EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXX.XXX, INC.,
CDK MERGER CORP., and
MILETOS, INC.;
And
XXXXXXX XXXXXXXX, as
REPRESENTATIVE OF CERTAIN STOCKHOLDERS OF MILETOS, INC.
Dated as of May 7, 2004
TABLE OF CONTENTS
Article I THE MERGER...........................................................1
Section 1.1. The Merger................................................1
Section 1.2. Consummation of the Merger................................1
Section 1.3. Effects of the Merger.....................................2
Section 1.4. Certificate of Incorporation of the Surviving
Corporation..............................................2
Section 1.5. By-Laws of the Surviving Corporation......................2
Section 1.6. Directors and Officers of the Surviving Corporation.......2
Section 1.7. Closing...................................................2
Article II CONVERSION AND EXCHANGE OF SECURITIES...............................2
Section 2.1. Conversion of Capital Stock...............................2
Section 2.2. Exchange of Certificates..................................4
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................6
Section 3.1. Organization and Qualification............................6
Section 3.2. Certificate of Incorporation and By-Laws..................7
Section 3.3. Limited Activities........................................7
Section 3.4. Capitalization............................................9
Section 3.5. Authority Relative to this Agreement.....................10
Section 3.6. Corporate Approvals Regarding Transactions...............10
Section 3.7. No Conflict; Required Filings and Consents...............10
Section 3.8. Agreements, Contracts and Commitments....................11
Section 3.9. Compliance With Law......................................11
Section 3.10. Properties and Assets; Encumbrances......................11
Section 3.11. Liabilities..............................................11
Section 3.12. Absence of Litigation....................................11
Section 3.13. Employees; Benefit Plans.................................11
Section 3.14. Taxes....................................................12
Section 3.15. Environmental Matters....................................13
Section 3.16. Intellectual Property....................................14
Section 3.17. Insurance................................................16
Section 3.18. Restrictions on Business Activities......................16
Section 3.19. Interested Party Transactions............................16
Section 3.20. Change in Control Payments...............................17
Section 3.21. Tax Matters..............................................17
Section 3.22. Brokers..................................................17
Section 3.23. Affiliates; Officers, Directors and Employees............17
Section 3.24. Private Sale.............................................17
Section 3.25. Enikia XXX Xxxxx and Records.............................17
Section 3.26. Disclaimer of the Company................................17
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............18
Section 4.1. Organization and Qualification...........................18
Section 4.2. Certificate of Incorporation; By-Laws; and Merger
Sub Activities..........................................18
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Section 4.3. Limited Activities.......................................18
Section 4.4. Capitalization...........................................19
Section 4.5. Authority Relative to this Agreement.....................20
Section 4.6. Corporate Approvals Regarding Transactions...............20
Section 4.7. No Conflict; Required Filings and Consents...............21
Section 4.8. Agreements, Contracts and Commitments....................21
Section 4.9. Compliance With Law......................................21
Section 4.10. Assets; Liabilities......................................21
Section 4.11. SEC Filings; Financial Statements........................22
Section 4.12. Absence of Certain Changes or Events.....................22
Section 4.13. No Undisclosed Liabilities...............................23
Section 4.14. Absence of Litigation....................................23
Section 4.15. Employees; Benefit Plans, and Employment Agreements......23
Section 4.16. Taxes....................................................23
Section 4.17. Environmental Matters....................................24
Section 4.18. Intellectual Property....................................25
Section 4.19. Insurance................................................26
Section 4.20. Restrictions on Business Activities......................26
Section 4.21. Interested Party Transactions............................26
Section 4.22. Change in Control Payments...............................27
Section 4.23. Tax Matters..............................................27
Section 4.24. Brokers..................................................27
Section 4.25. Parent Common Stock......................................27
Section 4.26. Disclaimer of Parent and Merger Sub......................27
Article V ADDITIONAL AGREEMENTS; COVENANTS....................................27
Section 5.1. Tax-Free Reorganization..................................27
Section 5.2. Employee Offers and Benefits.............................27
Section 5.3. Actions Taken by Parent Prior to the Effective Time......28
Section 5.4. Adoption of Equity Incentive Plan........................28
Section 5.5. Public Announcements.....................................28
Section 5.6. D & O Insurance..........................................29
Section 5.7. Assumption of Certain Liabilities........................29
Section 5.8. Financial Statements.....................................29
Section 5.9. Payment of Merger Expenses...............................29
Section 5.10. Three Year Compensation Plan.............................29
Section 5.11. Additional Agreements; Reasonable Best Efforts...........29
Article VI DOCUMENTS TO BE DELIVERED AT CLOSING...............................30
Section 6.1. Deliveries by the Company................................30
Section 6.2. Deliveries by Parent.....................................31
Article VII CONDITIONS TO THE PARTIES OBLIGATION TO CLOSE.....................32
Section 7.1. Parent and Merger Sub....................................32
Section 7.2. Company. ................................................33
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Article VIII INDEMNIFICATION..................................................33
Section 8.1. Survival of Representations and Warranties...............33
Section 8.2. Certification of Claims..................................33
Section 8.3. Termination of Rights Hereunder..........................33
Section 8.4. Indemnification of Parent and Merger Sub.................34
Section 8.5. Indemnification of Company Stockholders..................34
Section 8.6. Matters Involving Third Parties..........................35
Section 8.7. Definition of Damages....................................37
Section 8.8. Limitations..............................................37
Section 8.9. Escrows..................................................38
Article IX GENERAL PROVISIONS.................................................38
Section 9.1. Notices..................................................38
Section 9.2. Interpretations; Certain Definitions.....................39
Section 9.3. Amendment................................................41
Section 9.4. Extension; Waiver........................................41
Section 9.5. Headings.................................................41
Section 9.6. Severability.............................................41
Section 9.7. Entire Agreement, No Third Party Beneficiaries...........41
Section 9.8. Assignment...............................................42
Section 9.9. Failure or Indulgence Not Waiver; Remedies Cumulative....42
Section 9.10. Parties in Interest......................................42
Section 9.11. Governing Law............................................42
Section 9.12. Counterparts.............................................42
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EXHIBITS
Exhibit A - Form of Certificate of Merger
Exhibit B - [Intentionally Omitted]
Exhibit C - [Intentionally Omitted]
Exhibit E - Equity Incentive Plan
Exhibit F1 - Form of Miletos Escrow Agreement
Exhibit F2 - Form of CDK Escrow Agreement
Exhibit G1 - Consulting Agreement - Typaldos
Exhibit G2 - Employment Agreement - Loginov
Exhibit G3 - Consulting Agreement - Xxxxxxx
Exhibit H - Form of Stockholder Agreement
Exhibit I1 - Form Registration Rights Agreement - CDK
Exhibit I2 - Form Registration Rights Agreement - Typaldos
Exhibit J - Form of Lockup Agreement
Schedule 2.1(a) - Merger Consideration
Disclosure Schedules
Schedule 3.8 - Company Material Contracts
Schedule 3.10 - Company Liens
Schedule 3.11 - Company Liabilities
Schedule 3.12 - Company Litigation
Schedule 3.14 - Company Taxes
Schedule 3.16(a) - Company Intellectual Property Applications,
Registrations and Claims
Schedule 3.16(b) - Company Third Party Right to Intellectual
Property
Schedule 3.17 - Company Insurance
Schedule 3.19 - Company Interested Parties
Schedule 3.23 - Company Affiliates
Schedule 4.4(a) - Parent Options, Warrants and Convertibles
Schedule 4.13 - Parent Liabilities
Schedule 4.14 - Parent Litigation
Schedule 4.16 - Parent Taxes
Schedule 4.19 - Parent Insurance
Schedule 4.21 - Parent Interested Party
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Schedule 5.2 - List of Persons Offered Employment
Schedule 5.4 - Equity Compensation
Schedule 5.7 - Assumed Enikia Liabilities
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 7, 2004 (this
"AGREEMENT"), by and among XXXXxx.Xxx, Inc., a Delaware corporation ("PARENT"),
CDK Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent
("MERGER SUB"), and Miletos, Inc., a Delaware corporation (the "COMPANY"), and
Xxxxxxx Xxxxxxxx, in his individual capacity and as representative (the
"REPRESENTATIVE") of the following stockholders of the Company (collectively,
the "DESIGNATED COMPANY STOCKHOLDERS"): Xxxxx Xxxxxxxx, Xxxxx Holdings LLC,
Xxxxxxx Xxxxxxxx Family Limited Partnership and Xxxxx Xxxxxxxx Family
Partnership, Ltd.
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that it is advisable and in the best interests
of their respective equity holders that Parent acquire the Company pursuant to
the terms and conditions of this Agreement, and, in furtherance of such
acquisition, such Boards of Directors have approved the merger of Merger Sub
with and into the Company (the "MERGER") in accordance with the terms of this
Agreement and the applicable provisions of the Delaware General Corporation Law
of the State of Delaware (the "DGCL"); and
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code; and
WHEREAS, pursuant to the Merger, each of the Company's outstanding
Company Shares (as defined below) shall be converted into the right to receive
the Merger Consideration (as defined below), upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined below), the Company shall merge with and into
Merger Sub in accordance with the DGCL, the separate corporate existence of the
Company shall cease, and the Merger Sub shall continue as the surviving
corporation in the Merger. The Merger Sub, in its capacity as the corporation
surviving the Merger, is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
Section 1.2. Consummation of the Merger. In order to effectuate the Merger, on
the Closing Date (as defined below), Parent, Merger Sub and the Company shall
cause a certificate of merger (the "CERTIFICATE OF MERGER") to be filed with the
Secretary of State of Delaware, in such form as required by, and executed in
accordance with, the DGCL. The Merger shall be effective as of the time of
filing of the Certificate of Merger (the "EFFECTIVE TIME").
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Section 1.3. Effects of the Merger. The Merger shall have the effects provided
for in Section 259(a) of the DGCL.
Section 1.4. Certificate of Incorporation of the Surviving Corporation. At and
after the Effective Time, the Certificate of Incorporation of Merger Sub (the
"MERGER SUB CHARTER"), as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation.
Section 1.5. By-Laws of the Surviving Corporation. At and after the Effective
Time, the By-laws of Merger Sub (the "MERGER SUB BY-LAWS"), as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation.
Section 1.6. Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation, By-laws of the Surviving Corporation or as otherwise provided by
law.
(b) The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation, By-laws of the Surviving Corporation or as otherwise provided by
law.
Section 1.7. Closing. Subject to the provisions of this Agreement, the closing
of the Merger (the "CLOSING") shall take place at 10:00 a.m., Eastern Time, at
the offices of Xxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx
Xxxx, Xxx Xxxx on the second business day (or such other date the parties shall
mutually agree) following the satisfaction or waiver of all conditions to the
obligations of the parties to consummate the transactions contemplated hereby
set forth in Article VII (other than the conditions with respect to actions the
respective parties will take at the Closing) and subject to the execution and
delivery of all documents and agreements referred to in Article VI, but not
later than June 1, 2004. After such date, either party may terminate this
Agreement, provided it has performed its obligations in all material respect's.
The date on which the Closing shall occur is referred to herein as the "CLOSING
DATE."
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1. Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
capital stock of Merger Sub or the Company:
(a) Company Shares. Subject to this Article II, each share of the
Company's Common Stock, no par value, outstanding immediately prior to the
Effective Time (all of such shares collectively, the "COMPANY SHARES"), shall be
converted into the right to receive that number of shares of common stock, par
value $.0001 per share, of Parent ("PARENT COMMON
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STOCK") determined in accordance with the provisions of Section 2.1(b), payable
upon the surrender of the Certificates (as defined below); provided, however,
that 250,000 additional shares of Parent Common Stock issuable pursuant to the
Merger (hereinafter, the "CONTINGENT SHARES") shall be delivered into escrow
pursuant to Section 2.1(d) and held as specified in the CDK Escrow Agreement (as
defined below) and, to the extent such Contingent Shares are not applied to the
payment of indemnification claims against the Parent, the remaining Contingent
Shares shall be surrendered to the Parent for cancellation and shall thereupon
cease to exist. All of the Company Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of certificates representing any such Company Shares
shall cease to have any rights with respect thereto, except the right to receive
the shares of Parent Common Stock and a pro-rata portion of the Contingent
Shares pursuant to this Section 2.1(a), all to be issued in consideration
therefore upon the surrender of certificates representing Company Shares in
accordance with Section 2.2 (collectively, the "MERGER CONSIDERATION"). The
Merger Consideration payable to each holder of the Company's Common Stock
immediately prior to the Effective Time (collectively, the "Designated Company
Stockholders") in respect of the Company Shares owned by such Company
Stockholder shall be as set forth on Schedule 2.1(a), which schedule lists the
name and mailing address of each Company Stockholder and identifies the number
of shares of Parent Common Stock so issuable to such Company Stockholder
(including the number of shares of such Parent Common Stock initially
deliverable to the CDK Escrow Agent, and the Miletos Escrow Agent and subject to
the provisions of the Escrow Agreements) as described in Section 2.1(d) below.
