Attached files
| file | filename |
|---|---|
| EX-99.1 - PRESS RELEASE DATED SEPTEMBER 22, 2017. - Rekor Systems, Inc. | exhibit991-pressreleasegl.htm |
| EX-4.2 - FORM OF CERTIFICATE OF DESIGNATIONS OF NOVUME SERIES B CUMULATIVE CONVERTIBLE PR - Rekor Systems, Inc. | exhibit42-formofcertifica.htm |
| EX-4.1 - FORM OF REGISTRATION RIGHTS AGREEMENT, BY AND AMONG NOVUME SOLUTIONS, INC., G&W - Rekor Systems, Inc. | exhibit41formofregistrati.htm |
| 8-K - 8-K - Rekor Systems, Inc. | a8k.htm |
Exhibit
2.1
_____________________________________________________________________________
Agreement and Plan of Merger
Among
Novume Solutions, Inc.,
Global Technical Services Merger Sub Inc.,
Global Contract Professionals Merger Sub Inc.,
Global Technical Services Inc.,
Global Contract Professionals Inc.,
and
Paul Milligan
September 21, 2017
_____________________________________________________________________________
TABLE OF CONTENTS
Page
|
AGREEMENT AND PLAN OF MERGER
|
1
|
|
|
RECITALS
|
1
|
|
|
ARTICLE I CERTAIN DEFINITIONS
|
2
|
|
|
ARTICLE II THE MERGERS
|
13
|
|
|
2.1
|
Conversion/Cancellation of GTS Capital Stock and GTS Merger Sub
Capital Stock
|
13
|
|
2.2
|
Conversion/Cancellation of GCP Capital Stock and GCP Merger Sub
Capital Stock
|
14
|
|
2.3
|
Adjustments
|
14
|
|
2.4
|
Allocation of Merger Consideration
|
14
|
|
2.5
|
Repaid Indebtedness and Other Obligations
|
14
|
|
2.6
|
The Closing
|
15
|
|
2.7
|
Effects of the Mergers. At and upon the Effective Time
|
15
|
|
2.8
|
Surrender of Certificates; Payment of Merger
Consideration
|
16
|
|
2.9
|
Tax Withholding
|
16
|
|
2.1
|
Tax Consequences
|
16
|
|
2.11
|
Legends; Stop-Transfer Notices; Removal
|
17
|
|
2.12
|
Further Assurances
|
17
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANIES
|
17
|
|
|
3.1
|
Organization and Good Standing
|
18
|
|
3.2
|
Subsidiaries
|
18
|
|
3.3
|
Power, Authorization and Validity
|
18
|
|
3.4
|
Capitalization of the Companies
|
19
|
|
3.5
|
Consents; Conflict
|
20
|
|
3.6
|
Litigation
|
20
|
|
3.7
|
Taxes
|
21
|
|
3.8
|
Financial Statements; Books and Records
|
23
|
|
3.9
|
Title to Properties
|
24
|
|
3.1
|
Absence of Certain Changes
|
24
|
|
3.11
|
Contracts, Agreements, Arrangements, Commitments and
Undertakings
|
26
|
|
3.12
|
No Default; No Restrictions
|
28
|
|
3.13
|
Intellectual Property
|
29
|
|
3.14
|
Compliance with Laws
|
35
|
|
3.15
|
Certain Transactions and Agreements
|
36
|
|
3.16
|
Employees, ERISA and Other Compliance
|
36
|
|
3.17
|
Merger Expenses
|
41
|
|
3.18
|
Insurance
|
41
|
|
3.19
|
Environmental Matters
|
41
|
|
3.2
|
Customers and Suppliers
|
42
|
|
3.21
|
Accounts Receivable
|
43
|
|
3.22
|
Inventory
|
43
|
|
3.23
|
Bank Account
|
43
|
|
3.24
|
Board Approval
|
43
|
|
3.25
|
Indebtedness.
