EXHIBIT 2.3
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BRIDGELINE SOFTWARE, INC.,
OBJECTWARE, INC.
AND
XXXX X. XXXX
DECEMBER 7, 2006
AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger (the "AGREEMENT") is made as of this
7th day of December, 2006 by and among Bridgeline Software, Inc., a Delaware
corporation, with a principal place of business at 00 Xxxxx Xxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 ("BRIDGELINE"), Objectware, Inc. (the "SELLER"), a Georgia
corporation, with a principal place of business at 0000 Xxxxxxxx Xxxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxx 00000 and Xxxx X. Xxxx ( the "SHAREHOLDER").
RECITALS
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WHEREAS, the Shareholder owns 100% of the issued and outstanding shares
of the capital stock of Seller (the "SHARES");
WHEREAS, the Boards of Directors of each of Bridgeline and Seller have,
in accordance with the laws of the State of Delaware and the State of Georgia
respectively, approved the merger of Seller with and into Bridgeline, pursuant
to which all of the Shares will be converted into common stock of Bridgeline,
$0.001 par value per share (the "BRIDGELINE COMMON STOCK") and Seller will merge
with and into Bridgeline, with Bridgeline being the surviving corporation;
WHEREAS, it is the intention of the parties that the merger shall
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "CODE") and that this Agreement
shall constitute a "plan of reorganization" for the purposes of Section 368 of
the Code; and
WHEREAS, each of the parties to the Agreement desires to make certain
representations, warranties, and agreements in connection with the transaction
between the parties and to prescribe various conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
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1.1. THE MERGER. Subject to and upon the terms and conditions of
this Agreement, at the effective time of the merger of the Seller with and into
Bridgeline, and pursuant to the Delaware General Corporation Law ("DGCL") and
the Georgia Business Corporation Code ("GBCC"), the Seller will be merged with
and into Bridgeline (the "MERGER") and the separate existence of the Seller
shall thereupon cease, in accordance with the applicable provisions of the DGCL
and the GBCC. As a result of the Merger, Bridgeline will be the surviving
corporation
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and shall survive as a going concern (sometimes referred to herein as the
"SURVIVING COMPANY" or "BRIDGELINE"). The Certificate of Incorporation and
By-laws of the Surviving Company shall be those of Bridgeline as they are in
existence immediately prior to the Merger. The separate corporate existence of
Seller with all its rights, privileges, powers, assets, liabilities, operations,
intellectual property, contract rights, employees, and franchises shall be
extinguished in the Merger. The name of the Surviving Company shall be
"Bridgeline Software, Inc." On the Final Closing Date (as such term is defined
below), the parties shall cause a Certificate of Merger, meeting the
requirements of Section 251 of the DGCL (the "CERTIFICATE OF MERGER") and
Articles of Merger meeting the requirements of Section 14-2-1105 of the GBCC
(the "ARTICLES OF MERGER" and together with the Certificate of Merger, the
"MERGER DOCUMENTS"), to be promptly executed and filed with the Secretary of
State of the State of Delaware and the Secretary of State of the State of
Georgia, respectively. The Merger shall become effective (the "EFFECTIVE TIME")
upon the close of business on the date that the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and the Articles of
Merger with the Secretary of State of the State of Georgia has been completed or
at such other time or date than may otherwise be indicated in the Certificate of
Merger and Articles of Merger.
1.2. CONVERSION OF SHARES; EXCHANGE PROCEDURES AND BOOT.
(a) By virtue of the Merger, automatically and without any
action on the part of the holder thereof, the Shares outstanding immediately
prior to the Effective Time (other than any shares held as treasury stock by the
Seller, which shall be cancelled, retired and cease to exist, and for which no
payment hereunder shall be made) shall become and be converted into (i) the
right to receive such number of shares of Bridgeline Common Stock as is equal to
the quotient obtained by dividing $2,700,000 by the Effective Price (as defined
below) (the "BRIDGELINE STOCK"); (ii) $2,500,000 in immediately available funds
(the "CASH CONSIDERATION" and together with the Bridgeline Stock, the "INITIAL
MERGER Consideration"), and (iii) the Earn-Out Consideration (as defined below)
(together with the Initial Merger Consideration, the "MERGER CONSIDERATION").
The Initial Merger Consideration shall be subject to adjustment as set forth in
Section 1.2(b). The term "EFFECTIVE PRICE" shall mean the price at which
Bridgeline Common Stock is first sold to the public pursuant to the initial
underwritten public offering of shares of Bridgeline Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "IPO").
(b) If the Seller Net Working Capital (as defined below) is
less than $900,000 (the "TARGET Amount"), the aggregate dollar value of the
Initial Merger Consideration shall be decreased by the amount by which the
Seller Net Working Capital is less than the Target Amount, dollar for dollar. If
the Seller Net Working Capital exceeds the Target Amount, the aggregate value of
the Initial Merger Consideration shall be increased by the amount by which the
Seller Net Working Capital exceeds the Target Amount, dollar for dollar. "SELLER
NET WORKING CAPITAL" shall mean, as of the Closing Date, the dollar value of the
difference between (x) the sum of accounts receivables of Seller (including an
account receivable of over 90 days of approximately $407,000 owed by Neurotic
Media LLC to Seller), notes receivables of customers of Seller and cash of
Seller in an amount at least equal to $200,000 and (y) accounts payable of
Seller and accrued expenses of Seller (excluding deferred revenue and corporate
income tax liabilities of Seller currently due and deferred). Any adjustment to
the aggregate dollar value of
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the Initial Merger Consideration shall be pro rated between the Bridgeline Stock
and Cash Consideration.
(c) The Seller and the Shareholder shall cause to be delivered
to Bridgeline on the Closing Date the certificates representing all of the
Shares of Seller issued and outstanding immediately prior to the Closing, as
evidenced by the stock ledger and stock transfer records of the Seller
(collectively, the "SELLER CERTIFICATES"), and stock powers separate from the
certificates transferring ownership to Bridgeline. Upon surrender of the Seller
Certificates for exchange and cancellation to Bridgeline together with the stock
powers, the Shareholder shall receive a certificate representing the Bridgeline
Stock.
(d) No dividend or other distribution payable after the
Closing with respect to Bridgeline Stock shall be paid to the holder of any
unsurrendered Seller Certificate until the holder thereof surrenders such Seller
Certificate, at which time such holder shall receive all dividends and
distributions, without interest thereon, previously payable but withheld from
such holder pursuant hereto.
(e) After the Closing, the holder of shares of the capital
stock of the Seller shall cease to be, and shall have no rights as, a
stockholder of the Seller, other than to receive the Merger Consideration
pursuant to the provisions hereof.
(f) Notwithstanding the foregoing, neither Bridgeline nor the
Seller or any other person shall be liable to any former holder of shares of any
capital stock of the Seller for any shares or any dividends or distributions
with respect thereto properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) In the event any Seller Certificates shall have been lost,
stolen or destroyed, upon receipt of an affidavit of lost stock certificate as
to such loss, theft or destruction and to the ownership of such certificate by
the person claiming such certificate to be lost, stolen or destroyed, and the
receipt by Bridgeline of appropriate indemnification, Bridgeline will cause to
be delivered in exchange for such lost, stolen or destroyed certificate the
shares of Bridgeline Stock deliverable in respect thereof.
(h) If any certificate representing shares of Bridgeline Stock
is to be issued in a name other than that in which the Seller Certificates
surrendered and exchanged therefore is registered, it shall be a condition of
the issuance thereof that the certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer (including, but not limited to, that the signature
of the transferor shall be properly guaranteed by a commercial bank, trust
company, member firm of a national or regional securities exchange or other
eligible guarantor institution), and that the person requesting such exchange
shall pay to Bridgeline in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of Bridgeline Stock
in any name other than that of the registered holder of the Seller certificate
representing the Shares surrendered, or required for any other reason, or shall
establish to the satisfaction of Bridgeline that such tax has been paid or is
not payable.
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1.3. EARN-OUT CONSIDERATION.
(a) The Shareholder shall be entitled to earn additional
consideration (the "EARN-OUT") during the Complete Earn-Out Period (as defined
below), in an amount, up to $1,800,000 in the aggregate, payable in cash and
Bridgeline Common Stock in accordance with the terms of this Section 1.3 (the
"EARN-OUT CONSIDERATION"). Notwithstanding anything in this Agreement to the
contrary, (1) the aggregate amount of cash payable to the Shareholder in
accordance with this Section 1.3 shall not exceed $1,000,000 and the aggregate
number of shares of Bridgeline Common Stock issued to the Shareholder in
accordance with this Section 1.3 shall not have a value in excess of $800,000
(based on the Closing Price (as defined below) used to determine the shares of
Bridgeline Common Stock issued pursuant to this Section 1.3) and (2) in the
event the aggregate number of shares of Bridgeline Common Stock to be issued to
the Shareholder in accordance with this Section 1.3 would result in the
Shareholder's ownership of more than 19.99% of the total issued and outstanding
capital stock of Bridgeline as calculated immediately prior to the Effective
Time, then the issuance of that number of shares of Bridgeline Common Stock to
the Shareholder pursuant to this Section 1.3 which would result in the
Shareholder's ownership of more than 19.99% of the total issued and outstanding
capital stock of Bridgeline as calculated immediately prior to the Effective
Time (the "Excess Shares"), shall be conditioned on and subject to the approval
by the stockholders of Bridgeline of the Merger or, at Bridgeline's option, the
amount otherwise payable in shares of Bridgeline Common Stock shall be paid in
cash in an amount equal to the Excess Shares multiplied by the Closing Price (as
defined below).
(b) The followings terms shall have the following meanings for
purposes of this Agreement:
"ATLANTA BUSINESS UNIT" shall mean the business operations
formerly of the Seller based in Atlanta, Georgia and Reston, Virginia, which
includes revenues generated from the sale and licensing of software solutions,
web application development and hosting services that are developed and
delivered by the Atlanta Business Unit.
"CLOSING PRICE" shall mean the last reported sales price
of Bridgeline Common Stock on the last trading day of the applicable Earn-Out
Period (as defined below) or Additional Earn-Out Period (as defined below), as
the case may be.
"COMPLETE EARN-OUT PERIOD" shall mean the Initial Earn-Out
Period and the Secondary Earn-Out Period (as defined below), if any, for a total
of up to sixteen (16) full calendar quarters.
"EARN-OUT AMOUNT" shall mean the amount to be paid to
Shareholder following an Earn-Out Period or Additional Earn-Out Period, as the
case may be, as calculated in accordance with this Section 3.1.
"INITIAL EARN-OUT PERIOD" shall mean the period beginning
on the
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Closing Date (as defined below) and continuing for the twelve (12) calendar
quarters immediately following the Closing (each calendar quarter, an "EARN-OUT
PERIOD"), with the first Earn-Out Period to include the first full calendar
quarter following the Closing Date plus the period between the Closing Date and
the first day of such calendar quarter.
"POST-MERGER EBITDA" shall mean the sum of (a) net income
of the Seller Business (as defined below) earned during an Earn-Out Period or
Additional Earn-Out Period, as the case may be, and (b) interest expenses,
taxes, depreciation and amortization of the Seller Business during such Earn-Out
Period or Additional Earn-Out Period, without any deduction to net income for
any corporate overhead allocation (i.e. general and administrative expenses) or
corporate marketing allocation from Bridgeline's New England headquarters, as
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP").
"SECONDARY EARN-OUT PERIOD" shall mean the period
beginning on the first day of the first full calendar quarter following the
Initial Earn-Out Period and continuing for the four (4) calendar quarters
immediately following the Initial Earn-Out Period (each such calendar quarter,
an "ADDITIONAL EARN-OUT PERIOD").
"SELLER BUSINESS" shall mean the business and operations
associated exclusively with the operations of the Atlanta Business Unit
following the completion of the Merger independent of the remaining business and
operations of Bridgeline (excluding any royalties and other rights pursuant to
the WebOp Agreement (as defined in Section 9.1(c)).
(c) The Earn-Out shall be paid as follows:
(i) If the Post-Merger EBITDA of an Earn-Out Period is
less than $250,000 but at least equal to $225,000, the Shareholder shall receive
(x) a cash payment equal to $41,666.66 and (y) a number of shares of Bridgeline
Common Stock equal to the quotient obtained by dividing $33,333.33 by the
Closing Price (the "PARTIAL EARN-OUT AMOUNT").
(ii) If the Post-Merger EBITDA of an Earn-Out Period is at
least equal to $250,000, the Shareholder shall receive (x) a cash payment equal
to $83,333.33 and (y) a number of shares of Bridgeline Common Stock equal to the
quotient obtained by dividing $66,666.66 by the Closing Price (the "MAXIMUM
EARN-OUT AMOUNT").
(d) Within forty-five (45) calendar days after the end of each
calendar quarter (i.e., the three (3) months ended March 31, June 30, September
30 and December 31 of each relevant calendar year) or portion thereof that is
included within an Earn-Out Period, Bridgeline shall prepare an income statement
reflecting the Seller Business calculated in accordance with GAAP for such
Earn-Out Period or Additional Earn-Out Period, as the case may be, and a related
calculation of Post-Merger EBITDA for such Earn-Out Period or Additional
Earn-Out Period, such calculation of Post-Merger EBITDA to reflect as closely as
reasonably possible the Post-Merger EBITDA that would have been achieved by the
Seller during such Earn-Out Period
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or Additional Earn-Out Period, if the Merger had not occurred (each such income
statement and Post-Merger EBITDA calculation are collectively referred to herein
as the "INCOME Statement"). Bridgeline shall provide to the Shareholder a
preliminary draft of the Income Statement within thirty (30) days after the end
of each calendar quarter. For purposes of computing the Post-Merger EBITDA of
the Seller Business, the following rules shall apply: (i) there shall be no (A)
allocations of any Bridgeline costs, expenses or other financial items charged
to the Atlanta Business Unit except to the extent directly incurred by the
Seller Business or (B) compensation charge to the Atlanta Business Unit for
issuance of stock options (regardless of whether required by GAAP) and (ii)
without the prior written consent of the Shareholder (which shall not be
unreasonably withheld, conditioned or delayed) there shall be no (A) incurrence
by Bridgeline of reimbursable expenditures on behalf of the Atlanta Business
Unit, (B) charge-offs against the Atlanta Business Unit (other than charge-offs
required by GAAP), or (C) other accounting adjustments with respect to the
Seller Business by Bridgeline that adversely affect the Earn-Out or Additional
Earn-Out, as the case may be (except as required to be made in accordance with
GAAP). Promptly following Bridgeline's determination of such Post-Merger EBITDA
for an Earn-Out Period or Additional Earn-Out Period, Bridgeline shall deliver
the Income Statement to the Shareholder, which shall include a statement of the
total amount owed to the Shareholder, if any, based on the calculation set forth
above (each Income Statement and each such accompanying statement of the
Earn-Out Amount, if any, are collectively referred to herein as the "EARN-OUT
NOTICE").
(e) The Shareholder shall have fourteen (14) days from the
date of his receipt of an Earn-Out Notice to either (i) accept the calculations
and conclusions made in the Earn-Out Notice or (ii) give notice to Bridgeline in
writing that the Shareholder intends to dispute the amounts included in the
Earn-Out Notice, and such notice shall set forth in reasonable detail the
disputed amount and the basis for such dispute. Any such dispute by the
Shareholder must be reasonable and made in good faith. If the Shareholder
accepts the Earn-Out or Additional Earn-Out computation, Bridgeline shall pay
the Earn-Out Amount no later than five (5) days following acceptance of such
computation.
(f) If, within the 14 day period provided for in Section
1.3(e), the Shareholder either affirmatively notifies Bridgeline that he accepts
the calculations and conclusions made in the Earn-Out Notice or does not
otherwise give notice to Bridgeline in writing that he intends to dispute the
amounts included in the Earn-Out Notice, then within five (5) business days
following the expiration of such fourteen day period provided for in Section
1.3(e) or, if earlier, the date of Bridgeline's receipt of such affirmative
notice of the Shareholder's acceptance of the calculations and conclusions made
in the Earn-Out Notice, Bridgeline shall pay to the Shareholder the Earn-out
Amount.
(g) (i) If the Shareholder notifies Bridgeline that he intends
to dispute the amounts included in the Earn-Out Notice in accordance with
Section 1.3(e)(ii) above, then Bridgeline and the Shareholder shall negotiate in
good faith to resolve the dispute. If Bridgeline and the Shareholder are unable
to reach a resolution within ten (10) business days after receipt by Bridgeline
of the Shareholder's written notice of dispute, then Bridgeline and the
Shareholder shall submit the matter to a mutually acceptable independent public
accounting firm registered with the Public Company Accounting Oversight Board
(PCAOB) (the "INDEPENDENT
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ACCOUNTING FIRM"), which shall, within thirty (30) calendar days after such
submission, determine the Earn-Out Amount, if any. The determination of the
Earn-Out Amount by the Independent Accounting Firm shall be final,
non-appealable and binding on the parties.
(ii) In the event that the Independent Accounting Firm
determines that the Earn-Out Amount stated by Bridgeline under Section 1.3(d) is
accurate and correct in all material respects, then (A) the Shareholder shall
pay all costs and expenses charged by the Independent Accounting Firm (the
"EARN-OUT IAF FEE") and (B) if an Earn-Out Amount is due under such Earn-Out
Notice, within five (5) business days of the parties' receipt of such report by
the Independent Accounting Firm, Bridgeline shall pay such Earn-Out Amount to
the Shareholder (which payment may be in an amount net of the Earn-Out IAF Fee
otherwise due from the Shareholder to the Independent Accounting Firm, if
Bridgeline chooses in its sole discretion to pay directly to the Independent
Accounting Firm the Earn-Out IAF Fee due from the Shareholder).
(iii) In the event that the Independent Accounting Firm
determines that Bridgeline's calculations and conclusions made in the Earn-Out
Notice are inaccurate or misstated such that the Earn-Out Notice includes no
Earn-Out Amount or otherwise references an Earn-Out Amount lower than the
accurate Earn-Out Amount, then (A) Bridgeline shall pay the Earn-Out IAF Fee and
(B) within five (5) business days of the parties' receipt of such report by the
Independent Accounting Firm, Bridgeline shall pay to the Shareholder the
Earn-Out Amount determined by the Independent Accounting Firm.
(h) Each of the Earn-Out and Additional Earn-Out is computed
on a quarter-by-quarter basis and is not cumulative.
(i) In the event that the Shareholder has not earned the
Maximum Earn-Out Amount for any individual Earn-Out Period but has earned at
least the Partial Earn-Out Amount for such Earn-Out Period (a "DEFICIENT
PERIOD"), then the Shareholder shall be entitled to earn additional
consideration (the "ADDITIONAL EARN-OUT"), in an amount equal to the Partial
Earn-Out Amount in the aggregate with respect to each Deficient Period during
the Secondary Earn-Out Period, payable in cash and Bridgeline Common Stock in
accordance with the terms of this Section 1.3(i). The Additional Earn-Out shall
be paid as follows: to the extent that the Post-Merger EBITDA for each
applicable Additional Earn-Out Period is at least equal to $250,000, the
Shareholder shall receive the Partial Earn-Out Amount for each applicable
Deficient Period.
(j) In the event of (1) a sale of all or substantially all of
the Seller Business by any means, (2) the consolidation of the Seller Business
(including without limitation its operations based in Reston, Virginia) with or
into any other existing or future business unit or affiliate of Bridgeline, (3)
any other recapitalization or reorganization of Bridgeline or the Seller
Business the consequences of which is that the operation of the Seller Business
are no longer able to be clearly separated from those of the other businesses or
business units of Bridgeline, (4) a material reduction to the number of
employees in the Atlanta Business Unit occurring while the Atlanta Business Unit
is generating positive operating income, or (5) a material change to the line of
business conducted by the Atlanta Business Unit occurring while the Atlanta
Business Unit is generating positive operating income, then the provisions of
this Section 1.3 shall be
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modified to provide that the Shareholder shall receive the Maximum Earn-Out
Amount for the remaining Earn-Out Periods, as they become otherwise payable.
