Exhibit 2.4
EXECUTION COPY
SUPPLEMENTAL AGREEMENT
DATED AS OF NOVEMBER 24, 2002
by and among
PATRON SYSTEMS, INC.,
ESC ACQUISITION, INC.
and
ENTELAGENT SOFTWARE CORP.
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
Section 1.1 The Merger ............................................... 2
Section 1.2 Filing of the Merger Agreement ........................... 2
Section 1.3 Closing .................................................. 2
Section 1.4 Merger Consideration ..................................... 2
Section 1.5 Company Stock Options and Stock Purchase Warrants. ....... 2
Section 1.6 Dissenting Shares ........................................ 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT ..............................
Section 2.1 Organization of Parent ................................... 3
Section 2.2 Subsidiaries and Investments of Parent ................... 3
Section 2.3 Parent Operations ........................................ 3
Section 2.4 Capital Stock of Parent .................................. 4
Section 2.5 Mergerco ................................................. 4
Section 2.6 Authorization ............................................ 4
Section 2.7 Non-Contravention ........................................ 5
Section 2.8 Valid Shares ............................................. 5
Section 2.9 TrustWave Corp ........................................... 5
Section 2.10 Share Exchange .......................................... 5
Section 2.11 Title to Assets ......................................... 6
Section 2.12 No Undisclosed Liabilities .............................. 6
Section 2.13 No Violation, Litigation or Regulatory Action ........... 6
Section 2.14 Material Contracts and Agreements ....................... 6
Section 2.15 Transactions with Affiliates ............................ 6
Section 2.16 Status of Parent ........................................ 7
Section 2.17 Private Placement Memorandum ............................ 7
Section 2.18 No Finder ............................................... 7
Section 2.19 Disclosure .............................................. 7
Section 2.20 Parent Disclosure Schedules ............................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization ............................................. 8
Section 3.2 Subsidiaries and Investments ............................. 8
Section 3.3 Capital Stock of the Company ............................. 8
Section 3.4 Authorization ............................................ 9
Section 3.5 Non-Contravention ........................................ 10
Section 3.6 Financial Statements ..................................... 10
Section 3.7 Operations Since Balance Sheet Date ...................... 10
Section 3.8 No Undisclosed Liabilities ............................... 13
Section 3.9 Taxes .................................................... 13
Section 3.10 Availability of Assets and Legality of Use .............. 14
Section 3.11 Governmental Permits .................................... 14
Section 3.12 Real Property ........................................... 15
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Section 3.13 Real Property Leases ...................................... 15
Section 3.14 Condemnation .............................................. 15
Section 3.15 Personal Property ......................................... 15
Section 3.16 Personal Property Leases .................................. 15
Section 3.17 Intellectual Property ..................................... 15
Section 3.18 Accounts Receivable; Inventories .......................... 17
Section 3.19 Title to Assets ........................................... 17
Section 3.20 Employees ................................................. 17
Section 3.21 Employee Matters .......................................... 17
Section 3.22 Employee Benefit Plans .................................... 18
Section 3.23 Contracts ................................................. 18
Section 3.24 Status of Contracts ....................................... 19
Section 3.25 No Violation, Litigation or Regulatory Action ............. 20
Section 3.26 Insurance ................................................. 20
Section 3.27 Environmental Protection .................................. 20
Section 3.28 Customers and Suppliers ................................... 21
Section 3.29 Shareholders' Assets ...................................... 21
Section 3.30 No Finder ................................................. 21
Section 3.31 Transactions with Affiliates .............................. 21
Section 3.32 Budget and Financial Projections .......................... 21
Section 3.33 Confidentiality Agreements ................................ 22
Section 3.34 Bank Accounts; Powers of Attorney; Minute Books ........... 22
Section 3.35 Proxy Statement ........................................... 22
Section 3.36 Disclosure ................................................ 22
Section 3.37 Company Disclosure Schedules .............................. 23
ARTICLE IV
[INTENTIONALLY RESERVED]
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 5.1 Ordinary Course ............................................ 23
Section 5.2 Access Prior to Closing; Certain Notices ................... 24
Section 5.3 Regulatory and Other Authorizations ........................ 24
Section 5.4 Further Assurances ......................................... 24
Section 5.5 Company Financial Statements ............................... 25
Section 5.6 Delivery of Documents ...................................... 25
Section 5.7 Employees .................................................. 25
Section 5.8 Use of Trade Names ......................................... 25
Section 5.9 Continued Relationships .................................... 25
Section 5.10 Preserve Accuracy of Representations and Warranties ....... 25
Section 5.11 Notification by the Company of Certain Matters ............ 25
Section 5.12 Necessary Actions ......................................... 25
Section 5.13 No Assurance of IPO ....................................... 26
Section 5.14 Reorganization ............................................ 27
Section 5.15 Lok Tek Investment ........................................ 27
Section 5.16 Indebtedness .............................................. 27
Section 5.17 Option Grants ............................................. 27
Section 5.18 Certain Liabilities and Obligations of the Company. ....... 27
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Section 5.19 Pre-Closing Working Capital...................................................... 28
Section 5.20 Indemnification of Officers and Directors of the Company......................... 28
Section 5.21 Update of the Parent Disclosure Schedules........................................ 28
Section 5.22 Patron Holdings Merger........................................................... 29
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 The Company's Conditions to Close................................................. 29
Section 6.2 Parent's Conditions to Close...................................................... 31
ARTICLE VII
THE CLOSING
Section 7.1 Deliveries by the Company......................................................... 34
Section 7.2 Parent's Deliveries............................................................... 34
ARTICLE VIII
[INTENTIONALLY RESERVED]
ARTICLE IX
TERMINATION
Section 9.1 Termination....................................................................... 35
Section 9.2 Effect of Termination............................................................. 36
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses......................................................................... 36
Section 10.2 Notices.......................................................................... 37
Section 10.3 Assignment....................................................................... 37
Section 10.4 Interpretation................................................................... 38
Section 10.5 Counterparts..................................................................... 38
Section 10.6 Amendment........................................................................ 38
Section 10.7 Entire Agreement................................................................. 38
Section 10.8 Binding Effect................................................................... 38
Section 10.9 Survival......................................................................... 38
Section 10.10 Severability.................................................................... 38
Section 10.11 Third Parties................................................................... 39
Section 10.12 Waivers......................................................................... 39
Section 10.13 Confidential Nature of Information.............................................. 39
Section 10.14 Governing Law; Arbitration...................................................... 39
Section 10.15 Definitions..................................................................... 40
ANNEX
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A Shareholders' Consideration Table
B TrustWave Supplemental Agreement
C Share Exchange Agreement
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EXHIBITS
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A Form of Agreement and Plan of Merger
B Form of Stock Option Cancellation Agreement
C Form of D'Angelo Employment Agreement
D Form of Xxxxxx Employment Agreement
E Form of Xxxxxx Employment Agreement
F Form of Xxxxxx Employment Agreement
G Form of Xxxxx Employment Agreement
H Form of Registration Rights Agreement
SCHEDULES
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2.1 Organization of Parent
2.2 Subsidiaries and Investments of Parent
2.3 Parent Operations
2.4 Capital Stock of Parent
2.7 Non-Contravention of Parent
2.9 TrustWave Corp.
2.10 Share Exchange
2.11 Title to Assets of Parent
2.12 No Undisclosed Liabilities of Parent
2.13 No Violation, Litigation or Regulatory Action
2.14 Material Contracts of Parent
2.15 Transactions with Affiliates
3.1 Organization of the Company
3.3 Capital Stock of the Company; Shareholders
3.5 Non-Contravention of the Company
3.6 Financial Statements
3.7 Operations Since Balance Sheet Date
3.8 No Undisclosed Liabilities
3.9 Taxes
3.10 Availability of Assets and Legality of Use
3.11 Governmental Permits
3.13 Real Property Leases
3.15 Personal Property
3.16 Personal Property Leases
3.17 Intellectual Property
3.18 Accounts Receivable
3.19 Title to Assets of the Company
3.20 Employees
3.21 Employee Matters
3.22(a) Plans
3.22(b) ERISA Plans
3.23 Contracts
3.24 Status of Contracts
3.25 No Violation, Litigation or Regulatory Action
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3.26 Company Insurance
3.27 Environmental Protection
3.28 Customers and Suppliers
3.31 Transactions with Affiliates
3.32 Budget and Financial Projections
3.34 Bank Accounts
5.16 Indebtedness
5.17 Option Grants
5.18(a) Certain Company Obligations to be Paid or Satisfied at Closing
5.18(b) Assumed Company Obligations
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SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT dated as of November 24, 2002 (this "Agreement") by
and among Patron Systems, Inc., a Delaware corporation ("Parent"), ESC
Acquisition, Inc., a California corporation ("Mergerco"), and Entelagent
Software Corp., a California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Mergerco and the Company are entering into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), in the form of Exhibit A
attached hereto, which provides, among other things, for the merger of Mergerco
with and into the Company (the "Merger") pursuant to the applicable laws of the
State of California;
WHEREAS, Parent and each of its stockholders (the "Parent Stockholders")
entered into that certain Share Exchange Agreement dated as of September 27,
2002, as amended and restated on October 10, 2002 (the "Share Exchange
Agreement"), with Patron Holdings, Inc., a Nevada corporation, f/k/a Combined
Professional Services, Inc., ("Patron Holdings"), pursuant to the terms of which
all outstanding shares of Parent Common Stock (as defined below) were exchanged
for shares of common stock, par value $0.001, of Patron Holdings (the "Patron
Holdings Common Stock"), such that the Parent Stockholders, upon the
consummation of the transactions contemplated by the Share Exchange Agreement,
acquired approximately 85% of the outstanding capital stock of Patron Holdings
(the "Share Exchange") with Parent surviving as a wholly owned subsidiary of
Patron Holdings;
WHEREAS, subsequent to the date hereof, but prior to the Closing Date (as
defined below), Parent and Patron Holdings intend to effect a merger whereby
Patron Holdings will be merged with and into Parent, with Parent continuing as
the surviving corporation incorporated under the laws of the State of Delaware
(the "Patron Holdings Merger");
WHEREAS, the parties hereto believe it is desirable to enter into this
Agreement in order to set forth the representations and warranties made by
Parent and the Company in connection with the Merger, to set forth certain
covenants and agreements of the parties and to set forth various other
provisions relating to the Merger and the relative rights and obligations of the
parties with respect thereto;
WHEREAS, the parties hereto desire that the Merger qualify as a
reorganization in accordance with Section 368(a) of the Code; and
WHEREAS, certain capitalized terms are defined in the Merger Agreement and
shall have the same meaning when used in this Agreement unless otherwise defined
herein or in Section 10.15, the definitions of such terms being incorporated
herein as if set forth in full herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement and as more particularly described in the Merger Agreement, Mergerco
shall be merged with and into the Company at the Effective Time.
Section 1.2 Filing of the Merger Agreement. The Company, Parent and
Mergerco shall cause the Merger Agreement, duly executed in accordance with
Section 1103 of the California General Corporation Law (the "CGCL"), to be filed
on the Closing Date (or on such other date as Parent and the Company may agree)
with the Secretary of State of the State of California in accordance with the
CGCL.
Section 1.3 Closing. The closing of the Merger (the "Closing") shall take
place on January 21, 2003 or on such other date as Parent and the Company may
agree; provided, that, in either case, each of the conditions set forth in
Article VI has been satisfied or waived prior to such date. The time and date on
which the Closing is actually held is sometimes referred to herein as the
"Closing Date."
Section 1.4 Merger Consideration. Subject to the provisions of Article I of
the Merger Agreement, as of the Effective Time, by virtue of the Merger, the
aggregate outstanding shares of Company Stock immediately prior to the Effective
Time shall be converted, in the aggregate, into 1,800,000 validly issued, fully
paid and nonassessable shares of Parent Common Stock (the "Merger
Consideration"). The Merger Consideration shall be allocated among the
Shareholders to be set forth on Annex A which the Company shall use its best
efforts to deliver to Parent within 10 days after the date hereof, but in any
event, not later than the date of delivery of the Proxy Statement to Parent and
its counsel pursuant to Section 5.12. The parties hereto acknowledge and agree
that for purposes of (i) determining the "Liquidation Preference" of the
Shareholders pursuant to Article III, Section B(2) of the Company's Articles of
Incorporation and (ii) the Shareholder Merger Consideration Approval, the value
of the shares of Parent Common Stock to be issued pursuant to this Agreement is
at least $3.56 per share.
Section 1.5 Company Stock Options and Stock Purchase Warrants.
(a) In accordance with the terms of the Merger Agreement, each of the
stock options to purchase shares of Company Common Stock issued by the Company
pursuant to the Company Stock Plan and set forth on Schedule 3.3 hereto (the
"Company Stock Options"), which are outstanding as of the Effective Time shall
terminate and be of no further force and effect at the Effective Time, and each
holder of a Company Stock Option shall execute and deliver to the Company an
Option Termination Agreement in the form attached hereto as Exhibit B.
(b) In accordance with the terms of the Merger Agreement, each
outstanding warrant to purchase shares of Company Stock set forth on Schedule
3.3 hereto (the "Stock Purchase Warrants"), which are outstanding as of the
Effective Time shall be terminated and be of no further force and effect at the
Effective Time.
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Section 1.6 Dissenting Shares. Any issued and outstanding shares of Company
Stock held by a Person (a "Dissenting Shareholder") who properly exercises such
Person's dissenters' rights under the CGCL ("Dissenting Shares") shall not be
converted as described in Section 1.4, but rather shall be converted into the
right to receive such consideration as may be determined to be due to such
Dissenting Shareholder pursuant to the CGCL. Subject to the foregoing, if, after
the Effective Time, such Dissenting Shareholder withdraws his demand for payment
or fails to perfect or otherwise loses his right of payment, in any case
pursuant to the CGCL, the Dissenting Shares of such Dissenting Shareholder shall
be deemed to be converted as of the Effective Time into the right to receive the
amount to which such Dissenting Shareholder would otherwise have been entitled
to pursuant to Section 1.4. The Company shall give Parent prompt notice of any
demands for payment received by the Company. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands, and, prior to the Effective Time, Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 2.1 Organization of Parent. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions listed in Schedule 2.1, which
jurisdictions are the only ones in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect on
Parent, and no other jurisdiction has demanded, requested or otherwise indicated
that the Company is required to so qualify. Parent has full corporate power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted. Parent has delivered or otherwise
made available to the Company true, correct and complete copies of Parent's
Amended and Restated Certificate of Incorporation, as in effect on the date
hereof, Amended and Restated By-laws, as in effect on the date hereof, minute
books and stock transfer records. Parent is not in violation of any term or
provision of its charter, bylaws or other organizational document the
consequences of which would reasonably be expected to result in a Material
Adverse Effect on Parent.
