EXHIBIT 10.1
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AGREEMENT AND PLAN OF MERGER
by and among
NEOMEDIA TECHNOLOGIES, INC.,
NEOMEDIA TELECOM SERVICES, INC.,
and
BSD SOFTWARE, INC.
Dated as of December 21, 2004
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS......................................................................................................1
1.1. Defined Terms...............................................................................................1
1.2. Interpretation Provisions..................................................................................11
ARTICLE 2. THE MERGER......................................................................................................11
2.1. The Merger.................................................................................................11
2.2. Effective Time.............................................................................................11
2.3. Effect of the Merger.......................................................................................12
2.4. Certificate of Incorporation; Bylaws.......................................................................12
2.5. Directors and Officers.....................................................................................12
2.6. The Merger Consideration; Effect on Outstanding Securities of the Company..................................12
2.7. Dissenting Shares..........................................................................................13
2.8. Exchange Procedures........................................................................................13
2.9. No Further Ownership Rights in Company Common Stock........................................................14
2.10. Lost, Stolen or Destroyed Certificates.....................................................................14
2.11. Taking of Necessary Action; Further Action.................................................................14
2.12. Tax Treatment..............................................................................................14
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS............................................14
3.1. Organization of the Company................................................................................15
3.2. Capitalization of the Company..............................................................................15
3.3. Stockholders' Agreements, etc..............................................................................16
3.4. Authorization..............................................................................................16
3.5. Officers and Directors.....................................................................................16
3.6. Bank Accounts..............................................................................................16
3.7. Subsidiaries...............................................................................................16
3.8. Real Property..............................................................................................17
3.9. Personal Property..........................................................................................18
3.10. Environmental Matters......................................................................................19
3.11. Contracts..................................................................................................20
3.12. No Conflict or Violation; Consents.........................................................................21
3.13. Permits.........................................................................................................22
3.14. SEC Reports; Financial Statements; Books and Records.......................................................22
3.15. Absence of Certain Changes or Events.......................................................................23
3.16. Liabilities................................................................................................25
3.17. Litigation.................................................................................................26
3.18. Labor Matters..............................................................................................26
3.19. Employee Benefit Plans.....................................................................................27
3.20. Transactions with Related Parties..........................................................................29
3.21. Compliance with Law........................................................................................29
3.22. Intellectual Property......................................................................................29
3.23. Tax Matters................................................................................................33
3.24. Insurance..................................................................................................35
3.25. Brokers; Transaction Costs.................................................................................36
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3.26. No Other Agreements to Sell the Company or the Assets......................................................36
3.27. Accounts Receivable........................................................................................36
3.28. Inventory..................................................................................................36
3.29. Product Warranty...........................................................................................37
3.30. Board Recommendation.......................................................................................37
3.31. Material Misstatements or Omissions........................................................................37
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB..........................................................37
4.1. Organization...............................................................................................38
4.2. Capitalization of Buyer....................................................................................38
4.3. Authorization..............................................................................................38
4.4. SEC Reports; Financial Statements; Books and Records.......................................................39
4.5. No Conflicts...............................................................................................40
4.6. Approvals..................................................................................................40
4.7. Merger Consideration.......................................................................................40
4.8. Brokers' and Finders' Fees.................................................................................40
4.9. Board Approval; No Stockholder Approval Required...........................................................40
ARTICLE 5. CONDUCT PRIOR TO THE EFFECTIVE TIME.............................................................................40
5.1. Conduct of Business of the Company.........................................................................40
5.2. No Solicitation............................................................................................42
ARTICLE 6. ADDITIONAL COVENANTS............................................................................................44
6.1. Special Meeting; Board Recommendation......................................................................44
6.2. Voting Agreements..........................................................................................45
6.3. Access to Information......................................................................................45
6.4. Confidentiality............................................................................................45
6.5. Expenses...................................................................................................45
6.6. Public Disclosure..........................................................................................46
6.7. Commercially Reasonable Efforts............................................................................46
6.8. Notification of Certain Matters............................................................................46
6.9. Company Repurchases........................................................................................46
6.10. Proprietary Rights.........................................................................................46
6.11. Tax Matters................................................................................................47
6.12. SEC Filings................................................................................................48
6.13. Stockholder Litigation.....................................................................................48
6.14. Indemnification............................................................................................48
6.15. Company Options............................................................................................49
ARTICLE 7. CONDITIONS TO THE MERGER........................................................................................49
7.1. Conditions to Obligations of Each Party to Effect the Merger...............................................49
7.2. Additional Conditions to Obligations of the Company........................................................49
7.3. Additional Conditions to the Obligations of Buyer..........................................................50
ARTICLE 8. TERMINATION.....................................................................................................52
8.1. Termination................................................................................................52
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8.2. Termination by Buyer.......................................................................................52
8.3. Termination by the Company.................................................................................53
8.4. Procedure for Termination..................................................................................53
8.5. Effect of Termination......................................................................................54
8.6. Extension; Waiver..........................................................................................54
ARTICLE 9. MISCELLANEOUS PROVISIONS........................................................................................54
9.1. Notices....................................................................................................54
9.2. Entire Agreement...........................................................................................55
9.3. Further Assurances; Post-Closing Cooperation...............................................................55
9.4. Amendment; Waiver..........................................................................................55
9.5. Third Party Beneficiaries..................................................................................56
9.6. Opportunity to Hire Counsel; Role of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP............................................56
9.7. No Assignment; Binding Effect..............................................................................56
9.8. Headings...................................................................................................56
9.9. Invalid Provisions.........................................................................................56
9.10. Governing Law..............................................................................................56
9.11. Arbitration................................................................................................56
9.12. Remedies Cumulative........................................................................................57
9.13. Construction...............................................................................................57
9.14. Counterparts...............................................................................................57
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TABLE OF EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Form of Buyer Compliance Certificate
Exhibit D Form of Company Compliance Certificate
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 21, 2004 (the
"Agreement"), is by and among NEOMEDIA TECHNOLOGIES, INC., a Delaware
corporation ("Buyer"), NEOMEDIA TELECOM SERVICES, INC, a Nevada corporation and
wholly-owned subsidiary of Buyer ("Merger Sub"), and BSD SOFTWARE, INC., a
Florida corporation (the "Company").
RECITALS:
A. The respective Boards of Directors of Buyer, Merger Sub and the Company
have determined that it is advisable and in the best interests of their
respective stockholders to effect the acquisition of the Company pursuant to the
terms and subject to the conditions set forth herein.
B. In furtherance of such acquisition, the Boards of Directors of Buyer,
Merger Sub and the Company have each approved the merger of the Company with and
into Merger Sub (the "Merger"), upon the terms and subject to the conditions set
forth herein, in accordance with the applicable provisions of the Nevada Revised
Statutes (the "NRS" or "Nevada Law").
C. In connection with the execution of this Agreement, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇
Trust, Inc., and Trans Research Trust (collectively, the "Major Stockholders")
shall have executed and delivered to Buyer, concurrently with the execution and
delivery of this Agreement by the parties hereto, a Voting Agreement in the form
attached hereto as Exhibit A.
D. Pursuant to the Merger, each outstanding share of Company Common Stock
will be converted solely into the right to shares of Buyer Common Stock, as
provided in Section 2.6 herein, upon the terms and subject to the conditions set
forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Buyer, Merger Sub and the Company hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the terms below shall have
the following meanings:
"Acquisition Proposal" has the meaning set forth in Section 5.2(c).
"Actions" means, collectively, any action, order writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding,
investigation or dispute.
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"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. 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.
"Agreement" has the meaning set forth in the preamble.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets" means the right, title and interest of any Person in its
properties, assets and rights of any kind, whether tangible or intangible, real
or personal, including without limitation the right, title and interest in the
following: all Contracts and Contract Rights; all machinery, equipment and
computer hardware; all inventory; all Books and Records; all Proprietary Rights;
all Permits; all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to such Person; all cash,
accounts receivable, deposits and prepaid expenses; and all goodwill.
"Balance Sheet" means the balance sheet of the Company as of the Balance
Sheet Date which constitutes a portion of the Financial Statements.
"Balance Sheet Date" means July 31, 2004.
"Benefit Arrangement" means any employment, consulting, severance or other
similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company or any Subsidiary or under which the
Company or any Subsidiary may incur any liability, and (c) covers any Employee
or former Employee.
"Books and Records" means (a) all product, business and marketing plans,
sales and promotional literature and artwork relating to the Assets of the
Company or the Company Subsidiary or the Business, (b) all books, records,
lists, ledgers, financial data, files, reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, journals,
deeds, title policies, minute books, stock certificates and books, stock
transfer ledgers, Contracts, product and design manuals, plans, drawings,
technical manuals and operating records of every kind relating to the Assets of
the Company or the Company Subsidiary or the Business (including records and
lists of customers, distributors, suppliers and personnel), computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans, and (c) all
telephone and fax numbers used in the Business, and in each case whether
maintained as hard copy or stored in computer memory and whether owned by the
Company or its Affiliates.
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"Business" means the business and operations of the Company.
"Business Combination" means, with respect to any Person, (i) any merger,
consolidation or other business combination to which such Person is a party,
(ii) any sale, dividend, split or other disposition of any capital stock or
other equity interests of such Person (except for issuances of common stock upon
conversion of preferred stock outstanding on the date hereof or the exercise of
options or warrants outstanding on the date hereof or issued in accordance with
the covenants of this Agreement), (iii) any tender offer (including a self
tender), exchange offer, recapitalization, restructuring, liquidation,
dissolution or similar or extraordinary transaction, (iv) any sale, dividend or
other disposition of all or a material portion of the Assets of such Person
(including by way of exclusive license or joint venture formation) or (v) the
entering into of any agreement or understanding, the granting of any rights or
options, or the acquiescence of such Person, with respect to any of the
foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of Florida are authorized or obligated to close.
"Buyer" has the meaning set forth in the preamble.
"Buyer Expense Notice" has the meaning set forth in Section 8.5(b).
"Buyer Transaction Expenses" has the meaning set forth in Section 8.5(b).
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Certificates" has the meaning set forth in Section 2.8.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"COBRA" has the meaning set forth in Section 3.19(f).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Merger Consideration" means the amount equal to the fraction, the
numerator of which is the Merger Consideration and the denominator of which is
the aggregate number of shares of Company Common Stock outstanding at the
Effective Time.
"Company" has the meaning set forth in the preamble.
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"Company Balance Sheet" has the meaning set forth in Section 3.14(b).
"Company Common Stock" means the Common Stock, par value $0.001 per share,
of the Company.
"Company Financial Statements" has the meaning set forth in Section
3.14(b).
"Company Material Adverse Effect" or "Company Material Adverse Change" or
a similar phrase means (a) any change, circumstance or effect that individually
or in the aggregate with all other changes, circumstances and effects, is or
would be reasonably likely to be materially adverse to (i) the business,
operations, assets, properties (whether tangible or intangible), liabilities
(taken as a whole), condition (financial or otherwise), results of operations or
prospects, of the Company and the Company Subsidiary, taken as a whole, or (ii)
the right or ability of the Company to consummate any of the transactions
contemplated hereby or (b) any event or condition which, with the passage of
time, the giving or receipt of notice, would reasonably be expected to
constitute a "Material Adverse Effect" on or "Material Adverse Change" with
respect to the Company and the Company Subsidiary, taken as a whole.
"Company Negative Vote" has the meaning set forth in Section 8.1(d).
"Company Options" means options to purchase shares of Company Common Stock
issued by the Company (including, but not limited to, options issued to
Employees).
"Company Proprietary Right" shall mean any Proprietary Right that is (i)
owned by, (ii) licensed to, or (iii) was developed or created by or for the
Company or the Company Subsidiary.
"Company Registered Proprietary Rights" means all Registered Proprietary
Rights owned by, filed in the name of, assigned to or applied by or for, the
Company or the Company Subsidiary.
"Company Restricted Stock" means shares of Company Common Stock which are
subject to a repurchase option by the Company.
"Company SEC Reports" has the meaning set forth in Section 3.14(a).
"Company Shares" means (i) all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time, (ii) all vested and
unvested Company Options issued and outstanding immediately prior to the
Effective Time, and (iii) any other securities convertible into or otherwise
exercisable or exchangeable for Company Common Stock issued and outstanding
immediately prior to the Effective Time.
"Company Special Meeting" has the meaning set forth in Section 6.1(a).
"Company Stockholder" means each holder of Company Common Stock at the
Effective Time.
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"Company Subsidiary" means Triton Global Business Services, Inc., a
Canadian company, and Triton Global Communications, Inc., an Alberta, Canada
company.
"Consents" means any and all Permits and any and all consents, approvals
or waivers from third parties that are required for the consummation of the
transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the Contracts.
"Contracts" means all agreements, contracts, leases (whether for real or
personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which a Person is a party or by which a Person or
any of its Assets are bound or affected, whether written or oral.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"DGCL" or "Delaware Law" has the meaning set forth in the recitals.
"Disclosure Schedules" has the meaning set forth in Article 3.
"Dissenting Shares" has the meaning set forth in Section 2.7(a).
"Effective Time" has the meaning set forth in Section 2.2.
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Employees" means all officers and directors of the Company or the Company
Subsidiary and all other Persons employed by the Company on a full or part-time
basis, together with all Persons retained as "independent contractors" as of the
relevant date.
"Employment Agreements" has the meaning set forth in Section 7.3(i).
"Encumbrance" means any claim, lien, pledge, option, charge, easement, tax
assessment, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"Environmental Claims" means all notices of violation, liens, claims,
demands and Action or Proceedings arising directly or indirectly out of
Environmental Conditions or Environmental Laws.
5
"Environmental Conditions" means the state of the environment, including
natural resources (e.g., flora and fauna), soil, surface water, ground water,
any present or potential drinking water supply, subsurface strata or ambient
air, relating to or arising out of the use, handling, storage, treatment,
recycling, generation, transportation, release, spilling, leaking, pumping,
pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping
or threatened release of Hazardous Substances by the Company or any of its
predecessors or successors in interest, or by its respective agents,
representatives, Employees or independent contractors when acting in such
capacity on behalf of the Company. With respect to Environmental Claims by third
parties, Environmental Conditions also include the exposure of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous Substances migrating from or otherwise emanating from or located on
property owned or occupied by the Company.
"Environmental Laws" means all applicable U.S. federal, state, district
and local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata), including, without
limitation, (a) laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, industrial materials, wastes or
other substances into the environment and (b) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, and all analogous laws
promulgated or issued by any state or other Governmental or Regulatory
Authority.
"Environmental Reports" means any and all written analyses, summaries or
explanations, in the possession or control of the Company or the Company
Subsidiary, prepared for the purpose of analyzing or assessing (a) any
Environmental Conditions in, on or about the properties of the Company or the
Company Subsidiary or (b) the Company's or the Company Subsidiary's compliance
with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time was)
a member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, or otherwise required
to be aggregated with, the Company as set forth in Section 414(b), (c), (m) or
(o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
6
"Facilities" means all plants, offices, manufacturing facilities, stores,
warehouses, administration buildings and all real property and related
facilities leased by the Company or the Company Subsidiary, all as identified or
listed on Disclosure Schedule 3.8(b).
"GAAP" means generally accepted accounting principles as applied in the
United States.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, ministry
or a branch thereof, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, province, county, city or
other political subdivision.
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws.
"Key Employee" means ▇▇▇ ▇▇▇▇▇.
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Lease" means a real property lease or a personal property lease, as
applicable.
"Leased Property" has the meaning set forth in Section 3.8(b).
"Letter of Intent" means that certain non-binding Letter of Intent between
Buyer and the Company dated as of December 9, 2003.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Proprietary Right (including without
limitation any covenants not to ▇▇▇ with respect to any Proprietary Right).
"Major Stockholders" has the meaning set forth in the preamble.
"Merger" has the meaning set forth in the preamble.
"Merger Consideration" means the number of shares of Buyer Common Stock to
be issued to the shareholders of the Company in exchange for all of the
outstanding shares of Company Common Stock. The number of shares of Buyer Common
Stock to be issued to the shareholders of the Company shall be equal to (i) the
product of the aggregate number of shares of Company Common Stock outstanding at
the Effective Time multiplied by 0.07, (ii) divided by the Volume Weighted
Average Price per share of the common stock of the Buyer on the NASDAQ Bulletin
Board market for the five trading days immediately preceding the Effective Time.
7
"Merger Sub" has the meaning set forth in the preamble.
"Multiemployer Plan" means any "multiemployer plan," as defined in Section
4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA Affiliate
contributes to or is required to contribute to, or, after September 25, 1980,
contributed to or was required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and (b) covers any Employee or
former Employee or any ERISA Affiliate.
"NRS" or "Nevada Law" has the meaning set forth in the recitals.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than such Person's preferred stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Outside Date" has the meaning set forth in Section 8.1(b).
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five (5) years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
Employee or former Employee or any ERISA Affiliate.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, national, state or local, necessary for the
past, present or anticipated conduct or operation of the Business or ownership
of the Assets of any Person.