|
44
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANIES
|
44
|
|
|
4.1
|
Organization and Good Standing
|
44
|
|
4.2
|
Power, Authorization and Validity
|
44
|
|
4.3
|
No Conflict
|
45
|
|
4.4
|
Interim Operations of Merger Sub
|
45
|
|
4.5
|
Stockholders Consent
|
46
|
|
4.6
|
Financial Capacity
|
46
|
|
4.7
|
Merger Consideration
|
46
|
|
4.8
|
Litigation
|
46
|
|
4.9
|
Reorganization
|
46
|
|
4.1
|
Capitalization of Parent
|
46
|
|
4.11
|
Board Approval
|
47
|
|
4.12
|
SEC Documents; Parent Financial Statements
|
47
|
|
4.13
|
No Undisclosed Statements
|
47
|
|
4.14
|
Subsidiaries
|
47
|
|
ARTICLE V COMAPNY COVENANTS
|
48
|
|
|
5.1
|
Advise of Changes
|
48
|
|
5.2
|
Maintenance of Business
|
48
|
|
5.3
|
Conduct of Business
|
49
|
|
5.4
|
Regulatory Approvals
|
51
|
|
5.5
|
Necessary Consents
|
51
|
|
5.6
|
Litigation
|
52
|
|
5.7
|
No Other Negotiations
|
52
|
|
5.8
|
Access to Information
|
53
|
|
5.9
|
Satisfaction of Conditions Precedent
|
53
|
|
5.1
|
Notices to Company Stockholder and Employees
|
53
|
|
ARTICLE VI PARENT COVENANTS
|
54
|
|
|
6.1
|
Advise of Changes
|
54
|
|
6.2
|
Regulatory Approvals
|
54
|
|
6.3
|
Satisfaction of Conditions Precedent
|
54
|
|
ARTICLE VII ADDITIONAL AGREEMENTS
|
55
|
|
|
7.1
|
Approval of the Company Stockholder
|
55
|
|
7.2
|
Employees
|
55
|
|
7.3
|
Tax Matters
|
55
|
|
7.4
|
Sale of Shares Pursuant to Regulation D
|
57
|
|
7.5
|
Blue Sky Laws
|
57
|
|
7.6
|
Payment of Company Indebtedness
|
57
|
|
7.7
|
Release of Guarantees
|
57
|
|
ARTICLE VIII CONDITIONS TO CLOSING OF MERGERS
|
58
|
|
|
8.1
|
Conditions to Each Party’s Obligation to Effect the
Mergers
|
58
|
|
8.2
|
Additional Conditions to Obligations of Parent and Merger
Subs
|
58
|
|
8.3
|
Additional Conditions to Obligations of the Companies
|
61
|
|
ARTICLE IX TERMINATION OF AGREEMENT
|
62
|
|
|
9.1
|
Termination by Mutual Consent
|
62
|
|
9.2
|
Unilateral Termination
|
62
|
|
9.3
|
Effect of Termination
|
63
|
|
ARTICLE X INDEMNIFICATION
|
63
|
|
|
10.1
|
Survival Periods
|
63
|
|
10.2
|
Indemnification by Company Stockholder
|
64
|
|
10.3
|
Limitations
|
65
|
|
10.4
|
Determination of the Closing Net Working Capital
|
66
|
|
10.5
|
Defense of Third Party Claims
|
68
|
|
10.6
|
Indemnification Claim Procedure
|
68
|
|
10.7
|
Exercise of Remedies Other Than by Parent
|
69
|
|
10.8
|
Certain Limitations
|
69
|
|
10.9
|
Parent Indemnification
|
70
|
|
ARTICLE XI MISCELLANEOUS
|
70
|
|
|
11.1
|
Governing Law
|
70
|
|
11.2
|
Assignment; Binding Upon Successors and Assigns
|
70
|
|
11.3
|
Severability
|
70
|
|
11.4
|
Counterparts
|
70
|
|
11.5
|
Other Remedies
|
71
|
|
11.6
|
Amendments and Waivers
|
71
|
|
11.7
|
Expenses
|
71
|
|
11.8
|
Attorneys’ Fees
|
71
|
|
11.9
|
Notices
|
71
|
|
11.1
|
Interpretation; Rules of Construction
|
72
|
|
11.11
|
Third Party Beneficiary Rights
|
73
|
|
11.12
|
Public Announcement
|
73
|
|
11.13
|
Entire Agreement
|
73
|
|
11.14
|
Waiver of Jury Trial
|
73
|
|
Exhibit
A-1
|
List of
Key Employees
|
|
Exhibit
A-2
|
List of
Critical Employees
|
|
Exhibit
B
|
Form of
Investor Representation Statement
|
|
Exhibit
C
|
Form of
Promissory Note Payoff and Lien Release Letter
|
|
Exhibit
D
|
Form of
Certificate of Designation
|
This
Agreement and Plan of Merger (this “Agreement”) is made and entered
into as of September 21, 2017 (the “Agreement Date”) by and among
Novume Solutions, Inc., a Delaware corporation (“Parent”), Global Technical
Services Merger Sub Inc., a Delaware corporation and wholly owned
subsidiary of Parent (“GTS
Merger Sub”), Global Contract Professionals Merger Sub
Inc., a Delaware corporation and wholly owned subsidiary of Parent
(“GCP Merger
Sub”, and together with GTS Merger Sub, the
“Merger Subs”),
Global Technical Services Inc., a Texas corporation
(“GTS”), Global
Contract Professionals Inc., a Texas corporation
(“GCP”),
(“GTS” and “GCP” are each a
“Company”, and
together the “Companies”), and Paul Milligan as
sole Stockholder of each Company (the “Company
Stockholder”).