Section 2.2 Subsidiaries and Investments of Parent. Except as set forth on
Schedule 2.2 (which will include the percentage owned by Parent), Parent does
not, directly or indirectly, (i) own, of record or beneficially, or own or hold
the right to acquire, any outstanding voting or equity securities or other
voting or equity interests in any corporation, partnership, joint venture or
other entity or (ii) otherwise control any such corporation, partnership, joint
venture or other entity.
Section 2.3 Parent Operations. Other than the negotiation and execution of
this Agreement, the Merger Agreement, the Share Exchange Agreement, the Patron
Holdings Merger and the transactions contemplated hereby and thereby and the
negotiation of other transactions for the purchase by Parent of other business
entities, each as described in
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Schedule 2.3, prior to the date hereof, Parent has not conducted any material
business activities or operations and has not completed any other acquisitions
or combinations.
Section 2.4 Capital Stock of Parent. As of the date hereof, the authorized
capital of Parent consists of (i) 150,000,000 shares of Common Stock of Parent,
par value $.01 per share (the "Parent Common Stock"), of which, as of the date
hereof, 25,400,000 shares are issued and outstanding; and (ii) 75,000,000 shares
of preferred stock, par value $.01 per share (the "Parent Preferred Stock,"
together with the Parent Common Stock, the "Parent Capital Stock"), none of
which is issued and outstanding or reserved for any purpose. All outstanding
shares of Parent Common Stock are validly issued, fully paid and nonassessable.
None of the issued and outstanding shares of Parent Common Stock has been issued
in violation of the preemptive rights of any person or in violation of
applicable federal or state securities laws, except where any such violation or
violations, individually or in the aggregate, would not have a Material Adverse
Effect on Parent. Schedule 2.4 sets forth a true and complete list of the names
and addresses of each of the holders of record of options to purchase Parent
Common Stock (the "Parent Stock Options"), the respective number of shares of
Parent Common Stock subject to such Parent Stock Option, the exercise price
applicable to such Parent Stock Option and the expiration date of such Parent
Stock Option. Except for this Agreement, the Merger Agreement and except as set
forth on Schedule 2.4 hereof, there are no agreements, arrangements, warrants,
options, puts, calls, rights or other commitments, plans or understandings of
any character relating to the issuance, sale, purchase, redemption, conversion,
exchange, registration, voting, or transfer of any shares of Parent Common Stock
or any other securities of Parent. Except as set forth on Schedule 2.4 and
except pursuant to applicable laws, there are no restrictions, including but not
limited to self-imposed restrictions, on the retained earnings of Parent or on
the ability of Parent to declare and pay dividends.
Section 2.5 Mergerco. Mergerco is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Mergerco has not conducted any business activities prior to the date of this
Agreement, other than the negotiation and execution of this Agreement and the
Merger Agreement. All outstanding shares of capital stock of Mergerco are owned,
beneficially and of record, by Parent.
Section 2.6 Authorization. (a) Parent has full corporate power and
authority to enter into this Agreement, the Merger Agreement, the Registration
Rights Agreement and the Employment Agreements (collectively, the "Transaction
Documents"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms and provisions hereof and thereof, subject to the
conditions hereof and thereof. The execution, delivery and performance by Parent
of each of the Transaction Documents, and the actions to be taken by Parent
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of Parent, and no other corporate proceedings on the part of
Parent are necessary with respect hereto or thereto. Each of the Transaction
Documents constitutes the valid and binding obligations of Parent, in each case
enforceable in accordance with its terms, subject to (i) general principles of
equity, regardless of whether enforcement is sought in a proceeding in equity or
at law, and (ii) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
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(b) Mergerco has full corporate power and authority to enter into this
Agreement and the Merger Agreement, to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and provisions
hereof and thereof. The execution, delivery and performance by Mergerco of this
Agreement and the Merger Agreement and the actions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors of
Mergerco, and no other corporate proceedings on the part of Mergerco are
necessary with respect hereto or thereto. This Agreement and the Merger
Agreement constitute the valid and binding obligations of Mergerco, in each case
enforceable in accordance with its terms, subject to (i) general principles of
equity, regardless of whether enforcement is sought in a proceeding in equity or
at law, and (ii) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
Section 2.7 Non-Contravention. Except as set forth in Schedule 2.7, neither
the execution or delivery of the Transaction Documents by Parent or this
Agreement and the Merger Agreement by Mergerco, nor the consummation of the
transactions contemplated hereby or thereby by Parent and Mergerco, will (a)
conflict with or result in the breach of any term or provision of, or constitute
a default under, the respective charters or By-laws of Parent or Mergerco or any
material agreement, instrument or indenture to which Parent or Mergerco is a
party or by which either is bound; (b) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent or Mergerco; or (c)
require, as of the date hereof, the approval, consent, waiver, authorization or
act of, or the making by Parent or Mergerco of any declaration, filing or
registration with, any third party or any Governmental Body and the filing of a
copy of the Merger Agreement with the Secretary of State of the State of
California and such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on Parent,
materially impair the ability of Parent or Mergerco to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 2.8 Valid Shares. The issuance of the Parent Common Stock in
connection with the Merger has been duly authorized on behalf of Parent and such
shares, when issued pursuant to this Agreement and the Merger Agreement, will be
duly and validly issued and outstanding, fully paid and nonassessable.
Section 2.9 TrustWave Corp. Except as set forth on Schedule 2.9, to the
Knowledge of Parent, all of the representations and warranties contained in
Article III of the TrustWave Supplemental Agreement, a true, correct and
complete copy of which is attached hereto as Annex B, that are qualified as to
materiality are true and correct in all respects and such representations and
warranties that are not so qualified are true and correct in all material
respects.
Section 2.10 Share Exchange. Except as set forth on Schedule 2.10, to the
Knowledge of Parent, as of the date hereof and as of the date of the
consummation of the Patron Holdings Merger, all of the representations and
warranties contained in Article V of the Share Exchange Agreement, a true,
correct and complete copy of which is attached hereto as Annex C, that are
qualified as to materiality are true and correct in all respects and such
representations and warranties that are not so qualified are true and correct in
all material respects.
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Section 2.11 Title to Assets. Parent has good title to all of its assets,
free and clear of all Encumbrances, except for Permitted Encumbrances and except
as set forth in Schedule 2.11.
Section 2.12 No Undisclosed Liabilities. Except as set forth on Schedule
2.12, Parent is not subject to any obligation or liability of a kind required to
be included as a liability on the balance sheet set forth in Schedule 2.12
(including, without limitation, unasserted claims whether known or unknown),
whether absolute, contingent, accrued or otherwise, which is not shown or which
is in excess of amounts shown or reserved for on such balance sheet, other than
liabilities reasonably incurred in the ordinary course of business after the
date of such balance sheet or incurred with respect to the matters disclosed in
Schedule 2.3, none of which, individually or in the aggregate, would have a
Material Adverse Effect on Parent and none of which is a liability for breach of
contract, breach of warranty, tort, infringement or other lawsuit.
Section 2.13 No Violation, Litigation or Regulatory Action. Except as set
forth on Schedule 2.13:
(a) To the Knowledge of Parent, Parent has complied with all laws,
regulations, rules, writs, injunctions, ordinances, franchises, decrees,
stipulations, awards or orders of any Governmental Body which are applicable to
Parent;
(b) No notice has been served upon Parent by any Governmental Body or
other person of any violation of any Requirements of Law or calling attention to
the necessity of any work, repairs, new construction, installation or alteration
of any real or personal property owned, leased or used by Parent;
(c) There are no lawsuits, claims, suits, proceedings pending or, to
the Knowledge of Parent, threatened against Parent or investigations pending
regarding Parent nor, to the Knowledge of Parent, is there any basis for any of
the same, and there are no lawsuits, suits or proceedings pending or
contemplated in which Parent is the plaintiff or claimant; and
(d) There is no action, suit or proceeding pending or, to the
Knowledge of Parent, threatened which questions the legality or propriety of the
transactions contemplated by this Agreement or the Merger Agreement.
Section 2.14 Material Contracts and Agreements. Schedule 2.14 includes a
list of all material contracts, agreements and instruments to which Parent or
Mergerco is a party, true and complete copies of all of which have been
delivered by Parent to the Company. All of such material contracts, agreements
and instruments constitute valid and binding obligations of Parent and/or
Mergerco and, to the Knowledge of Parent, the other parties thereto and are in
full force and effect in all material respects, without any material breach by
Parent or Mergerco or, to the Knowledge of Parent, any other parties thereto.
Section 2.15 Transactions with Affiliates. Except as set forth on Schedule
2.15, no officer, director or other Affiliate of Parent (including spouses,
children and other relatives of any of the foregoing) is a party to any
agreement, contract, arrangement or
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transaction with Parent or has any interest in any property (real or personal or
mixed, tangible or intangible) owned or leased by Parent.
Section 2.16 Status of Parent. Neither Parent nor Mergerco nor any of their
officers, directors or affiliates, promoters or control persons, nor any
predecessor thereof, has been (a) the general partner or an executive officer of
any business with respect to which a petition for relief under the Bankruptcy
Code has been filed either at the time of the filing or within two years before
that time; (b) been convicted in a criminal proceeding or been the subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses); (c) been subject to any order, judgment or decree, subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his or its involvement in any type of business, securities or banking
activities; or (d) been found by a court of competent jurisdiction (in a civil
action) or the Securities Exchange Commission to have violated a federal or
state securities law, and the judgment has not been reversed, suspended or
vacated.
Section 2.17 Private Placement Memorandum. The Private Placement Memorandum
(the "PPM") to be prepared by Parent in accordance with Section 5.12 will not,
at the time of the mailing of the PPM to the Shareholders, at the time of the
Shareholders Meeting or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
Parent makes no representation or warranty with respect to (i) any information
supplied by the Company for use in the PPM or (ii) any information contained in
the Proxy Statement to which the PPM will be attached as an Appendix. If at any
time prior to the Effective Time any event with respect to Parent, its officers
and directors or any of its subsidiaries should occur which is required to be
described in an amendment of, or a supplement to, the PPM such event shall be so
described. None of the information that Parent or Mergerco will supply
specifically for use in the Proxy Statement will contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, not misleading.
Section 2.18 No Finder. Parent has not paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
Section 2.19 Disclosure. No representation or warranty made by Parent
contained in this Agreement and no statement contained in any certificate, list,
exhibit or other instrument specified or referred to in this Agreement,
including, without limitation, the Parent Disclosure Schedules, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of circumstances
under which they were made, not misleading.
Section 2.20 Parent Disclosure Schedules. Notwithstanding anything in this
Agreement to the contrary, (a) all information contained in the Schedules
delivered by Parent pursuant to Article II hereto (the "Parent Disclosure
Schedules") is and for all purposes shall be deemed to constitute a part of
Parent's representations and warranties set forth in this Article II, (b) the
Parent Disclosure Schedules are incorporated in this Agreement by
7
reference, and (c) disclosure by Parent in or on one Parent Disclosure Schedule
shall be deemed to be disclosure for all other purposes on any or all of the
other Parent Disclosure Schedules for which such disclosure may be relevant to
the extent that a reasonable person would understand that information disclosed
in such Schedule might reasonably apply to such other Schedule(s).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Mergerco as follows:
Section 3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Company is duly qualified to transact business as a foreign corporation and
is in good standing in each of the jurisdictions listed in Schedule 3.1, which
jurisdictions are the only ones in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect on
the Company, and no other jurisdiction has demanded, requested or otherwise
indicated that the Company is required to so qualify. The Company has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted. The Company
has delivered or otherwise made available to Parent true, correct and complete
copies of the Company's Articles of Incorporation, as in effect on the date
hereof, By-laws, as in effect on the date hereof, minute books and stock
transfer records. The Company is not in violation of any term or provision of
its charter, bylaws or other organizational document the consequences of which
would reasonably be expected to result in a Material Adverse Effect on the
Company.
Section 3.2 Subsidiaries and Investments. The Company does not, directly or
indirectly, (i) own, of record or beneficially, or own or hold the right to
acquire, any outstanding voting or equity securities or other voting or equity
interests in any corporation, partnership, joint venture or other entity or (ii)
otherwise control any such corporation, partnership, joint venture or other
entity.
Section 3.3 Capital Stock of the Company. The authorized capital stock of
the Company consists of (i) 10,000,000 shares of Common Stock, $.01 par value
("Company Common Stock"), 3,278,900 of which are duly and validly issued and
outstanding, fully paid and nonassessable, and none of which are held by the
Company as treasury shares, and (ii) 200,000 shares of preferred stock, par
value $.01 per share (the "Company Preferred Stock," together with the Company
Common Stock, the "Company Stock"), of which (A) 50,000 shares have been
designated Series A Preferred Stock, of which, as of the date hereof, 19,250
shares are issued and outstanding, (B) 15,000 shares have been designated Series
B Preferred Stock, of which, as of the date hereof, 12,000 shares are issued and
outstanding and (C) 100,000 shares have been designated Series C Preferred
Stock, of which, as of the date hereof, 20,227 shares are issued and
outstanding. All outstanding shares of Company Stock are validly issued, fully
paid and nonassessable. None of the issued and outstanding shares of Company
Stock has been issued in violation of the preemptive rights of any person or in
violation of applicable federal or state securities laws, except where any such
violation or violations, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. Schedule 3.3 sets forth a true and
complete list of the names of (i) each of the
8
holders of record of the Company Stock and the respective number of outstanding
shares held of record by each such holder, (ii) each of the holders of record of
Company Stock Options, the respective number of shares of Company Common Stock
subject to each such Company Stock Option and the exercise price applicable to
such Company Stock Option and (iii) each of the holders of record of Company
Stock Purchase Warrants, the respective number of shares of Company Stock
subject to each such Company Stock Purchase Warrant and the exercise price
applicable to such Company Stock Purchase Warrant. Except for this Agreement,
the Merger Agreement and except as set forth on Schedule 3.3 hereof, there are
no agreements, arrangements, warrants, options, puts, calls, rights or other
commitments, plans or understandings of any character relating to the issuance,
sale, purchase, redemption, conversion, exchange, registration, voting, or
transfer of any shares of Company Stock or any other securities of the Company.
