, or
agent, except for increases in salary, wages or benefits in the Ordinary
Course which individually exceeds $25,000 or in the aggregate exceeds
$100,000;
6.5.7 accrual or arrangement, whether direct or indirect, for, or
payment of, bonuses or special compensation of any kind, or any severance or
termination pay, to any present or former officer, director, or employee of
the Company, other than in the Ordinary Course and provided that any such
accrual or arrangement does not individually exceed $25,000 or in the
aggregate exceed $100,000;
6.5.8 labor dispute or activity or proceeding by a labor union or threat
thereof or other event or condition of any character that could have a
Material Adverse Effect;
6.5.9 material transaction entered into or carried out by the Company in
connection with the Business other than in the Ordinary Course;
6.5.10 borrowing or incurrence of any indebtedness (including letters of
credit and foreign exchange contracts), contingent or otherwise, by or on
behalf of the Company or any endorsement, assumption, or guarantee of payment
or performance of any such indebtedness or any Liabilities of any other Person
by or on behalf of the Company other than in the Ordinary Course and provided
that any such borrowing or incurrence of indebtedness does not individually
exceed $25,000 or in the aggregate exceed $100,000;
6.5.11 change made by the Company with respect to its Tax or financial
accounting, or the making of any Tax election;
6.5.12 grant of any Lien (other than a Permitted Lien) with respect to
the assets, properties or rights of the Company;
18
6.5.13 transfer of any material assets, properties or rights (tangible
or intangible) of the Company, other than arm's-length sales, leases, or
dispositions in exchange for not less than the fair market value thereof and
in the Ordinary Course;
6.5.14 issuance by the Company of any security, including without
limitation any option, warrant or right to receive any security;
6.5.15 change in the authorized capital or outstanding securities of the
Company;
6.5.16 payment of any obligation or liability (absolute or contingent)
by the Company, other than current liabilities reflected in or shown on the
Company Financial Statements and current liabilities incurred in the Ordinary
Course;
6.5.17 change in any accounting methods or practices by the Company
(including, without limitation, any change in depreciation or amortization
methods, policies, or rates);
6.5.18 entry into, or amendment, modification, or termination of, any
Material Contracts;
6.5.19 waiver or release of any right or claim of the Company or
cancellation of any debts or claims, except in the Ordinary Course and
provided that any such waiver or release does not individually exceed $25,000
or in the aggregate exceed $100,000;
6.5.20 capital expenditure by the Company individually exceeding $25,000
or in the aggregate exceeding $100,000; and
6.5.21 any agreement by, or Board resolution authorizing, the Company to
do any of the foregoing items.
6.6 Undisclosed Liabilities.
6.6.1 To the Knowledge of the Shareholders, the Company does not have
any Liabilities, except:
(a) those Liabilities identified on the Company Financial
Statements; or
(b) as incurred in the Ordinary Course since the date of the most
recent Company Financial Statements (none of which has had or may reasonably
be expected to have a Material Adverse Effect on the Company except as
described in Schedule 6.6).
6.6.2 To the Knowledge of the Shareholders, except as disclosed herein,
there is no currently existing condition or circumstance which would
reasonably be expected to result in such a Liability which would have a
Material Adverse Effect.
6.7 Taxes.
6.7.1 The Company has filed, or caused to be filed, on a timely basis
all Tax Returns and such Tax Returns are true, correct and complete in all
respects. Without limiting the foregoing, none of the Tax Returns contains
any position that is, or would be, subject to penalties under Section 6662 of
the Code (or any corresponding provisions of state, local or foreign Tax law).
The Company has not entered into any "listed transactions" as defined in
Section 1.6011-4(b) (2) of the Treasury Regulations, and the Company has
properly disclosed all reportable transactions as required by Section 1.6011-4
of the Treasury Regulations.
6.7.2 Schedule 6.7, attached hereto, lists all Tax Returns for periods
up to the Closing Date (whether or not the period ends on such date) that have
not been filed on or before the Closing Date. The Company currently is not
the beneficiary of any extension of time within which to file any Tax Return.
6.7.3 All Taxes due and owing by the Company (whether or not reflected on any
Tax Return) have been timely and fully paid when due and there are no grounds
for the assertion or assessment of additional Taxes against the Company or its
assets.
6.7.4 The Company has timely and properly withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party, including, but not limited to, amounts required to be withheld
under Sections 1441 and 1442 of the Code, or any similar provision under
foreign law.
6.7.5 The Company has filed or caused to be filed with the appropriate
Government entity all unclaimed property reports required to be filed and has
remitted to the appropriate Government entity all unclaimed property required
to be remitted.
6.7.6 There are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon any assets of the Company.
6.7.7 The Company is not a party to or bound by any Tax indemnity, Tax
sharing, Tax allocation or other similar agreement.
6.7.8 The Company (i) is not and never has been a member of an
"affiliated group" within the meaning of Section 1504 of the Code; and (ii)
does not have any Liability for the Taxes of any Person under Treasury
regulation Section 1.1502-6 (or similar provision of state, local or foreign
law) as a transferee or successor, by contract or otherwise.
6.7.9 The Company is not a party to or a partner in any joint venture,
partnership or other arrangement or contract that is, or could be, treated as
a "partnership" for federal income tax purposes.
6.7.10 The Company has not conducted business outside the State of
California in any manner that would subject it to the income tax of a state
other than the State of California. The Company does not have and has not had
a permanent establishment in any foreign country, as defined in any applicable
tax treaty or convention between the United States and such foreign country,
or any other presence in a foreign country that could subject the Company to
income tax in such foreign country.
20
6.7.11 Except as set forth in Schedule 6.7, no federal, state, local or
foreign Tax audits or administrative or judicial Tax proceedings are pending
or being conducted with respect to the Company.
6.7.12 Except as set forth in Schedule 6.7, the Company has not received
from any federal, state, local or foreign Tax authority (including
jurisdictions where the Company has not filed a Tax Return) any (i) notice
indicating an intent to open an audit or other review; (ii) request for
information related to Tax matters; or (iii) notice or deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed by any Tax
authority against the Company.
6.7.13 The Company has not waived any statutes of limitation in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
6.7.14 True, correct and complete copies of all income Tax Returns, Tax
examination reports and statements of deficiencies assessed against, or agreed
to with respect to the Company with respect to the last five (5) years with
the IRS or any taxing authority have been made available to Datalogic.
6.8 Accounts Receivable. The accounts receivable of the Company
(collectively, the "Accounts Receivable") are (to the extent not yet paid in
full) valid, genuine and existing and arose or will have arisen from bona fide
sales of products or services actually made in the Ordinary Course. To the
Knowledge of the Shareholders and except as disclosed in Schedule 6.8, the
Accounts Receivable are not subject to, and the Company has received no notice
of, any counterclaim, set-off, defense or Lien with respect to the Accounts
Receivable. To the Knowledge of the Shareholders, except to the extent of any
reserve therefor on the Company Financial Statements or to the extent paid
prior to Closing, the Accounts Receivable are and will at Closing be fully
collectible. No agreement for deduction, free goods, discount or deferred
price or quantity adjustment has been made with respect to any Accounts
Receivable, except in the Ordinary Course.
6.9 Inventories; Consignment. The inventory held by the Company at any
location as of the Closing consists of a quantity and quality usable and
salable in the Ordinary Course. The Company does not hold any inventory or
materials on consignment or have title to any inventory or materials in the
possession of others except in the Ordinary Course.
6.10 No Breach of Law or Governing Document. The Company is not (i) in
default under or in breach or violation of any Law, or of any provision of its
Articles of Incorporation or Bylaws, or (ii) the provisions of any Government
permit, franchise, or license, which breach or violation of such permit,
franchise, or license would have a Material Adverse Effect on the Company.
Neither the Company nor any Shareholder has received any notice alleging such
default, breach or violation. Neither the execution of this Agreement nor any
Related Agreement, nor the Closing, does or will constitute or result in any
such default, breach or violation.
21
6.11 Litigation.
6.11.1 Except as set forth in Schedule 6.11, there is no suit, claim,
litigation, proceeding (administrative, judicial, or in arbitration, mediation
or alternative dispute resolution), Government or grand jury investigation, or
other action (any of the foregoing, an "Action"), pending or, to the Knowledge
of the Shareholders, threatened, anticipated or contemplated, against the
Company (or against any of Shareholders, ▇▇▇, ▇▇▇▇ or ▇▇▇, solely with respect
to the Company or the Business), involving the Business, or involving any of
the Company's properties, assets, rights or capital stock, or any of its
directors, officers, agents, or other personnel in their capacity as such,
including without limitation any Action challenging, enjoining, or preventing
this Agreement, or the consummation of the transactions contemplated hereby.
6.11.2 The Company is not currently and, to the Knowledge of the
Shareholders, has not been, subject to any Order other than Orders of general
applicability.
6.11.3 To the Knowledge of the Shareholders, the Company is not being
and has not been threatened to be subject to any Action or Order relating to
personal injury, death, or property or economic damage arising from products
sold, licensed or leased and services performed by the Company.
6.12 Owned and Leased Real Property.
6.12.1 There are no interests in real property owned by the Company.
6.12.2 Set forth in Schedule 6.12.2, attached hereto, is a description
of each lease under which the Company is the lessee of any real property
("Leased Real Property"). The Company has made available to Datalogic a true,
correct and complete copy of each lease identified on Schedule 6.12.2. The
premises or property described in such leases are presently occupied or used
by the Company as lessee under the terms of such leases. All rentals due
under such leases have been paid and there exists no default by the Company or
by any other party to such leases under the terms of such leases and no event
has occurred which, upon passage of time or the giving of notice, or both,
would result in any event of default by the Company or by any other party to
such leases, or prevent or limit the Company from exercising and obtaining the
benefits of any rights or options contained therein. The Company has all
right, title and interest of the lessee under the terms of said leases, free
of all Liens other than Permitted Liens identified on Schedule 1.1.56 and, to
the Knowledge of the Shareholders, all such leases are valid and in full force
and effect.
6.12.3 To the Knowledge of the Shareholders, all improvements located
on, and the use presently being made of, the Leased Real Property comply with
the material provisions of all applicable zoning and building codes,
ordinances and regulations and all applicable fire, environmental,
occupational safety and health standards and similar standards established by
Law or standard. To the Knowledge of the Shareholders, the present use and
operation of the Leased Real Property does not constitute a non-conforming use
and is not subject to a variance. To the Knowledge of the Shareholders, there
is no proposed, pending or threatened change in any such code, ordinance,
regulation or standard which would have a Material Adverse Effect on such
improvements.