"Permitted Encumbrances" means (a) statutory liens of landlords, liens of
carriers, warehousepersons, mechanics and material persons, and purchase money
liens incurred in the ordinary course of business for sums (i) not yet due and
payable, or (ii) being contested in good faith, if, in either such case, an
adequate reserve shall have been made therefor in such Person's financial
statements, (b) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (c) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of the Company and the
Company Subsidiary and do not materially detract from the value of the property
upon which such encumbrance exists, and (d) liens securing taxes, assessments
and governmental charges not yet due and payable.
8
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Potential Acquiror" has the meaning set forth in Section 5.2(a).
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including ▇▇▇▇▇
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) rights in Trade
Secrets, (f) domain name registrations, (g) other proprietary rights, and (h)
licenses granting any rights with respect to any of the foregoing.
"Proxy Statement" has the meaning set forth in Section 6.1(b).
"PTO" shall mean the United States Patent and Trademark Office.
"Registered Proprietary Rights" shall mean all United States,
international and foreign: (a) issued patents and patent applications (including
provisional applications), (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
(c) registered copyrights and applications for copyright registration, (d) any
mask work registrations and applications to register mask works, and (e) any
other Proprietary Right that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"Related Party" means (a) any of the Company's officers, directors,
stockholders and any officers, directors, partners, associates or relatives of
such officers, directors and stockholders, (b) any Person in which the Company
or any stockholder or any Affiliate, associate or relative of any such Person
has any direct or indirect interest, and (c) any direct or indirect trustee or
beneficiary of any stockholder.
"Representative" of any Person means any officer, director, Employee,
stockholder, attorney, principal, investment advisors, accountant, agent,
Affiliate, or other representative of such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
9
"Subsidiary" means any Person in which the Company or Buyer, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"Superior Proposal" has the meaning set forth in Section 5.2(d).
"Surviving Corporation" has the meaning set forth in Section 2.1(a).
"Tax" or "Taxes" means any (i) federal, state, local or foreign net
income, gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (ii) any liability of the Company
or the Company Subsidiary imposed by law for the payment of amounts described in
clause (i) on another Person, including as a result of being a transferee,
successor or a member of an affiliated, consolidated, combined or unitary group.
"Tax Liability" means a Liability for any Tax.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, and including any
elections, rulings and requests for rulings and other correspondence to or from
any Governmental Authority dealing with Taxes.
"Third Party Expenses" has the meaning set forth in Section 6.5.
"to the knowledge" or "knowledge" of a party (or similar phrases) means to
the extent of matters which are actually known by such party and when used in
respect of the Company or the Company Subsidiary, the term "to the knowledge" or
"knowledge" shall mean the matters which are known or reasonably should be known
by ▇▇▇ ▇▇▇▇▇, or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ after due inquiry.
"Trade Secrets" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans, mailing and e-mail lists, and customer and supplier mailing and
e-mail lists and information), in each case which are not generally known to the
public.
"Voting Agreement" means a Voting Agreement in the form attached hereto as
Exhibit A, dated the date hereof, executed and delivered to Buyer by each Major
Stockholder.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
Employee or former Employee or any ERISA Affiliate.
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1.2. Interpretation Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents are also to all
subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The schedules and exhibits to this Agreement are a material part
hereof and shall be treated as part of this Agreement.
ARTICLE 2.
THE MERGER
2.1. The Merger.
(a) The Merger. At the Effective Time, and on the terms and subject
to the conditions of this Agreement and the DGCL, the Company shall be merged
with and into Merger Sub, the separate corporate existence of the Company shall
cease, and Merger Sub shall continue as the surviving corporation. Merger Sub,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated
pursuant to Section 8.1, and subject to the satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7, the
closing of the transactions contemplated by this Agreement (the "Closing") will
take place (i) at the offices of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, as promptly as
practicable (and in any event within three (3) business days) after satisfaction
(or to the extent permitted, the waiver) of the conditions set forth in Articles
6 and 7 or (ii) at such other time, date or place as Buyer and the Company may
mutually agree.
2.2. Effective Time. As promptly as practicable after the satisfaction (or
to the extent permitted, the waiver) of the conditions set forth in Articles 6
and 7, and provided that this Agreement has not been terminated pursuant to
Section 9.1, the parties hereto shall cause the Merger to be consummated by
executing and filing a certificate of merger, in substantially the form attached
hereto as Exhibit B, with the Secretary of State of the State of Nevada as
required by, and executed in accordance with the relevant provisions of, the
DGCL (the "Certificate of Merger"), the time of acceptance by the Secretary of
State of Nevada of such filing or such later time as may be agreed to by the
parties and set forth in the Certificate of Merger being referred to herein as
the "Effective Time".
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2.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights
privileges, powers, franchises of the Company and the Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.4. Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of the
Merger Sub as attached to the Certificate of Merger shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
(b) At the Effective Time, the Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
2.5. Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation and in
accordance with applicable law. The Company shall cause each or any director and
officer of the Company to tender his or her resignation prior to the Effective
Time, with each such resignation to be effective as of the Effective Time.
2.6. The Merger Consideration; Effect on Outstanding Securities of the
Company. On the terms and subject to the conditions of this Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
Buyer, the Company or the holder of any Company Shares, the following shall
occur:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time will be
canceled and extinguished, and each share of Company Common Stock which is
issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares (as provided in Section 2.7)) shall be automatically converted
into solely the right to receive in shares of Buyer Common Stock, the Common
Merger Consideration.
(b) Cancellation of Company-Owned Stock. Each share of Company
Common Stock owned by the Company or the Company Subsidiary immediately prior to
the Effective Time shall be automatically canceled and extinguished without any
exchange thereof and without any further action on the part of Buyer, Merger Sub
or the Company.
(c) Company Options. Immediately prior to the Effective Time, all
outstanding Company Options shall become fully vested and exercisable and all
repurchase rights with respect to Company Restricted Stock will lapse. Any
Company Options not exercised prior to the Effective Time will be automatically
terminated.
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(d) Common Stock of Merger Sub. Each stock certificate of Merger Sub
evidencing ownership of any shares of common stock of the Merger Sub shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
2.7. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger and who has
demanded appraisal for such shares in accordance with Florida Law ("Dissenting
Shares") shall not be converted into a right to receive the Common Merger
Consideration unless and until such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal. A holder of Dissenting Shares
shall be entitled to receive payment of the appraisal value of such shares of
Company Common Stock held by such holder in accordance with the provisions of
Section 607 of the Florida Business Corporation Act unless, after the Effective
Time, such holder fails to perfect or withdraws or loses such holder's right to
appraisal, in which case such shares shall be treated as if they had been
converted as of the Effective Time into the right to receive the Common Merger
Consideration.
(b) The Company shall give Buyer (i) prompt notice of its receipt of
any written demands for appraisal of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to Canadian Law and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under Canadian Law. The Company shall not, except with the
prior written consent of Buyer or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle or settle any such demands.
2.8. Exchange Procedures.
(a) Exchange Procedures. As soon as practicable after the Effective
Time, Buyer shall cause to be mailed to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
Company Common Stock (the "Certificates") and which shares of Company Common
Stock are exchanged for and represent the right to receive a portion of the
Merger Consideration pursuant to Section 2.6, (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Transfer Agent and shall be in such form and have such other
provisions as Buyer may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the appropriate
portion of the Merger Consideration pursuant to Section 2.6. Upon surrender of a
Certificate for cancellation to the Transfer Agent or to such other agent or
agents as may be appointed by Buyer, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange therefor
the shares of Buyer Common Stock to which such holder is entitled pursuant to
Section 2.6, and the Certificate so surrendered shall be canceled. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Company Shares will be deemed from and after the Effective Time to
evidence the ownership of the portion of the Merger Consideration as provided in
Section 2.6 without any interest thereon.
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2.9. No Further Ownership Rights in Company Common Stock. The portion of
the Merger Consideration issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Company of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.
2.10. Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, Buyer shall cause the Transfer Agent to pay the portion of
the Merger Consideration applicable to such shares in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof; provided, however, that Buyer or Transfer Agent may, in
their discretion and as a condition precedent to the issuance of shares of Buyer
Common Stock thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity with respect to the Certificates alleged to
have been lost, stolen or destroyed.
2.11. Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the
Surviving Corporation and the Buyer are fully authorized to take, and will use
their reasonable efforts to take, all lawful and reasonable action.
2.12. Tax Treatment. The Merger shall constitute a non-taxable transaction
under the Code.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS
As an inducement of Buyer to enter into this Agreement, the Company hereby
makes the following representations and warranties to Buyer which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, except as otherwise set forth in written
disclosure schedules of the Company (the "Disclosure Schedules") delivered to
Buyer prior to the date hereof, a copy of which is attached hereto. The
Disclosure Schedules are numbered to correspond to the various sections of this
Article 3 setting forth certain exceptions to the representations and warranties
contained in this Article 3 and certain other information called for by this
Agreement.
14
3.1. Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, with all requisite corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets owned or leased by it. The Company Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of Canada. Each
of the Company and the Company Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction the failure to
be so qualified would constitute a Company Material Adverse Effect. Each
jurisdiction in which the Company and the Company Subsidiary are qualified to do
business as a foreign corporation is set forth in Disclosure Schedule 3.1.
3.2. Capitalization of the Company.
(a) Authorized Capitalization. As of the date of this Agreement, the
authorized capitalization of the Company consists of (i) 50,000,000 shares of
common stock, par value $.001 per share, of which 32,060,897 shares are issued
and outstanding and (ii) 5,000,000 shares of undesignated preferred stock, par
value $.001 per share, none of which are issued and outstanding. The Company has
no other capital stock authorized, issued or outstanding. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. With respect to
any Company Common Stock that has been issued subject to a right of repurchase
on the part of the Company, Disclosure Schedule 3.2(a) sets forth the holder
thereof, the number and type of securities covered thereby, and the vesting
schedule thereof (including a description of the circumstances under which such
vesting schedule can or will be accelerated).
(b) Company Options and Warrants. As of the date of this Agreement,
750,000 shares of Company Common Stock are reserved for issuance upon the
exercise of outstanding Company Options and 1,000,000 shares of Company Common
Stock are reserved for issuance upon the exercise of outstanding Company
Warrants. All of the Company Options have been validly granted under the Company
Common Stock Plan. Disclosure Schedule 3.2(b) sets forth the name of each holder
of Company Options, as well as the number of Company Options held by each such
holder, the number of shares of Company Common Stock for which each such Company
Option is exercisable (both vested and unvested), and the price per share of
Company Common Stock for which each such Company Option is exercisable (without
taking into account whether or not such Company Option is in fact exercisable on
the date hereof). The Company has previously provided to Buyer true and correct
copies of all option agreements governing Company Options.
(c) No Other Capital Stock, Options, Warrants. Except for the
Company Options referred to above, there are no outstanding Options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of the Company or the Company
Subsidiary. No debt securities of the Company or the Company Subsidiary are
issued and outstanding.
15
(d) The Company is directly or indirectly the record and beneficial
owner of all of the outstanding shares of capital stock or other equity
interests of the Company Subsidiary. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by the Company free and
clear of any claim, lien or encumbrance of any kind with respect thereto. There
are no proxies or voting agreements with respect to such shares, and there are
not any existing options, warrants, calls, subscriptions, or other rights or
other agreements or commitments obligating the Company or the Company Subsidiary
to issue, transfer or sell any shares of capital stock or any other securities
convertible into, exercisable for, or evidencing the right to subscribe for any
shares of the Company Subsidiary. The Company does not directly or indirectly
own any interest in any Person except the Company Subsidiary.
(e) Valid Issuances. All outstanding shares of Company Common Stock
are, and any shares of Company Common Stock issued upon exercise of any Company
Option or Company Warrant will be, validly issued, fully paid and non-assessable
and not subject to any preemptive or similar rights created by statute, the
Company's Certificate of Incorporation or Bylaws, or any Contract. The Company
Options have been, and the shares of Company Common Stock have been or will be,
issued in compliance with all federal, state and foreign corporate and
securities laws.
3.3. Stockholders' Agreements, etc. Neither the Company nor the Company
Subsidiary is a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no Contract, arrangement or understanding between
or among any Persons, which affects, restricts or relates to voting, giving of
written consents, dividend rights or transferability of shares with respect to
the Company Common Stock, including without limitation any voting trust
agreement or proxy.
3.4. Authorization. The Company has all necessary corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and, assuming the approval of the adoption of the Merger by a majority of the
outstanding shares of Company Common Stock at the Company Special Meeting or any
adjournment or postponement thereof, has taken all corporate action necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company, and this Agreement is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors or (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
3.5. Officers and Directors. Disclosure Schedule 3.5 contains a true,
correct and complete list of all the officers and directors of the Company and
the Company Subsidiary.
3.6. Bank Accounts. Disclosure Schedule 3.6 contains a list of all of the
Company's and the Company Subsidiary's bank accounts, safe deposit boxes and
persons authorized to draw thereon or have access thereto.
3.7. Subsidiaries. The Company has no Subsidiaries other than the Company
Subsidiary. Neither the Company nor the Company Subsidiary owns any or has any
obligations, whether conditional or otherwise, to purchase any equity interests
in any other entity.
16
3.8. Real Property.
(a) Company-Owned Real Property. Neither the Company nor the Company
Subsidiary owns any real property.
(b) Leased Real Property. Disclosure Schedule 3.8(b) sets forth and
describes briefly all Leases pursuant to which Facilities are leased, occupied
or used by the Company or the Company Subsidiary (as lessee), true and correct
copies of which have been delivered to Buyer. The Company or the Company
Subsidiary has good and valid leasehold title to, and enjoys peaceful and
undisturbed possession of, all leased property described in such Leases (the
"Leased Property"), free and clear of any and all Encumbrances other than any
Permitted Encumbrances which would not permit the termination of the Lease
therefor by the lessor. With respect to each Leased Property (i) there are no
pending or, to the knowledge of the Company, threatened condemnation or
administrative proceedings relating to, or any pending or threatened Actions
relating to, the Company's or the Company Subsidiary's leasehold interests in
such Leased Property or any portion thereof, (ii) to the knowledge of the
Company, no third party has entered into any sublease, license, option, right,
concession or other agreement or arrangement, written or oral, granting to any
person the right to use or occupy such Leased Property or any portion thereof or
interest therein, except in connection with a Permitted Encumbrance, and (iii)
neither the Company nor the Company Subsidiary has received notice of any
pending or threatened special assessment relating to such Leased Property or
otherwise has any knowledge of any pending or threatened special assessment
relating thereto.
With respect to each Lease listed on Disclosure Schedule 3.8(b), (i) there
has been no breach or default under any such Lease by the Company, the Company
Subsidiary or, to the knowledge of the Company, by any other party, (ii) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not cause a material default under any
such Lease, (iii) such Lease is a valid and binding obligation of the lessor, is
in full force and effect with respect to and is enforceable against the lessor
in accordance with its terms, and will continue to be legal, binding,
enforceable, valid, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby, (iv) no party is in
breach or default and no action has been taken by the Company or the Company
Subsidiary, and no event has occurred which, with notice or lapse of time or
both, would permit termination, modification or acceleration by a party thereto
other than the Company or the Company Subsidiary without the consent of the
Company or the Company Subsidiary, as the case may be, under any such Lease that
is material to the Company or the Company Subsidiary, (v) no party has
repudiated any term thereof or threatened to terminate, cancel or not renew any
such Lease, (vi) neither the Company nor the Company Subsidiary has assigned,
transferred, conveyed, mortgaged or encumbered any interest therein or in any
leased property subject thereto (or any portion thereof), (vii) there are no
disputes, oral agreements, or forbearance programs in effect as to the lease or
sublease, (viii) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (vii) above are true and correct
with respect to the underlying Lease, (ix) neither the Company nor the Company
Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold, and (x) all Facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
17
3.9. Personal Property.
(a) General. The Company or the Company Subsidiary owns or leases
all personal property Assets necessary for the conduct of the Business as
presently conducted, and such personal property Assets (taken as a whole) (i)
are free from material defects (patent and latent), (ii) have been maintained in
accordance with normal industry practice, and (iii) are in such operating
condition and repair as is appropriate for the conduct of the Business as
presently conducted.
(b) Owned Personal Property. The Company or the Company Subsidiary
has good and marketable title to all such personal property used by it, free and
clear of any and all Encumbrances other than Permitted Encumbrances. With
respect to each such item of personal property (i) there are no Leases,
subleases, licenses, options, rights, concessions or other agreements, written
or oral, granting to any party or parties the right of use of any portion of
such item of personal property, (ii) there are no outstanding options or rights
of first refusal in favor of any other party to purchase any such item of
personal property or any portion thereof or interest therein and (iii) there are
no parties (other than the Company or the Company Subsidiary) who are in
possession of or who are using any such item of personal property.
(c) Leased Personal Property. Other than Personal Property owned by
the Company or the Company Subsidiary, the Company or the Company Subsidiary has
good and valid leasehold title to all of the tangible personal property Assets
used by the Company or the Company Subsidiary, free and clear of any and all
Encumbrances other than Permitted Encumbrances which would not permit the
termination of the lease therefor by the lessor. Disclosure Schedule 3.9(c) sets
forth all Leases for personal property.
