AGREEMENT AND PLAN OF MERGER
AMONG
COGNITRONICS CORPORATION
TN ACQUISITION CORPORATION
THINKENGINE NETWORKS, INC.
THE PRINCIPAL SECURITYHOLDERS HEREIN
AND XXXXXX XXXXXXX, AS SECURITYHOLDERS' REPRESENTATIVE
Dated as of October 28, 2005
Article I PLAN OF REORGANIZATION 2
Section 1.1 The Merger 2
Section 1.2 Merger Consideration and Cancellation of
Outstanding Company Securities 3
Section 1.3 Closing; Effective Time; Legends 5
Section 1.4 Closing Net Working Capital Adjustment 6
Section 1.5 Company Expense Certificate 9
Section 1.6 Adjustment to Form of Consideration 9
Article II REPRESENTATIONS AND WARRANTIES 9
Section 2.1 Representations and Warranties of the
Principal Securityholders 9
2.1.1. Authorizations, etc 9
2.1.2. Title 10
2.1.3. Accredited Investors; Investment Purpose 10
2.1.4. Restrictions on Transfer 10
2.1.5. Ability to Bear Risk; Sophistication 10
2.1.6. Review of Cognitronics Filings 10
Section 2.2 Representations and Warranties of the Company 10
2.2.1. Capitalization 11
2.2.2. No Conflicts, etc 12
2.2.3. Corporate Status 12
2.2.4. Authorization; Enforceability 12
2.2.5. Subsidiaries; Investments 13
2.2.6. Financial Statements 13
2.2.7. Undisclosed Liabilities, etc 13
2.2.8. Absence of Changes 14
2.2.9. Tax Matters 15
2.2.10. Assets 18
2.2.11. Real Property 18
2.2.12. Contracts 18
2.2.13. Intellectual Property 19
2.2.14. Insurance 20
2.2.15. Litigation 20
2.2.16. Compliance with Laws and Instruments; Consents 21
2.2.17. Environmental Matters 21
2.2.18. Affiliate Transactions; Guarantees 22
2.2.19. Employees, Labor Matters, etc 22
2.2.20. Employee Benefit Plans and Related Matters; ERISA 23
2.2.21. Accounts Receivable 25
2.2.22. Accounts Payable 25
2.2.23. Bank Accounts 25
2.2.24. Brokers, Finders, etc 25
2.2.25. Indebtedness 25
2.2.26. Company Expenses 25
Article III REPRESENTATIONS AND WARRANTIES OF
COGNITRONICS AND NEWCO 25
Section 3.1 Corporate Status; Authorization, etc 25
Section 3.2 No Conflicts, etc 26
Section 3.3 Brokers, Finders, etc 26
Section 3.4 Capitalization 26
Section 3.5 Litigation 27
Section 3.6 SEC Filings; American Stock Exchange 27
Section 3.7 Interim Operation of Merger Sub 27
Section 3.8 Valid Issuance of Cognitronics Shares 27
Section 3.9 Financing 27
Article IV COVENANTS OF THE COMPANY AND THE PRINCIPAL
SECURITYHOLDERS 27
Section 4.1 Conduct of Business 27
Section 4.2 Exclusivity 28
Section 4.3 Access and Information 28
Section 4.4 Further Assurances 29
Section 4.5 Confidentiality 29
Article V COVENANTS OF THE PRINCIPAL SECURITYHOLDERS,
THE COMPANY, COGNITRONICS AND NEWCO 30
Section 5.1 Public Announcements 30
Section 5.2 Further Actions 30
Section 5.3 Election of Directors of Cognitronics 30
Section 5.4 Indemnification of Officers and Directors 31
Section 5.5 Employee Benefit Plans 32
Article VI CONDITIONS PRECEDENT 33
Section 6.1 Conditions to Obligations of Each Party 33
6.1.1. No Injunction, etc 33
Section 6.2 Conditions to Obligations of Cognitronics
and Newco 33
6.2.1. Representations, Performance 33
6.2.2. Consents 34
6.2.3. FIRPTA Certificate 34
6.2.4. Ancillary Agreements 34
6.2.5. Corporate Proceedings 34
6.2.6. Officer's Certificate 34
6.2.7. Secretary's Certificate 35
6.2.8. Expense Certificate 35
6.2.9. Termination of Company Stock Options and
Company Rights 35
6.2.10. Employment Agreements 35
Section 6.3 Conditions to Obligations of the Principal
Securityholders and the Company 35
6.3.1. Representations; Performance 35
6.3.2. Corporate Proceedings 36
6.3.3. Ancillary Agreements 36
6.3.4. Officer's Certificate 36
6.3.5. Secretary's Certificate 36
6.3.6. Merger Consideration 36
Article VII TERMINATION 37
Section 7.1 Termination 37
Section 7.2 Effect of Termination 37
Article VIII SURVIVAL OR REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION 38
Section 8.1 Indemnification by the Principal Securityholders 38
Section 8.2 Indemnification by Cognitronics 38
Section 8.3 Tax Treatment of Adjustments 39
Section 8.4 Indemnification Procedures 39
Section 8.5 Limitations on Indemnification 40
Section 8.6 Indemnification; Escrow 41
Section 8.7 Survival of Representations and Warranties 41
Section 8.8 Indemnification as Exclusive Remedy 41
Article IX DEFINITIONS 41
Section 9.1 Definitions in Agreement 41
Section 9.2 Additional Definitions 43
Article X MISCELLANEOUS 48
Section 10.1 Securityholders' Representative 48
Section 10.2 Expenses 50
Section 10.3 Notices 50
Section 10.4 Governing Law; Jurisdiction 51
Section 10.5 Binding Effect; No Third Party Beneficiaries 52
Section 10.6 Assignment 52
Section 10.7 Amendment; Waivers, etc 52
Section 10.8 Entire Agreement 53
Section 10.9 Severability 53
Section 10.10 Headings; Counterparts 53
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Escrow Agreement
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Employment Agreement between Cognitronics,
Surviving Corporation and Xxxxxxx Xxxxxxxx, Xxxx
Xxxxx and Xxxxxxx Xxxxx
SCHEDULES
Schedule 1.2(b) Allocation of Merger Consideration
Schedule 4.1 Available Employees
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 28, 2005,
among Cognitronics Corporation, a New York corporation
("Cognitronics"), TN Acquisition Corporation, a New York
corporation ("Newco"), ThinkEngine Networks, Inc., a Delaware
corporation (the "Company"), each of the principal securityholders
of the Company listed on the signature pages hereto (each a
"Principal Securityholder" and collectively, the "Principal
Securityholders"), and Mr. Xxxxxx Xxxxxxx, as Securityholders'
Representative. Capitalized terms used in this Agreement have
the meanings indicated in Article IX.
W I T N E S S E T H:
WHEREAS, Cognitronics, Newco and the Company intend
to effect a merger of Newco with and into the Company;
WHEREAS, the respective Boards of Directors of Newco
and the Company (which together are sometimes referred to
as the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and
their respective stockholders that Newco merge with and
into the Company (the "Merger") pursuant to this Agreement
and the applicable provisions of the laws of the State of
New York and the State of Delaware; and
WHEREAS, the Merger is intended to be a currently
taxable transaction for the holders of securities of the
Company.
NOW, THEREFORE, in consideration of the mutual
promises, covenants, representations and warranties made
herein and of the mutual benefits to be derived herefrom,
the parties hereto agree as follows:
ARTICLE I PLAN OF REORGANIZATION
Section 1.1 The Merger.
(a) The Merger. At the Effective Time, Newco shall
be merged with and into the Company and the separate
corporate existence of Newco shall cease. (the Company, as
it exists from and after the Effective Time, is sometimes
referred to as the "Surviving Corporation").
(b) Effects of the Merger. The Merger shall, from
and after the Effective Time, have all the effects provided
by the New York Business Corporation Law and the Delaware
General Corporation Law. If at any time after the
Effective Time, any further action is deemed necessary or
desirable to carry out the purposes of this Agreement, the
parties hereto agree that the Surviving Corporation and its
officers and directors shall be authorized to take, and
shall take, any and all such action.
(c) Organizational Documents. At the Effective
Time, the Certificate of Incorporation and By-Laws of Newco
shall be the Certificate of Incorporation and By-Laws of
the Surviving Corporation as in effect immediately prior to
the Effective Time until thereafter duly amended.
(d) Directors and Officers. The initial directors
of the Surviving Corporation shall be the directors of
Newco immediately prior to the Effective Time and will hold
office until their respective successors are duly elected
and qualified. The initial officers of the Surviving
Corporation shall be the officers of the Company
immediately prior to the Effective Time and will hold
office until their respective successors are duly elected
and qualified.
Section 1.2 Merger Consideration and Cancellation of
Outstanding Company Securities. At the Closing:
(a) Cognitronics shall pay and issue the following
in consideration of the Merger (collectively, the "Merger
Consideration"), which shall be allocated in accordance
with Section 1.2(b) and Schedule 1.2(b):
(i) $1,250,000 in cash (the "Cash Amount");
(ii) a number of shares of the stock of Cognitronics
Stock (the "Cognitronics Shares"), equal to 19.99%
of the issued and outstanding Cognitronics Stock on
the Closing Date; and
(iii) promissory notes, in the form attached as
Exhibit A (collectively, the "Notes"), in an
aggregate principal amount of $300,000 (the "Initial
Principal Amount"), provided that the Initial
Principal Amount shall be subject to reduction in
accordance with Section 1.4(d) (such Initial
Principal Amount, as so reduced, the "Adjusted
Principal Amount").
(b) Allocation of Merger Consideration;
Cancellation of Company Securities. At the Effective Time,
by virtue of the Merger and without any action on the part
of any holder of securities of the Constituent
Corporations, the following shall occur (and the Merger
Consideration shall be allocated as follows):
(i) All issued or otherwise outstanding capital stock
and all other securities of the Company, including
all of the Company Capital Stock, all Company
Capital Stock held in the Company's treasury (if
any), each Company stock option (each a "Company
Stock Option" and collectively, the "Company Stock
Options") and each security, instrument or
obligation (including any call, warrant or right to
purchase shares of Company Capital Stock or other
securities of the Company) that is or may become
convertible into or exchangeable for any shares of
Company Capital Stock (other than the Company Notes)
(each such security or right, other than the Company
Notes, a "Company Right") shall be canceled and
extinguished, shall cease to exist and no
Cognitronics Shares or other consideration shall be
delivered in exchange therefor. If in the good
faith determination of the Company's Board of
Directors the aggregate value of the Merger
Consideration allocable to the Company Noteholders
under clause (iii) below is greater than the sum
total of the amounts due and owing under such
Company Notes as of the Effective Time, then such
excess amounts shall be allocated to the holders of
the Company Capital Stock in accordance with the
Company Certificate.
(ii) Each of the Persons entitled to receive a
portion of the Merger Consideration pursuant to the
Company's Management Retention Plan set forth on
Schedule 1.2(b) (the "Manager Recipients") shall be
entitled to receive that percentage of the Cash
Amount set forth on Schedule 1.2(b) for such Manager
Recipient.
(iii) Concurrently with (i) and (ii) above, each
promissory note issued by the Company pursuant to
(A) that certain Note Purchase Agreement dated May
4, 2005 by and among the Company and the Lenders
named on the Schedule of Lenders attached thereto
(as amended and restated through the date hereof),
(B) that certain Note and Warrant Purchase Agreement
dated October 4, 2004 by and among the Company and
the Lenders named on the Schedule of Lenders
attached thereto or (C) that certain Note and
Warrant Purchase Agreement dated December 10, 2003
by and among the Company and the Lenders named on
the Schedule of Lenders attached thereto ((A), (B),
and (C) collectively, the "Note Purchase
Agreements"), which in any case is outstanding
immediately prior to the Closing (each such
promissory note a "Company Note" and collectively,
the "Company Notes") shall be canceled and
extinguished, shall cease to exist and shall be
converted into the right of each holder of such
Company Notes immediately prior to the Closing (the
"Company Noteholders") to receive (x) that
percentage of each of the Cash Amount and the
Cognitronics Shares set forth for each Company
Noteholder on Schedule 1.2(b), and (y) a Note equal
to the Initial Principal Amount multiplied by the
percentage applicable to each Company Noteholder as
set forth on Schedule 1.2(b) (such Initial Principal
Amount subject to adjustment in accordance with
Section 1.4).
(c) Closing of the Company's Transfer Books. At
the Effective Time, holders of certificates representing
shares of the Company Capital Stock (each a "Company Stock
Certificate") that were outstanding immediately prior to
the Effective Time shall cease to have any rights as
stockholders, Company Stock Option holders or holders of
Company Rights, as the case may be, except the right of the
Company Noteholders and the Manager Recipients to receive
the Merger Consideration, if any, as set forth in this
Agreement, and the stock transfer books of the Company
shall be closed with respect to all shares of such Company
Capital Stock, Company Stock Options and Company Rights
outstanding immediately prior to the Effective Time. No
further transfer of any shares of the Company Capital Stock
shall be made on such stock transfer books after the
Effective Time.
(d) Capital Stock of Newco. Each share of common
stock, par value $0.01 per share, of Newco issued and
outstanding immediately prior to the Effective Time shall
be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation. Following the
Effective Time, each certificate evidencing ownership of
shares of Newco common stock shall evidence ownership of
such shares of the Surviving Corporation.
(e) Fractional Shares. No fractional shares of
Cognitronics Shares shall be issued, but in lieu thereof
each Company Noteholder otherwise entitled to receive a
fraction of a share of Cognitronics Shares shall receive
from Cognitronics an amount of cash equal to the
Cognitronics Stock Value multiplied by the fraction of a
share of Cognitronics Shares to which such holder would
otherwise be entitled.
Section 1.3 Closing; Effective Time; Legends. (a)
Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Cognitronics, 0 Xxxxxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxxxxx, as soon as possible but in no
event later than five Business Days after the satisfaction
or waiver of the conditions set forth in Article VI except
for those conditions that by their terms are satisfied by
deliveries at the Closing, unless the parties otherwise
agree in writing. The "Closing Date" shall be the date on
which the Closing actually occurs.
(i) At the Closing, the Company Noteholders shall
deliver to Cognitronics, free and clear of any
Liens, the Company Notes held by such holder and, if
applicable, any certificates held by such holder
representing any of the Company Capital Stock
entitled to receive the Merger Consideration under
Section 1.2(b), duly cancelled and terminated, and
with no further force or effect;
(ii) Cognitronics shall, promptly following receipt
of a Company Note from a Company Noteholder:
(A) issue and deliver to such Company Noteholder
one or more certificates representing the Cognitronics
Shares issuable to such Company Noteholder pursuant to
Section 1.2, provided that Cognitronics shall place in
escrow with the Escrow Agent (as defined in the Escrow
Agreement) one or more share certificates representing
an amount of Cognitronics Shares equal to 10% of the
aggregate Merger Consideration to which such holder
would otherwise be entitled under Section 1.2, valued
on the basis of the Cognitronics Stock Value (the
"Escrowed Shares"), and deliver all such certificates
to the Escrow Agent for deposit to the escrow account
created under the Escrow Agreement, to be held and
disposed of as provided in the Escrow Agreement.