22
6.12.4 At the Closing, the Company shall have all rights, easements and
agreements necessary for the use and maintenance of water, gas, electric,
telephone, sewer or other utility pipelines, poles, wires, conduits or other
like facilities, and appurtenances thereto, over, across and under the Leased
Real Property. To the Knowledge of the Shareholders, no proceeding is pending
which could adversely affect the zoning classification of the Leased Real
Property.
6.12.5 To the Knowledge of the Shareholders, the Leased Real Property
and the improvements located thereon are in good condition and repair,
ordinary wear and tear excepted.
6.13 Personal Property; Title to Assets.
6.13.1 Schedule 6.13, attached hereto, sets forth a complete and correct
list and brief description of each item of equipment, furniture, fixtures and
other tangible personal property owned or leased by the Company and having an
individual book value in excess of $50,000.
6.13.2 Except with respect to leases set forth in Schedule 6.12.2 and
Schedule 6.14 hereof (or which, by the terms of such Sections, are not
required to be set forth in said Schedules), the Company has good and
marketable title to and is the sole and exclusive owner of all right, title
and interest in and to all of the property used by it or necessary to conduct
its business, including in each case all personal property reflected on the
Company Financial Statements or acquired after the date thereof (except any
personal property subsequently sold in the Ordinary Course), free and clear of
all Liens except for Permitted Liens.
6.14 Personal Property Leases. Set forth in Schedule 6.14, attached hereto,
is a description of each lease having annual lease payments in excess of
$50,000 under which the Company is the lessee of any personal property, and
including the location of such property. The Company has made available to
Datalogic a true, correct and complete copy of each lease identified on
Schedule 6.14. The property described in such leases is presently used by the
Company as lessee in compliance with the terms of such leases. All rentals
due under such leases have been paid and there exists no default by the
Company or, to the Knowledge of the Shareholders, by any other party to such
leases under the terms of such leases and no event has occurred which, upon
passage of time or the giving of notice, or both, would result in any event of
default by the Company or, to the Knowledge of the Shareholders, by any other
party to such leases, or prevent the Company from exercising and obtaining the
benefits of any rights or options contained therein. The Company has all
right, title and interest in the leasehold interests of the lessee under the
terms of said leases, free of all Liens other than Permitted Liens and all
such leases are valid and in full force and effect.
6.15 Necessary Property. The assets owned or leased by the Company
constitute all of the property and property rights used or necessary for the
conduct of the Business in the manner and to the extent presently conducted by
the Company. There exists no condition, restriction or reservation affecting
the title to or utility of such assets of the Company which would prevent the
Surviving Corporation or Datalogic from utilizing such assets, or any part
thereof, after the Closing to the same full extent that the Company might
continue to do so if the transactions contemplated hereby did not take place.
23
6.16 Use and Condition of Property; Location. To the Knowledge of the
Shareholders, all the assets of the Company are in good operating condition
and repair, subject to ordinary and normal wear and tear, as reasonably
required for its use as presently conducted, and conform in all material
respects to all applicable Laws, and no notice of any violation of any Law
relating to any of such property or assets has been received by the Company
except such as have been fully complied with. No property or assets of the
Company, other than inventory in transit or on consignment or bailment, are in
the possession of others and the Company does not hold any property, other
than inventory on consignment.
6.17 Licenses and Permits. The Company possesses all licenses, permits and
other authorizations and Governmental approvals required for the conduct of
the Business in the manner in which it is currently being conducted. Each
such license or permit is valid and in full force and effect and is not
subject to any pending or, to the Knowledge of the Shareholders, threatened or
contemplated administrative or judicial proceeding to revoke, cancel or
declare such license or permit invalid in any respect, except where such
action would not have a Material Adverse Effect on the Business. Upon
Closing, the Company will have all right and authority to conduct its
activities pursuant to such licenses and permits. The Company is in
compliance in all respects with such licenses and permits except where such
non-compliance would have a Material Adverse Effect. No such license or
permit has been, or to the Knowledge of the Shareholders is threatened to be,
revoked, canceled, suspended or materially adversely modified. Neither the
execution of this Agreement nor the Closing does or will constitute or result
in a material default under or violation of any such license or permit.
6.18 Environmental Matters.
6.18.1 There is no Environmental Claim pending or, to the Knowledge of
the Shareholders, threatened or contemplated, against the Company, or pending,
or to the Knowledge of the Shareholders, threatened or contemplated, against
any Person whose Liability for such Environmental Claim the Company has or may
have incurred, retained, succeeded to, or assumed either contractually, by
operation of law or otherwise, relating to the Leased Real Property, and the
Company has received no notice or other communication from any Governmental
agency with respect to any such Liability or alleging or asserting against the
Company or any Affiliate thereof any violation of Environmental Law.
6.18.2 To the Knowledge of the Shareholders, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the handling, manufacture, treatment, storage,
use, generation, release, emission, discharge, presence or disposal of any
Hazardous Materials, either collectively, individually, or severally, that
could form the basis of any Environmental Claim against the Company, or
against any Person whose Liability for any Environmental Claim the Company has
incurred, retained, succeeded to, or assumed either contractually, by
operation of law or otherwise, relating to the Leased Real Property.
6.18.3 To the Knowledge of the Shareholders, there has been no release
of any Hazardous Material on, in, at, under or from the Leased Real Property,
which would or may result in material Liabilities of or to the Company, and
the Company has no Liability for any off-site disposal of any Hazardous
Materials which would or may result in material Liabilities of or to the
Company.
6.18.4 To the Knowledge of the Shareholders: (i) there are no above
ground or underground storage tanks currently or formerly located on any
Leased Real Property or which would or may result in Liabilities which would
or may result in material Liabilities of or to the Company; and (ii) there are
no Hazardous Materials on any Leased Real Property which would or may result
in Liabilities which would or may result in material Liabilities of or to the
Company.
6.19 Contracts and Commitments.
6.19.1 Schedule 6.19 attached hereto lists each of the Contracts of the
Company described below (such Contracts being hereinafter referred to as the
"Material Contracts"), true and complete copies of which have been or will be
provided to Datalogic:
(a) any ongoing contract whereby the Company is obligated to
provide goods or services to any other Person for any fiscal year in excess of
$25,000;
(b) any agreement to act as a reseller for another Person's
products or to purchase goods through a wholesaler;
(c) any Contract to sell products or to provide services to third
parties which (i) the Company knows is at a price which would result in a net
loss on the sale of such products or provision of such services or (ii)
contains terms or conditions which the Company cannot reasonably expect the
Company to satisfy or fulfill in all material respects;
(d) any Contract pursuant to which the Company is the lessor or
sublessor of, or permits any third party to operate, any real or personal
property;
(e) any revocable or irrevocable power of attorney granted to any
Person for any purpose whatsoever;
(f) any loan agreement, indenture, promissory note, conditional
sales agreement, mortgage, security agreement, pledge, letter of credit
arrangement, guarantee, endorsement, assumption, indemnity, surety, foreign
exchange contract, accommodation or other similar type of Contract;
(g) any other Contract which involves (i) a sharing of profits,
(ii) future payments of $25,000 individually or $50,000 or more in the
aggregate per annum to other persons, or (iii) any joint venture, strategic
alliance, partnership or similar Contract;
(h) any sales agency, sales representation, consultant,
distributorship or franchise Contract that is not terminable unilaterally by
the Company without penalty within sixty (60) days;
(i) any Contract providing for the payment of any cash or other
benefits upon the sale or change of control of the Company or a substantial
portion of its assets;
25
(j) any Contract prohibiting or limiting competition, prohibiting
or limiting the Company from freely engaging in any business anywhere in the
world, or prohibiting or limiting the disclosure of trade secrets or other
confidential or proprietary information;
(k) any Contract not made in the Ordinary Course (irrespective of
whether such Contract was permitted to be left off of any other Schedule
hereto by virtue of the monetary value thereof or otherwise);
(l) any Contract pursuant to which the Company has or has agreed
to acquire, redeem, repurchase, or dispose of any securities or acquire or
dispose of any business, product line or the like;
(m) any shareholder agreements or agreements relating to the
issuance of any securities of the Company and/or the granting of registration
rights with respect thereto; and
(n) to the extent not included within Section 6.19.1(a) through
(m) above, any Contract not made in the Ordinary Course of the Company's
Business, or otherwise requiring special authorization by the Company's Board
of Directors, regardless of monetary value.
6.19.2 To the Knowledge of the Shareholders, the Company has not
received any notice of any intention to terminate, repudiate, rescind or
disclaim any Material Contract.
6.20 Validity of Contracts. Each of the Material Contracts is a valid,
binding and enforceable obligation of the Company and, to the Knowledge of the
Shareholders, the other parties thereto, in accordance with its terms and
conditions, except as enforceability may be limited by applicable bankruptcy,
insolvency or other laws affecting creditors rights. The Company is not, to
the extent it would create a current or future Liability of Datalogic and/or
the Surviving Corporation, the Company has not been, and to the Knowledge of
the Shareholders, no other party to a Material Contract is, in material breach
or violation of or default under any Material Contract, and no event has
occurred that, through the passage of time or the giving of notice, or both,
would constitute, and neither the execution of this Agreement nor the Closing
hereunder do or will constitute or result in, such a breach, violation or
default on the part of any party thereto, cause the acceleration of any
Liability of the Company or any other party thereto, or the creation of a Lien
upon any assets of the Company or any of the Company Shares thereby, or
require any consent thereunder. The Company has provided or made available to
Datalogic a true, complete and accurate copy of each Material Contract.
6.21 Intellectual Property. Schedule 6.21 attached hereto sets forth all
registered and unregistered Intellectual Property owned or claimed by the
Company (excluding non-proprietary information, know-how or processes
otherwise available to the industry or public or rights obtained pursuant to
licenses associated with software and other Intellectual Property generally
made available for purchase or use by the industry or the public) and
accurately identifies, where applicable, the following for each item
applicable to such registered Intellectual Property: the filing date, issue
date, classification of invention or goods or services covered, country of
origin, licensor, license date, licensed subject matter, territorial
limitations and the degree of exclusivity of use.