With respect to each Lease listed on Disclosure Schedule 3.9(c), (i) there
has been no breach or default under such Lease by the Company, the Company
Subsidiary or by any other party, (ii) the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not cause (with or without notice and with or without the passage of time)
a default under any such Lease, (iii) such Lease is a valid and binding
obligation of the applicable lessor, is in full force and effect and is
enforceable by the Company or the Company Subsidiary in accordance with its
terms, (iv) no action has been taken by the Company or the Company Subsidiary
and no event has occurred which, with notice or lapse of time or both, would
permit termination, modification or acceleration by a party thereto other than
by the Company or the Company Subsidiary without the consent of the Company or
the Company Subsidiary, (v) no party has repudiated any term thereof or
threatened to terminate, cancel or not renew any such Lease, and (vi) neither
the Company nor the Company Subsidiary has assigned, transferred, conveyed,
mortgaged or encumbered any interest therein or in any leased property subject
thereto (or any portion thereof).
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3.10. Environmental Matters.
(a) Compliance. The Company and the Company Subsidiary are in
compliance with all Environmental Laws, including, without limitation, all
Permits required thereunder to conduct the Business as currently being conducted
or proposed to be conducted. All such Permits are listed on Disclosure Schedule
3.10(a). Neither the Company nor the Company Subsidiary has received any notice
to the effect that (i) it is not in compliance with, or is in violation of, any
such Environmental Laws or Permits required thereunder or (ii) any currently
existing circumstances are reasonably likely to result in a failure of the
Company to comply with, or a violation by the Company or the Company Subsidiary
of, any such Environmental Laws or Permits required thereunder.
(b) Environmental Claims. There are no existing or, to the knowledge
of the Company, threatened Environmental Claims against the Company or the
Company Subsidiary. Neither the Company nor the Company Subsidiary has received
any notification of any allegation of any actual, or potential responsibility
for, or any inquiry or investigation regarding, any disposal, release or
threatened release at any location of any Hazardous Substance generated or
transported by the Company or the Company Subsidiary.
(c) Hazardous Substances. To the knowledge of the Company, (i) no
underground tank or other underground storage receptacle for Hazardous
Substances is currently located on the Facilities, and (ii) there have been no
releases of any Hazardous Substances from any such underground tank or related
piping. There have been no releases (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances in quantities
exceeding the reportable quantities as defined under federal or state law on,
upon or into the Facilities other than those authorized by Environmental Laws
including, without limitation, the Permits required thereunder. In addition, to
the knowledge of the Company, (i) there have been no such releases by
predecessors of the Company or the Company Subsidiary and (ii) no releases in
quantities exceeding the reportable quantities as defined under federal or state
law on, upon, or into any real property in the immediate vicinity of any of the
real properties of the Company or the Company Subsidiary other than those
authorized by Environmental Laws which, through soil or ground water
contamination, may have come to be located on the properties of the Company.
(d) Environmental Indemnities. Neither the Company nor the Company
Subsidiary is a party, whether as a direct signatory or as successor, assign or
third-party beneficiary, or otherwise bound, to any Lease or other Contract
(excluding insurance policies disclosed on the Disclosure Schedules) under which
the Company or the Company Subsidiary is obligated by or entitled to the
benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions. Neither the Company nor the Company Subsidiary has
released any other person from any claim under any Environmental Law or waived
any rights concerning any Environmental Condition.
(e) Environmental Reports. Complete and accurate copies of the
Environmental Reports, as well as all other written environmental reports,
audits or assessments which have been conducted, either by the Company, the
Company Subsidiary or any person engaged by the Company or the Company
Subsidiary for such purpose, at any facility owned or formerly owned by the
Company or the Company Subsidiary have been made available to Buyer.
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3.11. Contracts.
(a) Disclosure. Disclosure Schedule 3.11(a) sets forth a complete
and accurate list of all of the Contracts to which the Company or the Company
Subsidiary is a party of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements, whether the
Company or the Company Subsidiary is the licensor or licensee thereunder
(excluding licenses that are commonly available on standard commercial terms,
such as software "shrink-wrap" licenses);
(iii) Non-disclosure agreements (whether the Company or the
Company Subsidiary is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments (including groups of related
Contracts or commitments) involving future expenditures or Liabilities, actual
or potential, in excess of $25,000.00 after the date hereof or otherwise
material to the Business or the Assets of the Company or the Company Subsidiary;
(v) Contracts or commitments relating to commission
arrangements with others that are material to the Business;
(vi) Employment contracts, consulting contracts, severance
agreements, "stay-bonus" agreements and similar arrangements, including
Contracts (A) to employ or terminate executive officers or other personnel and
other contracts with present or former officers or directors of the Company or
the Company Subsidiary or (B) that will result in the payment by, or the
creation of any Liability of the Company, the Company Subsidiary or Buyer to pay
any severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether the Company or the Company
Subsidiary shall be the borrower, lender or guarantor thereunder (excluding
credit provided by the Company or the Company Subsidiary in the ordinary course
of business to purchasers of its products and obligations to pay vendors in the
ordinary course of business and consistent with past practice);
(ix) Contracts containing covenants limiting the freedom of
the Company, the Company Subsidiary, or any officer, director, Employee or
Affiliate of the Company or the Company Subsidiary to engage in any line of
business or compete with any Person that relates directly or indirectly to the
Business;
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(x) Any Contract with the federal, state or local government
or any agency or department thereof;
(xi) Any Contract or other arrangement with a Related Party;
(xii) Leases of real or personal property (including groups of
related Leases) involving annual payments of more than $25,000.00;
(xiii) Contracts or commitments (including groups of related
Contracts or commitments) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than six months, result in a loss to the Company or the Company
Subsidiary, or involve consideration in excess of $25,000.00;
(xiv) Contracts or commitments concerning a partnership or
joint venture; and
(xv) Any other Contract under which the consequences of a
default by any party or termination would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Complete and accurate copies of all of the Contracts listed on Disclosure
Schedule 3.11, including all amendments and supplements thereto, have been
provided to Buyer. There are no oral Contracts.
(b) Absence of Defaults. All of the Contracts are valid, binding and
enforceable in accordance with their terms, with no material existing (or
threatened in writing) Default or dispute. The Company or the Company Subsidiary
has fulfilled, or is in a position to take all action necessary to enable it to
fulfill when due, all of its material obligations under each of such Contracts.
All parties to such Contracts have complied in all material respects with the
provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to the Company or the Company Subsidiary.
3.12. No Conflict or Violation; Consents.
(a) None of the execution, delivery or performance of this
Agreement, the consummation of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (a) violate or
conflict with any provision of the governing documents of the Company or the
Company Subsidiary, (b) violate, conflict with, or result in a breach of or
constitute a default (with or without notice or the passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice or consent under, or result in the creation of any Encumbrance upon any
of its respective Assets under, any Contract, Lease, License, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security interest or other arrangement to which the Company or the Company
Subsidiary is a party or by which the Company or the Company Subsidiary is bound
or to which any of its respective Assets are subject, (c) violate any applicable
Regulation or Order or (d) impose any Encumbrance on any of the Assets of the
Company or the Company Subsidiary or the Business.
21
(b) No notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
national, state or local governmental or administrative authorities) are
necessary to be made or obtained by the Company in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.13. Permits. Disclosure Schedule 3.13 sets forth a complete list of all
material Permits held by the Company and the Company Subsidiary, all of which
are as of the date hereof in full force and effect. The Company and the Company
Subsidiary have, and at all times have had, all material Permits required under
any applicable Regulation in the operation of the Business or in the ownership
of the Assets of the Company or the Company Subsidiary, and own or possess such
Permits free and clear of all Encumbrances. Neither the Company nor the Company
Subsidiary is in default, and neither the Company nor the Company Subsidiary has
received any notice of any claim of default with respect to any such Permit.
Except as otherwise governed by law, all such Permits are renewable by their
terms or in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees and will not be adversely affected by the completion of the transactions
contemplated by this Agreement.
3.14. SEC Reports; Financial Statements; Books and Records.
(a) SEC Reports. The Company has filed with the SEC all required
forms, reports, registration statements and documents required to be filed by it
with the SEC (collectively, all such forms, reports, registration statements and
documents filed since January 1, 2001 are referred to herein as the "Company SEC
Reports"). All of the Company SEC Reports complied as to form, when filed, in
all material respects with the applicable provisions of the Securities Act and
the Exchange Act. Accurate and complete copies of the Company SEC Reports have
been made available to Buyer. As of their respective dates or, in the case of
registration statements, their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
the Company SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has been
advised by each of its current officers and directors that each such person and
such persons' Affiliates have complied with all filing requirements under
Section 13 and Section 16(a) of the Exchange Act. Each certification included in
the Company SEC Reports pursuant to Section 302 or Section 906 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 was accurate when made.
(b) Financial Statements. Each of the financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "Company Financial Statements"), (x) was prepared in accordance
with GAAP and (y) fairly presented the financial position of Company as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, consistent with the books and records of the
Company, except that the unaudited interim financial statements were or are
subject to normal year-end adjustments. The balance sheet of the Company
contained in the Company's Form 10-KSB for the year ended July 31, 2004 is
hereinafter referred to as the "Company Balance Sheet."
22
(c) Internal Controls; Disclosure Controls. The Company maintains a
system of internal accounting controls and disclosure controls and procedures
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorization, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences and (v) material information
concerning the Company is publicly disseminated in a timely manner.
(d) Books and Records. The Books and Records, in reasonable detail,
accurately and fairly reflect in all material respects the activities of the
Company, the Company Subsidiary and the Business and have been provided to Buyer
or made available for its inspection.
(e) All Accounts Recorded. Neither the Company nor the Company
Subsidiary has engaged in any transaction, maintained any bank account or used
any corporate funds except for transactions, bank accounts or funds which have
been and are reflected in the Books and Records.
(f) Corporate Records. The stock records and minute books of the
Company and the Company Subsidiary that have been made available to Buyer fully
reflect all minutes of meetings, resolutions and other material actions and
proceedings of the stockholders and board of directors and all committees
thereof, all issuances, transfers and redemptions of capital stock of the
Company and the Company Subsidiary and contain true, correct and complete copies
of their respective Certificate of Incorporation and Bylaws and all amendments
thereto through the date hereof.
3.15. Absence of Certain Changes or Events. Since the Balance Sheet Date,
the Company and the Company Subsidiary have conducted the Business only in the
ordinary course consistent with past practice and there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so as to
use all commercially reasonable efforts to preserve the Business intact and to
preserve the continued services of the Employees and the goodwill of suppliers,
customers and others having business relations with the Company or the Company
Subsidiary;
(c) resignation or termination of any officer, director or manager,
or any increase in the rate of compensation payable or to become payable by the
Company or the Company Subsidiary to any officer, director or Representative of
the Company or the Company Subsidiary (other than standard increases in
connection with general, regularly-scheduled reviews consistent with past
practice), including the making of any loan to, or the payment, grant or accrual
of any bonus, incentive compensation, service award or other similar benefit to,
any such Person;
23
(d) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or the Assets to, or entering
into of any Contract with, any Related Party except regular compensation to
Employees;
(e) sale, assignment, license, transfer or Encumbrance of any of the
Assets of the Company or the Company Subsidiary, tangible or intangible, singly
or in the aggregate, other than sales of products and services involving less
than $25,000.00 in the ordinary course of business and consistent with past
practice;
(f) new Contracts (or series of related new Contracts), or
extensions, modifications, terminations, accelerations or renewals thereof,
except for Contracts involving less than $25,000.00 entered into, modified or
terminated in the ordinary course of business and consistent with past practice;
(g) actual or threatened (i) termination of any material customer
account or group of accounts or actual or (ii) material reduction in purchases
or royalties payable by any such customer or occurrence of any event that is
likely to result in any such termination or reduction;
(h) disposition or lapsing of any Proprietary Rights of the Company
or the Company Subsidiary, in whole or in part, or any disclosure of any trade
secret, process or know-how to any Person not an Employee;
(i) change in accounting methods or practices by the Company or the
Company Subsidiary;
(j) revaluation by the Company or the Company Subsidiary of any of
their respective Assets, including writing off or establishing reserves with
respect to inventory, notes or accounts receivable (other than for which
adequate reserves have been previously established);
(k) damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets, the Business or the prospects of the
Company or the Company Subsidiary;
(l) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or the Company
Subsidiary or any redemption, purchase or other acquisition of any equity
securities of the Company or the Company Subsidiary;
(m) issuance or reservation for issuance by the Company or the
Company Subsidiary of, or commitment of it to issue or reserve for issuance, any
shares of capital stock or other equity securities or obligations or securities
convertible into or exchangeable for shares of capital stock or other equity
securities;
24
(n) increase, decrease or reclassification of the capital stock of
the Company or the Company Subsidiary;
(o) amendment of the Certificate of Incorporation or Bylaws of the
Company or the Company Subsidiary;
(p) capital expenditure or execution of any lease or any incurring
of liability therefor by the Company in one or more related transactions,
involving payments or obligations in excess of $25,000.00 in the aggregate;
(q) failure to pay any obligation of the Company or the Company
Subsidiary when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company or the Company Subsidiary, except in the
ordinary course of business and consistent with past practice;
(s) indebtedness incurred or guaranteed by the Company or the
Company Subsidiary for borrowed money or any commitment to borrow money entered
into by the Company or the Company Subsidiary, or any loans made or agreed to be
made by the Company or the Company Subsidiary;
(t) liability incurred by the Company or the Company Subsidiary
except in the ordinary course of business and consistent with past practice, or
any increase or change in any assumptions underlying or methods of calculating
any bad debt, contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of the
Company or the Company Subsidiary other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of Liabilities as reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date;
(v) acquisition of any equity interest in any other Person by the
Company or the Company Subsidiary; or
(w) agreement by the Company or the Company Subsidiary directly or
indirectly to do any of the foregoing.
3.16. Liabilities. Neither the Company nor the Company Subsidiary has any
Liabilities (absolute, accrued, contingent or otherwise) except (i) Liabilities
which are reflected and properly reserved against in the Financial Statements,
(ii) Liabilities incurred after the Balance Sheet Date in the ordinary course of
business and consistent with past practice (iii) Liabilities arising under the
Contracts (other than obligations which are required to be reflected on a
balance sheet prepared in accordance with GAAP) set forth on Disclosure Schedule
3.11 and (iv) Liabilities set forth on Disclosure Schedule 3.16. None of the
Liabilities described in this Section 3.16 relates to any breach of Contract,
breach of warranty, tort, infringement or violation of law or arose out of any
Action.
25
3.17. Litigation. There is no Action pending or threatened or, to the
knowledge of the Company, anticipated (i) against, relating to or affecting the
Company or the Company Subsidiary, or any of the Assets of the Company or the
Company Subsidiary or any of the officers and directors of the Company or the
Company Subsidiary, (ii) which seeks to enjoin or obtain damages in respect of
the transactions contemplated hereby or (iii) which seeks to prevent the Company
from consummating the transactions contemplated hereby. None of such Actions, if
adversely determined against the Company, the Company Subsidiary, their
respective directors or officers, or any other Person could reasonably be
expected to result in a loss to the Company and the Company Subsidiary,
individually or in the aggregate, in excess of $25,000.00. There is no basis for
any Action, which if adversely determined against the Company, the Company
Subsidiary, their respective directors or officers, or any other Person could
reasonably be expected to result in a loss to the Company, individually or in
the aggregate, in excess of $25,000.00. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting the Company, the Company Subsidiary, the Business or
any of the Assets of the Company or the Company Subsidiary. Disclosure Schedule
3.17 contains a complete and accurate description of all Actions to which the
Company or the Company Subsidiary has been a party or which relate to any of the
Assets of the Company or the Company Subsidiary or the Company's or the Company
Subsidiary's officers or directors as such, or any such Actions which were
settled prior to the institution of formal proceedings, other than Actions
brought by the Company or the Company Subsidiary for collection of monies owed
in the ordinary course of business.
3.18. Labor Matters.
(a) General. Neither the Company nor the Company Subsidiary is a
party to any labor agreement with respect to its Employees with any labor
organization, group or association. No petition for certification as the
exclusive bargaining representative for any of the Employees is pending. To the
Company's knowledge, no union organizing activity has occurred with respect to
the Employees in the past two years. There is no unfair labor practice charge or
complaint against the Company pending before any domestic or foreign
governmental agency arising out of the Company's or the Company Subsidiary's
activities, and the Company has no knowledge of any facts or information which
would give rise thereto; there is no labor strike or labor disturbance pending
or threatened against the Company or the Company Subsidiary, nor is any
grievance currently being asserted against it; and neither the Company nor the
Company Subsidiary has experienced a work stoppage or other labor difficulty.
There are no material controversies pending or to the knowledge of the Company,
threatened between the Company or the Company Subsidiary and the Employees, and
the Company has no knowledge of any facts which could reasonably result in any
such controversy. To the knowledge of the Company, no executive, Key Employee,
or group of Employees has any plans to terminate employment with the Company or
the Company Subsidiary.