(b) Exchange Rate . The aggregate number of shares of Parent Common
Stock to be issued in the Merger (including the 250,000 shares of Parent Common
Stock to be delivered in escrow to the CDK Escrow Agent and Miletos Escrow Agent
in accordance with the provisions of Section 2.1(d)) in exchange for all
outstanding of Company Shares is 15,840,575 (the "PARENT STOCK AMOUNT"). The
number of shares of Parent Common Stock to be issued in the Merger in respect of
each outstanding Company Share (the "EXCHANGE Rate") shall be, calculated as the
Parent Stock Amount divided by the number of Company Shares outstanding on the
date of the Closing.
(c) Capital Stock of Merger Sub. Each share of common stock, par value
$.01 per share, of Merger Sub ("MERGER SUB COMMON Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(d) Escrows. At the Effective Time, Parent shall instruct Interwest
Transfer Company (the "TRANSFER AGENT") to deliver: (1) to Xxxxxx & Xxxxxxxxx
LLP, or any successor escrow agent appointed pursuant to the Miletos Escrow
Agreement (the "MILETOS ESCROW AGENT") certificates evidencing 2,000,000 shares
of Parent Common Stock issued in the name of each Designated Company Stockholder
pro rata in accordance with their respective ownership of Common Stock of
Miletos at the Effective Time as security for payment of potential future
indemnification claims (other than the Assumed Enikia Liabilities) against such
Designated Company Stockholders pursuant to an Escrow Agreement in substantially
the form attached hereto as Exhibit F1 (the "MILETOS ESCROW AGREEMENT"); and (2)
to Xxxxxx XxXxxxxxxx & Marcus, P.A. or any successor escrow agent appointed
pursuant to the CDK Escrow
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Agreement (the "CDK ESCROW AGENT" and together with the Miletos Escrow Agent,
the "ESCROW AGENTS") certificates evidencing 250,000 Contingent Shares issued
pro rata, in the name of each Miletos Stockholder on the Closing Date as
security for payment of potential future indemnification claims against the
Parent, pursuant to an Escrow Agreement in substantially the form attached
hereto as Exhibit F2 (the "CDK ESCROW Agreement").
Section 2.2. Exchange of Certificates.
(a) Exchange Procedures. As soon as practicable after the Effective
Time, Parent shall instruct the Transfer Agent to promptly issue stock
certificates representing the number of shares of Parent Common Stock issuable
pursuant to Section 2.1(a) in exchange for the outstanding Company Shares, which
shares of Parent Common Stock shall be deemed to have been issued at the
Effective Time and which shares of Parent Common Stock will bear appropriate
legends evidencing, among other things, the fact that such shares have not been
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT").
Parent shall instruct the Transfer Agent to issue and deliver (i) certificates
representing 1,250,000 Company Shares registered in the name of several bridge
lenders identified by Representative (the "Set Aside Shares"), against delivery
of duly executed satisfaction or release; and (ii) certificates representing the
shares of Parent Common Stock to be delivered to the Company Stockholders and
the respective Escrow Agents in the name of the Company Stockholders appearing
in the stock register of the Company immediately prior to the Effective Time
upon presentation of certificates evidencing outstanding Company Shares (the
"CERTIFICATES"). Until so surrendered, any certificate that, prior to the
Effective Time, represented Company Shares will be deemed from and after the
Effective Time, for all corporate purposes, to represent only the right to
receive, upon surrender, the Merger Consideration for such Company Shares so
evidenced.
(b) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of shares of Company Shares Stock pursuant to this Article II; and no
dividend, stock split or other change in the capital structure of Parent shall
relate to any fractional security; and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. Each
fractional share issuable shall be rounded up to the nearest whole share of
Parent Common Stock.
(c) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefore is registered, it will be a condition to the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or have established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(d) No Liability. Neither Parent, Merger Sub nor the Company, nor any
of their respective directors, officers, employees or agents, shall be liable to
any holder of Company Shares or Parent Common Stock, as the case may be, for
such shares (or dividends or
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distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(e) No Further Ownership Rights in Company Shares. At the Effective
Time, the transfer books of the Company shall be closed, and thereafter there
shall be no further registration of transfers on the transfer books of the
Company or the Surviving Corporation of the Company Shares that were outstanding
immediately prior to such time. If, after such time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article II.
(f) Lost, Stolen or Destroyed Certificates. In the event any evidence
of ownership of Company Shares shall have been lost, stolen or destroyed, Parent
shall instruct the Transfer Agent to issue in exchange therefore, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 2.1(a) as well as the other
Merger Consideration as provided in this Article II; provided, however, that
Parent may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver an agreement of indemnification in form satisfactory to Parent, or a
bond in such sum as Parent may reasonably direct as indemnity against any claim
that may be made against Parent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
(g) Taking of Necessary Action; Further Action. Each of Parent, Merger
Sub and the Company will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
(h) Material Adverse Effect. When used in connection with the Company
or Parent or any of its subsidiaries, as the case may be, the term "MATERIAL
ADVERSE EFFECT" means any change, effect or circumstance that, individually or
when taken together with all other such changes, effects or circumstances that
have occurred prior to the date of determination of the occurrence of the
material adverse effect, (a) will or is reasonably likely to be materially
adverse to the business, assets (including intangible assets), liabilities,
condition (financial or otherwise) or results of operations of the Company or
Parent and its subsidiaries (taken as a whole), as the case may be, or (b) will
or is reasonably likely to delay or prevent the consummation of the transactions
contemplated hereby; PROVIDED, HOWEVER, that "material adverse effect" shall not
be deemed to include the impact of (A) any changes, after the date hereof, in
laws or interpretations thereof by courts or Governmental Entities (as defined
below), or (B) changes in economic conditions affecting companies in the
industry in which the Company or Parent operates generally.
(i) Shareholder Representative. The Designated Company Stockholders, by
virtue of the approval of this Agreement and the Merger, will be deemed to have
irrevocably constituted
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and appointed, effective as of the date hereof, Xxxxxxx Xxxxxxxx (together with
his permitted successors, the "REPRESENTATIVE"), as their true and lawful agent
and attorney-in-fact, and the Representative, by his execution of this Agreement
shall be deemed to have accepted such appointment, to enter into any agreement
in connection with the transactions contemplated by this Agreement, the Escrow
Agreements or the Shareholder Agreement to exercise all or any of the powers,
authority and discretion conferred on him under any such agreement, to waive any
terms and conditions of any such agreement (other than the Merger
Consideration), to give and receive notices on their behalf, and to be their
exclusive representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any such
agreement, including, without limitation, the assertion, prosecution, defense,
settlement or compromise of any claim, action or proceeding for which any
Company Stockholder, Parent or the Merger Sub may be entitled to indemnification
and the Representative agrees to act as, and to undertake the duties and
responsibilities of, such agent and attorney-in-fact. This power of attorney is
coupled with an interest and is irrevocable. The Representative shall not be
liable for any action taken or not taken by him in his capacity as
Representative (i) with the consent of Designated Company Stockholders who, as
of the date of this Agreement, own a majority in number of the outstanding
Company Shares owned by all of the Designated Company Stockholders, in the
aggregate, or (ii) in the absence of his own willful misconduct. If the
Representative shall be unable or unwilling to serve in such capacity, his
successor shall be named by those persons holding a majority of the Company
Shares outstanding immediately prior to the Effective Time held by the
Designated Company Stockholders who shall serve and exercise the powers of
Representative hereunder. Solely with respect to any actions taken by the
Representative in his capacity as such, the Representative shall have no
liability to Parent or any of its affiliates except for claims based upon fraud.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the written disclosure schedule dated as of the
date hereof, prepared by the Company, signed by the President of the Company and
delivered to Parent simultaneously with the execution hereof (the "COMPANY
DISCLOSURE SCHEDULE"), the Company represents and warrants to Parent and Merger
Sub that all of the statements contained in this Article III are true and
correct as of the date of this Agreement (or, if made as of a specified date, as
of such date). Each exception set forth in the Company Disclosure Schedule and
each other response to this Agreement set forth in the Company Disclosure
Schedule is identified by reference to, or has been grouped under a heading
referring to, a specific individual section of this Agreement and relates only
to such section, except to the extent that one portion of the Company Disclosure
Schedule specifically refers to another portion thereof, identifying such other
portion by section reference or similar specific cross reference.
Section 3.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority necessary to own,
lease and operate the properties it purports to own, lease or operate and to
carry on its business as it is now being conducted or presently proposed to be
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such
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qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a material
adverse effect on the Company. The Company has no subsidiaries and does not
directly or indirectly own any equity, debt (other than trade receivables
received in the ordinary course of business) or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, or have the right to vote any interest in, any corporation,
partnership, joint venture or other business association or entity.
Section 3.2. Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a true, complete and correct copy of its
Certificate of Incorporation, as amended to date (the "COMPANY CHARTER"), and
By-Laws, (the "COMPANY BY-LAWS"). Such Company Charter and Company By-Laws are
in full force and effect. The Company is not in violation of any of the
provisions of the Company Charter or Company By-Laws.
Section 3.3. Limited Activities.
(a) As of the date hereof and as of the Effective Time, the Company has
not and will not have incurred, directly or indirectly, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person, except for
obligations or liabilities incurred in connection with its incorporation or
organization, and the transactions contemplated by this Agreement, the
foreclosure sale held on March 23, 2004 (the "FORECLOSURE SALE"), pursuant to
which the Company purchased assets of Enikia, LLC, a loan agreement relating to
$50,000 advanced on its behalf by Bridlington Ltd. (the "BRIDLINGTON LOAN") and
certain settlement agreements with former Enikia, LLC members and lenders (the
"ENIKIA SETTLEMENTS").
(b) The Company has not assumed nor is it responsible for any
liability, obligation, debt or commitment of Enikia LLC, other than the Assumed
Enikia Liabilities set forth in Schedule 5.7, which liabilities, obligations,
debts and commitments not so assumed (the "Excluded Obligations") shall include
and not be limited to liabilities, obligations, debts or commitments, absolute
or contingent, whenever the same may arise (other than the Assumed Enikia
Liabilities):
(i) which arise or are asserted by operation of any law, including
but not limited to any liability which may be sought to be
imposed on the Company as successor to any part of Enikia LLC's
business, or otherwise, by reason of any event, act or omission,
injury or transaction which shall have occurred or failed to have
occurred, whether by reason of the operation of the business or
otherwise, prior to the Effective Time;
(ii) except as otherwise expressly provided herein, which arises prior
to the Effective Time or is otherwise incurred in respect of any
event which occurs prior to the Effective Time, whether under any
of Enikia LLC's contracts which are assumed by Miletos or
otherwise;
(iii) relating in any way to any of Enikia LLC's affiliates;
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(iv) except as provided in Section 5.2 in respect of any of Enikia
LLC's employee policies and benefit plans;
(v) for any deficit in Enikia LLC's unemployment compensation
obligations in respect of Enikia LLC's employees prior to the
Effective Time;
(vi) to any of Enikia LLC's employees in respect of any matter prior
to the Effective Time, whether self-insured by Enikia LLC or
otherwise, and including but not limited to worker's compensation
and medical claims;
(vii) to any of Enikia LLC's retired employees;
(viii) in respect of any express or implied representation, warranty
or guarantee made in connection with any of Enikia LLC's services
or products, or which are or may be imposed by operation of law
in respect of any operations prior to the Effective Time; and
(ix) any liability, whenever the same may arise, in respect of any
pricing, profit limitation or other regulation applicable to
government contracts, if any, of Enikia LLC for all periods prior
to the Effective Time.
(x) any undisclosed liability;
(xi) any product liability or claim for injury to person or property,
regardless of when made or asserted, which arises out of or is
based upon any express or implied representation, warranty,
agreement or guarantee made by Enikia LLC, or alleged to have
been made by Enikia LLC, or which is imposed or asserted to be
imposed by operation of law, in connection with any service
performed or product sold or leased by or on behalf of Enikia LLC
on or prior to the Effective Time, including without limitation
any claim relating to any product delivered in connection with
the performance of such service and any claim seeking recovery
for consequential damage, lost revenue or income;
(xii) any federal, state, local or foreign taxes, including, but not
limited to income, franchise, sales and use taxes, and penalties
and interest as a result of Enikia LLC to qualify or become
authorized to do business as a foreign corporation in any
jurisdiction (i) payable with respect to the business, assets,
properties or operations of Enikia LLC or any member of any
affiliated group of which it is a member for any period prior to
the Effective Time, or (ii) incident to or arising as a
consequence of the negotiation or consummation by Enikia LLC or
any member of any affiliated group of which it is a member of
this Agreement and the transactions contemplated hereby;
(xiii) except as otherwise expressly provided in this Agreement, any
liability or obligation arising prior to or as a result of the
Effective Time to any employees, agents or independent
contractors of Enikia LLC, whether or not employed by the Company
after the Effective Time, or under any compensation or benefit
arrangement with respect thereto; or
8
(xiv) except as otherwise expressly provided in this Agreement, any
liability or obligation of Enikia LLC or the Company arising or
incurred in connection with, or incident to, the negotiation,
preparation and execution of this Agreement and the transactions
contemplated hereby and fees and expenses of counsel, accountants
and other experts.
Section 3.4. Capitalization.