A. The
parties hereto intend that, subject to the terms and conditions
hereinafter set forth, (i) GTS shall merge with GTS Merger Sub (the
“GTS Merger”),
with GTS to be the surviving corporation of the GTS Merger (the
“GTS Surviving Corporation”), and (ii)
GCP shall merge with GCP Merger Sub (the “GCP Merger”, and together with the
GTS Merger, the “Mergers”), with GCP to be the
surviving corporation of the GCP Merger (the “GCP Surviving Corporation”, and
together with the GTS Surviving Corporation, the
“Surviving
Corporations”), on the terms and subject to the
conditions of this Agreement and pursuant to the applicable
provisions of the laws of the State of Delaware and the State of
Texas.
B. The
Boards of Directors of Parent, GTS Merger Sub and GTS have
determined that the GTS Merger is in the best interests of their
respective stockholders and have approved and declared advisable
this Agreement and the GTS Merger. The Boards of Directors of
Parent, GCP Merger Sub and GCP have determined that the GCP Merger
is in the best interests of their respective stockholders and have
approved and declared advisable this Agreement and the GCP
Merger.
C. At
the Closing, and as a condition and inducement to Parent’s
willingness to enter into this Agreement, each of the employees of
the Companies under the heading “Key Employees” listed
on Exhibit A-1 will
execute and deliver to Parent an executed employment agreement
(including the related Confidentiality and Assignment of Inventions
Agreement) in form satisfactory to Parent (an “Employment Agreement”), which
Employment Agreements shall become effective only upon the
Effective Time (as defined in Article I).
D. Concurrently
with the execution and delivery of this Agreement, and as a
condition and inducement to Parent’s willingness to enter
into this Agreement, each Holder (as defined below, including
G&W and Company Stockholder) is executing and delivering to
Parent an Investor Representation Statement, in substantially the
form attached hereto as Exhibit B.
E. Concurrently
with the execution and delivery of this Agreement, and as a
condition and inducement to Parent’s willingness to enter
into this Agreement, GTS shall cause G&W to provide Parent with
the Promissory Note Payoff and Lien Release Letter, in
substantially the form attached hereto as Exhibit C which shall provide
for the cancellation of the Promissory Note in exchange for certain
consideration provided by Parent, on behalf of GTS, to G&W at
the Closing (as such terms are defined below).
F. Parent,
Merger Subs and the Companies desire to make certain
representations, warranties, covenants and agreements in connection
with the Mergers and to prescribe various conditions to the
Mergers.
G. For
United States federal income tax purposes, it is intended that the
Mergers shall qualify as tax-free transactions pursuant to Section
368 of the Internal Revenue Code of 1986, as amended (the
“Code”), and
this Agreement is a “plan of reorganization” within the
meaning of Treasury Regulations Section 1.368-2(g).
Now,
therefore, in consideration of the foregoing and the mutual
promises, covenants and conditions contained herein, the parties
hereby agree as follows:
ARTICLE I
As used
in this Agreement, the following terms shall have the meanings set
forth below. Unless indicated otherwise, all mathematical
calculations contemplated hereby shall be made to the fifth decimal
place.