(b) Compliance. Each of the Company and the Company Subsidiary is in
material compliance with all applicable Laws respecting employment practices,
terms and conditions of employment, wages and hours, equal employment
opportunity, and the payment of social security and similar taxes and is not
engaged in any unfair labor practice. The Company has no knowledge of any claims
for past due wages or any penalties for failure to comply with any of the
foregoing.
26
(c) Severance Obligations. Neither the Company nor the Company
Subsidiary has entered into any severance, "stay-bonus" or similar arrangement
in respect of any present or former Employee that will result in any obligation
(absolute or contingent) of Buyer or the Company or the Company Subsidiary to
make any payment to any present or former Employee following termination of
employment or upon consummation of the transactions contemplated by this
Agreement (whether or not employment is continued for any specified period after
the Effective Time). Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in the
acceleration or vesting of any other rights of any Person to benefits under any
Employee Plans.
(d) Highly Compensated Employees. Attached hereto as Disclosure
Schedule 3.18(d) is a list of the names of all present Employees with total
compensation exceeding $100,000.00 in 2003 and their current compensation
payable by the Company or the Company Subsidiary. Notwithstanding any provision
of this Agreement or any Disclosure Schedule to the contrary, the Company
represents that from and after the Effective Time no benefit or other
compensation is payable to any Person identified on Disclosure Schedule 3.18(d)
upon the voluntary resignation of such Person from employment with Buyer or the
Company or the Company Subsidiary as a result of the Merger.
3.19. Employee Benefit Plans.
(a) There are no, and since the formation of the Company and the
Company Subsidiary, there have been no, Employee Plans which cover or have
covered Employees or under which the Company has contributed or has any
obligation to contribute or with respect to which the Company may have any
liability. With respect to each Employee Plan, the Company has delivered or made
available to Buyer a true, complete and correct copy of (i) such Employee Plan
(or, if not written, a written summary of its material terms) and the most
recent summary plan description, if any, related to such Employee Plan, (ii)
each trust agreement or other funding arrangement relating to such Employee
Plan, and (iii) the most recent actuarial report or financial statement relating
to such Employee Plan. The Company and the Company Subsidiary have no, and to
the knowledge of Company, no other person or entity has, any express or implied
obligation, whether legally enforceable or not, to modify, change or terminate
any Employee Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) Compliance. Each Employee Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including ERISA and the Code, and contributions required to be made under the
terms of any of such Employee Plans as of the date of this Agreement have been
timely made or, if not yet due, have been properly reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Financial Statements prior to the date of this Agreement. With respect to such
Employee Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which Company or the Company Subsidiary could
be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Employee Plans, ERISA,
the Code or any other applicable Law.
27
(c) Qualification. The Company on behalf of itself and each ERISA
Affiliate hereby represents that: (i) each Employee Plan which is intended to
qualify under Section 401(a), Section 401(k), Section 401(m) or Section
4975(e)(7) of the Code has received a favorable determination letter from the
IRS as to its qualified status, and each trust established in connection with
any such Employee Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code is so exempt, and no fact or event has
occurred that could adversely affect the qualified status of any such Employee
Plan or the exempt status of any such trust and (ii) each Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability (other than (A) liability for
ordinary administrative expenses typically incurred in a termination event or
(B) if the Employee Plan is a Pension Plan subject to Part 2 of Title I of
ERISA, liability for the accrued benefits of the Pension Plan as of the date of
such termination to the extent that either there are sufficient assets set aside
in the Pension Plan's trust or insurance contract to satisfy such liability or
such liability is reflected on the most recent balance sheet included in the
Company Financial Statements prior to the date of this Agreement). No suit,
administrative proceeding, action or other litigation has been brought, or is
threatened, against or with respect to any such Employee Plan, including any
audit or inquiry by the IRS or United States Department of Labor (other than
routine benefits claims by Employee Plan participants or beneficiaries).
(d) Title IV Pension Plans. No Employee Plan is a Multiemployer Plan
or other Pension Plan subject to Title IV of ERISA, and neither the Company nor
any ERISA Affiliate has sponsored or contributed to or been required to
contribute to a Multiemployer Plan or other Pension Plan subject to Title IV of
ERISA. No material liability under Title IV of ERISA has been incurred by
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to Company or any ERISA Affiliate
of incurring or being subject (whether primarily, jointly or secondarily) to a
material liability thereunder. None of the assets of Company or any ERISA
Affiliate is, or may reasonably be expected to become, the subject of any lien
arising under ERISA or Section 412(n) of the Code. Neither the Company nor any
ERISA Affiliate has any liability for unpaid contributions to a Multiemployer
Plan under Section 515 of ERISA.
(e) Funding Deficiency. With respect to each Pension Plan set forth
on Disclosure Schedule 3.19 that is subject to Title IV or Part 3 of Title I of
ERISA or Section 412 of the Code, (i) no reportable event (within the meaning of
Section 4043 of ERISA, other than an event that is not required to be reported
before or within 30 days of such event) has occurred or is expected to occur,
(ii) there was not an accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived, as of
the most recently ended plan year of such Pension Plan; and (iii) there is no
"unfunded benefit liability" (within the meaning of Section 4001(a)(18) of
ERISA).
(f) Retiree Welfare Benefits; COBRA and HIPAA. Except as required by
Law, no Employee Plan provides any of the following retiree or post-employment
benefits to any person: medical, disability or life insurance benefits. To the
extent it is applicable, the Company is in compliance with (i) the requirements
of the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations (including proposed regulations, if any) thereunder and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended, and the regulations (including proposed regulations)
thereunder.
28
(g) Deductibility of Payments. There is no contract, agreement, plan
or arrangement covering any Employee or former Employee that, individually or
collectively, requires the payment by the Company or the Company Subsidiary of
any amount (i) that is not deductible under Section 162(a)(1), 162(m) or 404 of
the Code or (ii) that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(h) Fiduciary Duties and Prohibited Transactions. No prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) has
occurred that involves the assets of any Employee Plan for which no exemption
exists under Section 408 of ERISA and Section 4975(c)(2) or (d) of the Code and
is reasonably likely to subject the Company, the Company Subsidiary or any of
their employees, directors or officers to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions imposed on
prohibited transactions under Title I of ERISA. Neither the Company nor the
Company Subsidiary has violated or has participated with a fiduciary (as defined
in Section 3(21) of ERISA) of a Welfare Plan or Pension Plan in a violation of
Part 4 of Title I, Subtitle B of ERISA with respect to any such plan, and the
Company has not been assessed any civil penalty under Section 502(l) of ERISA.
(i) No Adoption. Neither the Company nor any ERISA Affiliate has
announced to their employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to
adopt, change or terminate any Employee Plan which is intended to cover
Employees or former Employees.
3.20. Transactions with Related Parties. No Related Party has (a) borrowed
from or loaned to the Company money or other property which has not been repaid
or returned, (b) any contractual relationship or other claims, express, or
implied, of any kind whatsoever against the Company or the Company Subsidiary or
(c) any interest in any property used by the Company or the Company Subsidiary.
3.21. Compliance with Law. The Company and the Company Subsidiary have
conducted the Business in compliance with all applicable Laws and Orders.
Neither the Company nor the Company Subsidiary has received any notice to the
effect that, or has otherwise been advised that, the Company or the Company
Subsidiary is not in compliance with any such Laws or Orders, and the Company
has no reason to anticipate that any existing circumstances are likely to result
in any material violation of any of the foregoing.
3.22. Intellectual Property.
(a) Disclosure Schedule 3.22(a) lists all Company Registered
Proprietary Rights (including all Company Registered Proprietary Rights and all
trademarks and service marks that the Company or the Company Subsidiary has used
with the intent of creating or benefiting from any common law rights relating to
such marks) and lists any proceedings or actions pending as of the date hereof
before any court or tribunal (including the PTO or equivalent authority anywhere
in the world) related to any of the Company Registered Proprietary Rights.
29
(b) The Company or the Company Subsidiary has all requisite right,
title and interest in or valid and enforceable rights under Contracts or
Licenses to use all Company Proprietary Rights used by the Company or the
Company Subsidiary or necessary to the conduct of the Business as presently
conducted. Each item of Company Proprietary Rights, including all Company
Registered Proprietary Rights listed on Disclosure Schedule 3.22(b), is owned
exclusively by the Company (excluding Proprietary Rights licensed to the Company
under any License) and is free and clear of any Encumbrances). The Company (i)
owns exclusively all trademarks, service marks and trade names used by the
Company or the Company Subsidiary in connection with the operation or conduct of
the Business, including the sale of any products or technology or the provision
of any services by the Company or the Company Subsidiary, provided, however,
that the Company or the Company Subsidiary may use trademarks, service marks and
trade names of third parties which are licensed to the Company or the Company
Subsidiary, and (ii) owns exclusively, and have good title to, all copyrighted
works that are the Company's products or other works of authorship that the
Company otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to the Company or are in the public domain.
(c) To the extent that any Company Proprietary Rights have been
developed or created by any Person other than the Company, the Company has a
written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Proprietary Rights by operation of law or by valid assignment of any such rights
or (ii) has obtained a License under or to such Proprietary Rights.
(d) Neither the Company nor the Company Subsidiary has transferred
ownership of or granted any License of or other right to use or authorized the
retention of any rights to use, any Proprietary Rights that are or were Company
Proprietary Rights, to any other Person.
(e) The Company Proprietary Rights constitute all the Proprietary
Rights necessary or desirable to the conduct of the Business as it currently is
conducted or as reasonably contemplated to be conducted, including, without
limitation, the design, development, distribution, marketing, manufacture, use,
import, license, and sale of the products, technology and services of the
Company (including products, technology, or services currently under
development). Each of the Company Proprietary Rights owned or used by the
Company or the Company Subsidiary immediately prior to the Closing will be owned
or available for use by the Company or the Company Subsidiary on identical terms
and conditions immediately subsequent to the Closing. The Company has taken all
necessary and desirable action to maintain and protect each item of the Company
Proprietary Rights that it or the Company Subsidiary owns or uses.
(f) Disclosure Schedule 3.22(f) lists all Contracts and Licenses
(including all inbound Licenses) to which the Company or the Company Subsidiary
is a party with respect to any Proprietary Rights. No Person other than the
Company or the Company Subsidiary has ownership rights to improvements made by
the Company or the Company Subsidiary in Proprietary Rights which has been
licensed to the Company or the Company Subsidiary.
30
(g) Disclosure Schedule 3.22(g) lists all Contracts, Licenses and
agreements between the Company or the Company Subsidiary and any other Person
wherein or whereby the Company or the Company Subsidiary has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or Liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Company, the Company Subsidiary or such other Person of the Proprietary Rights
of any Person other than the Company or the Company Subsidiary.
(h) To the knowledge of the Company, the operation of the Business
as currently conducted or as presently proposed to be conducted, including the
Company's design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company or the Company Subsidiary does not
infringe or misappropriate the Proprietary Rights of any Person, violate the
rights of any Person (including rights to privacy or publicity), or constitute
unfair competition or an unfair trade practice under any applicable Law, and
neither the Company nor the Company Subsidiary has received notice from any
Person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Proprietary Rights of any Person or
constitutes unfair competition or trade practices under any applicable Law. To
the extent that the Company has received any notice related to the above or is
aware of any pending, anticipated, or threatened Action against the Company or
the Company Subsidiary relating to infringement or misappropriation of the
Proprietary Rights of any Person, the Company has conducted, prior to the
Closing Date, a complete and accurate investigation of any alleged infringement
or misappropriation. Based on the complete and accurate investigation, there is
no basis for any Action against the Company or the Company Subsidiary and any
judgment, order, or determination from such Action will have no material impact
on the operation of the Business as currently conducted or as presently proposed
to be conducted, including the Company's design, development, use, import,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company.
These representations are in addition to those of Section 3.17 of this Agreement
or any other provision hereof.
(i) Each item of Company Registered Proprietary Rights is valid and
subsisting, and all necessary registration, maintenance, renewal fees, annuity
fees and taxes due through the date of this Agreement in connection with such
Registered Proprietary Rights have been paid and all necessary documents and
certificates in connection with such Company Registered Proprietary Rights have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Proprietary Rights. Disclosure Schedule
3.22(i) lists all actions that must be taken by the Company or the Company
Subsidiary within 180 days from the date hereof, including the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Proprietary Rights.
The Company has not registered the copyright with the U.S. Copyright Office for
the latest version of each product or technology of the Company or the Company
Subsidiary that constitutes or includes a copyrightable work. In each case in
which the Company or the Company Subsidiary has acquired ownership of any
Proprietary Rights from any Person, the Company or the Company Subsidiary has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Proprietary Rights (including the right to seek damages with
respect to such Proprietary Rights) to the Company or the Company Subsidiary, to
the maximum extent required to protect the Company's or the Company Subsidiary's
ownership interests in and to such Proprietary Rights in accordance with
applicable Laws, the Company has recorded each such assignment of Registered
Proprietary Rights with the relevant Governmental or Regulatory Authority,
including the PTO, the U.S. Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.
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(j) There are no Contracts or Licenses between the Company or the
Company Subsidiary and any other Person with respect to Company Proprietary
Rights under which there is any claim (or facts that may reasonably lead to a
claim) known to the Company regarding the scope of such Contract or License, or
performance under such Contract or License, including with respect to any
payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Proprietary Rights.
(l) The Company has taken all commercially reasonable steps to
protect its rights in confidential information and trade secrets of the Company
and the Company Subsidiary or provided by any other Person to the Company or the
Company Subsidiary subject to a duty of confidentiality. Without limiting the
generality of the foregoing, the Company has, and enforces, a policy requiring
each Employee, consultant and independent contractor to execute proprietary
information, confidentiality and invention and copyright assignment agreements,
and all current and former Employees, consultants and independent contractors of
the Company and the Company Subsidiary have executed such agreements, as
applicable. Forms of all such agreements have been provided to Buyer or made
available to Buyer for review.
(m) No Company Proprietary Rights or product, technology or service
of the Company is subject to any Order or Action or Proceeding that restricts,
or that is reasonably expected to restrict in any manner, the use, transfer or
licensing of any Company Proprietary Rights by the Company or that may affect
the validity, use or enforceability of such Company Proprietary Rights.
(n) Neither this Agreement nor any transactions contemplated by this
Agreement will result in Buyer granting any rights or licenses with respect to
the Proprietary Rights of Buyer to any Person pursuant to any Contract to which
the Company or the Company Subsidiary is a party or by which any of their
respective Assets are bound.
(o) Disclosure Schedule 3.22(o) sets forth a list of (x) all
software which is material to the Business and which the Company or the Company
Subsidiary has licensed from any third party which is used by the Company or the
Company Subsidiary in the Company products or otherwise in their businesses and
(y) a list of all "freeware" and "shareware" incorporated into any product now
shipped by the Company or the Company Subsidiary. The Company and the Company
Subsidiary have all rights necessary to the use of such software, "freeware" and
"shareware."
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(p) The Company has taken all necessary and appropriate steps to
protect and preserve ownership of Company Proprietary Rights. The Company has
secured valid written assignments from all consultants and Employees who
contributed to the creation or development of the Company Proprietary Rights. In
the event that the consultant is concurrently employed by the Company or the
Company Subsidiary and a third party, the Company has taken additional steps to
ensure that any Company Proprietary Rights developed by such a consultant does
not belong to the third party or conflict with the third party's employment
agreement such steps include, but are not limited to, ensuring that all research
and development work performed by such a consultant are performed only on the
Company's or the Company Subsidiary's facilities and only using the Company's or
the Company Subsidiary's resources.
3.23. Tax Matters.
(a) Filing of Tax Returns. The Company and the Company Subsidiary
have timely filed with the appropriate taxing authorities and in the proper form
all Tax Returns required to be filed. The Tax Returns filed are complete and
accurate. All Taxes due and payable by the Company or the Company Subsidiary
(whether or not shown on any Tax Return) have been paid. Neither the Company nor
the Company Subsidiary has applied for or received any extension of time within
which to file any Tax Return, other than for Tax Returns that have already been
filed. No claim has ever been made by an authority in a jurisdiction where the
Company or the Company Subsidiary does not file Tax Returns that the Company or
the Company Subsidiary is or may be subject to taxation by that jurisdiction.
(b) Payment of Taxes. The unpaid Taxes of the Company and the
Company Subsidiary (i) did not, as of the Balance Sheet Date, exceed the reserve
for Tax Liability (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the balance sheets contained in the Financial Statements (rather than in any
notes thereto), and (ii) will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of the Company and the Company Subsidiary in filing their respective
Tax Returns.
(c) Audits, Investigations or Claims. To the knowledge of the
Company, no deficiencies for Taxes of the Company or the Company Subsidiary have
been claimed, proposed or assessed by any taxing or other governmental
authority. There are no pending or, to the knowledge of the Company, threatened
audits, assessments or other Actions for or relating to any Liability in respect
of Taxes of the Company or the Company Subsidiary, and there are no matters
under discussion with any governmental authorities, or known to the Company,
with respect to Taxes that are likely to result in an additional Liability for
Taxes with respect to the Company or the Company Subsidiary. Audits of federal,
state, local and foreign Tax Returns by the relevant taxing authorities have
been completed for the periods set forth on Disclosure Schedule 3.23(c) and,
except as set forth in such Disclosure Schedule, none of the Company, the
Company Subsidiary and their predecessors have been notified that any taxing
authority intends to audit a Tax Return for any other period.