(B) deliver to the bank account of such Company
Noteholder by wire transfer of immediately available
funds, or by check (as specified in written
instructions delivered by such Company Noteholder at
least two (2) days prior to the Closing, that portion
of the Cash Amount payable to such Company Noteholder
pursuant to Section 1.2; and
(C) issue and deliver to the Securityholder's
Representative Notes in favor of such Company
Noteholder equal to the Initial Principal Amount
multiplied by the percentage applicable to each such
Person pursuant to Section 1.2, which Notes shall be
held in escrow by the Securityholder's Representative
and not released until such time as the Initial
Principal Amount has been adjusted (if at all) in
accordance with Sections 1.4(d) and (e); and
(iii) at the Closing, Cognitronics shall deliver to
each Manager Recipient by check that portion of the
Cash Amount payable to such Manager Recipient
pursuant to Section 1.2.
(b) Effective Time. At the Closing, the Company
and Newco will cause a certificate of merger to be executed
and filed with the Secretary of State of the State of
Delaware and the Secretary of State of the State of New
York, in each case as required by applicable Laws. When
used herein, the term "Effective Time" shall mean the time
when the certificate of merger has been accepted for filing
and is deemed effective under applicable Laws.
Section 1.4 Closing Net Working Capital Adjustment.
(a) Delivery and Review of Closing Net Working Capital
Certificate. As promptly as practicable, but not later
than sixty (60) days after the Closing Date, Cognitronics
will prepare and deliver or cause to be prepared and
delivered to the Securityholders' Representative a
statement (the "Closing Net Working Capital Certificate")
that sets forth the total current assets of the Business
minus the total current liabilities of the Business as of
12:01 a.m. on the Closing Date (the "Closing Net Working
Capital"). The Closing Net Working Capital shall be
determined in accordance with United States generally
accepted accounting principles ("GAAP"), provided that (i)
deferred revenue, deferred tax assets and deferred tax
liabilities shall not be taken into account and (ii) no
liability or obligation under any of the Company Notes
shall be taken into account. The Securityholders'
Representative shall have thirty (30) days from the date on
which the Closing Net Working Capital Certificate is
delivered (the "Review Period") to review such document.
In connection with such review, Cognitronics shall grant
the Securityholders' Representative (and any agents and
other representatives designated by the Securityholders'
Representative) reasonable access to its records and to any
work papers of Cognitronics' independent auditors and any
other relevant information reasonably requested by the
Securityholders' Representative. If the Securityholders'
Representative shall disagree with any item or amount shown
or reflected in the Closing Net Working Capital
Certificate, the Securityholders' Representative may, on or
prior to the last day of the Review Period, deliver a
notice to Cognitronics setting forth, in reasonable detail,
each disputed item or amount and the basis for the
Securityholders' Representative's disagreement therewith,
together with supporting calculations (the "Dispute
Notice"). If no Dispute Notice is received by Cognitronics
on or prior to the last day of the Review Period, the
Closing Net Working Capital Certificate shall be deemed
accepted by the Securityholders' Representative. The
rights of the parties to indemnification pursuant to
Article VIII shall not be deemed to limit, supersede or
otherwise affect the rights to an adjustment of the Initial
Principal Amount pursuant to this Section 1.4.
(b) Appointment of Accountant. If Cognitronics and
the Securityholders' Representative shall not have resolved
all of the issues set forth in the Dispute Notice within
fifteen (15) days after Cognitronics' receipt of the
Dispute Notice, then not more than five (5) days thereafter
Cognitronics and the Securityholders' Representative shall
jointly contact and retain a mutually agreed independent,
nationally recognized financial analyst to resolve the
issues set forth in the Dispute Notice. If for any reason
such analyst shall not be available to resolve such issues
consistent with this Section 1.4 or Cognitronics and the
Securityholders' Representative are unable to select such
an analyst, Cognitronics and the Securityholders'
Representative shall promptly retain the services of a
nationally recognized independent accounting firm that does
not at the time of retention provide and has not in the
prior five years provided services to Cognitronics or the
Securityholders' Representative (or to their Affiliates).
If Cognitronics and the Securityholders' Representative
cannot agree on the independent accounting firm to be
retained, Cognitronics and the Securityholders'
Representative shall each submit the name of one accounting
firm that satisfies the qualifications set forth in this
Section 1.4, and the independent accounting firm shall be
selected by lot from those two firms. The independent
accounting firm retained by Cognitronics and the
Securityholders' Representative (the "Accountant") shall
act as an arbitrator to determine, based solely on
presentations by the Securityholders' Representative and
Cognitronics, and not by independent review, only those
issues still in dispute.
(c) Accountant's Adjustment Report. The
Accountant's determination shall be made within fifteen
(15) days of the submission of the items remaining in
dispute under the Dispute Notice, and shall set forth in a
report (the "Adjustment Report") the Accountant's
determination with respect to each of the disputed items or
amounts specified in the Dispute Notice, and the revisions,
if any, to be made to the Closing Net Working Capital
Certificate and Closing Working Capital, together with
supporting calculations. Cognitronics shall pay the out-
of-pocket fees and expenses incurred in connection with the
resolution of any dispute concerning the Closing Net
Working Capital Certificate incurred pursuant to Section
1.4(b) up to a maximum amount of $5,000, and any such fees
and expenses in excess of $5,000 shall be paid one-half by
Cognitronics and one-half by the Principal Securityholders.
The Adjustment Report shall be final and binding upon
Cognitronics and the Securityholders' Representative and
shall be deemed a final and enforceable arbitration award.
(d) Adjustment of Merger Consideration. Pursuant
to the terms of this Section 1.4, the Initial Principal
Amount shall be decreased by the amount by which the
Adjusted Closing Net Working Capital is less than $500,000
(as so decreased, the "Adjusted Principal Amount"),
provided that if the amount of such decrease is such that
the Adjusted Principal Amount is reduced to an amount that
is less than zero (the "Subzero Amount"), then a number of
Escrowed Shares equal in value to the Subzero Amount (based
on the Cognitronics Stock Value) shall, pursuant to the
terms of the Escrow Agreement, no longer be subject to the
escrow and released to Cognitronics. Any such decrease of
the Initial Principal Amount shall be reflected in a
corresponding, proportionate decrease in the principal
amount of each of the Notes issued pursuant to Section 1.2.
The term "Adjusted Closing Net Working Capital" shall mean
the difference obtained by subtracting (A) the D&O Premium
Deduction (as defined in Section 5.4(b)) from (B) the total
current assets of the Business minus the total current
liabilities of the Business as of 12:01 a.m. on the Closing
Date, determined in accordance with GAAP, as set forth on
the Adjusted Closing Net Working Capital Certificate,
provided that (i) deferred revenue, deferred tax assets and
deferred tax liabilities shall not be taken into account
and (ii) no liability or obligation under any of the
Company Notes shall be taken into account. The term
"Adjusted Closing Net Working Capital Certificate" shall
mean the definitive Closing Net Working Capital Certificate
agreed or deemed to have been agreed to by Cognitronics and
the Securityholders' Representative in accordance with
Section 1.4(a) or the definitive Closing Net Working
Capital Certificate resulting from the determinations made
by the Accountant in accordance with Section 1.4(c) (in
addition to those items, if any, theretofore agreed to by
the Securityholders' Representative and Cognitronics).
(e) Delivery of Adjustment to Initial Principal
Amount. If the Initial Principal Amount is decreased
pursuant to this Section 1.4, the Securityholders'
Representative shall deliver to Cognitronics, within ten
(10) days of the date of the Closing Net Working Capital
Certificate, the Notes held in escrow by the
Securityholders' Representative pursuant to Section
1.3(a)(ii)(C) and such Notes shall be amended to reflect
the corresponding, proportionate decrease in the principal
amount of such Note in accordance with Section 1.4(d) and
shall thereafter be promptly issued to the Company
Noteholders. Otherwise, the Notes shall be released to the
Company Noteholders without adjustment.
(f) Limitation. Notwithstanding anything to the
contrary contained in this Agreement, in the event the
Closing does not occur by October 31, 2005, then (i) the
term "Closing Net Working Capital" shall mean the total
current assets of the Business minus the total current
liabilities of the Business as of 12:01 a.m. on October 31,
2005 (determined in accordance with Section 1.4(a)) and
(ii) the term "Adjusted Closing Net Working Capital" shall
mean the difference obtained by subtracting (A) the D&O
Premium Deduction (as defined in Section 5.4(b)) from (B)
the total current assets of the Business minus the total
current liabilities of the Business as of 12:01 a.m. on
October 31, 2005 as determined in accordance with Section
1.4(a), as set forth on the Adjusted Closing Net Working
Capital Certificate.
Section 1.5 Company Expense Certificate. One
Business Day prior to the Closing Date, the Company shall
deliver to Cognitronics a certificate that sets forth the
amount of unpaid fees, expenses and disbursements incurred
by the Company as of the Closing Date in connection with
the subject matter of this Agreement that are payable by
the Company in accordance with Section 10.1 (the "Company
Expenses").
ARTICLE II REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the
Principal Securityholders. As of the date hereof and as of
the Closing Date, each Principal Securityholder, severally
and not jointly with the other Principal Securityholders,
represents and warrants as to himself or herself to
Cognitronics and Newco, as follows:
2.1.1. Authorizations, etc. Such Principal
Securityholder has full power and authority to execute and
deliver this Agreement and any Ancillary Agreement to which
it is or will be a party, to perform fully its obligations
hereunder or thereunder, and to consummate the transactions
contemplated hereby and thereby. Such Principal
Securityholder has duly executed and delivered this
Agreement and on the Closing Date will have duly executed
and delivered the Ancillary Agreements to which such
Principal Securityholder is a party. This Agreement
constitutes, and on the Closing Date each such Ancillary
Agreement will constitute, legal, valid and binding
obligations of such Principal Securityholder enforceable
against such Principal Securityholder in accordance with
their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditor's rights and to general principals of equity.
2.1.2. Title. Such Principal Securityholder owns
beneficially and of record the Company Notes set forth
beside such Principal Securityholder's name on
Schedule 2.1.2 of the Disclosure Schedule and has good and
marketable title to such Company Notes, free and clear of
all Liens.
2.1.3. Accredited Investors; Investment Purpose.
Such Principal Securityholder is an "accredited investor"
as such term is defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended (the "Securities
Act"), and is acquiring the Cognitronics Shares issuable to
such Principal Securityholder under Section 1.2 solely for
investment and not with a view to any distribution.
2.1.4. Restrictions on Transfer. Such Principal
Securityholder understands that the Cognitronics Shares to
be issued to such Principal Securityholder pursuant to
Section 1.2 of this Agreement have not been registered
under the Securities Act and will not be transferable
unless registered or sold in accordance with an exemption
from registration available under the Securities Act. In
addition, such Principal Securityholder acknowledges and
agrees that such Cognitronics Shares will be subject to the
provisions of (i) the Registration Rights Agreement and
(ii) the Escrow Agreement, which provides for the escrow of
a portion of the Merger Consideration to secure the
indemnification obligations of the Principal
Securityholders and the Company pursuant to this Agreement.
2.1.5. Ability to Bear Risk; Sophistication. Such
Principal Securityholder can by virtue of his or her
financial situation afford to bear the economic risk of
holding the Cognitronics Shares issuable to such Principal
Securityholder under Section 1.2 for an indefinite period
and to suffer the complete loss of such investment. Such
Principal Securityholder's experience in financial and
business matters is such that he or she is capable of
evaluating the merits and risk of ownership of such
Cognitronics Shares, and he or she does not require
additional information regarding Cognitronics or its
Subsidiaries.
2.1.6. Review of Cognitronics Filings. Such
Principal Securityholder has had access to and has reviewed
the report on Form 10-K of Cognitronics for 2004 and the
interim reports on Form 10-K for 2005.
Section 2.2 Representations and Warranties of the
Company. Subject to such exceptions as are set forth in a
disclosure letter prepared by the Company and delivered to
Cognitronics (the "Disclosure Schedule"), as of the date
hereof and as of the Closing Date, the Company represents
and warrants to Cognitronics and Newco as follows:
2.2.1. Capitalization.
(a) The authorized capital stock of the Company
consists of (i) 252,927,510 shares of common stock, par
value $.01 (the "Company Stock"), of which 14,746,860
shares have been issued and are outstanding and (ii)
108,267,328 shares of preferred stock, par value $.01 (the
"Company Preferred Stock"), of which 34,087,454 have been
designated as Series A Preferred Stock 33,882,909 shares of
which are issued and outstanding, and of which 74,179,874
have been designated Series B Preferred Stock, 72,589,390
of which are issued and outstanding. All of the
outstanding shares of Company Capital Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. The Company has not declared any dividends
on the Company Preferred Stock. All outstanding shares of
Company Capital Stock have been issued and granted in
compliance with all applicable Laws. The Company has
outstanding warrants to purchase 204,545 shares of its
Series A Preferred Stock and 706,522 shares of its Series B
Preferred Stock. The Company also has outstanding a total
of twelve (12) warrants to purchase the Company's Preferred
Stock issued pursuant to the Note Purchase Agreements. Set
forth on Schedule 2.2.1 of the Disclosure Schedule is a
capitalization chart showing the ownership and allocation
of all Company Capital Stock, Company Rights (other than
the Bridge Warrants), Company Stock Options and Company
Notes. Unless as otherwise set forth on Schedule 2.2.1 of
the Disclosure Schedule, none of the outstanding shares of
Company Capital Stock is entitled or subject to any
preemptive right, right of participation, right of
maintenance or any similar right (whether pursuant to the
Certificate of Incorporation or By-Laws of the Company or
any contract or statute to which the Company is subject or
otherwise) and there is no contract or agreement to which
the Company is subject relating to the voting or
registration of, or restricting any Person from purchasing,
selling, pledging, transferring or otherwise disposing of
(or granting any option or similar right with respect to),
any shares of Company Capital Stock. The Company is not
under any obligation, nor is bound by any contract or
agreement pursuant to which it may become obligated, to
repurchase, redeem or otherwise acquire any outstanding
shares of Company Capital Stock. The distribution of the
Merger Consideration to the Company Noteholders and the
Manager Recipients pursuant to this Agreement is consistent
with the Company Capital Stock, Company Notes, Company
Rights and Company Stock Options issued and outstanding,
and the Company Certificate and By-Laws, and based on the
foregoing, only the Company Noteholders and the Manager
Recipients are entitled to receive the Merger
Consideration.