1.4. TAX-FREE REORGANIZATION. It is the intention of the parties
hereto that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code. All aspects of the
transactions contemplated by this Agreement shall be implemented in a manner
consistent with this intent.
1.5. CLOSING. The closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place on the business day immediately
preceding the date Bridgeline intends to submit to the Securities and Exchange
Commission (the "SEC") a request that the Registration Statement (as defined in
Section 10.3) be declared effective (the "CLOSING DATE"); PROVIDED THAT, on or
as of such date the conditions set forth in Article IX shall have been satisfied
or waived. At the Closing, all documents and other deliverables required to be
delivered at the Closing, other than the Initial Merger Consideration
(collectively, the "CLOSING DELIVERABLES"), shall be delivered and held in
escrow by the Escrow Agent (as defined in the Closing Escrow Agreement),
pursuant to the terms of an escrow agreement in a form reasonably satisfactory
to Bridgeline, the Seller and the Escrow Agent (the "CLOSING ESCROW AGREEMENT")
at which time the provisions of Section 10.3 hereof shall terminate and be of no
further force and effect. Not later than five (5) business days after the
Registration Statement has been declared effective by the SEC and trading has
commenced and within one (1) hour of receipt by Bridgeline of net proceeds of
the IPO in an aggregate amount at least equal to $10,000,000, Bridgeline shall
(i) initiate a wire transfer of the cash portion of the Initial Merger
Consideration to the Escrow Agent and (ii) shall deliver by overnight mail the
stock certificates representing the Bridgeline Stock to the Escrow Agent. Upon
receipt by the Escrow Agent of the Initial Merger Consideration, the Escrow
Agent shall immediately release the Closing Deliverables from escrow in
accordance with the terms of the Escrow Agreement (such date of release by the
Escrow Agent, referred to herein as the "FINAL CLOSING Date"). Notwithstanding
anything to the contrary contained herein, in the event that the Registration
Statement resulting in net proceeds to Bridgeline of at least $10,000,000 is not
declared effective by the SEC on or before the ninth business day following the
Closing Date, any transactions occurring at the Closing and any deliveries made
by Bridgeline, the Seller or the Shareholder, at or in connection with such
Closing shall automatically be deemed rescinded and of no further force and
effect. Notwithstanding the preceding sentence, in the event that the
Registration Statement resulting in net proceeds to Bridgeline of at least
$10,000,000 is not declared effective by the SEC on or before the ninth business
day following the Closing Date, Bridgeline shall pay Seller a termination fee of
$150,000 (plus reasonable expenses of the Seller actually incurred relating to
the transactions contemplated by this Agreement).
1.6. AGREEMENTS REGARDING STOCK OPTIONS. In connection with the
Closing, all outstanding options to acquire Seller common stock (the "SELLER
OPTIONS") shall be substituted on an equitable basis with options to acquire
Bridgeline Common Stock as set forth below. Each holder of Seller Options
(individually, a "SELLER OPTIONHOLDER" and collectively, the "SELLER
OPTIONHOLDERS") shall receive options to purchase Bridgeline Common Stock at the
same ratio of stock valuations used to determine the merger consideration
payable by Bridgeline for Seller,
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and at each Seller Optionholder's current vesting schedule of such Seller
Options (exclusive of any acceleration otherwise resulting from the Merger and
except for Seller Options granted in 2006 which shall vest according to
Bridgeline's standard vesting schedule for employees), all as set forth on
Exhibit 1.6 to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER
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In order to induce Bridgeline to enter into this transaction, the
Seller and the Shareholder represent and warrant to Bridgeline that, except as
set forth in the disclosure schedules of Seller (the "DISCLOSURE SCHEDULES"),
the statements made in this Article II are true and correct as of the date of
this Agreement and will be true and correct as of the Closing as through made as
of the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date) and except to the
extent such representations and warranties are qualified by knowledge or
materiality as provided therein. The Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered and lettered sections contained in this
Article II and the disclosure in any paragraph shall qualify other sections in
this Article II to the extent that it is apparent from a reading of such
disclosure that it also qualifies or applies to such other sections. Whenever in
this Article II the term "to the knowledge of the Seller" is used, it shall mean
the knowledge of Xxxx X. Xxxx.
Seller may, from time to time after the date hereof but not later than
two Business Days (as defined below) before the Closing, prepare and deliver to
Bridgeline an updated version of the Disclosure Schedule. In the event the
Closing does not occur, the initial Disclosure Schedule shall constitute the
Disclosure Schedule to be used in determining any inaccuracy in, or breach of,
any representations or warranties of Seller. In the event the Closing occurs,
the final version of the Disclosure Schedule as of the Closing Date shall
supersede the initial Disclosure Schedule and shall constitute the definitive
Disclosure Schedule for all purposes of this Agreement. "BUSINESS DAY." shall
mean any day other than a Saturday, a Sunday or a legal holiday or a day on
which banking institutions or trust companies are authorized or obligated by law
to close in Boston, Massachusetts.
2.1. ORGANIZATION AND CORPORATE POWER. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of the
State of Georgia and has the power and authority to carry on its business as
presently conducted. Seller is duly licensed or qualified to do business as a
foreign corporation in the District of Columbia and the Commonwealth of Virginia
and there is no other jurisdiction wherein the character of its property, or the
nature of the activities presently conducted by it, makes such qualification
necessary, except where the failure to be so qualified will not have a Material
Adverse Effect on the Seller. For purposes of this Agreement, the term "MATERIAL
ADVERSE EFFECT", when used with respect to any party to this Agreement, means a
material adverse effect upon the results of operations, financial condition,
assets, liabilities, intellectual property, or business of such entity, taken as
a whole.
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2.2. AUTHORIZATION. Seller has the right, power and legal capacity
and has taken all necessary legal director and shareholder action required for
the due and valid authorization, execution, delivery and performance by Seller
of this Agreement and any other agreement or instrument executed by Seller in
connection herewith (collectively, the "TRANSACTION DOCUMENTS") and the
consummation of the transactions contemplated herein or therein. This Agreement
is, and to the extent that Seller is a party thereto, each of the Transaction
Documents is, a valid and binding obligation of Seller enforceable in accordance
with its respective terms, except to the extent that such enforcement may be
subject to applicable bankruptcy, reorganization, insolvency, fraudulent
conveyance or other laws affecting creditors' rights generally and to the
application of general equitable principles.
2.3. NO CONFLICTS. Except as set forth on the Disclosure Schedule,
the execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by Seller does not and will not violate, conflict with, result in a
breach of or constitute a default under (or which with notice or lapse of time,
or both, would constitute a breach of or default under), or result in the
creation of any lien, security interest or other encumbrance under (a) any note,
agreement, contract, license, instrument, lease or other obligation to which
Seller is a party or by which Seller is bound, and for which Seller has not
previously obtained a written waiver of such breach or default, which waiver has
been delivered to Bridgeline, except where such violation would not have a
Material Adverse Effect on Seller, (b) any judgment, order, decree, ruling or
injunction known and applicable to Seller, (c) any statute, law, regulation or
rule of any governmental agency or authority, or (d) the articles of
incorporation, by-laws, organizational documents or equivalent documents of
Seller (collectively, the "SELLER CHARTER DOCUMENTS"). This Agreement and the
transactions contemplated hereby have been unanimously approved by Seller's
Board of Directors and approved by the Shareholder, as required by the Seller
Charter Documents, and do not require any further legal action or authorization,
and are not and will not be subject to any right of first refusal, put, call or
similar right.
2.4. GOVERNMENT APPROVALS. Except for filing with and acceptance by
the Delaware Secretary of State and Georgia Secretary of State of applicable
merger certificates, no consent, approval, license, order or authorization of,
or registration, qualification, declaration, designation, or filing (each a
"Consent") with any court, arbitral tribunal, administrative agency or
commission or other governmental or regulatory agency (each a "GOVERNMENTAL
ENTITY"), is or will be required on the part of the Seller in connection with
the execution, delivery and performance of this Agreement, the other Transaction
Documents and any other agreements or instruments executed by Seller in
connection herewith or therewith, the failure of which would have a Material
Adverse Effect on Seller.
2.5. AUTHORIZED AND OUTSTANDING EQUITY INTERESTS. The Disclosure
Schedule sets forth the issued and outstanding capital stock of Seller, all of
which is held by the Shareholder and is validly issued and outstanding, and all
options and warrants to acquire capital stock of Seller. Such equity interests
are all of the issued and outstanding equity interests, actual or contingent, in
Seller and are validly issued and free from any restrictions on transfer, except
for restrictions imposed by federal or state securities laws. Except as set
forth in the Seller Charter Documents, there are no voting agreements, voting
trusts, registration rights, rights of first
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refusal, preemptive rights, buy-sell agreements, co-sale rights, or other
restrictions applicable to any capital stock or equity interests in Seller. All
of the issued and outstanding capital stock in Seller were issued in
transactions complying with or exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES Act") and any applicable
state "blue sky" laws. Any equity interests in Seller that consist of
contractual or so-called "phantom" equity interests are separately identified on
the Disclosure Schedule, and all of such interests have been effectively
terminated prior to the Closing without any direct or indirect payment by Seller
in respect thereof.
2.6. SUBSIDIARIES. Seller does not have, and at no time during its
existence has it had, any subsidiaries. Except as set forth on the Disclosure
Schedule, Seller does not have any investment or other interest in, or any
outstanding loan or advance to or from, any person or entity, including, without
limitation, any officer, director or shareholder.
2.7. FINANCIAL INFORMATION. Seller has previously delivered to
Bridgeline the unaudited balance sheets of Seller as of September 30, 2004 and
September 30, 2005 and the profit and loss statements for the years then ended
(collectively, the "ANNUAL SELLER FINANCIAL STATEMENTS"). In addition, Seller
has previously delivered to Bridgeline the unaudited balance sheet of Seller at
July 31, 2006, and the related statements of earnings and cash flows for the ten
months then ended ( the "INTERIM SELLER FINANCIAL STATEMENTS" and together with
the Annual Seller Financial Statements, the "SELLER FINANCIAL STATEMENTS"). To
the knowledge of the Seller, the Seller Financial Statements present fairly, in
all material respects, the financial condition and results of operations of
Seller as of and for the relevant periods in accordance with GAAP applied on a
basis consistent with prior periods, except that none of such financial
statements contain footnotes, and the Interim Seller Financial Statements are
subject to normal year-end adjustments, which such adjustments will neither
individually nor in the aggregate have a Material Adverse Effect on the Seller.
Except as set forth on the Disclosure Schedule, Seller has no liability,
contingent or otherwise, which is not adequately reflected in or reserved
against in the Seller Financial Statements that could materially and adversely
affect the financial condition of Seller. Except as set forth in the Interim
Seller Financial Statements or on the Disclosure Schedule, since July 31, 2006
(the "BALANCE SHEET DATE"), (i) there has been no change in the business,
property, assets, liabilities, condition (financial or otherwise), operations,
results of operations, affairs or prospects of Seller except for changes in the
ordinary course of business which, in the aggregate, would not have a Material
Adverse Effect on Seller, and (ii) none of the business, property, assets,
liabilities, condition (financial or otherwise), operations, results of
operations, affairs or prospects of Seller have been materially adversely
affected by any occurrence or development, in the aggregate, whether or not
insured against. Seller is solvent and the Pre-Merger EBITDA (as defined below)
of Seller is at least equal to $1,100,000. "PRE-MERGER EBITDA" shall mean net
income increased by interest expense, taxes, depreciation and amortization on a
cash basis, as adjusted for discretionary and non-recurring items, each as set
forth in the Disclosure Schedule. For purposes hereof, Pre-Merger EBITDA shall
be calculated based on the twelve-month period immediately preceding the date of
this Agreement; provided, however, that Seller shall, prior to the Closing,
update the calculation of Pre-Merger EBITDA so that it is based on the
twelve-month period immediately preceding the Closing.
2.8. EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS.
Except as set
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forth on the Disclosure Schedule, or in the Seller Financial Statements, since
the Balance Sheet Date, Seller has not, in excess of $10,000 (i) issued any
equity interest, (ii) borrowed any amount or incurred or become subject to any
material liability (absolute, accrued or contingent), except liabilities under
contracts entered into in the ordinary course of business, (iii) discharged or
satisfied any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities shown
on the Seller Financial Statements and incurred in the ordinary course of
business, (iv) declared or made any payment, other than ordinary payments of
compensation in amounts consistent with the historic levels, or distribution to
shareholders or purchased or redeemed any Shares or other equity interests,
except for the exercise of stock options or similar rights, (v) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, other
than liens of current real property taxes not yet due and payable or such
liabilities or obligations which would not have a Material Adverse Effect on
Seller, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any material debt or claim, except
in the ordinary course of business, in an individual amount in excess of $2,500,
or $7,500 in the aggregate, (vii) sold, assigned, transferred or granted any
license with respect to any patent, trademark, trade name, service xxxx,
copyright, trade secret or other intangible asset, except pursuant to license or
other agreements entered into in the ordinary course of business, in an
individual amount in excess of $2,500, or $7,500 in the aggregate, (viii)
suffered any material loss of property or knowingly waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation, (x) made any material change in the manner
of business or operations of Seller, (xi) entered into any transaction except in
the ordinary course of business or as otherwise contemplated hereby, or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.9. LITIGATION. Except as otherwise set forth on the Disclosure
Schedule, there is no litigation or governmental proceeding or investigation,
pending or, to Seller's and the Shareholder's knowledge, threatened, against
Seller or affecting any of Seller's properties or assets, or against any
director, officer, key employee, present or former shareholder of Seller in his
capacity as such, nor to Seller's or the Shareholder's knowledge has there
occurred any event or does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted. Except as
set forth on the Disclosure Schedule, each incident or proceeding described on
the Disclosure Schedule is fully covered by insurance except to the extent of
applicable insurance deductibles. To Seller's or the Shareholder's knowledge,
Seller is not in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency,
except for such order, writ, injunction, decree, ruling or decision which would
not have a Material Adverse Effect on Seller.
2.10. COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set
forth on the Disclosure Schedule, the Seller is in compliance with the Seller
Charter Documents, and in all material respects with the provisions of each
mortgage, indenture, lease, license, other agreement or instrument, judgment,
decree, judicial order, statute and regulation by which it is bound or to which
its properties are subject and where non-compliance would not have a Material
Adverse Effect on Seller.
2.11. TAXES.
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(a) The term "TAXES" as used in this Agreement means all
federal, state, local, foreign net income, alternative or add-on minimum tax,
estimated, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, capital profits, lease, service, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term "TAX" means any one of the foregoing Taxes.
The term "TAX RETURNS" as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term "Tax Return" means any one of the foregoing Tax Returns.
"TAX Authority" means any governmental authority responsible for the imposition
of any Tax.
(b) The Seller has timely filed all Tax Returns required to be
filed by it and has paid all Taxes owed (whether or not shown as due on such
returns), including, without limitation, all Taxes which the Seller is obligated
to withhold for amounts paid or owing to employees, creditors and third parties.
All Tax Returns filed by the Seller were complete and correct in all material
respects. Except as set forth on the Disclosure Schedule, none of the Tax
Returns filed by the Seller or Taxes payable by the Seller have been the subject
of an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any governmental authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the knowledge of the Seller or the Shareholder, threatened. Except as set
forth on the Disclosure Schedule, the Seller is not currently the beneficiary of
any extension of time within which to file any Tax Return, and the Seller has
not waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. All material
elections with respect to Taxes with respect to the Seller, as of the Closing
Date, are set forth in the Seller Financial Statements or in the Disclosure
Schedule.
(c) To the best of the Seller's and the Shareholder's
knowledge, no circumstances exist or have existed which would constitute grounds
for assessment against the Seller of any tax liability with respect to any
period for which Tax Returns have been filed.
(d) The Seller is not a party to any Tax sharing agreement or
similar arrangement. The Seller has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Seller), and the Seller does not have any liability for the Taxes
of any Person. "Person" shall mean an individual or entity, including a
partnership, limited liability company, corporation, association, joint stock
company, trust, joint venture, unincorporated organization or Governmental
Entity (or any department, agency, or political subdivision thereof).
(e) There are no liens for Taxes upon any of the assets of the
Seller, other than for ad valorem Taxes not yet due and payable. The unpaid
Taxes of the Seller did not, as of September 30, 2005, exceed by any material
amount the reserve for actual Taxes (as opposed to any reserve for deferred
Taxes established to reflect timing differences between book and Tax
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income) as shown on the Annual Seller Financial Statements, and will not exceed
by any material amount such reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
in filing its Tax Returns. The Seller has not incurred any liability for Taxes
from October 1, 2005 through the Closing Date other than in the ordinary course
of business consistent with past practice. The Seller is not obligated to file
any Tax Return in any jurisdiction (whether foreign or domestic) other than
those jurisdictions in which it currently files Tax Returns.
(f) Each Plan (as defined in Section 2.20) that is a
non-qualified deferred compensation plan subject to Section 409A of the Code has
been operated in good faith compliance with Section 409A of the Code and IRS
Notice 2005-1 since January 1, 2005 and the Company does not have, and does not
expect to have any future, Tax withholding obligation in respect of Section 409A
under any Plan.
(g) The Company has never elected to be taxed as and has never
been taxed as a subchapter S corporation under Section 1361 of the Code.
(h) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(2) of the Code.
(i) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of (i) any "excess parachute payments" within the
meaning of Section 280G of the Code (without regard to the exceptions set forth
in Sections 280G(b)(4) and 280G(b)(5) of the Code).
2.12. REAL PROPERTY.
(a) The Disclosure Schedule sets forth the addresses and uses
of all real property that Seller owns, leases or subleases, and any lien or
encumbrance on any such owned real property or Seller's leasehold interest
therein, specifying in the case of each such lease or sublease, the name of the
lessor or sublessor, as the case may be, the lease term and the rental
obligations of the lessee thereunder.
(b) There are no defaults by Seller under any existing leases,
subleases or other contractual obligations pertaining to real property that
Seller owns, leases or subleases, and to the best knowledge of Seller, by any
other party, which might curtail in any material respect the present use of
Seller's property listed on the Disclosure Schedule.
2.13. PERSONAL PROPERTY & CAPITAL EQUIPMENT. The Disclosure Schedule
sets forth a full and complete list of all personal property, including capital
equipment, owned or leased by Seller. Except as set forth on the Disclosure
Schedule, and except for property sold or otherwise disposed of in the ordinary
course of business, Seller has good and marketable title, free and clear of any
lien, charge, restriction or encumbrance, to all of such personal property. All
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material items of such personal property used in the operation of the business
of Seller are in good operating condition, normal wear and tear accepted.
2.14. INTELLECTUAL PROPERTY.
(a) The "SELLER INTELLECTUAL PROPERTY" consists of all trade
secrets, copyrights, patents, trademarks, service marks, trade dress, all
registrations and applications with respect thereto and all licenses or rights
under the same, that are owned or used by the Seller and are necessary or
incidental to the operation of the business, including without limitation, any
of the foregoing embodied or contained in any of the following: net lists;
domain names and URLs and textual information contained in web sites;
schematics; processes; customer and supplier lists; know-how and show-how;
computer software programs, source code and object code; complete system build
software; development and test tools, documentation, specifications, programmer
and user manuals used by the Seller to install, operate, maintain, correct,
test, repair enhance, extend, modify, prepare derivative works based upon,
design, develop, reproduce and package software; all license and other rights in
any third-party product, intellectual property, proprietary or personal rights,
documentation, or tangible or intangible property; all documents, records and
electronic files relating to the design, end user documentation, manufacturing,
quality control, sales, marketing, or customer support; and all Seller Products
& Services (as defined below). "SELLER PRODUCTS & SERVICES" means all products
of the Seller currently being licensed or sold or that are currently being
developed, including all hardware products and tools, software products and
tools, and services that are currently licensed, offered or under development by
the Seller. The Seller Intellectual Property and Seller Products & Services do
not include any intellectual property, products or services that are purchased
or licensed from third parties and are otherwise listed on the Disclosure
Schedules as "Third Party Intellectual Property."