Except as set forth on Schedule 3.3 and except pursuant to applicable laws,
there are no restrictions, including but not limited to self-imposed
restrictions, on the retained earnings of the Company or on the ability of the
Company to declare and pay dividends.
All outstanding shares of Company Stock are held free and clear of all
Encumbrances created by the Company and, to the Knowledge of the Company, such
shares are beneficially owned by the holders listed on Schedule 3.3 (and to the
Knowledge of the Company) free and clear of all Encumbrances (other than
restrictions under the Securities Act, and the rules and regulations thereunder,
and state securities laws).
Section 3.4 Authorization. The Board of Directors of the Company has
declared the Merger advisable and has duly resolved to recommend that the Merger
and the Merger Agreement be approved by the Shareholders. The Company has full
corporate power and authority to enter into the Transaction Documents and to
consummate the transactions contemplated hereby and thereby and to comply with
the terms and provisions hereof and thereof, subject to the conditions hereof
and thereof. The execution, delivery and performance by the Company of the
Transaction Documents and the actions to be taken by the Company contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject to approval of the Merger
and the Merger Agreement by the Shareholders. The approval of the valuation of
the Merger Consideration as required by Article III, Section B(2)(b)(ii)(B) of
the Company's Articles of Incorporation by the affirmative vote of a majority of
the votes that holders of the outstanding shares of each series of Company
Preferred Stock are entitled to cast (voting as a single class on an as-if
converted basis in accordance with the Company's Articles of Incorporation) (the
"Shareholder Merger Consideration Approval"), the affirmative vote of a majority
of the votes that holders of the outstanding shares of Company Common Stock are
entitled to cast (voting as a single class with the holders of the Company
Preferred Stock voting on an as-if converted basis in accordance with the
Company's Articles of Incorporation), the affirmative vote of a majority of the
votes that holders of the outstanding shares of each series of Company Preferred
Stock are entitled to cast (each series of Company Preferred Stock voting
separately as a class in accordance with the Company's Articles of
Incorporation) and the affirmative vote of a majority of the votes that holders
of the outstanding shares of Company Preferred Stock are entitled to cast
(voting as a single class on an as-if converted basis in accordance with the
Company's Articles of Incorporation), are the only votes of the holders of any
class or series of the Company's capital stock necessary to approve the Merger
Agreement and the transactions contemplated thereby. Each of this Agreement and
the Merger Agreement constitutes the valid and binding
9
obligation of the Company, enforceable in accordance with its terms, subject to
(a) general principles of equity, regardless of whether enforcement is sought in
a proceeding in equity or at law, and (b) bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium, receivership or other similar
laws relating to or affecting creditors' rights generally.
Section 3.5 Non-Contravention. Except as set forth on Schedule 3.5, neither
the execution or delivery of the Transaction Documents by the Company nor the
consummation of the transactions contemplated hereby or thereby by the Company
will (a) conflict with or result in the breach of any term or provision of, or
constitute a default under, the Articles of Incorporation or By-laws of the
Company; (b) result in a default, or give rise to any right of termination,
cancellation or acceleration, under any provisions of any material agreement
(including, without limitation, any loan agreements or promissory note),
indenture or instrument to which the Company is a party or by which the Company
is bound; (c) result in the creation or imposition of any Encumbrance on any of
the property of the Company; (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company; or (e) require on the
part of the Company or the Shareholders, as of the date hereof, the approval,
consent, waiver, authorization or act of, or the making by the Company of any
declaration, filing or registration with, any third party or any Governmental
Body, except for the filing of a copy of the Merger Agreement with the Secretary
of State of the State of California and such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 3.6 Financial Statements. Schedule 3.6 contains (a) the unaudited
balance sheets of the Company as of December 31, 2000 and December 31, 2001 and
the related statements of income, stockholder's equity and cash flows for the
years then ended, and the notes to such financial statements (collectively, the
"Company's Annual Financial Statements") and (b) the unaudited internal
statement of the Company for the nine months ended September 30, 2002 (the
"Balance Sheet" together with the Company's Annual Financial Statements, the
"Company's Financial Statements").
Except as set forth on Schedule 3.6, the Company's Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis except as may be noted therein, are true and correct and present fairly in
all material respects the financial condition and the results of operations and
cash flows of the Company at the dates and for the respective periods stated
therein. None of the Company's Financial Statements referred to in this Section
3.6 contains any material items of special or nonrecurring income except as
expressly specified therein.
Section 3.7 Operations Since Balance Sheet Date. (a) Except as set forth on
Schedule 3.7, during the period from the Balance Sheet Date to the date hereof,
inclusive, there has been no damage, destruction, loss or claim made or filed
against the Company (whether or not covered by insurance) or condemnation or
other taking which materially adversely affects the Business or the results of
operations, properties or condition (financial or otherwise) of the Company.
10
(b) Since the Balance Sheet Date, except (i) as set forth on Schedule
3.7, (ii) for actions described below that would not result in a Material
Adverse Effect on the Company (other than subsections (i), (vii), (xi) and (xv)
which shall not be qualified by this subclause (ii)) and (iii) for actions
described below that would not cause any of the representations and warranties
contained in this Article III (other than this Section 3.7) to be untrue in any
material respect, the Company has not:
(i) issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver, or granted any option, warrant or other right to
purchase, any of its capital stock or other equity interest or any security
convertible into its capital stock or other equity interest;
(ii) paid any obligation or liability (absolute or contingent) other
than current liabilities reflected on the Balance Sheet and current
liabilities incurred since the Balance Sheet Date in the ordinary course of
business consistent with past practice;
(iii) undertaken or committed to undertake capital expenditures
exceeding $10,000 for any single project or related series of projects;
(iv) made charitable donations in excess of $2,000 in the aggregate;
(v) sold, leased, transferred or otherwise disposed of (including any
transfers from the Company to any of its Affiliates), or mortgaged or
pledged, or imposed or suffered to be imposed any Encumbrance (other than
Permitted Encumbrances) on, any of the assets reflected on the Balance
Sheet or any assets acquired after the Balance Sheet Date, except for sales
of inventory in the ordinary course of business consistent with past
practice;
(vi) canceled any debts owed to or claims held by the Company
(including the settlement of any claims or litigation) or waived any rights
of material value;
(vii) created, incurred, guaranteed or assumed any indebtedness for
borrowed money or entered into any capitalized leases;
(viii) accelerated collection of any note or account receivable to a
date prior to the date such collection would have occurred in the ordinary
course of business consistent with past practice;
(ix) delayed payment of any account payable or other liability of the
Company beyond its due date or the date when such liability would have been
paid in the ordinary course of business consistent with past practice;
(x) allowed the levels of raw materials, supplies, work-in-process,
finished goods or other materials included in its inventory to vary in any
material respect from levels customarily maintained;
(xi) granted any bonus or other special compensation or increased the
compensation or benefits payable or to become payable to any directors,
11
officers or employees, or instituted any increase in or otherwise amended
any profit sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
employee benefit plan except for increases required by law;
(xii) sold, assigned or transferred any patents, trademarks, service
marks, trade names, copyrights, Software (as defined in Section 3.17)
(except in the ordinary course of business consistent with past practice),
trade secrets or other similar intangible assets, or disclosed any
proprietary or confidential information to any person or entity (other than
Parent, its Affiliates and agents);
(xiii) extended credit other than in the ordinary course of business
or permitted any change in credit practices or in the method of maintaining
books, accounts or business records;
(xiv) declared, set aside or paid any dividend or made any other
distribution (whether in cash, stock or other property) to any of the
Shareholders in respect of any Company Stock or other securities of the
Company;
(xv) purchased, redeemed, called for purchase or redemption or
otherwise acquired any shares of Company Stock or any other securities of
the Company;
(xvi) made any write-down of the value of any inventory or write-offs
as uncollectible of any notes or accounts receivable except for write-downs
and write-offs in the ordinary course of business and consistent with past
practice, none of which would reasonably be expected to have a Material
Adverse Effect on the Business or the results of operations, properties or
condition (financial or otherwise) of the Company;
(xvii) except as otherwise contemplated herein, entered into any
transaction other than in the ordinary course of business or any
transaction (not involving purchases and sales of inventory) including
commitments for expenditures in excess of $10,000;
(xviii) made any changes in the accounting methods or practices
followed by the Company;
(xix) entered into or performed any transactions with any of its
Affiliates except for transactions in the ordinary course of business and
on terms no less favorable than those customarily enjoyed by the Company;
(xx) agreed or committed to do or authorized any of the foregoing; or
(xxi) prepared or filed any Tax Return inconsistent with past practice
or, on any such Tax Return taken any position, made any election, or
adopted any method that is inconsistent with positions taken, elections
made or methods used in preparing
12
or filing similar Tax Returns in prior periods (including, without
limitation, positions, elections or methods which would have the effect of
deferring income to periods ending after the Closing Date or accelerating
deductions to periods ending on or prior to the Closing Date).
Section 3.8 No Undisclosed Liabilities. Except as set forth on Schedule
3.8, the Company is not subject to any obligation or liability of a kind
required to be included as a liability on the Balance Sheet under the method of
accounting described in Section 3.6 hereof (including, without limitation,
unasserted claims whether known or unknown), whether absolute, contingent,
accrued or otherwise, which is not shown or which is in excess of amounts shown
or reserved for on the Balance Sheet, other than liabilities reasonably incurred
in the ordinary course of business after the Balance Sheet Date, none of which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company and none of which is a liability for breach of contract, breach of
warranty, tort, infringement or other lawsuit.
Section 3.9 Taxes. (a) Except as set forth on Schedule 3.9, (i) all Tax
Returns, required to be filed by or on behalf of the Company prior to the
Closing Date have been or will be timely filed, and such Tax Returns as so filed
are or will be complete and accurate in all material respects and disclose all
Taxes required to be paid for the periods covered thereby and all Taxes shown to
be due on such Tax Returns have been timely paid; (ii) no extension of time in
which to file any such Tax Returns is in effect or has been requested; (iii) all
Taxes for which the Company is liable relating to any period ending on or prior
to the Closing Date (or the portion of any Tax period ending on the Closing Date
and with respect to any Tax Period which begins before the Closing Date and ends
after the Closing Date) shall have been paid or, if not yet due and payable,
properly accrued for as of the Closing Date; (iv) all Taxes which the Company is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or will be paid to the proper Governmental
Body; (v) there are no Tax liens (except for liens relating to current Taxes not
yet due) on any property of the Company and, to the Knowledge of the Company, no
basis exists for any such liens; (vi) the Tax Returns referred to in clause (i)
have been examined by the appropriate taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (vii) no audit of any kind has been conducted with respect to
any Tax Return by an appropriate Taxing authority; (viii) all deficiencies which
have been asserted as a result of any examination set forth on Schedule 3.9
hereto have been fully paid or finally settled, and no issue has been raised in
any such examination which, by application of similar principles, reasonably
would be expected to result in assertion of a deficiency for any other year not
so examined; (ix) the Company has neither executed nor entered into a closing
agreement pursuant to Section 7121 of the Code, or any predecessor provision or
any similar provision of state, local or foreign law; (x) there are no
outstanding agreements or waivers extending the statutes of limitations with
respect to the assessment of any Tax and no such agreements or waivers have been
requested; (xi) the Company has not incurred any liability with respect to Taxes
based upon income, operations, purchases, sales, payroll, licenses,
compensation, business, capital stock or surplus, properties or assets except in
the ordinary course of business, or any liabilities for interest or penalties
with respect to the foregoing; (xii) there is no action, suit, investigation,
audit, claim or assessment pending or proposed or, to the Knowledge of the
Company, threatened with respect to Taxes of the Company and, to the Knowledge
of the Company, no basis exists therefor; (xiii) the accruals for Taxes
reflected on the Balance Sheet are adequate
13
to cover any Tax liability of the Company; (xiv) since the Balance Sheet Date,
the Company has not and, to the Knowledge of the Company, none of the
Shareholders has taken any action not in accordance with past practice that
would have the effect of deferring any Tax liability for the Company from any
taxable period ending on or before the Closing Date to any taxable period ending
after the Closing Date; and (xv) no claim has ever been made by a Taxing
Authority in a jurisdiction where the Company has never paid Taxes or filed Tax
Returns asserting that the Company is or may be subject to Taxes assessed by
such jurisdiction.
(b) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer Taxes, sales
Taxes, use Taxes, real estate transfer or gains Taxes, or other similar Taxes
will be imposed on the transactions contemplated by this Agreement.
(c) As a result of the Merger, none of the Company, the Surviving
Corporation or Parent will be obligated to make a payment to an individual
employed by the Company that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
(d) For any Taxable period as to which the relevant statute of
limitations will not have expired as of the Closing Date, the Company has not
been a member of an affiliated group (as defined in Section 1504(a) of the Code
without regard to the limitations contained in Section 1504(b) of the Code) or
has filed Tax Returns with a group of corporations filing a combined,
consolidated or unitary income Tax Return.
(e) The Company has not and, to the Knowledge of the Company, the
Shareholders have not taken or failed to take any action which action or failure
would cause the Merger to fail to qualify as a reorganization within the meaning
of Section 368(a) of the Code.
Section 3.10 Availability of Assets and Legality of Use. Except as set
forth on Schedule 3.10, the assets owned or leased by the Company, or which the
Company is entitled to use under license or other agreements, constitute all the
assets used by the Company in the conduct of the Business (including, but not
limited to, all books, records, computers and computer programs and data
processing systems), and the tangible assets owned or leased by the Company are
in good condition (subject to normal wear and tear) and serviceable condition.
Except as set forth on Schedule 3.10, to the Knowledge of the Company, (a) all
such assets and their uses conform to all applicable laws, regulations, rules,
ordinances, codes, licenses, franchises and permits (including, without
limitation, all electrical, building, zoning, environmental and occupational
safety and health Requirements of Law), and (b) no written notice of any
existing violation of any of such matters relating to such assets or their use
has been received by the Company or any of the Shareholders.