(b) The Company has reserved 55,411,860 shares of
Company Common Stock for issuance under its 2000 Stock
Plan, of which options to purchase 33,712,352 shares are
outstanding as of the date of this Agreement. Schedule
2.2.1(b) of the Disclosure Schedule accurately sets forth,
with respect to each Company Stock Option outstanding as of
the date hereof (whether vested or unvested): (i) the name
of the holder of such Company Stock Option and (ii) the
total number of shares of Company Common Stock that are
subject to such Company Stock Option and the number of
shares of the Company's Common Stock with respect to which
such Company Stock Option is immediately exercisable.
Except for the Company Stock Options, Company Notes and
Company Rights described in Section 2.2.1(a), there are no
Company Stock Options or Company Rights, or any condition
or circumstance that may give rise to or provide a basis
for the assertion of a claim by any Person to the effect
that such Person is entitled to acquire or receive any
shares of capital stock or other securities of the Company.
The Company has not issued any debt securities which grant
the holder thereof any right to vote on, or veto, any
actions by the Company.
2.2.2. No Conflicts, etc. The execution, delivery
and performance by the Company of this Agreement and the
Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby, do not and
will not conflict with or result in a violation or breach
of or default under (with or without the giving of notice
or the lapse of time, or both), create in any other Person
a right of termination, acceleration, amendment or
increased payment of, or result in the creation of any Lien
on any of the properties or assets of the Company under (i)
any Laws applicable to the Company or any of its properties
or assets, (ii) any provision of any of the Organizational
Documents of the Company or (iii) any Material Contract to
which the Company is a party or by which the Company or any
of its properties or assets may be bound or affected. No
Governmental Approval or Consent is required to be obtained
by the Company in connection with the execution and
delivery of this Agreement and the Ancillary Agreements, or
the consummation of the transactions contemplated hereby
and thereby, other than the filing of a certificate of
merger with the Secretary of State of the State of Delaware
and of the State of New York.
2.2.3. Corporate Status. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has
full corporate power and authority to conduct its business
and to own or lease and to operate its properties. The
Company is duly qualified or licensed to do business and is
in good standing in each of the jurisdictions in which such
qualification or licensing is necessary (each jurisdiction
in which such qualification or licensing is necessary to
the Company's Knowledge is set forth in Schedule 2.2.3 of
the Disclosure Schedule). The Company has delivered to
Cognitronics complete and correct copies of the
Organizational Documents of the Company, as amended or
modified through and in effect on the date hereof. Each of
the Organizational Documents of the Company is in full
force and effect. The minute books of the Company, a copy
of which has been provided to Cognitronics, contain
accurate and complete records, in all material respects, of
all meetings held by, and corporation action taken by, the
stockholders of the Company, the board of directors of the
Company (the "Board of Directors") and committees of the
Board of Directors.
2.2.4. Authorization; Enforceability. Subject to
obtaining the approval of its stockholders (to be obtained
prior to the Closing), the Company has the requisite
corporate power and authority to execute and deliver this
Agreement and each Ancillary Agreement to which it will be
a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and each
Ancillary Agreement to which it will be a party, and the
consummation of the transactions contemplated hereby and
thereby, have been duly authorized by the Board of
Directors (and will be duly authorized by the Company's
stockholders prior to the Closing) and no other corporate
proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement and
each Ancillary Agreement to which it will be a party and
the consummation of the transactions contemplated hereby
and thereby. The Company has duly executed and delivered
this Agreement and on the Closing Date will have duly
executed and delivered the Ancillary Agreements to which it
is a party. Assuming the due authorization, execution and
deliver of this Agreement and the Ancillary Agreements by
Cognitronics and Newco, this Agreement constitutes, and on
the Closing Date each such Ancillary Agreement will
constitute, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with
their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditor's rights and to general principles of equity.
2.2.5. Subsidiaries; Investments. Except as set
forth on Schedule 2.2.5 of the Disclosure Schedule, the
Company has no Subsidiaries and does not own any shares of
capital stock or other securities of or interests in any
other Person.
2.2.6. Financial Statements. The balance sheets
included in the Financial Statements present fairly the
financial position of the Company as at the respective
dates thereof, and the statements of income, cash flows and
stockholders equity included in such Financial Statements
present fairly the results of operations, cash flows and
stockholders equity of the Company for the respective
periods indicated, in each case in conformity with GAAP
applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes
thereto).
2.2.7. Undisclosed Liabilities, etc. Except as set
forth on Schedule 2.2.7 of the Disclosure Schedule, the
Company has no liabilities or obligations of any nature,
whether known, unknown, absolute, accrued, contingent or
otherwise and whether due or to become due, except (a) as
and to the extent disclosed or reserved against in the
Balance Sheet or specifically disclosed in the notes
thereto and (b) for liabilities and obligations that (i)
are incurred after the date of the Balance Sheet in the
ordinary course of the Business consistent with past
practice and are not prohibited by this Agreement and (ii)
individually and in the aggregate, could not reasonably be
expected to be material to the Company. Since the date of
the Balance Sheet, there has not occurred or come to exist
any Material Adverse Effect or any event, occurrence, fact,
condition, change, development or effect that, individually
or in the aggregate, would result in a Material Adverse
Effect.
2.2.8. Absence of Changes. Since the date of the
Balance Sheet, except as set forth on Schedule 2.2.8 of the
Disclosure Schedule or specifically permitted after the
date hereof pursuant to Section 4.1, the Company has not:
(a) declared, set aside, made or paid any dividend
or other distribution in respect of its capital stock or
otherwise purchased or redeemed, directly or indirectly,
any shares of its capital stock; other than the repurchase
of shares of its Common Stock, at cost in connection with
the termination of employment with, or service to, the
Company;
(b) granted any stock options or issued or sold any
shares of any class of its capital stock, or any securities
convertible into or exchangeable for any such shares other
than Company Stock Options outstanding on the date hereof
and set forth in Schedule 2.2.1(b) of the Disclosure
Schedule;
(c) incurred any liability or obligation other than
current liabilities for trade or business obligations
incurred in the ordinary course of the Business consistent
with past practice in connection with the purchase of goods
or services;
(d) forgiven, canceled, compromised, waived or
released any material debts, claims or rights, other than
in the ordinary course of the Business consistent with past
practice;
(e) modified any existing Material Contract or
entered into any new material Contract that, pursuant to
its terms, is not cancelable without penalty on less than
30 days' notice;
(f) paid any bonus to any officer, director,
employee, sales representative, agent or consultant, or
granted to any officer, director, employee, sales
representative, agent or consultant any other increase in
compensation in any form;
(g) other than due to ordinary wear and tear,
suffered any damage, destruction or loss (whether or not
covered by insurance), or any strike, or any loss of a
material supplier, vendor, distributor, customer or key
employee (and the Company does not believe any such damage,
destruction, loss, strike, loss will occur prior to or as a
result of the consummation of the transactions contemplated
hereby);
(h) to the Company's Knowledge, suffered to exist
any Lien (other than Permitted Liens) on any asset or
property of the Company;
(i) made or committed to make any capital
expenditures or capital additions or improvements in excess
of an aggregate of $15,000;
(j) sold any assets with a value in excess of
$15,000 in the aggregate, other than inventory in the
ordinary course of the Business consistent with past
practice;
(k) purchased, leased or otherwise acquired any
material assets or property, except in the ordinary course
of the Business consistent with past practice;
(l) instituted, settled or agreed to settle any
Litigation, action or proceeding before any Governmental
Authority relating to the Business or the Assets;
(m) made any material changes in policies or
practices relating to selling practices, returns, discounts
or other terms of sale or accounting therefor or in
policies of employment; or
(n) taken any action or omitted to take any action
that could reasonably be expected to result in the
occurrence of any of the foregoing.
2.2.9. Tax Matters. Except as set forth on
Schedule 2.2.9 of the Disclosure Schedule:
(a) (i) All Returns with respect to the Company
required to be filed have been duly and timely filed, (ii)
all such Returns are true and correct, (iii) all Taxes due
by the Company, chargeable as a Lien upon the assets of the
Company, claimed to be due by any Governmental Authority,
or that may become due by the Company with respect to any
period (or portion thereof) ending on or before the Closing
Date have been paid or have been adequately reserved for in
the books and records of the Company and will be paid when
due if due on or before the Closing Date, and (iv) the
Company has duly and timely withheld all Taxes required to
be withheld and such withheld Taxes have been either duly
and timely paid to the proper Governmental Authority or
properly set aside in accounts for such purpose and will be
duly and timely paid to the proper Governmental Authority.
(b) No agreement or other document waiving or
extending, or having the effect of waiving or extending,
the statute of limitations or the period of assessment or
collection of any Taxes on or with respect to the Company,
and no power of attorney with respect to any such Taxes,
has been filed or entered into with any Governmental
Authority, which waiver, extension or power of attorney is
currently in effect. The time for filing any Return with
respect to the Company has not been extended to a date
later than the date of this Agreement.
(c) No Taxes on or with respect to the Company are
currently under audit, examination or investigation by any
Governmental Authority. No Governmental Authority is now
asserting or, to the Knowledge of the Company, threatening
to assert against the Company any deficiency or claim for
any such Taxes or any adjustment to such Taxes.
(d) No Governmental Authority has asserted or
raised (or threatened to assert or raise) any claim or
issue concerning any liability for Taxes on or with respect
to the Company. No circumstances exist to form the basis
for asserting or raising such a claim or issue. There are
no outstanding adjustments for Tax purposes applicable
under Section 481 of the Code or otherwise as a result of
any change in method of accounting.
(e) The Company (i) is not a party to or bound by
or has an obligation under any Tax allocation, sharing,
indemnity or similar agreement or arrangement, (ii) is not
and has not been a member of any consolidated, combined or
unitary group for purposes of filing Returns or paying
Taxes, (iii) is not otherwise liable for the Taxes of any
other Person, as a transferee, successor or otherwise, and
(iv) has not received or applied for a Tax ruling and has
not entered into a closing agreement pursuant to Section
7121 of the Code, or any predecessor provision or any
similar provision of state or local law.
(f) Cognitronics and Newco will not be required to
deduct or withhold any consideration or amount paid
pursuant to Section 1445(a) of the Code in connection with
the Merger.
(g) Schedule 2.2.9(g) of the Disclosure Schedule
contains a list of states, territories and jurisdictions in
which an income, franchise, sales or use Tax Return with
respect to the Company was filed in any of the past three
years.
(h) True, correct and complete copies of all
income, franchise, sales and use Tax Returns and forms
filed by or with respect to the Company for the past three
years have been furnished to Cognitronics.
(i) The Company will not, as a result of the
transaction contemplated by this Agreement, make or become
obligated to make any parachute payment as defined in
Section 280(G) of the Code.
(j) None of the assets of the Company are subject
to Tax liens (other than liens for Taxes which are not yet
due and payable).
(k) The federal Returns of the Company have been
examined and settled with the Internal Revenue Service, or
the statutes of limitation for the assessment of federal
income Taxes for such periods have expired, for all years
through 2001.
2.2.10. Assets. The Company has good title, valid
leasehold interests in or valid rights under Contract to
use, all of the tangible properties and assets (real,
personal or mixed, used or held for use in connection with,
necessary for the present conduct of the Business (the
"Assets"), in each case free and clear of any Lien, except
Permitted Liens. None of the Principal Securityholders or
the Manager Recipients or any Affiliate of any Principal
Securityholder or the Manager Recipients (other than the
Company) has title to, or any possessors or ownership
interest in, any of the Assets. The Assets are in good
operating condition subject only to ordinary wear and tear,
and to the Knowledge of the Company, there are no facts or
conditions affecting the Assets which could reasonably be
expected to, individually or in the aggregate, interfere in
any material respect with the use, occupancy or operation
thereof.
2.2.11. Real Property. Schedule 2.2.11 of the
Disclosure Schedule contains a complete and correct list of
all Owned Real Property setting forth the address of each
parcel of Owned Real Property and describing all
improvements thereon. Schedule 2.2.11 of the Disclosure
Schedule contains a complete and correct list of all Leases
setting forth the address and landlord for each Lease. The
Principal Securityholders have delivered to Cognitronics
and Newco correct and complete copies of the Leases. The
Company enjoys peaceful and undisturbed possession under
its respective Leases for the Leased Real Property. To the
Company's Knowledge, the use and operation of the Real
Property in the conduct of the Business does not violate
any instrument of record or agreement affecting the Real
Property. There is no violation of any covenant,
condition, restriction, easement or agreement or order of
any Governmental Authority that materially affects the Real
Property or the ownership, operation, use or occupancy
thereof.
2.2.12. Contracts. Schedule 2.2.12 of the
Disclosure Schedule contains a complete and correct list,
as of the date hereof, of all Contracts, other than those
that (i) may be terminated by the Company on ninety (90)or
fewer days notice without material cost to the Company or
(ii) provide for or contemplate the exchange of
consideration, or the provision of products or services,
with a value (as documented in such Contract or, in the
absence of such documentation of value, determined in good
faith by the Company) of less than $15,000 (each, a
"Material Contract"). The Company has delivered to
Cognitronics complete and correct copies of all written
Material Contracts set forth in Schedule 2.2.12 of the
Disclosure Schedule. All Material Contracts are legal,
valid, binding, in full force and effect and, to the
Company's Knowledge, enforceable against the parties
thereto, except as the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws relating to the
enforcement of creditors' rights generally and by general
principles of equity. There does not exist under any
Material Contract any violation, breach or event of
default, or, to the Company's Knowledge, event or condition
that, after notice or lapse of time or both, would
constitute a violation, breach or event of default
thereunder that would materially adversely affect the
rights of the Company thereunder. Subject to obtaining
consents for all Material Contracts set forth on Schedule
2.2.12 of the Disclosure Schedule, the enforceability of
all material Contracts against the Company and, to the
Company's Knowledge, each other party thereto will not
be affected by the execution, delivery or performance
of this Agreement or any Ancillary Agreement, and,
except as set forth on on Schedule 2.2.12 of the
Disclosure Schedule, no Material Contract contains
any change in control terms or conditions thay will
become applicable as a result of the consummation of
the transactions contemplatedmby this Agreement or the
Agreements.
2.2.13. Intellectual Property. (a) Schedule
2.2.13(a)(i) of the Disclosure Schedule sets forth a
complete and correct list of all Intellectual Property that
is owned by the Company. Schedule 2.2.13(a)(ii) of the
Disclosure Schedule sets forth a complete and correct list
of all written licenses and arrangements pursuant to which
(i) the use by any Person of Intellectual Property, that is
owned by the Company, is permitted by the Company and (ii)
the use by the Company of Intellectual Property is
permitted by any Person. Schedule 2.2.13(a)(i) of the
Disclosure Schedule and Schedule 2.2.13(a)(ii) of the
Disclosure Schedule contain all Intellectual Property used
or held for use in connection with, necessary for the
conduct of, or otherwise material to the Business (other
than works and other Intellectual Property protected by
legal rights which subsist in or by the creation thereof
and to which the Company owns or has sufficient legal
rights to use in the conduct of the business). To the
Knowledge of the Company, the Company has not improperly
used or included any confidential information of any third
party in the development of the products or services.