As used in this Agreement "software" means any and all current and
prior and currently under development versions and releases, and predecessors of
the software and computer programs and applications of the Seller to the extent
related to the business as currently being conducted or as currently required or
as reasonably can be anticipated to be conducted in the future, including all
such software and computer programs in machine readable source code forms and in
machine executable object code forms and all related specifications (including
all logic architectures, algorithms and logic flows and all physical,
functional, operating and design parameters), any data used by or related to
software, work in progress relating to corrections, modifications, revisions,
upgrades, translations or enhancements, all Seller and third party development
and test tools used to develop or test the software, third party application
program interfaces to the software written by them and all methods of
implementation and packaging, together with all associated know-how and show-how
and all related Documentation. As used in this Agreement, "DOCUMENTATION" means
all documentation, specifications, manuals and other materials relating to the
software, including programmer and user manuals which are used by the Seller to
install, operate, maintain, correct, test, repair, enhance, extend, modify,
prepare derivative works based upon, design, develop, reproduce and package such
software.
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(b) The Disclosure Schedule lists: (i) all patents, copyright
registrations, mask works, trademarks, service marks, trade dress, any renewal
rights for any of the foregoing, and any applications and registrations for any
of the foregoing, which are included in the Seller Intellectual Property and
owned or licensed by or on behalf of the Seller and are necessary to its
business (except for standard off-the-shelf software such as Microsoft Office);
(ii) all Seller Products & Services; and (iii) all licenses, sublicenses and
other agreements to which the Seller is a party and pursuant to which the Seller
or any other person is authorized to use the Seller Intellectual Property and
Third Party Intellectual Property or exercise any other right with regard
thereto. The Seller has delivered to Bridgeline true and complete copies of the
agreements described in (iii) hereof.
(c) The Seller Intellectual Property consists solely of items
and rights which are either: (i) owned by the Seller; (ii) in the public domain;
or (iii) rightfully used and authorized for use by the Seller and its successors
pursuant to a valid license. The Seller has all rights in the Seller
Intellectual Property and Third Party Intellectual Property necessary to
commercially exploit the same in connection with the Seller's current and
planned or scheduled (whether for release or development) activities in all
geographic locations and fields of use in which the Seller currently operates or
is scheduled to operate, and to sublicense any or all such rights to third
parties, including the right to grant further sublicenses. All software created
by the Seller is as described in the Documentation and performs in all material
respects in accordance with the specifications included in the Documentation
(subject to software errors or bugs which do not interfere in any material
respect with the operation of the software). The Seller has taken all reasonable
measures to protect the proprietary nature of each item of Seller Intellectual
Property. No other person or entity has any rights to any of the Seller
Intellectual Property (except pursuant to agreements or licenses specified on
the Disclosure Schedule), and to the knowledge of Seller, no other person or
entity is infringing, violating or misappropriating any of the Seller
Intellectual Property. The Seller owns or has the right to use all Intellectual
Property necessary (i) to use, market, distribute and provide, as the case may
be, the Seller Products & Services, or (ii) to operate the Seller's internal
systems that are material to the business or operations of the Seller,
including, without limitation, computer hardware systems, software applications
and embedded systems (the "SELLER INTERNAL SYSTEMS"). Each item of Seller
Intellectual Property and Third Party Intellectual Property (to the extent the
standard form of license agreement for such Third Party Intellectual Property
permits) will be owned or available for use by Bridgeline immediately following
the Closing on substantially identical terms and conditions as it was
immediately prior to the Closing, except for any changes that do not, either
individually or in the aggregate, have a Material Adverse Effect on Seller.
Except as set forth in Schedule 2.14(c), Seller has a fully-paid license to all
Third Party Intellectual Property including without limitation, all Third Party
Intellectual Property incorporated in Seller Products & Services ("Incorporated
Intellectual Property"). Solely to the extent permitted in the standard form of
license agreement pursuant to which Seller has obtained licenses to Third Party
Intellectual Property, Seller has the right to sublicense and distribute such
Incorporated Intellectual Property, without additional cost to Seller or its
customers. Except as set forth on the Disclosure Schedule, the Seller's software
and the Seller Internal Systems are free from significant defects or programming
errors which interfere with the operation and use of the software and Seller
Internal Systems and conform in all material respects to the written
documentation and specifications therefor.
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(d) The Seller is not, nor as a result of the execution or
delivery of this Agreement, the other Transaction Documents and all other
agreements contemplated hereby, or performance of the Seller's obligations
hereunder, will the Seller be, in violation of any license, sublicense or other
agreement to which the Seller is a party. The Disclosure Schedule lists all
contracts or agreements under which the Seller is obligated to provide any
consideration (whether financial or otherwise) to any third party, or under
which any third party otherwise would be entitled to any consideration, with
respect to any exercise of rights by the Seller or Bridgeline in the Seller
Intellectual Property. The Disclosure Schedule identifies each item of Seller
Intellectual Property that is owned by a party other than the Seller, and the
license or agreement pursuant to which the Seller uses it (excluding
off-the-shelf software programs licensed by the Seller pursuant to "shrink wrap"
or "click wrap" licenses, such exclusion only extending to programs used by the
Seller solely for non-revenue generating administrative functions).
(e) Except as set forth on the Disclosure Schedule, the use,
reproduction, modification, distribution, licensing, sublicensing, sale or any
other exercise of rights by the Seller with respect to any of the Seller
Products & Services does not infringe any intellectual property right, right of
privacy, or right in personal data of any person or entity. No claims (i)
challenging the validity, effectiveness or ownership by the Seller of any of the
Seller Intellectual Property, or (ii) to the effect that the use, reproduction,
modification, manufacturing, distribution, licensing, sublicensing, sale or any
other exercise of rights by the Seller with respect to any of the Seller
Products and Services infringes or will infringe on any intellectual property or
other proprietary or personal right of any person, have been asserted to the
Seller or, to the knowledge of the Seller or the Shareholder, are threatened by
any person, nor to the knowledge of the Seller or the Shareholder, are there any
valid grounds for any bona fide claim of any such kind. All granted or issued
patents and mask works and all registered trademarks listed on the Disclosure
Schedule and all registered copyrights held by the Seller are valid, enforceable
and subsisting. To the knowledge of the Seller and the Shareholder, there are no
pending or unissued patent rights which infringe upon or impair the Seller
Intellectual Property. To the knowledge of the Seller and the Shareholder, there
is no unauthorized use, infringement or misappropriation of any of the Seller
Intellectual Property by any third party, employee or former employee.
(f) The Seller has not disclosed the source code for any of
the software owned by the Seller or other confidential information constituting,
embodied in or pertaining to the software to any person or entity, except
pursuant to the agreements listed on the Disclosure Schedule, and the Seller has
taken reasonable measures to prevent disclosure of such source code. No parties
other than the Seller possess any current or contingent rights to any source
code that is part of the Seller Intellectual Property.
(g) Except as set forth on the Disclosure Schedule, all of the
copyrightable materials (including software) incorporated in or bundled with the
Seller's Products & Services have been created by employees of the Seller within
the scope of their employment by the Seller or by independent contractors of the
Seller who have executed agreements expressly assigning all right, title and
interest in such copyrightable materials to the Seller. No portion of such
copyrightable materials was jointly developed with any third party. The
Disclosure Schedule lists all parties who have created any portion of, or
otherwise have any rights in or to, the Seller
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Intellectual Property, other than employees of the Seller who have no rights in
or to any Seller Intellectual Property. Except as set forth on the Disclosure
Schedule, the Seller has secured from all parties who have created any portion
of, or otherwise have any rights in or to, the Seller Intellectual Property
valid and enforceable written assignments of any such work or other rights to
Seller and has provided true and complete copies of such assignments to
Bridgeline.
(h) The Disclosure Schedule identifies each license or other
agreement (or type of license or other agreement) pursuant to which the Seller
has licensed, distributed or otherwise granted any rights to any third party
with respect to any Seller Intellectual Property. The Disclosure Schedule
includes a true and complete list of support and maintenance agreements relating
to Seller Intellectual Property including the identity of the parties entitled
to receive such service or maintenance, and the term of such agreements. Except
as set forth in the Disclosure Schedule, the Seller has licensed, distributed or
otherwise granted rights to third parties with respect to Seller Intellectual
Property pursuant to consulting services agreements and hosting agreements,
copies of which have been made available to Bridgeline for review.
(i) Except as set forth on the Disclosure Schedule, the Seller
has obtained written agreements from all employees and third parties with whom
Seller has shared confidential proprietary information (i) of the Seller, or
(ii) received from others which the Seller is obligated to treat as
confidential, which agreements require such employees and third parties to keep
such information confidential. The Seller has delivered or given access to all
copies of such written agreements, as executed, to Bridgeline. None of the
present or former employees, officers or directors of the Seller owns directly
or indirectly, in whole or in part, any Seller Intellectual Property or
application therefor.
(j) To the knowledge of the Seller and the Shareholder, none
of the Seller Internal Systems, or the use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. The Disclosure Schedule lists any complaint, claim or notice,
or written threat thereof, received by the Seller alleging any such
infringement, violation or misappropriation, and the Seller has provided to
Bridgeline complete and accurate copies of all written documentation in the
possession of the Seller relating to any such complaint, claim, notice or
threat. The Seller has provided to Bridgeline complete and accurate copies of
all written documentation in the Seller's possession relating to claims or
disputes known to the Seller concerning any Seller Intellectual Property.
2.15. AGREEMENTS OF DIRECTORS, OFFICERS, EMPLOYEES AND CONSULTANTS.
Except as set forth on the Disclosure Schedule, to Seller's and the
Shareholder's knowledge, no current or former officer or employee of or
consultant to Seller is in violation of any term of any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement containing restrictive
covenants relating to the conduct of any such current or former shareholder,
officer, employee, or consultant or otherwise relating to the use of trade
secrets or proprietary information of others by any such person. The Disclosure
Schedule sets forth the name and address of each person currently serving as an
officer or a director of Seller, and each person listed on the Disclosure
Schedule was duly elected and is presently serving as such officer or director.
Set forth on the Disclosure
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Schedule is a list of all current officers, directors, employees, and
consultants of Seller. Each current and former officer, employee and consultant
of the Seller has executed a non-disclosure and non-competition agreement with
Seller in the form provided to Bridgeline. Except as disclosed on the Disclosure
Schedule, since October 1, 2005, Seller has not paid or become committed to pay
any bonus or similar additional compensation to any officer, director or
employee of Seller.
2.16. GOVERNMENTAL LICENSES. Seller has all the material permits,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or regulatory bodies necessary for Seller
to conduct its business as presently conducted. All such permits, licenses,
orders, franchises and other rights and privileges are in full force and effect
and, to Seller's knowledge, no suspension or cancellation of any of them is
threatened, and none of such permits, licenses, orders, franchises or other
rights and privileges will be Materially Adversely Affected by the consummation
of the transactions contemplated by this Agreement or any of the Transaction
Documents.
2.17. LIST OF MATERIAL CONTRACTS AND COMMITMENTS. The Disclosure
Schedule sets forth a complete and accurate list of all material contracts to
which Seller is a party or by or to which any of its assets or properties is
bound or subject. As used on the Disclosure Schedule, the phrase "SELLER
MATERIAL CONTRACT" means and includes every material agreement or material
understanding of any kind, written or oral, which is legally enforceable by or
against Seller, and specifically includes without limitation (a) contracts and
other agreements with any current or former officer, director, employee,
consultant or shareholder or any partnership, company, joint venture or any
other entity in which any such person or entity has an interest; (b) agreements
with any labor union or association representing any Seller employee; (c)
contracts and other agreements for the provision of services other than by
employees of Seller which entail a reasonably foreseeable financial consequence
to any contracting party of at least $15,000; (d) bonds or other security
agreements provided by any party in connection with the business of Seller; (e)
contracts and other agreements for the sale of any of the assets or properties
of Seller other than in the ordinary course of business or for the grant to any
person or entity of any preferential rights to purchase any of said assets or
properties; (f) joint venture agreements relating to the assets, properties or
business of Seller or by or to which any of its assets or properties are bound
or subject; (g) contracts or other agreements under which Seller agrees to
indemnify any party, to share tax liability of any party, or to refrain from
competing with any party; (h) any contracts or other agreements with regard to
any indebtedness of Seller; or (i) any other contract or other agreement whether
or not made in the ordinary course of business and involving a reasonably
foreseeable financial consequence to any contracting party of at least $15,000.
Seller has delivered to Bridgeline true, correct and complete copies of all such
contracts, together with all modifications and supplements thereto. Except as
set forth on the Disclosure Schedule, each of the contracts listed on the
Disclosure Schedule is in full force and effect. Seller is not in breach of any
of the material provisions of any such Seller Material Contract, nor, to the
best knowledge of Seller and the Shareholder, is any other party to any such
contract in default thereunder, nor does any event or condition exist which with
notice or the passage of time or both would constitute a default of a material
provision thereunder, except for any such breach or default that individually
and in the aggregate would not have a Material Adverse Effect on Seller. Seller
has performed in all material respects all obligations required to
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be performed by it under each such contract as of the Closing.
2.18. ACCOUNTS RECEIVABLE. The Disclosure Schedule sets forth a full
and complete list of Seller's accounts receivable and accounts receivable
reserve as of close of business on a date within two (2) business days of the
date of this Agreement. Except as set forth on the Disclosure Schedule, all
accounts and notes receivable reflected on the Seller Financial Statements, and
all accounts and notes receivable arising subsequent to the date of such balance
sheets, have arisen in the ordinary course of business and represent valid
obligations owing to Seller. Except as set forth on the Disclosure Schedule, to
the best knowledge of Seller and the Shareholder, none of Seller's receivables
are subject to any claim of offset, recoupment, setoff or counterclaim and
neither Seller nor the Shareholder has knowledge of any specific facts or
circumstances (whether asserted or unasserted) that could give rise to any such
claim. No material amount of receivables is contingent upon the performance by
Seller of any obligation or contract other than normal warranty repair and
replacement. No person has any lien on any such receivables and no agreement for
deduction or discount has been made with respect to any such receivables.
2.19. INSURANCE COVERAGE. The Disclosure Schedule hereto contains an
accurate summary of the insurance policies currently maintained by Seller.
Except as described on the Disclosure Schedule, there are currently no claims
pending against Seller pursuant to any insurance policy currently in effect and
covering the property, the business or the employees of Seller.
2.20. EMPLOYEE MATTERS. Except as set forth on the Disclosure
Schedule, neither the Seller nor any person that together with the Seller would
be treated as a single employer (an "ERISA AFFILIATE") under Section 414 of the
Code has established or maintains or is obligated to contribute to (a) any
bonus, severance, stock option, or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (written or
oral), (b) any pension, profit-sharing, retirement or other plan, program or
arrangement, or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans (individually,
a "PLAN" and collectively, the "PLANS") have been operated and administered in
all material respects in accordance with their terms, as applicable, with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. No act or failure to act by the
Seller has resulted in, nor does the Seller have knowledge of a non-exempt
"prohibited transaction" (as defined in ERISA) with respect to the Plans.
Neither the Seller nor any ERISA Affiliate maintains or has ever maintained or
contributed to any Plan subject to Title IV of ERISA. With respect to the
employees and former employees of the Seller, there are no employee
post-retirement medical or health plans in effect, except as required by Section
4980B of the Code. The Seller has funded, or made adequate reserves for, the
full amounts of the employer contributions that are required under the terms of
said plan to be paid by the Seller with respect to the year ended December 31,
2005 and the period from and including October 1, 2005 through and including the
Closing Date.
2.21. CUSTOMERS. Except as set forth on the Disclosure Schedule:
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(a) The relationships of Seller with its significant customers
are good commercial working relationships and no significant customer of Seller
has canceled or otherwise terminated, or to Seller's or the Shareholder's
knowledge, threatened to cancel or otherwise to terminate its relationship with
Seller, or has during the last twelve (12) months decreased materially, or
threatened to decrease or limit materially, its usage or purchase of the Seller
Products & Services except for normal cyclical changes related to customers'
businesses and except for changes which have not had a Material Adverse Effect
on Seller.
(b) No current supplier or customer has notified Seller that
it intends to cancel or otherwise substantially modify its relationship with
Seller or to decrease materially or limit its services, supplies or materials to
Seller, or its usage or purchase of the services of Seller, and, to the best
knowledge of Seller and the Shareholder, the consummation of the transactions
contemplated hereby will not materially adversely affect the relationship of
Bridgeline with any such supplier or customer.
2.22. NO BROKERS OR FINDERS. Except as set forth on the Disclosure
Schedule, no person or entity has or will have, as a result of the actions of
Seller or the Shareholder, any right, interest or claim against or upon Seller
or the Shareholder for any commission, fee or other compensation as a finder or
broker arising from the transactions contemplated by this Agreement.
2.23. TRANSACTIONS WITH INSIDERS. Except as set forth on the
Disclosure Schedule, there are no currently outstanding loans, leases or other
contracts between Seller and any officer or director of Seller, or any person or
entity owning five percent (5%) or more of the total number of Shares, or any
respective family member or affiliate of any such officer, director or
shareholder.
2.24. GUARANTEES. Except as set forth on the Disclosure Schedule,
Seller has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on or for any indebtedness of any other person or entity,
except guarantees by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
2.25. BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Except
as set forth on the Disclosure Schedule, Seller has no account or safe deposit
box in any bank and no person or entity has any power, whether singly or
jointly, to sign any checks on behalf of Seller, to withdraw any money or other
property from any bank, brokerage or other account of Seller, or to act pursuant
to any power of attorney granted by Seller at any time for any purpose.
2.26. BOOKS AND RECORDS. The books and records of Seller made
available to Bridgeline for inspection include copies of the by-laws and other
governing documents as currently in effect and accurately record therein in all
material respects all actions, proceedings, consents and meetings of the Board
and shareholders of Seller and any committees thereof.
2.27. PRIVACY AND DATA COLLECTION. The Seller has at all times
complied in all material
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respects with all laws and regulations relating or applicable to privacy,
publicity, data protection, collection, storage, transfer, release and use of
personal information and user information gathered or accessed in the course of
the business and operations of the Seller. The Seller has at all times complied
in all material respects with all rules, policies and procedures established by
the Seller from time to time with respect to privacy, publicity, data
protection, collection, storage, transfer and use of personal information and
user information gathered or accessed in the course of the business and
operations of the Seller (collectively, the "SELLER PRIVACY POLICIES"),
noncompliance with which would result in a Material Adverse Effect on Seller. No
claims have been asserted or, to the knowledge of the Seller and the
Shareholder, threatened against the Seller by any Person or governmental entity
alleging a violation of such Person's, or any other Person's, privacy,
publicity, personal or confidentiality rights under any such laws, or a breach
or other violation of any of the Seller Privacy Policies, where such violation
would have a Material Adverse Effect on Seller. The Seller has taken
commercially reasonable measures (including but not limited to, implementing and
monitoring compliance with adequate measures with respect to technical and
physical security) to ensure that personal and consumer information is protected
against loss and against unauthorized access, use, modification, disclosure or
other misuse. To the knowledge of the Seller and the Shareholder, there has been
no unauthorized access to, use, modification, disclosure or other misuse of such
information. Neither the execution, delivery nor performance of this Agreement
or the consummation of the transactions contemplated hereby shall result in any
breach or violation of the Seller Privacy Policies or violate any Law with
respect to such data or information.