(d) Copies of Tax Returns, Waivers and Extensions. The Company has
delivered to Buyer complete and accurate copies of federal, state, local and
foreign Tax Returns of the Company, the Company Subsidiary and their
predecessors for the years ended December 31, 2000, 2001 and 2002, and complete
and accurate copies of all examination reports and statements of deficiencies
assessed against or agreed to by the Company or any predecessor since December
31, 1996. None of the Company, the Company Subsidiary or any predecessor has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
33
(e) Liens. There are no Encumbrances for Taxes other than Permitted
Encumbrances on any of the Assets of the Company or the Company Subsidiary.
(f) Tax Elections. All elections with respect to Taxes affecting the
Company, the Company Subsidiary or their Assets, as of the date hereof are set
forth on Disclosure Schedule 3.23(f).
(g) Prior Affiliated Groups. Neither the Company nor the Company
Subsidiary is or has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the Code or of any group that has filed a
combined consolidated or unitary state or local return.
(h) Tax Sharing Agreements. None of the Company, the Company
Subsidiary, their respective Assets or the Business are, or will be after the
Effective Time, bound by any Tax-sharing agreement (including indemnity
arrangements) or similar arrangements. Neither the Company nor the Company
Subsidiary has assumed the liability of any other Person for Taxes by contract
or course of dealing.
(i) Partnerships, Single Member LLCs, CFCs and PHCs. Neither the
Company nor the Company Subsidiary (i) is a partner for Tax purposes with
respect to any joint venture, partnership, or other arrangement or contract
which is treated as a partnership for Tax purposes, (ii) owns a single member
limited liability company which is treated as a disregarded entity, (iii) is a
stockholder of a "controlled foreign corporation" as defined in Section 957 of
the Code (or any similar provision of state, local or foreign law) and (iv) is a
"personal holding company" as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law).
(j) No Withholding. The Company and the Company Subsidiary have
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
(k) FIRPTA. Neither the Company nor the Company Subsidiary is or has
ever been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
section 897(c)(1)(A)(ii) of the Code.
(l) International Boycott. Neither the Company nor the Company
Subsidiary has ever participated in or is participating in an international
boycott within the meaning of Section 999 of the Code.
(m) Permanent Establishment. Neither the Company nor the Company
Subsidiary has or has had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United States of
America and such foreign country.
34
(n) Other Agreements. Except as set forth on Disclosure Schedule
3.23(n), (i) there are no Tax rulings, requests for rulings, or "closing
agreements" relating to the Company or the Company Subsidiary which could affect
the Company's or the Company Subsidiary's liability for Tax for any period after
the Closing Date, (ii) as a result of any closing agreement, neither the Company
nor the Company Subsidiary will be required to include any item of income in, or
exclude any item of deduction from, any taxable period ending after the Closing
Date, and (iii) as a result of a change in accounting method for a Tax period
beginning on or before the Closing Date, neither the Company nor the Company
Subsidiary will be required to include any adjustment in taxable income for any
Tax period ending after the Closing Date.
(o) Other Taxes. No transaction contemplated by this Agreement will
be subject to any stock transfer Tax, sales Tax, use Tax, real estate transfer
or gains Tax, or other similar Tax.
(p) Acceleration of Severance or Other Business. No severance
payment or other benefit, and no acceleration of the vesting of any options,
payments or other benefits, will be accelerated, as a direct or indirect result
of the transactions contemplated by this Agreement.
3.24. Insurance. Disclosure Schedule 3.24 sets forth the following
information with respect to each insurance policy or binders of insurance
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Company or
the Company Subsidiary has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past two years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence or other basis) and amount (including a description
of how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy or binder: (i) the policy is
legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) none of the Company, the Company Subsidiary or any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy, and (iv) no
party to the policy has repudiated any provision thereof. Since its
incorporation, each of the Company and the Company Subsidiary has been covered
by insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Disclosure Schedule 3.24
describes any self-insurance arrangements affecting the Company or the Company
Subsidiary. There are no facts known to the Company upon which an insurer might
reasonably be justified in reducing or denying coverage or increasing premiums
on existing policies or binders. There are no outstanding unpaid claims under
any such policies or binders. Such policies and binders are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Closing Date.
35
3.25. Brokers; Transaction Costs. Neither the Company nor the Company
Subsidiary has entered into and will not enter into any contract, agreement,
arrangement or understanding with any Person which will result in the obligation
of Buyer, the Company or the Company Subsidiary to pay any finder's fee,
brokerage commission, legal, accounting, or similar payment in connection with
the transactions contemplated hereby.
3.26. No Other Agreements to Sell the Company or the Assets. Neither the
Company nor the Company Subsidiary has any legal obligation, absolute or
contingent, to any other Person to sell the Assets of the Company or the Company
Subsidiary (other than inventory in the ordinary course of business) or to sell
any capital stock of the Company or the Company Subsidiary or to effect any
merger, consolidation or other reorganization of the Company or the Company
Subsidiary or to enter into any agreement with respect thereto, except pursuant
to the Company Options and this Agreement.
3.27. Accounts Receivable. All Accounts Receivable of the Company and the
Company Subsidiary that are reflected on the Balance Sheet or on the accounting
records of the Company as of the Closing Date represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business of the Company. Unless paid prior to the Closing
Date, such Accounts Receivable are or will be as of the Closing Date collectible
net of an appropriate reserve shown on the Balance Sheet or on the accounting
records of the Company as of the Closing Date (which reserves are adequate and
calculated consistent with past practice). Each of such Accounts Receivable
either has been or will be collected in full, without any set-off, within one
hundred twenty (120) days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off under any Contract with
any obligor of any Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Disclosure Schedule 3.27 contains a complete and
accurate list of all Accounts Receivable as of the date of the hereof, which
list sets forth the aging of such Accounts Receivable.
3.28. Inventory. All inventory of the Company and the Company Subsidiary,
whether or not reflected in the Balance Sheet or on the accounting records of
the Company or the Company Subsidiary as of the Closing Date (accounted for
consistent with past practice), consists of a quality and quantity usable and
salable in the ordinary course of business of the Company, except for obsolete
items and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Balance Sheet or on the accounting
records of the Company as of the Closing Date, as the case may be. The
quantities of each item of inventory are not excessive, but are reasonable in
the present circumstances of the Company. The Company has good and marketable
title to the inventories free and clear of all Encumbrances. The inventories do
not include any material amount of inventory that is slow-moving, obsolete,
excess, damaged or otherwise not merchantable or returnable by vendors for full
credit.
36
3.29. Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company or the Company Subsidiary has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and neither the Company nor the Company Subsidiary has any Liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damage in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. No product manufactured, sold, leased,
or delivered by the Company or the Company Subsidiary is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease. The Company has previously provided to Buyer
complete and accurate copies of the standard terms and conditions of sale or
lease for the Company and the Company Subsidiary (containing applicable
guaranty, warranty, and indemnity provisions).
3.30. Board Recommendation. The board of directors of the Company has, by
unanimous written consent dated November 29, 2004, (i) approved, adopted and
declared advisable this Agreement, (ii) determined that this Agreement is fair
to and in the best interests of the stockholders of the Company and (iii)
resolved to recommend approval of the adoption of this Agreement to the
stockholders of the Company. The Company has taken any and all action necessary
to exempt the execution, delivery and performance of this Agreement from the
restrictions on "business combinations" set forth in the Florida Business
Corporations Act.
3.31. Material Misstatements or Omissions. No representations or
warranties by the Company in this Agreement (including all schedules,
certificates and exhibits hereto) contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
misleading. In addition, the other document, written information, statement,
certificate or schedule heretofore or hereinafter furnished by the Company or
any of its Representatives to Buyer or Merger Sub in connection with the
transactions contemplated by this Agreement, or mailed or delivered to
stockholders of the Company in connection with soliciting the approval of the
adoption of this Agreement by the stockholders of the Company, taken as a whole
do not contain or will not contain any untrue statement of a material fact, or
do not omit or will not at the Effective Time omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
As an inducement of the Company to enter into this Agreement, Buyer and
the Merger Sub represent and warrant to the Company as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
37
4.1. Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Nevada. Merger Sub has not engaged in any business (other than
in connection with this Agreement and the transactions contemplated hereby)
since the date of its incorporation. Merger sub is a wholly-owned subsidiary of
Buyer.
4.2. Capitalization of Buyer.
(a) Authorized Capitalization. As of the date of this Agreement, the
authorized capitalization of Buyer consists of (i) 1,000,000,000 shares of
common stock, par value $0.01 per share, of which 367,735,954 shares are issued
and outstanding and (ii) 25,000,000 shares of undesignated preferred stock, par
value $0.01 per share, none of which are issued and outstanding. Buyer has no
other capital stock authorized, issued or outstanding. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to Buyer. With respect to any Buyer Common Stock
that has been issued subject to a right of repurchase on the part of the
Company, Disclosure Schedule 4.2(a) sets forth the holder thereof, the number
and type of securities covered thereby, and the vesting schedule thereof
(including a description of the circumstances under which such vesting schedule
can or will be accelerated).
(b) No Other Capital Stock, Options, Warrants. Except as provided in
the Buyer SEC Reports (as defined below and in Disclosure Schedule 4.2(b)),
there are no outstanding Options, warrants, convertible securities or rights of
any kind to purchase or otherwise acquire any shares of capital stock or other
securities of Buyer.
(c) Buyer is directly or indirectly the record and beneficial owner
of all of the outstanding shares of capital stock or other equity interests of
Merger Sub. All of such shares have been duly authorized and are validly issued,
fully paid, nonassessable and free of preemptive rights with respect thereto and
are owned by Buyer free and clear of any claim, lien or encumbrance of any kind
with respect thereto. There are no proxies or voting agreements with respect to
such shares, and there are not any existing options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating
Buyer to issue, transfer or sell any shares of capital stock or any other
securities convertible into, exercisable for, or evidencing the right to
subscribe for any shares of Merger Sub.
4.3. Authorization. Each of Buyer and Merger Sub has all necessary
corporate power and authority to enter into this Agreement and, assuming the
approval of the adoption of this Agreement by the sole stockholder of Merger
Sub, has taken all action necessary to consummate the transactions contemplated
hereby and to perform its respective obligations hereunder. This Agreement has
been duly executed and delivered by each of Buyer and Merger Sub, and this
Agreement is a valid and binding obligation of each of Buyer and Merger Sub
enforceable against each of Buyer and Merger Sub in accordance with its terms,
except that enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
38
4.4. SEC Reports; Financial Statements; Books and Records.
(a) SEC Reports. Buyer has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements and
documents filed since January 1, 2001 are referred to herein as the "Buyer SEC
Reports"). All of the Buyer SEC Reports complied as to form, when filed, in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act. Accurate and complete copies of the Buyer SEC Reports have been
made available to the Company. As of their respective dates or, in the case of
registration statements, their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
the Buyer SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Buyer has been advised
by each of its current officers and directors that each such person and such
persons' Affiliates have complied with all filing requirements under Section 13
and Section 16(a) of the Exchange Act. Each certification included in the Buyer
SEC Reports pursuant to Section 302 or Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 was accurate when made.
(b) Financial Statements. Each of the financial statements
(including, in each case, any related notes thereto) contained in the Buyer SEC
Reports (the "Buyer Financial Statements"), (x) was prepared in accordance with
GAAP and (y) fairly presented the financial position of Buyer as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, consistent with the books and records of the
Buyer, except that the unaudited interim financial statements were or are
subject to normal year-end adjustments. The balance sheet of the Buyer contained
in the Buyer's Form 10-KSB for the year ended December 31, 2003 is hereinafter
referred to as the "Buyer Balance Sheet."
(c) Internal Controls; Disclosure Controls. Buyer maintains a system
of internal accounting controls and disclosure controls and procedures
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorization, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences and (v) material information
concerning Buyer is publicly disseminated in a timely manner.
(d) Books and Records. The Books and Records, in reasonable detail,
accurately and fairly reflect in all material respects the activities of Buyer
and have been provided to the Company or made available for its inspection.
(e) All Accounts Recorded. Buyer has not engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts or funds which have been and are reflected in its books and
records.
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4.5. No Conflicts. The execution and delivery by each of Buyer and Merger
Sub of this Agreement does not, and the performance by each Buyer and Merger Sub
of its obligations under this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws of
Buyer or Merger Sub; or
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Buyer or Merger Sub.
4.6. Approvals. Other than the filing of the Certificate of Merger,
together with the required officers' certificates, and such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under state or federal securities laws, if any, there are no material
Approvals of Governmental or Regulatory Authorities relating to the business
conducted by Buyer or Merger Sub required to be given to or obtained by Buyer
from any Governmental or Regulatory Authorities in connection with the
consummation of the transactions contemplated by this Agreement.
4.7. Merger Consideration. Buyer currently has available, and at the
Effective Time of the Merger will continue to have available, sufficient cash
and cash equivalents to enable it to perform its obligations under this
Agreement.
4.8. Brokers' and Finders' Fees. Neither Buyer nor Merger Sub has
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated hereby.
4.9. Board Approval; No Stockholder Approval Required. The boards of
directors of Buyer and Merger Sub have approved this Agreement and the Merger.
The stockholders of Buyer are not required to adopt this Agreement. Buyer, as
the sole stockholder of Merger Sub, shall adopt this Agreement immediately after
the execution and delivery of this Agreement by the parties hereto.
ARTICLE 5.
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. Conduct of Business of the Company. Except as otherwise expressly
contemplated by this Agreement or as consented to by Buyer in writing, from the
date hereof through the Closing, the Company shall, and shall cause the Company
Subsidiary to, (a) operate the Business solely in the ordinary course of
business and in accordance with past practice and (b) not take any action
inconsistent with this Agreement or the consummation of the Merger. Without
limiting the generality of the foregoing, except as specifically contemplated by
this Agreement or as consented to by Buyer in writing, the Company shall not,
and shall cause the Company Subsidiary not to:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse, or otherwise become responsible for obligations of any other Person;
40
(b) issue (except pursuant to the exercise of the Company Options
outstanding on the date of this Agreement) or commit to issue any shares of its
capital stock or any other securities or any securities convertible into shares
of its capital stock or any other securities, including, without limitation, any
options to acquire capital stock, accelerate the vesting of any Company Options,
or reserve for issuance additional shares;
(c) declare, pay or incur any obligation to pay any dividend or
distribution on its capital stock or declare, make or incur any obligation to
make any distribution or redemption with respect to capital stock;
(d) make any change to the Company's Certificate of Incorporation or
Bylaws or the Company Subsidiary's charter documents;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale or
disposition of inventory to customers in the ordinary course of business and
consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it;
(g) make any investment or commitment of a capital nature either by
purchase of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
(h) terminate any Contract listed on Disclosure Schedule 3.11 or
make any change in any such Contract;
(i) without the written consent of Buyer, which consent shall not be
unreasonably withheld, (i) enter into or modify any employment Contract, (ii)
pay any compensation to or for any Employee, officer or director other than in
the ordinary course of business and pursuant to employment arrangements existing
as of the date of this Agreement, (iii) pay or agree to pay any bonus, incentive
compensation, service award, severance, "stay bonus" or other like benefit or
(iv) enter into or modify any other material Employee Plan;
(j) enter into or modify any Contract or other arrangement with a
Related Party;
(k) make any change in any method of accounting or accounting
practice;
(l) fail to comply with all material Laws applicable to the Assets
of the Company or the Company Subsidiary and the Business consistent with past
practices;
(m) fail to use its commercially reasonable efforts to (i) maintain
the Business, (ii) maintain existing relationships with material suppliers and
customers of the Company and others having business dealings with the Company,
and (iii) otherwise preserve the goodwill of the Business so that such
relationships and goodwill will be preserved on and after the Closing Date;
41
(n) make or change any election in respect of Taxes, adopt or change
any material accounting method in respect of Taxes, enter into any Tax
allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(o) commence any Action or Proceeding;
(p) take any action that would cause any representation or warranty
of the Company in this Agreement to be or become untrue in any material respect;
(q) knowingly take any other actions that would prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder; or
(r) directly or indirectly take, agree to take or otherwise permit
to occur any of the actions described in Sections 5.1(a) through 5.1(q).