Section 3.11 Governmental Permits. To the Knowledge of the Company, the
Company owns, holds or possesses all governmental licenses, franchises, permits,
privileges, variances, immunities, approvals and other authorizations which are
necessary to entitle it to own, lease, operate and use its assets and properties
and to carry on and conduct the Business substantially as currently conducted
(herein collectively called "Governmental Permits"),
14
except for such Governmental Permits as to which the failure to so own, hold or
possess would not have a Material Adverse Effect on the Company. Schedule 3.11
sets forth a list and brief description of each such Governmental Permit.
To the Knowledge of the Company, the Company has fulfilled and performed
its respective obligations under each of such Governmental Permits, and no event
has occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under any
such Governmental Permit, or permits or, after notice or lapse of time or both,
would permit revocation or termination of any such Governmental Permit, or which
might adversely affect the right of the Company under any such Governmental
Permit. No notice of cancellation, of default or of any dispute concerning any
Governmental Permit, or of any event, condition or state of facts described in
the preceding sentence, has been received or is known by the Company. Except as
set forth on Schedule 3.11, each of the Governmental Permits is valid,
subsisting and in full force and effect and will continue in full force and
effect after the Closing, in each case without (a) the occurrence of any breach,
default or forfeiture of rights thereunder or (b) the consent, approval, or act
of, or the making of any filing with, any Governmental Body or other party.
Section 3.12 Real Property. The Company does not own, and has never owned,
any real property or any option to acquire any real property.
Section 3.13 Real Property Leases. Schedule 3.13 sets forth a list of each
lease or similar agreement under which the Company is lessee of, or holds or
operates, any real property owned by any third party. Except as set forth on
Schedule 3.13, (i) there are no subleases, tenancies or other rights of
occupancy affecting all or any part of such leases, (ii) the Company has the
right to quiet enjoyment of the premises described in any lease identified on
such Schedule for the full term of each such lease or similar agreement (and any
renewal option related thereto) relating thereto, and (iii) the leasehold or
other interest of the Company therein is not subject or subordinate to any
Encumbrance held by persons claiming by, through or under the Company, except
for Permitted Encumbrances.
Section 3.14 Condemnation. Neither the whole nor any part of any real
property listed on Schedule 3.13 is subject to any pending suit for condemnation
or other taking by any public authority and, to the Knowledge of the Company, no
such condemnation or other taking is threatened.
Section 3.15 Personal Property. Schedule 3.15 contains a list as of the
date hereof of all machinery, equipment, vehicles, furniture and other personal
property owned by the Company having an original cost of $2,000 or more.
Section 3.16 Personal Property Leases. Schedule 3.16 contains a list of
each lease or other agreement or right, whether written or oral, under which the
Company is lessee of, or holds or operates, any machinery, equipment, computer
hardware and related peripheral equipment, vehicle or other tangible personal
property owned by a third party.
Section 3.17 Intellectual Property. (a) Schedule 3.17 contains a list of:
(i) all United States and foreign patents and patent applications and
patent disclosures owned or controlled by the Company;
15
(ii) all United States and foreign copyrights, registered or
unregistered, copyrighted works and copyright registration applications
owned or controlled by the Company;
(iii) all computer software programs and software systems (including,
without limitation, all data, databases, compilations, tool sets, related
documentation and materials, whether in source code, object code or human
readable form and regardless of media), developed by or for the Company or
otherwise used in the Business ("Software");
(iv) all United States, state and foreign trademarks, service marks
and trade names for which registrations have been issued or applied for by
the Company, and all other United States, state and foreign trademarks,
service marks and trade names owned or used by the Company or in which the
Company holds any right, license, sublicense or interest;
(v) all agreements, commitments, contracts, understandings,
licenses, sublicenses, assignments and indemnities which relate or pertain
to any asset, property or right of the character described in the preceding
clause to which the Company is a party;
(vi) all licenses, sublicenses or agreements which are material to
the Business and which relate or pertain to mailing lists, know-how, trade
secrets, disclosures or uses of ideas to which the Company is a party,
showing in each case the parties and the material terms; and
(vii) all registered and unregistered assumed or fictitious names
under which the Company is conducting the Business or has within the
previous three years conducted the Business.
(b) All patents listed on Schedule 3.17 as being owned, controlled
or used by the Company are valid and in force and all patent applications of the
Company listed therein are in good standing, all without challenge of any kind,
and, except as otherwise set forth on Schedule 3.17, the Company owns the entire
right, title and interest in and to such patents and patent applications, free
and clear of all Encumbrances, except Permitted Encumbrances. All of the
registrations for trademarks, service marks, trade names and copyrights listed
on Schedule 3.17 as being owned, controlled or used by the Company are valid and
in force and all applications for such registrations are pending and in good
standing, all without challenge of any kind, and, except as otherwise set forth
on Schedule 3.17, the Company owns the entire right, title and interest in and
to all such trademarks, service marks, trade names and copyrights so listed as
well as the registrations and applications for registration therefor, free and
clear of all Encumbrances, except Permitted Encumbrances. Correct and complete
copies of all the patents and patent applications and of all of the trademarks,
service marks, trade names and copyrights and registrations, applications or
deposits therefor and all the agreements, commitments, contracts,
understandings, licenses, sublicenses, assignments, and indemnities listed on
Schedule 3.17 have heretofore been delivered or otherwise made available by the
Company to Parent.
16
Section 3.18 Accounts Receivable; Inventories. (a) All accounts receivable
of the Company have arisen from bona fide transactions by the Company in the
ordinary course of business consistent with past practice and, to the Knowledge
of the Company, are not subject to counterclaims or setoffs. Except as set forth
on Schedule 3.18, no such receivable has been outstanding for more than 90 days
beyond its due date. To the Knowledge of the Company, all of the accounts
receivable reflected on the Balance Sheet, taken as a whole, are good and
collectible in the ordinary course of business at the aggregate amounts recorded
in respect thereof, net of any applicable allowance for doubtful accounts, which
allowances will be determined on a basis consistent with the basis used in
determining the allowances for doubtful accounts reflected in the Balance Sheet.
(b) The inventories of the Company (including raw materials,
supplies, work-in-process, finished goods and other materials) are in good and
useable condition and (i) are reflected in the Balance Sheet in accordance with
generally accepted accounting principles and (ii) are reflected in the books and
records of the Company at the lower of average cost or market value. The
inventory obsolescence policies of the Company are appropriate for the nature of
the products sold and the marketing methods used by the Company, and the reserve
for inventory obsolescence contained in the Balance Sheet fairly reflects the
amount of obsolete inventory as of the Balance Sheet Date. The Company has
heretofore delivered to Parent a list of places where material inventories of
the Company are located.
Section 3.19 Title to Assets. To the Knowledge of the Company, the Company
has good title to all of its assets reflected on the Balance Sheet as being
owned by it and all of the assets thereafter acquired by it (except to the
extent that such assets have been disposed of after the Balance Sheet Date in
the ordinary course of business consistent with past practice), free and clear
of all Encumbrances, except for Permitted Encumbrances and except as set forth
in Schedule 3.19.
Section 3.20 Employees. Schedule 3.20 contains a list of the employees of
the Company as of the date hereof. As of the date hereof, all bonuses payable to
employees of the Company for services performed on or prior to the date hereof
have been paid in full, and there are no outstanding agreements, understandings
or commitments of the Company with respect to any bonuses or increases in
compensation.
Section 3.21 Employee Matters. To the Knowledge of the Company, the Company
has complied in all material respects with all applicable laws, rules and
regulations which relate to wages, hours, discrimination in employment and
collective bargaining and to the operation of its business and is not liable for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing. The Company believes that the Company's relations with its
employees are satisfactory. Except as set forth in Schedule 3.21, the Company is
not a party to any collective bargaining agreement, the Company has complied in
all material respects with all collective bargaining agreements listed in such
Schedule and the Company is not a party to, and it is not affected by or, to the
Knowledge of the Company, threatened with, any dispute or controversy with a
union or with respect to unionization or collective bargaining involving its
employees. The Company is not materially affected by any dispute or controversy
with a union or with respect to unionization or collective bargaining involving
any supplier or customer of the Company. The Company is not affected by any
union organizing or election activities involving any employee of the
17
Company and, to the Knowledge of the Company, no such activities are threatened
as of the date hereof.
Section 3.22 Employee Benefit Plans. (a) The Company's 401(k) Plan, as
referenced on Schedule 3.22(a) (the "401(k) Plan"), is the only "employee
pension benefit plan" (as such term is defined in Section 3(2) of ERISA) at any
time maintained by the Company or which provides or will provide benefits to
present or prior employees of the Company. The Company has at no time maintained
any "employee welfare benefit plan" (as such term is defined in Section 3(1) of
ERISA) and neither has provided nor will provide benefits to present or prior
employees of the Company pursuant to such a plan. In addition, set forth on
Schedule 3.22(a) is a true and complete list of each stock ownership, stock
purchase, stock option, phantom stock, bonus, deferred compensation, incentive
compensation, severance or termination pay, change of control, death benefit or
similar plan, agreement or arrangement maintained by the Company (the "Non-ERISA
Commitments"). The Company has never maintained or been required to contribute
to any "employee pension benefit plan" subject to Section 302 or Title IV of
ERISA or any "multiemployer plan," as such term is defined in Section 3(37) of
ERISA. The Company does not have, and has never had, any ERISA Affiliate. Except
as disclosed on Schedule 3.22(a), true copies of the 401(k) Plan and each
Non-ERISA Commitment, the annual reports required to be filed under ERISA for
the last two years with respect to the 401(k) Plan, if any, and the financial
statements for the most recent two years for which such statements exist with
respect to the 401(k) Plan have been delivered or made available to Parent.
(b) Neither the Company nor, to the Knowledge of the Company, any of
the Shareholders, any other "disqualified person" (within the meaning of Section
4975 of the Code) or any "party in interest" (within the meaning of Section
3(14) of the Code) has engaged in any non-exempt prohibited transaction (within
the meaning of Section 4975 of the Code or Section 406 of ERISA), nor, to the
Knowledge of the Company, has any breach of fiduciary duty occurred, with
respect to the 401(k) Plan. Except as disclosed on Schedule 3.22(b), the 401(k)
Plan (i) has been administered in accordance with its terms and (ii) complies in
form, and has been maintained in accordance, with the requirements of ERISA and,
where applicable, the Code. Except as disclosed on Schedule 3.22(b), the Company
has no obligations to provide health or life insurance benefits to its former
employees, except as specifically required by law. Except as disclosed on
Schedule 3.22(b), the 401(k) Plan has received a favorable determination letter
from the Internal Revenue Service, and to the Knowledge of the Company nothing
has occurred and no condition exists that could cause the loss of such
qualification. All contributions or payments that are due from the Company with
respect to the 401(k) Plan and Non-ERISA Commitments have been timely paid and
any related insurance and third party administration contracts remain in full
force and effect. There is no pending or to the Knowledge of the Company
threatened claim in respect of the 401(k) Plan or any Non-ERISA Commitments
other than routine claims for benefits in the ordinary course of business.
Section 3.23 Contracts. Except as set forth on Schedule 3.23 or any other
Schedule hereto, the Company is not a party to or bound by:
(a) any contract for the purchase, sale or lease of real property or
any option to purchase or sell real property;
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(b) any indebtedness, obligation or liability for borrowed money, or
liability for the deferred purchase price of property in excess of $10,000, or
any instrument guaranteeing any indebtedness, obligation or liability, or any
obligation to incur any of the foregoing;
(c) any joint venture, partnership or other arrangement involving a
sharing of profits involving the Company;
(d) any agreement which is material to the Business and which
includes provisions regarding minimum volumes or volume discounts, excluding
outstanding price quotations;
(e) any agreement which is material to the Business and pursuant to
which a rebate, discount, bonus, commission or other payment with respect to the
sale of any product of the Company will be payable or required after the
Closing;
(f) any guarantee of the obligations of the Company's customers,
suppliers, officers, directors, employees or Affiliates or others;
(g) any consignment, distributor, dealer, manufacturer's
representative, sales agency, advertising representative or advertising or
public relations contract which is material to the Business;
(h) any agreement limiting the Company's ability to engage in any
business anywhere in the world;
(i) any contract which provides for, or relates to, any
non-competition or confidentiality arrangement with any Person, including any
current or former officer or employee of the Company;
(j) any contract or group of related contracts for capital
expenditures in excess of $10,000 for any single project or related series of
projects;
(k) any contract which involves payments or receipts by the Company
of more than $5,000; or
(l) any contract not made in the ordinary course of business.
Section 3.24 Status of Contracts. Each of the leases, contracts and other
agreements listed on Schedules 3.13, 3.16, 3.17, 3.22(a) and 3.23 (collectively,
the "Material Contracts"), constitutes a valid and binding obligation of the
Company and, to the Knowledge of the Company, the other parties thereto, and is
in full force and effect and each of the Material Contracts (except as set forth
in Schedule 3.24 and except for those Material Contracts which by their terms
will expire prior to the Closing Date or will be otherwise terminated prior to
the Closing Date in accordance with the provisions hereof) will continue in full
force and effect after the Closing Date, in each case without materially
breaching the terms thereof or resulting in the forfeiture or impairment of any
rights thereunder and without the consent, approval or act of, or the making of
any filing with, any other party. Except as set forth on Schedule 3.24, the
Company has fulfilled and performed its obligations in all
19
material respects under each of the Material Contracts and the Company is not
in, or, to the Knowledge of the Company, alleged to be in, material breach or
default under, nor is there or, to the Knowledge of the Company, is there
alleged to be any basis for termination of any of the Material Contracts. To the
Knowledge of the Company, no other party to any of the Material Contracts has
breached or defaulted thereunder. No event has occurred and no condition or
state of facts exists which, with the passage of time or the giving of notice or
both, would constitute such a default or breach by the Company or, to the
Knowledge of the Company, by any other party. The Company is not currently
renegotiating any of the Material Contracts or paying liquidated damages in lieu
of performance thereunder.