2.28 FOREIGN CORRUPT PRACTICES ACT. The Seller has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations thereunder. There is not
now, and there has never been, any employment by the Seller of, or record
ownership in the Seller by, any governmental or political official in any
country in the world.
2.29 DISCLOSURE. Neither the representations or warranties made by
the Seller in this Agreement, nor the Seller Disclosure Schedule or any other
certificate executed and delivered by the Company pursuant to this Agreement,
when taken together, contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein not misleading in light of the circumstances under which they
were furnished.
ARTICLE III
REPRESENTATIONS, COVENANTS AND RIGHTS OF SHAREHOLDER
----------------------------------------------------
In order to induce Bridgeline to enter into this transaction, the
Shareholder represents and warrants to Bridgeline that, except as set forth in
the disclosure schedules of the Shareholder (the "SHAREHOLDER DISCLOSURE
SCHEDULES"), the statements made in this Article III are true and correct as of
the date of this Agreement and will be true and correct as of the Closing as
through made as of the Closing, except to the extent such representations and
warranties are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such date) and
except to the extent such representations and warranties are qualified
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by knowledge or materiality as provided therein. The Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered sections
contained in this Article III and the disclosure in any paragraph shall qualify
other sections in this Article III to the extent that it is apparent from a
reading of such disclosure that it also qualifies or applies to such other
sections.
The Shareholder may, from time to time after the date hereof but not
later than two Business Days before the Closing, prepare and deliver to
Bridgeline an updated version of the Shareholder Disclosure Schedule. In the
event the Closing does not occur, the initial Shareholder Disclosure Schedule
shall constitute the Shareholder Disclosure Schedule to be used in determining
any inaccuracy in, or breach of, any representations or warranties of Seller. In
the event the Closing occurs, the final version of the Shareholder Disclosure
Schedule as of the Closing Date shall supersede the initial Shareholder
Disclosure Schedule and shall constitute the definitive Shareholder Disclosure
Schedule for all purposes of this Agreement.
3.1. OWNERSHIP OF SHARES. The Shareholder has valid title to and
owns beneficially and of record all of the Shares set forth opposite his name on
Schedule 3.1 to the Shareholder Disclosure Schedule, and has good and marketable
title to such Shares, free and clear of any and all transfer restrictions (other
than those imposed by relevant securities laws), options, liens, claims,
pledges, voting trusts and agreements, security interests, charges and other
restrictions or encumbrances of any kind or nature. The Shareholder has the
absolute and unconditional right, power, authority and capacity to execute and
perform this Agreement and any of the Transaction Documents to which he is a
party and to consummate the transactions contemplated hereby. Except as set
forth on the Shareholder Disclosure Schedule, the Shareholder has not granted
any option or other commitment or is not otherwise a party to or bound by any
agreement obligating such Shareholder to sell, pledge or otherwise grant any
interest in the Shares to any person or entity.
3.2. AUTHORIZATION. The Transaction Documents shall include all
documents executed and delivered at the Closing to which the Shareholder is a
party. This Agreement and each of the Transaction Documents to which the
Shareholder is a party have been duly executed and delivered by the Shareholder
and constitute the valid and binding obligations of the Shareholder enforceable
against the Shareholder in accordance with their respective terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance or other laws affecting
creditors' rights generally and to the application of general equitable
principles.
3.3. NO CONFLICTS. Except as set forth on the Shareholder
Disclosure Schedule, the execution, delivery and performance of this Agreement
and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby by the Shareholder do not and will not violate,
conflict with, result in a breach of or constitute a default under (or which
with notice or lapse of time, or both, would constitute a breach of or default
under), or result in the creation of any lien, security interest or other
encumbrance under (a) any note, agreement, contract, license, instrument, lease
or other obligation to which the Shareholder is a party or by which the
Shareholder is bound, and for which the Shareholder has not previously obtained
a
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written waiver of such breach or default, which waiver has been delivered to
Bridgeline, except where such violation would not have a Material Adverse Effect
on the Shareholder, (b) any judgment, order, decree, ruling or injunction known
and applicable to the Shareholder, or (c) any statute, law, regulation or rule
of any governmental agency or authority.
3.4. SHAREHOLDER INVESTMENT REPRESENTATIONS.
NOTWITHSTANDING THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
SECTION 3.4 WHICH ARE INTENDED TO COMPLY WITH THE REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS, FOR PURPOSES OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION THE INDEMNITY OBLIGATIONS OF BRIDGELINE SET FORTH HEREIN, BRIDGELINE
ACKNOWLEDGES AND AGREES THAT (1) THE SHAREHOLDER IS RELYING ON THE
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE SET FORTH IN THIS AGREEMENT, (2)
SUCH REPRESENTATIONS AND WARRANTIES OF BRIDGELINE ARE A MATERIAL INDUCEMENT TO
THE SHAREHOLDER TO ENTER INTO THIS AGREEMENT AND TO EFFECTUATE THE TRANSACTIONS
CONTEMPLATED HEREIN AND (3) THE REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER IN
THIS SECTION 3.4 SHALL NOT LIMIT OR OTHERWISE ABROGATE IN ANY RESPECT THE
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE IN THIS AGREEMENT.
The Shareholder represents individually that his present intention is
to acquire the shares of Bridgeline Common Stock to be issued in connection with
this Agreement for his own account and that such Bridgeline Common Stock is
being and will be acquired for the purpose of investment and not with a view to
distribution or resale thereof. The Shareholder represents that he has had an
opportunity to ask questions of and receive answers from the authorized
representatives of Bridgeline and to review any relevant documents and records
concerning the business of Bridgeline and the terms and conditions of this
investment and that any such questions have been answered to the Shareholder's
satisfaction. The Shareholder acknowledges that it has been called to his
attention that this investment involves a high degree of risk and that
Bridgeline and has a limited operating history. The Shareholder acknowledges
that he can bear the economic risks of his investment in the Bridgeline Common
Stock and that he has such knowledge and experience in financial or business
matters that he is capable of evaluating the merits and risks of this investment
in the Bridgeline Common Stock and protecting his own interests in connection
with this investment. Except as set forth on the Disclosure Schedule attached
hereto, the Shareholder hereby represents and warrants to Bridgeline that he is
an "accredited investor" as such term is defined under Section 501(a) of
Regulation D promulgated under the Securities Act. The Shareholder understands
that the Bridgeline Common Stock to be issued in connection with the
transactions contemplated hereby has not been registered under the Securities
Act and that such shares must be held indefinitely unless a subsequent
disposition thereof is permitted under the Securities Act or is exempt from such
registration. The Shareholder further represents that he understands and agrees
that until transferred as herein provided, or transferred pursuant to the
provisions of Rule 144 of the Securities Act, all certificates evidencing the
Bridgeline Common Stock to be issued in connection with the Closing, whether
upon initial issuance or upon transfer thereof, shall bear a legend (and
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Bridgeline will make a notation on its transfer books to such effect)
prominently stamped or printed thereon reading substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
3.5. AGREEMENTS REQUIRED IN A PUBLIC OFFERING. The Shareholder
agrees that upon request by any underwriter managing a public offering of shares
of Bridgeline Common Stock, such Shareholder will agree to any lockup for a
period of up to one year from the Closing Date or other provisions affecting the
transferability of the shares of Bridgeline Common Stock owned by the
Shareholder in the form executed by the executive officers of Bridgeline, and
will provide such underwriter and its counsel with such information with respect
to the Shareholder as is reasonably required to carry out such public offering.
3.6. RESTRICTIVE UNDERTAKINGS.
(a) NONCOMPETITION COVENANT. The restrictive covenants set
forth in this Section 3.6 are a material inducement for Bridgeline to enter into
this Agreement. For good and valuable consideration provided pursuant to this
Agreement, the receipt and sufficiency of which is hereby acknowledged, the
Shareholder agrees that, during the Restrictive Period (as hereinafter defined),
he shall not, directly or indirectly, (i) invest (except for the ownership of
less than 3% of the capital stock of a publicly held company), or hold a
directorship or other position of authority in any of Bridgeline's Direct
Competitors ("DIRECT COMPETITORS" defined as: any person or entity, or a
department or division of an entity, whereby more than 25% of the person's or
entity's total revenues are derived from Competitive Services ("COMPETITIVE
SERVICES" being defined as design and development for third parties of:
Internet, Intranet and Extranet web applications, content management or document
management software, flash or rich media development, usability engineering,
e-commerce and e-learning applications, search engine optimization solutions and
Web hosting and managed services), (ii) undertake preparation of or planning for
an organization or offering of Competitive Services, (iii) combine or
collaborate with other employees or representatives of Bridgeline or any third
party for the purpose of organizing, engaging in, or offering Competitive
Services, or (iv) be employed by, serve as a consultant to or otherwise provide
services to (whether as principal, partner, shareholder, member, officer,
director, stockholder, agent, joint venturer, creditor, investor or in any other
capacity), or participate in the management of a Direct Competitor or
participate in any
-26-
other business that Bridgeline may be engaged or has fixed, written plans to
undertake at the date of the termination of the Restrictive Period.
(b) NONSOLICITATION OF CUSTOMERS. The Shareholder agrees that,
during the Restrictive Period, he shall not directly or indirectly, either for
himself or for any other person, corporation, partnership, limited liability
company or any other business entity, service or supervise or assist the
servicing or supervision of, divert or take away or attempt to divert or take
away, or directly or indirectly call on or solicit or attempt to call on or
solicit any of the Clients (as hereinafter defined) of Bridgeline, or
communicate, advise or consult with, write or respond to, or inform any such
Client for the purpose of soliciting, selling or recommending Competitive
Services, or otherwise attempt to induce any such Client to terminate, modify or
reduce such Client's relationship with Bridgeline.
(c) NONSOLICITATION OF EMPLOYEES. The Shareholder agrees that,
during the Restrictive Period, he shall not directly or indirectly without the
consent of Bridgeline contact, recruit, solicit, induce or employ, or attempt to
contact, recruit, solicit, induce or employ, any employee, consultant, agent,
director or officer of Bridgeline to terminate his employment with or otherwise
cease any relationship with, Bridgeline.
(d) RESTRICTIVE PERIOD. For purposes of this Section, the term
Bridgeline shall include Bridgeline and any of its subsidiaries, divisions or
business units. For purposes of this Section, the term "Restrictive Period"
shall mean the period commencing on the Closing Date and ending on the later of:
(i) three-year anniversary thereof, or (ii) twelve (12) months following the
termination of the Shareholder's employment relationship with Bridgeline. For
the purposes of this Section, "Client" shall mean any person or entity to which
Bridgeline has provided services to or made Proposals to at any time within the
twelve (12) months preceding this Agreement or thereafter. "Proposal" shall mean
any Client-specific, BONA FIDE proposal for services that included a description
of services, time line and proposed fees for the project.
(e) GEOGRAPHIC RESTRICTIONS REASONABLE. The Shareholder
expressly declares that the territorial and time limitations contained in this
Section are entirely reasonable and are properly and necessarily required for
the adequate protection of the business, operations, trade secrets and goodwill
of Bridgeline and are given as an integral part of the merger, but for which
Bridgeline would not have entered into this Agreement. It is the desire and
intent of the Shareholder and Bridgeline that the provisions of this Section
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Section, including but not
limited to, any territorial or time limitations set forth in this Section, shall
be adjudicated to be invalid or unenforceable by a court of competent
jurisdiction, whether due to passage of time, change of circumstances or
otherwise, the provisions of this Section shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, or to
reduce said territorial or time limitations to such areas or periods of time as
said court shall deem reasonable, such deletion or reduction to apply only with
respect to the operation of this Section in the particular jurisdiction in which
such adjudication is made.
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(f) RIGHTS CUMULATIVE. The non-competition and
non-solicitation provisions contained herein are in addition to, and not in
limitation of, any rights that Bridgeline may have under any other contract, law
or otherwise, including but not limit to, the Employment Agreements between
Bridgeline and the Shareholder. The Shareholder acknowledges that the remedy at
law for any breach of this Section may be inadequate. The Shareholder agrees
that upon any such breach of this Section, Bridgeline or shall, in addition to
all other available remedies (including but not limited to, seeking an
injunction or other equitable relief), be entitled to injunctive relief without
having to prove the inadequacy of the remedies available at law and without
being required to post bond or other security.
(g) COMPUTATION OF RESTRICTIVE PERIOD. All time periods in
this Section shall be computed by excluding from such computation any time
during which a Shareholder is in violation of any provision of this Section and
any time during which there is pending in any court of competent jurisdiction
any action (including any appeal from any final judgment) in which action
Bridgeline seeks to enforce the agreements and covenants in this Section or in
which any person or entity contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement which is determined adversely against the Shareholder or such other
party.
3.7. FOREIGN CORRUPT PRACTICES ACT. The Shareholder has not taken
any action which would cause the Shareholder to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules and regulations
thereunder. There is not now, and there has never been, any employment by the
Shareholder of any governmental or political official in any country in the
world
3.8. DISCLOSURE. Neither the representations or warranties made by
the Shareholder in this Agreement, nor the Shareholder Disclosure Schedule or
any other certificate executed and delivered by the Shareholder pursuant to this
Agreement, when taken together, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading in light of the circumstances
under which they were furnished.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BRIDGELINE
--------------------------------------------
In order to induce Seller and the Shareholder to enter into this
transaction, Bridgeline represents and warrants to Seller and the Shareholder
that, except as set forth in the disclosure schedules of Bridgeline (the
"BRIDGELINE DISCLOSURE SCHEDULES"), the statements made in this Article IV are
true and correct as of the date of this Agreement and will be true and correct
as of the Closing as through made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date) and except to the extent such representations and warranties are
qualified by knowledge or materiality as provided therein. The Disclosure
Schedule will be arranged in paragraphs corresponding to the numbered and
lettered sections
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contained in this Article IV and the disclosure in any paragraph shall qualify
other sections in this Article IV to the extent that it is apparent from a
reading of such disclosure that it also qualifies or applies to such other
sections.
Bridgeline may, from time to time after the date hereof but not later
than two Business Days before the Closing, prepare and deliver to Seller and the
Shareholder an updated version of the Bridgeline Disclosure Schedule. In the
event the Closing does not occur, the initial Bridgeline Disclosure Schedule
shall constitute the Bridgeline Disclosure Schedule to be used in determining
any inaccuracy in, or breach of, any representations or warranties of
Bridgeline. In the event the Closing occurs, the final version of the Bridgeline
Disclosure Schedule as of the Closing Date shall supersede the initial
Bridgeline Disclosure Schedule and shall constitute the definitive Bridgeline
Disclosure Schedule for all purposes of this Agreement.
4.1. ORGANIZATION AND QUALIFICATION. Bridgeline is a corporation
duly organized, validly existing and in corporate good standing in the State of
Delaware and has the power and authority to carry on its business as presently
conducted. Bridgeline is duly qualified to do business and is in good standing
in all jurisdictions in which its ownership of property or the character of its
business requires such qualification, except where the failure to be so
qualified will not have a Material Adverse Effect on Bridgeline. Each subsidiary
of Bridgeline is a corporation duly organized, validly existing and in corporate
good standing under the laws of its jurisdiction of incorporation.
4.2. AUTHORITY. This Agreement, and to the extent Bridgeline is a
party to the Transaction Documents, each of the Transaction Documents, has been
duly authorized, executed and delivered by Bridgeline and constitutes a legal,
valid and binding obligation of Bridgeline, enforceable against it in accordance
with its terms except to the extent that such enforcement may be subject to
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance or
other laws affecting creditors' rights generally and to the application of
general equitable principles. Bridgeline has the right, power and authority to
enter into this Agreement and to carry out the terms and provisions of this
Agreement, and to enter into and carry out the terms of all agreements and
instruments required to be delivered by Bridgeline by the terms of this
Agreement, without obtaining the consent of any third parties or authorities.
This Agreement and the transactions contemplated hereby have been unanimously
approved by the Board of Directors of Bridgeline and no additional corporate
action or authorization is required by Bridgeline in connection with the
consummation of the transactions contemplated by this Agreement.
4.3. NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby by Bridgeline, and compliance with
the provisions hereof, do not and will not: (a) violate, conflict with or result
in a breach of any provision or constitute a default under (i) the Certificate
of Incorporation or By-laws of Bridgeline (the "BRIDGELINE CHARTER DOCUMENTS"),
or (ii) any contract or agreement to which Bridgeline is a party or to which the
assets or business of Bridgeline may be subject, except where such violation
would not have a Material Adverse Effect on Bridgeline; or (b) violate any
judgment, ruling, order, writ, injunction, award, decree,
-29-
statute, law, ordinance, code, rule or regulation of any court or foreign,
federal, state, county or local government or any other governmental, regulatory
or administrative agency or authority which is applicable to the assets,
properties or business of Bridgeline, except where such violation would not have
a Material Adverse Effect on Bridgeline.
4.4. GOVERNMENT APPROVALS. Except as set forth in the Bridgeline
Disclosure Schedules and except for filing with and acceptance by the Delaware
Secretary of State and Georgia Secretary of State of applicable merger
certificates and filings pursuant to Regulation D of the Securities Act and the
effectiveness of the SB-2 registration statement filed with the Securities and
Exchange Commission under the Securities Act, no Consent with any Governmental
Entity, is or will be required on the part of the Bridgline in connection with
the execution, delivery and performance of this Agreement, the other Transaction
Documents and any other agreements or instruments executed by Bridgeline in
connection herewith or therewith, the failure of which would have a Material
Adverse Effect on Bridgeline.
4.5. AUTHORIZED AND OUTSTANDING STOCK. As of the date of this
Agreement, the authorized capital stock of Bridgeline consists of 15,000,000
shares of Common Stock, of which 4,273,833 shares are validly issued and
outstanding. A true and correct capitalization table of Bridgeline as of the
date of this Agreement, setting forth the name of each owner of Bridgeline
Common Stock, number of shares and percentage owned, and all holders of options,
warrants or other securities convertible into Bridgeline Common Stock, is set
forth in the Bridgeline Disclosure Schedule. All of the issued and outstanding
shares of capital stock of Bridgeline were issued (i) in transactions complying
with or exempt from the registration provisions of the Securities Act, and (ii)
in compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws. Bridgeline is the sole owner of
all capital stock of its subsidiaries. Except as set forth on the Bridgeline
Disclosure Schedule, as of the date of this Agreement, there are no outstanding
warrants, promissory notes, options, commitments, preemptive rights, rights to
acquire or purchase, conversion rights or demands of any character relating to
the capital stock or other securities of Bridgeline. There are no voting trusts
or voting agreements with respect to any shares of Bridgeline Common Stock.
Bridgeline is the sole owner of all shares of capital stock of its subsidiaries.
As of the date of this Agreement, other than as set forth in the Bridgeline
Disclosure Schedule, there are no outstanding warrants, options, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or demands
of any character relating to the capital stock or other securities of any of the
subsidiaries of Bridgeline. There are no voting trusts or voting agreements with
respect to any shares of capital stock of any subsidiary of Bridgeline. Any
equity interests in Bridgeline that consist of contractual or so-called
"phantom" equity interests are separately identified on the Bridgeline
Disclosure Schedule.
4.6. SUBSIDIARIES. Except as set forth on the Bridgeline Disclosure
Schedule, Bridgeline does not have, and at no time during its existence has it
had, any subsidiaries. Except as set forth on the Bridgeline Disclosure
Schedule, Bridgeline does not have any investment or other interest in, or any
outstanding loan or advance to or from, any person or entity, including, without
limitation, any officer, director or shareholder.