“409A Plan” has the meaning set
forth in Section
3.16(t).
“Accounting Arbitrator” has the
meaning set forth in Section 10.4(c).
“Accounts Receivable” has the
meaning set forth in Section 3.21.
“Affiliate” has the meaning set
forth in Rule 144 promulgated under the Securities
Act.
“Agreed Amount” has the meaning set
forth in Section
10.6(c).
“Agreement” has the meaning set
forth in the Preamble.
“Agreement Date” has the meaning
set forth in the Preamble.
“Alternative Transaction” means
(a) any acquisition or purchase of capital stock of either
Company by any Person (other than as provided for or permitted by
this Agreement), or any merger, consolidation, business combination
or similar transaction involving either Company; (b) any sale,
lease, exchange, transfer, license, acquisition or disposition of a
substantial portion of the assets of either Company; or
(c) any sale, lease, exchange, transfer, license or
disposition to a third party of either Company
Business.
“Ancillary Agreements” means the
Company Ancillary Agreements, the Parent Ancillary Agreements and
the Merger Sub Ancillary Agreements.
“Applicable Law” means, collectively, all foreign,
federal, state, provincial, territorial, local or municipal laws,
statutes, ordinances, regulations, rules, and all orders, writs,
injunctions, awards, judgments and decrees applicable to the
assets, properties and business (and any regulations promulgated
thereunder) of the applicable company or entity.
“Balance Sheet Date” means December
31, 2016.
“Books and Records” means (a) all
product, business and marketing plans, sales and promotional
literature and artwork relating to the assets of the applicable
Company or its applicable Company Business, (b) all books, records,
lists, ledgers, financial data, files, reports, Returns and related
work papers and letters from accountants, budgets, pricing
guidelines, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, product
and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the assets of such
Company or the applicable Company Business (including records and
lists of customers, distributors, suppliers and personnel),
computer files and programs (including data processing files and
records), retrieval programs, operating data and plans and
environmental studies and plans, and (c) all telephone and fax
numbers used in such Company Business, and in each case whether
maintained as hard copy or stored in computer memory and whether
owned by such Company or its Affiliates.
“Business Day” means a day other
than Saturday, Sunday or any day on which banks located in the
State of Texas are authorized or obligated to close.
“Certificate of
Incorporation” means the Certificate of
Incorporation of each Company (as amended), filed with the
Secretary of State of the State of Texas.
“Certificate of Merger” means, as
applicable, (a) the certificate of merger to be filed with the
Office of the Secretary of State of the State of Delaware at the
time of Closing in such appropriate form as shall be required by
Delaware Law, and/or (b) the certificate of merger to be filed with
the Office of the Secretary of State of the State of Texas at the
time of Closing in such appropriate form as shall be required by
Texas Law.
“Certificates” has the meaning set
forth in Section
2.8.
“Claimed Amount” has the meaning
set forth in Section 10.6(a).
“Closing” means the closing of the
transactions necessary to consummate the Mergers.
“Closing Date” means a time and
date on which the Closing shall occur to be specified by the
parties, which shall be no later than the second business day after
the satisfaction or waiver of the conditions set forth in
Article VIII, or at
such other time, date and location as the parties hereto agree in
writing.
“COBRA” has the meaning set forth
in Section
3.16(l).
“Code” has the meaning set forth in
the Preamble.
“Company” has the meaning set forth
in the Preamble.
“Company Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
either Company by an officer or officers of such Company at the
Closing pursuant to Article VIII and each agreement
or document (other than this Agreement) that either Company is to
enter into as a party thereto pursuant to this
Agreement.
“Company Balance Sheet” means the
applicable Company’s audited balance sheet as of the Balance
Sheet Date included in the Company Financial
Statements.
“Company Benefit Arrangements” has
the meaning set forth in Section 3.16(d).
“Companies Business” means the
business of the Companies (including their Subsidiaries) as
presently conducted.
“Company Business” means the
business as presently conducted of GTS or GCP, as applicable, and
in each case including its applicable Subsidiaries.
“Company Capital Stock” means the
Common Stock of GTS and/or the Common Stock of GCP, as
applicable.