Section 3.25 No Violation, Litigation or Regulatory Action. Except as set
forth on Schedule 3.25:
(a) To the Knowledge of the Company, the Company has complied with
all laws, regulations, rules, writs, injunctions, ordinances, franchises,
decrees, stipulations, awards or orders of any Governmental Body which are
applicable to the Company or its Business;
(b) No notice has been served upon the Company by any Governmental
Body or other person of any violation of any Requirements of Law or calling
attention to the necessity of any work, repairs, new construction, installation
or alteration of any real or personal property owned, leased or used by the
Company;
(c) There are no lawsuits, claims, suits, proceedings pending or, to
the Knowledge of the Company, threatened against the Company or investigations
pending regarding the Company nor, to the Knowledge of the Company, is there any
basis for any of the same, and there are no lawsuits, suits or proceedings
pending or contemplated in which the Company is the plaintiff or claimant; and
(d) There is no action, suit or proceeding pending or, to the
Knowledge of the Company, threatened which questions the legality or propriety
of the transactions contemplated by this Agreement or the Merger Agreement.
Section 3.26 Insurance. All fire and casualty, liability (general, products
and other liability), workers' compensation and other forms of insurance and
bonds maintained by the Company are set forth on Schedule 3.26, provide full and
adequate coverage for all normal risks incident to the Business and the
respective properties and assets of the Company, and, to the Knowledge of the
Company, are in character and amount at least equivalent to that carried by
Persons engaged in similar businesses and subject to the same or similar peril
or hazards. The Company has made any and all payments required to maintain such
policies in full force and effect. The Company has not received notice of
default under any such policy, and has not received written notice or, to the
Knowledge of the Company, oral notice of any pending or threatened termination
or cancellation, coverage limitation or reduction or material premium increase
with respect to such policy.
Section 3.27 Environmental Protection. Except as set forth on Schedule
3.27: to the Knowledge of the Company, (i) the Company has all permits and
licenses required under all applicable federal, state or local statutes, laws,
ordinances, codes, rules, regulations, guidelines or any binding determinations
of any Governmental Body (including consent
20
decrees and administrative orders) relating to protection of the environment or
public or worker health and safety (collectively, "Environmental Laws") in
connection with the operation of the Business, (ii) is in compliance with such
permits and licenses as well as with Environmental Laws, (iii) has not received
notice of any actual or alleged noncompliance and (iv) there have been no past
events, actions or practices which will prevent continued compliance with
permits, licenses and Environmental Laws in effect at the Effective Time or
which could form the basis for any claim, action or suit, based on the Release
or threatened Release of any Contaminant on, in or under or from any Facility
now or previously owned, operated or leased by the Company. Except as set forth
on Schedule 3.27, the Company has not received any formal notice, demand or
claim, and there are no legal or administrative proceedings pending or resolved
in which it has been alleged that the Company is not in compliance with
Environmental Laws or that it is liable under Environmental Laws in connection
with any generation, treatment, storage, transportation or disposal of any
Contaminant. Except as set forth on Schedule 3.27, to the Knowledge of the
Company, there have been no past events, actions, practices which will prevent
continued compliance with permits, licenses and Environmental Laws in effect at
the Effective Time, or which could form the basis for any claim, action or suit,
based on the Release or threatened Release of any Contaminant, it being
understood that awareness or notice of future Environmental Laws of general
application by environmental regulatory bodies will not constitute a breach of
this representation and warranty.
Section 3.28 Customers and Suppliers. Set forth in Schedule 3.28 hereto is
a list of names and addresses of the Company's ten (10) largest customers and
the nine (9) largest vendors during each of the years ended December 31, 2000
and December 31, 2001. Except as set forth in Schedule 3.28, there exists no
actual or, to the Knowledge of the Company, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship of
the Company with any customer or group of customers or supplier or group of
suppliers listed in Schedule 3.28, or whose purchases or sales individually or
in the aggregate are material to the operations of the Company's business.
Section 3.29 Shareholders' Assets. None of the Shareholders owns, directly
or indirectly, any assets or properties relating to or used by the Company in
the Business.
Section 3.30 No Finder. The Company has not paid or become obligated to pay
any fee or commission to any broker, finder or intermediary for or on account of
the transactions contemplated by this Agreement.
Section 3.31 Transactions with Affiliates. Except as set forth on Schedule
3.31, no officer, director or other Affiliate of the Company (including spouses,
children and other relatives of any of the foregoing) is a party to any
agreement, contract, arrangement or transaction with the Company or has any
interest in any property (real or personal or mixed, tangible or intangible)
owned or leased by the Company.
Section 3.32 Budget and Financial Projections. (a) Schedule 3.32 sets forth
(i) as of the date hereof the budgets of capital, payroll and other expenditures
of the Company for the fiscal year ending December 31, 2002 (collectively, the
"Budget") and (ii) the total capital expenditures through December 31, 2002, if
any, for each capital expenditure project for which funds are proposed to be
expended during such fiscal year.
21
(b) The Company has made available to Parent certain financial
projections with respect to the Company, which projections were prepared for
internal use only. The Company makes no representation or warranty regarding the
accuracy of such projections or as to whether such projections will be achieved
or otherwise, except that the Company represents and warrants that such
projections were prepared in good faith and are based on assumptions believed by
the Company to be reasonable.
Section 3.33 Confidentiality Agreements. Each current employee and officer
of the Company has executed a Confidentiality and Nondisclosure Agreement
substantially in the form or forms previously presented or made available to
Parent.
Section 3.34 Bank Accounts; Powers of Attorney; Minute Books. (a) Schedule
3.34 sets forth a complete and correct list of all bank accounts and safe
deposit boxes of the Company and persons authorized to sign or otherwise act
with respect thereto as of the date hereof and a complete and correct list of
all persons holding a general or special power of attorney granted by the
Company.
(b) True and complete copies of the minute books of the
Company have been delivered to Parent. Such minute books contain true and
complete records of all meetings and other corporate action taken by the Board
of Directors and stockholders of the Company.
Section 3.35 Proxy Statement. The Proxy Statement and related proxy
materials (collectively, the "Proxy Statement") to be prepared by the Company in
accordance with Section 5.12 and used in connection with the Company's meeting
of Shareholders described in Section 5.12 at which the Merger Agreement and the
Merger will be considered for approval (the "Shareholders Meeting") will, when
prepared by the Company and distributed to the Shareholders, comply in all
material respects with the provisions of the CGCL and will not, at the time of
the mailing of the Proxy Statement to the Shareholders, at the time of the
Shareholders Meeting or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representation or warranty with respect to any information
supplied by Parent for use in the Proxy Statement, including, without limitation
any information contained in the PPM, to be attached to the Proxy Statement as
an Appendix. If at any time prior to the Effective Time any event with respect
to the Company, its officers and directors or any of its subsidiaries should
occur which is required to be described in an amendment of, or a supplement to,
the Proxy Statement, such event shall be so described. None of the information
that the Company will supply specifically for use in the PPM will contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they will be made, not misleading.
Section 3.36 Disclosure. No representation or warranty made by the Company
contained in this Agreement and no statement contained in any certificate, list,
exhibit or other instrument specified or referred to in this Agreement,
including, without limitation, the Company Disclosure Schedules, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of circumstances
under which they were made, not misleading.
22
Section 3.37 Company Disclosure Schedules. Notwithstanding anything in this
Agreement to the contrary, (a) all information contained in the Schedules
delivered by the Company pursuant to Article III hereto (the "Company Disclosure
Schedules") for all purposes is and shall be deemed to constitute a part of the
Company's representations and warranties set forth in this Article III, (b) the
Company Disclosure Schedules are incorporated in this Agreement by this
reference, and (c) disclosure by the Company in or on one Company Disclosure
Schedule shall be deemed to be disclosure for all other purposes on any or all
of the other Company Disclosure Schedules for which such disclosure may be
relevant to the extent that a reasonable person would understand that
information disclosed in such Schedule might reasonably apply to such other
Schedule(s).
ARTICLE IV
[INTENTIONALLY RESERVED]
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 5.1 Ordinary Course. The Company covenants that prior to the
Closing, without Parent's written consent, the Company shall not:
(a) take or authorize any of the actions set forth in Section
3.7(b);
(b) issue or sell any shares of its capital stock of any
class, or issue or sell any securities convertible into, or options with respect
to, or warrants to purchase or rights to subscribe to, any shares of its capital
stock of any class, or make any commitment to issue or sell any such shares or
securities;
(c) directly or indirectly solicit or negotiate with respect
to any inquiries or proposals from any person relating to: (i) the merger or
consolidation of the Company with any person; (ii) the direct or indirect
acquisition by any person of any of the assets of the Company (other than the
sale of assets in the ordinary course of business consistent with past practice,
not otherwise prohibited by this Section 5.1); or (iii) the acquisition of
direct or indirect beneficial ownership or control of the Company or any
securities thereof by any person;
(d) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any election, or
adopt any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar Tax Returns in prior periods
(including, without limitation, positions, elections or methods which would have
the effect of deferring income to periods ending after the Closing Date or
accelerating deductions to periods ending on or prior to the Closing Date); or
(e) agree or commit to do or authorize any of the foregoing;
provided, that, if the Company provides written notice to Parent
(pursuant to the terms of Section 10.2) of its intent to take, authorize, agree
or commit to do or authorize any action prohibited by this Section 5.1, and
prior to obtaining Parent's consent as required by
23
this Section 5.1, the Board of Directors of the Company acting in good faith
determines that the failure to take, authorize, agree or commit to do or
authorize such action will jeopardize the existence of the Company, the taking,
authorization, agreement or commitment to do or authorize any such action by the
Company shall not constitute a breach of this Agreement giving rise to a claim
for damages by Parent or Mergerco; provided, further, that the foregoing proviso
shall in no way operate as a waiver by Parent of the requirements of Section 6.2
or limit or condition Parent's right to terminate this Agreement pursuant to
Section 9.1(d).
Section 5.2 Access Prior to Closing; Certain Notices. (a) Upon reasonable
notice, Parent, the Company, each of their respective subsidiaries and each of
their respective directors, officers, agents and employees shall afford to the
other and the other's representatives (including, without limitation, its
independent public accountants, banks or other lenders' representatives and
attorneys) reasonable access during regular business hours from the date hereof
through the Closing to any and all of its premises, properties, contracts,
books, records, data and personnel or relating to its operations and during such
period each shall make available or furnish promptly to the other (a) a copy of
each report, schedule, registration statement and other document filed or
received by it pursuant to the requirements of federal or state securities laws
and (b) all other information concerning its business, properties and personnel
as the other may reasonably request. No investigation by either of the parties
or their respective representatives shall affect or otherwise obviate or
diminish the representations, warranties, covenants, agreements or conditions to
the obligations of the other party set forth herein.
(b) The Company covenants that prior to the Closing the
Company will promptly notify Parent of any notice or any pending, threatened or
contemplated lawsuit, claim, suit, proceeding or Governmental Body investigation
which, if existing on the date hereof, would have been disclosable pursuant to
Section 3.25(b) or (c).
Section 5.3 Regulatory and Other Authorizations. (a) Parent and the Company
shall use commercially reasonable efforts to secure before the Closing Date,
each consent, approval or waiver, in form and substance reasonably satisfactory
to the Company or Parent, required to be obtained to satisfy the conditions set
forth in Section 6.1 and Section 6.2 below; provided, that, none of the Company,
Parent or Mergerco shall have any obligation to pay any consideration in order
to obtain any such consents or approvals.
(b) During the period prior to the Closing Date, Parent and
the Company shall use commercially reasonable efforts to secure any consents and
approvals of any Governmental Body required to satisfy the conditions set forth
in Sections 6.1 and 6.2 below; provided, however, that the Company shall not
make any agreement or understanding affecting its assets or the Business as a
condition for obtaining any such consents or approvals except with the prior
written consent of Parent.
Section 5.4 Further Assurances. At any time and from time to time at or
after the Closing, the parties agree to cooperate with each other, to execute
and deliver such other documents, instruments of transfer or assignment, files,
books and records and do all such further acts and things as may be reasonably
required to carry out the transactions contemplated hereby.
24
Section 5.5 Company Financial Statements. The Company shall promptly
provide to Parent copies of any financial statements prepared with respect to
the Company as of a date or for a period subsequent to that reflected in the
Company's Financial Statements.
Section 5.6 Delivery of Documents. Subject to the satisfaction of the
conditions to their respective obligations contained in Article VI, the parties
shall cause the delivery of the respective documents required to be delivered or
caused to be delivered by them pursuant to Article VII.
Section 5.7 Employees. The Company hereby acknowledges that, after the
Closing, neither Parent nor the Surviving Corporation, has any obligation to
continue the employment of any of the employees of the Company; except for the
employment of Xxxx X'Xxxxxx pursuant to the D'Angelo Employment Agreement, Xxxx
Xxxxxx pursuant to the Xxxxxx Employment Agreement, X.X. Xxxxxx pursuant to the
Xxxxxx Employment Agreement, Xxxxxx Xxxxxx pursuant to the Xxxxxx Employment
Agreement and Xxxxx Xxxxx pursuant to the Xxxxx Employment Agreement.
Section 5.8 Use of Trade Names. Parent and Surviving Corporation and their
Affiliates shall, after the Effective Time, have the unlimited, exclusive,
royalty-free and perpetual right to use the names "Entelagent" and any other
names or tradenames used by the Company with respect to the Business.
Section 5.9 Continued Relationships. After the date hereof and through the
Closing the Company shall use commercially reasonable efforts to preserve intact
the business of the Company and keep available the services of its officers and
employees and maintain good relationships with suppliers, advertising and other
customers and others having business relations with the Company.
Section 5.10 Preserve Accuracy of Representations and Warranties. Between
the date hereof and the Closing Date, each of the parties hereto shall refrain
from taking any action which would render any of its respective representations
or warranties contained in Article II or III of this Agreement inaccurate as of
the Closing Date, after taking into effect any amendments or supplements to the
Parent Disclosure Schedules necessary or appropriate as a result of the Patron
Holdings Merger. Each party shall promptly notify the other of any action, suit
or proceeding that has been instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement or the Merger Agreement.