Assuming the Company obtains all consents to assignment in
regard to all Material Contracts requiring such a consent
(as set forth on Schedule 2.2.12 of the Disclosure
Schedule), from and after the Closing, the Company will own
or possess all rights to Intellectual Property Rights
necessary to conduct the Business as then currently
conducted as of the Closing. Immediately after the Closing
and assuming the Company obtains all consents to assignment
in regard to all Material Contracts requiring such a
consent (as set forth on Schedule 2.2.12 of the Disclosure
Schedule), the Company will own or have the right to use
all Intellectual Property described on
Schedule 2.2.13(a)(i) of the Disclosure Schedule and
Schedule 2.2.13(a)(ii) of the Disclosure Schedule, free and
clear from any Liens (other than Permitted Liens).
(b) To the Knowledge of the Company, without having
conducted any special investigation or patent search,
neither the conduct of the Business generally nor the sale
or other use by the Company of any product or service
offered for sale by the Company infringes, misappropriates
or otherwise violates the Intellectual Property rights of
any other Person. To the Knowledge the Company, the
Company has not infringed (directly, contributorily, by
inducement, or otherwise), misappropriated, or otherwise
violated any Intellectual Property right of any other
Person. To the Knowledge of the Company, none of the
Intellectual Property is being infringed by any Person.
(c) To the Knowledge of the Company, no challenge,
claim or Litigation involving any Intellectual Property or
Intellectual Property Right licensed to the Company is
pending or has been threatened and there is no reasonable
basis for any such challenge, claim or Litigation. The
Intellectual Property set forth on Schedule 2.2.13(a)(i) of
the Disclosure Schedule has been duly registered with,
filed in or issued by, as the case may be, the United
States Patent and Trademark Office and United States
Copyright Office or other filing offices, domestic or
foreign, to the extent necessary to ensure full protection
under any applicable Laws, and the same remain in full
force and effect.
(d) The Company has taken commercially reasonable
steps to maintain the confidentiality of and otherwise
protect and enforce its rights in all proprietary
information that the Company holds, or purports to hold, as
a trade secret.
(e) To the Knowledge of the Company, none of the
software (including firmware and other software embedded in
hardware devices) owned, developed, used, marketed,
distributed, licensed, or sold by the Company (other than
non-customized third-party software licensed to the Company
for internal use on a non-exclusive basis) (the "Company
Software") contains any bug, defect, or error (including
any bug, defect, or error relating to or resulting from the
display, manipulation, processing, storage, transmission,
or use of date data) that adversely affects, in a material
way, the use, functionality, or performance of such Company
Software or any product or system containing or used in
conjunction with such Company Software.
2.2.14. Insurance. Schedule 2.2.14 of the
Disclosure Schedule contains a complete and correct list
and complete summary description of all insurance policies
maintained by or on behalf of the Company. The Company has
delivered to Cognitronics complete and correct copies of
all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and
all premiums due thereon have been paid. The Company has
complied in all material respects with the terms and
provisions of such policies. Schedule 2.2.14 sets forth
all claims by the Company under any policy of insurance
during the past eighteen (18) months with respect to the
Business.
2.2.15. Litigation. Except as set forth on Schedule
2.2.15 of the Disclosure Schedule, there is no Litigation
pending or, to the Knowledge of the Company, threatened
that involves the Company or would reasonably be expected
to materially affect the Assets or the Business or which
could reasonably be expected to prohibit or delay the
Closing. To the Company's Knowledge, there are no
outstanding orders, judgments, decrees or injunctions
issued by any Governmental Authority against the Company,
or that in any way materially affect the Business.
2.2.16. Compliance with Laws and Instruments;
Consents.
(a) Compliance. (i) The Company is not in
conflict, violation, breach or default with, of or under
(and to the Company's Knowledge, there exists no event
that, with notice or passage of time or both, would
constitute a conflict, violation, breach or default with,
of or under) (x) any Laws (including escheat and unclaimed
property Laws) applicable to it, any of its properties or
assets or the operations of its Business, (y) any provision
of its Organizational Documents, or (z) any Material
Contract to which it is party or by which it or any of its
properties or assets is bound, except (in the case of each
of (x), (y) and (z)) to the extent that such conflict,
violation, breach or default would not result in a Material
Adverse Effect. The Company holds no unclaimed property
not reflected on the Balance Sheet as required by GAAP.
(b) Consents. Schedule 2.2.16(b) of the Disclosure
Schedule contains a complete and correct list of all
Governmental Approvals and other Consents necessary for or
material to the conduct of the Business. All such
Governmental Approvals and other Consents have been duly
obtained and are held by the Company and are in full force
and effect. The execution, delivery and performance of
this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and
thereby do not and will not violate any such Governmental
Approval or Consent, or result in any revocation,
cancellation, suspension, modification or nonrenewal
thereof.
2.2.17. Environmental Matters.
(a) The Company has complied and is in compliance
with all applicable Environmental Laws pertaining to any of
the properties or assets of the Company or to the operation
of the Business. No violation by the Company has been or
is being alleged of any applicable Environmental Laws
relating to any of the Assets or to the operation of the
Business.
(b) Neither the Company nor, to the Company's
Knowledge, any other Person has caused or taken any action
that has or will result in any liability or obligation of
the Company relating to (i) the environmental conditions
on, under, or about the Real Property or other properties
or assets owned, leased, operated or used by the Company or
any predecessor thereto at the present time or in the past
or (ii) the past or present use, management, handling,
transport, treatment, generation, storage, disposal or
Release of any Hazardous Materials.
(c) The Company has provided to Cognitronics all
information, including all studies, analyses and test
results known to the Company relating to (i) the
environmental conditions, on, under or about any properties
or assets owned, leased, operated or used by the Company or
any predecessor in interest currently or in the past, and
(ii) any Hazardous Materials used or Released by the
Company or any other Person on, under, about or from any of
the properties or assets used, leased, operated or used by
the Company or any predecessor in interest.
2.2.18. Affiliate Transactions; Guarantees. (a)
Schedule 2.2.18(a) of the Disclosure Schedule contains an
accurate and complete list of all Contracts and other
transactions, whether written or oral, to or by which the
Company, on the one hand, and any Affiliate or Associate of
the Company, on the other hand, is a party and that (i) are
in effect or (ii) involve continuing liabilities and
obligations in excess of $5,000 per annum in any individual
case or $10,000 per annum in the aggregate.
(b) Except as set forth in Schedule 2.2.18(b) of
the Disclosure Schedule and except for employee benefits
available to the Company employees as of the date hereof
that are set forth on Schedule 2.2.20(a) of the Disclosure
Schedule, to the Company's Knowledge no stockholder,
officer, director, or employee of the Company or any
Associate or Affiliate of any such Person, (i) owns
directly or indirectly any interest in any Person that is a
supplier, customer or competitor of or lessor to the
Company, (ii) serves as Representative to any Person that
is a supplier, customer or competitor of the Company or
(iii) has a debtor or a creditor relationship with the
Company.
(c) Except as set forth on Schedule 2.2.18(c) of
the Disclosure Schedule, to the Company's Knowledge, none
of the obligations or liabilities of the Company is
guaranteed by or subject to a similar contingent obligation
of any other Person. Except as set forth on
Schedule 2.2.18(c) of the Disclosure Schedule, there are no
outstanding letters of credit, surety bonds or similar
instruments of the Company or any of its Affiliates in
connection with the Business or the Assets.
2.2.19. Employees, Labor Matters, etc. Except as
set forth on Schedule 2.2.19 of the Disclosure Schedule,
the employment of each of the Company's employees is
terminable by the Company at will without any liability for
severance or other termination pay. The Company has
provided to Cognitronics complete copies of all employee
manuals and handbooks, disclosure materials, policy
statements and other materials relating to the employment
of the current employees of the Company. The Company is
not a party to or bound by any collective bargaining
agreement, and there are no labor unions or other
organizations representing, purporting to represent or
attempting to represent any employees employed by the
Company. There has not occurred or been threatened any
strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity
with respect to any employees of the Company. There are no
labor disputes currently subject to any grievance
procedure, arbitration or litigation and there is no
representation petition pending or threatened with respect
to any employee of the Company. The Company has complied
in all material respects with all applicable Laws
pertaining to the employment or termination of employment
of its employees, including all such Laws relating to labor
relations, wages and hours, equal employment opportunities,
fair employment practices, plant closures or mass layoffs,
prohibited discrimination or distinction and other similar
employment activities.
2.2.20. Employee Benefit Plans and Related Matters;
ERISA. (a) Employee Benefit Plans. Schedule 2.2.20(a) of
the Disclosure Schedule lists each Company Plan. With
respect to each such Company Plan, the Company has provided
Cognitronics complete and correct copies of: (i) such
Company Plan, if written, or a description of such Company
Plan if not written, and (ii) to the extent applicable to
such Company Plan, all trust agreements, insurance
contracts or other funding arrangements, the three most
recent actuarial and trust reports, the three most recent
Forms 5500 required to have been filed with the IRS and all
schedules thereto, the most recent IRS determination
letter, all current summary plan descriptions, all material
communications received from or sent to the IRS, the
Pension Benefit Guaranty Corporation or the Department of
Labor (including a written description of any oral
communication), any actuarial study of any post-employment
life or medical benefits provided under any such Company
Plan, if any, statements or other communications regarding
withdrawal or other multiemployer plan liabilities, if any,
and all amendments and modifications to any such document.
The Company has not communicated to any employee or former
employee of the Company (collectively, the "Employees") any
intention or commitment to modify any Company Plan or to
establish or implement any other employee or retiree
benefit or compensation plan or arrangement.
(b) Qualification. Each Company Plan intended to
be qualified under Section 401(a) of the Code, and the
trust (if any) forming a part thereof, has received a
favorable determination letter from the IRS as to its
qualification under the Code and to the effect that each
such trust is exempt from taxation under Section 501(a) of
the Code, and nothing has occurred since the date of such
determination letter that could reasonably be expected to
adversely affect such qualification or tax-exempt status.
(c) Compliance; Liability.
(i) No liability under Title IV (including Section
4069 or 4212) or Section 302 of ERISA has been
incurred by the Company or any Related Person
(either directly or indirectly, including as a
result of an indemnification obligation) that has
not been satisfied in full and no event, transaction
or condition has occurred or exists that could
result in any such liability to the Company, any
such Related Person or, following the Closing,
Cognitronics or any of its Affiliates. All
contributions and premiums required to have been
paid by the Company and each Related Person to any
Company Plan have been timely paid in accordance
with such Company Plan and applicable Laws.
(ii) Each of the Company Plans has been operated and
administered in all material respects in compliance
with its terms and all applicable Laws. There are
no material pending or, to the Knowledge of the
Company, threatened claims by or on behalf of any
of the Plans, by any Employee or otherwise involving
any such Company Plan or the assets of any Company
Plan (other than routine claims for benefits, all of
which have been fully reserved for on the regularly
prepared balance sheets of the Company). No
"prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company
Plan. There are no audits, inquiries or proceedings
pending or, to the Knowledge of the Company,
threatened by the IRS, Department of Labor, or any
other Governmental Authority with respect to any
Company Plan. Neither the Company nor any Related
Person has ever incurred any penalty or tax with
respect to any Company Plan under Section 502(i) of
ERISA or Sections 4975 through 4980 of the Code.
(iii) Neither the Company nor any Related Person has
ever maintained, established, sponsored,
participated in, contributed to or otherwise
incurred any liability under any "multiemployer
plan" within the meaning of Section 4001(a)(3) of
ERISA, a "multiple employer plan" within the meaning
of Section 4063 or 4064 of ERISA, or any employee
pension benefit plan (within the meaning of Section
3(2) of ERISA) that is subject to Section 412 of the
Code or Section 302 or Title IV of ERISA.
(iv) With respect to each Company Plan which is an
employee welfare benefit plan (within the meaning of
Section 3(1) of ERISA), all claims incurred by
Company are (A) insured pursuant to a contract of
insurance whereby the insurance company bears any
risk of loss with respect to such claims, (B)
covered under a contract with a health maintenance
organization (an "HMO") pursuant to which the HMO
bears the liability for claims or (C) reflected as a
liability or accrued for on the Balance Sheet. No
Employee is or will become entitled to post-
employment benefits of any kind by reason of
employment with the Company, including death or
medical benefits (whether or not insured), other
than (x) coverage mandated by Section 4980B of the
Code, (y) retirement benefits payable under any
Company Plan qualified under Section 401(a) of the
Code or (z) deferred compensation accrued as a
liability on the Balance Sheet. The consummation of
the transactions contemplated by this Agreement and
the Ancillary Agreements will not result in an
increase in the amount of compensation or benefits
or the acceleration of the vesting or timing of
payment of any compensation or benefits payable to
or in respect of any Employee.
2.2.21. Accounts Receivable. To the Company's
Knowledge, except as set forth in Schedule 2.2.21 of the
Disclosure Schedule, no account receivable of the Company
is uncollectible or subject to counterclaim or offset,
except to the extent reserved against in the Financial
Statements. All allowances, rebates and cash discounts to
customers of the Company are as shown on its books and
records and in no event exceed 1% of receivables to which
they relate.
2.2.22. Accounts Payable. Except as set forth on
Schedule 2.2.22 of the Disclosure Schedule, all accounts
payable of the Company are currently within their
respective terms, and are neither in default nor otherwise
past due by more than forty-five 45 days.
2.2.23. Bank Accounts. Schedule 2.2.23 of the
Disclosure Schedule sets forth a complete and correct list
containing the name of each bank in which the Company has
an account or safe deposit or lock box, the account or box
number, as the case may be, and the name of every person
authorized to draw thereon or having access thereto.
2.2.24. Brokers, Finders, etc. Other than Xxxxx
Advisors Inc., no Person has acted on behalf of the Company
as a broker or finder or in a comparable capacity in
connection with the transactions contemplated by this
Agreement or the Ancillary Agreements and no Person is or
will be entitled to any brokerage or finder's commission,
fee or similar compensation from the Company, Cognitronics,
Newco or the Surviving Corporation, or for any bonus
payable to any Representative of the Company upon
consummation of the transactions contemplated hereby or
thereby.
2.2.25. Indebtedness. To the Company's Knowledge,
except as disclosed on Schedule 2.2.25 of the Disclosure
Schedule, the Company has no Debt (including for the
extension of credit), other than trade indebtedness
incurred in the ordinary course of the Business consistent
with past practice.
2.2.26. Company Expenses. As of the date of
delivery and as of the Closing Date, the certificate
delivered to Cognitronics pursuant to Section 1.5
accurately lists all of the unpaid fees, expenses and
disbursements payable by the Company pursuant to Section
10.1.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COGNITRONICS AND
NEWCO
Cognitronics and Newco jointly and severally
represent and warrant to the Company and to the Principal
Securityholders as follows:
Section 3.1 Corporate Status; Authorization, etc.