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4.7. FINANCIAL INFORMATION. Bridgeline has previously delivered to
Seller the unaudited balance sheets of Bridgeline at September 30, 2004 and
September 30, 2005, and the related statements of earnings and cash flows for
the years then ended (the "ANNUAL BRIDGELINE FINANCIAL STATEMENTS"). In
addition, Bridgeline has previously delivered to Seller the unaudited balance
sheet of Bridgeline at July 31, 2006, and the related statements of earnings and
cash flows for the nine months then ended (the "INTERIM BRIDGELINE FINANCIAL
STATEMENTS" and collectively with the Annual Bridgeline Financial Statements,
the "BRIDGELINE FINANCIAL STATEMENTS"). To the knowledge of Bridgeline, the
Bridgeline Financial Statements present fairly, in all material respects, the
financial condition and results of operations of Bridgeline as of and for the
relevant periods in accordance with GAAP applied on a basis consistent with
prior periods, except that none of such financial statements contain footnotes
and the Interim Bridgeline Financial Statements are subject to normal year-end
adjustments, which adjustments will neither individually nor in the aggregate
have a Material Adverse Effect on Bridgeline. Bridgeline has no liability,
contingent or otherwise, which is not adequately reflected in or reserved
against in the Interim Bridgeline Financial Statements that could materially and
adversely affect the financial condition of Bridgeline. Except as set forth in
the Interim Bridgeline Financial Statements or the Bridgeline Disclosure
Schedule, since July 31, 2006 (i) there has been no change in the business,
property, assets, liabilities, condition (financial or otherwise), operations,
results of operations, affairs or prospects of Bridgeline except for changes in
the ordinary course of business which, in the aggregate, would not have a
Material Adverse Effect on Bridgeline, and (ii) none of the business, property,
assets, liabilities, condition (financial or otherwise), operations, result of
operations, affairs or prospects of Bridgeline have been materially adversely
affected by any occurrence or development, in the aggregate, whether or not
insured against.
4.8. EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS.
Except as set forth on the Bridgeline Disclosure Schedule, or in the Bridgeline
Financial Statements, since July 31, 2006, Bridgeline has not (i) issued any
stock, bond or other corporate security; (ii) borrowed any amount or incurred or
become subject to any material liability (absolute, accrued or contingent),
except liabilities under contracts entered into in the ordinary course of
business; (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on Bridgeline Financial Statements and incurred in the
ordinary course of business or such liabilities which would not have a Material
Adverse Effect on Bridgline; (iv) declared or made any payment, other than
ordinary payments of compensation in amounts consistent with the historic
levels, or distributions to stockholders or purchased or redeemed any shares of
its capital stock or other securities, except for the exercise of stock options,
and distributions in the ordinary course of business and required under
applicable tax law; (v) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable; (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any material debt
or claim, except in the ordinary course of business; (vii) sold, assigned,
transferred or granted any licenses with respect to any patent, trademark, trade
name, service xxxx, copyright, trade secret or other intangible asset, except
pursuant to license or other agreements entered into in the ordinary course of
business; (viii) suffered any material loss of property or waived any right of
substantial value whether or not in the ordinary course of business; (ix) made
any change in officer compensation; (x) made any material change
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in the manner of business or operations of Bridgeline; (xi) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby; or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
4.9. LITIGATION. Except as otherwise set forth on the Bridgeline
Disclosure Schedule, there is no litigation or governmental proceeding or
investigation, pending or, to Bridgeline's knowledge, threatened, against
Bridgeline or affecting any of Bridgeline's properties or assets, or to
Bridgeline's knowledge, pending or threatened against any officer, director, or
key employee of Bridgeline in his capacity as such, nor has there occurred any
event or, to Bridgeline's knowledge, does there exist any condition on the basis
of which any litigation, proceeding or investigation might properly be
instituted. Except as set forth on the Bridgeline Disclosure Schedule, each
incident or proceeding described on the Bridgeline Disclosure Schedule is fully
covered by insurance. To the best of Bridgeline's knowledge, Bridgeline is not
in default with respect to any order, writ, injunction, decree, ruling or
decision of any court, commission, board or other government agency, except for
such order, writ, injunction, decree, ruling or decision which would not have a
Material Adverse Effect on Bridgeline.
4.10. COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Bridgeline is in
compliance with all of the provisions of this Agreement, the Bridgeline Charter
Documents, and in all material respects with the provisions of each mortgage,
indenture, lease, license, other agreement or instrument, judgment, decree,
judicial order, statute and regulation by which it is bound or to which its
properties are subject, and where non-compliance would not have a Material
Adverse Effect on Bridgeline.
4.11. ABSENCE OF CHANGES. No event, occurrence, fact, condition,
change, development or effect that has not been disclosed on the Bridgeline
Disclosure Schedule hereto shall exist or have occurred or come to exist or been
threatened that, individually or in the aggregate, has had or resulted in or
could be expected to become or result in a Material Adverse Effect on
Bridgeline.
4.12. TAXES.
(a) Bridgeline has timely filed all Tax Returns required to be
filed and has paid all Taxes owed (whether or not shown as due on such returns),
including, without limitation, all Taxes which Bridgeline is obligated to
withhold for amounts paid or owing to employees, creditors and third parties.
All Tax Returns filed by Bridgeline were complete and correct in all material
respects. Except as set forth on the Bridgeline Disclosure Schedule, none of the
Tax Returns filed by Bridgeline or Taxes payable by Bridgeline have been the
subject of an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any governmental authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the knowledge of Bridgeline, threatened. Except as set forth on the
Bridgeline Disclosure Schedule, Bridgeline is not currently the beneficiary of
any extension of time within which to file any Tax Return, and Bridgeline has
not waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. All material
elections with respect to Taxes with respect to Bridgeline,
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as of the date hereof, are set forth in Bridgeline Financial Statements or in
the Bridgeline Disclosure Schedule.
(b) Bridgeline is not a party to any Tax sharing agreement or
similar arrangement. Bridgeline has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Bridgeline), and Bridgeline does not have any liability for the Taxes
of any Person.
(c) There are no liens for Taxes upon any of the assets of
Bridgeline, other than for ad valorem Taxes not yet due and payable. The unpaid
Taxes of Bridgeline did not, as of September 30, 2005, exceed by any material
amount the reserve for actual Taxes (as opposed to any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) as
shown on Bridgeline's unaudited balance sheet dated July 31, 2006, and will not
exceed by any material amount such reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Bridgeline in filing its Tax Returns. Bridgeline has not incurred any liability
for Taxes from October 1, 2005 through the Closing Date other than in the
ordinary course of business consistent with past practice. Bridgeline is not
obligated to file any Tax Return in any jurisdiction (whether foreign or
domestic) other than those jurisdictions in which it currently files Tax
Returns.
4.13. REAL PROPERTY.
(a) The Bridgeline Disclosure Schedule sets forth the
addresses and uses of all real property that Bridgeline owns, leases or
subleases, and any lien or encumbrance on any such owned real property or
Bridgeline's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, the
lease term and the rental obligations of the lessee thereunder.
(b) There are no defaults under any existing leases, subleases
or other contractual obligations pertaining to real property that Bridgeline
owns, leases or subleases, and to the best knowledge of Bridgeline, by any other
party, which might curtail in any material respect the present use of
Bridgeline's property listed on the Bridgeline Disclosure Schedule.
4.14. PERSONAL PROPERTY & CAPITAL EQUIPMENT. The Bridgeline
Disclosure Schedule sets forth a full and complete list of all personal
property, including capital equipment, owned or leased by Bridgeline. Except as
set forth on the Bridgeline Disclosure Schedule, and except for property sold or
otherwise disposed of in the ordinary course of business, Bridgeline has good
and marketable title, free and clear of any lien, charge, restriction or
encumbrance, to all of such personal property. All material items of such
personal property used in the operation of the business of Bridgeline are in
good operating condition, normal wear and tear accepted.
4.15. INTELLECTUAL PROPERTY.
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(a) The "BRIDGELINE INTELLECTUAL PROPERTY" consists of all
material trade secrets, copyrights, patents, trademarks, service marks, trade
dress, all registrations and applications with respect thereto and all licenses
or rights under the same, that are owned or used by Bridgeline, including
without limitation, any of the foregoing embodied or contained in any of the
following: net lists; domain names and URLs and textual information contained in
web sites; schematics; manufacturing processes; customer lists and supplier
lists; know-how and show-how; computer software programs, source code and object
code; complete system build software; development and test tools, documentation,
specifications, programmer and user manuals used by Bridgeline to install,
operate, maintain, correct, test, repair enhance, extend, modify, prepare
derivative works based upon, design, develop, reproduce and package software;
all license and other rights in any third-party product, intellectual property,
proprietary or personal rights, documentation, or tangible or intangible
property; all documents, records and electronic files relating to the design,
end user documentation, manufacturing, quality control, sales, marketing, or
customer support; and all Bridgeline Products & Services (as defined below).
"BRIDGELINE PRODUCTS & SERVICES" means all products of Bridgeline currently
being licensed or sold or that are currently being developed, including all
hardware products and tools, software products and tools, and services that are
currently licensed, offered or under development by Bridgeline. The Bridgeline
Intellectual Property and Bridgeline Products & Services do not include any
intellectual property, products or services that are purchased or licensed from
third parties and are otherwise listed on the Disclosure Schedules as "Third
Party Intellectual Property."
(b) The Bridgeline Disclosure Schedule lists: (i) all patents,
copyright registrations, mask works, trademarks, service marks, trade dress, any
renewal rights for any of the foregoing, and any applications and registrations
for any of the foregoing, which are included in Bridgeline Intellectual Property
and owned by or on behalf of Bridgeline; (ii) all Bridgeline Products &
Services; and (iii) all licenses, sublicenses and other agreements to which
Bridgeline is a party and pursuant to which Bridgeline or any other person is
authorized to use Bridgeline Intellectual Property or exercise any other right
with regard thereto. Bridgeline has delivered to the Seller true and complete
copies of the agreements described in (iii) hereof.
(c) Bridgeline Intellectual Property consists solely of items
and rights which are either: (i) owned by Bridgeline; (ii) in the public domain;
or (iii) rightfully used and authorized for use by Bridgeline and its successors
pursuant to a valid license. Bridgeline has all rights in Bridgeline
Intellectual Property necessary to commercially exploit the same in connection
with Bridgeline's current, former, and planned or scheduled (whether for release
or development) activities in all geographic locations and fields of use in
which Bridgeline currently operates or is scheduled to operate, and to
sublicense any or all such rights to third parties, including the right to grant
further sublicenses. All software created by Bridgeline is as described in the
Documentation and performs in all material respects in accordance with the
specifications included in the Documentation (subject to software errors or bugs
which do not interfere in any material respect with the operation of the
software). Bridgeline has taken all reasonable measures to protect the
proprietary nature of each item of Bridgeline Intellectual Property. No other
person or entity has any rights to any of Bridgeline Intellectual Property
(except pursuant to agreements or licenses specified in the Bridgeline
Disclosure Schedule), and to the knowledge of Bridgeline, no other person or
entity is infringing, violating or
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misappropriating any of the Bridgeline Intellectual Property. Bridgeline owns or
has the right to use all Intellectual Property necessary (i) to use, market,
distribute and perform, as the case may be, the Bridgeline Products & Services,
or (ii) to operate Bridgeline's internal systems that are material to the
business or operations of Bridgeline, including, without limitation, computer
hardware systems, software applications and embedded systems (the "BRIDGELINE
INTERNAL SYSTEMS"). Each item of Bridgeline Intellectual Property will be owned
or available for use by Bridgeline immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to the
Closing, except for any changes that do not, either individually or on the
aggregate, have a Material Adverse Effect on Bridgeline. Except as set forth on
the Bridgeline Disclosure Schedule, to Bridgeline's knowledge the Bridgeline's
software and the Bridgeline Internal Systems are free from significant defects
or programming errors and conform in all material respects to the written
documentation and specifications therefor.
(d) Bridgeline is not, nor as a result of the execution or
delivery of this Agreement, the other Transaction Documents and all other
agreements contemplated hereby, or performance of Bridgeline's obligations
hereunder, will Bridgeline be, in violation of any license, sublicense or other
agreement to which Bridgeline is a party. The Bridgeline Disclosure Schedule
lists all contracts or agreements under which Bridgeline is obligated to provide
any consideration (whether financial or otherwise) to any third party, or under
which any third party otherwise would be entitled to any consideration, with
respect to any exercise of rights by Bridgeline in Bridgeline Intellectual
Property. The Bridgeline Disclosure Schedule identifies each item of Bridgeline
Intellectual Property that is owned by a party other than Bridgeline, and the
license or agreement pursuant to which Bridgeline uses it (excluding
off-the-shelf software programs licensed by Bridgeline pursuant to "shrink wrap"
or "click wrap" licenses, such exclusion only extending to programs used by
Bridgeline solely for non-revenue generating administrative functions).
(e) Except as set forth on the Bridgeline Disclosure Schedule,
the use, reproduction, modification, distribution, licensing, sublicensing, sale
or any other exercise of rights by Bridgeline with respect to any of the
Bridgeline Products & Services does not infringe any copyright, trade secret,
trademark, service xxxx, trade name, trade dress or mask work, or any patent,
moral right or other intellectual property right, right of privacy, or right in
personal data of any person. No claims (i) challenging the validity,
effectiveness or ownership by Bridgeline of any of the Bridgeline Intellectual
Property, or (ii) to the effect that the use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale or any other exercise
of rights by Bridgeline with respect to any of the Bridgeline Products &
Services infringes or will infringe on any intellectual property or other
proprietary or personal right of any person, have been asserted to Bridgeline
or, to the knowledge of Bridgeline, are threatened by any person, nor to the
knowledge of Bridgeline are there any valid grounds for any bona fide claim of
any such kind. All granted or issued patents and mask works and all registered
trademarks listed on the Bridgeline Disclosure Schedule and all registered
copyrights held by Bridgeline are valid, enforceable and subsisting. To the
knowledge of Bridgeline, there are no pending or unissued patent rights which
infringe upon or impair the Bridgeline Intellectual Property. To the knowledge
of Bridgeline, there is no unauthorized use, infringement or misappropriation of
any of Bridgeline Intellectual Property by any third party, employee or former
employee.
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(f) Bridgeline has not disclosed the source code for any of
the software owned by Bridgeline or other confidential information constituting,
embodied in or pertaining to the software to any person or entity, except
pursuant to the agreements listed on the Bridgeline Disclosure Schedule, and
Bridgeline has taken reasonable measures to prevent disclosure of such source
code. No parties other than Bridgeline possess any current or contingent rights
to any source code that is part of Bridgeline Intellectual Property.
(g) Except as set forth on the Bridgeline Disclosure
Schedules, all of the copyrightable materials (including software) incorporated
in or bundled with Bridgeline's products have been created by employees of
Bridgeline within the scope of their employment by Bridgeline or by independent
contractors of Bridgeline who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to Bridgeline. No
portion of such copyrightable materials was jointly developed with any third
party. The Bridgeline Disclosure Schedule lists all parties who have created any
portion of, or otherwise have any rights in or to, Bridgeline Intellectual
Property, other than employees of Bridgeline who have no rights in or to any
Bridgeline Intellectual Property. Except as set forth on the Bridgeline
Disclosure Schedule, Bridgeline has secured from all parties who have created
any portion of, or otherwise have any rights in or to, Bridgeline Intellectual
Property valid and enforceable written assignments of any such work or other
rights to Seller and has provided true and complete copies of such assignments
to Bridgeline.
(h) The Bridgeline Disclosure Schedule identifies each license
or other agreement (or type of license or other agreement) pursuant to which
Bridgeline has licensed, distributed or otherwise granted any rights to any
third party with respect to any Bridgeline Intellectual Property. The Bridgeline
Disclosure Schedule includes a true and complete list of support and maintenance
agreements relating to Bridgeline Intellectual Property including the identity
of the parties entitled to receive such service or maintenance, and the term of
such agreements.
(i) Except as set forth on the Bridgeline Disclosure Schedule,
Bridgeline has obtained written agreements from all employees and third parties
with whom Bridgeline has shared confidential proprietary information (i) of
Bridgeline, or (ii) received from others which Bridgeline is obligated to treat
as confidential, which agreements require such employees and third parties to
keep such information confidential. None of the present or former employees,
officers or directors of Bridgeline owns directly or indirectly, in whole or in
part, any Bridgeline Intellectual Property or application therefor.
(j) To the knowledge of Bridgeline, none of the Bridgeline
Internal Systems, or the use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
The Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by Bridgeline alleging any such infringement, violation or
misappropriation, and Bridgeline has provided to the Seller complete and
accurate copies of all written documentation in the possession of Bridgeline
relating to any such complaint, claim, notice or threat. Bridgeline has provided
to the Seller complete and accurate copies of all written
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documentation in Bridgeline's possession relating to claims or disputes known to
Bridgeline concerning any Bridgeline Intellectual Property.
4.16. AGREEMENTS OF DIRECTORS, OFFICERS, EMPLOYEES AND CONSULTANTS.
No current or former director, officer or employee of or consultant to
Bridgeline is in violation of any term of any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement containing restrictive
covenants relating to the conduct of any such current or former director,
officer, employee, or consultant or otherwise relating to the use of trade
secrets or proprietary information of others by any such person. The Bridgeline
Disclosure Schedule hereto sets forth the name and address of each person
currently serving as an officer or a director of Bridgeline, and each person
listed on the Bridgeline Disclosure Schedule was duly elected and is presently
serving as such officer or director. Set forth on the Bridgeline Disclosure
Schedule is a list of all current or former employees and consultants of
Bridgeline who have (i) executed a non-disclosure agreement with Bridgeline or
(ii) executed a non-competition agreement with Bridgeline. Except as disclosed
on the Bridgeline Disclosure Schedule, since December 31, 2005, Bridgeline has
not paid or become committed to pay any bonus or similar additional compensation
to any officer, director or employee of Bridgeline.
4.17. GOVERNMENTAL LICENSES. Bridgeline has all the material
permits, licenses, orders, franchises and other rights and privileges of all
federal, state, local or foreign governmental or regulatory bodies necessary for
the Bridgeline to conduct its business as presently conducted. All such permits,
licenses, orders, franchises and other rights and privileges are in full force
and effect and no suspension or cancellation of any of them is threatened, and
none of such permits, licenses, orders, franchises or other rights and
privileges will be affected by the consummation of the transactions contemplated
by this Agreement or the Transaction Documents.
4.18. SECURITIES ACTS. Bridgeline has complied with all applicable
federal or state securities laws in connection with the transactions
contemplated by this Agreement and all previous issuances of securities.
4.19. INSURANCE COVERAGE. The Bridgeline Disclosure Schedule
contains an accurate summary of the insurance policies currently maintained by
Bridgeline. Except as described on the Bridgeline Disclosure Schedule, there are
currently no claims pending against Bridgeline pursuant to any insurance policy
currently in effect and covering the property, the business or the employees of
Bridgeline. All such policies (a) are in full force and effect and (b) are
sufficient for compliance by Bridgeline with all requirements of all agreements
to which Bridgeline is a party.
4.20. EMPLOYEE MATTERS. Except as set forth in the Bridgeline's
Disclosure Schedule, neither Bridgeline nor any person that together with
Bridgeline would be treated as an ERISA Affiliate under Section 414 of the Code
has established or maintains or is obligated to contribute to (a) any bonus,
severance, stock option, or other type of incentive compensation plan, program,
agreement, policy, commitment, contract or arrangement (written or oral); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee
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benefit plan, fund or program, including, but not limited to, those described in
Section 3(3) of ERISA. All such Plans have been operated and administered in all
material respects in accordance with their terms, as applicable, with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code. No act or failure to act by
Bridgeline has resulted in, nor does Bridgeline have knowledge of a non-exempt
"prohibited transaction" (as defined in ERISA) with respect to the Plans.