(a) Schedule 2.1(a) lists all outstanding Company Shares, which is the
only type of equity ownership authorized by the Company Charter. All of the
outstanding Company Shares is duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding Company Shares has been offered, issued
and sold by the Company in compliance with applicable federal and state
securities laws. Schedule 2.1(a) sets forth a complete and correct list as of
the date hereof, of the number of outstanding Company Shares, including the
record and beneficial owners thereof, which represent all of the authorized,
issued and outstanding equity of the Company. There are no Company Shares
subject to outstanding options, warrants or similar rights or other rights to
purchase or receive Company Shares, or any restricted Company Shares awards. No
rights, contingent or otherwise, to purchase, acquire or otherwise obtain any
Company Shares or other equity security of the Company or any security
convertible into or otherwise exchangeable for Company Shares or other equity
security of the Company are outstanding presently nor will there be any
outstanding immediately prior to the Effective Time. There are no obligations,
contingent or otherwise, of the Company to repurchase, redeem or otherwise
acquire any Company Securities or to provide funds to or make any investment (in
the form of a loan, capital contribution, guarantee or otherwise) in any other
entity. There are no accrued and unpaid distributions with respect to any
outstanding equity security of the Company. The Company has made available to
Parent true and complete copies of all certificates or other documents or
instruments evidencing or representing all Company Securities, which
certificates or other documents or instruments reflect, except to the extent
identified on Section 3.4(a) of the Company Disclosure Schedule, all adjustments
or other transactions affecting the number of shares of Company Shares evidenced
by such certificates or other documents or instruments.
(b) There are no equity securities of any class of the Company or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. There are no options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party, or by which the Company is bound, obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional equity
securities of the Company or obligating the Company to grant, extend or
accelerate the vesting of or enter into any such option, warrant, call, right,
commitment or agreement. There is no indebtedness of the Company issued and
outstanding that has general voting rights, or any debt convertible into
securities having such rights. There are no voting trusts, proxies or other
similar agreements or understandings with respect to the shares of capital stock
of the Company. There are no agreements, written or oral, between the Company
and any holder of its securities or others, or, to the Company's knowledge,
among any holders of its securities, relating to the acquisition (including
without limitation rights of first refusal, anti-dilution or pre-emptive
rights), disposition, or registration under the Securities Act of the equity
securities of the Company, in each case, which have not been effectively waived
prior to the Effective Time.
9
Section 3.5. Authority Relative to this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by it at the Closing and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each instrument required hereby to be executed and delivered at
the Closing by the Company and the consummation by the Company of the
transactions contemplated hereby or thereby have been duly and validly
authorized by all necessary action on the part of the Company and the Company's
shareholders. This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law).
Section 3.6. Corporate Approvals Regarding Transactions. The Company's Board of
Directors has determined that it is advisable and in the best interests of the
Company's shareholders for the Company to enter into a business combination with
Parent upon the terms and subject to the conditions of this Agreement, and has
recommended that the Company's shareholders approve and adopt this Agreement and
the Merger. None of the aforesaid actions have been amended, rescinded or
modified. Designated Company Stockholders have by written consent (the "COMPANY
STOCKHOLDER CONSENT") voted in favor of and approved this Agreement and the
Merger, in accordance with the DGCL, and, no Company Stockholder has any
dissenter's or appraisal rights under the Company Charter, Company By-Laws, this
Agreement, or the DGCL or other Delaware statute in respect of the Merger. No
state takeover statute is applicable to the Merger or the other transactions
contemplated hereby.
Section 3.7. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and each instrument
required hereby to be executed and delivered by the Company at the Closing does
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Company Charter or Company By-Laws; (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or by which its or any of its properties is bound or affected; or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any security interest, lien, claim, pledge, agreement,
limitation in voting rights, charge or other encumbrance of any nature
whatsoever (collectively, "Liens") on any of the properties or assets of the
Company pursuant to, any Company Agreement or Material Contract (defined in
Section 3.8), except in the case of (ii) and (iii) for any such conflicts,
violations, breaches, defaults or other occurrences that would not have a
material adverse effect on the Company.
(b) The execution and delivery of this Agreement and any instrument
required hereby to be executed and delivered by the Company at the Closing does
not, and the performance of
10
this Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any court,
administrative or regulatory agency or commission or other governmental
authority or instrumentality (whether domestic or foreign, a "GOVERNMENTAL
ENTITY"), except (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country; (ii) the
filing and recordation of appropriate merger or other documents as required by
the DGCL; and (iii) such other consents, approvals, authorizations or permits
which, if not obtained or made, would not have a material adverse effect on the
Company.
Section 3.8. Agreements, Contracts and Commitments. To the Company's knowledge,
it has not breached, is not in default under, and has not received written
notice of any breach of or default under any agreement requiring expenditures by
the party in excess of ten thousand dollars ($10,000) or resulting in payments
to the party in excess of ten thousand dollars ($10,000) (each, a "MATERIAL
CONTRACT"), and to the Company's knowledge, no other party to any Material
Contract has breached or is in default of any of its obligations thereunder.
Section 3.9. Compliance With Law. To the Company's knowledge, it is not in
conflict with, or in default or violation of (and has not received any notices
of violation with respect to), any law, rule, regulation, order, judgment or
decree applicable to the Company or by which it or any of its properties is
bound or affected, and the Company is not aware of any such conflict, default or
violation thereunder, except in each case for any such conflicts, defaults or
violations that is not currently having or would not have a material adverse
effect on the Company.
Section 3.10. Properties and Assets; Encumbrances. Except as set forth in
Company Disclosure Schedule 3.10, the Company has good, valid and marketable
title to all the properties and assets it purports to own, and all such
properties and assets are free and clear of all Liens, except for Liens for
current taxes not yet due, Liens that do not, individually or in the aggregate,
materially detract from the value or impair the use of the property or assets
subject thereto.
Section 3.11. Liabilities. Except as set forth in Section 3.11 of the Company
Disclosure Schedule, the Company has no actual knowledge of any material
liabilities of the Company.
Section 3.12. Absence of Litigation. Except as set forth in Section 3.12 of the
Company Disclosure Schedule, the Company has no knowledge of any claims,
actions, suits, proceedings or investigations (i) pending against the Company or
any properties or assets of the Company, or (ii) threatened against the Company
or any properties or assets of the Company, in each case, which claims, actions,
suits, proceedings or investigations could reasonably be expected to have a
material adverse effect on the Company.
Section 3.13. Employees; Benefit Plans. Since the Company Incorporation Date,
the Company has not employed any persons and is neither committed nor obligated
to hire any employees in the future. The Company has not established, nor
offered any employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
11
Section 3.14. Taxes.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean taxes,
fees, levies, duties, tariffs, imposts and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including without limitation (1)
income, franchise, profits, gross receipts, ad valorem, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and (2)
interest, penalties, additional taxes and additions to tax imposed with respect
thereto; and "TAX RETURNS" shall mean returns, reports and information
statements with respect to Taxes required to be filed with the IRS or any other
taxing authority, domestic or foreign, including without limitation,
consolidated, combined or unitary tax returns.
(b) The Company has filed with the appropriate taxing authorities all
Tax Returns required to be filed by them, except where the failure to file such
Tax Returns would not have a material adverse effect on the Company, and all
such Tax Returns were correct and complete in all material respects. Except as
set forth in Section 3.14 of the Company Disclosure Schedule, (i) all Taxes due
and owing by the Company have been paid or adequately reserved for, except to
the extent any failure to pay or reserve would not, individually or in the
aggregate, have a material adverse effect on the Company; (ii) the Company is
not currently the beneficiary of any extension of time within which to file any
Tax Return, (iii) there are no Tax Liens on any assets of the Company other than
liens relating to Taxes not yet due and payable; and (iv) the Company has not
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax.
(c) The accruals and reserves for Taxes (including deferred taxes) by
the Company identified as such on the Company's financial statements are in all
material respects adequate to cover all Taxes accruable through the date hereof
(including interest and penalties, if any, hereon and Taxes being contested) in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis.
(d) The Company is not, nor has it been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
12
(e) Except as set forth in Section 3.14of the Company Disclosure
Schedule, (i) the Company has withheld and paid all Taxes required to have been
withheld and paid, and complied with all information and backup withholding
requirements, including the maintenance of records with respect thereto, in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party, except to the extent any
failure to withhold would not, individually or in the aggregate, have a material
adverse effect on the Company; (ii) the Company has not been delinquent in the
payment of any Tax, except to the extent any failure to pay such Tax would not,
individually or in the aggregate, have a material adverse effect on the Company;
(iii) the Company has not received any written notice of any Tax deficiency
outstanding, proposed or assessed against the Company; (iv) the Company has not
received any written notice of any audit examination, deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to any Tax
Return of the Company; (v) no claim has ever been made by any taxing authority
or jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation by that taxing authority or jurisdiction, except where the
failure to file such Tax Returns or pay Taxes claimed to be owed would not have
a material adverse effect on the Company; and (vi) the Company has not filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company.
(f) The Company is not a party to or bound by any tax indemnity, tax
sharing or tax allocation agreements. The Company has never been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code.
The Company has not agreed to make nor is it required to make any material
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. The Company has not made any payment, is not obligated to
make any payment, and is not a party to any agreement that could obligate it to
make any payment that will not be deductible under Sections 162, 280G or 404 of
the Code or be subject to the excise Tax of Section 4999 of the Code.
(g) The Company has previously provided Parent with written schedules
of (i) with respect to Taxes, those years, if any, for which examinations have
been completed and those years, if any, for which examinations are presently
being conducted, and (ii) the foreign countries, if any, in which the Company
has or has had a permanent establishment, as defined in any applicable Tax
treaty or convention between the United States and such foreign country.
Section 3.15. Environmental Matters.
(a) The Company is in compliance in all material respects with all
applicable Environmental Laws (as defined below). The Company has not received
any communication from a Governmental Entity, citizens group, employee or other
person that alleges that the Company is not in full compliance with all
applicable Environmental Laws.
(b) There is no Environmental Claim (as defined below) pending against
the Company or, to the Company's knowledge, threatened against any person whose
liability for any Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law.
13
(c) To the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including the
Release, emission, discharge or disposal of any Materials of Environmental
Concern (as defined below), that could form the basis of any Environmental Claim
against the Company or, to the Company's knowledge, against any person whose
liability for any Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law.
(d) The Company has delivered or otherwise made available for
inspection to Parent true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring possessed by the Company
pertaining to Materials of Environmental Concern in, on, beneath or adjacent to
any property currently or formerly owned, operated or leased by the Company or
regarding the Company's compliance with applicable Environmental Laws, and the
Company has not initiated or requested any other reports, studies, analyses,
tests or monitoring.
(e) "ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice by any person alleging potential liability arising out
of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned by the Company, Parent, or Merger Sub, or (ii) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
(f) "ENVIRONMENTAL LAWS" means all federal, state, local and foreign
laws and regulations relating to pollution or protection or preservation of
human health or the environment including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata and natural
resources, and including, without limitation, all laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, containment (whether above ground or
underground), disposal, transport or handling of Materials of Environmental
Concern, or the preservation of the environment or mitigation of adverse effects
thereon and all laws and regulations with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Materials of Environmental
Concern.
(g) "MATERIALS OF ENVIRONMENTAL CONCERN" means all pollutants,
containments, toxic or hazardous substances, materials and wastes, petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
bipheryls, radon or lead-based paints and materials.
(h) "RELEASE" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of
any property, including the movement of Materials of Environmental Concern
through or in the air, soil, surface water, groundwater or property.
Section 3.16. Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure Schedule lists all of the
patent applications, trademark registrations and material unregistered
trademarks that the Company
14
owns by the applicable jurisdictions of issue or registration or in which an
application for issuance and registration has been filed, the respective
registration or application numbers and the names of all registered owners.
Except as set forth in Section 3.16(b) of the Company Disclosure Schedule, to
the actual knowledge of the Company, the Company owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor, trade
secrets, mask works, schematics, know how, computer software programs or
software applications, and tangible or intangible proprietary intellectual
property information or material that are used in the business of the Company as
currently conducted or used in the development of the business at the Effective
Time (the "INTELLECTUAL PROPERTY RIGHTS").
(b) Except as set forth in Section 3.16(b) of the Company Disclosure
Schedule, to the actual knowledge of the Company, no third-party owns or
possesses any rights in any code embedded or incorporated in the Company's
products (provided, the representation set forth in this sentence shall not be
deemed to address third-party patent rights). To the actual knowledge of the
Company, except as set forth in Section 3.16(b) of the Company Disclosure
Schedule, the Company is the sole and exclusive owner of all right, title and
interest in and to (free and clear of any Liens), or is the exclusive or
non-exclusive licensee of, the Intellectual Property Rights, and, in the case of
all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, trade secrets, mask works, schematics, know how, computer
software programs or software applications, and tangible or intangible
proprietary intellectual property information or material, all to the extent
owned by the Company (the "COMPANY-OWNED INTELLECTUAL PROPERTY RIGHTS"), the
Company has sole and exclusive rights (and is not contractually obligated to pay
any compensation to any third party in respect thereof) for the use thereof.