5.2. No Solicitation.
(a) The Company shall not, and shall cause the Company Subsidiary
and its Representatives not to: (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal that constitutes or is
reasonably likely to lead to any Acquisition Proposal (as defined in Section
5.2(c) hereof), (ii) engage in negotiations or discussions (other than to advise
as to the existence of the restrictions set forth in this Section 5.2) with, or
furnish any information or data to, any third party relating to an Acquisition
Proposal, or (iii) enter into any agreement with respect to any Acquisition
Proposal or approve any Acquisition Proposal. Notwithstanding anything to the
contrary contained in this Section 5.2 or in any other provision of this
Agreement, the Company and its Representatives (i) may participate in
discussions or negotiations with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "Potential Acquiror") or approve
an unsolicited Acquisition Proposal if (x) neither the Company nor any of its
Representatives has violated the provisions of this Section 5.2 and (y) the
board determines in good faith with advice from its financial advisor that the
Potential Acquiror submitting such Acquisition Proposal is reasonably capable of
consummating such Acquisition Proposal, and the board determines in good faith
after receiving advice from its financial advisor, that such Acquisition
Proposal is reasonably likely to lead to a Superior Proposal (as defined in
Section 5.2(d) hereof). Prior to furnishing any non-public information to a
Potential Acquiror, the Company shall enter into an agreement with such
Potential Acquiror containing confidentiality, standstill and nonsolicitation
provisions at least as favorable to the Company as the confidentiality,
standstill and nonsolicitation provisions of the Confidentiality Agreement and
the Letter of Intent. In the event that the Company shall determine to provide
any information as described above, or shall receive any Acquisition Proposal
(or any material amendment to an Acquisition Proposal previously received), it
shall promptly, and in any event within 24 hours, inform Buyer in writing as to
that fact and shall furnish to Buyer the identity of the recipient of such
information to be provided and/or the Potential Acquiror and the terms of such
Acquisition Proposal (or material amendment).
42
(b) Except as provided in this Section 5.2(b), the board of
directors of the Company shall recommend to the stockholders of the Company the
adoption of this Agreement. The board of directors of the Company shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Buyer, its approval and recommendation of the adoption of this Agreement or (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal unless, in each case, the board has (x) determined in good faith that
the failure to take such action would be inconsistent with the board's fiduciary
duties under applicable law and (y) gives at least five (5) business days' prior
written notice to Buyer of its determination under clause (x) of this Section
5.2(b).
(c) For purposes of this Agreement, "Acquisition Proposal" shall
mean any bona fide proposal, whether in writing or otherwise, made by a third
party to:
(i) acquire beneficial ownership (as defined under Rule 13d-3
of the Exchange Act) of all or a material portion of the business of, or any
material equity interest in, the Company or the Company Subsidiary pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer or exchange offer or similar transaction
involving the Company or the Company Subsidiary; or
(ii) acquire, lease, exchange, transfer, license or dispose of
(other than in the ordinary course of business), a material portion of the
Company's Proprietary Rights.
Each of (i) or (ii) above shall include any single or multi-step transaction or
series of related transactions which is structured to permit any transaction
described therein.
(d) The term "Superior Proposal" means a bona fide Acquisition
Proposal for all of the Company Common Stock (or all or substantially all of the
assets of the Company), made in writing and not initiated, solicited or
encouraged in violation of Section 5.2(a) of this Agreement, on terms which the
board of directors of the Company determines in good faith to be more favorable
to Company and the stockholders of the Company than the Merger (based on the
advice of the Company's financial advisor that the value of the consideration
provided for in such proposal is superior to the value of the consideration
provided for in the Merger), for which financing, to the extent required, is
then committed.
(e) The Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to an
Acquisition Proposal to which it or the Company Subsidiary is a party.
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ARTICLE 6.
ADDITIONAL COVENANTS
6.1. Special Meeting; Board Recommendation.
(a) In order to obtain stockholder approval of this Agreement, the
Company, acting through its board of directors, shall duly call, give notice of,
convene and hold a special meeting of the stockholders of the Company for the
purpose of considering and voting on the adoption of this Agreement (the
"Company Special Meeting") or shall obtain the written consent of the holders of
a majority of the issued and outstanding shares of common stock of the Company
approving this Agreement and the transactions provided for herein. The Company
Special Meeting shall be held, or the shareholder written consent obtained, as
soon as practicable after the execution of this Agreement. Without limiting the
generality of the foregoing, the Company's obligations pursuant to the first
sentence of this Section 6.1(a) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to the Company of any
Acquisition Proposal or (ii) the withdrawal or modification by the board of
directors of the Company or any committee of such board of directors of the
recommendation of this Agreement or the Merger.
(b) As promptly as practicable after the execution of this
Agreement, the Company shall prepare and file with the SEC a preliminary form of
the proxy statement for the Company Special Meeting (the "Proxy Statement") or,
if a written consent of shareholders is obtained, an Information Statement. As
promptly as practicable following receipt of SEC comments on such preliminary
Proxy Statement or Information Statement, the Company shall prepare a response
to such comments. The Company shall provide drafts of the Proxy Statement or
Information Statement and any response letter to Buyer, and Buyer shall be
entitled to review and comment on all such drafts. Neither the Proxy Statement,
the Information Statement nor any such response letter shall be filed with the
SEC without the consent of Buyer, which consent shall not be unreasonably
withheld. Upon resolution of all comments or expiration of any waiting period,
the Company shall mail the definitive Proxy Statement or Information Statement
to the stockholders of the Company as of the record date for the Company Special
Meeting or such date designated in the Information Statement. The Company shall
use all commercially reasonable efforts to have the preliminary Proxy Statement
or Information Statement cleared by the SEC as promptly as practicable. Buyer
and the Company shall promptly furnish to each other all information, and take
such other actions (including, without limitation, using all commercially
reasonable efforts to provide any required consents of their respective
independent auditors), as may reasonably be requested in connection with any
action by any of them in connection with the preceding sentences of this Section
6.1(b). Promptly after execution of this Agreement, Buyer and the Company shall
cooperate to prepare and file with the SEC a combined Proxy Statement (or
Information Statement) and Registration Statement on Form S-4 by which Buyer
shall register the shares of Buyer Common Stock to be issued to the shareholders
of the Company in the transaction. Buyer and the Company shall use all
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable.
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(c) Subject to Section 5.2(b), the Proxy Statement or Information
Statement shall contain the recommendation of the board of directors of the
Company in favor of the adoption of this Agreement.
6.2. Voting Agreements. Contemporaneously with the execution of this
Agreement, each of the Major Stockholders have entered into Voting Agreements
with Buyer (in the form of Exhibit A attached hereto) with respect to the voting
of their Company Common Stock and which Voting Agreements prohibit the Major
Stockholders from selling or transferring their Company Common Stock prior to
the Effective Time.
6.3. Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Buyer and its officers, employees,
accountants, counsel, financing sources and other agents and representatives
reasonable access to all buildings, offices, and other facilities and to all
Books and Records of the Company and the Company Subsidiary, whether located on
the premises of the Company or at another location; (ii) permit Buyer to make
such inspections as it may reasonably require; (iii) cause its officers to
furnish Buyer such financial, operating, technical and product data and other
information with respect to the Business and Assets of the Company or the
Company Subsidiary as Buyer from time to time may request, including without
limitation, financial statements and schedules; (iv) allow Buyer the opportunity
to interview such Employees and other personnel and Affiliates of the Company
and the Company Subsidiary as Buyer may reasonably request; and (v) assist and
cooperate with Buyer in the development of integration plans for implementation
by Buyer and the Surviving Corporation following the Effective Time; provided,
however, that no investigation pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty made by the Company herein.
6.4. Confidentiality. Each of the parties hereto hereby agrees to keep the
information or knowledge obtained in any investigation pursuant to Section 6.3,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of Law, or a confidentiality
agreement or other contractual, legal or fiduciary obligation of confidentiality
of the disclosing party or any other party with respect to such information, (c)
became known to the public through no fault of such party, (d) is later lawfully
acquired by such party without confidentiality restrictions from other sources
not bound by applicable confidentiality restrictions, (e) is required to be
disclosed by order of court or Governmental or Regulatory Authority with
subpoena powers (provided that such party shall have provided the other party
with prior notice of such order and an opportunity to object or seek a
protective order and take any other available action) or (f) which is disclosed
without obligation of confidentiality in the course of any Action or Proceeding
between any of the parties hereto.
6.5. Expenses. All fees and expenses incurred in connection with the
proposed Merger, including all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties ("Third Party Expenses")
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses.
45
6.6. Public Disclosure. Except as required by law (including federal and
state securities laws), or as may be reasonably necessary to complete the
Merger, no party hereto shall disclose the existence of, or any subject matter
of, or the terms and conditions of, this Agreement to any third party (other
than a party's financial and legal advisors) without the prior written consent
of the other (which shall not be unreasonably withheld or delayed), and each
party is responsible for preventing disclosure by such party's financial and
legal advisors. The parties will mutually reasonably agree to the timing and
content of any announcements, press releases or public statements concerning the
proposed Merger.
6.7. Commercially Reasonable Efforts. The Company and Buyer shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
do, or cause to be done, all things necessary, proper and appropriate under this
Agreement, applicable laws, and applicable regulations to complete the
transactions contemplated by this Agreement, including without limitation, (a)
obtain all Approvals and Consents under any of the Contracts and under other
agreements as may be required in connection with the Merger (including those set
forth in Disclosure Schedule 3.12), (b) to obtain all Approvals from
Governmental or Regulatory Authorities including, without limitation, using
commercially reasonable efforts to obtain all necessary governmental and private
party consents, approvals or waivers, provided, however, that no party shall be
obligated to make a material payment of money as a condition to obtaining any
such Approval or Consent other than filing fees and other reasonably anticipated
costs and expenses. Buyer and the Company shall provide each other with such
assistance and information as is reasonably required to obtain such Approvals as
set forth in Disclosure Schedule 3.12.
6.8. Notification of Certain Matters. The Company shall give prompt notice
to Buyer, and Buyer shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing Date and (b) any failure of the Company or Buyer, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.8 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
6.9. Company Repurchases. The Company will exercise any rights that mature
between the date hereof and the Effective Time to repurchase any outstanding
shares of Company Common Stock at the price at which such shares were issued.
6.10. Proprietary Rights. The Company shall give Buyer prompt notice of
that any Person shall have (i) commenced, or shall have notified the Company or
the Company Subsidiary that it intends to commence, an Action or Proceeding or
(ii) provided the Company or the Company Subsidiary with notice, in either case
which allege(s) that any of the Proprietary Rights, including the Company
Proprietary Rights, presently embodied, or proposed to be embodied, in the
Company's or the Company Subsidiary's products or utilized in Company-designed
or modified development tools (including standard cells) or design environments
infringes or otherwise violates the intellectual property rights of such Person,
is available for licensing from a potential licensor providing the notice or
otherwise alleges that the Company or the Company Subsidiary does not otherwise
own or have the right to exploit such Proprietary Rights, including the Company
Proprietary Rights. The Company shall take commercially reasonable actions to
maintain, perfect, preserve or renew the Company Registered Proprietary Rights,
including, without limitation, the payment of any registration, maintenance,
renewal fees, annuity fees and taxes or the filing of any documents,
applications or certificates related thereto, and to promptly respond and
prepare to respond to all requests, related to the Company Registered
Proprietary Rights, received from Governmental or Regulatory Authorities. At the
Closing, the Company will notify Buyer of all material actions which must be
taken within the 180 days following the Closing and which are necessary to
maintain, perfect, preserve or renew the Company Registered Proprietary Rights,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto.
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6.11. Tax Matters.
(a) Tax Periods Ending on or before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and the Company Subsidiary for all periods ending on or prior to
the Closing Date which are required to be filed (taking into account all
extensions properly obtained) after the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for Tax periods which begin before the Closing Date
and end after the Closing Date.
(c) Refunds. Any Tax refunds of the Company that are received by
Buyer or the Company and any amounts credited against Tax of the Company to
which Buyer or the Company become entitled, that relate to Tax periods or
portions thereof ending on or before the Closing Date shall be for the account
of the Buyer.
(d) Tax Elections. Neither the Company nor the Company Subsidiary
shall make or change any election or method of accounting with respect to Taxes
or settle or compromise any material Tax Liability or refund after the date
hereof without Buyer's prior written consent (which consent shall not be
unreasonably withheld).
(e) FIRPTA Certificate. The Company shall have delivered to Buyer,
not more than 20 days before the Closing Date, a statement in accordance with
Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h) certifying that the
Company is not, and has not been, a "United States real property holding
corporation" for purposes of Sections 897 and 1445 of the Code. In addition, the
Company shall have delivered to Buyer on the Closing Date a copy of the
notification to the IRS, prepared in accordance with Treasury Regulations
Section 1.897-2(h)(2), of delivery of the statement referred to in the preceding
sentence, signed by a responsible corporate officer of the Company. The Company
acknowledges that Buyer may cause the Company to file such notification with the
IRS on or after the Closing Date.
47
(f) Carrybacks. Any net operating losses or similar Tax attribute of
the Company or the Company Subsidiary is an asset of the Company that (subject
to any applicable limitations imposed by law) is being acquired by Buyer
pursuant to the Merger, and neither the Company nor the Company Subsidiary shall
elect to carry back any such Tax attributes to prior years of the Company or the
Company Subsidiary or otherwise act so as to limit the ability of Buyer to use
such attributes subsequent to the Merger.
6.12. SEC Filings. The Company will deliver promptly to Buyer true and
complete copies of each report, registration statement or statement mailed by it
to its stockholder generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports, including the consolidated financial statements
included therein, and statements (excluding any information therein provided by
Buyer or the Merger Sub, as to which the Company makes no representation) will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such reports, (a) shall comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, (b) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-QSB under the Exchange Act) and (c) shall fairly present the consolidated
financial position of the Company and the Company Subsidiary as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal year-end adjustments.
6.13. Stockholder Litigation. The Company and Buyer agree that in
connection with any third party or derivative litigation which may be brought
against the Company, the Company Subsidiary or their respective directors
relating to the transactions contemplated hereby, the Company will keep Buyer,
and any counsel which Buyer may retain, informed of the course of such
litigation, to the extent Buyer is not otherwise a party thereto, and the
Company agrees that it will consult with Buyer prior to entering into settlement
or compromise of any such stockholder litigation; provided that no such
settlement or compromise will be entered into without Buyer's prior written
consent (which consent or denial of consent shall not be unreasonably delayed).
6.14. Indemnification. The certificate of incorporation and bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the certificate of incorporation and bylaws of the
Company as of the date hereof, which provisions shall not be amended, repealed
or otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors and officers of the
Company, unless such modification is required by law. The Surviving Corporation
will honor and fulfill the obligations of the Company pursuant to
indemnification agreements with the Company's officers and directors existing as
of the date hereof.
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6.15. Company Options. At or prior to the Closing, the Company shall cause
all agreements evidencing Company Options to be amended, in a manner reasonably
satisfactory to Buyer, to the extent necessary to provide for the treatment of
such Company Options in the Merger as contemplated by this Agreement.
6.16. Within a reasonable period of time after the Effective Time, Buyer
shall make an offer to purchase all of the shares of common stock of Company
Subsidiary (excluding any shares owned by Buyer or any affiliate of Buyer)
outstanding as of the Effective Time, at a price and on terms set by Buyer and
in Buyer's sole discretion. Such offer shall be made in accordance with
applicable state and federal laws and regulations of the United States, and to
the extent applicable, of Canada.
ARTICLE 7.
CONDITIONS TO THE MERGER
7.1. Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or mutual waiver at or prior to the Closing
of the following conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained.
(b) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Buyer
were to agree to limitations on its business activities or operations.
(c) Legal Proceedings. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing.
7.2. Additional Conditions to Obligations of the Company. The obligation
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall have been accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date.
49
(b) Performance. Buyer shall have performed and complied with in all
material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Buyer at or before the
Closing Date.
(c) Buyer Certificate. Buyer shall have delivered to the Company a
certificate, dated the Closing Date and executed by an authorized officer of the
Buyer, substantially in the form set forth in Exhibit C hereto.
(d) Dissenting Shares. Not more than 5% of the outstanding shares of
the Company common stock shall be Dissenting Shares.
(e) Registration Effective. The Registration Statement respecting
the shares of Buyer Common Stock to be issued in the transaction provided for
herein shall have been declared effective.
7.3. Additional Conditions to the Obligations of Buyer. The obligation of
Buyer to consummate the Merger and the other transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Buyer:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been accurate
in all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date,
provided, that all "Company Material Adverse Effect" or "Company Material
Adverse Change" qualifications, other materiality qualifications, and knowledge
qualifications contained in such representations and warranties shall be
disregarded in determining the accuracy of the representation and warranties.
(b) Performance. The Company shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date.
(c) Company Certificate. The Company shall have delivered to Buyer a
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of the Company, substantially in the form set forth in Exhibit
D.
(d) Stockholder Approval. The adoption of this Agreement by the
requisite holders of the outstanding shares of Company Common Stock shall have
been obtained at the Company Special Meeting or any adjournment or postponement
thereof or by written consent as permitted by law.
(e) Liabilities of the Company. The Company shall not have
liabilities in an amount greater than Five Million Dollars (US $5,000,000.00) as
of the Balance Sheet Date and as of the Closing Date.
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(f) Assets of the Company. The Company shall have Assets in an
amount equal to or greater than Eight Hundred Fifty Thousand Dollars (US
$850,000) as of the Balance Sheet Date and as of the Closing Date.
(g) Issued Company Common Stock. The Company shall not have in
excess of 35,000,000 shares of Company Common Stock issued and outstanding as of
the Closing Date.