Section 5.11 Notification by the Company of Certain Matters. The Company
shall promptly advise Parent in writing of (i) any change or event having a
Material Adverse Effect on the Company, (ii) any notice or other communication
from any third Person alleging that the consent of such third Person is or may
be required in connection with the transactions contemplated by this Agreement,
and (iii) any material default under any Material Contract or event which, with
notice or lapse of time or both, would become such a default on or prior to the
Effective Time and of which the Company has Knowledge.
Section 5.12 Necessary Actions. Subject to the terms of this Agreement,
Parent, Mergerco and the Company shall use commercially reasonable efforts to
effect the Merger as promptly as possible after the date hereof. The Company
shall prepare Annex A hereto and
25
shall use its best efforts to deliver Annex A to Parent within 10 days after the
date hereof, but in any event not later than the date of delivery of the Proxy
Statement to Parent and its counsel pursuant to this Section 5.12. The Company
shall prepare the Proxy Statement, which shall include a recommendation in favor
of the Merger by the Company's Board of Directors, as promptly as possible after
the date hereof and shall submit the proposed Proxy Statement to Parent and its
counsel not less than 10 days prior to submitting the Proxy Statement to the
Shareholders; provided, however, that the Company's Board of Directors may
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent and/or Mergerco, such recommendation in favor of the Merger if, after
consultation with independent legal counsel, the Company's Board of Directors
determines in good faith that such action is necessary to avoid a breach by the
Board of Directors of the Company of its fiduciary duties to the Shareholders
under applicable laws; provided, further, that notwithstanding such withdrawn
recommendation, the Company shall comply with all other requirements of this
Section 5.12. The Company covenants and agrees that at the time of mailing of
the Proxy Statement to the Shareholders, at the time of the Shareholders Meeting
and at the Effective Time the Proxy Statement, insofar as it contains
information provided by the Company, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Parent covenants and
agrees that at the time of mailing of the PPM to the Shareholders, at the time
of the Shareholders Meeting and at the Effective Time the PPM, insofar as it
contains information provided by Parent, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company shall use
commercially reasonable efforts to hold the Shareholders Meeting within
forty-five (45) days after the later of (a) the date of this Agreement; (b)
delivery by Parent of the PPM to each of the Shareholders or (c) approval by
Parent of the final form of the Proxy Statement. The Proxy Statement and the
submission thereof to the Shareholders, the Board of Directors meeting approving
this Agreement, the Merger Agreement, the Merger and authorizing submission of
the Merger for approval of Shareholders and the Shareholders Meeting shall each
comply in all material respects with the requirements of the CGCL and the
Company's Articles of Incorporation and By-laws and all other applicable laws,
including all applicable rules and regulations of Governmental Bodies and all
laws (including common laws) relating to the fiduciary duties of the Company's
Board of Directors.
Section 5.13 No Assurance of IPO. The Company acknowledges and agrees:
(a) that there exists no firm commitment, binding agreement, or
promise or other assurance of any kind, whether express or implied, oral or
written, that an IPO (or any other public offering of the capital stock of
Parent) will occur at a particular price or within a particular range of
prices or occur at all;
(b) that neither Parent, any of its subsidiaries, any of their
respective officers, directors, agents or representatives nor any
prospective underwriter shall have any liability to the Company, any
Shareholder or any other person or entity affiliated or associated with the
Company for any failure of an IPO (or any other public offering of the
capital stock of Parent) to occur at a particular price or within a
particular range of prices or to occur at all; and
26
(c) that the decision of each Shareholder to vote in favor of or
consent to the proposed Merger has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications, or
due diligence investigations which have been or will be made or performed
by any prospective underwriter or by Parent personnel, relative to Parent
or any possible IPO (or any other public offering of the capital stock of
Parent).
Section 5.14 Reorganization. During the period from the date of this
Agreement through the Effective Time, unless the other parties hereto shall
otherwise agree in writing, none of Parent, Mergerco, the Company or any of
their respective subsidiaries shall knowingly take or fail to take any action
which action or failure would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
Section 5.15 Lok Tek Investment. Prior to the Effective Time, (a) the
Company shall use commercially reasonable efforts to terminate any existing
contracts or other agreements between Lok Technologies, Inc., a Delaware
corporation ("Lok Tek"), and the Company (the "Lok Tek Agreements") and (b)
Parent shall either expressly assume or otherwise discharge or satisfy in full
the Company's indebtedness or other obligations to Lok Tek.
Section 5.16 Indebtedness. The Company shall use commercially reasonable
efforts to restructure all monies lent or debts owed by the Company to any of
its employees, any Shareholder or third parties. All indebtedness of the Company
as of the date hereof is set forth on Schedule 5.16 hereto. Parent and the
Company shall amend Schedule 5.16 prior to the Closing to reflect all
indebtedness of the Company as of the date which is two business days prior to
the Closing.
Section 5.17 Option Grants. Subsequent to the Closing, Parent shall grant
440,000 options to purchase Parent Common Stock to certain employees and
non-employee consultants of the Company in the amounts specified on Schedule
5.17 hereto.
Section 5.18 Certain Liabilities and Obligations of the Company.
(a) Concurrently with and at the Closing, Parent shall pay and
satisfy in full each of the liabilities and obligations of the Company set forth
on Schedule 5.18(a) hereto. Not later than two business days prior to the
Closing, Parent and the Company shall amend Schedule 5.18(a) to reflect the
current amounts of such liabilities and obligations of the Company.
(b) Concurrently with and at the Closing, Parent and the Company
shall execute and deliver an Assignment and Assumption Agreement in form and
substance reasonably acceptable to Parent and the Company (the "Assignment and
Assumption Agreement"), pursuant to which the Company shall expressly assign to
Parent, and Parent shall expressly, irrevocably and fully assume, all of the
liabilities and obligations of the Company set forth on Schedule 5.18(b) hereto
(collectively, the "Assumed Liabilities and Obligations"). Parent shall (and the
Assignment and Assumption Agreement will provide that Parent shall) pay,
discharge in full or obtain a release from each of the Assumed Liabilities and
Obligations within the time periods specified on Schedule 5.18(b) and on a
conforming schedule to the Assignment and Assumption Agreement. Not later than
two
27
business days prior to the Closing, Parent and the Company shall amend Schedule
5.18(b) to reflect the current amounts of the Assumed Liabilities and
Obligations.
Section 5.19 Pre-Closing Working Capital. Following the date of this
Agreement through the Effective Date, Parent shall provide the Company with
adequate working capital to fund the business operations of the Company.
Section 5.20 Indemnification of Officers and Directors of the Company. For
six (6) years from and after the Effective Time (or, in the case of matters
occurring at or prior to the Effective Time that have not been resolved prior to
the sixth anniversary of the Effective Time, until such matters are finally
resolved), Parent shall indemnify and hold harmless each individual who as of
the date hereof is a director or officer of the Company (an "Indemnified
Person") for and against all losses, expenses and liabilities that such person
incurs or may incur based upon or relating to facts, events and/or matters
existing or occurring prior to or at the Effective Time (including in connection
with the Merger or the consummation thereof), to the same extent as provided in
(or permitted by) the Company's Articles of Incorporation and/or Bylaws, in each
case, as in effect on the date of this Agreement; provided, however, that Parent
shall not be required to indemnify or hold harmless any Indemnified Person in
connection with any proceeding (or portion thereof) to the extent (but only to
such extent) involving any claim initiated by any Indemnified Person (or any
spouse or member of such Indemnified Person's family, or a custodian, trustee
(including a trustee of a voting trust), executor or other fiduciary for the
account of such Indemnified Person's spouse or members of such Indemnified
Person's family, or a trust for such Indemnified Person's own self) unless such
proceeding is brought by such Indemnified Person solely to enforce rights under
this Section 5.20. As used herein, the word "family" shall include any spouse,
lineal ancestor or descendent, step-child, brother or sister. The Bylaws of the
Surviving Corporation shall contain provisions identical with respect to
indemnification to those set forth in Article VII, Section 1 of the Company's
Bylaws as in effect on the date of this Agreement and the Charter of the
Surviving Corporation shall contain provisions identical with respect to
indemnification as those set forth in Article IV.B of the Articles of
Incorporation of the Company as in effect as of the date of this Agreement and
such provisions shall not be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Time in any manner that would
adversely affect any of the rights of indemnification of persons covered thereby
immediately before the Effective Time. Subject to all of the foregoing
provisions in this Section 5.20, from and after the Effective Time, each person
who as of the date of this Agreement is a director and/or officer of the Company
who becomes a director and/or officer of Parent or any of its subsidiaries
(including the Surviving Corporation) shall (in addition to that which they are
and shall be entitled pursuant to the foregoing provisions of this Section) have
indemnification rights (with respect to their capacities as directors or
officers of Parent or any of its subsidiaries (including the Surviving
Corporation) at or after the Effective Time) to the extent provided in the
Certificate of Incorporation or similar governing documents of Parent and its
subsidiaries (including the Surviving Corporation), as in effect from time to
time after the Effective Time.
Section 5.21 Update of the Parent Disclosure Schedules. Subsequent to the
Patron Holdings Merger, but not later than five days prior to the Effective
Date, Parent will supplement or amend the Parent Disclosure Schedules as
necessary to reflect any and all facts, conditions, occurrences, changes and
other matters, in each case occurring as a result of the Patron Holdings Merger,
and in each case entirely consistent with the representations and
28
warranties contained in Article V of the Share Exchange Agreement, which are
necessary to correct any information in such Parent Disclosure Schedules which
has been rendered inaccurate thereby and/or that has caused or may cause
Parent's representations and warranties contained herein (other than the
representations and warranties of Parent set forth in Section 2.10) not to be
true and correct in all respects. Subject to the foregoing, any such supplement
or amendment to the Parent Disclosure Schedules shall, as of the date of
delivery to the Company, be deemed to constitute a part of Parent's
representations and warranties set forth in this Agreement and, from and after
any such supplement or amendment, the accuracy or completeness of Parent's
representations and warranties and the Parent Disclosure Schedules shall be
determined by reference to the representations, warranties and Parent Disclosure
Schedules, as so supplemented or amended.
Section 5.22 Patron Holdings Merger. Subject to Sections 9.1(e) and 9.2,
the parties hereto agree to negotiate in good faith any amendments to this
Agreement, the Exhibits and the Merger Agreement mutually deemed necessary by
the parties hereto to effect the transactions contemplated hereby following the
completion of the Patron Holdings Merger.
Section 5.23 Registration Rights Agreement. At the Closing, Parent shall
execute and deliver the Registration Rights Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 The Company's Conditions to Close. The obligations of the
Company under this Agreement are subject to the satisfaction at or prior to the
Closing of each of the following conditions, but compliance with any or all of
such conditions may be waived (in whole or in part), in writing, by the Company,
to the extent permitted by applicable law:
(a) The representations and warranties of Parent contained in
this Agreement that are qualified as to materiality shall be true and correct in
all respects and the representations and warranties of Parent contained in this
Agreement that are not so qualified shall be true and correct in all material
respects on the date hereof and on the Closing Date (after taking into account
the updated Parent Disclosure Schedules delivered by Parent pursuant to Section
5.21), with the same effect as though such representations and warranties had
been made on and as of the Closing Date (except to the extent that they
expressly relate to an earlier date); provided, that, the conditions set forth
in this Section 6.1(a) shall be deemed satisfied by Parent to the extent that
any such inaccuracies contained in any such representation or warranty of Parent
do not, individually or in the aggregate, adversely affect Parent or the
properties, assets, liabilities (fixed or otherwise) or condition (financial or
otherwise) of Parent and any of its subsidiaries, taken as a whole, in an amount
in excess of $200,000;
(b) Parent and Mergerco shall have performed and complied in
all material respects with all of the covenants and agreements contained in this
Agreement (other than in Section 5.6) and satisfied in all material respects all
of the conditions required by this Agreement to be performed or complied with or
satisfied by Parent at or prior to the Closing;
29
(c) Parent, Mergerco and the Company shall have received all
approvals and actions of or by all Governmental Bodies, which are necessary to
consummate the transactions contemplated hereby;
(d) There shall not have occurred any change which would have
or would be likely to have a Material Adverse Effect with respect to Parent or
Mergerco;
(e) On the Closing Date, there shall be no Requirement of Law,
injunction, restraining order or decree of any nature of any court or
Governmental Body in effect that restrains or prohibits the consummation of the
transactions contemplated by this Agreement;
(f) No action, suit or proceeding shall have been instituted
by any person or entity, or threatened by any Governmental Body, before a court
or Governmental Body, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement and the Merger Agreement;
(g) The valuation of the Merger Consideration shall have been
approved as required by Article III, Section B(2)(b)(ii)(B) of the Company's
Articles of Incorporation by the affirmative vote of a majority of the votes
that holders of the outstanding shares of each series of Company Preferred Stock
are entitled to cast (voting as a single class on an as-if converted basis in
accordance with the Company's Articles of Incorporation);
(h) The Merger and the Merger Agreement shall have been duly
approved by the affirmative vote of the holders of not less than a majority of
the shares of Company Common Stock outstanding and entitled to vote with respect
thereof (voting as a single class with the holders of Company Preferred Stock
voting on an as-if converted basis in accordance with the Company's Articles of
Incorporation), by the holders of the Company Preferred Stock with each series
voting separately as a class in accordance with the Company's Articles of
Incorporation and by the holders of the Company Preferred Stock with each series
voting as a single class on as as-if converted basis in accordance with the
Company's Articles of Incorporation;
(i) Parent shall have delivered the PPM to each Shareholder;
(j) The Company shall be reasonably satisfied that the Merger
and the transactions contemplated thereby are exempt from the registration
requirements of the Securities Act under Section 4(2) of the Securities Act
pursuant to and in full compliance with the conditions of Rule 506 of Regulation
D promulgated thereunder;
(k) The Company shall be reasonably satisfied that the Merger
and the transactions contemplated thereby are exempt from the registration or
qualification provisions of all state securities laws applicable to the Merger
and the transactions contemplated thereby;
(l) Parent shall have executed and delivered to the Company
the Assignment and Assumption Agreement;
(m) Parent shall have performed fully Parent's obligations
under Section 5.18(a);
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(n) Parent and Mergerco shall have executed and delivered to the
respective Shareholder party thereto the D'Angelo Employment Agreement, the
Xxxxxx Employment Agreement, the Xxxxxx Employment Agreement, the Xxxxxx
Employment Agreement and the Xxxxx Employment Agreement;
(o) The Merger Agreement shall have been filed with the Secretary of
State of the State of California;
(p) Parent shall have executed and delivered to the Shareholders
signatory thereto the Registration Rights Agreement;
(q) Parent shall have consummated its acquisition of TrustWave
pursuant to the terms of the TrustWave Agreement and Plan of Merger and the
TrustWave Supplemental Agreement and TrustWave shall have become a wholly owned
subsidiary of Parent;
(r) The shareholders of Patron Holdings shall have approved the Patron
Holdings Merger and Parent and Patron Holdings shall have effected the Patron
Holdings Merger;
(s) There shall have been no material breach by TrustWave of any of
its representations and warranties contained in Article III of the TrustWave
Supplemental Agreement, which breach is not cured or remedied in full to the
Company's reasonable satisfaction within 10 days after written notice of such
breach provided by the Company to Parent;
(t) There shall not exist or have been made any material
misrepresentation or omission in any of the Patron Holdings Filings, which
material misrepresentation or omission is not cured or remedied in full to the
Company's reasonable satisfaction within 10 days after written notice thereof
provided by the Company to Parent; and
(u) Parent shall have delivered to the Company a certificate, in form
and substance reasonably satisfactory to the Company, dated as of the Closing
Date, signed by Parent's chief executive officer and chief financial officer, to
the effect set forth in clauses (a) through (f), inclusive, of this Section 6.1.