Except as set forth in Section 3.16(b) of the Company Disclosure Schedule, no
claims with respect to the Intellectual Property Rights have been received by
the Company and, to the Company's knowledge, at the Effective Time no such
claims have been asserted or are threatened by any person (1) to the effect that
the manufacture, sale, licensing or use by the Company of any of the products or
services of the Company infringes on any intellectual property or other
proprietary rights of any third party; (2) against the use by the Company of any
trademarks, service marks, trade names, trade secrets, copyrights, patents or
know how and software applications in the business, or in the development of the
business, of the Company; or (3) challenging the ownership or use by the Company
or the validity of any of the Intellectual Property Rights. To the actual
knowledge of the Company, except as set forth in Section 3.16(b) of the Company
Disclosure Schedule, there does not exist any third-party intellectual property
right that relates to the business of the Company as presently conducted, except
any such right that would not likely have a material adverse effect. To the
actual knowledge of the Company and except as disclosed in Section 3.16(c)(i) of
the Company Disclosure Schedule, all Company-owned Intellectual Property Rights
consisting of patent applications and registered and non-registered trademarks
listed in Section 3.16(a) of the Company Disclosure Schedule that are used in
the business of the Company as currently conducted or used in the development of
the business at the Effective Time are subsisting, in full force and effect, and
have not expired or been cancelled or abandoned. To the knowledge of the
Company, there is no unauthorized use, infringement or misappropriation of any
of the Intellectual Property Rights by any third party, including any employee
or former employee of the Company. To the Company's knowledge, no Intellectual
Property Rights or product or service of the Company is subject to any
outstanding judicial decree, order, judgment or stipulation restricting in any
manner the use, sale or licensing
15
thereof by the Company. Except as disclosed in Section 3.16(b) of the Company
Disclosure Schedule, the Company has not entered into any agreement under which
the Company is restricted from using or licensing any Company-owned Intellectual
Property Rights or selling or otherwise distributing any of its products or
services.
(c) Except as disclosed on Section 3.16(c)(i) of the Company Disclosure
Schedule, the consummation of the transactions contemplated hereby will not
result in any loss or impairment of any of the Company-owned Intellectual
Property Rights, nor require the consent of any Governmental Entity or third
party with respect to any of the Company-owned Intellectual Property Rights.
(d) All current or former Company personnel, including employees,
agents, consultants and contractors, who have contributed to or participated in
the conception and development of any part of the Company-owned Intellectual
Property Rights on behalf of the Company, have executed agreements with
nondisclosure and assignment provisions. To the Company's knowledge, no current
or former partner, director, officer, employee, agent, consultant or contractor
of the Company (or any predecessor in interest) owns or retains any rights in or
to any of the Company-owned Intellectual Property Rights.
(e) Section 3.16(e) of the Company Disclosure Schedule sets forth a
complete list of all material licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company or any other
person is authorized to use any Intellectual Property Rights (excluding object
code end-user licenses granted to end-users in the ordinary course of business
that permit use of software products without a right to modify, distribute or
sublicense the same), and includes the identity of all parties thereto. To the
actual knowledge of the Company, the Company is not in violation of any material
license, sublicense or agreement described on such list.
Section 3.17. Insurance. Section 3.17 of the Company Disclosure Schedule sets
forth an accurate and complete list and summary description (including nature of
coverage, limits and deductibles) of all policies of insurance maintained, owned
or held by the Company. The Company has paid all premiums due on such insurance
policies and are in compliance with the provisions thereof.
Section 3.18. Restrictions on Business Activities. Except for this Agreement,
there is no agreement executed by the Company or, to the Company's knowledge,
any other agreement, judgment, injunction, order or decree binding upon the
Company that has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of the Company, the
acquisition of material property by the Company or the conduct of business by
the Company as currently conducted or as proposed to be conducted by the
Company.
Section 3.19. Interested Party Transactions. Except as set forth in Section 3.19
of the Company Disclosure Schedule, no officer or director of the Company, or
any person with whom any such officer or director has any direct or indirect
relation by blood, marriage or adoption, or any entity in which any such person
owns any beneficial interest (other than a publicly-held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than 1% of the stock of which is beneficially owned by all of such
persons), has
16
any interest in (i) any contract, arrangement or understanding with, or relating
to, the business or operations of the Company or Enikia LLC that could
reasonably be expected to result in a liability or obligation of the Company,
(ii) any loan, arrangement, understanding, agreement or contract for or relating
to indebtedness with the Company, (iii) any property (real, personal or mixed),
tangible or intangible, used or currently intended to be used in, the business
or operations of the Company, (iv) to the Company's knowledge, any business or
entity that competes with the Company, or (v) any other transaction that would
be required to be reported as a Certain Relationship or Related Transaction,
pursuant to Item 404 of Regulation S K promulgated by the Securities and
Exchange Commission (the "SEC"), if the Company filed such reports.
Section 3.20. Change in Control Payments. The Company has no plans, programs or
agreements to which they are parties, or to which they are subject, pursuant to
which payments (or acceleration of benefits) may be required upon, or may become
payable directly or indirectly as a result of, a change of control of the
Company.
Section 3.21. Tax Matters. Neither the Company nor any of its affiliates has
taken or agreed to take any action or failed to take any action that would
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
Section 3.22. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 3.23. Affiliates; Officers, Directors and Employees. Section 3.23(a) of
the Company Disclosure Schedule contains a true, complete and correct list of
all persons who are, as of the date hereof, affiliates of the Company and Enikia
LLC. Section 3.23(b) of the Company Disclosure Schedule contains a correct and
complete list of all of the officers and directors of the Company, specifying
their office.
Section 3.24. Private Sale. At the time of effectiveness of the Company
Stockholder Consent, on the date hereof and at the Effective Time, there was not
and will not be more than 35 holders of Company Common Stock who are not
"accredited investors", as that term is defined in Regulation D promulgated
under the Securities Act, evidenced by the subscription documents executed by
each Company Stockholder.
Section 3.25. Enikia XXX Xxxxx and Records. The Company has acquired the books
and records of Enikia LLC as a part of the Foreclosure Sale.
The Company is not aware that Enikia LLC's books and records fail to reflect its
assets and liabilities and maintain proper internal accounting controls which
provide assurance that (i) transactions were executed with management's
authorization; and (ii) transactions were recorded as necessary to permit
preparation of the financial statements of Enikia LLC.
Section 3.26. Disclaimer of the Company. Except as set forth in this Article
III, the Company makes no other representation or warranty, express or implied,
at law or in equity, in respect of the Company's business and matters relating
to Enikia LLC, including, without limitation, with respect to merchantability or
fitness for a particular purpose of any asset of the
17
Company, and any such other representations or warranties are hereby expressly
disclaimed; provided, however, that the foregoing is not intended to limit in
any respect, the representations and warranties expressly set forth in this
Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the written disclosure schedule dated as of the
date hereof, prepared by the Parent, signed by the President of Parent and
delivered to Company simultaneously with the execution hereof (the "PARENT
DISCLOSURE SCHEDULE"), each of the Parent and Merger Sub jointly and severally
represents and warrants to Company and all Designated Company Stockholders that
all of the statements contained in this Article IV are true and correct as of
the date of this Agreement (or, if made as of a specified date, as of such
date). Each exception set forth in the Parent Disclosure Schedule and each other
response to this Agreement set forth in the Parent Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual section of this Agreement and relates only to such section,
except to the extent that one portion of the Parent Disclosure Schedule
specifically refers to another portion thereof, identifying such other portion
by section reference or similar specific cross reference.
Section 4.1. Organization and Qualification. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority necessary to own, lease and operate the properties it purports to
own, lease or operate and to carry on its business as it is now being conducted
or presently proposed to be conducted. Each of Parent and Merger Sub is duly
qualified or licensed as foreign corporations to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not have a material
adverse effect on Parent, Merger Sub and any other Parent subsidiaries, taken as
a whole.
Section 4.2. Certificate of Incorporation; By-Laws; and Merger Sub Activities.
(a) Parent has heretofore furnished to the Company a true, complete and
correct copy of its Certificate of Incorporation, as amended to date (the
"PARENT CHARTER"), and By-Laws, (the "PARENT BY-LAWS"). Such Parent Charter and
Parent By-Laws are each in full force and effect. Parent is not in violation of
any of the provisions of the Parent Charter or Parent By-Laws.
(b) Merger Sub has heretofore furnished to the Company a true, complete
and correct copy of the Merger Sub Charter and Merger Sub By-Laws. Such Merger
Sub Charter and Merger Sub By-Laws are each in full force and effect. Merger Sub
is not in violation of any of the provisions of the Merger Sub Charter or Merger
Sub By-Laws.
Section 4.3. Limited Activities. As of the date hereof and as of the Effective
Time, except for obligations or liabilities incurred in connection with its
incorporation or organization
18
and the transactions contemplated by this Agreement and Merger Sub has not and
will not have incurred, directly or indirectly, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.
Section 4.4. Capitalization.
(a) The authorized capital stock of Parent consists of 100,000,000
shares of Parent Common Stock and 5,000,000 shares of preferred stock, par value
$0.0001 per share ("Parent Preferred Stock"). As the date herof there are
4,488,525 shares outstanding. As of the Closing Date no more than 5,863,525
shares of Parent Common Stock will be outstanding (which includes the private
placement of 675,000 shares and 700,000 shares issued to settle outstanding
convertible debt) and no shares of Parent Preferred Stock are issued and
outstanding. All of the outstanding Parent Common Stock is duly authorized,
validly issued, fully paid and nonassessable. All of the issued and outstanding
shares of Parent Common Stock have been offered, issued and sold by Parent in
compliance with applicable federal and state securities laws. Section 4.4(a) of
the Parent Disclosure Schedule sets forth (A) a complete and correct list, as of
the date hereof, of the number of shares of Parent Common Stock issuable upon:
(i) the exercise of outstanding stock options, warrants and all similar rights,
and the vesting schedules, exercise prices and expiration dates of such options,
warrants and other rights to purchase or receive shares of Parent's capital
stock, and any restricted stock awards, and (ii) the conversion or exchange of
outstanding notes, debentures, evidences of indebtedness, preferred stock or any
other securities of the Parent which by their terms are convertible into or
exchangeable for shares of Parent Common Stock; and (iii) any other contract,
arrangement or commitment, written or oral, to issue Parent Common Stock, Parent
Preferred Stock, or other securities of the type described in clauses (i) and
(ii) above; and (B) the amount and nature of the beneficial ownership of any and
all securities of Parent owned by affiliates of Parent as of the date hereof.
There are no obligations, contingent or otherwise, of Parent to repurchase,
redeem or otherwise acquire any Parent Common Stock or any other security of
Parent, or to provide funds to or make any investment (in the form of a loan,
capital contribution, guarantee or otherwise) in any other entity. Immediately
prior to the Closing there will be no accrued and unpaid dividends with respect
to any outstanding shares of capital stock of Parent. There is no indebtedness
of the Parent issued and outstanding that has general voting rights, or any debt
convertible into securities having such rights. There are no voting trusts,
proxies or other similar agreements or understandings with respect to the shares
of capital stock of the Parent. There are no agreements, written or oral,
between Parent and any holder of its securities or others, or, to the Parent's
knowledge, among any holders of its securities, relating to the acquisition
(including without limitation rights of first refusal, anti-dilution or
pre-emptive rights), disposition, or registration under the Securities Act of
the equity securities of Parent, in each case, which have not been effectively
waived prior to the Closing Date.
(b) All of the shares of Parent Common Stock to be issued in the Merger
have been duly authorized by all necessary corporate action and will be, when
issued in accordance with this Agreement, duly authorized, validly issued, fully
paid and nonassessable.
(c) The authorized capital stock of Merger Sub consists of 100 shares
of Merger Sub Common Stock, $.01 par value, all of which is issued and
outstanding and fully paid and nonassessable, and is owned beneficially and of
record by Parent. There are no rights,
19
contingent or otherwise, to purchase, acquire or otherwise obtain any stock or
other equity security of Merger Sub or any security convertible into or
otherwise exchangeable for stock or other equity security of Merger Sub. There
are no obligations, contingent or otherwise, of Merger Sub to repurchase, redeem
or otherwise acquire any securities of Merger Sub or to provide funds to or make
any investment (in the form of a loan, capital contribution, guarantee or
otherwise) in any other entity. There are no accrued and unpaid distributions
with respect to any outstanding equity security of Merger Sub. There are no
options, warrants, calls, rights, commitments or agreements of any character to
which Merger Sub is a party, or by which Merger Sub is bound, obligating Merger
Sub to issue, deliver or sell, or cause to be issued, delivered or sold,
additional equity securities of Merger Sub or obligating Merger Sub to grant,
extend or accelerate the vesting of or enter into any such option, warrant,
call, right, commitment or agreement. There is no indebtedness of Merger Sub
issued and outstanding that has general voting rights, or any debt convertible
into securities having such rights. There are no voting trusts, proxies or other
similar agreements or understandings with respect to the shares of capital stock
of Merger Sub. There are no agreements, written or oral, between Merger Sub and
any holder of its securities or others, or, to Merger Sub's knowledge, among any
holders of its securities, relating to the acquisition (including without
limitation rights of first refusal, anti-dilution or pre-emptive rights),
disposition, or registration under the Securities Act of the equity securities
of Merger Sub, in each case, which have not been effectively waived prior to the
Closing Date.
Section 4.5. Authority Relative to this Agreement. Each of Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by it
at the Closing and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and each instrument required hereby to be executed
and delivered at the Closing by each of Parent and Merger Sub and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby or thereby have been duly and validly authorized by all necessary action
on the part of each of Parent and Merger Sub and each of Parent shareholders and
Merger Sub shareholders. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub, and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and by general equitable
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law).