Neither Bridgeline nor any ERISA Affiliate maintains or has ever maintained or
contributed to any Plan subject to Title IV of ERISA. With respect to the
employees and former employees of Bridgeline, there are no employee
post-retirement medical or health plans in effect, except as required by Section
4980B of the Code.
4.21. CUSTOMERS. Except as set forth on the Bridgeline Disclosure
Schedule:
(a) The relationships of Bridgeline with its significant
suppliers and customers are good commercial working relationships and no
significant supplier or customer of Bridgeline has canceled or otherwise
terminated, or to Bridgeline's knowledge, threatened to cancel or otherwise to
terminate its relationship with Bridgeline, or has during the last twelve (12)
months decreased materially, or threatened to decrease or limit materially, its
services, supplies or materials for use by Bridgeline or its usage or purchase
of the services or products of Bridgeline, except for normal cyclical changes
related to customers' businesses and except for changes which have not had a
Material Adverse Effect on Bridgeline.
(b) No current supplier or customer has notified Bridgeline
that it intends to cancel or otherwise substantially modify its relationship
with Bridgeline or to decrease materially or limit its services, supplies or
materials to Bridgeline, or its usage or purchase of the services of Bridgeline,
and, to the best knowledge of Bridgeline, the consummation of the transactions
contemplated hereby will not materially adversely affect the relationship of
Bridgeline with any such supplier or customer.
4.22. NO BROKERS OR FINDERS. Except as set forth on the Bridgeline
Disclosure Schedule, no person or entity has or will have, as a result of the
actions of Bridgeline, any right, interest or claim against or upon Bridgeline
for any commission, fee or other compensation as a finder or broker arising from
the transactions contemplated by this Agreement.
4.23. TRANSACTIONS WITH INSIDERS. Except as set forth on the
Bridgeline Disclosure Schedule, there are no loans, leases or other contracts
between Bridgeline and any officer or director of Bridgeline, or any person or
entity owning five percent (5%) or more of the total number of issued and
outstanding shares of Bridgeline Common Stock or any respective family member or
affiliate of any such officer, director or shareholder.
4.24. ASSUMPTIONS, GUARANTEES. Except as set forth on the Bridgeline
Disclosure Schedule, Bridgeline has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other person or entity, except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
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4.25. BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Except
as set forth on the Bridgeline Disclosure Schedule, Bridgeline has no account or
safe deposit box in any bank and no person or entity has any power, whether
singly or jointly, to sign any checks on behalf of Bridgeline, to withdraw any
money or other property from any bank, brokerage or other account of Bridgeline,
or to act pursuant to any power of attorney granted by Bridgeline at any time
for any purpose.
4.26. CORPORATE BOOKS. The books and records of Bridgeline made
available to Seller and the Shareholder for inspection include copies of the
Bridgeline Charter Documents as currently in effect and accurately record
therein in all material respects all actions, proceedings, consents and meetings
of the Board of Directors and shareholders of Bridgeline and any committees
thereof. The books and records of Bridgeline have been, and are being,
maintained in accordance with any applicable legal and regulatory requirements
and reflect only actual transactions.
4.27. LIST OF MATERIAL CONTRACTS AND COMMITMENTS. The Disclosure
Schedule sets forth a complete and accurate list of all material contracts to
which Bridgeline is a party or by or to which any of its assets or properties is
bound or subject. As used on the Bridgeline Disclosure Schedule, the phrase
"BRIDGELINE MATERIAL CONTRACT" means and includes every material agreement or
material understanding of any kind, written or oral, which is legally
enforceable by or against Bridgeline, and specifically includes without
limitation (a) contracts and other agreements with any current or former
officer, manager, employee, consultant or shareholder or any partnership,
company, joint venture or any other entity in which any such person or entity
has an interest; (b) agreements with any labor union or association representing
any Bridgeline employee; (c) contracts and other agreements for the provision of
services other than by employees of Bridgeline which entail a reasonably
foreseeable financial consequence to any contracting party of at least $15,000;
(d) bonds or other security agreements provided by any party in connection with
the business of Bridgeline; (e) contracts and other agreements for the sale of
any of the assets or properties of Bridgeline other than in the ordinary course
of business or for the grant to any person or entity of any preferential rights
to purchase any of said assets or properties; (f) joint venture agreements
relating to the assets, properties or business of Bridgeline or by or to which
any of its assets or properties are bound or subject; (g) contracts or other
agreements under which Bridgeline agrees to indemnify any party, to share tax
liability of any party, or to refrain from competing with any party; (h) any
contracts or other agreements with regard to any indebtedness of Bridgeline; or
(i) any other contract or other agreement whether or not made in the ordinary
course of business and involving a reasonably foreseeable financial consequence
to any contracting party of at least $15,000. Bridgeline has delivered to Seller
true, correct and complete copies of all such contracts, together with all
modifications and supplements thereto. Except as set forth on the Bridgeline
Disclosure Schedule, each of the contracts listed on the Bridgeline Disclosure
Schedule is in full force and effect. Bridgeline is not in breach of any of the
material provisions of any such Bridgeline Material Contract, nor, to the best
knowledge of Bridgeline, is any other party to any such contract in default
thereunder, nor does any event or condition exist which with notice or the
passage of time or both would constitute a default of a material provision
thereunder, except for any such breach or default that individually and in the
aggregate would not have a Material Adverse Effect on Bridgeline. Bridgeline has
performed in all material respects all obligations required to be performed by
it
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under each such contract as of the Closing.
4.28. PRIVACY AND DATA COLLECTION. Bridgeline has at all times
complied in all material respects with all laws and regulations relating or
applicable to privacy, publicity, data protection, collection, storage,
transfer, release and use of personal information and user information gathered
or accessed in the course of the business and operations of Bridgeline.
Bridgeline has at all times complied in all material respects with all rules,
policies and procedures established by Bridgeline from time to time with respect
to privacy, publicity, data protection, collection, storage, transfer and use of
personal information and user information gathered or accessed in the course of
the business and operations of Bridgeline (collectively, the "BRIDGELINE PRIVACY
POLICIES"), noncompliance with which would result in a Material Adverse Effect
on Bridgeline. No claims have been asserted or, to the knowledge of Bridgeline,
threatened against Bridgeline by any Person or governmental entity alleging a
violation of such Person's, or any other Person's, privacy, publicity, personal
or confidentiality rights under any such laws, or a breach or other violation of
any of the Bridgeline Privacy Policies, where such violation would have a
Material Adverse Effect on Bridgeline. Bridgeline has taken commercially
reasonable measures (including but not limited to, implementing and monitoring
compliance with adequate measures with respect to technical and physical
security) to ensure that personal and consumer information is protected against
loss and against unauthorized access, use, modification, disclosure or other
misuse. To the knowledge of Bridgeline, there has been no unauthorized access
to, use, modification, disclosure or other misuse of such information. Neither
the execution, delivery nor performance of this Agreement nor the consummation
of the transactions contemplated hereby shall result in any breach or violation
of the Bridgeline Privacy Policies or violate any Law with respect to such data
or information.
4.29. ACCOUNTS RECEIVABLE. The Bridgeline Disclosure Schedule sets
forth a full and complete list of Bridgeline's accounts receivable and accounts
receivable reserve as of close of business on a date within two (2) business
days of the date of this Agreement. Except as set forth on the Disclosure
Schedule, all accounts and notes receivable reflected on the Bridgeline
Financial Statements, and all accounts and notes receivable arising subsequent
to the date of such balance sheets, have arisen in the ordinary course of
business and represent valid obligations owing to Bridgeline. Except as set
forth on the Bridgeline Disclosure Schedule, to the best knowledge of
Bridgeline, none of Bridgeline's receivables is subject to any claim of offset,
recoupment, setoff or counterclaim and Bridgeline has no knowledge of any
specific facts or circumstances (whether asserted or unasserted) that could give
rise to any such claim. No material amount of receivables are contingent upon
the performance by Bridgeline of any obligation or contract other than normal
warranty repair and replacement. No person has any lien on any such receivables
and no agreement for deduction or discount has been made with respect to any
such receivables.
4.30. FOREIGN CORRUPT PRACTICES ACT. Bridgeline has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations thereunder. There is not
now, and there has never been, any employment by Bridgeline of, or record
ownership in Bridgeline by, any governmental or political official in any
country in the world.
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4.31. DISCLOSURE. Neither the representations or warranties made by
Bridgeline in this Agreement, nor the Bridgeline Disclosure Schedule or any
other certificate executed and delivered by Bridgeline pursuant to this
Agreement, when taken together, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading in light of the circumstances
under which they were furnished.
ARTICLE V
COVENANTS OF SELLER
-------------------
During the period from the date of this Agreement (except as otherwise
indicated) and continuing until the earlier of the termination of this Agreement
or the Effective Time, Seller agrees (except as expressly contemplated by this
Agreement or otherwise permitted with Bridgeline's prior written consent):
5.1. CONDUCT OF BUSINESS IN ORDINARY COURSE. Seller will carry on
its business in the ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use its
best efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers, consultants and employees, except as provided herein, and preserve its
relationships with customers, suppliers and distributors and others having
business dealings with it. Seller will confer on a regular and frequent basis
with representatives of Bridgeline to report operational matters of a material
nature and to report the general status of the ongoing operations of the
business of Seller. The foregoing notwithstanding, Seller will not, without the
prior consent of Bridgeline:
(a) other than in the ordinary course of business consistent
with prior practice, enter into any material commitment or transaction,
including but not limited to any purchase of assets (other than raw materials,
supplies or cash equivalents);
(b) enter into or amend any agreements pursuant to which any
other party is granted support, service, marketing or other rights, other than
in the ordinary course of business consistent with prior practice, or is granted
distribution rights of any type or scope with respect to any products of Seller;
(c) other than in the ordinary course of business consistent
with prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses, franchises, permits, indentures, authorizations,
instruments, or commitments, or amend or otherwise change in any material
respect the terms thereof in a manner adverse to Seller;
(d) commence a lawsuit other than: (i) for the routine
collection of bills, (ii) in such cases where Seller in good faith determines
that failure to commence suit would result in a
-41-
material impairment of a valuable aspect of Seller's business, or (iii) for a
breach of this Agreement or any agreement related hereto;
(e) modify in any material respect existing discounts or other
terms and conditions with dealers, distributors and other resellers of Seller's
products or services in a manner adverse to Seller;
(f) take any action which would make any representation or
warranty in this Agreement untrue or incorrect, as if made as of such time;
(g) take any action that would or would reasonably be expected
to prevent, impair or materially delay the ability of Bridgeline or Seller to
consummate the transactions contemplated by this Agreement; or
(h) agree in writing or otherwise to take any of the foregoing
actions.
5.2. DIVIDENDS, ISSUANCE OF, OR CHANGES IN SECURITIES. Seller will
not: (i) declare or pay any dividends on or make other distributions to its
shareholders (whether in cash, shares or property), (ii) issue, deliver, sell,
or authorize, propose, or agree to, or commit to the issuance, delivery, or sale
of any shares of its capital stock of any class, or any securities convertible
into its capital stock, any options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions, arrangements
or rights of any character obligating Seller to issue any such shares, or other
convertible securities; (iii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of capital stock of Seller, (iv)
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or options or warrants related thereto, or (v) propose any of the
foregoing.
5.3. GOVERNING DOCUMENTS. Seller will not amend the Seller Charter
Documents.
5.4. SOLICITATION.
(a) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement in accordance
with Article X, Seller shall not, directly or indirectly, through any officer,
director, employee, representative or agent, (i) solicit, initiate, or knowingly
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of all or substantially all of the assets, sale of shares of
capital stock (including without limitation by way of a tender offer) or similar
transactions involving Seller, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as a "TAKEOVER PROPOSAL"), (ii) engage in negotiations or discussions
concerning any Takeover Proposal, or (iii) agree to, approve or recommend any
Takeover Proposal.
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(b) Seller shall notify Bridgeline immediately (and no later
than 24 hours) after receipt by Seller (or its advisors or agents) of any
Takeover Proposal or any request for information in connection with a Takeover
Proposal or for access to the properties, books or records of Seller by any
Person that informs Seller that it is considering making, or has made, a
Takeover Proposal. Such notice shall be made orally and in writing in accordance
with the provisions of Section 14.2, and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact.
5.5. NO DISPOSITIONS. Seller will not sell, lease, license,
transfer, mortgage, encumber or otherwise dispose of any of its material assets
or cancel, release, or assign any material indebtedness or claim, except in the
ordinary course of business.
5.6. INDEBTEDNESS. Seller will not incur any indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise.
5.7. COMPENSATION. Seller will not adopt or amend, or modify in any
material respect, any Plan or pay any pension or retirement allowance not
required by any existing Plan. Other than in accordance with existing guidelines
of Seller's business, without the prior consent of Bridgeline, Seller will not
enter into or modify any employment or severance contracts, increase the
salaries, wage rates or fringe benefits of its officers, directors, employees or
consultants or grant or pay bonuses or other remuneration except for current
salaries, severance and other remuneration for which Seller is obligated under
arrangements existing prior to the Balance Sheet Date to which Seller is a party
and which have been disclosed in the Disclosure Schedule.
5.8. CLAIMS. Seller will not settle any claim, action or
proceeding, except in the ordinary course of business consistent with prior
practice.
5.9. ACCESS TO PROPERTIES AND RECORDS. Subject to contractual and
other obligations, Seller will give Bridgeline and its representatives full
access, during reasonable business hours and following reasonable notice but in
such a manner as not unduly to disrupt the business of Seller, to its senior
management, senior technical personnel, premises, properties, contracts,
commitments, books, records and affairs, and will provide Bridgeline with such
financial, technical and operating data and other information pertaining to its
business as Bridgeline may request. With Seller's prior consent, which will not
be unreasonably withheld, Bridgeline will be entitled in conjunction with Seller
personnel to make appropriate inquiries of third parties in the course of its
investigation.
5.10. BREACH OF REPRESENTATIONS AND WARRANTIES. Seller will not take
any action or omit to take any action that would cause or constitute a breach of
any of the representations and warranties set forth in Article II or that would
cause any of such representations and warranties to be inaccurate in any
material respect or that would constitute a breach of any of its other
obligations under this Agreement. In the event of, and promptly after becoming
aware of, the occurrence of or the pending or threatened occurrence of any event
that would cause or
-43-
constitute such a breach or inaccuracy, Seller will give detailed notice thereof
to Bridgeline and will use its best efforts to prevent or remedy promptly such
breach or inaccuracy.
5.11. CONSENTS. Seller will promptly apply for or otherwise seek and
use its best efforts to obtain, all Consents, and make all filings with
Governmental Entities, required with respect to the consummation of the Merger.
5.12. TAX RETURNS. Seller will promptly provide or make available to
Bridgeline copies of all tax returns, reports and information statements that
have been filed or are filed after the date of this Agreement and prior to the
Closing Date.
5.13. NOTICE OF EVENTS. Throughout the period between the date of
this Agreement and the Effective Time, Seller will promptly advise and consult
with Bridgeline regarding any and all material events and developments
concerning its financial position, results of operation, assets, liabilities or
business or any event likely to cause a Material Adverse Effect on Seller or to
make any of the representations and warranties of Seller contained in this
Agreement incorrect in any material respect.
5.14. BEST EFFORTS. Seller will use its best efforts to effectuate
the transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to Closing under this Agreement.
5.15. INSURANCE. Seller will use its best efforts to maintain in
force at the Effective Time policies of insurance of the same character and
coverage as those described in the Disclosure Schedule, and Seller will promptly
notify Bridgeline in writing of any changes in such insurance coverage occurring
prior to the Effective Time.
5.16. SELLER OPTIONS. Seller shall take all actions necessary to
substitute on an equitable basis all Seller Options with options to acquire
Bridgeline Common Stock in accordance with Section 1.6.
5.17. TERMINATION OF SELLER 401(K) PLAN. Seller shall terminate its
tax-qualified 401(k) plan (the "Seller 401(k) Plan") immediately prior to the
Effective Time.
ARTICLE VI
COVENANTS OF THE SHAREHOLDER
----------------------------
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time (or later
where so indicated), the Shareholder agrees (except as expressly contemplated by
this Agreement or with Bridgeline's prior written consent):
6.1. BREACH OF REPRESENTATIONS AND WARRANTIES. The Shareholder will
not take any
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action which would cause or constitute a breach of any of the representations
and warranties set forth in Article III or which would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event which would cause or constitute such a
breach or inaccuracy, the Shareholder will give detailed notice thereof to
Bridgeline and will use its best efforts to prevent or remedy promptly such
breach or inaccuracy.
6.2. BEST EFFORTS. The Shareholder will use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement.
6.3. NOTICE OF EVENTS. Throughout the period between the date of
this Agreement and the Effective Time, the Shareholder will promptly advise and
consult with Bridgeline regarding any and all material adverse change to the
representations, warranties and covenants of the Shareholder contained in this
Agreement.
ARTICLE VII
COVENANTS OF BRIDGELINE
-----------------------
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time (or later
where so indicated), Bridgeline agrees (except (i) as expressly contemplated by
this Agreement, (ii) with Seller's prior written consent or (iii) otherwise
required in connection with the IPO):
7.1. CONDUCT OF BUSINESS IN ORDINARY COURSE. Bridgeline will carry on
its business in the ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use its
best efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers, consultants and employees, except as provided herein, and preserve its
relationships with customers, suppliers and distributors and others having
business dealings with it. The foregoing notwithstanding, Bridgeline will not,
without the prior consent of the Seller:
(a) other than in the ordinary course of business consistent
with prior practice, enter into any material commitment or transaction,
including but not limited to any purchase of assets (other than raw materials,
supplies or cash equivalents);
(b) enter into or amend any agreements pursuant to which any
other party is granted support, service, marketing or other rights, other than
in the ordinary course of business consistent with prior practice, or is granted
distribution rights of any type or scope with respect to any products of
Bridgeline;
(c) other than in the ordinary course of business consistent
with prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses,
-45-
franchises, permits, indentures, authorizations, instruments, or commitments, or
amend or otherwise change in any material respect the terms thereof in a manner
adverse to Bridgeline;
(d) take any action which would make any representation or
warranty in this Agreement untrue or incorrect, as if made as of such time;
(e) take any action that would or would reasonably be expected
to prevent, impair or materially delay the ability of Bridgeline or Seller to
consummate the transactions contemplated by this Agreement; or
(f) agree in writing or otherwise to take any of the foregoing
actions.
7.2. DIVIDENDS, ISSUANCE OF, OR CHANGES IN SECURITIES. Bridgeline
will not: (i) declare or pay any dividends on or make other distributions to its
shareholders (whether in cash, shares or property), (ii) issue, deliver, sell,
or authorize, propose, or agree to, or commit to the issuance, delivery, or sale
of any shares of its capital stock of any class, or any securities convertible
into its capital stock, any options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions, arrangements
or rights of any character obligating Bridgeline to issue any such shares, or
other convertible securities; (iii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of
Bridgeline, (iv) repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock or options or warrants related thereto, or (v)
propose any of the foregoing.
7.3. GOVERNING DOCUMENTS. Bridgeline will not amend the Bridgeline
Charter Documents.
7.4. NO DISPOSITIONS. Bridgeline will not sell, lease, license,
transfer, mortgage, encumber or otherwise dispose of any of its material assets
or cancel, release, or assign any material indebtedness or claim, except in the
ordinary course of business.
7.5. INDEBTEDNESS. Bridgeline will not incur any indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise..
7.6. ACCESS TO PROPERTIES AND RECORDS. Subject to contractual and
other obligations, Bridgeline will give Seller and its representatives full
access, during reasonable business hours and following reasonable notice but in
such a manner as not unduly to disrupt the business of Bridgeline, to its senior
management, senior technical personnel, premises, properties, contracts,
commitments, books, records and affairs, and will provide Seller with such
financial, technical and operating data and other information pertaining to its
business as Seller may request. With Bridgeline's prior consent, which will not
be unreasonably withheld, Seller will be entitled in conjunction with Bridgeline
personnel to make appropriate inquiries of third parties in the course of its
investigation.