(h) Termination of the Company's Employment Agreements. The Company
shall have terminated prior to the Closing Date any and all employment
agreements, severance agreements, "golden parachute" provisions of any
agreements, and/or any other agreements that would entitle any person
compensation or payment pursuant to the termination of such person's employment
or a change of control in the Company.
(i) Consents and Approvals. All consents, approvals, notifications,
disclosures, filings and registrations listed or required to be listed in
Disclosure Schedule 3.12 of the Disclosure Schedule shall have been obtained or
made.
(j) Actions. No Action shall be pending or threatened relating in
any way to this Agreement or the transactions contemplated herein.
(k) Dissenting Shares. Not more than 5% of the issued and
outstanding shares of Company Common Stock shall be Dissenting Shares.
(l) Key Employees. Each of the Key Employees shall remain
continuously employed by the Company on substantially the same terms and with
substantially the same responsibilities as on the date hereof and the Company
shall have no knowledge that any of the Key Employees has any intention to
terminate their employment with the Surviving Corporation
(m) Company Options. All agreements evidencing Company Options shall
have been amended, in a manner reasonably satisfactory to Buyer, to the extent
necessary to provide for the treatment of such Company Options in the Merger as
contemplated by this Agreement.
(n) Section 280G. The Company, the Company Stockholders and any
person who is a "disqualified individual" (as defined in Section 280G(c) of the
Code and the proposed Treasury Regulations promulgated thereunder) with respect
to the Company shall have taken any and all actions necessary to provide that no
payment or acceleration of any right to benefits or payment pursuant to this
Agreement, any Employee Plan, Contract or any other plan or arrangement shall
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1). Buyer and the Company each acknowledge and agree that such actions
may include, but are not necessarily limited to, the approval by the Company
Stockholders of the right to receive or retain such payments or benefits, which
approval satisfies the requirements of Section 280G(b)(5)(B) of the Code and the
proposed Treasury Regulations promulgated thereunder.
(o) FIRPTA Certificate. Buyer shall have no actual knowledge and
shall not have received a notice pursuant to Treasury Regulations Section
1.445-4 that the statement delivered by the Company pursuant to Section 6.11(g)
is false. ARTICLE 8. TERMINATION
51
8.1. Termination. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after the
adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the parties duly authorized by the
boards of directors of the Company and Merger Sub;
(b) by either Buyer or the Company if the Merger shall not have been
consummated on or before March 31, 2005 (the "Outside Date"), which date may be
extended by mutual consent of the parties hereto; provided, however, that the
party seeking to terminate this Agreement pursuant to this clause 8.1(b) shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
(c) by either Buyer or the Company if (i) any law shall have been
enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated hereby or (ii) a court of competent
jurisdiction or other Government Entity shall have issued an order, decree,
ruling or injunction, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger
substantially on the terms contemplated hereby, and such order, decree, ruling,
injunction or other action shall have become final; provided, that the party
seeking to terminate this Agreement pursuant to this Section 8.1(c) shall have
used its reasonable commercial efforts to remove such order, decree, ruling or
injunction; or
(d) by either Buyer or the Company if the adoption of this Agreement
by a majority of the outstanding shares of Company Common Stock is not obtained
at the Company Special Meeting or any adjournment or postponement thereof (a
"Company Negative Vote") or by written consent of the holders of the requisite
number of shares of Company common stock.
8.2. Termination by Buyer. This Agreement may be terminated and the Merger
may be abandoned any time prior to the Effective Time, whether before or after
adoption of this Agreement by the stockholders of the Company, by Buyer, if:
(a) The Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by the Company at or prior to such
date of termination; provided, however, that if such failure or failures are
capable of being cured prior to the Effective Time, such failure or failures
shall not have been cured within thirty (30) days of delivery to the Company of
written notice of such failure or failures;
(b) there exists a breach or breaches of any representation or
warranty of the Company contained in this Agreement such that the closing
condition set forth in Section 7.3(a) would not be satisfied; provided, however,
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not have been cured within thirty
(30) days of delivery to the Company of written notice of such breach or
breaches; or
52
(c) (i) the board of directors of the Company fails to recommend the
adoption of this Agreement to the stockholders of the Company, or withdraws,
amends or modifies in a manner adverse to Buyer its recommendation to the
stockholders of the Company for adoption of this Agreement, (ii) a tender offer
(to which Rule 14e-2(a) applies) for any of the outstanding shares of capital
stock of the Company is commenced prior to the Company Special Meeting, and
within the time required by Rule 14e-2(a) under the Exchange Act the board of
directors of the Company fails to recommend against acceptance of such tender
offer, or takes no position with respect to such tender offer, or states its
inability to take a position with respect to such tender offer, (iii) the
Company or its board of directors takes any position (including making no
recommendation or stating an inability to make a recommendation) with respect to
any Acquisition Proposal other than a recommendation to reject such Acquisition
Proposal, (iv) the board of directors of the Company resolves (which resolution
shall not modify, limit or impair the Company's obligations under this
Agreement) to accept, accepts or recommends to the stockholders of the Company a
Superior Proposal, or (v) the board of directors of the Company resolves to take
any of the foregoing actions.
8.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
adoption of this Agreement by the stockholders of the Company, by action of the
board of directors of the Company, if:
(a) Buyer or Merger Sub shall have failed to comply in any material
respect with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by Buyer or Merger Sub at or prior to
such date of termination; provided, however, that if such failure or failures
are capable of being cured prior to the Effective Time, such failure or failures
shall not have been cured within thirty (30) days of delivery to Buyer of
written notice of such failure or failures; or
(b) there exists a breach or breaches of any representation or
warranty of Buyer or Merger Sub contained in this Agreement such that the
Closing condition set forth in Section 7.2(a) would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not be cured within thirty (30)
days of delivery to Buyer of written notice of such breach or breaches.
(c) In accordance with Section 5.2(b), the board of directors of the
Company accepts or recommends to the stockholders of the Company a Superior
Proposal or resolves to do so, provided that the Company has given written
notice of such Superior Proposal as required under Section 5.2(b) and Buyer has
not made a proposal which is reasonably equivalent from the perspective of the
stockholders of the Company within seventy-two (72) hours of such written
notice.
8.4. Procedure for Termination. In order to terminate this Agreement
pursuant to this Article VIII, a Party shall provide written notice thereof to
the other Parties.
53
8.5. Effect of Termination.
(a) In the event of termination of this Agreement pursuant to this
Article VIII, no Party (or any of its directors or officers) shall have any
liability or further obligation under this Agreement to any other Party, except
as provided in this Section 8.5 and except that nothing herein shall relieve any
Party from liability for breach of this Agreement.
8.6. Extension; Waiver At any time prior to the Effective Time, Buyer or
the Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
9.1. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If prior to the Closing, to the Company: BSD Software, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PC
-------------------
▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Sute 2200
---------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
------------
Telephone No. ▇▇▇-▇▇▇-▇▇▇▇
------------------------
54
If to Buyer or Merger Sub or, if after the NeoMedia Technologies, Inc.
Closing, to the Surviving Corporation:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Miami Center - 20th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon receipt of facsimile
confirmation, (c) if delivered by mail in the manner described above to the
address as provided for in this Section 9.1, be deemed given on the earlier of
the third Business Day following mailing or upon receipt and (d) if delivered by
overnight courier to the address as provided in this Section 9.1, be deemed
given on the earlier of the second Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 9.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
9.2. Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule, constitute the entire
Agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement, which shall continue in full force and effect and
shall survive any termination of this Agreement or the Closing in accordance
with its terms.
9.3. Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4. Amendment; Waiver. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Buyer, Merger Sub and the Company. Any term
or condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
55
9.5. Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person, other than any Person entitled to indemnity
under Section 6.14, and each such person shall be a third-party beneficiary of
the provisions set forth in Section 6.14.
9.6. Opportunity to Hire Counsel; Role of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP. The
Company acknowledges that it has been advised and has been given an opportunity
to hire counsel with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the law firm of ▇▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP has solely represented buyer and Merger Sub in connection with this
Agreement and the transactions contemplated hereby and no other person.
9.7. No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.8. Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.9. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.10. Governing Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware.
9.11. Arbitration. Any and all disputes or controversies arising out of
this Agreement shall be finally settled by arbitration conducted in Florida in
accordance with the then existing rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof; provided, that nothing in this Section 9.10
shall prevent a party from applying to a court of competent jurisdiction to
obtain temporary relief pending resolution of the dispute through arbitration.
The parties hereby agree that service of any notices in the course of such
arbitration at their respective addresses as provided for in Section 9.10 shall
be valid and sufficient.
56
9.12. Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
9.13. Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum.
9.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
* * * * * *
57
IN WITNESS WHEREOF, Buyer, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized representatives, all as of the
date first written above.
NEOMEDIA TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Title: President, CEO, COO & Director
-------------------------------------
NEOMEDIA TELECOM SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. Dodge
----------------------
Name: ▇▇▇▇▇ ▇. Dodge
----------------------
Title: Secretary and Treasurer
------------------------------
BSD SOFTWARE, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇
-----------------
Name: ▇▇▇ ▇▇▇▇▇
---------------
Title: President and Chief Executive Officer
--------------------------------------------
58
EXHIBIT A
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of
________, 2004 by and among the undersigned stockholder ("Stockholder") of BSD
Software, Inc., a Florida corporation (the "Company"), and NeoMedia
Technologies, Inc., a Delaware corporation ("NeoMedia").
RECITALS
A. Stockholder is the registered and/or beneficial owner of such number of
shares of the Company's common stock (the "Common Stock") and options to
purchase shares of the Common Stock as is indicated on Exhibit A to this
Agreement.
B. NeoMedia Telecom Services, Inc., a Nevada corporation and a
wholly-owned subsidiary of NeoMedia ("Merger Sub"), and the Company are entering
into the Agreement and Plan of Merger (the "Merger Agreement"), dated as of the
date hereof, pursuant to which Merger Sub will merge with and into the Company
upon the terms and conditions set forth in the Merger Agreement (the "Merger").
Capitalized terms not defined in this Agreement have the meanings ascribed to
them in the Merger Agreement.
C. The execution of this Agreement by Stockholder is a condition to
NeoMedia's obligation to execute the Merger Agreement.
D. The parties wish to provide for the voting arrangements set forth in
this Agreement.
In consideration of the mutual covenants and agreements set forth herein,
the Company's and NeoMedia's willingness to enter into the Merger Agreement, and
such other valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Voting Agreement. Subject to Section 3 below, Stockholder hereby
irrevocably agrees to vote (or cause to be voted) all of its shares of capital
stock of the Company as is indicated on Exhibit A and all other shares of
capital stock of the Company now owned or hereafter acquired, or which
Stockholder may be empowered to vote (the "Shares"), from time to time and at
all times, whether at an annual or special meeting of the Company's
stockholders, or upon an action by written consent, (a) in favor of the adoption
of the Merger Agreement and the consummation of the transactions contemplated
therein, including the Merger, (b) against any action or agreement that would
result in a breach in any material respect of the Company and NeoMedia under the
Merger Agreement, and (c) except as otherwise agreed to in writing in advance by
the Company (other than the Merger and the other transactions contemplated by
the Merger Agreement), against: (i) any Acquisition Proposal, (ii) any change in
the board of directors of the Company other than in connection with the Merger,
(iii) any amendment of the Company's certificate of incorporation other than in
connection with the Merger or (iv) any other action which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially and adversely affect the contemplated benefits to the Company of
the Merger and the other transactions contemplated by the Merger Agreement.
Stockholder shall not enter into any agreement or understanding, whether oral or
written, with any person or entity prior to the termination of this Agreement to
vote thereafter in a manner inconsistent with this Section 1.
2. Irrevocable Proxy. Contemporaneously with the execution of this
Agreement, Stockholder has executed and delivered to NeoMedia a duly executed
proxy in the form attached hereto as Exhibit B (the "Proxy") with respect to
each meeting of stockholders of Company, such Proxy to cover the total number of
Shares for which Stockholder is entitled to vote at any such meeting. Upon the
execution of this Agreement by Stockholder, Stockholder hereby revokes any and
all prior proxies given by Stockholder with respect to the Shares and agrees not
to grant any subsequent proxies with respect to the Shares until on or after the
Expiration Date (as defined below). NeoMedia shall (i) vote for each proposal or
give its consent, as applicable, with respect to any matter described in Section
1(a) and (ii) vote against or withhold its consent, as applicable, with respect
to (A) any matter described in Section 1(b) and (B) unless agreed to in writing
in advance by the Company and NeoMedia, any matter described in Section 1(c).
3. Term. This Agreement shall be effective as of the date hereof and shall
continue in effect until the earlier to occur of (i) the Effective Time of the
Merger or (ii) termination of the Merger Agreement in accordance with its terms
(the "Expiration Date").
4. Solicitation. Prior to the Expiration Date, Stockholder shall not,
directly or indirectly: (i) solicit, initiate or encourage (including by way of
furnishing nonpublic information) inquiries or proposals concerning any
Acquisition Proposal or, except as set for in the Merger Agreement, have
discussions or negotiations with any third party (other than NeoMedia or Merger
Sub) regarding any Acquisition Proposal (other than the Merger); or (ii) induce
or encourage any other stockholder of the Company to vote against, or fail to
vote in favor of, the Merger Agreement and the Merger. Stockholder shall notify
NeoMedia of any written inquiries or proposals it receives relating to any
Acquisition Proposal.
5. Specific Enforcement. The parties acknowledge and agree that the
parties hereto would be irreparably damaged in the event any of the provisions
of this Agreement were not performed by the parties in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that
NeoMedia and the Company shall be entitled to an injunction to prevent breaches
of this Agreement and to specifically enforce this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which the parties may be entitled at law or in equity. Each party
consents to personal jurisdiction in any such action brought in the United
States District Court for the Southern District of Florida or in any court of
the State of Florida having subject matter jurisdiction.
6. Agreement to Retain Shares. Stockholder agrees not to transfer (except
as may be specifically required by court order or by operation of law), sell,
exchange, pledge or otherwise dispose of or encumber the Shares, or to make any
offer or agreement relating thereto, at any time prior to the Expiration Date,
unless each person or entity to which any of such Shares are or may be
transferred shall have: (a) executed a counterpart of this Agreement and a Proxy
(with such modifications as NeoMedia may reasonably request); and (b) agreed in
writing to hold such Shares subject to all of the terms and provisions of this
Agreement.
2
7. Waiver of Appraisal Rights. Stockholder hereby irrevocably and
unconditionally waives, and agrees to cause to be waived and to prevent the
exercise of, any rights of appraisal, any dissenters' rights (including under
Section 262 of the General Corporation Law of the State of Delaware) and any
similar rights relating to the Merger or any related transaction that
Stockholder or any other person may have by virtue of the ownership of any
outstanding shares of Common Stock.
8. Legend Requirement. All certificates evidencing the Shares shall,
during the term of this Agreement, bear such restrictive legends as NeoMedia and
its counsel deem necessary or advisable under applicable law or pursuant to this
Agreement, and the Company agrees to so legend such Shares. Such legend may
include, without limitation, the following:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN VOTING
RESTRICTIONS PURSUANT TO A VOTING AGREEMENT RELATING TO SUCH SECURITIES,
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE
TERMS OF SUCH AGREEMENT."
9. Representations and Warranties.
9.1. Ownership of Shares. Stockholder represents and warrants that
(a) it has good title to and is the sole record owner of the Shares and it does
not own beneficially or of record any other capital stock of the Company, (b)
the Shares are validly issued, fully paid and nonassessable and (c) except for
the encumbrances and restrictions arising hereunder, it has no knowledge of the
Shares that are owned by Stockholder being subject to any pledges, liens,
security interests, adverse claims, assessments, proxies, participations,
options, equities, charges or encumbrances of any nature whatsoever with respect
to the ownership of or right to vote or dispose of such Shares, except for
applicable securities laws and the transactions documents under which they were
issued.
9.2. Authority; Due Execution; Enforceability. Stockholder hereby
represents and warrants that he has the full right, power, capacity and
authority to enter into this Agreement and Stockholder has sole voting power and
sole power of disposition with respect to the Shares with no restrictions on
Stockholder's voting rights or rights of disposition pertaining thereto. Each
party hereto represents and warrants that this Agreement has been duly and
validly executed and delivered by such party and constitutes a legal, valid and
binding obligation of such party enforceable against such party in accordance
with its terms, except as enforcement thereof may be limited against such party
by (a) bankruptcy, insolvency, reorganization, moratorium and similar laws, both
state and federal, affecting the enforcement of creditors' rights or remedies in
general as from time to time in effect or (b) the exercise by courts of equity
powers (the "Enforceability Exceptions"). The Proxy, when duly executed and
delivered by Stockholder, will constitute the legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with
its terms, except as enforcement thereof may be limited against Stockholder by
the Enforceability Exceptions. If Stockholder is married and the Shares
constitute community property, this Agreement has been duly executed and
delivered by, and constitutes the legal, valid and binding obligation of,
Stockholder's spouse, enforceable against Stockholder's spouse in accordance
with its terms, subject to laws of general application relating to bankruptcy,
fraudulent conveyance, insolvency and the relief of debtors, and rules of law
governing specific performance, injunctive relief and other equitable remedies.