26
6.21.1 Schedule 6.21.1 attached hereto sets forth a complete and
accurate list, showing in each case, where applicable, the registered owner,
title (in the case of patents), ▇▇▇▇, applicable jurisdiction, application
number, registration number and date of filing or registration (if any)) of
all (i) patents, (ii) trademarks, trade names, service marks and assumed or
fictitious names currently or previously used by the Company during the past
three (3) years, (iii) material Internet domain names currently or previously
used by the Company during the past three (3) years, (iv) registered or
claimed copyrights, and (v) material software (excluding software and other
Intellectual Property generally made available for purchase or use by the
industry or the public), in each case which are owned by the Company.
6.21.2 Schedule 6.21.2 attached hereto sets forth a complete and
accurate list and description of all material Contracts pursuant to which the
Company uses or grants others the right to use any Intellectual Property,
including software of the Company (excluding non-proprietary information,
know-how or processes otherwise available to the industry or public or rights
obtained pursuant to licenses associated with software and other Intellectual
Property generally made available for purchase or use by the industry or the
public).
6.21.3 The Company either owns or has the valid right to use all
Intellectual Property (excluding non-proprietary information, know-how or
processes otherwise available to the industry or public or rights obtained
pursuant to licenses associated with software and other Intellectual Property
generally made available for purchase or use by the industry or the public)
currently used in connection with the Business.
6.21.4 All of the registrations or applications set forth in Schedule
6.21.1 are valid and subsisting, in full force and effect, and have not
expired or been canceled or abandoned; and there is no pending or, to the
Knowledge of the Shareholders, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the Intellectual Property described in Schedule 6.21.1.
6.21.5 The licenses or sublicenses granted by the Company to Third
Parties, and the terms and conditions of any licenses or sublicenses granted
to the Company by Third Parties, in each case as described in Schedule 6.21.2,
are valid and binding obligations of the Company, enforceable in accordance
with its terms against the Company, except as enforceability may be limited by
applicable bankruptcy, insolvency or other laws affecting creditors rights,
and, to the Knowledge of the Shareholders, against each other Party thereto,
in accordance with its respective terms. There currently exists no event or
condition which will result in a material violation or breach of, or
constitutes (with or without due notice or lapse of time or both) a default
by, the Company under any such agreement.
6.21.6 To the Knowledge of the Shareholders, the manufacture,
advertising, sale or use of any products manufactured or sold by the Company
did not and does not infringe (nor has any claim been made that any such
action infringes) the intellectual property rights of any Third Party, and the
Company has not received any notice of a Third Party claim or suit, (i)
alleging that the Company's activities or the conduct of the business of the
Company infringes or constitutes the unauthorized use of the intellectual
property rights of any third party, or (ii) challenging the ownership, use,
validity or enforceability of any of the Intellectual Property.
6.21.7 To the Knowledge of the Shareholders, no Person (other than the
Company) is infringing on the Intellectual Property (excluding non-proprietary
information, know-how or processes otherwise available to the industry or
public or rights obtained pursuant to licenses associated with software and
other Intellectual Property generally made available for purchase or use by
the industry or the public) or upon the rights of the Company therein.
6.21.8 The Company owns or has the right to use all intellectual property set
forth in Schedule 6.21.1 and Schedule 6.21.2.
27
6.22 Insurance. The Company has at all times since December 31, 2004,
maintained insurance as required by Law or under any agreement to which the
Company is or has been a party, including without limitation general
comprehensive liability, unemployment and workers' compensation coverage.
Schedule 6.22 attached hereto sets forth all policies of insurance maintained
by the Company, together with the amount of coverage for each policy, and
indicates which of such insurance policies are claims-made policies and which
of such policies are occurrence-based policies. All of such insurance
policies are in full force and effect (with respect to the applicable coverage
periods), and the Company is not in default with respect to any of its
respective obligations under any of such insurance policies.
6.23 Employees, Officers, Directors and Consultants.
6.23.1 Schedule 6.23.1 attached hereto contains a complete and accurate
list of the following information for each director, officer and employee of
the Company, including each employee on leave of absence or layoff status:
name; job title; current compensation paid or payable and any change in
compensation since December 31, 2004, and vacation accrued.
6.23.2 Schedule 6.23.2 attached hereto is a list of: (i) all current
paid consultants to the Company, and (ii) all retirees and terminated
employees of the Company for whom the Company has any benefits responsibility
or other continuing or contingent Liability, together, with the current rate
of compensation, fees and benefits (if any) payable to each such Person and
any incentive or bonus payments.
6.23.3 Except as set forth on Schedule 6.23.3 attached hereto, the
Company is not indebted to any Shareholder, nor any director, officer,
employee or agent of the Company, except for amounts due as normal salaries,
wages, fees, employee benefits, and bonuses and in reimbursement of ordinary
expenses on a current basis not in excess of $1,000 in each single instance,
or $10,000 in the aggregate.
6.23.4 No officer, director, employee or consultant of the Company is
indebted to the Company for any amount in excess of $1,000 in each single
instance and $10,000 in the aggregate, other than for advances for ordinary
business expenses on a basis consistent with past practices.
6.23.5 All payments to agents, consultants and others made by the
Company have been in payment of bona fide fees and commissions and not as
bribes, kickbacks or as otherwise illegal payments, including, without
limitation, any payment in violation of the Foreign Corrupt Practices Act (15
U.S.C. 78dd, et seq.). All such payments have been made directly to or for
the account of the parties providing the goods or services for which such
payments were made,
28
and no such payment has been paid in a manner intended to avoid currency
controls or any Party's Tax reporting or payment obligations. The Company has
properly and accurately reflected on its books and records: (i) all
compensation paid to and perquisites provided to or on behalf of its agents
and employees; and (ii) all compensation and perquisites that are due and
payable to such persons, but which have not been paid or provided as of the
Closing Date. Such compensation and perquisites have been properly and
accurately reflected in the Company Financial Statements, records and
government filings of the Company, to the extent required by Law.
6.23.6 Except as set forth on Schedule 6.23.6 attached hereto, no former
or current employee or current or former officer or director of the Company is
a party to, or is otherwise bound by, any agreement, including any
confidentiality, non-competition, or proprietary rights agreement, between
such employee or officer or director and any other Person that in any way
adversely affected, affects, or will affect (i) the performance of his or her
duties as an employee or officer or director of the Company, or (ii) the
ability of the Company to conduct the Business, which agreement cannot be
terminated without further Liability on thirty (30) days notice by the
Company. Prior to the Closing, the Company shall have provided to Datalogic
the executed copies of any agreement set forth on Schedule 6.23.6.
6.24 Bank Accounts of the Company. Set forth on Schedule 6.24 attached
hereto, is a list of the locations and numbers of all bank accounts,
investment accounts and safe deposit boxes maintained by or on behalf of the
Company, together with the names of all persons who are authorized signatories
or have access thereto or control thereunder. The Company is not a party to
any lock-box or other similar arrangement, and all funds received by the
Company in the Ordinary Course are entitled to be, and are, deposited in its
operating account(s) identified on said Schedule 6.24.
6.25 Labor Matters.
6.25.1 The Company is not a party to or bound by any collective
bargaining, works council, union representation or similar agreement;
6.25.2 There is no controversy existing, pending or, to the Knowledge of
the Shareholders, threatened with any association or union or collective
bargaining representative of the employees of the Company;
6.25.3 There is no charge or complaint relating to unfair labor
practices pending against the Company, nor is there any labor strike, work
stoppage, material grievance or other labor dispute pending or, to the
Knowledge of the Shareholders, threatened against the Company;
6.25.4 To the Knowledge of the Shareholders, the Company is not and has
not engaged in any unfair labor practice and there is no pending or threatened
claim, investigation or other proceeding before any tribunal (including,
without limitation, the National Labor Relations Board, or the Equal
Employment Opportunity Commission), and all state, local, foreign or other
similar agencies responsible for the enforcement of labor or employment laws;
6.25.5 There is no labor strike, dispute, slowdown, or stoppage pending
or, to the Company's Knowledge, threatened against the Company;
29
6.25.6 To the Knowledge of the Shareholders, no current or former
employee of the Company has any claim against the Company on account of or for
(i) overtime pay, other than overtime pay for the current payroll period and
which the Company agrees is payable, (ii) wages or salary (excluding current
bonus accruals and amounts accruing under pension and profit sharing plans)
for any period other than the current payroll period and which the Company
agrees is payable, (iii) vacation, time off or pay in lieu of vacation or time
off, other than that earned in respect of the current fiscal year and which
the Company agrees is payable, or (iv) any violation of any Law relating to
minimum wages or maximum hours of work;
6.25.7 No claim has been made against the Company that remains
outstanding for breach of any contract of employment or for services or for
severance or redundancy payments or protective awards or for compensation for
unfair dismissal or for failure to comply with any Law with regard to
employment rights or in relation to any alleged sex or race discrimination or
for any other Liability accruing from the termination or variation of any
contract of employment or for services, nor is Shareholder aware that any such
claim has been threatened or is pending;
6.25.8 There is no contract of service in force between the Company and
any of its directors, officers or employees which is not terminable by the
Company without compensation or other consideration on less than three months'
notice given at any time or which provides for compensation or other
consideration specifically in connection with the transactions contemplated by
this Agreement; and
6.25.9 The Company is not a party to (i) any outstanding employment,
consulting or management Contracts with any Person that are not terminable at
will, or that provide for the non-discretionary payment of any bonus or
commission, or (ii) any Contract, policy, guideline or practice that does or
would require it to pay termination or severance pay to salaried, non-exempt
or hourly employees (other than as required by applicable Law).
6.26 Employee Benefit Matters. Except as set forth in Schedule 6.26, the
Company has no Plan, whether or not subject to ERISA, which the Company or its
ERISA Affiliates maintains, or to which the Company or its ERISA Affiliates
contributes, or has any obligation to contribute.
6.27 Product and Service Warranties. Set forth in Schedule 6.27, attached
hereto, are the standard forms of product and service warranties and
guarantees used by the Company and copies of all other outstanding product and
service warranties and guarantees. No oral product or service warranties or
guaranties have been authorized or made containing terms less favorable to the
Company than the terms of the forms of product and service warranties and
guarantees set forth in Schedule 6.27. Since December 31, 2004, no product or
service warranty or similar claims have been made against the Company except
routine claims as to which losses and expenses in respect of such service
costs and repair or replacement of merchandise do not and will not exceed the
amount of the reserve for warranties on the Company Financial Statements, or,
if no such reserve exists, $50,000 in the aggregate.