Section 4.6. Corporate Approvals Regarding Transactions. The Board of Directors
of each of the Parent and Merger Sub has determined that it is advisable and in
the best interest of its shareholders for the Parent and Merger Sub to enter
into a business combination with the Company upon the terms and subject to the
conditions of this Agreement, and has recommended that the Parent and Merger Sub
shareholders approve and adopt this Agreement and the Merger. None of the
aforesaid actions have been amended, rescinded or modified. The Parent has by
written consent voted in favor of and approved this Agreement and the Merger, in
accordance with the DGCL, and no Parent shareholder or Merger Sub shareholder
has any dissenter's or appraisal rights under any of the Parent Charter, Parent
By-Laws, Merger
20
Sub Charter, Merger Sub By-Laws, this Agreement, the DGCL or other Delaware
statute in respect of the Merger. No state takeover statute is applicable to the
Merger or the other transactions contemplated hereby.
Section 4.7. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and each instrument
required hereby to be executed and delivered by each of the Parent and/or Merger
Sub at the Closing does not, and the performance of this Agreement by each of
the Parent and Merger Sub will not, (i) conflict with or violate the Parent
Charter and/or Merger Sub Charter or Parent By-Laws and/or Merger Sub By-Laws;
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to each of the Parent and/or Merger Sub or by which its or any
of its properties is bound or affected; or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default), or impair the Parent and/or Merger Sub's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Lien on any of the properties or assets of the Parent and/or
Merger Sub pursuant to, any Parent and/or Merger Sub agreement, except in the
case of (ii) and (iii) for any such conflicts, violations, breaches, defaults or
other occurrences that would not have a material adverse effect on the Parent
and/or Merger Sub.
(b) The execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by each of the Parent and Merger
Sub does not, and the performance of this Agreement by each of the Parent and
Merger Sub will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country; (ii) the filing and recordation of
appropriate merger or other documents as required by the DGCL; and (iii) such
other consents, approvals, authorizations or permits which, if not obtained or
made, would not have a material adverse effect on Parent or Merger Sub.
Section 4.8. Agreements, Contracts and Commitments. Neither Parent nor Merger
Sub is, to its knowledge, in breach or default under, has received written
notice of any breach of or default under any Material Contract, and to each of
Parent's and Merger Sub's knowledge, no other party to any Material Contract has
breached or is in default of any of its obligations thereunder.
Section 4.9. Compliance With Law. Neither Parent nor Merger Sub is, to its
knowledge, in conflict with, or in default or violation of (and has not received
any notices of violation with respect to), any applicable law, rule, regulation,
order, judgment or decree by which it or any of its properties is bound or
affected, and neither Parent nor Merger Sub is aware of any such conflict,
default or violation thereunder, except in each case for any such conflict,
default or violation not currently having or which would not have a material
adverse effect on Parent and/or Merger Sub.
Section 4.10. Assets; Liabilities. Parent owns marketable securities, free and
clear of all Liens and claims, having a market value of not less than three
hundred thousand ($300,000)
21
dollars. The total liabilities of Parent and Merger Sub together do not exceed
twenty-five thousand ($25,000) dollars in the aggregate.
Section 4.11. SEC Filings; Financial Statements.
(a) Parent has timely filed and made available to the Company all
forms, reports, schedules, statements and other documents required to be filed
by Parent with the SEC since June 30, 2001 (collectively, the "PARENT SEC
REPORTS"). The Parent SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Exchange Act, and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Parent SEC Reports or necessary in order to make
the statements in such Parent SEC Reports, in light of the circumstances under
which they were made, not misleading. None of Parent's subsidiaries are required
to file any forms, reports, schedules, statements or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes), contained in the Parent SEC Reports, including any
Parent SEC Reports filed after the date of this Agreement until the Closing,
complied, as of its respective date, in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved and fairly presented the
consolidated financial position of Parent and its subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
(c) Except as otherwise disclosed on Schedule 4.11(c), Parent has not,
since December 31, 2003, entered into any material contracts (as defined in
Regulation S-K). Parent has furnished copies of all material contracts
identified on Schedule 4.11(c), to the Company.
Section 4.12. Absence of Certain Changes or Events. Except as set forth in
Section 4.12 of the Parent Disclosure Schedule, since December 31, 2003, each of
the Parent and Merger Sub has conducted its business in the ordinary course
consistent with past practice and, since such date, there has not occurred: (i)
any change, development, event or other circumstance, situation or state of
affairs that has had or could reasonably be expected to have a material adverse
effect on the Parent and/or Merger Sub; (ii) any amendments to or changes in the
Parent Charter, the Parent By-Laws, the Merger Sub Charter or the Merger Sub
By-Laws; (iii) any damage to, destruction or loss of any asset of the Parent
and/or Merger Sub (whether or not covered by insurance) that could reasonably be
expected to have a material adverse effect on the Parent and/or Merger Sub; (iv)
any material change by the Parent and/or Merger Sub in its accounting methods,
principles or practices; (v) any material revaluation by the Parent and/or
Merger Sub of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice; (vi) any sale of a
material amount of assets (tangible or intangible) of the Parent and/or Merger
Sub, or any increase (outside of the ordinary course of business and consistent
with past practices of the Parent and/or Merger Sub) in the outstanding
indebtedness of the Parent and/or
22
Merger Sub or indebtedness for which the Parent and/or Merger Sub are (by
guarantee or otherwise) or may become liable.
Section 4.13. No Undisclosed Liabilities. Except as set forth in Section 4.13 of
the Parent Disclosure Schedule, neither the Parent nor Merger Sub has any
knowledge of liabilities of the Parent and/or Merger Sub, other than liabilities
(i) disclosed or provided for in the Parent and/or Merger Sub Balance Sheet,
(ii) incurred in the ordinary course of business since the Parent's most recent
Parent SEC Report and which, if existing, would not have a material adverse
effect on the Parent and/or Merger Sub, or (iii) for Parent and/or Merger Sub
Transaction Expenses specifically identified on Section 4.13 of the Parent
Disclosure Schedule. There is no probable or reasonably possible loss
contingency (within the meaning of Statement of Financial Accounting Standards
No. 5) known to the Parent or Merger Sub which is not reflected in the Financial
Statements (including the notes thereto).
Section 4.14. Absence of Litigation. Except as set forth in Section 4.14 of the
Parent Disclosure Schedule, neither the Parent nor Merger Sub has any knowledge
of claims, actions, suits, proceedings or investigations (i) pending against the
Parent and/or Merger Sub or any properties or assets of the Parent and/or Merger
Sub, or (ii) threatened against the Parent and/or Merger Sub or any properties
or assets of the Parent and/or Merger Sub, in each case, which claims, actions,
suits, proceedings or investigations could reasonably be expected to have a
material adverse effect on the Parent and/or Merger Sub.
Section 4.15. Employees; Benefit Plans, and Employment Agreements.
(a) Neither the Parent nor Merger Sub currently has any persons under
its respective employment. To the extent Parent and/or Merger Sub have had
employees in the past, Parent and Merger Sub hereby represent that there are no
remaining obligations or liabilities to or with respect to such former
employees. Neither Parent nor Merger Sub has established, nor offered any
employee benefit plan within the meaning of ERISA. Except as set forth in
Section 4.15 of the Parent Disclosure Schedule, Parent and Merger Sub are
neither committed nor obligated to hire any employees.
Section 4.16. Taxes.
(a) The Parent and Merger Sub have filed with the appropriate taxing
authorities all Tax Returns required to be filed by them, except where the
failure to file such Tax Returns would not have a material adverse effect on the
Parent and/or Merger Sub, and all such Tax Returns were correct and complete in
all material respects. Except as set forth in Section 4.16(a) of the Parent
Disclosure Schedules, (i) all Taxes due and owing by the Parent and Merger Sub
have been paid or adequately reserved for, except to the extent any failure to
pay or reserve would not, individually or in the aggregate, have a material
adverse effect on the Parent and/or Merger Sub; (ii) neither the Parent nor
Merger Sub is currently the beneficiary of any extension of time within which to
file any Tax Return, (iii) there are no Tax Liens on any assets of the Parent
and/or Merger Sub other than liens relating to Taxes not yet due and payable;
and (iv) neither the Parent nor Merger Sub has granted any waiver of any statute
of limitations with respect to, or any extension of a period for the assessment
of, any Tax.
23
(b) The accruals and reserves for Taxes (including deferred taxes) by
the Parent and Merger Sub identified as such on the Parent and Merger Sub
financial statements from the date of most recent Parent SEC Report, are in all
material respects adequate to cover all Taxes accruable through the date thereof
(including interest and penalties, if any, thereon and Taxes being contested) in
accordance with GAAP applied on a consistent basis.
(c) Neither the Parent nor Merger Sub is, nor has it been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(d) Except as set forth in Section 4.16(d) of the Parent Disclosure
Schedule, (i) each of the Parent and/or Merger Sub has withheld and paid all
Taxes required to have been withheld and paid, and complied with all information
and backup withholding requirements, including the maintenance of records with
respect thereto, in connection with any amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party, except to
the extent any failure to withhold would not, individually or in the aggregate,
have a material adverse effect on the Parent and/or Merger Sub; (ii) neither the
Parent nor Merger Sub has been delinquent in the payment of any Tax, except to
the extent any failure to pay such Tax would not, individually or in the
aggregate, have a material adverse effect on the Parent and/or Merger Sub; (iii)
neither the Parent nor Merger Sub has received any written notice of any Tax
deficiency outstanding, proposed or assessed against the Parent and/or Merger
Sub; (iv) neither the Parent nor Merger Sub has received any written notice of
any audit examination, deficiency, refund litigation, proposed adjustment or
matter in controversy with respect to any Tax Return of the Parent and/or Merger
Sub; (v) no claim has ever been made by any taxing authority or jurisdiction
where the Parent and/or Merger Sub does not file Tax Returns that it is or may
be subject to taxation by that taxing authority or jurisdiction, except where
the failure to file such Tax Returns or pay Taxes claimed to be owed would not
have a material adverse effect on the Parent and/or Merger Sub; and (vi) neither
the Parent nor Merger Sub has filed any consent agreement under Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Parent and/or Merger Sub.
(e) Neither the Parent nor Merger Sub are a party to or bound by any
tax indemnity, tax sharing or tax allocation agreements. Neither the Parent nor
Merger Sub has ever been a member of an affiliated group of corporations within
the meaning of Section 1504 of the Code. Neither the Parent nor Merger Sub has
agreed to make nor is it required to make any material adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Neither the Parent nor Merger Sub has made any payment, is not obligated to make
any payment, and is not a party to any agreement that could obligate it to make
any payment that will not be deductible under Sections 162, 280G or 404 of the
Code or be subject to the excise Tax of Section 4999 of the Code.
Section 4.17. Environmental Matters.
(a) Each of the Parent and Merger Sub is in compliance in all material
respects with all applicable Environmental Laws. Neither the Parent nor Merger
Sub has received any communication from a Governmental Entity, citizens group,
employee or other person that
24
alleges that the Parent and/or Merger Sub is not in full compliance with all
applicable Environmental Laws.
(b) Neither of Parent nor Merger Sub has any Environmental Claim
pending against it, nor threatened against any person whose liability for any
Environmental Claim it has or may have retained or assumed either contractually
or by operation of law.
(c) To the Parent and/or Merger Sub's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including the Release, emission, discharge or disposal of any Materials of
Environmental Concern (as defined below), that could form the basis of any
Environmental Claim against the Parent and/or Merger Sub or, to the Parent
and/or Merger Sub's knowledge, against any person whose liability for any
Environmental Claim the Parent and/or Merger Sub have or may have retained or
assumed either contractually or by operation of law.
(d) The Parent has delivered or otherwise made available for inspection
to the Company true, complete and correct copies and results of any reports,
studies, analyses, tests or monitoring possessed by the Parent and/or Merger Sub
pertaining to Materials of Environmental Concern in, on, beneath or adjacent to
any property currently or formerly owned, operated or leased by the Parent
and/or Merger Sub or regarding the Parent and/or Merger Sub's compliance with
applicable Environmental Laws, and the Parent and/or Merger Sub has not
initiated or requested any other reports, studies, analyses, tests or
monitoring.
Section 4.18. Intellectual Property.
(a) To Parent and/or Merger Sub knowledge, at the Effective Time no
claims have been asserted or are threatened by any person (1) to the effect that
prior or current manufacture, sale, licensing or use by the Parent and/or Merger
Sub of any of the products or services of the Parent and/or Merger Sub infringed
or infringes on any intellectual property or other proprietary rights of any
third party; or (2) against prior or current use by the Parent and/or Merger Sub
of any trademarks, service marks, trade names, trade secrets, copyrights,
patents or know how and software applications in the business, or in the
development of the business, of the Parent and/or Merger Sub. Except as set
forth in Section 4.18(a)(i) of the Parent Disclosure Schedule, to the actual
knowledge of the Parent, there does not exist any third-party intellectual
property right that relates to the business of the Parent and/or Merger Sub as
previously or presently conducted, except any such right that would not likely
have a material adverse effect. Except as set forth in Section 4.18(a)(ii) of
the Parent Disclosure Schedule, no third-party owns or possesses any rights in
any code embedded or incorporated in the Parent and/or Merger Sub products
(provided, the representation set forth in this sentence shall not be deemed to
address third-party patent rights).