“Companies Disclosure Schedule”
means the disclosure schedule attached hereto and dated as of the
Agreement Date and delivered by the Companies to Parent on the
Agreement Date listing any exceptions to the representations and
warranties of the Companies herein as may be updated or modified
from time to time (each of which exceptions, in order to be
effective, shall clearly indicate the section and, if applicable,
the subsection of Article
III to which it relates, unless it is reasonably apparent on
its face that such information qualifies another representation and
warranty of the Companies).
“Company Financial Statements”
means, with respect to each Company, (a) such Company’s
unaudited balance sheet dated July 31, 2017 and audited
balance sheet dated December 31, 2016; and (b) such
Company’s unaudited statement of income and statement of cash
flows for the seven month period ended July 31, 2017 and
audited statement of income and statement of cash flows for the
year ended December 31, 2016.
“Company Material Contract” means
any Contract required to be listed on the Companies Disclosure
Schedule pursuant to Section 3.11.
“Company Charter Documents” has the
meaning set forth in Section 3.8(d).
“Company Indebtedness” means,
without duplication, (a) all indebtedness of either Company for
borrowed money, (b) all obligations of either Company evidenced by
notes, bonds, debentures, letters of credit or similar instruments
or pursuant to any guarantees, (c) all obligations payable by
either Company under interest rate protection agreements, (d) all
obligations of either Company for the deferred purchase price of
property, assets or services, (e) all liabilities or obligations of
either Company under leases that are classified or that are
required to be classified as capitalized lease obligations in
accordance with GAAP, (f) all obligations secured by Encumbrances
(other than Company Permitted Encumbrances) on property, and (g)
all interest (accrued or otherwise), premiums, penalties, and
breakage fees on any of the foregoing.
“Company IP Rights” has the meaning
set forth in Section 3.13(a).
“Company IP Rights Agreements” has
the meaning set forth in Section 3.13(b).
“Company-Licensed IP Rights” has
the meaning set forth in Section 3.13(a).
“Company-Owned IP Rights” has the
meaning set forth in Section 3.13(a).
“Company Permitted Encumbrances”
means (a) statutory liens for taxes that are not yet due and
payable or being contested in good faith (and for which adequate
accruals or reserves have been established on any Company Financial
Statements); (b) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements;
(c) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance or
similar programs mandated by Applicable Law; (d) statutory
liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and
other like liens; (e) Encumbrances securing the
Companies’ obligations under any Liability disclosed on the
Company Financial Statements; (f) Encumbrances securing the
Companies’ obligations under the Promissory Note; (g)
materialmen’s, mechanics’, carriers’,
workmen’s and repairmen’s Encumbrances and other
similar Encumbrances arising in the ordinary course of business
securing obligations; (h) Encumbrances which do not materially
detract from the value or materially interfere with any present or
intended use of such property or assets; and (i)any minor
imperfection of title or similar liens, charges or encumbrances
which individually or in the aggregate with other such liens,
charges and encumbrances does not impair the value of the property
subject to such lien, charge or encumbrance or the use of such
property in the conduct of the Companies Business.
“Company Product or Service” has
the meaning set forth in Section 3.13(c).
“Company Representatives” has the
meaning set forth in Section 5.7.
“Company Source Code” has the
meaning set forth in Section 3.13(j).
“Company Stockholder” has the
meaning set forth in the Preamble.
“Confidentiality Agreement” has the
meaning set forth in Section 5.8.
“Consideration Spreadsheet” has the
meaning set forth in Section 2.4.
“Contested Amount” has the meaning
set forth in Section
10.6(b).
“Contract” means any written or
oral legally binding contract, agreement, instrument, arrangement,
commitment, understanding or undertaking (including leases,
licenses, mortgages, notes, guarantees, sublicenses, subcontracts
and purchase orders).
“Critical Employees” has the
meaning set forth in Section 7.2.
“Damages” includes any loss,
damage, injury, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable out of pocket
attorneys’ fees), charge, cost (including reasonable costs of
investigation) or expense of any nature, but does not include any
incidental, indirect, special, exemplary, punitive or consequential
damages (including lost revenues or profits) unless for amounts
paid or payable to third parties in respect of any third-party
claim for which indemnification hereunder is otherwise
required.