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7.7. BREACH OF REPRESENTATIONS AND WARRANTIES. Bridgeline will not
take any action which would cause or constitute a breach of any of the
representations and warranties set forth in Article IV or which would cause any
of such representations and warranties to be inaccurate in any material respect.
In the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event which would cause or constitute
such a breach or inaccuracy, Bridgeline will give detailed notice thereof to
Seller and will use its best efforts to prevent or remedy promptly such breach
or inaccuracy.
7.8. CONSENTS. Bridgeline will promptly apply for or otherwise seek
and use its best efforts to obtain, all Consents, and make all filings with
Governmental Entities, required with respect to the consummation of the Merger.
7.9. TAX RETURNS. Bridgeline will promptly provide or make
available to Seller copies of all tax returns, reports and information
statements that have been filed or are filed after the date of this Agreement
and prior to the Closing Date.
7.10. BEST EFFORTS. Bridgeline will use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement.
7.11. NOTICE OF EVENTS. Throughout the period between the date of
this Agreement and the Effective Time, Bridgeline will promptly advise and
consult with Seller regarding any and all material adverse change to the
representations, warranties and covenants of Bridgeline contained in this
Agreement.
7.12. BENEFIT PLANS. As soon as administratively practicable after
the Closing Date and to the extent allowable under the Bridgeline Benefit Plans
(as defined below), Bridgeline shall take all reasonable action so that
employees of Seller shall be entitled to participate in each employee benefit
plan, program or arrangement of the Bridgeline of general applicability (the
"BRIDGELINE BENEFITS Plans") to the same extent as similarly-situated employees
of Bridgeline and its subsidiaries (it being understood that inclusion of the
employees of Seller in the Bridgeline Benefits Plans may occur at different
times with respect to different plans). Bridgeline covenants and agrees that the
Bridgeline Benefit Plans do not contain any waiting periods for eligibility of
participation for new employees (with the exception of a thirty-day waiting
period for eligibility to participate in Bridgeline's 401k Plan).
ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
In addition to the foregoing, Bridgeline, Seller and the Shareholder
agree to take the following actions after the execution of this Agreement.
8.1. LEGAL CONDITIONS TO THE MERGER. Each of Bridgeline, Seller and
the Shareholder
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will use all reasonable efforts to take actions necessary to comply promptly
with all legal requirements which may be imposed on it with respect to the
Merger. Each of Bridgeline, Seller and the Shareholder will use all reasonable
efforts to take all actions to obtain (and to cooperate with the other parties
in obtaining) any consent required to be obtained or made by Seller, Bridgeline
or the Shareholder in connection with the Merger, or the taking of any action
contemplated thereby or by this Agreement.
8.2. EMPLOYEE MATTERS. Nothing contained herein will be considered
as requiring Seller or Bridgeline to continue the employment of any employee for
any specified period, at any specified location or under any specified job
category, except as specifically provided for in an offer letter or other
agreement of employment. Except as otherwise set forth herein, it is
specifically understood that continued employment with Seller or employment with
Bridgeline is not offered or implied for any employees of Seller.
8.3. ADDITIONAL AGREEMENTS. In case at any time after the Closing
Date any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
Seller, the parties will take all such necessary action.
8.4. PUBLIC ANNOUNCEMENTS. Except as may be required by law or
stock market regulations, neither Bridgeline nor Seller will disseminate any
press release or other announcement concerning this Agreement or the
transactions contemplated herein to any third party (except to the directors,
officers and employees of the parties to this Agreement whose direct involvement
is necessary for the consummation of the transactions contemplated under this
Agreement, or to the attorneys, advisors and accountants of the parties hereto)
without the prior written agreement of Bridgeline and Seller.
8.5. CONFIDENTIALITY. Seller, Bridgeline and the Shareholder have
entered into a Non-Disclosure Agreement, dated November 1, 2005 (the
"CONFIDENTIALITY AGREEMENT"), concerning each party's obligations to protect the
confidential information of the other party. Seller, the Shareholder and
Bridgeline each hereby affirm each of their obligations under such agreement. If
this Agreement is terminated in accordance with Article X hereof, Bridgeline
will, and will cause its accountants, counsel and other representatives to
deliver to Seller all documents and other material, and all copies thereof,
obtained by Bridgeline or on its behalf from Seller in connection with this
Agreement, whether so obtained before or after the execution hereof, and will
not disclose any such information or documents to any third parties or make any
use of such. If this Agreement is terminated in accordance with Article X
hereof, each of Seller and the Shareholder will, and will cause its accountants,
counsel and other representatives to, deliver to Bridgeline all documents and
other material, and all copies thereof, obtained by Seller or on its behalf or
by the Shareholder from Bridgeline in connection with this Agreement, whether so
obtained before or after the execution hereof, and will not disclose any such
information or documents to any third parties or make any use of such.
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ARTICLE IX
CONDITIONS PRECEDENT
--------------------
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger will be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Governmental Approvals. Other than the filing of the
Merger Documents with the Secretary of State of the State of Delaware and the
Secretary of State of the State of Georgia and the effectiveness of the
Registration Statement filed with the Securities and Exchange Commission, all
statutory requirements and all Consents of Governmental Entities legally
required for the consummation of the Merger and the transactions contemplated by
this Agreement will have been filed, occurred, or been obtained, other than such
Consents for which the failure to obtain would not have a material adverse
effect on the consummation of the Merger or the other transactions contemplated
hereby.
(b) No Restraints. No statute, rule or regulation, and no
final and nonappealable order, decree or injunction will have been enacted,
entered, promulgated or enforced by any court or Governmental Entity of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger.
(c) WebOps, LLC License Agreement. Seller shall have assigned
all of the rights, obligations and liabilities under that certain Royalty and
License Agreement, dated July 26, 2006 by and between the Seller and WebOps, LLC
(the "WEBOPS AGREEMENT") to the Shareholder or an entity wholly-owned by the
Shareholder (the "ASSIGNEE"). Notwithstanding the foregoing, effective upon the
Closing, to the extent that the additional services are provided to WebOps, LLC,
including without limitation, the sale and licensing of additional software
solutions or modules other than what is licensed to WebOps, LLC under the WebOps
Agreement, web application development and hosting services, any and all
revenues derived from such services shall inure to the benefit of Bridgeline.
The parties hereto further acknowledge and agree that, effective upon the
Closing, the Shareholder shall be solely responsible for the indemnification
obligations set forth in Section 5 of the WebOps Agreement.
(d) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite stockholder approval of the
Seller in accordance with the GBCC and the Seller Charter Documents.
9.2. CONDITIONS OF OBLIGATIONS OF BRIDGELINE. The obligations of
Bridgeline to effect the Merger are subject to the satisfaction of the following
conditions unless waived by Bridgeline:
(a) Representations and Warranties of Seller. The
representations and warranties of Seller set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects, and all
other representations and warranties of Seller set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this
-49-
Agreement and as of the Closing as though made on and as of the Closing, except
(i) as otherwise contemplated by this Agreement, (ii) as a result of actions
taken or not taken at the direction of or after consultation with and written
concurrence of Bridgeline and (iii) for representations and warranties
specifically limited to an earlier date(s) (in which case such representations
and warranties shall be true and correct as of such date). Bridgeline will have
received a certificate signed by the chief executive officer of Seller to such
effect on the Closing Date.
(b) Representations and Warranties of the Shareholder. The
representations and warranties of the Shareholder set forth in this Agreement
that are qualified as to materiality shall be true and correct in all respects,
and all other representations and warranties of the Shareholder set forth in
this Agreement shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing as though made on and as
of the Closing, except (i) as otherwise contemplated by this Agreement, (ii) as
a result of actions taken or not taken at the direction of or after consultation
with and written concurrence of Bridgeline and (iii) for representations and
warranties specifically limited to an earlier date(s) (in which case such
representations and warranties shall be true and correct as of such date).
Bridgeline will have received a certificate signed by the Shareholder to such
effect on the Closing Date.
(c) Performance of Obligations of Seller. Seller will have
performed in all material respects all agreements and covenants required to be
performed by it under this Agreement prior to the Closing Date except (i) as
otherwise contemplated or permitted by this Agreement and (ii) as a result of
actions taken or not taken at the direction of or after consultation with and
written concurrence of Bridgeline, and Bridgeline will have received a
certificate signed by the chief executive officer of Seller to such effect on
the Closing Date.
(d) Performance of Obligations of the Shareholder. The
Shareholder will have performed in all material respects all agreements and
covenants required to be performed by it under this Agreement prior to the
Closing Date except (i) as otherwise contemplated or permitted by this Agreement
and (ii) as a result of actions taken or not taken at the direction of or after
consultation with and written concurrence of Bridgeline, and Bridgeline will
have received a certificate signed by the Shareholder to such effect on the
Closing Date.
(e) No Material Adverse Effect. No event, occurrence, fact,
condition, change, development or effect that has not been disclosed in the
Seller Financial Statements or on the Disclosure Schedule shall exist or have
occurred or come to exist or been threatened that, individually or in the
aggregate, has had or resulted in or could reasonably be expected to become or
result in a Material Adverse Effect on Seller, and Bridgeline will have received
from the Seller a certificate signed by the Seller to such effect on the Closing
Date.
(f) Stockholder Approval. The holders of not less than 100% of
the outstanding capital stock of Seller shall have executed a written consent to
approve and adopt this Agreement and the Merger, in accordance with the GBCC
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(g) Employment Agreement. Xxxx X. Xxxx shall have entered into
an employment agreement substantially in the form attached hereto as EXHIBIT
9.2G (the "EMPLOYMENT AGREEMENT"), effective as of the Closing Date, relating to
his employment by the Surviving Corporation or any successor entity after the
Merger, which Employment Agreement shall be in full force and effect in
accordance with its terms.
(h) Legal Action. There will not be overtly threatened or
pending any action, proceeding or other application before any court or
Governmental Entity brought by any Person or Governmental Entity: (i)
challenging or seeking to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain any material
damages from Bridgeline or Seller as a result of such transactions; or (ii)
seeking to prohibit or impose any limitations on Bridgeline's ownership or
operation of all or any portion of Seller's business or assets, or to compel
Bridgeline to dispose of or hold separate all or any portion of its or Seller's
business or assets as a result of the transactions contemplated by the Agreement
which if successful would have a material adverse effect on Bridgeline's ability
to receive the anticipated benefits of the Merger and the employment of the
individual referenced in Section 9.2(g).
(i) Termination of Rights and Certain Securities. Any
registration rights, rights of first refusal, voting rights, rights to any
liquidation preference or redemption rights relating to any security of Seller
will have been terminated or waived or satisfied as of the Closing.
(j) Seller Options. The Seller shall have taken all actions
necessary to provide for the substitution of Seller Options for options to
acquire Bridgeline Common Stock in accordance with Section 1.6.
(k) Audit. UHY, LLC shall have completed an audit of Seller
for the fiscal years ending September 30, 2004 and September 30, 2005.
(l) Calculation of Net Working Capital. Seller shall deliver
to Bridgeline the calculation of the Seller Net Working Capital as of the
Closing Date.
(m) Termination of Seller 401(k) Plan. The Seller 401(k) Plan
shall have been terminated in accordance with Section 5.18.
(n) Merger Filing. Seller shall have executed and delivered to
Bridgeline a counterpart signature page of the Merger Documents to be filed with
the Secretary of State of the State of Delaware and the Secretary of State of
the State of Georgia.
(o) Escrow Agreement. Seller and the Escrow Agent shall have
executed and delivered the Closing Escrow Agreement to Bridgeline.
(p) Corporate Proceedings Satisfactory. All corporate and
other proceedings to be taken by Seller in connection with the transactions
contemplated hereby and all documents
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incident thereto will be satisfactory in form and substance to Bridgeline and
its counsel, and Bridgeline and its counsel will have received all such
counterpart originals or certified or other copies of such documents and other
closing documents as they reasonably may request.
(q) Supporting Documents. Seller shall have delivered to
Bridgeline a certificate (i) of the Secretary of State of the State of Georgia
dated on or around the Closing Date, certifying as to the corporate legal
existence and good standing of Seller, (ii) of the Secretary of State of the
District of Columbia and the Secretary of the Commonwealth of Virginia,
certifying as to the good standing of Seller, and (iii) of the Secretary of
Seller, dated as of the Closing Date, certifying on behalf of Seller (1) that
attached thereto is a true and complete copy of the Articles of Incorporation of
Seller, certified by the Secretary of State of the State of Georgia, (2) that
attached thereto is a true and complete copy of the By-Laws of Seller as in
effect on the date of such certification, (3) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors and the
stockholders of Seller authorizing the execution, delivery and performance of
the Agreement and the consummation of the Merger, and (4) to the incumbency and
specimen signature of each officer of Seller executing on behalf of Seller this
Agreement and the other agreements related hereto.
9.3. CONDITIONS OF OBLIGATION OF SELLER AND THE SHAREHOLDER. The
obligation of Seller and the Shareholder to effect the Merger is subject to the
satisfaction of the following conditions unless waived by Seller and the
Shareholder:
(a) Representations and Warranties of Bridgeline. The
representations and warranties of Bridgeline set forth in this Agreement that
are qualified as to materiality shall be true and correct in all respects, and
all other representations and warranties of Bridgeline set forth in this
Agreement shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing as though made on and as of the
Closing, except (i) as otherwise contemplated by this Agreement, (ii) as a
result of actions taken or not taken at the direction of or after consultation
with and written concurrence of Seller and (iii) for representations and
warranties specifically limited to an earlier date(s) (in which case such
representations and warranties shall be true and correct as of such date).
Seller and the Shareholder will have received a certificate signed by the chief
executive officer and the chief financial officer of Bridgeline to such effect
on the Closing Date.
(b) Performance of Obligations of Bridgeline. Bridgeline will
have performed in all material respects all agreements and covenants required to
be performed by them under this Agreement prior to the Closing Date, and Seller
and the Shareholder will have received a certificate signed by the chief
executive officer and the chief financial officer of Bridgeline to such effect
on the Closing Date.
(c) No Material Adverse Effect. No event, occurrence, fact,
condition, change, development or effect that has not been disclosed in the
Bridgeline Financial Statements or on the Bridgeline Disclosure Schedule shall
exist or have occurred or come to exist or been threatened that, individually or
in the aggregate, has had or resulted in or could reasonably be
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expected to become or result in a Material Adverse Effect on Bridgeline, and
Seller will have received from the Seller a certificate signed by the Seller to
such effect on the Closing Date.
(d) Merger Filing. Bridgeline shall have executed and
delivered to Seller a counterpart signature page of the Merger Documents to be
filed with the Secretary of State of the State of Delaware and the Secretary of
State of the State of Georgia.
(e) Delivery of Initial Merger Consideration. On the Effective
Date, Bridgeline shall deliver to the Shareholder a stock certificate
representing the Bridgeline Stock and the Cash Consideration by wire transfer of
immediately available funds.
(f) Bridgeline Stock Options. On the Effective Date,
Bridgeline shall deliver to the Seller Optionholders, stock option agreements
for Bridgeline options in accordance with Section 1.6 in substantially the form
of Exhibit 9.3(f) hereto.
(g) Bridgeline Capitalization. As of the Effective Date, the
total number of shares of Bridgeline Common Stock outstanding shall not exceed
10,000,000 and Bridgeline's authorized capital stock shall consist solely of
Bridgeline Common Stock.
(h) Escrow Agreement. Bridgeline and the Escrow Agent shall
have executed and delivered the Escrow Agreement to the Seller.
(i) Employment Agreement. Bridgeline shall have entered into
the Employment Agreement effective as of the Closing Date
(j) Bridgeline Supporting Documents. Bridgeline shall have
delivered to Seller a certificate (i) of the Secretary of State of the State of
Delaware and the Secretary of the Commonwealth of Massachusetts each dated on or
around the Closing Date, certifying as to the corporate legal existence and good
standing of Bridgeline, and (ii) of the Secretary of Bridgeline, dated as of the
Closing Date, certifying on behalf of Bridgeline: (1) that attached thereto is a
true and complete copy of the Certificate of Incorporation of Bridgeline,
certified by the Secretary of State of the State of Delaware; (2) that attached
thereto is a true and complete copy of the By-Laws of Bridgeline as in effect on
the date of such certification; (3) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors of Bridgeline
authorizing the execution, delivery and performance of the Agreement and the
consummation of the Merger; and (4) to the incumbency and specimen signature of
each officer of Bridgeline executing on behalf of Bridgeline this Agreement and
the other agreements related hereto.
ARTICLE X
TERMINATION AND AMENDMENT
-------------------------
10.1. TERMINATION. This Agreement may be terminated at any time
prior to the
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Effective Time by written notice by the terminating party to the other parties
hereto.
10.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Bridgeline,
Seller or the Shareholder or their respective officers, directors, or
stockholders; provided that (i) any such termination shall not relieve any party
from liability for any willful breach of this Agreement (which includes, without
limitation, the making of any representation or warranty by a party in this
Agreement that the party knew was not true and accurate when made) and (ii) the
provision of Sections 8.5, 10.3 and Article XIV of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
10.3. FEES AND EXPENSES.
(a) Except as set forth in this Section 10.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees and expenses,
whether or not the Merger is consummated; PROVIDED, HOWEVER, that if the Merger
is consummated, Bridgeline shall pay up to an aggregate of $150,000 for the
reasonable legal expenses of counsel to the Seller incurred in connection with
the Merger and the accounting fees for the audit of Seller's fiscal years ending
September 30, 2004, September 30, 2005 and September 30, 2006, it being
acknowledged and agreed to by the parties that the Shareholder shall be
personally responsible for any such expenses of Seller exceeding this limit.
(b) The Seller shall pay Bridgeline a termination fee of (i)
$250,000 in the event of termination of this Agreement prior to the filing by
Bridgeline of a registration statement for the initial public offering of
Bridgeline Common Stock (the "REGISTRATION STATEMENT") with the SEC, (ii)
$750,000 in the event of termination by the Seller after the filing of the
Registration Statement but prior to the effectiveness of the Registration
Statement, or (iii) $1,200,000 in the event of termination by the Seller after
the effectiveness of the Registration Statement; provided that no such
termination fee shall be paid by Seller to Bridgeline in the event of the
termination of this Agreement:
(i) by Bridgeline;
(ii) by mutual agreement of the parties hereto;
(iii) by Seller, if in its sole discretion, it is not
satisfied with its due diligence investigation of Bridgeline after conducting a
reasonable investigation;
(iv) by Seller, if after the date of this Agreement, there
has been a material adverse change in the business or financial condition of
Bridgeline;
(v) by Seller, if there has been a breach of or failure to
perform any
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representation, warranty, covenant or agreement on the part of Bridgeline set
forth in this Agreement, which breach or failure to perform shall not have been
cured within 10 days following receipt by Bridgeline of written notice of such
breach or failure to perform from Seller;
(vi) by Seller, upon the death or permanent disability of
the Shareholder;
(vii) by Seller, upon the failure of Mr. Xxxxxx Xxxxxx to
serve as the Chief Executive Officer of Bridgeline;
(viii) by Seller, upon withdrawal by Bridgeline of the
Registration Statement; and
(ix) by Seller, at any time following May 15, 2007.
Any fee due under this Section 10.3(b) shall be paid by wire transfer
of immediately available funds within one business day after the date of
termination of this Agreement.