6.28 Product Liability Claims. The Company has not received any written
notice or information relating to any claim or allegation of personal injury,
death, or property or economic damages, any claim for punitive or exemplary
damages, any claim for contribution or indemnification, or any claim for
injunctive relief in connection with or involving any service
30
provided or any product designed, manufactured, serviced, produced, modified,
distributed or sold by or on behalf of the Company, resulting from an alleged
defect in design, manufacture, materials or workmanship, performance, or any
alleged failure to warn, or from any alleged breach of implied warranties or
representations, or any alleged noncompliance with any applicable Laws
pertaining to products liability matters, other than notices or claims that
have been settled or resolved.
6.29 Books and Records and Financial Controls.
6.29.1 True, correct and complete copies of the books of account, stock
record books, minute books, bank accounts, and other corporate records solely
relating to the Company (where necessary, redacted to exclude information not
solely related to the Company) have been made available to Datalogic and such
books and records have been maintained in accordance with good business
practices consistently applied. The minute book of the Company contains
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Board of Directors, and any special committees
of the Board of Directors of the Company. At the Closing, all of those books
and records will be in the possession of the Company.
6.29.2 The Company uses reasonable efforts to establish proper and
adequate internal accounting controls which provide reasonable assurance that
(i) transactions are executed with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of the financial
statements of the Company and to maintain accountability for the Company's
assets; (iii) access to the Company's assets is permitted only in accordance
with management's authorization; (iv) the reporting of the Company's assets is
compared with existing assets at regular intervals; and (v) accounts, notes
and other receivables and inventory are recorded accurately, and proper and
adequate procedures are implemented to effect the collection thereof on a
current and timely basis.
6.30 Customers and Suppliers. Schedule 6.30 attached hereto sets forth a
complete and correct list of (a) the five (5) largest suppliers by dollar
volume of the Company and the aggregate dollar volume of purchases by the
Company from such suppliers during the immediately preceding twelve (12)
months; (b) the top five (5) customers of the Company by dollar volume of
purchase during the immediately preceding twelve (12) months; and (c) any
provider of goods or services material to the Business as currently being
conducted, as to which such provider is the sole source of such good or
service, or where the loss of such supplier would result in a Material Adverse
Effect, if any. To the Knowledge of the Shareholders, the Company has not
received any notice or indication that any of the persons listed on Schedule
6.30 will (i) cease doing business with the Company, or (ii) materially reduce
the volume of such business which such person did during the immediately
preceding twelve (12) months.
6.31 Propriety of Past Payments. Except for the finder's fee due to ▇▇▇
▇▇▇▇▇▇▇▇ as set forth in Section 5.5, which shall be satisfied in full by
means of the payment of cash and issuance of Datalogic Restricted Stock as set
forth therein, no finder's fee or other payment has been, or will be, made by
or on behalf of the Company in respect of, or in connection with, any
commitment to any person, firm, corporation or other entity which is not a
party to such Contract or commitment. No funds or assets of the Company have
been used for illegal purposes; no
31
unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in its books and records; no
false or artificial entry has been made in the books and records of the
Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such
payment; and the Company has not made, directly or indirectly, any illegal
contributions to any political party or candidate, either domestic or foreign.
6.32 Change in Ownership. To the Knowledge of the Shareholders, neither the
Merger, nor the consummation of the other transactions contemplated by this
Agreement, will cause any Material Adverse Effect upon the Business,
operations or financial condition of the Company, or result in the loss of the
benefits of any relationships it has with any customer, supplier, employee,
independent contractor or other business relationship.
6.33 Guarantees. The Company is not a guarantor, indemnitor, surety or
accommodation party or, to the Knowledge of the Shareholders, otherwise liable
for any indebtedness of any other Person, firm or corporation except as
endorser of checks received and deposited in the Ordinary Course.
6.34 Accuracy of Information. To the Knowledge of the Shareholders, none of
the representations, warranties or statements of the Company or any
Shareholder contained in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
any of such representations, warranties or statements in this Agreement or in
any Schedule or Exhibit hereto not misleading.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
REGARDING MERGER SUBSIDIARY
The Merger Subsidiary and Datalogic represent and warrant to the
Shareholders that the statements set forth in this Article 7 are true, correct
and complete.
7.1 Corporate Existence and Power.
7.1.1 Merger Subsidiary is a corporation, validly existing and in good
standing under the laws of the State of Delaware.
7.1.2 Merger Subsidiary has all requisite corporate power and authority
to own and use its assets and to transact the business in which it is engaged,
and holds all franchises, licenses and permits required therefor. Upon the
filing of a qualification certificate to do business in California after the
Closing Date, Merger Subsidiary will be duly licensed or qualified to do
business as a foreign corporation in California and will be duly licensed and
in good standing in each other jurisdictions where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business of the Merger Subsidiary.
7.1.3 Merger Subsidiary has the corporate power, authority and capacity
to enter into this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby.
7.1.4 Merger Subsidiary is not a party to, subject to or bound by any
Contract, Law or Order which would (i) be breached or violated or its
obligations thereunder accelerated or increased (whether or not with notice or
lapse of time or both) by the execution or delivery by Merger Subsidiary of
this Agreement or the performance by Merger Subsidiary of the transactions
contemplated by this Agreement, or (ii) prevent the carrying out of the
transactions contemplated hereby. Except as otherwise provided for herein, no
waiver or consent of any third Person is required for the execution of this
Agreement by Merger Subsidiary or the consummation by Merger Subsidiary of the
transactions contemplated hereby.
7.2 Valid and Enforceable Agreement; Authorization. This Agreement
constitutes a legal, valid and binding obligation of Merger Subsidiary,
enforceable against it in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general principles of equity. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of Merger Subsidiary.
32
7.3 Capitalization and Ownership. Merger Subsidiary is a wholly-owned
subsidiary of Datalogic. Datalogic owns all issued and outstanding common
stock of Merger Subsidiary, and there are no other shares of capital stock of
Merger Subsidiary issued and outstanding. There are no authorized or
outstanding warrants, preemptive rights, other rights, or options with respect
to any securities of Merger Subsidiary, and neither Datalogic or Merger
Subsidiary is subject to any obligation to issue, sell, deliver, redeem,
exchange, convert, repurchase, substitute or otherwise transfer, acquire or
retire any other securities of Merger Subsidiary.
7.4 Consents and Approvals. The execution, delivery and performance by
Merger Subsidiary has been authorized and approved by all requisite corporate
and other action on the part of the Company and its sole stockholder,
Datalogic, and Merger Subsidiary is not required to obtain any other consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal or state governmental authority,
regulatory or self regulatory agency, or other Person in connection with the
execution, delivery and performance by Merger Subsidiary of this Agreement,
other than (i) the filing of the Delaware Certificate of Merger, as set forth
in Section 2.3, and (ii) any filings, notices or registrations under
applicable state securities laws.
7.5 Investment Company. Merger Subsidiary is not, and is not controlled by
or under common control with an affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
7.6 Broker's Fees. No fees or commissions or similar payments with respect
to the transactions contemplated by this Agreement have been paid or will be
payable by Merger Subsidiary to any broker, financial advisor, finder,
investment banker, or bank. The Shareholders shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section 7.6 that may be
due in connection with the transactions contemplated by this Agreement.
33
7.7 Financial Ability. Merger Subsidiary is financially able to consummate
the transactions contemplated by this Agreement.
7.8 Solvency. As of the date hereof and the Closing, and the Effective Time
(both before and after giving effect to the transactions contemplated by this
Agreement), Merger Subsidiary (a) is and shall be solvent; (b) can and shall
be able to meet its Liabilities as they become due (including the obligations
contained in this Agreement); and (c) has or will have sufficient funds or
binding credit arrangements available to it to meet and pay its Liabilities
under this Agreement to which it is a party.
7.9 Litigation. There is no Action pending or, to Merger Subsidiary's
knowledge, threatened, anticipated or contemplated, against Merger Subsidiary,
involving Merger Subsidiary's business, or involving any of Merger
Subsidiary's properties, assets, rights or capital stock, or any of its
directors, officers, agents, or other personnel in their capacity as such,
including without limitation any Action challenging, enjoining, or preventing
this Agreement, or the consummation of the transactions contemplated hereby.
7.10 Accuracy of Information. To Merger Subsidiary's knowledge, none of the
representations, warranties or statements pertaining to Merger Subsidiary
contained in this Agreement contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make any of such
representations, warranties or statements in this Agreement or in any Schedule
hereto not misleading.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
REGARDING DATALOGIC
The Merger Subsidiary and Datalogic represent and warrant to the
Shareholders that the statements set forth in this Article 8 are true, correct
and complete, except for events, transactions or occurrences contemplated or
required by this Agreement, or set forth on any Schedule hereto.
8.1 Corporate Existence and Power.
8.1.1 Datalogic is a corporation, validly existing and in good standing
under the laws of the State of Delaware.
8.1.2 Datalogic has all requisite corporate power and authority to own
and use its assets and to transact the business in which it is engaged, and
holds all franchises, licenses and permits required therefor. Datalogic is
duly licensed or qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such license or qualification is
required except for jurisdictions where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.
34
8.1.3 Datalogic has the corporate power, authority and capacity to enter
into this Agreement, to perform its obligations hereunder, and to consummate
the transactions contemplated hereby.
8.1.4 Datalogic is not a party to, subject to or bound by any Contract,
Law or Order which would (i) be breached or violated or its obligations
thereunder accelerated or increased (whether or not with notice or lapse of
time or both) by the execution or delivery by Datalogic of this Agreement or
the performance by Datalogic of the transactions contemplated by this
Agreement, or (ii) prevent the carrying out of the transactions contemplated
hereby. Except as otherwise provided for herein, no waiver or consent of any
third Person is required for the execution of this Agreement by Datalogic or
the consummation by Datalogic of the transactions contemplated hereby.
8.2 Valid and Enforceable Agreement; Authorization. This Agreement
constitutes a legal, valid and binding obligation of Datalogic, enforceable
against it in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general principles of equity. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized, approved and ratified by all necessary action on
the part of Datalogic.
8.3 Authorization and Validity, Issuance of Closing Shares. The Closing
Shares will be validly issued, fully paid and non-assessable, free and clear
of all liens, encumbrances and rights of first refusal, other than liens and
encumbrances created by the Shareholders and will not be subject to any
preemptive or similar rights. Assuming the accuracy of the representations
and warranties of the Shareholders as set forth in Section 9.5, the issuance
by Datalogic of the Closing Shares is exempt from registration under the
Securities Act.