(b) Except as set forth in Section 4.18(b) of the Parent Disclosure
Schedule, the consummation of the transactions contemplated hereby will not
result in any loss or impairment of any of the Parent and/or Merger Sub rights
under the agreements listed in Section 4.18(c)(i) of the Parent Disclosure
Schedule.
(c) Except as set forth in Section 4.18(c)(i) of the Parent Disclosure
Schedule, and excluding object code end-user licenses granted to end-users in
the ordinary course of business
25
that permit use of software products without a right to modify, distribute or
sublicense the same, there are no material licenses, sublicenses and other
agreements as to which the Parent and/or Merger Sub is a party and pursuant to
which the Parent, Merger Sub or any other person is authorized to use any
intellectual property rights including but not limited to patents, trademarks,
trade names, service marks, copyrights, and any applications therefor, trade
secrets, mask works, schematics, know how, computer software programs or
software applications, and tangible or intangible proprietary intellectual
property information or material. Neither the Parent nor Merger Sub is in
violation of any material license, sublicense or agreement described in Section
4.18(c)(i) of the Parent Disclosure Schedule except such violations as do not
materially impair the Parent and/or Merger Sub rights under such license,
sublicense or agreement. Except as set forth in Section 4.18(c)(ii) of the
Parent Disclosure Schedule, the execution and delivery of this Agreement by the
Parent and/or Merger Sub, and the consummation of the transactions contemplated
hereby, will not cause the Parent and/or Merger Sub to be in violation or
default under any such license, sublicense or agreement, nor entitle any other
party to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement.
Section 4.19. Insurance. Section 4.19 of the Parent Disclosure Schedule sets
forth an accurate and complete list and summary description (including nature of
coverage, limits and deductibles) of all policies of insurance maintained, owned
or held by the Parent and/or Merger Sub. Each of the Parent and Merger Sub has
paid all premiums due on such insurance policies and are in compliance with the
provisions thereof.
Section 4.20. Restrictions on Business Activities. Except for this Agreement and
the agreement executed by Parent in connection with the sale of ValueFlash
assets (which limitation on business activities only involves a web based
advertising technology) in June 2001, there is no agreement executed by the
Parent and/or Merger Sub or, to the Parent and/or Merger Sub's knowledge, any
other agreement, judgment, injunction, order or decree binding upon the Parent
and/or Merger Sub that has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of the Parent and/or
Merger Sub, the acquisition of material property by the Parent and/or Merger Sub
or the conduct of business by the Parent and/or Merger Sub as currently
conducted or as proposed to be conducted by the Parent and/or Merger Sub.
Section 4.21. Interested Party Transactions. Except as set forth in Section 4.21
of the Parent Disclosure Schedule, no officer or director of the Parent and/or
Merger Sub, or any person with whom any such officer or director has any direct
or indirect relation by blood, marriage or adoption, or any entity in which any
such person owns any beneficial interest (other than a publicly-held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by all of such persons), has any interest in (i) any contract, arrangement
or understanding with, or relating to, the business or operations of the Parent
and/or Merger Sub that could reasonably be expected to result in a liability or
obligation of the Parent and/or Merger Sub, (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness with the
Parent and/or Merger Sub, (iii) any property (real, personal or mixed), tangible
or intangible, used or currently intended to be used in, the business or
operations of the Parent and/or Merger Sub, (iv) to the Parent and/or Merger
Sub's knowledge, any business or entity that competes with the Parent and/or
Merger Sub, or (v) any other transaction that would be required to be reported
as a Certain
26
Relationship or Related Transaction, pursuant to Item 404 of Regulation S K
promulgated by the SEC, if the Parent and/or Merger Sub filed such reports.
Section 4.22. Change in Control Payments. Neither the Parent nor Merger Sub has
any plans, programs or agreements to which it is a party, or to which it is
subject, pursuant to which payments (or acceleration of benefits) may be
required upon, or may become payable directly or indirectly as a result of, a
change of control of the Parent and/or Merger Sub.
Section 4.23. Tax Matters. Neither the Parent, Merger Sub nor any of their
respective affiliates have taken or agreed to take any action or failed to take
any action that would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
Section 4.24. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Parent and/or Merger Sub.
Section 4.25. Parent Common Stock. Shares of Parent Common Stock are publicly
traded on the OTCBB and were held of record by 120 persons as of March 29, 2004.
Section 4.26. Disclaimer of Parent and Merger Sub. Except as set forth in this
Article IV, Parent and Merger Sub make no other representation or warranty,
express or implied, at law or in equity, in respect of the Parent and Merger
Sub's business, including, without limitation, with respect to merchantability
or fitness for a particular purpose of any asset of the Parent and/or Merger
Sub, and any such other representations or warranties are hereby expressly
disclaimed; provided, however, that the foregoing is not intended to limit in
any respect, the representations and warranties expressly set forth in this
Article IV.
ARTICLE V
ADDITIONAL AGREEMENTS; COVENANTS
Section 5.1. Tax-Free Reorganization. Parent and the Company intend that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code. Parent and the Company shall each use its reasonable best efforts to
cause the Merger to so qualify. Neither Parent nor the Company shall (nor shall
the Company permit any Company Stockholder to) knowingly take any action, or
knowingly fail to take any action that would be reasonably likely to jeopardize
the qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
Section 5.2. Employee Offers and Benefits. Parent agrees that, as soon as
reasonably practicable following the Effective Time, the Surviving Corporation
shall: (i) offer employment to the persons set forth in Schedule 5.2 (the
"RETAINED EMPLOYEES") by delivering offer letters containing the substantive
terms identified in Schedule 5.2, and shall honor and perform the terms of such
offers for those persons accepting such employment; and (ii) provide the
employee plans and programs that provide benefits such as health care insurance
and retirement benefits which the Board of Directors of the Parent deems
reasonable and prudent in the circumstances. With respect to such benefits,
service accrued by such Retained Employees shall
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be recognized for purposes of vesting and eligibility commencing as of the dates
set forth in Schedule 5.2, except to the extent necessary to prevent duplication
of benefits.
Section 5.3. Actions Taken by Parent Prior to the Effective Time.
As a condition precedent to the Merger, CDK, prior to the Effective
Time, shall demonstrate to the reasonable satisfaction of the Representative
that:
(a) At the Effective Time, Parent will have at least $950,000 of cash
(including the proceeds of a private placement of Parent Common Stock and the
assignment and satisfaction of the Bridlington Loan to the Company in exchange
for 41,667 Parent Shares as part of the recent placement), of which $150,000
shall be placed in escrow pending payment thereof to the Internal Revenue
Service in respect of the Assumed Enikia Liabilities due to the IRS in
accordance with the agreed upon payment schedule and marketable securities
having a fair market value of at least $300,000;
(b) At the Effective Time, Parent shall have no material assets other
than the cash and marketable securities described above, or liabilities
(including contingent liabilities) in excess of $25,000;
(c) Parent shall have no option, warrant, conversion right, preferred
stock, or other securities convertible into or exercisable or exchangeable for
common stock outstanding except as disclosed in Section 4.4(a) of Parent's
Disclosure Schedule;
(d) Concurrently with the Effective Time, subject in the case of
directors, compliance with Rule 14f-1, the following shall become executive
officers and directors of the Company:
Name
Xxxxxxx Xxxxxxxx Director
Xxxxxxx Xxxxxx Director
Xxxxxx Xxxxxx Director (CDK designee)
Xxxx Xxxxxxxx Director, President and CEO
Xxxx Xxxxxxx CFO and Secretary
Section 5.4. Adoption of Equity Incentive Plan. The Parent will adopt an Equity
Incentive Plan in the form annexed hereto as Exhibit E and made the awards set
forth on Schedule 5.4 hereto under the plan, as part of the Closing. The Parent
shall, as soon as practicable and in any event within 6 months after the
Effective Time cause such plans to be registered under the Securities Act of
1933 on a Form S-8 registration statement.
Section 5.5. Public Announcements. No press release or any public disclosure,
either written or oral, of the transactions contemplated by this Agreement shall
be made by the Company or the Surviving Corporation, or any officer, director or
affiliate thereof without the prior written consent of Parent.
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Section 5.6. D & O Insurance. The Surviving Corporation will, for a period of
not less than 2 years following the Effective Time, maintain a liability policy
for Directors and Officers covering Xxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxxx and
Xxxxxxx Xxxxxx having a deductible approved by the Board of Directors of the
Parent, as constituted following the Effective Time.
Section 5.7. Assumption of Certain Liabilities. From and after the Effective
Time, Parent shall, and hereby does, assume and agree to pay, upon the terms and
conditions set forth below, those certain liabilities and obligations of Enikia,
L.L.C. identified and described on Schedule 5.7, attached hereto (the "Assumed
Enikia Liabilities"), and no others. Schedule 5.7 identifies portions of the
Assumed Enikia Liabilities which Parent agrees to pay: (i) in cash within two
(2) business days after the Effective Time; (ii) in cash from time to time
promptly after request for payment thereof by the Representative, designating
the amounts and payees thereof; and (iii) by the delivery of shares of the
Parent's Common Stock in the amounts and at the times substantially as set forth
in Schedule 5.7, promptly after request for issuance thereof by the
Representative and execution and delivery by the recipient of such agreements,
certificates and documents as counsel to Parent may require to substantiate that
issuance of such shares is exempt from the registration requirements of federal
and state securities laws.
Section 5.8. Financial Statements. Surviving Corporation shall deliver financial
statements of the Company and Enikia, LLC for the periods required to be
disclosed by Parent in its Exchange Act reports with the audit report of an
independent certified public accountant, if required by Regulation S-X.
Section 5.9. Payment of Merger Expenses. Concurrently with the Effective Time,
Parent shall pay the fees and expenses of the Company in connection with the
Merger, including without limitation the fees and disbursements of counsel to
the Company and the Representative; provided, that Parent's cash payment
obligations with respect to such counsel fees and disbursements is limited to
the amounts set forth on Schedule 5.7 attached hereto.
Section 5.10. Three Year Compensation Plan. Promptly, and in any event within 30
days after the Effective Time, Surviving Corporation and Parent shall authorize
and adopt a three year salary, bonus and option plan for the Surviving
Corporation and Parent's employees, officers and directors acceptable to the
Parent and the Surviving Corporation. Without limiting the generality of the
foregoing, the Parents shall authorize and adopt a stock option plan reserving
Parent Common Shares for issuance upon exercise of options granted thereunder
which amount to 5% of amount of Parent Common Shares, on a fully diluted basis,
outstanding immediately after the Effective Time, and providing for the issuance
of both "incentive stock options" and "nonqualified options" thereunder.
Concurrently with the adoption of such stock plans, and in any event within 30
days after the Effective Time, Parent shall grant options to the persons and for
the respective amounts of shares, set forth in Schedule 5.10 hereto, at an
exercise price of $.01 per share.
Section 5.11. Additional Agreements; Reasonable Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
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Issuance of Adelphia Shares. The Company will issue to the Designated Company
Stockholder 500,000 Shares in addition to the Merger Consideration in exchange
for a partial assignment of interests held by the Designated Company Stockholder
in Enikia.
ARTICLE VI
DOCUMENTS TO BE DELIVERED AT CLOSING
Section 6.1. Deliveries by the Company. At the Closing, the Company shall
deliver or cause to be delivered to Parent, and the obligations of Parent and
Merger Sub hereunder shall be subject to the satisfaction at or prior to the
Effective Time of, all of the following:
(a) Company Charter. A copy of the Company Charter, certified as of a
recent date by the Secretary of State of the State of Delaware.
(b) Good Standing Certificate. A certificate of good standing of the
Company, issued as of a recent date by the Secretary of State of the State of
Delaware and each other jurisdiction where the Company is qualified to transact
business as a foreign corporation.
(c) Stock Powers for Parent Common Stock. Stock powers executed in
blank from each Company Stockholder for the shares of Parent Common Stock to be
delivered to the Escrow Agent pursuant to Section 2.1(d) on behalf of such
Company Stockholder.
(d) Secretary's Certificate. A certificate of the secretary of the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to Parent as to (A) the continuing effectiveness of an annexed copy of the
Company Charter as amended to date, (B) no amendments to the Company Charter or
Company By-Laws, (C) the corporate actions (including copies of relevant votes)
taken by the Company, its stockholders and Board of Directors to authorize the
transactions contemplated hereby, and (D) the incumbency and signatures of the
officers of the Company executing this Agreement and the other agreements,
instruments and other documents executed by or on behalf of the Company pursuant
to this Agreement or otherwise in connection with the transactions contemplated
hereby.
(e) Certificate of Merger. The Certificate of Merger in the form
attached hereto as Exhibit A, duly executed by the Company.
(f) Certificates. Certificates, if any, representing all outstanding
Company Shares, together with such letters of transmittal, stock powers and
other documents as are necessary to effect the cancellation or exchange thereof.
(g) Escrow Agreements. A copy of each of the Miletos Escrow Agreement
substantially in the form of Exhibit F1 and the CDK Escrow Agreement
substantially in the form attached hereto as Exhibit F2, executed by the parties
thereto.
(h) Key Employee Agreements. Each of Xxxxxxx Xxxxxxxx, Xxxx Xxxxxxx and
Xxxx Xxxxxxx shall have executed without modification the Consulting Agreement
and Employment Agreement annexed hereto as Exhibit G1, Exhibit G2 and Exhibit
G3, respectively.