Each of Cognitronics and Newco is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of New York. Each of Cognitronics
and Newco has full corporate power and authority to execute
and deliver this Agreement and each Ancillary Agreement to
which it will be a party, to perform fully its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and
delivery of this Agreement and each Ancillary Agreement to
which it will be a party, the performance of its
obligations hereunder and thereunder, and the consummation
of the transactions contemplated hereby and thereby, have
been duly authorized by all requisite corporate actions of
Cognitronics and Newco. Each of Cognitronics and Newco has
duly executed and delivered this Agreement. This Agreement
constitutes, and each Ancillary Agreement to which each of
Cognitronics or Newco will be a party will be, the legal,
valid and binding obligation of each of Cognitronics or
Newco, as the case may be, enforceable against each of
Cognitronics and Newco in accordance with their respective
terms.
Section 3.2 No Conflicts, etc. The execution,
delivery and performance by each of Cognitronics and Newco
of this Agreement and the Ancillary Agreements to which
each of Cognitronics and Newco will be a party, and the
consummation of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a
violation or breach of or default under (with or without
the giving of notice or the lapse of time, or both), create
in any other Person a right or claim of termination,
acceleration amendment or increased payment of, or result
in the creation of any Lien on any of the properties or
assets of Cognitronics or Newco under (a) any Laws
applicable to Cognitronics or Newco or any of their
respective properties or assets, (b) any provision of any
of the Organizational Documents of Cognitronics or Newco,
or (c) any Contract to which Cognitronics or Newco is a
party or by which their respective properties or assets may
be bound or affected. No Governmental Approval or other
Consent is required to be obtained or made by Cognitronics
or Newco in connection with the execution and delivery of
this Agreement and the Ancillary Agreements to which each
of Cognitronics and Newco will be a party, or the
consummation of the transactions contemplated hereby and
thereby, other than the filing of a certificate of merger
with the Secretaries of State of the State of New York and
the State of Delaware.
Section 3.3 Brokers, Finders, etc. No Person has
acted on behalf of Cognitronics or Newco or any of their
Affiliates in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements and no Person
is or will be entitled to any brokerage or finder's
commission, fee or similar compensation from Cognitronics
or Newco.
Section 3.4 Capitalization. Authorized Capital Stock
of Cognitronics. The authorized capital stock of
Cognitronics consists of 20,000,000 shares of Common Stock,
par value $.20 per share, of which 5,751,403 shares were
issued and outstanding as of the date hereof. The
Cognitronics Shares have been duly authorized and when
issued and delivered at or following the Closing (as
applicable) will be validly issued, fully paid and
nonassessable. The Cognitronics Shares are not subject to
any preemptive right, right of participation, right of
maintenance or similar right.
Section 3.5 Litigation. There is no Litigation
pending or, to the knowledge of Cognitronics and Newco,
threatened that could reasonably be expected to affect the
ability of Cognitronics or Newco to consummate the
transactions contemplated hereby or perform their
respective obligations hereunder, or to prohibit or delay
the Closing. There are no outstanding orders, judgments,
decrees or injunctions issued by any Governmental Authority
against Cognitronics or Newco.
Section 3.6 SEC Filings; American Stock Exchange.
Cognitronics has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange
Commission (the "SEC") and the American Stock Exchange and
is substantially in compliance with the SEC rules
promulgated under the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, and the rules of the American Stock Exchange.
Section 3.7 Interim Operation of Merger Sub. Newco
was formed by Cognitronics solely for the purpose of
engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this
Agreement. Newco has no liabilities and, except for a
subscription agreement pursuant to which all of its
authorized capital stock was issued to Cognitronics, is not
a party to any agreement other than this Agreement and
agreements with respect to the appointment of registered
agents and similar matters.
Section 3.8 Valid Issuance of Cognitronics Shares.
The shares of Cognitronics Common Stock to be issued
pursuant to this Agreement will, when issued, be duly
authorized, validly issued, fully paid and non-assessable,
and assuming the accuracy of the Company's representations
hereunder and the accuracy of the Principal
Securityholders' representations and warranties, will be
issued in compliance with all applicable Federal and state
securities laws and rules of the American Stock Exchange.
Section 3.9 Financing. Cognitronics has sufficient
funds available to satisfy the obligation to pay the Merger
Consideration, and has and will continue to have sufficient
funds available to pay all amounts due under the Notes
issued pursuant to Section 1.2.
ARTICLE IV COVENANTS OF THE COMPANY AND THE PRINCIPAL
SECURITYHOLDERS
Section 4.1 Conduct of Business. On and after the
date hereof to the Closing Date, the Company will conduct
its business in the ordinary course consistent with past
practice and use its reasonable best efforts to preserve
intact its business organizations and relationships with
customers, suppliers and others and keep available the
services of its present officers and the employees set
forth on Schedule 4.1. Without limiting the generality of
the foregoing, and except as required by this Agreement or
expressly consented to by Cognitronics in writing, from the
date hereof to the Closing Date the Company will not: (i)
adopt or propose any change to its Organizational
Documents; (ii) merge or consolidate with any other Person
or acquire a material amount of stock or assets of any
other Person; (iii) sell, lease, license or otherwise
dispose of any material amount of assets, securities or
property or enter into or amend or waive any material right
under any Contract other than the sale of inventory in the
ordinary course of the Business; (iv) take any action
outside of the ordinary course of the Business that would
make any representation or warranty of the Company
hereunder inaccurate or incomplete in any respect at, or as
of any time prior to, the Closing Date, or omit to take any
action necessary to prevent any such representation or
warranty from being inaccurate or incomplete in any respect
at any time; (v) except in furtherance of consummating the
transactions contemplated by this Agreement, modify any
existing Material Contract or enter into any new Material
Contract; (vi) make or revoke any material Tax election
that is inconsistent with past practice; or (vii) agree or
commit to do any of the foregoing.
Notwithstanding the foregoing or anything to the
contrary in this Agreement, Cognitronics acknowledges and
agrees that prior to the Closing the Company may (i)
repurchase any or all of the notes issued to Xxxxxxx
Xxxxxxxx under the Note Purchase Agreement and (ii)
repurchase (or cause to be contributed back to the Company)
any or all of the notes issued to G&H Partners under the
Note Purchase Agreements, and no such repurchase or
contribution shall constitute a breach of this Agreement.
Section 4.2 Exclusivity. Until the earlier of the
termination of this Agreement or the Effective Time, each
of the Company and the Principal Securityholders (severally
and not jointly) shall not, and shall cause their
respective Representatives not to (a) directly or
indirectly solicit or encourage any inquiries or proposals
for, or enter into or continue any discussions with respect
to the acquisition by any Person of any of the shares of
the Company Capital Stock, any other shares of capital
stock or other securities of the Company, or all or a
material part of the Business or of the Assets of the
Company (a "Competing Transaction") or (b) furnish or
permit to be furnished any non-public information
concerning the Company or its business and operations to
any Person (other than Cognitronics and its lenders and
investors and their respective Representatives), other than
information furnished in the ordinary course of business.
The Principal Securityholders shall promptly notify
Cognitronics of any inquiry or proposal received by the
Principal Securityholders or any Representative thereof
with respect to any such Competing Transaction. The
Principal Securityholders shall immediately cease and cause
to be terminated any existing activities, discussions or
negotiations with any Person other than Cognitronics in
respect of any Competing Transaction.
Section 4.3 Access and Information. So long as this
Agreement remains in effect, the Company will (and will use
its commercially reasonable efforts to cause its
Representatives to) upon reasonable notice, give
Cognitronics, its Affiliates, lenders and their respective
Representatives, reasonable access during reasonable
business hours and upon reasonable notice to all of such
Person's respective properties, assets, books, contracts,
commitments, accounting records, including accountant's
work papers, reports and records relating to the Company,
and furnish to them all such documents, records and
information with respect to the properties, assets and
business of the Company and copies of any work papers
relating thereto as Cognitronics shall from time to time
reasonably request. In addition, the Company will permit
Cognitronics, its Affiliates, lenders and their respective
Representatives, reasonable access during reasonable
business hours to the Company, the Company's lenders,
customers and suppliers, as may be necessary or useful to
Cognitronics in connection with its review of the
properties, assets and business of the Company and the
above-mentioned documents, records and information. All
information obtained by Cognitronics or Newco pursuant to
this Section 4.3 shall be kept confidential in accordance
with the Confidentiality Agreement (as defined below).
Section 4.4 Further Assurances. The parties shall
use commercially reasonable efforts to take, or cause to be
taken, all appropriate action to do and cause to be done
all things necessary, proper or advisable under applicable
Law or otherwise to consummate and make effective the
Merger and the other transactions contemplated by this
Agreement as soon as is reasonably practicable. Without
limiting the generality of the foregoing, the Company shall
provide an updated Schedule 1.2(b) providing for a final
numerical allocation of the Merger Consideration at least
one (1) Business Day prior to the Closing. Additionally,
following the Closing Date, the Principal Securityholders
shall from time to time, execute and deliver such
additional instruments, documents, conveyances or
assurances and take such other actions as shall be
reasonably necessary, to confirm and assure the obligations
of such Principal Securityholder provided for in this
Agreement and the Ancillary Agreements and render effective
the consummation of the transactions contemplated hereby
and thereby, or otherwise to carry out the intent and
purposes of this Agreement and the Ancillary Agreements.
Notwithstanding the foregoing or anything to the contrary
in this Agreement, the Company shall not be required to
obtain any consent under any Contract in connection with
the transactions contemplated hereby.
Section 4.5 Confidentiality. Except as provided in
Section 5.2, each Principal Securityholder shall, and shall
cause its respective Affiliates and Representatives to,
keep confidential any and all information relating to the
Company, the Business, this Agreement or the Ancillary
Agreements, and each Principal Securityholder shall not
disclose (other than to its Representatives) or use (other
than for the sole purpose of consummating the transactions
contemplated by this Agreement and the Ancillary
Agreements) any such information, provided that such
Principal Securityholder may disclose or use any such
information (i) as is or becomes generally available to the
public other than through a breach of this Agreement by
such Principal Securityholder or any of its respective
Affiliates and Representatives (ii) as becomes available to
such Principal Securityholder on a non-confidential basis
from a source other than another party hereto or such other
party's Affiliates or Representatives, provided that such
source is not known or reasonably believed by such
Principal Securityholder to be bound by a confidentiality
agreement or other obligation of secrecy, (iii) as may be
required in any report, statement or testimony required to
be submitted to any Governmental Authority having or
claiming to have jurisdiction over it, or as may be
otherwise required by applicable Laws, or as may be
required in response to any summons or subpoena or in
connection with any litigation, (iv) as may be required to
obtain any Governmental Approval or Consent required in
order to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements or (v) as may be
necessary to establish such Principal Securityholder's
rights under this Agreement or Ancillary Agreements;
provided, further, that in the case of clauses (iii) and
(iv), the Person intending to disclose confidential
information will promptly notify the party to whom it is
obliged to keep such information confidential and, to the
extent practicable, provide reasonable assistance to such
party in its efforts, if any, to prevent public disclosure
of such information. In the event the transactions
contemplated hereby are not consummated and this Agreement
is terminated pursuant to Section 7.1, each party hereto
shall return all confidential materials to the appropriate
other party or destroy such confidential materials
exchanged in connection with this Agreement or the
Ancillary Agreements. Each of the Principal
Securityholders acknowledges responsibility for disclosures
caused by it, and any of its respective Affiliates and
Representatives, in breach of this Section.
ARTICLE V COVENANTS OF THE PRINCIPAL SECURITYHOLDERS, THE
COMPANY, COGNITRONICS AND NEWCO
Section 5.1 Public Announcements. Except as
otherwise required by applicable Laws, each party hereto
shall not make any public announcement in respect of this
Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby without the prior written
consent of the other parties hereto.
Section 5.2 Further Actions. Each party hereto shall
use its reasonable best efforts to take or cause to be
taken all actions, and to do or cause to be done all other
things, reasonably necessary, proper or advisable in order
to fulfill and perform its obligations in respect of this
Agreement and the Ancillary Agreements to which it is a
party, or otherwise to consummate and make effective the
transactions contemplated hereby and thereby, including (i)
making all filings and submissions required by such party
under any Laws and giving such reasonable undertakings as
may be required by such party in connection therewith, and
(ii) using its reasonable best efforts to obtain or make
all Governmental Approvals and Consents necessary to be
obtained or made by such party in connection with this
Agreement or the Ancillary Agreements, or the consummation
of other transactions contemplated hereby or thereby. Each
party hereto shall coordinate and cooperate in exchanging
such information and supplying such reasonable assistance
as may be reasonably requested by the other parties hereto
in connection with the transactions contemplated hereby.
Section 5.3 Election of Directors of Cognitronics.
Simultaneously with the Closing, and at all times following
the Closing so long as Prism Venture Partners or one of its
affiliated funds holds 400,000 shares of Cognitronics Stock
(as adjusted for stock splits, combinations, stock
dividends, reorganizations, recapitalizations and similar
events), Cognitronics shall cause an individual designated
by Prism Venture Partners who is reasonably acceptable to
Cognitronics' board of directors to be elected as a member
of the board of directors of Cognitronics in accordance
with the Organizational Documents of Cognitronics. Such
designated director shall initially be Mr. Xxxxxx Xxxxxxx.
Section 5.4 Indemnification of Officers and Directors.
(a) For a period of three (3) years from and after
the Effective Time, Cognitronics and the Surviving
Corporation agree to indemnify (including advancement of
expenses) and hold harmless all past and present officers
and directors of the Company to the same extent such
persons are indemnified by the Company as of the date of
this Agreement pursuant to the Company Certificate or
Bylaws, indemnification agreements identified on the
Disclosure Schedule or under applicable Law for acts or
omissions which occurred at or prior to the Effective Time.
The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions with respect
to indemnification and exculpation that are at least as
favorable to the past and present officers and directors of
the Company as those provisions contained in the Company's
Certificate of Incorporation and Bylaws in effect on the
date hereof, and such provisions shall not be amended,
repealed or otherwise modified for a period of three (3)
years in any manner that would adversely affect the rights
of the past and present officers and directors of the
Company (unless such modification is required by applicable
Law).
(b) For a period of three (3) years from and after
the Effective Time, Cognitronics agrees to provide
officers' and directors' liability insurance with respect
to acts or omissions occurring at or prior to the Effective
Time covering each past and present officer and director of
the Company who are currently covered by the Company's
officers' and directors' liability insurance policy (a true
and complete copy of which has been delivered to
Cognitronics) and is referenced in Schedule 2.2.14 of the
Disclosure Schedule. The terms and coverage amounts of the
liability insurance policy shall be at least as favorable
as the terms and coverage amounts of the Company's
liability insurance policy in effect on the date hereof;
provided, however, that an amount equal to one-half of the
aggregate premiums payable by Cognitronics for insuring
such past and present Company officers and directors (such
amount, the "D&O Premium Deduction") shall be subtracted
from the Adjusted Closing Net Working Capital, as set forth
in Section 1.4(d).