Section 6.2 Parent's Conditions to Close. The obligations of Parent under
this Agreement are subject to the satisfaction at or prior to the Closing of
each of the following conditions, but compliance with any or all of any such
conditions may be waived (in whole or in part), in writing, by Parent, to the
extent permitted by applicable law:
(a) The representations and warranties of the Company contained in
this Agreement that are qualified as to materiality shall be true and correct in
all respects and the representations and warranties of the Company contained in
this Agreement that are not so qualified shall be true and correct in all
material respects on the date hereof and on the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except to the extent that they expressly relate to an earlier
date); provided, that, the conditions set forth in this Section 6.2(a) shall be
deemed satisfied by the Company to the extent that any such inaccuracies
contained in any such representation or warranty of the Company do not,
individually or in the aggregate, adversely
31
affect the Company or the properties, assets, liabilities (fixed or otherwise)
or condition (financial or otherwise) of the Company in an amount in excess of
$200,000;
(b) The Company shall have performed and complied in all material
respects with all the covenants and agreements contained in this Agreement
(other than Section 5.6) and satisfied in all material respects all the
conditions required by this Agreement to be performed or complied with or
satisfied by it at or prior to the Closing;
(c) Parent and the Company shall have received all approvals and
actions of or by all Governmental Bodies, which are necessary to consummate the
transactions contemplated hereby;
(d) On the Closing Date, there shall be no Requirement of Law,
injunction, restraining order or decree of any nature of any court or
Governmental Body in effect that restrains or prohibits the consummation of the
transactions contemplated by this Agreement or the Merger Agreement;
(e) No action, suit or proceeding shall have been instituted by any
person or entity, or threatened by any Governmental Body, before a court or
Governmental Body, to restrain or prevent the carrying out of the transactions
contemplated by this Agreement or that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Business or the
results of operations, properties or condition (financial or otherwise) of the
Company;
(f) The valuation of the Merger Consideration shall have been approved
as required by Article III, Section B(2)(b)(ii)(B) of the Company's Articles of
Incorporation by the affirmative vote of a majority of the votes that holders of
the outstanding shares of each series of Company Preferred Stock are entitled to
cast (voting as a single class on an as-if converted basis in accordance with
the Company's Articles of Incorporation);
(g) The Merger and the Merger Agreement shall have been duly approved
by the affirmative vote of the holders of not less than a majority of the shares
of Company Common Stock outstanding and entitled to vote with respect thereof
(voting as a single class with the holders of Company Preferred Stock voting on
an as-if converted basis in accordance with the Company's Articles of
Incorporation), by the holders of the Company Preferred Stock with each series
voting separately as a class in accordance with the Company's Articles of
Incorporation and by the holders of the Company Preferred Stock with each series
voting as a single class on as as-if converted basis in accordance with the
Company's Articles of Incorporation;
(h) The Company shall have received all necessary consents or
approvals, in form and substance reasonably satisfactory to Parent, to the
transactions contemplated by this Agreement as specified in Schedules 3.5 and
3.24 hereto;
(i) Parent shall be reasonably satisfied that the Merger and the
transactions contemplated thereby are exempt from the registration requirements
of the Securities Act under Section 4(2) of the Securities Act pursuant to and
in full compliance with the conditions of Rule 506 of Regulation D promulgated
thereunder;
32
(j) The Company shall have executed and delivered to Parent the
Assignment and Assumption Agreement;
(k) Parent shall be reasonably satisfied that the Merger and the
transactions contemplated thereby are exempt from the registration or
qualification provisions of all state securities laws applicable to the Merger
and the transactions contemplated thereby;
(l) The shares of Company Stock representing Dissenting Shares shall
be no more than 400,000 of the issued and outstanding shares of Company Stock
immediately prior to the Effective Time; provided, that, (a) if more than 5% of
the issued and outstanding shares of Company Stock constitute Dissenting Shares
or (b) if fewer than 95% of the votes that holders of the outstanding shares of
Company Common Stock are entitled to cast (voting as a single class with the
holders of the Company Preferred Stock voting on an as-if converted basis in
accordance with the Company's Articles of Incorporation) vote in favor of the
Merger Agreement and the transactions contemplated thereby, then Parent may
elect, in its sole discretion, to delay the Closing until the expiration of the
thirty-day period set forth in Section 1301(b)(2) of the CGCL;
(m) Since the Balance Sheet Date, there shall not have occurred any
change which has had or would reasonably be expected to result in a Material
Adverse Effect with respect to the Company;
(n) The Merger Agreement shall have been filed with the Secretary of
State of the State of California;
(o) Xxxx X'Xxxxxx shall have entered into an Employment Agreement, in
the form of Exhibit C hereto (the "D'Angelo Employment Agreement"), Xxxx Xxxxxx
shall have entered into an Employment Agreement, in the form of Exhibit D hereto
(the "Xxxxxx Employment Agreement"), X.X. Xxxxxx shall have entered into an
Employment Agreement, in the form of Exhibit E hereto (the "Xxxxxx Employment
Agreement"), Xxxxxx Xxxxxx shall have entered into an Employment Agreement, in
the form of Exhibit F hereto (the "Xxxxxx Employment Agreement") and Xxxxx Xxxxx
shall have entered into an Employment Agreement, in the form of Exhibit G hereto
(the "Xxxxx Employment Agreement");
(p) The Shareholders signatory thereto shall have executed and
delivered to Parent the Registration Rights Agreement;
(q) Each holder of a Company Stock Option shall have executed and
delivered to the Company an Option Termination Agreement in the form attached
hereto as Exhibit B (the "Executed Option Termination Agreements") and each
Stock Purchase Warrant shall have been terminated; and
(r) The Company shall have delivered to Parent a certificate, in form
and substance reasonably satisfactory to Parent, dated as of the Closing Date,
signed by the Company's chief executive officer and chief financial officer, to
the effect set forth in clauses (a) through (h), inclusive, and (m) of this
Section 6.2.
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ARTICLE VII
THE CLOSING
Section 7.1 Deliveries by the Company. At the Closing, the Company shall
deliver the following to Parent:
(a) A certificate of good standing as of a recent date from the
California Secretary of State stating that the Company is a validly existing
corporation in good standing under the laws of California.
(b) Copies of duly adopted resolutions of the Board of Directors of
the Company and the Shareholders approving the Merger and the execution,
delivery and performance of this Agreement and the Merger Agreement and the
other agreements and instruments contemplated hereby and thereby, certified by
the Secretary of the Company;
(c) The duly executed Merger Agreement;
(d) The duly executed Employment Agreements;
(e) The duly executed Registration Rights Agreement;
(f) The duly executed Assignment and Assumption Agreement;
(g) The certificate described in Section 6.2(r);
(h) A copy of the Budget signed by the Company;
(i) A true and complete copy of the Articles of Incorporation, as in
effect on the Closing Date, of the Company, certified by the Secretary of State
of the State of California, and a true and complete copy of the By-laws, as in
effect on the Closing Date, of the Company, certified by the Secretary of the
Company;
(j) The Executed Option Termination Agreements; and
(k) Documentation to Parent's reasonable satisfaction evidencing the
termination of each of the Stock Purchase Warrants.
Section 7.2 Parent's Deliveries. At the Closing, Parent shall deliver the
following to the Company:
(a) Certificate of good standing as of a recent date from the Delaware
Secretary of State stating that Parent is a validly existing corporation in good
standing;
(b) Certificate of good standing as of a recent date from the
California Secretary of State stating that Mergerco is a validly existing
corporation in good standing;
(c) Copies of duly adopted resolutions of Parent's and Mergerco's
oards of Directors approving the execution, delivery and performance of this
Agreement and the Merger Agreement and the other agreements and instruments
contemplated hereby and thereby, certified by the Secretary or an Assistant
Secretary of Parent or Mergerco;
34
(d) The duly executed Merger Agreement;
(e) The duly executed Employment Agreements;
(f) The duly executed Registration Rights Agreement;
(g) The duly executed Assignment and Assumption Agreement;
(h) The certificate described in Section 6.1(u);
(i) Documentation to the Company's reasonable satisfaction to the
effect that Parent has performed its obligations sets forth in Section 5.18(a);
and
(j) A true and complete copy of the Certificate of Incorporation as in
effect on the Closing Date, of Parent, certified by the Secretary of State of
the State of Delaware, and a true and complete copy of the By-laws, in effect on
the Closing Date, of Parent, certified by the Secretary of the Parent.
ARTICLE VIII
[INTENTIONALLY RESERVED]
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement shall be terminated automatically
in the event the Merger Agreement is terminated in accordance with its terms.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement may also be terminated at any time prior to the Closing Date:
(a) By the mutual consent of the Company and Parent;
(b) By the Company or Parent if the Closing shall not have occurred on
or before April 30, 2003 (or such later date as shall be mutually agreed to in
writing by the Company and Parent); provided that the party seeking termination
is not in default or breach of this Agreement;
(c) By the Company in the event of a material breach by Parent of any
of its representations, warranties, agreements or covenants contained in this
Agreement, which breach is not cured by Parent within 10 days after written
notice of such breach; provided, that, the Company shall have no right to
terminate pursuant to this Section 9.1(c) if any such breach or breaches,
individually or in the aggregate, do not deprive the Company of the economic
benefits of the transactions contemplated hereby in an amount in excess of
$200,000;
(d) By Parent in the event of a material breach by the Company of any
of its respective representations, warranties, agreements and covenants
contained in this Agreement, which breach is not cured by the Company with 10
days after written notice of such breach; provided, that, Parent shall have no
right to terminate pursuant to this Section
35
9.1(d) if any such breach or breaches, individually or in the aggregate, do not
deprive Parent of the economic benefits of the transactions contemplated hereby
in an amount in excess of $200,000;
(e) By the Company if the supplemented Parent Disclosure Schedules
delivered by Parent pursuant to Section 5.21 contain any facts, conditions,
occurrences, changes and other matters which (A) had not been previously
disclosed (x) in the Parent Disclosure Schedules attached hereto as of the date
hereof or (y) in any registration statement, prospectus, form report or document
required to be filed by Patron Holdings under the Securities Act or the
Securities Exchange Act of 1934 at any time prior to the Effective Time
(collectively, the "Patron Holdings Public Filings") and (B) when taken as a
whole, would result in a Material Adverse Effect on Parent;
(f) By the Company in the event of a material breach by TrustWave of
any of its representations and warranties contained in Article III of the
TrustWave Supplemental Agreement, which breach is not cured or remedied in full
to the Company's reasonable satisfaction within 10 days after written notice of
such breach provided by the Company to Parent; or
(g) By the Company in the event that there exists or has been made any
material misrepresentation or omission in any of the Patron Holdings Filings,
which material misrepresentation or omission is not cured or remedied in full to
the Company's reasonable satisfaction within 10 days after written notice
thereof provided by the Company to Parent.
Section 9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the preceding Section of this Agreement, all further
obligations of the parties under this Agreement and the Merger Agreement shall
be terminated without further liability of any party or its shareholders,
directors or officers to the other parties, provided (a) that this Section 9.2,
Section 10.1 and Section 10.13 shall survive any such termination and (b) that
nothing herein shall relieve any party from liability for its willful breach of
this Agreement or the Merger Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses. (a) No later than five (5) business days prior to
the Closing, the Company shall provide to Parent a good faith written estimate
of the expenses and fees of counsel to the Company and the Company's accountants
incurred by the Company in connection with the preparation, negotiation and
execution of the Transaction Documents and consummation of the transactions
contemplated hereby and thereby (the "Company Expense Report"). Unless this
Agreement is terminated pursuant to Article IX, payment of the expenses and fees
set forth on the Company Expense Report shall be made by Parent at Closing.
(b) Except as otherwise provided herein, Parent shall bear its own
expenses and fees and commissions (including, but not limited to, all
compensation and expenses of counsel, consultants and accountants) incurred in
connection with its preparation, negotiation and execution of the Transaction
Documents and consummation of the transactions contemplated hereby or thereby.
36
Section 10.2 Notices. All notices required or permitted to be given under
this Agreement (and, unless otherwise expressly provided therein, under any
document delivered pursuant to this Agreement) shall be given in writing and
shall be deemed received (i) when personally delivered to the relevant party at
such party's address as set forth below, (ii) if sent by mail (which must be
certified or registered mail, postage prepaid) or overnight courier, when
received or rejected by the relevant party at such party's address indicated
below, or (iii) if sent by facsimile, when confirmation of delivery is received
by the sending party:
If to the Company prior to Closing, to:
Entelagent Software Corp.
00000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx LLP
Xxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
If to Parent or Mergerco, to:
Patron Systems, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxx, Chief Executive Officer
Telecopy: (000) 000-0000
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx
Bank Xxx Xxxxx
00 X. Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Each party hereto may change its address or facsimile number for purposes of
this Section 10.2 by providing notice to the other parties in accordance with
this Section 10.2.