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(i) Shareholder Agreement. Each of the Company, Xxxx Xxxxxxxx,
[Typaldos Affiliates], and the specified Parent Shareholders shall have executed
the Shareholders and Voting Agreement, substantially in the form annexed hereto
as Exhibit H.
(j) FIRPTA Certificates. Prior to the Closing Date, the Company shall
deliver to Parent an affidavit (in form and substance reasonably satisfactory to
Parent) meeting the requirements necessary to establish that the Designated
Company Stockholders are eligible for the exemption from withholding provided by
Section 1445(b)(2) of the Code.
(k) Books and Records. The Company's books and stock records and, to
the extent requested, all other documents, books, records, agreements and
financial data in the possession of the Company shall have been delivered to
Parent.
(l) Closing Statement. A closing statement detailing consideration
issued and expenses and charges paid at the Closing (the "Closing Statement").
(m) Bring Down Certificate. A certificate executed by the President of
the Parent confirming that all representations and warranties of the Parent
hereunder remain true, accurate and complete as of the Effective Time.
(n) Additional Documents. Such other instruments and documents as
Parent may reasonably request from the Company in connection with the
transactions contemplated hereby.
Section 6.2. Deliveries by Parent. At the Closing, Parent shall deliver or cause
to be delivered to the Company, and the obligations of the Company hereunder
shall be subject to the satisfaction at or prior to the Effective Time of, all
of the following:
(a) Certificate of Merger. The Certificate of Merger in the form
attached hereto as Exhibit A, duly executed by Merger Sub; and
(b) Registration Rights Agreements. A copy of the Registration Rights
Agreements substantially in the form of Exhibit I1 and I2 (the "REGISTRATION
RIGHTS AGREEMENTS") executed by Parent;
(c) Other Agreements. A copy of the Escrow Agreements, Shareholders and
Voting Agreement, Key Employee Agreements and Closing Statement, executed by
Parent;
(d) Secretary's Certificate. A certificate of the Secretary of Parent
and the Secretary of Merger Sub, dated the Closing Date, in form and substance
reasonably satisfactory to the Company as to (A) the continuing effectiveness of
the annexed copies of the Certificate of Incorporation of the Parent and the
Merger Sub, (B) no amendments to the Certificate of Incorporation or By-Laws of
Parent or Merger Sub (C), the corporate actions taken by Parent and Merger Sub
and their respective boards of directors to authorize the transactions
contemplated hereby, and (D) the incumbency and signatures of the officers of
Parent and Merger Sub executing this Agreement and the other agreements,
instruments and other documents executed by or on behalf of Parent and Merger
Sub pursuant to this Agreement or otherwise in connection with the transactions
contemplated hereby.
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(e) CDK Escrow Deposit. Stock certificates, together with stock
transfer powers executed in blank, evidencing the Contingent Shares
(f) Good Standing. Good Standing Certificates from the Delaware
Secretary of State for each of the Parent and the Merger Sub.
(g) Lock-up Agreements. Lock-up agreements in the form attached hereto
as Exhibit J of the shares of Parent Common Stock issued or issuable in respect
of the Parent's Series A Preferred Stock.
(h) Discharge of Bridlington Loan. The original executed counterpart of
any and all financing agreements evidencing the Bridlington Loan, endorsed for
cancellation against payment in full of the amounts due thereunder or assignment
to Parent in exchange for subscriptions in the private placement.
(i) Bring Down Certificate. A Certificate executed by the President of
the Company confirming that the representations and warranties of the company
are true, accurate and complete as of the Effective Time.
(j) Additional Documents. Such other instruments and documents as the
Company may reasonably request from Parent in connection with the transactions
contemplated hereby.
ARTICLE VII
CONDITIONS TO THE PARTIES OBLIGATION TO CLOSE
Section 7.1. Parent and Merger Sub. In addition to the various actions to be
taken at or prior to Closing, the following are express conditions of the Parent
and Merger Sub obligation to close:
(a) Assignment of Patents. Parent shall have received evidence that the
Patent applications set forth on Company Disclosure Schedule 3.16(a)(i) have
been assigned to the Company.
(b) Subscriptions. Parties introduced to the Company by the
Representative shall have subscribed and purchased not less than 208,333 shares
of Parent Common Stock for $1.20 per share (which shall not be counted as
outstanding prior to the Effective Time for the purpose of Section 1.2 hereof).
(c) No Action. No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (iii) affect adversely the right of Merger
Sub to own the former assets of the Company.
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(d) Company Schedules. The Company shall have delivered disclosure
schedules setting forth exceptions to the representation and warranties
contained in Article III, inform and substance acceptable to Parent and Merger
Sub.
Section 7.2. Company. In addition to the various actions to be taken at or prior
to Closing, the following are express conditions of the Company's obligation to
close:
(a) No Action. No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation.
(b) Parent and Merger Sub Schedules. The Parent and Merger Sub shall
have delivered disclosure schedules setting forth exceptions to the
representation and warranties contained in Article IV, inform and substance
acceptable to the Company.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Survival of Representations and Warranties. All representations and
warranties of the Company and Parent contained herein or in any document,
certificate or other instrument required to be delivered hereunder in connection
with the transactions contemplated hereby shall survive the Closing for the
period ending on the date that is twelve months after the Closing Date (the
"SURVIVAL DATE"). No claim for indemnification for breach of a representation or
warranty may be commenced after the period of survival of such representation or
warranty, provided, however, that claims made within the applicable time period
shall survive to the extent of such claim until such claim is finally determined
and, if applicable, paid.
Section 8.2. Certification of Claims. If Parent has reasonable grounds to
believe that any Buyer Claim (as such term is defined below) has occurred or
will or may occur, Parent shall so notify the Representative, and each such
notice shall be in writing and shall describe with reasonable specificity the
nature and amount of such asserted Buyer Claim. If the Representative has
reasonable grounds to believe any Seller Claim (as such term is defined below)
has occurred or will or may occur, the Representative shall so notify Parent,
and each such notice shall be in writing and shall describe with reasonable
specificity the nature and amount of such asserted Seller Claim.
Section 8.3. Termination of Rights Hereunder. Notwithstanding any other
provision hereof, no Buyer Claim or Seller Claim may be made or lawsuit
instituted under the provisions of this Article VIII or in any way arising in
connection with this Agreement or any representation or warranty hereunder
(except for Reserved Claims (as defined below)) after the Survival Date.
Notwithstanding the foregoing, with respect to all claims based upon fraud or
intentional misrepresentation, claims may be made or suits instituted at any
time. "Reserved Claims" shall mean any Buyer Claims or Seller Claims which have
been asserted, in accordance with this Article VIII, within the applicable
periods set forth above.
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Section 8.4. Indemnification of Parent and Merger Sub. By their approval of this
Agreement and the Merger and by their acceptance of the Merger Consideration,
each of the Designated Company Stockholders agrees, subject to the terms and
conditions set forth herein, to severally and not jointly, based upon such
Designated Company Stockholder's pro rata share of the Merger Consideration
payable in respect of all outstanding shares of Company Stock, indemnify and
hold harmless each of Parent, Merger Sub, the Surviving Corporation, each of
their respective subsidiaries and affiliates and each of their and their
subsidiaries' and affiliates' respective directors, officers, agents and
employees (each an indemnified party) at all times from and after the Closing
from and against all Damages (as defined below) that result from (i) the breach
or inaccuracy of any representation or warranty of the Company set forth in this
Agreement or in any certificate or other document delivered in connection with
the transactions contemplated by this Agreement (as such representation or
warranty would read if all qualifications as to materiality and material adverse
effect were deleted therefrom) as of the date the same were made, with respect
to which a claim for indemnification is brought by an indemnified party within
the Survival Period described in Section 8.1, or (ii) any breach or
nonfulfillment by the Company, or any noncompliance by the Company with, any
covenant, agreement, or obligation contained herein or in any certificate or
other document delivered in connection with the transactions contemplated by
this Agreement except to the extent waived in writing by Parent, or (iii) the
Excluded Obligations, or (iv) any claim by a holder or former holder of the
Company's or Enikia LLC's Securities or options, warrants or other securities
convertible into or exercisable for shares of the Company's or Enikia LLC's
Securities (the "CONVERTIBLE SECURITIES") or any other person, seeking to
assert, or based upon: (A) ownership or rights of ownership to any equity
security of the Company or Enikia LLC; (B) any rights of an equity holder of the
Company (other than the right to receive the Merger Consideration pursuant to
this Agreement), including any option, preemptive rights, or rights to notice or
to vote; (C) any rights of an equity holder of Enikia LLC, including any option,
preemptive rights or rights to notice or to vote; (D) any rights under the
Certificate of Incorporation or By-Laws of the Company; or (E) any claim that
his, her or its Company Shares or Convertible Securities were wrongfully
repurchased, canceled, terminated or otherwise limited by the Company,
regardless of whether an action, suit or proceeding can or has been made against
the Company, and any and all actions, suits and proceedings resulting from any
of the foregoing (hereinafter called a "BUYER CLAIM" or "BUYER CLAIMS").
Section 8.5. Indemnification of Company Stockholders. Parent agrees, subject to
the terms and conditions set forth herein, to indemnify, defend, protect, and
hold harmless each any and all of the Company Stockholders and all of their
respective members, shareholders, partners, officers, directors, managers and
agents (each an indemnified party) at all times from and after the Closing from
and against all Damages that result from (i) the breach or inaccuracy of any
representation or warranty of Parent set forth in the Agreement or in any
certificate or other document delivered in connection with the transactions
contemplated by this Agreement (as such representation or warranty would read if
all qualifications as to materiality and material adverse effect were deleted
therefrom) as of the date the same are made, with respect to which a claim for
indemnification is brought by an indemnified party within the survival period
described in Section 8.1, or (ii) any breach or nonfulfillment by Parent, or any
noncompliance by Parent with, any covenant, agreement, or obligation contained
herein or in any certificate or other document delivered in connection with the
transactions contemplated by this Agreement except to the extent waived in
writing by the Representative; or (iii) the Assumed Enikia Liabilities; (iv) any
34
and all lawsuits, legal proceedings and claims pending against Parent or any of
its subsidiaries at the Effective Time, whether or not disclosed on Parent's
Disclosure Schedules; and (v) any claim by a holder or former holder of Parent
Common Stock, or securities of the Parent convertible into, exercisable for or
exchangeable for Parent Common Stock that their rights and privileges as such
holder were wrongfully amended, limited or abridged by the Parent, regardless of
whether an action, suit or proceeding can be made against the Parent, and any
and all actions, suits and proceedings resulting from any of the foregoing
(hereinafter called a "SELLER CLAIM" or "SELLER CLAIMS").
Section 8.6. Matters Involving Third Parties.
(a) In the event any claim is made, suit is brought or tax audit or
other proceeding is instituted against Parent or the Company, or any of their
respective directors, officers or affiliates which involves or appears
reasonably likely to involve a Buyer Claim for which indemnification may be
sought against the Designated Company Stockholders hereunder, Parent will
promptly (and in any event within two (2) business days) after receipt of notice
of any such claim, suit or proceeding, notify the Representative of the
commencement thereof. The failure to so notify the Representative of the
commencement of any such claim, suit or proceeding will relieve the Designated
Company Stockholders from liability only to the extent that such failure
adversely affects the ability of the Representative to defend their interests in
such claim, action or proceeding. The Representative (at the expense of the
Designated Company Stockholders) shall have the right and shall be given the
opportunity to assume and control the defense of such claim, suit or proceeding
with counsel of their choice reasonably satisfactory to Parent so long as (i)
the Representative notifies the indemnified party in writing within 30 days
after the indemnified party has given notice of such claim that the Designated
Company Stockholders will indemnify the indemnified party from and against the
entirety of any damages the indemnified party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by such claim, (ii) such claim
involves only money damages and does not seek an injunction or other equitable
relief, and (iii) the Representative conducts the defense of such claim actively
and diligently; provided, however, that Parent and its counsel (at Parent's
expense) may participate in (but not control the conduct of) all matters
pertaining to the defense or settlement of such claim, suit or proceeding. If
Parent is entitled to and elects to assume the defense of a Buyer Claim, the
Representative and its counsel (at the Designated Company Stockholders' expense)
may participate in (but not control the conduct of) all matters pertaining to
the defense or settlement of such claim, suit or proceeding. Except as set forth
in the next sentence, any proposed settlement of any such claim, suit or
proceeding must be approved by a committee (the "SETTLEMENT COMMITTEE")
consisting of three persons including the Representative, Xxxxxx Xxxxxx and Xxxx
Xxxxxx acting by majority vote. Notwithstanding anything to the contrary in the
foregoing sentence, the Representative may settle any claim of the following
nature without the prior approval of the Settlement Committee: (i) any claim by
a member of or a person claiming rights to acquire membership interests in
Enikia, LLC in respect of their interests as such; or (ii) any claim by a lender
to Enikia, LLC; in respect of their interests as such; provided that in all such
cases the claimant is not related to or affiliated with the Representative and
the settlement involves payment to such claimant of Parent Company Shares from
the Miletos Escrow Deposit.