(c) If Cognitronics, the Surviving Corporation or
any of its successors or assigns (i) consolidates with or
merges into any other Person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any
Person, then, and in each such case, to the extent
necessary, Cognitronics shall cause proper provision to be
made so that the successors and assigns of Cognitronics or
the Surviving Corporation, as the case may be, shall assume
the obligations set forth in this Section 5.4.
(d) The provisions of this Section 5.4 are intended
for the benefit of, and shall be enforceable by, all past
and present officers and directors of the Company and their
respective heirs and representatives. The rights of all
past and present officers and directors of the Company
under this Section 5.4 are in addition to, and not in
substitution for, any other rights to indemnification or
contribution that any such person may have by contract,
applicable Law or otherwise.
Section 5.5 Employee Benefit Plans. All employees of
the Company shall continue in the Company's existing
benefit plans until such time as, in Cognitronics'
reasonable discretion, an orderly transition can be
accomplished to employee benefit plans and programs
maintained by Cognitronics for its employees in the United
States. Cognitronics shall take such reasonable actions,
to the extent permitted by Cognitronics' benefits programs,
as are necessary to allow eligible employees of the Company
to participate in the health, welfare and other benefit
programs of Cognitronics or alternative benefits programs
in the aggregate that are substantially equivalent to those
applicable to employees of Cognitronics in similar
functions and positions on similar terms (it being
understood that equity incentive plans are not considered
employee benefits). Pending such action, Cognitronics
shall maintain the effectiveness of the Company's benefit
plans. To the extent that Cognitronics transitions
employees of the Company from the Company's benefit plans
to employee benefit plans and programs maintained by
Cognitronics or alternative benefits programs, from and
after the Effective Time, Cognitronics shall grant all
employees of the Company credit for all service (to the
same extent as service with Cognitronics is taken into
account with respect to similarly situated employees of
Cognitronics) with the Company prior to the Effective Time
for (i) eligibility and vesting purposes and (ii) for
purposes of vacation accrual after the Effective Time as if
such service with the Company was service with
Cognitronics. Cognitronics and the Company agree that
where applicable with respect to any welfare benefit plan,
including without limitation medical or dental benefit
plans, of Cognitronics, Cognitronics shall waive any
pre-existing condition exclusion and actively-at-work
requirements (provided, however, that no such waiver shall
apply to a pre-existing condition of any employee of the
Company who was, as of the Effective Time, excluded from
participation in a plan maintained by the Company by virtue
of such pre-existing condition) and similar limitations,
eligibility waiting periods and evidence of insurability
requirements under any of Cognitronics' group health plans
to the extent permitted by such plans. Cognitronics shall
provide that any covered expenses incurred on or before the
Effective Time by the Company's employees or such
employees' covered dependents shall be taken into account
for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions after the
Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated
employees of Cognitronics.
Section 5.6 Cognitronics shall, in accordance with
Section 262 of the Delaware General Corporation Law, notify
the stockholders of the Company of the Merger and of the
rights of any stockholder who has not consented to the
Merger to have their shares of Company Capital Stock
appraised by the Delaware Court of Chancery.
ARTICLE VI CONDITIONS PRECEDENT
Section 6.1 Conditions to Obligations of Each Party.
The obligations of the Principal Securityholders, the
Company, Cognitronics and Newco to consummate the
transactions contemplated hereby shall be subject to the
fulfillment on or prior to the Closing Date of the
following conditions:
6.1.1. No Injunction, etc. Consummation of the
transactions contemplated hereby or by the Ancillary
Agreements shall not have been restrained, enjoined or made
illegal by any applicable Laws. No action or proceeding
shall be pending or threatened by any Governmental
Authority before any court or other Governmental Authority
to restrain, enjoin or delay the consummation of the
transactions contemplated hereby or by the Ancillary
Agreements, or to obtain material damages or other relief
as a result of such transactions.
Section 6.2 Conditions to Obligations of Cognitronics
and Newco. The obligations of Cognitronics and Newco to
consummate the transactions contemplated hereby shall be
subject to the fulfillment on or prior to the Closing Date
of the following additional conditions:
6.2.1. Representations, Performance. The
representations and warranties of the Company and the
Principal Securityholders contained in this Agreement or in
any Ancillary Agreement shall be true and correct in all
respects (in the case of any representation or warranty
containing any materiality qualification) or in all
material respects (in the case of any representation or
warranty without any materiality qualification) at and as
of the date hereof (except for representations and
warranties that speak as of a specific date, which
representations and warranties shall be true and correct as
of such date) and on and as of the Closing Date with the
same effect as though made at and as of the Closing Date.
The Company and the Principal Securityholders shall have in
all material respects duly performed and complied with all
material agreements, covenants and conditions required by
this Agreement to be performed or complied with by the
Principal Securityholders prior to or on the Closing Date.
Notwithstanding the foregoing, from time to time prior to
the Closing Date, the Company may at its option supplement
or amend and deliver the Disclosure Schedule with respect
to any matter hereafter arising or any information first
known to the Company after the date hereof which, if
existing, occurring or known at or prior to the date of
this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or which is necessary
to complete or correct any information in the Disclosure
Schedule or in any representation or warranty of the
Company which has been rendered inaccurate thereby.
Cognitronics shall waive and agree not to assert or
exercise any right not to close the transactions
contemplated herein on the basis of any such supplement or
amendment to the Disclosure Schedule unless (i) the
supplement or amendment, individually or in the aggregate
with any other supplement(s) or amendment(s), constitutes a
Material Adverse Effect and Cognitronics notifies the
Company in writing within five (5) Business Days after
receipt of the supplemented or amended Disclosure Schedule,
that it will refuse to close as a result of such supplement
or amendment to the Disclosure Schedule and setting forth
the basis for such refusal, or (ii) the Company fails
within a reasonable period of time, but in any event not
later than the latest of (A) November 5, 2005, (B) such
time as the Cognitronics Shares are properly listed on the
American Stock Exchange and (C) five (5) days following the
date on which the matters identified in such supplement or
amendment first arose or became known to the Company, to
cure any deficiency or breach identified in such supplement
or amendment.
6.2.2. FIRPTA Certificate. Each of the Principal
Securityholders shall have delivered to Cognitronics and
Newco a certificate, as contemplated under and meeting the
requirements of Section 1.1445-2(b)(2)(i) of the Treasury
Regulations, to the effect that such Principal
Securityholder is not a foreign person within the meaning
of the Code and applicable Treasury Regulations.
6.2.3. Ancillary Agreements. Each Principal
Securityholder shall have executed and delivered each of
the Escrow Agreement and the Registration Rights Agreement.
6.2.4. Corporate Proceedings. All corporate
proceedings of the Company and all actions of the Principal
Securityholders in connection with the transactions
contemplated by this Agreement and the Ancillary
Agreements, and all documents and instruments incident
thereto, shall be reasonably satisfactory in form and
substance to Cognitronics and its counsel, and Cognitronics
and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as
may be reasonably requested.
6.2.5. Officer's Certificate. Cognitronics shall
have received a certificate, dated as of the Closing Date,
signed on behalf of the Company by the Chief Executive
Officer of the Company and on behalf of the Principal
Securityholders by the Securityholders' Representative
certifying that the conditions set forth in Section 6.2.1
have been duly satisfied.
6.2.6. Secretary's Certificate. Cognitronics shall
have received a certificate, dated as of the Closing Date,
signed by the Secretary of the Company (i) attaching copies
of the Certificate of Incorporation and By-Laws, and any
amendments thereto, of the Company in effect immediately
prior to the Effective Time, (ii) attaching a recent long-
form good standing certificate of the Company, duly
certified by the Secretary of State of the State of
Delaware, (iii) certifying that attached thereto are true
and correct copies of action by written consent or
resolutions duly adopted by the board of directors and
stockholders of the Company which authorize and approve the
execution, delivery and performance of this Agreement and
the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby and (iv)
certifying the incumbency, signature and authority of the
officers of the Company authorized to execute, deliver and
perform this Agreement and the Ancillary Agreements and all
other documents, instruments or agreements related hereto
or thereto executed or to be executed by the Company.
6.2.7. Expense Certificate. Cognitronics shall
have received the certificate of Company Expenses pursuant
to Section 1.5.
6.2.8. Termination of Company Stock Options and
Company Rights. Cognitronics shall have received
reasonably sufficient documentation to evidence the
cancellation and termination of all Company Stock Options
and Company Rights as of the Effective Time.
6.2.9. Employment Agreements. On or prior to the
Closing Date, Cognitronics, the Surviving Corporation and
Xxxxxxx Xxxxxxxx, Xxxx Xxxxx and Xxxxxxx Xxxxx shall have
executed and delivered the Employment Agreements.
Section 6.3 Conditions to Obligations of the
Principal Securityholders and the Company. The obligation
of the Principal Securityholders and the Company to
consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or prior to the Closing
Date, of the following additional conditions:
6.3.1. Representations; Performance. The
representations and warranties of Cognitronics and Newco
contained in this Agreement and in any Ancillary Agreement
shall be true and correct in all respects (in the case of
any representation or warranty containing any materiality
qualification) or in all material respects (in the case of
any representation or warranty without any materiality
qualification) at and as of the date hereof and on and as
of the Closing Date with the same effect as though made at
and as of the Closing Date. Cognitronics and Newco shall
have in all material respects duly performed and complied
with all material agreements, covenants and conditions
required by this Agreement to be performed or complied with
by it prior to or on the Closing Date.
6.3.2. Corporate Proceedings. All corporate
proceedings of Cognitronics and Newco in connection with
the transactions contemplated by this Agreement and the
Ancillary Agreements, and all documents and instruments
incident thereto, shall be reasonably satisfactory in form
and substance to the Company and the Principal
Securityholders, and the Company and the Principal
Securityholders and their counsel shall have received all
such documents and instruments, or copies thereof,
certified if requested, as may be reasonably requested.
6.3.3. Ancillary Agreements. Cognitronics shall
have executed and delivered each of the Note, the Escrow
Agreement and the Registration Rights Agreement, and the
Surviving Corporation and Cognitronics shall have executed
and delivered the Employment Agreements.
6.3.4. Officer's Certificate. The Company shall
have received a certificate, dated as of the Closing Date,
signed on behalf of each of Cognitronics and Newco by the
Chief Executive Officer or Chief Financial Officer of
Cognitronics and Newco certifying that the conditions set
forth in Section 6.3.1 have been duly satisfied.
6.3.5. Secretary's Certificate. The Company shall
have received a certificate, dated as of the Closing Date,
signed by the Secretary of Cognitronics (i) attaching
copies of the Certificate of Incorporation and By-Laws, and
any amendments thereto, of Cognitronics in effect
immediately prior to the Effective Time, (ii) attaching a
recent long-form good standing certificate of the Company
and of Newco, duly certified by the Secretary of State of
the State of New York, (iii) certifying that attached
thereto are true and correct copies of action by written
consent or resolutions duly adopted by the board of
directors of Cognitronics and of Newco which authorize and
approve the execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby and
(iv) certifying the incumbency, signature and authority of
the officers of Cognitronics and of Newco authorized to
execute, deliver and perform this Agreement and the
Ancillary Agreements and all other documents, instruments
or agreements related hereto or thereto executed or to be
executed by Cognitronics or Newco.
6.3.6. Merger Consideration. Cognitronics shall
have paid the Merger Consideration to the Company
Noteholders and Manager Recipients in accordance with
Section 1.2 and 1.3, and the Cognitronics Shares shall have
been listed on the American Stock Exchange.
ARTICLE VII TERMINATION
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Closing Date:
(a) By the written agreement of Cognitronics,
Newco, the Company and the Principal Securityholders;
(b) By any of the Principal Securityholders and the
Company, on the one hand, or by Cognitronics and Newco, on
the other hand, by written notice to the other after
5:00 p.m. New York City time on December 31, 2005 if the
transactions contemplated hereby shall not have been
consummated pursuant hereto, unless such date is extended
by the mutual written consent of the parties; provided,
however, that such right of termination shall not be
available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of such consummation; or
(c) By either Cognitronics and Newco on the one
hand, or the Principal Securityholders and the Company, on
the other hand, by written notice to the other party if:
(i) subject to the last three sentences of
Section 6.2.1, the representations and warranties of the
other party shall not be true and correct in all
material respects at and as of the date when made, or
shall not be true and correct in all material respects
as of the Closing Date as though made on and as of such
date, provided, however, that if any such breach is
curable through the exercise of the respective
reasonable best efforts of the other party and for so
long as the other party continues to exercise such
reasonable best efforts, this Agreement may not be
terminated unless such breach is not cured within
fifteen (15) days following written notice thereof to
such breaching party (but no cure period shall be
required for a breach which by its nature cannot be
cured), or
(ii) the other party shall (and the terminating
party shall not) have failed to perform and comply with,
in all material respects, all agreements, covenants and
conditions hereby required to have been performed or
complied with by such party prior to the time of such
termination, and such failure shall not have been cured
within 15 days following written notice of such failure.
Section 7.2 Effect of Termination. In the event of
the termination of this Agreement pursuant to the
provisions of Section 7.1, this Agreement shall become void
and have no effect, without any liability to any Person in
respect hereof or of the transactions contemplated hereby
on the part of any party hereto, or any of its
Representatives, stockholders or Affiliates, except for
Sections 4.5 and Article X and the Non-Disclosure Agreement
which shall survive the termination of this Agreement and
except for any liability resulting from such party's breach
of this Agreement.
ARTICLE VIII SURVIVAL OR REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
Section 8.1 Indemnification by the Principal
Securityholders. Each Principal Securityholder severally
and not jointly, covenants and agrees to defend, indemnify
and hold harmless each of Cognitronics, its Affiliates, the
Surviving Corporation and their respective Representatives
(collectively, the "Cognitronics Indemnitees") from and
against, and pay or reimburse Cognitronics Indemnitees for,
any and all claims, demands, liabilities, obligations,
actual losses, fines, costs, expenses, royalties,
Litigation, deficiencies or damages (excluding any
punitive, special, multiple based, indirect or
consequential damages and also excluding any damages based
on lost profits or diminution in value), including interest
and out-of-pocket expenses and reasonable attorneys' and
accountants' fees and expenses incurred in the
investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective
rights hereunder or under any Ancillary Agreement
(collectively, "Losses"), resulting from, arising out of or
relating to:
(i) any inaccuracy of representation or warranty when
made by such Principal Securityholder or the Company
herein (other than pursuant to Section 2.2.9) or
under any of the Ancillary Agreements or in
connection herewith or therewith;
(ii) any failure of such Principal Securityholder or
the Company to perform any covenant or agreement
hereunder or under any of the Ancillary Agreements
or fulfill any other obligation in respect hereof or
thereof; or
(iii) (A) the audit of the Company by the
Massachusetts Department of Revenue for the period
from August 2000 to July 2001 and from August 2001
through May 2003 and (B) a distribution of forfeited
funds aggregating $104,056 from the Company's 401(k)
plan, each of which the Company has reserved against
in the Balance Sheet, and each of which Cognitronics
acknowledges the Company has disclosed; provided
that the Company shall only be liable for Losses
under this clause (iii) to the extent such Losses
exceed $123,761 in the aggregate.