8.4 Consents and Approvals. Datalogic is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal or state governmental
authority, regulatory or self regulatory agency, or other Person in connection
with the execution, delivery and performance by Datalogic of this Agreement.,
other than any filings, notices or registrations under applicable state
securities laws.
8.5 Broker's Fees. No fees or commissions or similar payments with respect
to the transactions contemplated by this Agreement have been paid or will be
payable by Datalogic to any broker, financial advisor, finder, investment
banker, or bank, except (1) as set forth in Section 5.5, pursuant to which
Datalogic is paying certain finder's fees for the benefit of the Company, and
(2) Datalogic's obligation to pay a finder's fee to Core Capital with respect
to the transactions contemplated herein. The Shareholders shall have no
obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section 8.5
that may be due in connection with the transactions contemplated by this
Agreement.
35
8.6 Representations Relating to Qualification of the Merger as a Tax-Free
Reorganization.
8.6.1 Neither Datalogic nor the Merger Subsidiary (x) is an "investment
company" as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code; (y) has
a present plan or intention to liquidate the Surviving Corporation or to merge
the Surviving Corporation with or into any other corporation or entity, or to
sell or otherwise dispose of the stock of the Surviving Corporation, or to
cause the Surviving Corporation to sell, distribute or otherwise dispose of
its assets, all except in the ordinary course of business or if such
liquidation, merger or disposition is described in Section 368(a)(2)(C) or
Treasury Regulation Section 1.368-2(d)(4) or Section 1.368-2(k); or (z) has a
present plan or intention, following the Merger, to issue any additional
shares of stock of the Surviving Corporation or to create any new class of
stock of the Surviving Corporation.
8.6.2 The Merger Subsidiary is a wholly-owned subsidiary of Datalogic.
8.6.3 Immediately prior to the Merger, Datalogic will be in control of
Merger Subsidiary within the meaning of Section 368(c) of the Code.
8.6.4 Datalogic has no present plan or intention to reacquire any of the
Closing Shares.
It is Datalogic's present intention that following the Merger, the Surviving
Corporation will continue the Company's historic business or use a significant
portion of the Company's historic business assets in a business as required by
Section 368 of the Code and the Treasury Regulations promulgated thereunder.
8.7 Financial Ability. Datalogic is financially able to consummate the
transactions contemplated by this Agreement.
8.8 Solvency. As of the date hereof and the Closing, and the Effective Time
(both before and after giving effect to the transactions contemplated by this
Agreement), Datalogic: (a) is and shall be solvent; (b) can and shall be able
to meet its Liabilities as they become due (including the obligations
contained in this Agreement); and (c) has or will have sufficient funds or
binding credit arrangements available to it to meet and pay its Liabilities
under this Agreement to which it is a party.
8.9 Litigation. There is no Action pending or, to Datalogic's knowledge,
threatened, anticipated or contemplated, against Datalogic, involving
Datalogic's business, or involving any of Datalogic's properties, assets,
rights or capital stock, or any of its directors, officers, agents, or other
personnel in their capacity as such, including without limitation any Action
challenging, enjoining, or preventing this Agreement, or the consummation of
the transactions contemplated hereby.
8.10 Accuracy of Information. To Datalogic's knowledge, none of the
representations, warranties or statements of Datalogic contained in this
Agreement contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make any of such representations,
warranties or statements in this Agreement or in any Schedule hereto not
misleading.
36
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants to Merger Subsidiary
and to Datalogic that, as of the date of this Agreement and the Closing, the
statements contained in this Article 9 are true and correct except for events,
transactions or occurrences contemplated or required by this Agreement, or set
forth on any Schedule hereto:
9.1 Authorization. The Shareholders each have full power and capacity to
enter into, execute and perform this Agreement, which Agreement, once executed
by the Shareholders, shall be the valid and binding obligation thereof,
enforceable against each of them by any court of competent jurisdiction in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or other laws affecting creditors rights.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of each of the Shareholders and
the Company.
9.2 No Violation. None of the Shareholders are bound by or subject to any
contract, agreement, law, court order or judgment, administrative ruling,
regulation or any other item which prohibits or restricts them from entering
into and performing this Agreement in accordance with its terms, or requiring
the consent of any Third Party prior to the entry into or performance of this
Agreement in accordance with its terms by them.
9.3 Title to the Company Shares. Schedule 6.3.1 attached hereto correctly
sets forth next to Shareholder's name and information the number of Company
Shares owned by Shareholders of record and beneficially, which Company Shares
constitute the only securities of the Company issued to Shareholders except as
otherwise set forth on said Schedule 6.3.1. Shareholders have valid and
marketable title in and to the Company Shares identified as belonging thereto.
Upon consummation of the Merger as contemplated herein, there will be no
securities of the Company issued and outstanding.
9.4 Independent Representation. Each Shareholder has been advised to
consult with his or her own attorney regarding legal matters concerning the
Merger, and with a tax advisor regarding the tax consequences thereof.
9.5 Securities Matters. The Shareholders agree and acknowledge that (i) the
Shareholders will acquire the Closing Shares for their own account without any
view to the distribution thereof except in accordance with the Securities Act
and all applicable state securities or "blue sky" laws, (ii) such Closing
Shares must be held indefinitely unless subsequently registered under the
Securities Act and all applicable state securities and "blue sky" laws or
unless an exemption from such registration is available; (iii) the Closing
Shares will not be registered under the Securities Act on the grounds that the
offering and sale thereof contemplated by this Agreement will be exempt from
registration pursuant to Regulation D promulgated pursuant to the Securities
Act and that Merger Subsidiary's and Parent's reliance upon such exemption is
predicated upon the representations of the Shareholders set forth herein, (iv)
each Shareholder represents that he or she has the requisite knowledge,
experience and sophistication in financial
37
and business matters such that he or she is capable of fully and completely
evaluating the merits and risks inherent in the transactions contemplated by
this Agreement, (v) each Shareholder is an "accredited investor" as that term
is defined in Rule 501(c) of Regulation D of the Securities Act, and (vi) the
Shareholders' primary residence is at the address identified in Schedule
6.3.1. Each Shareholder further acknowledges and agrees that "stop transfer"
instructions shall be placed against the Closing Shares on the transfer books
of Datalogic's stock transfer agent until such time as such Closing Shares are
available for resale in accordance with all applicable law and that the
certificates evidencing the Closing Shares shall bear the following legend:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
or under any applicable state securities laws and neither
the Shares nor any interest therein may be sold, transferred,
pledged or otherwise disposed of in the absence of such
registration or an exemption from registration under such
Act and the rules and regulations thereunder and in the
absence of registration or an exemption from registration
under any applicable state securities laws.
ARTICLE 10
ADDITIONAL COVENANTS OF THE PARTIES
10.1 Confidentiality. Each Party acknowledges that, during the course of due
diligence, such Party has and will become aware of confidential information
and documents of the other Parties, and that its use of such confidential
information and documents, or communication of such information to third
parties, could be detrimental to the other Parties. Each Party covenants that
prior to Closing all information and documents concerning the other Parties
reviewed by it or its representatives in connection with this Agreement or the
transactions contemplated hereby (collectively, "Confidential Information")
shall be maintained in confidence and shall not be disclosed or used by it or
its representatives without the other Parties' prior written consent, unless
the covenanting Party clearly demonstrates that such information is (a)
publicly available by no act or omission of the covenanting Party or otherwise
not in violation of any confidentiality or other agreement (including the
confidentiality provisions or applicable law), (b) in the Party's possession
through disclosure by a third party by no act or omission of the covenanting
Party or in violation of any confidentiality or other agreement (including the
confidentiality provisions or applicable Law, or (c) required to be disclosed
pursuant to Order or Law. In the event that the Party or any of its
representatives becomes legally compelled to disclose any such information or
documents as referred to in this Section 6.1, the Party shall, to the extent
reasonably practicable, provide the other Parties with prompt written notice
before such disclosure to allow the other Parties to (i) either seek a
protective order, at the other Parties' expense, (ii) seek another appropriate
remedy preventing or prohibiting such disclosure, or (iii) waive compliance
with the provisions of this Section 6.1. With respect to information and
documents related to the other Parties, at the other Parties' request, in the
event that the Closing shall not occur, or as soon as practicable following
termination of this Agreement, (a) the Party shall, and shall cause its
representatives to, promptly destroy all information and documents concerning
the other Parties (including any copies thereof or extracts therefrom); and
(b) an officer of the Party shall certify to the other Parties such
destruction
38
10.2 Public Disclosures. Each Shareholder and the Company understand that
Datalogic is a publicly-listed corporation, and that the disclosure of
information concerning Datalogic and its business affairs and financial
condition is strictly regulated by the SEC and other legal and administrative
bodies. Accordingly, each Shareholder and the Company hereby agrees to take
reasonable measures not to make or disseminate any public statement, press
release or other disclosure concerning this Agreement, any Schedule or Exhibit
hereto, or the several transactions and relationships contemplated hereby and
thereby, without the prior, written consent of Datalogic (which consent may be
given or withheld in its sole discretion).
10.3 Due Diligence Review. The Parties understand and acknowledge that each
party's obligations to consummate the transactions contemplated by this
Agreement are contingent upon, among other things, the completion, to each
such parties' reasonable satisfaction, of a comprehensive due diligence review
(i) of the Company (including, without limitation, a review of the financial
books and records of the Company), to be conducted by or on behalf of
Datalogic by it or its designated representatives, and (ii) of Datalogic to be
conducted by or on behalf of the Shareholders or their designated
representatives. To that end, each party shall permit the other, its agents
and representatives, reasonable access to the books, records, files, assets
and other items belonging to such party for purposes of completing the due
diligence review referenced above, as well as access to the management of such
party for such purpose, all during reasonable hours and with reasonable notice
in advance.
10.4 Further Assurances; Cooperation. From and after the Closing, the
Parties shall do such acts and execute such documents and instruments as may
be reasonably required to make effective the transactions contemplated hereby.
On or after the Closing Date, the Parties shall, on request, cooperate with
one another by furnishing any additional information, executing and delivering
any additional documents and instruments, including contract assignments, and
doing any and all such other things as may be reasonably required by the
Parties or its counsel to consummate or otherwise implement the transactions
contemplated by this Agreement.