(b) In the event any of the conditions in Section 8.6(a) above is or
becomes unsatisfied, or if the Representative has elected not to conduct the
defense of the claim (i) the
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indemnified party may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, such claim in any manner it may
deem appropriate; PROVIDED, HOWEVER, that Parent shall not, except at its own
cost, make any settlement with respect to any such claim, suit or proceeding
without the prior written consent of the Settlement Committee, acting by
majority vote, (ii) the Designated Company Stockholders will reimburse the
indemnified party promptly and periodically for the costs of defending against
such claim (including attorneys' fees and expenses); provided that costs of only
one counsel for all of the indemnified parties in respect of such claim shall be
reimbursed, and (iii) the Designated Company Stockholders will remain
responsible for any damages the indemnified party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by such claim to the
fullest extent provided in this Article VIII.
(c) In the event any claim is made, suit is brought or tax audit or
other proceeding is instituted against a Company Stockholder or against the
Parent, the Merger Sub or the Company, which involves or appears reasonably
likely to involve a Seller Claim for which indemnification may be sought against
Parent hereunder, the Representative will, promptly (and in any event within two
(2) business days) after receipt of notice of any such claim, suit or proceeding
by the affected party, notify Parent of the commencement thereof. The failure to
so notify Parent of the commencement of any such claim, suit or proceeding will
relieve Parent from liability only to the extent that such failure adversely
affects the ability of Parent to defend its interests in such claim, action or
proceeding. Parent shall have the right and shall be given the opportunity to
assume and control the defense of such claim, suit or proceeding with counsel of
its choice reasonably satisfactory to the Representative so long as (i) Parent
notifies the indemnified party in writing within 30 days after the indemnified
party has given notice of such claim that Parent will indemnify the indemnified
party from and against the entirety of any damages the indemnified party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by such claim, (ii) such claim involves only money damages and does not seek an
injunction or other equitable relief, and (iii) Parent conducts the defense of
such claim actively and diligently; provided, however, that the Representative,
and its counsel (at the Designated Company Stockholders' expense) may
participate in (but not control the conduct of) all matters pertaining to the
defense or settlement of such claim, suit or proceeding. Whether or not Parent
elects to assume such defense, the Representative shall not, except at its own
cost, make any settlement with respect to any such claim, suit or proceeding
without the prior written consent of the Settlement Committee, acting by
majority vote, which shall not unreasonably be withheld or delayed.
(d) In the event any of the conditions in Section 8.6(c) above is or
becomes unsatisfied, or if Parent has elected not to conduct the defense of the
claim (i) the indemnified party may defend against, and consent to the entry of
any judgment or enter into any settlement with respect to, such claim in any
manner it may deem appropriate; provided that the indemnified party may not
enter into any settlement with respect to such claim without the prior written
consent of the Settlement Committee, acting by majority vote, if such settlement
would entitle the indemnified party to be paid monetary damages by Parent, (ii)
Parent will reimburse the indemnified party promptly and periodically for the
costs of defending against such claim (including attorneys' fees and expenses),
and (iii) Parent will remain responsible for any damages the indemnified party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by such claim to the fullest extent provided in this Article VIII.
Section 8.7. Definition of Damages. For purposes of this Article VIII, the term
"Damages" shall mean the amount of any loss, claim, demand, damage, deficiency,
assessment, judgment, remediation, cost or expense (including reasonable
attorneys', consultants' and experts' fees and expenses) actually incurred, less
the sum of any amount recovered under an insurance policy carried by the party
or parties seeking indemnification. In the event that an indemnified party
hereunder pays a claim covered by the indemnified party's insurance for which it
is entitled to indemnification by the other party hereunder, such indemnified
party shall pay such claim and the indemnifying party shall reimburse the
indemnified party the full amount of such claim (less the amount of any
insurance proceeds previously recovered by the indemnified party with respect to
such claim). In the event the indemnifying party pays a claim and the
indemnified party subsequently receives insurance proceeds with respect to such
claim, the indemnified party shall pay the indemnifying party such insurance
proceeds up to the amount actually paid by the indemnifying party. The
indemnified party shall be required to use its best efforts to seek and obtain
such insurance proceeds as quickly as practicable.
Section 8.8. Limitations. Notwithstanding the provisions of Sections 8.4 and
8.5, (i) Parent, Merger Sub and its affiliates shall not be entitled to
indemnification by the Designated Company Stockholders hereunder until the
aggregate amount of all Buyer Claims exceeds $25,000 (it being understood that
Parent, Merger Sub and its affiliates shall be entitled to indemnification for
the full amount of all Buyer Claims, the $25,000 threshold notwithstanding, to
the extent Buyer Claims exceed $25,000); provided, however, that Buyer Claims
related to the matters identified in Sections 3.4 and 3.14 and all claims based
upon fraud shall not be subject to the foregoing $25,000 threshold, and (ii)
Designated Company Stockholders shall not be entitled to indemnification by
Parent hereunder until the aggregate amount of all Seller Claims exceeds $25,000
(it being understood that the Designated Company Stockholders shall be entitled
to indemnification for the full amount of all Seller Claims, the $25,000
threshold notwithstanding, to the extent Seller Claims exceed $25,000); and
provided further that Seller Claims arising from or related to Parents
representations in Section 4.4 ("Capitalization"), or arising from clause (iii)
of Section 8.5(a) and all claims based upon fraud shall not be subject to the
$25,000 threshold. In addition, the liability of the Designated Company
Stockholders with respect to Buyer Claims shall not exceed the value of the
shares delivered in the Miletos Escrow Deposit which, except as set forth below,
shall be Parent's and Merger Sub's (and other indemnitees under Section 8.4)
sole and exclusive recourse for Damages under this Agreement; PROVIDED, HOWEVER,
that Buyer Claims related to the matters identified in Section 3.4 and all
claims based upon fraud shall not be subject to the foregoing limitation. For
the purpose of the foregoing proviso, no matter relating to Enikia, LLC which
results in a Buyer Claim shall be deemed to be fraudulent merely by virtue of
the fact that such matter is not included in the Company Disclosure Schedules,
if otherwise disclosed or known to the Parent, Merger Sub or other proponent of
such Buyer Claim. The liability of Parent with respect to Seller Claims except
for Seller Claims in respect of Assumed Enikia Liabilities, shall not exceed the
value of the shares delivered in the CDK Escrow Deposit, which except as set
forth below, shall be the Designated Company Stockholders' sole and exclusive
recourse for damages under this Agreement; PROVIDED FURTHER, HOWEVER, that
Seller Claims based upon fraud or the breach of warranties contained in Section
4.4 and Seller Claims in respect of Assumed Enikia Liabilities shall not be
subject to the foregoing limitation. In no event will any indemnifying party be
liable for consequential damages under this Article VIII.
37
Section 8.9. Escrows.
(a) The Representative, at his election may satisfy liabilities of the
Designated Company Stockholders for Buyer Claims in cash or by recourse to the
Parent Common Shares in the Miletos Escrow Deposit as further provided by the
terms of the Miletos Escrow Agreement. All Parent Common Shares paid or
distributed from the Miletos Escrow Deposit shall be valued at average of the
daily mid-points between the closing bid and asked prices for Parent Common
Shares as reported in the Over-the-Counter Bulletin Board, for the twenty (20)
most recent trading days for which such information is available preceding the
date of determination (the "Market Price") reported by Bloomberg LP.
(b) Subject to the provisions of Section 8.8, all liabilities of the
Parent in respect of Seller Claims, other than Seller Claims in respect of
Assumed Enikia Liabilities, shall be satisfied by recourse to the Parent Common
Shares held in the CDK Escrow Deposit as further provided under the terms of the
CDK Escrow Agreement,. All Parent Common Shares paid or distributed from the CDK
Escrow Deposit shall be valued at the Market Price (as such term is defined
above).
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
XXXxxx.Xxx, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
38
(b) If to the Company:
c/o the Representative
00 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx XxXxxxxxxx & Xxxxxx, P.A.
000 Xxxxx 000/000 Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: G. Xxxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(c) If to the Member Representative:
Xxxxxxx Xxxxxxxx
00 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx XxXxxxxxxx & Marcus, P.A.
000 Xxxxx 000/000 Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: G. Xxxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Section 9.2. Interpretations; Certain Definitions.
For purposes of this Agreement:
(a) when a reference is made in this Agreement to a section or article,
such reference shall be to a section or article of this Agreement unless
otherwise clearly indicated to the contrary;
39
(b) whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation";
(c) a reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefore and all regulations and statutory
instruments issued thereunder or pursuant thereto;
(d) a reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns;
(e) the parties have participated jointly in the negotiation and
drafting of this Agreement; in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement;
(f) as used in this Agreement, any reference to any event, change or
effect being material or having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means such event, change or
effect is materially adverse to (i) the consolidated financial condition,
businesses or results of operations of such entity as a whole (or, if used with
respect thereto, of such group of entities taken as a whole) or (ii) the ability
of such entity (or group) to consummate the transactions contemplated by this
Agreement;
(g) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which the first mentioned person (either alone, or through
or together with any other subsidiary) has, directly or indirectly, an interest
of 5% or more;
(h) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b 2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
(i) "business day" means any day other than a Saturday or Sunday or any
day on which banks in the State of New York are required or authorized to be
closed;
(j) "control" including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
40
(k) "knowledge of the Company" or "Company's knowledge" means the
actual knowledge of Xxxxxxx Xxxxxxxx and Xxxx Xxxxxxx, without any duty of
inquiry on their part; and
(l) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
(m) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and all regulations of the Securities Exchange Commission thereunder.
Section 9.3. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which by law requires
further approval by such shareholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
Section 9.4. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(b) waive any inaccuracies in the representations and warranties of any other
party hereto contained herein or in any document delivered pursuant hereto or
(c) waive compliance with any of the agreements or conditions of any other party
hereto contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
Section 9.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.6. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 9.7. Entire Agreement, No Third Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, and (b) is not intended to confer upon any person other than the
parties hereto and the Designated Company Stockholders represented by the
Representative any rights or remedies hereunder, other than the persons intended
to
41
benefit from the provisions of Article VIII, who shall have the right to enforce
such provisions directly.
Section 9.8. Assignment. This Agreement shall not be assigned by operation of
law or otherwise.
Section 9.9. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
Section 9.10. Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Article VIII (which is intended to be for the benefit of the indemnitees
thereunder and may be enforced by such indemnitees). Each of the parties hereto
acknowledges and agrees that such party has had an opportunity to consult with
legal counsel in connection with the negotiation and execution of this
Agreement, the Escrow Agreements, Shareholder Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby.
Section 9.11. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York, without regard
to the conflict of law provisions thereof, provided that the Merger of Merger
Sub with and into the Company shall be effected in accordance with the
applicable provisions of the DGCL. Each of the parties hereto agrees that any
action or proceeding brought to enforce the rights or obligations of any party
hereto under this Agreement will be commenced and maintained in any court of
competent jurisdiction located in Manhattan, New York. Each of the parties
hereto further agrees that process may be served upon it by certified mail,
return receipt requested, addressed as more generally provided in Section 9.1
hereof, and consents to the exercise of jurisdiction of a court of the State of
New York over it and its properties with respect to any action, suit or
proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby or the enforcement of any rights under this
Agreement.
Section 9.12. Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
42
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Member
Representative have caused this Agreement to be executed under seal as of the
date first written above by their respective officers thereunto duly authorized.
XXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
CDK MERGER CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
MILETOS, INC.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Xxxxxxx Xxxxxxxx, as Representative
43
EXHIBITS AND SCHEDULES TO THE AGREEMENT AND PLAN OF MERGER
Note: The following exhibits to the agreement have been omitted from this
exhibit because forms of such executed copies have been otherwise filed as
separate exhibits to this report:
Exhibit A - Form of Certificate of Merger
Exhibit B - [Intentionally Omitted]
Exhibit C - [Intentionally Omitted]
Exhibit E - Equity Incentive Plan
Exhibit F1 - Form of Miletos Escrow Agreement
Exhibit F2 - Form of CDK Escrow Agreement
Exhibit G1 - Consulting Agreement - Typaldos
Exhibit G2 - Employment Agreement - Loginov
Exhibit G3 - Consulting Agreement - Xxxxxxx
Exhibit H - Form of Stockholder Agreement
Exhibit I1 - Form Registration Rights Agreement - CDK
Exhibit I2 - Form Registration Rights Agreement - Typaldos
Exhibit J - Form of Lockup Agreement
Note: The following schedule to the agreement have been omitted and will be
forwarded to the Commission upon request:
Schedule 2.1(a) - Merger Consideration
Schedule 3.8 - Company Material Contracts
Schedule 3.10 - Company Liens
Schedule 3.11 - Company Liabilities
Schedule 3.12 - Company Litigation
Schedule 3.14 - Company Taxes
Schedule 3.16(a) - Company Intellectual Property Applications,
Registrations and Claims
Schedule 3.16(b) - Company Third Party Right to Intellectual
Property
Schedule 3.17 - Company Insurance
Schedule 3.19 - Company Interested Parties
Schedule 3.23 - Company Affiliates
Schedule 4.4(a) - Parent Options, Warrants and Convertibles
Schedule 4.13 - Parent Liabilities
Schedule 4.14 - Parent Litigation
Schedule 4.16 - Parent Taxes
1
Schedule 4.19 - Parent Insurance
Schedule 4.21 - Parent Interested Party
Schedule 5.2 - List of Persons Offered Employment
Schedule 5.4 - Equity Compensation
Schedule 5.7 - Assumed Enikia Liabilities
2