If any Principal Securityholder shall have an
indemnification obligation hereunder, such Principal
Securityholder shall satisfy such indemnification pursuant
to the terms and conditions of the Escrow Agreement through
transfer by the Escrow Agent (as defined in the Escrow
Agreement) to Cognitronics of an appropriate number of
shares of Cognitronics Shares (valued at the Cognitronics
Stock Value).
Section 8.2 Indemnification by Cognitronics.
Cognitronics and the Surviving Corporation covenant and
agree to defend, indemnify and hold harmless the Company
Noteholders and their respective Affiliates and
Representatives from and against any and all Losses
resulting from or arising out of (i) any inaccuracy in any
representation or warranty made by Cognitronics or Newco
herein or under any of the Ancillary Agreements or in
connection herewith or therewith; or (ii) any failure of
Cognitronics or Newco to perform any covenant or agreement
hereunder or fulfill any other obligation in respect hereof
or thereof.
Section 8.3 Tax Treatment of Adjustments. (a) The
provisions of this Article VIII shall in no way limit,
supersede or otherwise affect the rights of any party under
Section 1.4, and nothing contained in Section 1.4 relating
to an adjustment to the Initial Principal Amount shall
limit, supersede or otherwise affect the rights of any
party under this Article VIII, provided that no party shall
be entitled to be compensated more than once for the same
Loss.
(b) Cognitronics and the Company Noteholders agree
to treat any indemnity payment made pursuant to Article
VIII or Section 5.1 as an adjustment to the Merger
Consideration for all Tax purposes.
Section 8.4 Indemnification Procedures. Subject to
the terms of the Escrow Agreement and the limitations set
forth in this Article VIII, in the case of any claim
asserted by a third party against a party entitled to
indemnification under this Agreement (the "Indemnified
Party"), notice shall be given by the Indemnified Party to
the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may
be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying
Party) to assume the defense of any claim or any litigation
resulting therefrom, provided that if the Indemnifying
Party does so take over and assume control, the
Indemnifying Party shall not settle such claim or
litigation without the written consent of the Indemnified
Party if the Indemnified Party would be adversely affected
by such settlement, such consent not to be unreasonably
withheld. In the event that the Indemnifying Party does
not accept the defense of any matter as above provided, the
Indemnified Party, after providing the Indemnifying Party
prompt notice, shall have the full right to defend against
any such claim or demand, and shall be entitled to settle
or agree to pay in full such claim or demand; provided,
however, the Indemnified Party will keep the Indemnifying
Party reasonably informed of the progress of any such
defense, compromise or settlement. Counsel for the
Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the
Indemnified Party, and the Indemnified Party shall
cooperate in such defense at such Indemnified Party's
request and expense. The failure of any Indemnified Party
to give notice, or a delay in the giving of such notice by
the Indemnified Party, as provided herein shall not relieve
the Indemnifying Party of its indemnification obligation
under this Agreement except to the extent that such failure
results in a lack of actual notice to the Indemnifying
Party and such Indemnifying Party is materially prejudiced
as a result of such failure or delay. Except with the
prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or
litigation, shall consent to entry of any judgment or enter
into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the
giving by each claimant or plaintiff to such Indemnified
Party of a release from all liability with respect to such
claim or litigation. Notwithstanding the foregoing, in the
event that the Indemnified Party shall in good faith
determine with legal counsel that the Indemnified Party may
have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such
claim or any litigation relating thereto, the Indemnified
Party shall have the right at all times to take over and
assume control over the defense, settlement, negotiations
or litigation relating to any such claim at the sole cost
of the Indemnifying Party; provided, however, that the
Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement without the prior
written approval of the Indemnifying Party (such approval
to not be unreasonably withheld). In any event, the
Principal Securityholders and Cognitronics shall cooperate
in the defense of any claim or litigation subject to this
Article VIII.
Section 8.5 Limitations on Indemnification. (a)
Notwithstanding anything to the contrary contained in this
Article VIII, the Principal Securityholders shall not be
required to indemnify, defend or hold harmless the
Cognitronics Indemnitees pursuant to Section 8.1 unless the
aggregate of all of the Cognitronics Indemnitees' Losses
under clause (i) or (ii) of Section 8.1 (other than Losses
resulting from fraud) exceeds $100,000 (the "Basket") (in
which event the Company Noteholders shall be liable,
subject to the terms and conditions of this Article VIII,
for the entire amount of such Losses in excess of such
$100,000). Other than as set forth in Section 8.6, the
maximum aggregate amount of indemnifiable Losses arising
out of or resulting from the causes enumerated in this
Article VIII (or any other provision regarding
indemnification by the Principal Securityholders) that may
be recovered from the Principal Securityholders shall be
limited to the Escrowed Shares in the Escrow and shall not
exceed, with respect to any one of the Principal
Securityholders, such Principal Securityholder's
proportionate share of the Escrow as further set forth in
the Escrow Agreement. Any amounts payable pursuant to this
Article VIII shall be (i) reduced by any proceeds received
from insurance policies covering the Losses that are
subject to the claim for indemnity, (ii) reduced by any
proceeds received from third parties, through
indemnification, counterclaim or otherwise in compensation
for any claim for which indemnification is sought by such
Indemnified Party hereunder, and (iii) adjusted
appropriately to take into account any tax benefits
actually resulting from Losses that are the subject of the
indemnification claim. If any proceeds, benefits or
recoveries are received by an Indemnified Party with
respect to any Losses after the applicable Indemnifying
Party has made a payment to the Indemnified Party with
respect thereto, and receipt of such proceeds, benefits or
recoveries prior to such indemnification payment would have
reduced the amount of such indemnification payment if
received prior to such payment, then the Indemnified Party
shall promptly, but in no event later than ten (10)
Business Days after the receipt of such proceeds, benefits
or recoveries, pay the amount of such proceeds, benefits or
recoveries to the applicable Indemnifying Party.
(b) The maximum aggregate amount of indemnifiable
Losses arising out of or resulting from the causes
enumerated in Section 8.2 (or any other provision regarding
indemnification by Cognitronics) that may be recovered from
Cognitronics shall be limited to the value of the Escrowed
Shares (valued at the Cognitronics Stock Value) other than
Losses resulting from fraud.
Section 8.6 Indemnification; Escrow. All
indemnification claims brought by Cognitronics for Losses
pursuant to this Article XIII shall, at the option of the
applicable Indemnifying Party, be payable in cash in lieu
of the Escrowed Shares (in which case the corresponding
amount of Escrowed Shares shall be released to the
Indemnifying Party) and shall be subject to, and resolved
in accordance with, the terms of the Escrow Agreement.
Section 8.7 Survival of Representations and
Warranties. The representations and warranties contained
in this Agreement shall survive the execution and delivery
of this Agreement, any examination by or on behalf of the
parties hereto and the completion of the transactions
contemplated herein, but only until twelve (12) months
after the Closing Date (the "Survival Period") and except
with respect to unresolved claims that have been asserted
prior to expiration of the Survival Period, the
indemnification obligations of the Company Noteholders
pursuant to this Article VIII shall terminate upon the
expiration of the Survival Period and all Escrowed Shares
remaining in the Escrow shall be released to the Company
Noteholders who would have received such Escrowed Shares
under Section 1.2 but for such Escrow.
Section 8.8 Indemnification as Exclusive Remedy. The
rights of Cognitronics and the Principal Securityholders to
indemnification under this Article VIII shall be the
exclusive remedy for any and all Losses resulting from or
related to the subject matter of this Agreement or the
transactions contemplated hereby, other than Losses
resulting from fraud by the Principal Securityholders or
the Company on the one hand, or Cognitronics or Newco on
the other hand.
ARTICLE IX DEFINITIONS
Section 9.1 Definitions in Agreement. The following
terms are defined in the indicated sections:
Accountant 1.4(b)
Adjusted Closing Net Working Capital 1.4(d)
Adjusted Closing Net Working Capital Certificate 1.4(d)
Adjusted Principal Amount 1.2(a)(iii)
Adjustment Report 1.4(c)
Assets 2.2.10
Basket 8.5
Board of Directors 2.2.3
Cash Amount 1.2(a)(i)
Closing 1.3(a)
Closing Date 1.3(a)
Closing Net Working Capital 1.4(a)
Closing Net Working Capital Certificate 1.4(a)
Code Recitals
Cognitronics Introduction
Cognitronics Indemnitees 8.1
Cognitronics Shares 1.2(a)(ii)
Company Stock 2.2.1(a)
Company Introduction
Company Expenses 1.5
Company Note(s) 1.2(b)(iii) or
1.2(c)
Company Noteholder(s) 1.2(b)(iii) or
1.2(c)
Company Preferred Stock 2.2.1(a)
Company Right(s) 1.2(b)(i)
Company Software 2.13(e)
Company Stock Certificate 1.2(c) or 1.2(d)
Company Stock Option(s) 1.2(b)(i)
Competing Transaction 4.2
Constituent Corporations Recitals
D&O Premium Deduction 5.4(b)
Disclosure Schedule 2.2
Dispute Notice 1.4(a)
Effective Time 1.3(b)
Employee(s) 2.2.20(a)
Escrowed Shares 1.3(a)(ii)(A)
Exchange Act 3.6
GAAP 1.4(a)
HMO 2.2.20(c)(iv)
Indemnified Party 8.4
Indemnifying Party 8.4
Initial Principal Amount 1.2(a)(iii)
Losses 8.1
Manager Recipient(s) 1.2(a)
Material Contract 2.2.12
Merger Recitals
Merger Consideration 1.2(a)
Newco Introduction
Note Purchase Agreements 1.2(b)(iii)
Notes 1.2(a)(iii)
Principal Securityholder(s) Introduction
Review Period 1.4(a)
SEC 3.6
Securities Act 2.1.3
Securityholders' Representative 10.1
Stock Consideration 1.2(a)(ii)
Subzero Amount 1.4(d)
Survival Period 8.7
Surviving Corporation 1.1(a)
Section 9.2 Additional Definitions. Whenever used in
this Agreement (including in the Schedules, the Disclosure
Schedule and the Exhibits hereto), the following terms
shall have the respective meanings given to them below
(each such meaning to be equally applicable to the singular
and plural forms of the respective terms so defined):
Affiliate: of a Person means a Person that directly
or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, the
first Person, including a Subsidiary of the first Person, a
Person of which the first Person is a Subsidiary, or
another Subsidiary of a Person of which the first Person is
also a Subsidiary. "Control" (including the terms
"controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a
person, whether through the ownership of voting securities,
by contract or credit arrangement, as trustee or executor,
or otherwise. In no event will "Affiliate" be deemed to
include any of the bona fide portfolio companies (other
than the Company) of any of the Principal Stockholders.
Agreement: this Agreement and Plan of Merger,
including the Exhibits and Schedules hereto.
Ancillary Agreements: the Employment Agreements, the
Escrow Agreement, the Note and the Registration Rights
Agreement.
Associate: of a Person means (i) any Person (other
than the Company) of which such Person or any person
included in clause (iii) hereof is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity, (ii) any trust or other estate
in which such Person or any person included in clause (iii)
hereof has a substantial beneficial interest or serves as
trustee or in a similar fiduciary capacity, and (iii) any
relative or spouse of such Person, or any relative of such
spouse. In no event will "Associate" be deemed to include
any of the bona fide portfolio companies (other than the
Company) of any of the Principal Stockholders.
Balance Sheet: the balance sheet of the Company as
of September 30, 2005 included in the Financial Statements.
Business: the business and operations of the Company
as currently conducted prior to the Closing.
Business Day: any day other than a Saturday, Sunday
or other day on which the commercial banks in New York City
are authorized or required to close.
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Sec.
9601 et seq.
Cognitronics Stock Value: the average of the closing
prices of the Cognitronics Shares listed on the American
Stock Exchange for each of the ten (10) full trading days
ending on the third (3rd) full trading day immediately
prior to the Closing Date.
Company Capital Stock: the Company Common Stock and
the Company Preferred Stock.
Company Plan: each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, and each bonus,
incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other
equity-based, performance or other employee or retiree
benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or
unwritten, that provides or may provide benefits or
compensation in respect of any current or former
stockholder, officer, director or employee of the Company
or the beneficiaries or dependents of any such person that
is or has been maintained or established by the Company or
any other Related Person, to which the Company or any
Related Person contributes or is or has been obligated or
required to contribute, or to which any such Person may
have any liability or obligation.
Consent: any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement,
license, certificate, exemption, order, registration,
declaration, filing, report or notice of, with or to any
Person.
Contract: all agreements, contracts, warranties,
licenses, franchises, permits, powers of attorney, purchase
orders, leases, instruments, obligations, offers,
commitments, plans, arrangements and understandings,
written or oral, to which the Company is a party or by
which any of them or any of its properties or assets may be
bound or affected, in each case as amended, supplemented,
waived or otherwise modified.
Debt: any and all indebtedness of the Company for
money borrowed or for extension of credit, including
without limitation the letters of credit, capital leases
and indebtedness listed on Schedule 2.2.25, to the extent
outstanding, but excluding any extension of credit by
suppliers or other trade creditors in respect of trade
payables incurred by the Company in the ordinary course of
the Business consistent with past practice.
Employment Agreements: the employment agreement to
be entered into among Cognitronics, the Surviving
Corporation and Xxxxxxx Xxxxxxxx, Xxxx Xxxxx and Xxxxxxx
Xxxxx, substantially in the form of Exhibit D.
Environmental Laws: all Laws (in effect on the date
of this Agreement and the Closing Date) relating to the
protection of the environment, to human health and safety,
or to any environmental activity, including (a) CERCLA, the
Resource Conservation and Recovery Act, and the
Occupational Safety and Health Act, (b) all other
requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of Hazardous
Materials into the air, surface water, groundwater or land,
or relating to the manufacture, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport
or handling of Hazardous Materials, and (c) all other
requirements pertaining to the protection of the health and
safety of employees or the public.
ERISA: the Employee Retirement Income Security Act
of 1974, as amended.
Escrow Agreement: the Escrow Agreement to be entered
into among Cognitronics, the Surviving Corporation, the
Principal Securityholders and an independent escrow agent
to be determined by the parties thereto, dated as of the
Closing Date, substantially in the form of Exhibit B.