3
9.3. No Conflicts or Consents. Each party hereto represents and
warrants that the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, with or without
giving of notice or the passage of time, (a) violate any judgment, award,
decree, injunction or order of any court, arbitrator or governmental agency
applicable to such party or its property or assets or any federal or state law,
statute or regulation, (b) conflict with, result in the breach of any provision
of or constitute a violation of or default under any agreement or instrument to
which such party is a party or by which such party or such party's property or
assets may be bound, or (c) require any consent or approval of any person.
9.4. Title to Securities. As of the date of this Agreement: (a)
Stockholder either (i) holds of record or (ii) beneficially owns with the right
to vote (in the case of clause (i) and (ii), free and clear of any liens,
claims, options, rights of first refusal, co-sale rights, charges or other
encumbrances (collectively, "Liens")), other than a right of repurchase in favor
of the Company, the number of outstanding shares of Common Stock set forth on
Exhibit A hereof; and (b) Stockholder holds (free and clear of any Liens) the
options and other rights to acquire shares of Company Common Stock set forth
under the caption "Options and Other Rights to Purchase Common Stock" on Exhibit
A hereof; and (c) Stockholder does not directly or indirectly own any shares of
capital stock or other securities of the Company, or any option, warrant or
other right to acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the shares and
options and other rights specified on Exhibit A hereof.
9.5. Reliance by NeoMedia and Merger Sub. Stockholder understands
and acknowledges that NeoMedia and Merger Sub are entering into the Merger
Agreement in reliance, in part, upon Stockholder's execution and delivery of
this Agreement. Stockholder has sole voting power with respect to the Shares.
9.6. Duty of Candor. Stockholder represents and warrants that for
each patent application filed by BSD Software with the U.S. Patent and Trademark
Office (the "USPTO"), Stockholder is not aware of any relevant references or
publications that either should have been disclosed or need to be disclosed to
the USPTO.
10. Covenants of Stockholder. Except as set forth in the Merger Agreement,
Stockholder hereby covenants and agrees that during the term hereof it shall not
enter into any transaction, take any action or by inaction permit any event to
occur, that would result in any of the representations or warranties of
Stockholder herein contained not being true and correct. Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have under Section 262 of the General Corporation Law of the
State of Delaware or otherwise.
4
11. Confidentiality. Stockholder agrees, except as otherwise required by
legal process, (i) to hold any information regarding this Agreement and the
Merger in strict confidence, and (ii) not to divulge any such information to any
third person, until such time as NeoMedia or the Company has disclosed publicly
the Merger or the Expiration Date occurs or such information becomes public not
through disclosure by Stockholder.
12. Miscellaneous.
12.1. Assignment; Transfer of Rights. This Agreement shall inure to
the benefit of and be binding upon the respective executors, administrators,
heirs, successors, and assigns of the parties. The Shares may be transferred or
assigned by Stockholder; provided, however, that (i) NeoMedia and the Company
must receive written notice prior to the time of said transfer or assignment,
stating the name and address of said transferee or assignee, and (ii) such
transferee or assignee must agree in writing (which writing shall be in a form
acceptable to the Company) to be bound by the terms and conditions of this
Agreement.
12.2. Further Assurances. Stockholder shall cooperate with the
Company and execute and deliver any additional documents necessary or desirable,
in the opinion of the Company or its counsel, to evidence the irrevocable proxy
granted herein with respect to the Shares and to carry into effect the intent
and purposes of each provision of this Agreement.
12.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida, excluding those
laws that direct the application of the laws of another jurisdiction.
12.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.5. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively given upon
personal delivery or delivery by courier, or on the first business day after
transmission if sent by confirmed facsimile transmission, or five days after
deposit in the United States mail, by registered or certified mail, postage
prepaid, addressed to the party at the address set forth below such party's name
on the signature page of this Agreement, or at a new address as such party may
designate by ten (10) days' advance written notice to the other parties hereto.
12.6. Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
12.7. Survival. The representations, warranties and agreements of
the parties contained in this Agreement shall survive the termination of this
Agreement and shall continue in full force and effect following termination of
the Agreement.
12.8. Costs of Enforcement. If any party to this Agreement seeks to
enforce its rights under this Agreement by legal proceedings, the non-prevailing
party shall pay all costs and expenses incurred by the prevailing party,
including, without limitation, all reasonable attorneys' fees.
5
12.9. Entire Agreement; Amendment. This Agreement may be amended or
modified only by a written instrument executed by each of the parties hereto.
This Agreement, the Proxy and the Merger Agreement constitute and contain the
entire agreement of the parties with regard to the subject matter hereof and
thereof and supersede any and all prior negotiations, correspondence,
understandings and agreements between the parties regarding the subject matter
hereof or thereof.
[Signature Page Follows]
6
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of
the date first above written.
Stockholder: By:
-------------------------------------
Name:
-----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
BSD Software Inc.: By:
-------------------------------------
Name:
-----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Telephone:
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Facsimile:
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[Signature Page to Voting Agreement]
7
EXHIBIT A
TO VOTING AGREEMENT
___________ is the registered and/or beneficial owner of such number of
shares of the Company's common stock and options to purchase shares of the
Common Stock as indicated below:
Shares of common stock: _____
Company options: _____
EXHIBIT A-1
EXHIBIT B
TO VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of BSD Software Inc., a Florida corporation
("BSD Software"), hereby irrevocably (to the full extent permitted by the
Florida Business Corporations Act) appoints ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
Dodge, and each of them, or any other designee of NeoMedia Technologies, Inc., a
Delaware corporation ("NeoMedia"), as the sole and exclusive attorneys and
proxies of the undersigned, with full power of substitution and resubstitution,
to vote and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the shares of capital
stock of BSD Software that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of BSD Software issued
or issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy. The Shares beneficially
owned by the undersigned stockholder of BSD Software as of the date of this
Proxy are listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior proxies
given by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent provided in the Florida Business
Corporations Act) and is granted in consideration of NeoMedia entering into that
certain Agreement and Plan of Merger among BSD Software, Neomedia Telecom
Services, Inc., a Nevada corporation and a wholly-owned subsidiary of NeoMedia
("Merger Sub"), and NeoMedia (such agreement as it may be amended or restated is
hereinafter referred to as the "Merger Agreement"). The Merger Agreement
provides for the merger of Merger Sub with and into BSD Software (the "Merger").
As used herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Merger shall become effective in accordance with
the terms and provisions of the Merger Agreement or (ii) the date of termination
of the Merger Agreement in accordance with its terms.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 228 of the General Corporation Law of the State of
Delaware), at every annual, special or adjourned meeting of the stockholders of
BSD Software and in every written consent in lieu of such meeting as follows:
(a) in favor of the adoption of the Merger Agreement and the
consummation of the transactions contemplated therein, including the Merger,
EXHIBIT B-1
(b) against any action or agreement that would result in a breach in
any material respect of BSD Software and NeoMedia under the Merger Agreement;
and
(c) except as otherwise agreed to in writing in advance by BSD
Software (other than the Merger and the other transactions contemplated by the
Merger Agreement), against:
(i) any Acquisition Proposal (as defined in the Merger
Agreement);
(ii) any change in the board of directors of BSD Software
other than in connection with the Merger;
(iii) any amendment of BSD Software's certificate of
incorporation other than in connection with the Merger; or
(iv) any other action which is intended, or could reasonably
be expected, to impede, interfere with, delay, postpone, discourage or
materially and adversely affect the contemplated benefits to BSD Software of the
Merger and the other transactions contemplated by the Merger Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of
the undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Proxy is coupled with an interest and is irrevocable.
Dated: ________, 2004
--------------------------------------------
(Signature of Stockholder)
--------------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
_____ shares of BSD Software, Inc. Common Stock
EXHIBIT B-2
EXHIBIT B
ARTICLES OF MERGER
OF
BSD SOFTWARE, INC., a Florida corporation
INTO
NEOMEDIA TELECOM SERVICES, INC, a Nevada Corporation
Pursuant to Sections 607.1101, 607.1103, 607.1105 and 607.1107 of the Florida
Business Corporation Act (the "Act"), BSD SOFTWARE, INC., a Florida corporation
("BSD") and NEOMEDIA TELECOM SERVICES, INC, a Nevada Corporation ("NeoMedia"),
adopt the following Articles of Merger for the purposes of merging BSD with and
into NeoMedia (the "Merger").
FIRST: The Plan of Merger is attached hereto as Exhibit A.
SECOND: The Plan of Merger was adopted by the Board of Directors and the
shareholders, the number of votes cast being sufficient for approval, of each
BSD and MeoMedia on October _____, 2004.
IN WITNESS WHEREOF, these Articles of Merger have been executed on behalf of the
parties hereto as of this _____ day of October, 2004.
BSD SOFTWARE, INC.
---------------------------------
Signature
---------------------------------
Print Name and Title
NEOMEDIA TELECOM SERVICES, INC.
---------------------------------
Signature
---------------------------------
Print Name and Title
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October _____, 2004, between NEOMEDIA
TECHNOLOGIES, INC., a Delaware corporation (the "Parent"), NEOMEDIA TELECOM
SERVICES, INC, a Nevada corporation and wholly-owned subsidiary of Parent
("NeoMedia" or the "Surviving Corporation")), and BSD SOFTWARE, INC., a Florida
corporation ("BSD")
The Parent, NeoMedia and BSD desire to effect the statutory merger of BSD with
and into NeoMedia, with NeoMedia to survive such merger.
1. Defined Terms. As used in this Agreement and Plan of Merger, the terms below
shall have the following meanings:
"BSD Subsidiary" means Triton Global Business Services, Inc., a Canadian
company and Triton Global Communications, Inc., an Alberta, Canada company.
"Merger Consideration" means the number of shares of Parent Common Stock
to be issued to the shareholders of BSD in exchange for all of the outstanding
shares of BSD Common Stock. The number of shares of Parent Common Stock to be
issued to the shareholders of BSD shall be equal to (i) the product of the
aggregate number of shares of BSD Common Stock outstanding at the Effective Date
multiplied by 0.07, (ii) divided by the Volume Weighted Average Price per share
of the common stock of Parent on the NASDAQ Bulletin Board market for the five
trading days immediately preceding the Effective Date.
"Common Merger Consideration" means the amount equal to the fraction, the
numerator of which is the Merger Consideration and the denominator of which is
the aggregate number of the shares of BSD Common Stock outstanding at the
Effective Date.
2. Constituent Corporation. BSD and NeoMedia shall be parties to the merger (the
"Merger") of BSD with and into NeoMedia.
3. Terms and Conditions of Merger. BSD shall, pursuant to the provisions of the
Florida Business Corporation Act and the Nevada Corporate Statutes, be merged
with and into NeoMedia, which shall continue to exist pursuant to the laws of
the State of Nevada. Upon the effective date of the merger (as set forth in
paragraph 9) (the "Effective Date"), the existence of BSD shall cease. On the
Effective Date, NeoMedia shall assume the obligations of BSD.
4. Capital Stock; Conversion of Shares. On the terms and subject to the
conditions of this Agreement and Plan of Merger, at the Effective Date, by
virtue of the Merger and without any action on the part of Parent, BSD or the
holder of any BSD Shares, the following shall occur:
(a) Conversion of BSD Common Stock. Each share of BSD Common Stock
issued and outstanding immediately prior to the Effective Date will be canceled
and extinguished, and each share of BSD Common Stock which is issued and
outstanding immediately prior to the Effective Date (other than any Dissenting
Shares (as set forth in paragraph 5)) shall be automatically converted into
solely the right to receive in shares of Parent Common Stock, the Common Merger
Consideration.
(b) Cancellation of BSD-Owned Stock. Each share of BSD Common Stock
owned by BSD or a BSD Subsidiary immediately prior to the Effective Date shall
be automatically canceled and extinguished without any exchange thereof and
without any further action on the part of Parent, NeoMedia or BSD.
(c) BSD Options. Immediately prior to the Effective Date, all
outstanding BSD Options shall become fully vested and exercisable and all
repurchase rights with respect to BSD Restricted Stock will lapse. Any BSD
Options not exercised prior to the Effective Date will be automatically
terminated.
(d) Common Stock of NeoMedia. Each stock certificate of NeoMedia
evidencing ownership of any shares of common stock of NeoMedia shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
5. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares of
BSD Common Stock outstanding immediately prior to the Effective Date and held by
a holder who has not voted in favor of the Merger and who has demanded appraisal
for such shares in accordance with Florida Law ("Dissenting Shares") shall not
be converted into a right to receive the Common Merger Consideration unless and
until such holder fails to perfect or withdraws or otherwise loses such holder's
right to appraisal. A holder of Dissenting Shares shall be entitled to receive
payment of the appraisal value of such shares of BSD Common Stock held by such
holder in accordance with the provisions of Section 607 of the Florida Business
Corporation Act unless, after the Effective Date, such holder fails to perfect
or withdraws or loses such holder's right to appraisal, in which case such
shares shall be treated as if they had been converted as of the Effective Date
into the right to receive the Common Merger Consideration.
(b) BSD shall give Parent (i) prompt notice of its receipt of any written
demands for appraisal of any shares of BSD Common Stock, withdrawals of such
demands, and any other instruments relating to the Merger served pursuant to
Canadian Law and received by BSD and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under
Canadian Law. BSD shall not, except with the prior written consent of Parent or
as may be required under applicable law, voluntarily make any payment with
respect to any demands for appraisal of BSD Common Stock or offer to settle or
settle any such demands.
6. Articles of Incorporation. The Articles of Incorporation of NeoMedia as of
the Effective Date, shall be the Articles of Incorporation of the Surviving
Corporation and shall continue in full force and effect until changed, altered
or amended as therein provided and in the manner prescribed by the laws of the
State of Nevada.
7. Bylaws. The Bylaws of NeoMedia as of the Effective Date shall be the Bylaws
of the Surviving Corporation and shall continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the laws of the State of Nevada.
8. Directors and Officers. The directors and officers of NeoMedia in office on
the Effective Date shall continue to be the directors and officers of the
Surviving Corporation, all of whom shall hold their directorships and offices
until the election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the Bylaws of the
Surviving Corporation.
9. Effective Date. The Merger shall become effective on the date (the "Effective
Date") on which the Articles of Merger have been filed with the Secretary of
State of the State of Nevada.
10. Amendment of Plan of Merger. The Board of Directors of each BSD and NeoMedia
are authorized to amend this Plan of Merger at any time prior to the Effective
Date.
BSD SOFTWARE, INC.
---------------------------
Signature
---------------------------
Print Name and Title
NEOMEDIA TELECOM SERVICES, INC.
---------------------------
Signature
---------------------------
Print Name and Title
NEOMEDIA TECHNOLOGIES, INC.
---------------------------
Signature
---------------------------
Print Name and Title
EXHIBIT C
NEOMEDIA TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
Reference is made to the Agreement and Plan of Merger by and among
NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation ("NeoMedia"), NEOMEDIA
TELECOM SERVICES, INC., a Nevada corporation and wholly-owned subsidiary of
NeoMedia ("Merger Sub"), and BSD SOFTWARE, INC., a Florida corporation ("BSD"),
dated as of October ___, 2004 (the "Agreement'). Capitalized terms used herein
without definition have the meaning given to them in the Agreement. The
undersigned, in the name and on behalf of NeoMedia, pursuant to Section 7.2(c)
of the Agreement, does hereby certify that:
1. He is the duly elected and acting Chief Executive Officer of NeoMedia.
2. The representations and warranties of NeoMedia contained in the
Agreement are accurate in all respects as if made on and as of the date hereof.
3. NeoMedia has performed and complied in all material respects with all
agreements, covenants and obligations required by the Agreement to be performed
or complied with by NeoMedia on or prior to the date hereof.
Dated: December 21, 2004 /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------ --------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
NeoMedia Technologies, Inc.
EXHIBIT D
BSD SOFTWARE, INC.
COMPLIANCE CERTIFICATE
Reference is made to the Agreement and Plan of Merger by and among
NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation ("NeoMedia"), NEOMEDIA
TELECOM SERVICES, INC., a Nevada corporation and wholly-owned subsidiary of
NeoMedia ("Merger Sub"), and BSD SOFTWARE, INC., a Florida corporation ("BSD"),
dated as of October ___, 2004 (the "Agreement'). Capitalized terms used herein
without definition have the meanings given to them in the Agreement. The
undersigned, in the name and on behalf of BSD, pursuant to Section 7.3(c) of the
Agreement, does hereby certify that:
1. He is the duly elected and acting President and Chief Executive Officer
of BSD.
2. The representations and warranties of BSD contained in the Agreement
are accurate in all respects as if made on and as of the date hereof.
3. BSD has performed and complied in all material respects with all
agreements, covenants and obligations required by the Agreement to be preformed
or complied with by BSD on or prior to the date hereof.
Dated: December 21, 2004 /s/ ▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
President and Chief Executive Officer
BSD Software, Inc.