ARTICLE 11
CONDITIONS PRECEDENT TO OBLIGATIONS
OF MERGER SUBSIDIARY AND DATALOGIC
The obligation of Merger Subsidiary and Datalogic to proceed with the
Closing and the consummation of the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions precedent, any
of which may be waived in whole or in part by Datalogic:
11.1 Accuracy of Representations and Warranties and Performance of
Obligations. All representations and warranties made by the Company and each
Shareholder in or pursuant to this Agreement shall be true and correct in all
material respects, and the Company and each Shareholder shall have performed
or complied in all material respects with all covenants, agreements and
conditions contained in this Agreement on its part required to be performed or
complied with at or prior to the Closing. The Company shall deliver to
Datalogic at the Closing a Certificate, signed by the President of the
Company, certifying that the conditions stated in this Article 11 respecting
the Company have been fulfilled.
39
11.2 Consents and Approvals. The Parties shall have received all consents
and approvals, and gave such notices, as may be required for the Company and
each Shareholder to enter into, execute and perform such agreements in
accordance with their respective terms (a) by any federal, state, or other
governmental authority or regulatory body; (b) under any contract whereby,
pursuant to the terms of such contract the consent of such party is required,
whether or not such party has waived such right; and (c) under any order,
judgment or decree of any court or governmental agency, and all such consents
and approvals shall be in full force and effect. All necessary filings with
Government authorities or any other third parties shall have been made. All
licenses, permits, agreements and other items material to the conduct of the
Company's business, as currently being conducted by the Company, shall
continue in full force and effect following the change in control of the
Company, and that any notice required to be given, or consent required to be
obtained, in advance of the Closing shall have been given or obtained, as
applicable, prior to the date thereof.
11.3 No Litigation or Contrary Judgment. On the Closing Date there shall
exist no valid Order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction which prohibits or prevents the consummation of
the transactions contemplated by this Agreement that has not been vacated,
dismissed or withdrawn by the Effective Time.
11.4 No Material Adverse Effect. There shall not have occurred, and/or be
continuing at Closing, any event that has had or reasonably would be expected
to have a Material Adverse Effect
11.5 Management of Company. The Company shall have maintained at the Closing
management in place capable of conducting the business of the Company as
currently being conducted and, subject to the entry of the Company into the
Employment Agreements, such management shall be available to continue in such
positions following the Closing if requested to do so by Datalogic (provided
that no obligation exists on the part of Datalogic to maintain any prior
employment or other business relationship of the Company following the
Closing, except as expressly required by the terms of this Agreement).
11.6 Deliveries of the Company and the Shareholders at Closing. At Closing,
the Shareholders and the Company shall, as indicated below, deliver or cause
to be made available to Merger Subsidiary and Datalogic the following original
completed documents, dated as of the Closing Date (unless otherwise noted
below), executed by the persons who are parties thereto, as applicable:
11.6.1 originally-executed copies of this Agreement, signed by the
President of the Company and attested to by the Secretary of the Company, and
containing the signatures of Shareholders representing one hundred percent
(100%) of the total issued and outstanding common stock of the Company on a
fully-diluted basis;
11.6.2 originally-executed copies of the California Agreement of Merger,
signed by the President of the Company and attested to by the Secretary of the
Company,
11.6.3 executed originals of the Employment Agreements, signed by the
consultant or employee thereunder;
40
11.6.4 executed originals of the Non-Compete Agreements, signed by the
consultant or employee thereunder;
11.6.5 certificates (or a duly signed and notarized Affidavit of Lost
Stock Certificate) representing all of the Company Shares, free and clear of
all Liens (other than restrictions solely evidencing the restricted nature of
such Shares pursuant to applicable state and federal securities laws) duly
endorsed to Merger Subsidiary or in blank or accompanied by duly executed
stock powers;
11.6.6 all required consents and approvals from Governments and third
parties under Material Contracts;
11.6.7 the written release of all Liens (other than Permitted Liens)
relating to the assets of the Company and the Company Shares, executed by the
holder of or parties to each such Lien, which releases shall be reasonably
satisfactory in substance and form to Datalogic and its counsel;
11.6.8 a Certificate, signed by the Secretary of the Company, attaching
thereto, and certifying as true and correct, (i) copies of resolutions duly
passed by the Board of Directors of the Company approving the entry of Company
into this Agreement, and authorizing the Company to perform all of its
obligations thereunder; (ii) copies of resolutions duly passed by the
shareholders of the Company approving the entry of Company into this
Agreement, and authorizing the Company to perform all of its obligations
thereunder; (iii) the Articles of Incorporation of the Company, including all
amendments thereto, and (iv) the Bylaws of the Company, including all
amendments thereto;
11.6.9 a certificate of good standing of the Company, dated within five
(5) Business Days of the Closing Date, from the California Secretary of State
(and of the Secretary of State of each State in which the Company is qualified
or licensed as a foreign corporation);
11.6.10 all share transfer books, minute books and other corporate
records of the Company;
11.6.11 the certificate required of the Company's President, pursuant to
Section 7.1 above;
11.6.12 canceled certificates, agreements and/or other evidence of the
redemption or other payment by the Company in respect of all previously issued
and outstanding securities of the Company other than the Company Shares,
including all options and warrants;
11.6.13 such other customary documents, instruments or certificates as
shall be reasonably requested by Datalogic and as shall be consistent with the
terms of this Agreement.
41
ARTICLE 12
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to proceed with the
Closing shall be subject to the satisfaction, on or prior to the Closing Date,
of each of the following conditions precedent, any of which may be waived in
whole or in part by a majority in interest of the Shareholders at or prior to
the Closing:
12.1 Accuracy of Representations and Warranties and Performance of
Obligations. All representations and warranties made by merger Subsidiary and
by Datalogic in this Agreement shall be true and correct in all material
respects, except for those representations and warranties that are qualified
as to materiality which shall be true and correct in all respects, on and as
of the Closing Date with the same effect as if such representations and
warranties had been made on and as of the Closing Date, except to the extent
that any such representation or warranty by its terms relates to an earlier
date, and Merger Subsidiary and Datalogic shall have performed or complied in
all material respects with all covenants, agreements and conditions contained
in this Agreement on its part required to be performed or complied with at or
prior to the Closing. Merger Subsidiary shall deliver to the Shareholders at
the Closing a certificate of the President of Merger Subsidiary certifying
that the conditions stated in this Section 12.1 have been fulfilled.
Datalogic shall deliver to the Shareholders at the Closing a certificate of
the President of Datalogic certifying that the conditions stated in this
Section 12.1 have been fulfilled.
12.2 Consents and Approvals. All required filings with Government
authorities or any other third parties shall have been made and any necessary
authorizations, consents or approvals required from such authorities or third
parties shall have been obtained and shall be in full force and effect.
12.3 No Litigation or Contrary Judgment. On the Closing Date there shall
exist no valid Order, statute, rule regulation, executive order, stay decree,
judgment or injunction which prohibits or prevents the consummation of the
transactions contemplated by this Agreement that has not been vacated,
dismissed or withdrawn by the Effective Time.
12.4 Deliveries of the Merger Subsidiary and Datalogic at Closing. At
Closing, Merger Subsidiary and Datalogic shall, as indicated below, deliver or
cause to be made available to the Company and the Shareholders the following
original completed documents, dated as of the Closing Date (unless otherwise
noted below), executed by the persons who are parties thereto, as applicable:
12.4.1 originally-executed copies of this Agreement, signed by the
President of Merger Subsidiary and attested to by the Secretary of Merger
Subsidiary;
12.4.2 originally-executed copies of this Agreement, signed by the
President of Datalogic and attested to by the Secretary of Datalogic;
12.4.3 originally-executed copies of the California Agreement of Merger,
signed by the President of Merger Subsidiary and attested to by the Secretary
of the Merger Subsidiary,
42
12.4.4 originally-executed copies of the California Agreement of Merger,
signed by the President of Datalogic and attested to by the Secretary of
Datalogic;
12.4.5 the originally-executed Datalogic ▇▇▇▇▇▇▇▇▇ Note;
12.4.6 the originally-executed Datalogic ▇▇▇▇▇▇ Note;
12.4.7 the originally-executed Datalogic McDonald Note;
12.4.8 the originally-executed Datalogic Pledge Agreement, together with
share certificates and an assignment separate from certificate with respect to
the shares to which such pledge agreement pertains.
12.4.9 executed originals of the Employment Agreements, signed by both
an authorized executive officer of Merger Subsidiary and the consultant or
employee thereunder;
12.4.10 executed originals of the Non-Compete Agreements, signed by both
an authorized executive officer of Datalogic and the Shareholders, consultant
or employee thereunder;
12.4.11 all required consents and approvals from Governments and third
parties under Material Contracts;
12.4.12 a Certificate, signed by the Secretary of Merger Subsidiary,
attaching thereto, and certifying as true and correct, (i) copies of
resolutions duly passed by the Board of Directors of Merger Subsidiary
approving the Merger and the entry of Merger Subsidiary into this Agreement,
and authorizing Merger Subsidiary to perform all of its obligations
thereunder; (ii) the Articles of Incorporation of Merger Subsidiary, including
all amendments thereto, and (iii) the Bylaws of Merger Subsidiary, including
all amendments thereto;
12.4.13 a Certificate, signed by the Secretary of Datalogic, attaching
thereto, and certifying as true and correct, (i) copies of resolutions duly
passed by the Board of Directors of Datalogic approving the Merger and the
entry of Datalogic into this Agreement, and authorizing Datalogic to perform
all of its obligations thereunder; (ii) the Articles of Incorporation of
Datalogic, including all amendments thereto, and (iii) the Bylaws of
Datalogic, including all amendments thereto;
12.4.14 a certificate of good standing of Merger Subsidiary, dated
within five (5) Business Days of the Closing Date, from the California
Secretary of State (and of the Secretary of State of each State in which
Merger Subsidiary is qualified or licensed as a foreign corporation);
12.4.15 a short-form certificate of good standing of Datalogic, dated
within five (5) Business Days of the Closing Date, from the Delaware Secretary
of State (and of the Secretary of State of each State in which Datalogic is
qualified or licensed as a foreign corporation);
43
12.4.16 the certificate required of Merger Subsidiary's President,
pursuant to Section 12.1 above;
12.4.17 the certificate required of Datalogic's President, pursuant to
Section 12.1 above; and
12.4.18 such other customary documents, instruments or certificates as
shall be reasonably requested by Company and/or the Shareholders and as shall
be consistent with the terms of this Agreement.