(c) Bridgeline shall pay Seller a termination fee of $150,000
(plus reasonable expenses of the Seller actually incurred relating to the
transactions contemplated by this Agreement prior to termination) in the event
of termination of this Agreement; provided that no such termination fee shall be
paid by Bridgeline to Seller in the event of the termination of this Agreement:
(i) by Seller or the Shareholder;
(ii) by mutual agreement of the parties hereto;
(iii) by Bridgeline, if in its sole discretion, it is not
satisfied with its due diligence investigation of Seller after conducting a
reasonable investigation;
(iv) by Bridgeline, if after the date of this Agreement,
there has been a material adverse change in the business or financial condition
of Seller;
(v) by Bridgeline, if there has been a breach of or
failure to perform any representation, warranty, covenant or agreement on the
part of Seller or the Shareholder set forth in this Agreement, which breach or
failure to perform shall not have been cured within 10 days following receipt by
Seller or the Shareholder of written notice of such breach or failure to perform
from Bridgeline;
(vi) by Bridgeline, upon the death or permanent disability
of the Shareholder; and
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(vii) by Bridgeline, at any time following May 15, 2007.
Any fee due under this Section 10.3(c) shall be paid by wire transfer
of immediately available funds within one business day after the date of
termination of this Agreement.
(d) The parties acknowledge that the agreements contained in
this Section 10.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements the parties would not enter into
this Agreement. If one party fails to promptly pay to the other the expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid expense and fee at
the publicly announced prime rate of Bank of America, plus 5% per annum
compounded quarterly, from the date such expense reimbursement or fee was
required to be paid. Payment of the fees and expenses described in this Section
10.3(d) shall not be in lieu of damages incurred in the event of breach of this
Agreement.
10.4. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Board of Directors, at
any time before or after approval of the matters presented in connection with
the Merger by the shareholders of Seller, provided however, that, after such
approval, no amendment shall 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 on behalf of the parties
hereto.
10.5. 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, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, (iii) waive compliance with
any of the agreements or conditions 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 a written instrument signed on behalf of such party. Such extension or
waiver shall not be deemed to apply to any time for performance, inaccuracy in
any representation or warranty, or noncompliance with any agreement or
condition, as the case may be, other than that which is specified in the
extension or waiver. Failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
ARTICLE XI
GENERAL RELEASE AND INDEMNIFICATIONS
------------------------------------
11.1. SHAREHOLDER RELEASE. The Shareholder, effective at the
Closing, hereby releases and discharges Seller from and against any and all
claims, demands and liabilities which the Shareholder may have against Seller
immediately prior to the Closing, and the Shareholder
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specifically agrees to indemnify, defend and hold Seller and Bridgeline harmless
against any and all obligations, debts, bills, liabilities, causes of action and
claims of every nature of the Shareholder against Seller which accrue or have
arisen prior to the Closing.
11.2. SHAREHOLDER INDEMNIFICATION. Subject to the limitations set
forth in Section 11.5 below, the Shareholder agrees to indemnify and hold
harmless Bridgeline and its officers, directors, agents and employees to the
fullest extent lawful, from and against any and all actions, suits, claims,
counterclaims, proceedings, costs, losses, liabilities, obligations, demands,
damages, judgments, amounts paid in settlement and reasonable expenses,
including, without limitation, reasonable attorneys' fees and disbursements
(hereinafter collectively referred to as a "CLAIM," "LOSS" or "LOSSES") suffered
or incurred by Bridgeline to the extent relating to or arising out of any breach
of the representations, warranties, covenants or other agreements made by Seller
or the Shareholder herein or the Transaction Documents or failure of any
certificate, document or instrument delivered by or on behalf of Seller or the
Shareholder pursuant hereto or in connection herewith to be true and correct as
of the Closing. Notwithstanding the foregoing, to the extent that Bridgeline
receives and collects any insurance proceeds relating to a Claim or Loss covered
by insurance purchased by Seller prior to the Closing, then Bridgeline's claim
for indemnification hereunder shall be reduced, dollar-for-dollar, by the amount
of such proceeds received by Bridgeline for any insurable Claim or Loss.
11.3. BRIDGELINE'S INDEMNIFICATION. Subject to the limitations set
forth in Section 11.5 below, Bridgeline agrees to indemnify and hold harmless
the Shareholder to the fullest extent lawful, from and against any and all
Claims or Losses suffered or incurred by the Shareholder to the extent relating
to or arising out of any breach of the representations, warranties, covenants or
other agreements made by Bridgeline herein or failure of any certificate,
document or instrument delivered by or on behalf of Bridgeline pursuant hereto
or in connection herewith to be true and correct as of the Closing.
11.4. THIRD PARTY CLAIMS. In the event that a party (the
"INDEMNITEE") desires to make a claim against another party (the "INDEMNITOR")
pursuant to Section 11.2 or Section 11.3 in connection with any action, suit,
proceeding or demand at any time instituted against or made upon the Indemnitee
by any third party for which the Indemnitee may seek indemnification hereunder
(a "THIRD PARTY CLAIM"), the Indemnitee shall promptly notify, in writing, the
Indemnitor of such Third Party Claim and of the Indemnitee's claim of
indemnification with respect thereto. The Indemnitor shall have thirty (30) days
after receipt of such notice to notify the Indemnitee if he/she or it has
elected to assume the defense of such Third Party Claim. If the Indemnitor
elects to assume the defense of such Third Party Claim, the Indemnitor shall be
entitled at his/her or its own expense to conduct and control the defense and
settlement of such Third Party Claim through counsel of his or its own choosing;
PROVIDED, HOWEVER, that the Indemnitee may participate in the defense of such
Third Party Claim with his/her or its own counsel at his/her or its own expense
and the Indemnitor may not settle any Third Party Claim without the Indemnitee's
consent, which shall not be unreasonably withheld. If the Indemnitor fails to
notify the Indemnitee within thirty (30) days after receipt of the Indemnitee's
written notice of a Third Party Claim, the Indemnitee shall be entitled to
assume the defense of such Third Party Claim at the expense of the Indemnitor;
PROVIDED, HOWEVER, that the Indemnitee may not settle any Third Party Claim
without the Indemnitor's consent, which shall not be
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unreasonably withheld.
11.5. LIMITATIONS OF LIABILITY.
(a) Solely for purposes of determining the amount of any Claim
or Loss with regard to any representation, warranty, covenant, agreement,
certificate, document or instrument that has been breached by a party, such
amount shall be determined without regard to any "materiality" or "knowledge"
qualifier, including without limitation any reference to a "Material Adverse
Effect" on such party or to the "knowledge" or "best knowledge" of such party,
or words of similar effect, which may be contained in any such representation,
warranty, covenant, agreement, certificate, document or instrument.
(b) The Shareholder and Bridgeline shall have no liability
with respect to the matters described in Sections 11.2 and 11.3, respectively,
for any individual Claim or Loss less than $5,000 (the "MINIMUM CLAIM AMOUNT")
and until the total of all Claims or Losses, including those less than the
Minimum Claim Amount, exceeds $50,000 (the "BASKET"), at which point the
Shareholder or Bridgeline, as the case may be, shall be obligated to indemnify
the other party from and against all such Claims or Losses which shall exceed
the Basket. Notwithstanding anything contained in this Agreement to the
contrary, except for (x) the representations set forth in Sections 3.1
(Ownership of Shares), 2.11 (Taxes) and 4.12 (Taxes), which shall be uncapped,
and (y) and the representations set forth in Section 2.14 (Intellectual
Property) and Section 4.15 (Intellectual Property), for which each party's
indemnity obligation under this Agreement shall not exceed the sum of
$5,000,000, each party's indemnity obligation under this Agreement shall not
exceed the sum of $1,000,000. Additionally, notwithstanding anything contained
in this Agreement to the contrary, the Shareholder shall be obligated to
indemnify Bridgeline for all amounts, if any, by which the Seller's accounts
receivable existing as of the close of business on the date immediately
preceding the date of the Closing exceed $50,000 and remain uncollected six
months after the Closing. For purposes of the preceding sentence, an account
receivable shall not be deemed uncollected six months after the Closing if
payment of the account receivable is subject to a repayment schedule which has
been approved by Bridgeline and such repayment obligation is not in default.
Further, the Shareholder shall not be obligated to indemnify Bridgeline for any
and all amounts due and owing pursuant to that certain Non-Negotiable Promissory
Note in the principal amount of $407,000, dated August 11, 2006, issued by
Neurotic Media, LLC (the "Neurotic Note") in favor of the Seller, unless and
until the Neurotic Note is in default pursuant to its terms.
(c) In any situation in which an indemnification payment is
due from the Shareholder hereunder, Bridgeline shall seek to satisfy such
obligation, in whole or in part, in the following manner: (i) first, by
acceptance of a cash payment by the Shareholder equal to the value of the Claim
or Loss, (ii) second, if payment by the Shareholder in accordance with Section
11.5(a)(i) is not received by Bridgeline within thirty (30) days of the earlier
of (x) a final judicial determination of the indemnification payment due by the
Shareholder hereunder or (y) the agreement of Bridgeline and the Shareholder of
the indemnification payment due hereunder, by withholding or setting off the
amount of the Earn-Out payments that may then be due or may subsequently become
payable to the Shareholder, and (ii) third, if not (i) or (ii), by withholding
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or setting against the Bridgeline Common Stock such number of shares of
Bridgeline Common Stock as is equal to the value of the Claim or Loss (the value
for computing the number of shares to be set-off shall be equal to the average
closing price of the Bridgeline Common Stock during the thirty day period
preceding the Claim (the "CLAIM PRICE")). In any situation in which an
indemnification payment is due from Bridgeline hereunder, the Shareholder shall
seek to satisfy such obligation, in whole or in part, in either of the following
manners or any combination thereof, solely in Bridgeline's discretion: (i) by
issuance of such additional number of shares of Bridgeline Common Stock as is
equal to the value of the Claim or Loss as of the time the Claim or Loss is
incurred by the Shareholder (the value for computing the number of shares of
Bridgeline Common Stock to be issued shall be equal to the Claim Price), or (ii)
by acceptance of a cash payment by Bridgeline equal to the fair value of the
Claim or Loss as of the time the Claim or Loss is incurred by the Shareholder.
(d) No action or claim for Losses pursuant to this Article XI
shall be brought or asserted after the relevant date of survival referred to in
Article XII hereof (the "REPRESENTATION EXPIRATION DATE"). The amount of any
Claims or Losses suffered by an Indemnitee shall be reduced by any tax benefit
that has been realized or that is certain to be realized, and any insurance
benefits or claims against third parties which are actually received by such
party in respect of or as a result of such Claims or Losses, or the facts or
circumstances relating thereto. If any Losses for which indemnification is made
hereunder are subsequently reduced by any tax benefit or insurance payment, the
value of such tax benefit or other benefit or the amount of such payment or
other recovery shall be remitted to the Indemnitor.
(e) Bridgeline and the Shareholder acknowledge and agree that,
except as to Claims or Losses attributable to fraud, their sole remedy against
the other for any matter arising out of a breach of any representation,
warranty, covenant or other agreement contained in this Agreement is set forth
in this Article XI, and that except to the extent a party has asserted a claim
for indemnification prior to the Representation Expiration Date, neither party
shall have any remedy against the other party for any breach of a
representation, warranty, covenant or other agreement made by such other party
in this Agreement. The parties acknowledge that this Section 11.5 has been
negotiated fully by the parties and that neither party would have entered into
this Agreement but for the inclusion of this Section 11.5.
11.6. EXPENSES; REIMBURSEMENT. Subject to the limitations set forth
in Section 11.5 above, an Indemnitor hereunder promptly shall reimburse the
Indemnitee for all Losses constituting reasonable expenses (including reasonable
attorneys' fees and disbursements) as they are incurred in connection with
investigating, preparing to defend or defending any third-party action, suit,
claim or proceeding (including any inquiry or investigation) for which indemnity
is available under either Section 11.2 or Section 11.3, as applicable.
11.7. NOTICE. Each party shall provide written notice to the other
of any claim with respect to which it seeks indemnification promptly after the
discovery of any matters giving rise to a claim for indemnification; PROVIDED,
HOWEVER, that the failure of such party to give notice as provided herein shall
not relieve the Indemnitor of its obligations under this Article XI, except if
and to the extent that the Indemnitor has been materially prejudiced thereby.
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11.8. SURVIVAL. Subject to the provisions and limitations set forth
in Section 11.5(d) and in Article XII below, the obligations of Bridgeline and
the Shareholder under this Article XI shall survive and continue in effect
following the Closing until all Claims or Losses are resolved.
ARTICLE XII
SURVIVAL; WAIVER OF INDEMNITY OR CONTRIBUTION
---------------------------------------------
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided
herein, all representations, warranties, covenants and other agreements of the
parties contained herein shall survive the execution and delivery of this
Agreement and continue in effect following the Closing for a period commencing
on the Closing Date and ending on the date that is 18 months after the Closing
Date. Notwithstanding the preceding sentence, the representations set forth in
Section 2.1 (Ownership of Shares) with respect to the Shareholder's ownership of
the Shares shall survive and continue in effect indefinitely after the Closing,
the representations set forth in Sections 2.11 (Taxes) and 4.12 (Taxes) shall
survive until the expiration of the applicable statute of limitations relating
to any applicable Tax Return referred to therein.
12.2 NO INDEMNITY OR CONTRIBUTION; WAIVER. The Shareholder shall
not be entitled to make any claim for indemnity or contribution or any other
similar claim against Seller or Bridgeline with respect to any Claim or Losses
for which the Shareholder is liable under Article XI. To the extent that the
Shareholder may now or in the future have the right to assert any such claim
against Seller or Bridgeline, the Shareholder hereby waives any such right and
hereby releases and forever discharges Seller and Bridgeline from any such
claim.
ARTICLE XIII
TAX MATTERS
-----------
Bridgeline, Seller and the Shareholder shall use reasonable efforts to
cause the Merger to be treated as a reorganization within the meaning of Section
368(a) of the Code and shall not knowingly take or fail to take any action which
action or failure to act would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code. The Seller and
the Shareholder (a) without Bridgeline's prior approval, shall not file any Tax
Return or take any position inconsistent with the treatment of the Merger as a
reorganization described in Section 368(a) of the Code and shall not settle any
tax dispute with respect to any pre-closing period to the extent that the issue
relates to the income, gain or losses of the Company, and (b) shall comply with
the record keeping and information-reporting requirements set forth in Treas.
Reg. 1.368-3.
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ARTICLE XIV
MISCELLANEOUS
-------------
14.1. PARTIES IN INTEREST. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective heirs, successors and assigns of the parties hereto (including
permitted transferees of any of the Shares or Bridgeline Stock). Except as may
be required to be disclosed by order of a court or otherwise required by law,
the parties agree to maintain in confidence the terms of this Agreement, except
that the parties hereto may disclose such terms to its accountants, lawyers,
bankers and advisors in the ordinary course. Except as otherwise specifically
provided herein, this Agreement shall not confer any rights or remedies upon any
person other than the parties hereto and their respective heirs, successors and
assigns. Notwithstanding anything to the contrary set forth herein, the
Shareholder is not an intended third party beneficiary of any of the Seller's
representations and warranties contained in this Agreement.
14.2. NOTICES. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by fax or other electronic
medium, or sent by Federal Express or other overnight courier service providing
proof of delivery, to Bridgeline or the Shareholder, at the addresses set forth
below or to such other address for any such party as may be furnished in writing
to the other parties hereto:
Bridgeline: Xxxxxx X. Xxxxxx, President
Bridgeline Software, Inc.
00 Xxxxx Xxxx
Xxxxxx, XX 00000
Fax No.: 000-000-0000
With copy to: Xxxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Fax No.: 000-000-0000
Seller/Shareholder: Xxxx X. Xxxx
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
With copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxx Xxxxxxx LLP
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000 00xx Xxxxxx, XX
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Fax No: 000-000-0000
14.3. SEVERABILITY. All agreements and covenants contained in this
Agreement are severable, and in the event that any of them shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein.
14.4. COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original,
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via fax,
with the intention that they shall have the same effect as an original
counterpart hereof.
14.5. EFFECT OF HEADINGS/GENDER REFERENCES. The article and section
headings herein are for convenience only and shall not affect the construction
or interpretation hereof. The use of any gender in the Agreement shall be deemed
to include the other genders, and the use of the singular in this Agreement
shall be deemed to include the plural (and vice versa), wherever appropriate.
14.6. GOVERNING LAW. This Agreement shall be deemed a contract
made under the laws of the State of Delaware and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such state. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement or any of the
transactions contemplated hereby, shall be brought against any of the parties in
the courts of the Commonwealth of Massachusetts, and each of the parties
irrevocably submits to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding, waives any
objection to venue laid therein, agrees that all claims in respect of any action
or proceeding shall be heard and determined only in any such court and agrees
not to bring any action or proceeding arising out of or relating to this
Agreement or any transaction contemplated hereby in any other court. Process in
any action or proceeding referred to in the preceding sentence may be served on
any party anywhere in the world.
14.7. POST-CLOSING TAX MATTERS. Bridgeline agrees that it will
cooperate with the preparation of all tax returns of Seller for the period up to
the Closing Date. The Shareholder agrees that such tax returns shall be prepared
in a manner consistent with Seller's historical practices.
14.8. NON-TRANSFERABILITY OF EARN-OUT PAYMENTS. Any rights of the
Shareholder to receive Earn-Out payments pursuant to this Agreement shall be
non-transferable without the prior written consent of Bridgeline.
Notwithstanding the foregoing, the Shareholder may transfer all or any of such
rights (a) as a gift to any member of his family or to any trust for the benefit
of any such family member or the Shareholder, PROVIDED THAT any such transferee
shall agree in
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writing with Bridgeline, as a condition precedent to such transfer, to be bound
by all of the provisions of this Agreement relating to the Earn-Out payments, or
(b) by will or the laws of descent and distribution, in which event each such
transferee shall be bound by all of the provisions of this Agreement relating to
the Earn-Out payments or (c) to any member of his family in the event of his
Disability (as defined below), or (d) by court order, in which event each such
transferee shall be bound by all of the provisions of this Agreement relating to
the Earn-Out payments. As used herein, the word "family" shall include any
spouse, lineal ancestor or descendant, brother or sister. "Disability" shall
mean the inability of the Shareholder to perform the essential functions of his
position, with or without reasonable accommodation, for a total of ninety (90)
days or more in any continuous two hundred (200) day period because of a
substantial physical or mental impairment.
14.9. BOARD OBSERVER RIGHTS; APPOINTMENT TO MANAGEMENT COMMITTEE. So
long as the Shareholder owns at least five percent (5%) of the voting capital
stock of Bridgeline as calculated on a fully-diluted basis, and in any event for
at least one year from the Closing Date, the Shareholder shall be entitled to
appoint a representative to receive notice of, attend and participate in all
meetings of the Board of Directors of Bridgeline, and any and all committees or
subcommittees thereof, subject to customary limitations (such as sensitive
confidential information, conflicts of interest or interested party
transactions). The Shareholder shall be the initial observer and shall have the
right to remove the representative and appoint a successor (which successor
shall be subject to the approval of Bridgeline, such approval not to be
unreasonably withheld). The foregoing right shall be personal to the Shareholder
and not to any transferees of a Shareholder's interest in Bridgeline.
Additionally, the Shareholder shall be appointed as a member of the Management
Executive Committee and Information Technology Committee of Bridgeline for so
long as he remains as Executive Vice President & General Manager of the Atlanta
Business Unit.
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SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger on the date written above.
BRIDGELINE SOFTWARE, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: XXXXXX X. XXXXXX
Title: President and Chief Executive
Officer
OBJECTWARE, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: XXXX X. XXXX
Title: President and Chief Executive
Officer
SHAREHOLDER:
/s/ Xxxx X. Xxxx
-----------------------------------------
XXXX X. XXXX
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