Section 10.3 Assignment. Prior to the Effective Time, this Agreement may
not be assigned, by operation of law or otherwise. Following the Effective Time,
any party may assign any of its rights hereunder, but no such assignment shall
relieve it of its obligations hereunder.
37
Section 10.4 Interpretation. The article and section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms. The parties hereto acknowledge and agree that this
Agreement and the Merger Agreement are being executed prior to and in
contemplation of the Patron Holdings Merger and subsequent to the consummation
of the Patron Holdings Merger (subject to the provisions of Sections 9.1(e) and
9.2) this Agreement and the Merger Agreement shall be interpreted taking into
account any supplements, amendments or modifications pursuant to Sections 5.21
and 5.22,
Section 10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument; and shall become binding
when two or more counterparts have been signed by each of the parties hereto and
delivered to each of Parent, Mergerco and the Company.
Section 10.6 Amendment. This Agreement may not be amended, modified or
supplemented except by a writing signed by an authorized representative of each
of the parties hereto.
Section 10.7 Entire Agreement. The Merger Agreement (which is incorporated
herein in its entirety) and this Agreement (including the Schedules and Exhibits
attached hereto and the documents delivered pursuant hereto) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
Section 10.8 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
Section 10.9 Survival. The representations and warranties contained in
this Agreement or in any certificate or other writing delivered pursuant this
Agreement shall not survive the Effective Time or the termination of this
Agreement. This Section 10.9 shall not limit any covenant or agreement of the
parties contained in this Agreement which by its terms provides for performance
after the Effective Time. Except for the representations and warranties
contained in this Agreement, none of the Company, Parent or Mergerco has made
any representation or warranty, and, each of the Company, Parent and Mergerco
hereby acknowledges that no representations or warranties have been made by, and
it has not relied on any representation or warranty made by, any of the parties
hereto or any of their respective representatives in respect of this Agreement
and the transactions contemplated hereby and the documents and instruments
referred to herein, notwithstanding the delivery or disclosure to such party or
its representatives of any documentation or other information in respect of any
one or more of the foregoing. The inclusion of any entry on any of the Company
Disclosure Schedules or the Parent Disclosure Schedules hereto shall not
constitute an admission by, or agreement of, the Company or Parent, as
applicable, that such matter is material to the Company or Parent, as
applicable.
Section 10.10 Severability. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any
38
one or more of the provisions contained herein shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such provision shall be
ineffective in the jurisdiction involved to the extent, but only to the extent,
of such invalidity, illegality or unenforceability without invalidating the
remainder of such invalid, illegal or unenforceable provision or provisions or
any other provisions hereof, unless such a construction would be unreasonable.
Section 10.11 Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person or entity that is not a party hereto or
a successor or permitted assign of such a party.
Section 10.12 Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 10.13 Confidential Nature of Information. Each party agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other parties during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other parties all copies of nonpublic
documents and materials which have been furnished in connection therewith. Such
documents, materials and information shall not be communicated to any third
Person (other than, in the case of Parent and Mergerco, to their counsel,
accountants, financial advisors, shareholders or lenders, and in the case of the
Company, to their counsel, accountants, shareholders or financial advisors). No
other party shall use any confidential information in any manner whatsoever
except solely for the purpose of evaluating the proposed Merger; provided,
however, that after the Effective Time, Parent and the Surviving Corporation may
use or disclose any confidential information included in the assets of the
Company as of the Effective Time or otherwise reasonably related to the assets
or business of the Company. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information which (i) is or becomes available to such party from a source other
than such party, (ii) is or becomes available to the public other than as a
result of disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, or (iv) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby.
Section 10.14 Governing Law; Arbitration. This Agreement shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of Delaware.
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(i) Any dispute, controversy or claim arising out of or relating to
this Agreement or its breach, interpretation, termination or validity,
including any question whether a matter is subject to arbitration
hereunder, is referred to herein as a "Dispute."
(ii) If the parties fail to settle any Dispute within 30 days after
any party has given notice to the other parties hereto of the claimed
existence of a Dispute, the Dispute shall be resolved by a confidential,
binding arbitration. All such Disputes shall be arbitrated in Washington,
D.C. pursuant to the arbitration rules and procedures of J.A.M.S. Endispute
before an arbitrator or arbitrators selected in the manner provided in such
rules and procedures, except that the "Final Offer (or Baseball)"
Arbitration Option shall not be used unless otherwise agreed in writing. As
a condition to JAMS' jurisdiction, the parties shall be entitled to conduct
discovery pursuant to the Federal Rules of Civil Procedure.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction, and each party hereto consents
and submits to the jurisdiction of such court for purposes of such action.
The statute of limitations, estoppel, waiver, laches and similar doctrines,
which would otherwise be applicable in any action brought by a party, shall
be applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed to be the commencement of an action
for those purposes. The Federal Arbitration Act shall apply to the
construction, interpretation and enforcement of this arbitration provision.
Each party shall bear its own expenses (including, without limitation, the
fees and expenses of legal counsel and accountants) in connection with such
arbitration, and Parent and the Company shall each bear one-half of the
arbitrators' fees and expenses, provided that the arbitral award shall
allocate such fees and expenses of counsel, accountants, other advisors and
arbitrators according to the relative success of the contesting parties in
the arbitration, as determined by the arbitrators. The arbitrators shall
award an amount equal to the actual monetary damages suffered by each
contesting party, which may include interest costs incurred by such party
and, in the case of the Surviving Corporation, actual reductions in retail
earnings before interest, taxes, depreciation and amortization for the
period in which they occur, but the arbitrators shall not have the
authority to award punitive damages.
Section 10.15 Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 10.15 and shall be equally
applicable to both the singular and plural forms.
"Affiliate" shall mean: any person or entity (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the person or entity involved, including, without
limitation, officers and directors, (b) that directly or beneficially owns or
holds 5% or more of any equity interest in the person or entity involved, or (c)
5% or more of whose voting securities (or in the case of a person which is not a
corporation, 5% or more of any equity interest) is owned directly or
beneficially by the person or entity involved. As used herein, the term
"control" shall mean possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a person or entity,
whether through ownership of securities, by contract or otherwise.
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"Agreement" has the meaning specified in the first paragraph hereof.
"Assignment and Assumption Agreement" has the meaning specified in
Section 5.18(b).
"Assumed Liabilities and Obligations" has the meaning specified in
Section 5.18(b).
"Balance Sheet" has the meaning specified in Section 3.6(b).
"Balance Sheet Date" means September 30, 2002.
"Bankruptcy Code" means 11 U.S.C.ss.ss.101 et seq.
"Budget" has the meaning specified in Section 3.32(a).
"Business" means the businesses engaged in by the Company as of the
date of this Agreement.
"CGCL" has the meaning specified in Section 1.2.
"Closing" has the meaning specified in Section 1.3.
"Closing Date" has the meaning specified in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company's Annual Financial Statements" has the meaning specified in
Section 3.6(a).
"Company Common Stock" has the meaning specified in Section 3.3.
"Company Disclosure Schedules" has the meaning specified in Section
3.37.
"Company Expense Report" has the meaning specified in Section 10.1(a).
"Company's Financial Statements" has the meaning specified in Section
3.6(b).
"Company Preferred Stock" has the meaning specified in Section 3.3.
"Company Stock" has the meaning specified in Section 3.3.
"Company Stock Options" has the meaning specified in Section 1.5(a).
"Company Stock Plan" means the Company's 1997 Stock Option Plan, as
amended and approved by the Board of Directors of the Company.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, medical waste, special waste, asbestos, petroleum or
petroleum-derived substance, radioactive material or waste, or any constituent
of any such substance or waste and including, without limitation, any substance
which any Governmental Body or lawful
41
representative thereof requires to be controlled, removed, monitored,
encapsulated or remediated or otherwise addressed for the purposes of protection
of the environment or public or worker health and safety.
"D'Angelo Employment Agreement" has the meaning specified in Section
6.2(o).
"Dispute" has the meaning specified in Section 10.14.
"Dissenting Shareholder" has the meaning specified in Section 1.6.
"Dissenting Shares" has the meaning specified in Section 1.6.
"Effective Time" has the meaning specified in Section 1.2 of the Merger
Agreement.
"Employment Agreements" means the D'Angelo Employment Agreement, the
Xxxxxx Employment Agreement, the Xxxxxx Employment Agreement, the Xxxxxx
Employment Agreement and the Xxxxx Employment Agreement, collectively.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restriction of any kind.
"Environmental Laws" has the meaning specified in Section 3.27.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means (a) any corporation which at, or at any time
before, the Closing Date is or was a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Company
or any predecessor of the Company; (b) any partnership, trade or business
(whether or not incorporated) which at, or at any time before, the Closing Date
is or was under common control (within meaning of Section 414(c) of the Code)
with the Company; and (c) any entity, which at, or at any time before, the
Closing Date is or was a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as either the Company or any predecessor
of the Company, any corporation described in clause (a) or any partnership,
trade or business described in clause (b).
"Facility" means any real or personal property, plant, building,
facility, structure, underground storage tank, or equipment or unit, or other
asset owned, used, leased or operated by the Company.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Xxxxxx Employment Agreement" has the meaning specified in Section
6.2(o).
"Governmental Body" means any court, government (federal, state, local
or foreign), department, commission, board, bureau, agency, official or other
regulatory, administrative or governmental authority.
42
"Governmental Permits" has the meaning specified in Section 3.11.
"Xxxxxx Employment Agreement" has the meaning specified in Section
6.2(o).
"Indemnified Person" has the meaning specified in Section 5.20.
"IPO" means Parent's (or its successor's) initial underwritten public
offering of its Common Stock, par value $.01 per share, (or any class of capital
stock into which shares of its Common Stock shall be exchangeable or
convertible) pursuant to an effective registration statement under the
Securities Act, for the account of Parent.
"Knowledge of the Company" means, as a particular matter, the actual
knowledge of the following persons: X.X. Xxxxxx, Xxxx X'Xxxxxx and Xxxx Xxxxxx.
"Knowledge of Parent" means, as a particular matter, the actual knowledge
of the following persons: Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx.
"Lok Tek" has the meaning specified in Section 5.15.
"Lok Tek Agreements" has the meaning specified in Section 5.15.
"Material Adverse Effect" means any change or effect (or any
development that, insofar as can be reasonably foreseen, would result in any
change or effect) that is materially adverse to the assets, business, financial
condition, results of operations or prospects of the applicable Person or
Persons.
"Material Contracts" has the meaning specified in Section 3.24.
"Xxxxxx Employment Agreement" has the meaning specified in Section
6.2(o).
"Merger" has the meaning specified in the first recital to this
Agreement.
"Merger Agreement" has the meaning specified in the first recital of
this Agreement.
"Mergerco" has the meaning specified in the first paragraph hereof.
"Merger Consideration" has the meaning specified in Section 1.4.
"Xxxxx Employment Agreement" has the meaning specified in Section
6.2(o).
"Non-ERISA Commitments" has the meaning specified in Section 3.22(a).
"Parent" has the meaning specified in the first paragraph hereof.
"Parent Common Stock" has the meaning specified in Section 2.4.
"Parent Disclosure Schedules" has the meaning specified in Section
2.20.
"Parent Stockholders" has the meaning specified in the second recital
of this Agreement.
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"Parent Stock Options" has the meaning specified in Section 2.4.
"Patron Holdings" has the meaning specified in the second recital of
this Agreement.
"Patron Holdings Common Stock" has the meaning specified in the second
recital of this Agreement.
"Patron Holdings Merger" has the meaning specified in the third recital
of this Agreement.
"Patron Holdings Public Filings" has the meaning specified in Section
9.1(e).
"Permitted Encumbrances" means: (a) encumbrances for taxes or
assessments or other governmental charges which are not yet due and payable; (b)
materialmen's, merchants', carriers', worker's, repairer's, or other similar
Encumbrances arising in the ordinary course of business which are not yet due or
payable and; (c) purchase money security interests.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Body.
"PPM" has the meaning specified in Section 2.17.
"Proxy Statement" has the meaning specified in Section 3.35.
"Registration Rights Agreement" means the Registration Rights Agreement
by and among Parent and the Shareholders signatory thereto in the form attached
hereto as Exhibit H.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any Facility of any
Contaminant, including the movement of Contaminants through or in the air, soil,
surface water, groundwater or Facility.
"Requirements of Law" means any federal, state or local law, rule or
regulation, Governmental Permit or other binding determination of any
Governmental Body.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Exchange" has the meaning specified in the second recital of
this Agreement.
"Share Exchange Agreement" has the meaning specified in the second
recital of this Agreement.
"Shareholder Merger Consideration Approval" has the meaning specified
in Section 3.4.
"Shareholders" has the meaning specified in the Merger Agreement.
"Shareholders Meeting" has the meaning specified in Section 3.35.
44
"Software" has the meaning specified in Section 3.17(a)(iii).
"Stock Purchase Warrants" has the meaning specified in Section 1.5(b).
"Surviving Corporation" has the meaning specified in Section 1.1 of the
Merger Agreement.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (a)
any federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem,
transfer, value-added stamp or environmental tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any Governmental Body; and (b) liability of the Company or any
of its subsidiaries for the payment of amounts with respect to payments of a
type described in clause (a) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of the
Company or any of its subsidiaries under any Tax sharing arrangement or Tax
indemnity arrangement.
"Tax Returns" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Transaction Documents" has the meaning specified in Section 2.6.
"TrustWave" means TrustWave Corp., a Maryland corporation.
"TrustWave Agreement and Plan of Merger" means that certain Agreement
and Plan of Merger dated as of November 23, 2002 by and among Parent, TWC
Acquisition, Inc. and TrustWave.
"TrustWave Supplemental Agreement" means that certain Supplemental
Agreement dated as of November 23, 2002 by and among Parent, TWC Acquisition,
Inc., TrustWave and certain shareholders of TrustWave.
*****
45
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
PATRON SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx
------------------
Name: Xxxxx Xxxxxxx
Title:President
ESC ACQUISITION, INC.
By: /s/ Xxxxx Xxxxxxx
------------------
Name: Xxxxx Xxxxxxx
Title:CEO
ENTELAGENT SOFTWARE CORP.
By: /s/ J. Xxxxxxx Xxxxxx
----------------------
Name: J. Xxxxxxx Xxxxxx
Title:CEO
46