Financial Statements: the audited financial
statements of the Company as at and for the year ended
December 31, 2003 and the unaudited financial statements of
the Company as at and for the year ended December 31, 2004
and the quarters ended March 31, 2005, June 30, 2005 and
September 30, 2005, including (i) in each case, a balance
sheet and statements of income, cash flows and stockholders
equity, and (ii) in the case of the audited financial
statements, a report thereon from Ernst & Young, the
Company's independent auditors.
Governmental Approval: any Consent of, with or to
any Governmental Authority.
Governmental Authority: any nation or government,
any state or other political subdivision thereof; any
entity, authority or body exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government; any court,
tribunal or arbitrator; and any self-regulatory
organization.
Hazardous Materials: any substance that: (a) is or
contains asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum or petroleum-derived
substances or wastes, radon gas or related materials (b)
requires investigation, removal or remediation under any
Environmental Laws, or is defined, listed or identified as
a "hazardous waste" or "hazardous substance" thereunder, or
(c) is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any Governmental Authority or
Environmental Laws.
Intellectual Property: the United States and foreign
trademarks, service marks, trade names, trade dress,
copyrights, and similar rights, including registrations and
applications to register or renew the registration of any
of the foregoing, the United States and foreign letters
patent and patent applications, and inventions, processes,
designs, formulae, trade secrets, know-how, confidential
information, computer software (except for mass-marketed,
commercial "shrinkwrap" software with a retail value of
$2,500 or less), data and documentation, and all similar
intellectual property rights, tangible embodiments of any
of the foregoing (in any medium including electronic
media), and licenses of any of the foregoing.
IRS: the Internal Revenue Service.
Knowledge: shall mean, with respect to the Company,
the knowledge of the Xxxxxxx Xxxxxxxx and Xxx Xxxxxxxxxxx.
Laws: all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including the
common law), codes, rules, regulations, ordinances or
orders of any Governmental Authority, (b) Governmental
Approvals and (c) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any
Governmental Authority.
Leased Real Property: all interests leased pursuant
to the Leases.
Leases: the real property leases, subleases,
licenses and occupancy agreements pursuant to which the
Company is the lessee, sublessee, licensee, user or
occupant of real property used in or held for use in
connection with, necessary for the conduct of, or otherwise
material to, the Business.
Lien: any mortgage, pledge, deed of trust,
hypothecation, right of others, claim, security interest,
encumbrance, title defect, lease, sublease, license,
occupancy agreement, easement, covenant, condition,
encroachment, voting trust agreement, interest, option,
right of first offer, negotiation or refusal, proxy, lien,
charge or other restrictions or limitations of any nature
whatsoever.
Litigation: any action, cause of action, claim,
demand, suit, proceeding, citation, summons, subpoena,
inquiry or investigation of any nature pending or
threatened by or before any Governmental Authority.
Material Adverse Effect: any event, occurrence,
fact, condition, change, development or effect that is or
has a substantial likelihood to be materially adverse to
the business, operations, results of operations, financial
condition, properties or assets of the Company taken as a
whole; except for any change, event, occurrence, condition,
development or effect resulting from or arising in
connection with (i) any changes or events affecting general
economic or business conditions, (ii) any changes or events
affecting the industries in which Cognitronics operates,
(iii) the effect of the public announcement contemplated by
this Agreement, (iv) the taking of any action required by
the terms of this Agreement or (v) acts or events of war,
terrorism or natural disaster.
Non-Disclosure Agreement: the Confidentiality and
Non-Disclosure Agreement, entered into between Cognitronics
and the Company, dated as of March 23, 2005.
Organizational Documents: as to any Person, its
certificate or articles of incorporation, by-laws and other
organizational documents.
Owned Real Property: the real property owned by the
Company, together with all structures, facilities,
improvements, fixtures, systems, equipment and items of
property presently or hereafter located thereon or attached
or appurtenant thereto or owned by the Company and located
on Leased Real Property, and all easements, licenses,
rights and appurtenances relating to the foregoing.
Permitted Liens: (a) Liens reserved against in the
Balance Sheet, to the extent so reserved, (b) Liens for
Taxes not yet due and payable or which are being contested
in good faith and by appropriate proceedings, (c)
easements, restrictions, covenants or other similar matters
set forth in any deed conveying title to real property or
any recorded instrument, agreement or plat (other than
those that would have a material adverse effect of the use
of the property), (d) statutory Liens of landlords for
amounts not yet due and payable, or (e) Liens of carriers,
warehousemen, mechanics and materialmen incurred in the
ordinary course of business for amounts not yet due and
payable.
Person: any natural person, firm, partnership,
association, corporation, company, trust, business trust,
Governmental Authority or other entity.
Real Property: the Owned Real Property and the
Leased Real Property.
Registration Rights Agreement: the Registration
Rights Agreement to be entered into between Cognitronics
and the Principal Securityholders, dated as of the Closing
Date, substantially in the form of Exhibit C.
Release: any releasing, disposing, discharging,
injecting, spilling, leaking, leaching, pumping, dumping,
emitting, escaping, emptying, seeping, dispersal, leeching,
migration, transporting, placing and the like, including,
the moving of any materials through, into or upon, any
land, soil, surface water, ground water or air, or
otherwise entering into the environment.
Representatives: as to any Person, its accountants,
counsel, consultants (including actuarial, environmental
and industry consultants), officers, directors, employees,
agents, financial institutions and other advisors and
representatives.
Return: any return, report, declaration, form, claim
for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
Subsidiaries: each corporation or other Person in
which a Person owns or controls, directly or indirectly,
capital stock or other equity interests representing more
than 50% of the outstanding voting stock or other equity
interests.
Tax: any federal, state, local or foreign income,
alternative, minimum, accumulated earnings, personal
holding company, franchise, capital stock, profits,
windfall profits, gross receipts, sales, use, value added,
transfer, registration, stamp, premium, excise, customs
duties, severance, environmental (including taxes under
Section 59A of the Code), real property, personal property,
ad valorem, occupancy, license, occupation, employment,
payroll, social security, disability, unemployment,
workers' compensation, withholding, estimated or other
similar tax, duty, fee, assessment or other governmental
charge or deficiencies thereof (including all interest and
penalties thereon and additions thereto).
Treasury Regulations: the regulations prescribed
under the Code.
Any reference in this Agreement to a statute shall be
to such statute, as amended from time to time, and to the
rules and regulations promulgated thereunder. The words
"include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation."
ARTICLE X MISCELLANEOUS
Section 10.1 Securityholders' Representative. (a)
Xxxxxx Xxxxxxx shall act as the sole and exclusive
representative of the Principal Securityholders and the
Company Noteholders hereunder (the "Securityholders'
Representative") and shall be authorized and empowered to
take all actions necessary or appropriate in the good-faith
judgment of the Securityholders' Representative for the
accomplishment of the terms of this Agreement. Subject to
the terms and conditions set forth herein, the
Securityholders' Representative shall be the only party
entitled to assert the rights of the recipients of the
Merger Consideration hereunder, and Cognitronics shall be
entitled to rely on any and all actions of the
Securityholders' Representative taken on behalf of such
holders. If the Securityholders' Representative is unable
to perform his functions hereunder, or if the Principal
Securityholders wish to change the Securityholders'
Representative, the holders of a majority of the Merger
Consideration received hereunder shall elect, by written
ballot, a successor Securityholders' Representative. The
decisions and actions of any successor Securityholders'
Representative shall be, for all purposes, those of the
Securityholders' Representative as if originally named
herein.
(b) Cognitronics and Newco shall be entitled to
rely exclusively upon any communications or writings given
or executed by the Securityholders' Representative and
shall not be liable in any manner whatsoever for any action
taken or not taken in reliance upon the actions taken or
not taken or communications or writings given or executed
by the Securityholders' Representative.
(c) The Securityholders' Representative shall not
be liable for any act done or omitted in such capacity
while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted in good
faith pursuant to the advice of counsel shall be conclusive
evidence of such good faith. The Securityholders'
Representative shall have reasonable access to information
about the Company and the reasonable assistance of the
Company's officers and employees for purposes of performing
his duties and exercising his rights hereunder.
(d) Except as provided herein or in the Escrow
Agreement, the Securityholders' Representative is not
authorized to, and shall not, accept on behalf of any
Company Noteholder any Merger Consideration to which such
Company Noteholder is entitled under this Agreement and the
Securityholders' Representative shall not in any manner
exercise, or seek to exercise, any voting power whatsoever
with respect to shares of Company Capital Stock or
Cognitronics Shares now or hereafter owned of record or
beneficially by any securityholder of the Company unless
the Securityholders' Representative is expressly authorized
to do so in a writing signed by such securityholder of the
Company.
(e) The Company Noteholders shall, severally and not
jointly, on a pro rata basis based on their relative
allocation of the consideration paid to such Company
Noteholder by Cognitronics hereunder, defend and hold the
Securityholders' Representative harmless from and against
any loss, damage, tax or expense that may be incurred or
paid by the Securityholders' Representative arising out of
the administration of the Securityholders' Representative's
duties (except as caused by the Securityholders'
Representative's gross negligence or willful misconduct)
provided that no Company Noteholder shall be liable under
this clause (v) for any amount in excess of the value of
the Merger Consideration actually received by such Company
Noteholder.
Section 10.2 Expenses. The Principal Securityholders
and the Company, on the one hand, and Cognitronics and
Newco, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys' and
auditors' fees, except as may otherwise be expressly set
forth herein) in connection with the transactions
contemplated hereby and by the Ancillary Agreements.
Section 10.3 Notices. All notices, requests, demands,
waivers and other communications required or permitted to
be given under this Agreement shall be in writing and shall
be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or
delivery or (d) sent by fax or e-mail, as follows:
(a) if to Cognitronics, Newco or, after the
Closing, the Company:
Cognitronics Corporation
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
E-mail: xxxxxxxxxxxx@xxxxxxxxxxxx.xxx
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
E-mail: xxxxxxxxxxxxxxxx@xxxxxxxxxxxx.xxx
(b) if to the Principal Securityholders or, prior
to the Closing, the Company:
ThinkEngine Networks, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Chief Executive Officer
Email: xxxxxxxxx@xxxxxxxxxxx.xxx
with a copy to:
Xxxxxxxxx Xxxxxxx
Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
Email: xxxxx@xxxxxx.xxx
and
Gesmer Xxxxxxxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
Email: xxxxx.xxxxxxxx@xxxxxx.xxx
or, in each case, at such other address as may be specified
in writing to the other parties hereto.
All such notices, requests, demands, waivers and
other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery,
(x) if by certified or registered mail, on the seventh
Business Day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered, (z) if
by fax, on the next day following the day on which such fax
was sent, provided that a copy is also sent by certified or
registered mail.
Section 10.4 Governing Law; Jurisdiction. This
Agreement shall be governed in all respects, including as
to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the
conflict of laws rules thereof to the extent such rules
would require or permit the application of the laws of
another jurisdiction, except to the extent the Merger is
specifically and mandatorily governed by the laws of the
States of Delaware and New York. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the
Federal and state courts located in the State, City and
County of New York solely in respect of the interpretation
and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect
of the transactions contemplated hereby and thereby, except
solely to the extent that all such courts shall lawfully
decline to exercise such jurisdiction. Each party hereto
hereby waives as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or
of any such document or in respect of any such transaction,
that it is not subject to such jurisdiction, that the venue
thereof may not be appropriate or that this Agreement or
any such document may not be enforced in or by such courts.
Each party hereto hereby consents to grant any such court
jurisdiction over the person of such parties and over the
subject matter of any such dispute and agrees that mailing
of process or other papers in connection with any such
action or proceeding in the manner provided in Section 10.2
or in such other manner as may be permitted by law, shall
be valid and sufficient service thereof. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 10.5 Binding Effect; No Third Party
Beneficiaries. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns. Except
as provided in Article VIII with respect to indemnification
of indemnified parties and Section 5.6 (Indemnification of
Officers and Directors), nothing in this Agreement shall
confer any rights upon any Person other than the parties
hereto and their respective heirs, successors and permitted
assigns, other than to the right of the Company Noteholders
and the Manager Recipients to receive the Merger
Consideration.
Section 10.6 Assignment. This Agreement shall not be
assignable or otherwise transferable by any party hereto
without the prior written consent of the other parties
hereto, and any purported assignment or other transfer
without such consent shall be void and unenforceable.
Section 10.7 Amendment; Waivers, etc. No amendment,
modification or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in
writing and duly executed by the party against whom
enforcement is sought. Any such waiver shall constitute a
waiver only with respect to the specific matter described
in such writing and shall in no way impair the rights of
the party granting such waiver in any other respect or at
any other time. Neither the waiver by any of the parties
hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the
parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver
of any of such provisions, rights or privileges hereunder.
The rights and remedies herein provided are cumulative and
none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in
equity. Subject to Section 8.8, the rights and remedies of
any party based upon, arising out of or otherwise in
respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon
which any claim of any such inaccuracy or breach is based
may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties
of the Principal Securityholders shall not be affected or
deemed waived by reason of any investigation made by or on
behalf of Cognitronics (including by any of its advisors,
consultants or representatives) or by reason of the fact
that Cognitronics or any of such advisors, consultants or
representatives knew or should have known that any such
representation or warranty is or might be inaccurate.
Section 10.8 Entire Agreement. This Agreement and the
Ancillary Agreements (when executed and delivered)
constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral,
between the parties with respect to the subject matter
hereof.
Section 10.9 Severability. If any provision,
including any phrase, sentence, clause, section or
subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not
have the effect of rendering such provision in question
invalid, inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision herein
contained invalid, inoperative, or unenforceable to any
extent whatsoever.
Section 10.10 Headings; Counterparts. The headings
contained in this Agreement and Section 9.1 are for
purposes of convenience only and shall not affect the
meaning or interpretation of this Agreement. This
Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall
together constitute one and the same instrument.
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blank.]
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
THINKENGINE NETWORKS, INC.
By:
__________________________
Name: Xxxxxxx Xxxxxxxx
Title: President & CEO
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
PRISM VENTURE PARTNERS III,
L.P.
By: Prism Investment
Partners III, L.P.
its General Partner
By: Prism Venture Partners
III, L.L.C.
its General Partner
By:
__________________________
Managing Director
PRISM VENTURE PARTNERS III-A,
L.P.
By: Prism Investment
Partners III, L.P.
its General Partner
By: Prism Venture Partners
III, L.L.C.
its General Partner
By:
__________________________
Managing Director
_____________________________
Xxxxxx Xxxxxxx, as
Securityholders'
Representative
COGNITRONICS CORPORATION
By:
__________________________
Name:Xxxxx X. Xxxxxx
Title: President
TN ACQUISITION CORPORATION
By:
__________________________
Name: Xxxxx X. Xxxxxx
Title: President