In addition, Datalogic and Merger Subsidiary, at the Closing, shall deliver or
cause to be delivered the following payments: (i) the payments to ▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ in the amount of $26,373.50 and $6,176.50,
respectively, as referenced in Section 5.4.1; (ii) the payment to ▇▇▇ ▇▇▇▇▇▇▇▇
in the amount of $17,500 as referenced in Section 5.5; and (iii) and the
payment to ▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP in the amount of $25,000 as
referenced in Section 14.7.
ARTICLE 13
SURVIVAL; INDEMNIFICATION
13.1 Survival of Representations and Warranties. All of the representations
and warranties made by any party in this Agreement, or any certificates or
documents delivered hereunder shall survive the Closing Date and consummation
of the transaction contemplated hereby and will continue for a period of two
(2) years following the Closing Date, at which time they shall expire unless
and to the extent a notice of claim is made prior to such expiration with
respect to any breach of such representation or warranty occurring prior to
such expiration and set out in such notice of claim; provided, however, that
(a) the representations and warranties concerning Taxes, Employee Benefit
Matters, and Product Liability Claims shall survive the Closing Date until the
expiration of the applicable statutes of limitation, and (b) the
representations and warranties concerning Environmental Matters shall survive
the Closing Date for a period of three (3) years following the Closing Date.
No Indemnified Person shall be entitled to indemnification for breach of any
representation and warranty unless a notice of claim of such breach has been
given to the Indemnifying Party within the period of survival of such
representation and warranty as set forth herein.
13.2 No Special Damages. Notwithstanding anything to the contrary contained
herein, no party shall be liable to or otherwise responsible to any other
party hereto, or any Affiliate of any other party, for consequential,
incidental, punitive or special damages or for diminution in value or lost
profits that arise out of or relate to this Agreement or the performance or
breach hereof or any Liability retained or assumed hereunder.
13.3 Indemnification By Each Shareholder.
13.3.1 From and after the Closing, each Shareholder shall indemnify,
defend and hold harmless Merger Subsidiary and Datalogic and its respective
Affiliates, directors, officers, employees and agents, each in their
capacities as such (the "Datalogic Indemnified Parties"), from, against and in
respect of any Losses imposed on, sustained, incurred or suffered by, or
asserted against, any of Datalogic Indemnified Parties, whether in respect of
third party claims,
44
claims among the parties, or otherwise, directly or indirectly relating to,
arising out or resulting from (i) of breach or inaccuracy of any
representation or warranty made by such Shareholder in Article 6 or 9 for the
period such representation or warranty survives and (ii) any breach of or
failure by the Shareholders to perform any covenant, agreement or obligation
of the Shareholders in this Agreement.
13.3.2 The Shareholders' aggregate liability under Section 13.3.1 shall
in no event exceed the sum of (i) the consideration payable in connection with
the Closing under Section 5.2 and the (ii) Earn-Out payments under Section
5.3.1. (with it being understood, however, that nothing in this Agreement
(including this Section 13.3.2) shall limit or restrict Merger Subsidiary and
Datalogic's right to maintain or recover any amounts in connection with any
action or claim based upon fraudulent misrepresentation or deceit).
13.3.3 To the extent that the Shareholders or any of them is subject to
payment of indemnification under Section 13.3.1, the Shareholders shall have
the right, prior to payment of cash in satisfaction of such indemnification
obligation, to assign to Merger Subsidiary or Datalogic, as the case may be,
any shares of Datalogic Restricted Stock that the Shareholder(s) may have
received under Section 5.2.2, or 5.3.1, in satisfaction of the obligation, at
a deemed price per share for such shares equal to the calculated price per
share at which the shares were issued, under Section 5.2.2 or Section 5.3.1,
as the case may be.
13.4 Indemnification By Merger Subsidiary and Datalogic. From and after the
Closing, Merger Subsidiary and Datalogic shall jointly and severally
indemnify, defend and hold harmless each Shareholder and each Shareholder's
respective Affiliates, directors, officers, employees and agents, each in
their capacities as such (the "Shareholder Indemnified Parties") from, against
and in respect of any Losses imposed on, sustained, incurred or suffered by,
or asserted against, any of the Shareholder Indemnified Parties, whether in
respect of third party claims, claims among the parties, or otherwise,
directly or indirectly relating to, arising out of or resulting from (i) any
breach or inaccuracy of any representation or warranty contained in Article 7
or Article 8 for the period such representation or warranty survives and (ii)
any breach of or failure by Merger Subsidiary or Datalogic to perform any
covenant, agreement or obligation of Merger Subsidiary or Datalogic in this
Agreement.
13.5 Minimum Threshold For Indemnification. Notwithstanding any provision in
the contrary contained in this Agreement:
13.5.1 No party shall be obligated to indemnify any other party for any
Losses pursuant to this Article 13 unless, (i) the total of all such Losses
with respect to such matter for which indemnification is sought exceeds Five
Thousand Dollars ($5,000), and (ii) the total of all Damages shall equal in
the aggregate Twenty Five Thousand Dollars ($25,000) (provided, that if such
Damages do, in the aggregate, exceed Twenty Five Thousand Dollars ($25,000),
then the Indemnifying Party shall be liable for the entire amount of such
Losses); and
13.5.2 any amounts which any party hereto may be obligated to pay
another party hereto shall be reduced by an amount equal to any insurance
recovery or tax saving with respect to such Losses obtained by the Indemnified
Party.
45
13.6 Claim Notice. An Indemnified Person shall provide the Indemnifying
Party a reasonably detailed written notice of any claims that it may have
pursuant to this Article 13 (a "Claim Notice"), and in the event that there be
asserted against any Indemnified Person any written claim or demand for which
an Indemnifying Party may be obligated to indemnify any Indemnified Person
hereunder (a "Third Party Claim"), the Indemnified Person shall provide to the
Indemnifying Party a Claim Notice with respect thereto within 30 days
following the Indemnified Person's receipt of such claim (and no fewer than 10
days prior to a scheduled appearance date in a litigated matter). The failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
of any liability that it may have to the Indemnified Person, except to the
extent that the Indemnifying Party demonstrates that it has been materially
prejudiced thereby.
13.7 Third Party Claims. With respect to each Third Party Claim that is the
subject of a Claim Notice:
13.7.1 The Indemnifying Party shall be entitled, to the extent permitted
by applicable Law, to assume and control the defense of such Third Party Claim
with counsel approved by the Indemnified Person (which approval may not
unreasonably be withheld, delayed or conditioned). If the Indemnifying Party
elects to assume and control such defense, it shall be conclusively
established that the Indemnifying Party is obligated (subject to the other
provisions of this Article 13) to indemnify and reimburse the Indemnified
Person in respect of the matters described in the Claim Notice.
Notwithstanding the foregoing, if (i) the Indemnified Person shall have
reasonably concluded that there is a reasonable probability that the Third
Party Claim may materially and adversely affect it or its Affiliates other
than as a result of monetary damages for which the Indemnified Person would be
entitled to indemnification or reimbursement under this Article 13, or (ii)
the actual or potential defendants in, or targets of, such Third Party Claim
include both the Indemnifying Party and the Indemnified Person, and the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party, then, in either such case, the
Indemnifying Party shall not have the right to assume or control such defense.
13.7.2 After the Indemnifying Party duly assumes the defense of such
Third Party Claim:
(a) The Indemnified Person shall have the right to, but shall not
be obligated to, employ separate counsel and to participate in the defense of
such Third Party Claim. The Indemnifying Party shall reimburse the
Indemnified Person for the reasonable fees and disbursements of such separate
counsel as incurred, if: (A) the actual or potential defendants in, or
targets of, such Third Party Claim include both the Indemnifying Party and the
Indemnified Person, and the Indemnified Person shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, (B) the Indemnifying
Party shall not have employed counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person within a reasonable
time after electing to assume the defense of the Third Party Claim, or (C) the
Indemnifying Party shall authorize the Indemnified Person to employ separate
counsel at the Indemnifying Party's expense.
46
(b) The Indemnified Person shall cooperate in all reasonable
respects with the Indemnifying Party in connection with such defense and all
costs and expenses incurred by the Indemnified Person in connection therewith
shall be a liability of, and shall be paid by, the Indemnifying Party as
incurred.
(c) The Indemnifying Party shall not settle, compromise, admit
liability or consent to the entry of judgment in connection with such Third
Party Claim, nor shall it offer to do so, in any such case without the
Indemnified Person's written consent, unless (A) no finding or admission of
any violation of Law or any violation of the rights of any Party can be made
as the result of such action and such action will have no effect on other
claims that have been made or are reasonably likely to be made against the
Indemnified Person, and (B) the sole relief (if any) provided is monetary
damages that are reimbursed in full by the Indemnifying Party.
(d) The Indemnifying Party shall have no liability with respect to
any compromise, settlement or discharge of the Third Party Claim affected
without its written consent (which consent may not unreasonably be withheld,
delayed or conditioned).
13.7.3 Subject to Section 13.7.7, if the Indemnifying Party has not
provided written notice to the Indemnified Person of its election to assume
and control the defense of such Third Party Claim within Fifteen (15) days
following its receipt of the Claim Notice, then (i) the Indemnifying Party
shall be bound by any action taken, or any compromise or settlement effected
by the Indemnified Person prior to the assumption of such defense by the
Indemnifying Party, and (ii) to the extent that such Third Party Claim is
subject to indemnification or reimbursement under this Article 13, all costs
and expenses incurred by the Indemnified Person in defending the Third Party
Claim (including but not limited to legal, accounting and other professional
fees and disbursements, removal costs, remediation costs, closure costs and
expenses of investigation, preparation, defense and ongoing monitoring) shall
be a liability of, and shall be paid by, the Indemnifying Party as incurred.
If the Indemnifying Party has not provided such notice within 60 days
following its receipt of the Claim Notice, the Indemnifying Party shall
thereafter have no right to assume or control such defense.
13.7.4 The Indemnified Person and the Indemnifying Party shall keep each
other fully informed concerning the status of such Third Party Claim and any
related proceedings at all stages thereof, and shall render to each other such
assistance as they may reasonably require of each other and shall cooperate
with each other in good faith in order to ensure the proper and adequate
defense of such Third Party Claim.
13.7.5 The Indemnified Person and the Indemnifying Party shall use
reasonable best efforts to avoid production of confidential information
(consistent with applicable Law and rules of procedure), and to cause all
communications among employees, counsel and other representatives of the
Indemnified Person and the Indemnifying Party to be made so as to preserve any
applicable attorney-client or work-product privileges.
13.7.6 Each Party hereby consents to the non-exclusive jurisdiction of
any court in which a Third Party Claim is brought for purposes of any claim
for indemnification or reimbursement with respect to such Third Party Claim or
the matters alleged therein, and agrees that process may be served on such
Party with respect to any such claim anywhere in the world.
47
13.7.7 Notwithstanding any other provision of this Section 13.7, if the
Indemnified Person provides a Notice Claim to an Indemnifying Party with
respect to a Third Party Claim, and the Indemnifying Party presents an
Indemnification Claim Objection Notice in accordance with Section 13.8.1, or
fails to respond to a claim for indemnification or reimbursement with respect
to the Third Party Claim within the fifteen (15) day period following receipt
of the Claim Notice, then the Indemnified Person shall have no liability with
respect to the Third Party Claim until the resolution of the dispute
resolution process as specified in Section 13.8.
13.8 Dispute Resolution.
13.8.1 In the event the Indemnified Person provides the Indemnifying
Party a Claim Notice, the Indemnifying Party shall respond to the Claim Notice
in writing within fifteen (15) days, such response specifying that the
Indemnifying Party (i) will pay the amount of the Claim in accordance with the
Indemnified Person's payment instructions, or (ii) objects to the payment of
the claim (the "Indemnification Claim Objection Notice"), setting forth in
detail the basis for the objection, and identifying the amount of the claimed
Loss that is undisputed. If an amount of the claim is undisputed, the
Indemnifying Party shall pay such amount in accordance with the Indemnified
Person's payment instructions.
13.8.2 In the event the Indemnifying Party provides to the Indemnified
Person an Indemnification Claim Objection Notice, or fails to respond to a
claim for indemnification or reimbursement within the fifteen (15) day period
following receipt of the Claim Notice, the parties shall thereafter either (i)
agree to resolution of the claim and related Indemnification Claim Objection
Notice within forty-five (45) days following the receipt of the Claim Notice,
or (ii) commence an arbitration proceeding in accordance with Section 13.8.3
hereof within forty-five (45) days following receipt of the Claim Notice, or
(iii) in the case of a claim for indemnification or reimbursement with respect
to a Third Party Claim, at the election of the Indemnified Person, either (A)
resolve the matter by an arbitration proceeding in accordance with Section
13.8.3 hereof, which shall commence within forty-five (45) days
following receipt by the Indemnifying Party of the Claim Notice, or (B)
resolve the claim for indemnification or reimbursement in conjunction with the
Third Party Claim, in the same court where the Third Party Claim is being
heard, pursuant to the consent to jurisdiction granted under Section 13.76.
13.8.3 Except as otherwise provided in Section 13.8.2(iii), all disputes
relating to claims for indemnification or reimbursement shall be resolved by
mandatory binding expedited arbitration under the Commercial Arbitration Rules
of the American Arbitration Association ("AAA") in effect as of the date the
request for arbitration is filed (the "Rules") before a single, neutral
arbitrator, selected in accordance with the Rules. Each of the parties may
initiate such an arbitration pursuant to the Rules. The arbitration shall be
held in Orange County, California. The Shareholders, Merger Subsidiary and
Datalogic each agree that it will abide by any decision rendered in such
arbitration, and that any court having jurisdiction may enforce such a
decision. The arbitration award shall also provide for payment by the losing
party (i.e., the party or parties against whom an arbitration award is issued)
of the fees and costs incurred in connection with said arbitration, as well as
the reasonable attorneys' fees and costs incurred by the prevailing parties
(i.e., all parties to the arbitration other than the losing party). Each of
the parties agrees that service of process for all arbitration proceedings may
be made in accordance with the Rules and shall be deemed effective as provided
therein.
48
13.9 Mitigation. Each Indemnified Person shall use its commercially
reasonable efforts to mitigate any indemnifiable Loss. In the event any
Indemnified Person fails to so mitigate an indemnifiable Loss, the
Indemnifying Party shall have no liability for any portion of such Loss that
reasonably could have been avoided had the Indemnified Person made such
efforts.
13.10 Insurance. Following the Closing Date, Datalogic and Surviving
Corporation will maintain in place all insurance previously obtained by the
Company and in effect on the Closing Date, as identified in Section 6.22 and
the related Schedule 6.22, and all such insurance, to the extent applicable,
shall be available to reduce the obligations of the Parties hereto under this
Article 13.
13.11 Limitations. No claim for indemnification under this Article 13 may be
made with respect to the breach of any representation or warranty after the
date of the expiration of the survival of such representation or warranty as
set forth in Section 13.1.
13.12 Subrogation. In the event that the Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article IX, 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 14
MISCELLANEOUS PROVISIONS
14.1 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered in person, (b) by facsimile,
receipt confirmed, (c) on the next Business Day when sent by overnight
courier, or (d) on the second succeeding Business Day when sent by registered
or certified mail (postage prepaid, return receipt requested), to the
respective Parties at the following addresses (or at such other address for a
Party as shall be specified by like notice):
If to Datalogic: DataLogic International, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, CEO
With a copy (which
shall not constitute
notice) to: Weed & Co., LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, Esq.
If to the Company: BluBat, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇, President
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With a copy (which
shall not constitute
notice) to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, Esq.
▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ & Scripps, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to any Shareholder: at such Shareholder's address as set forth on Schedule
6.3.1.
14.2 Termination. This Agreement may be terminated at any time prior to the
Effective Time only by mutual written consent of Merger Subsidiary, Datalogic,
the Company and a majority in interest of the Shareholders. In the event of
any termination of this Agreement as provided in this Section 14.2, this
Agreement shall forthwith become wholly void and of no further force and
effect and there shall be no Liability on the part of Merger Subsidiary,
Datalogic, Company or any of the Shareholders, except that the provisions of
Section 10.1 and 10.2 shall survive any such termination of this Agreement.
14.3 Entire Agreement. This Agreement and the Schedules hereto embody the
entire agreement and understanding of the Parties hereto with respect to the
subject matter hereof, and supersede all oral or written, prior or
contemporaneous, agreements and understandings relative to such subject
matter.
14.4 Amendment and Modification. To the extent permitted by applicable Law,
this Agreement shall be amended, modified or supplemented only by a written
agreement signed by all of the Parties to this Agreement.
14.5 Assignment; Binding Agreement. This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding
upon the Parties hereto and their respective successors, and permitted
assigns. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be transferred, delegated, or assigned (by
operation of law or otherwise), by the Parties hereto without the prior
written consent of the other Parties.
14.6 Waiver of Compliance; Consents. Any failure of the Company and any
Shareholder, on the one hand, or Merger Subsidiary or Datalogic, on the other
hand, to comply with any obligation, covenant, agreement or condition herein
may be waived by Datalogic, on the one hand, or the Company and a majority in
interests of the Shareholder, on the other hand, and then only by a written
instrument signed by the Party or Parties granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any Party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 14.6.
14.7 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such costs or expenses, except that Datalogic shall pay the
attorneys' fees and costs of the Company's counsel ▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ &
Scripps LLP in the amount of $25,000, which shall be paid by Datalogic at the
Closing.
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14.8 Counterparts, Facsimiles. This Agreement may be executed in multiple
counterparts, and on separate counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. Facsimiles containing original signatures shall be deemed for all
purposes to be originally signed copies of the documents which are the subject
of such facsimiles.
14.9 Severability. If any provision of this Agreement shall be determined to
be contrary to Law and unenforceable by any court of Law, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
14.10 Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to the performance and enforcement of contracts made within such
state, without giving effect to the law of conflicts of laws applied thereby.
Except as otherwise provided in Article 13 with respect to claims for
indemnification or reimbursement, in the event that any dispute shall occur
between the parties arising out of or resulting from the construction,
interpretation, enforcement or any other aspect of this Agreement, the Parties
may bring an action in any Court of the State of California sitting within the
County of Orange. In the event either Party shall be forced to bring any
legal action to protect or defend its rights hereunder, then the prevailing
party in such proceeding shall be entitled to reimbursement from the
non-prevailing party of all fees, costs and other expenses (including, without
limitation, the reasonable expenses of its attorneys) in bringing or defending
against such action.
14.11 WAIVER OF JURY TRIAL. EACH AND EVERY PARTY HEREBY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION 14.11.
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14.12 No Third Party Beneficiaries or Other Rights. Except for ▇▇▇ ▇▇▇▇▇▇▇▇,
who shall be a third-party beneficiary solely of Section 5.5 hereof, nothing
herein shall grant to or create in any Person not a Party hereto, or any such
Person's dependents or heirs, any right to any benefits hereunder, and no such
Party shall be entitled to ▇▇▇ any Party to this Agreement with respect
thereto. The representations and warranties contained in this Agreement are
made for purposes of this Agreement only and shall not be construed to confer
any additional rights on the Parties under applicable state and federal
securities laws.
14.13 Further Assurances. Each Party hereto shall execute and/or cause to be
delivered to each other Party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing Date) for the purpose of carrying out or
evidencing any of the transactions contemplated herein.
[The remainder of this page is left intentionally blank.
Signature page follows.]
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be executed as of the date first above written.
"DATALOGIC"
DATALOGIC INTERNATIONAL, INC. ATTEST:
/s/ ▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By:______________________________ By: ________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CEO Secretary
"MERGER SUBSIDIARY"
IPN COMMUNICATIONS, INC. ATTEST:
/s/ ▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
By:______________________________ By: ________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
CEO Secretary
"THE COMPANY"
BLUBAT INC. ATTEST:
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: ______________________________ By: ________________________
▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President Secretary
[Signature Page continued on next page]
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"THE SHAREHOLDERS"
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
_____________________________
▇▇▇ ▇▇▇▇▇▇▇▇▇ as Co-Trustee
of the ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Family Trust
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
______________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as Co-Trustee
of the ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Family Trust
/s/ ▇▇▇ ▇▇▇▇▇▇
______________________________
▇▇▇ ▇▇▇▇▇▇
The undersigned, ▇▇▇ ▇▇▇▇▇▇▇▇, upon receipt of the finder's fee specified in
Section 5.5 of the foregoing Agreement, will have no further claim with
respect to any of the transactions specified in such Agreement, by reason of
finder's fees or otherwise. The undersigned hereby agrees to the terms of
Section 9.5 of the Agreement, and solely for purposes of such Section, shall
be deemed a Shareholder subject to the provisions of Section 9.5.
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
________________________
Date: November 21, 2005 ▇▇▇ ▇▇▇▇▇▇▇▇
54