“Deductible” has the meaning set
forth in Section
10.3(a).
“Delaware Law” means the General
Corporation Law of the State of Delaware.
“Disagreement Notice” has the
meaning set forth in Section 10.4(b).
“Dispute Period” has the meaning
set forth in Section 10.6(c).
“Documentation” means,
collectively, programmers’ notes or logs, source code
annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs,
plans, drawings, documentation, materials, supplier lists, software
source code and object code, net lists, photographs, development
tools, blueprints, media, memoranda and records that are primarily
related to or otherwise necessary for the use and exploitation of
any products or any products in development of either Company,
whether in tangible or electronic form, whether owned by such
Company or held by such Company under any licenses or sublicenses
(or similar grants of rights).
“DOL” has the meaning set forth in
Section
3.16(g).
“Effective Time” means the time of the filing of
the Certificates of Merger with the Office of the Secretary of
State of the State of Delaware and the filing of the Certificates
of Merger with the
Office of the Secretary of State of the State of Texas (or such later time as may be
mutually agreed in writing by the Company Stockholder and Parent
and specified in the Certificates of Merger); provided that the
Effective Time shall occur on the Closing Date.
“Employment Agreement” has the
meaning set forth in the Recitals.
“Encumbrance” means, with respect
to any asset, any mortgage, deed of trust, lien, pledge, charge,
security interest, title retention device, collateral assignment,
adverse claim, restriction or other encumbrance of any kind in
respect of such asset (including any restriction on the voting of
any security, any restriction on the transfer of any security or
other asset, any restriction on the receipt of any income derived
from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset). For purposes of clarification
only, an inability to sell a security without registering such
security for sale under the Securities Act or other federal
securities laws shall not represent an Encumbrance.
“Entity Representatives” has the
meaning set forth in the definition of “knowledge” in
this Article
I.
“Environmental Law” has the meaning
set forth in Section 3.19(b).
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any entity which is a member
of (a) a “controlled group of corporations,” as
defined in Section 414(b) of the Code; (b) a group of
entities under “common control,” as defined in Section
414(c) of the Code; or (c) an “affiliated service
group,” as defined in Section 414(m) of the Code, or
treasury regulations promulgated under Section 414(o) of the
Code, any of which includes the Companies.
“Estimated Net Working Capital” has
the meaning set forth in Section 8.2(i).
“Estimated Working Capital
Statement” has the meaning set forth in Section 8.2(i).
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
“Final Closing Working Capital
Statement” has the meaning set forth in Section 10.4(a).
“Fundamental Representations”
means: the representations and warranties set forth in Section 3.1 (Organization and Good
Standing), Section
3.3 (Power,
Authorization and Validity), Section 3.4 (Capitalization of the
Companies) and Section 3.7 (Taxes).
“Fundamental Reps Indemnity Period”
has the meaning set forth in Section 10.1.
“G&W” has the meaning set forth
in Section
2.5(a).
“GAAP” means United States
generally accepted accounting principles.
“GCP Common Stock” means the Common
Stock, par value $0.01 per share, of GCP.
“GCP Merger Consideration” means
such portion of the Merger Consideration equal to the product of
the Merger Consideration multiplied by five percent
(5%).
“Governmental Authority” means any
court or tribunal, governmental or regulatory body, administrative
agency, commission or other governmental authority.
“Governmental Permits” has the
meaning set forth in Section 3.14(b).
“GTS Common Stock” means the Common
Stock, par value $0.1 per share, of GTS.
“GTS Merger Consideration” means
such portion of the Merger Consideration equal to the product of
the Merger Consideration multiplied by ninety-five
percent (95%).
“Holdback Amount” means
$200,000.
“Holdback Deduction” means such
amount equal to ten percent (10%) of the difference between
$10,618,224 and the Holdback Revenue Amount, but only to the extent
that the Holdback Revenue Amount is less than
$10,618,224.
“Holdback Period” means ten days
after receipt by Company Stockholder from Parent of a written
statement setting forth the aggregate revenue amounts actually
collected by the Companies for the period of August 1, 2017 through
December 31, 2017 (such aggregate amounts, the “Holdback Revenue
Amount”).
“Holder” has the meaning set forth
in the Section
2.11(b).
“Indemnitee” means the following
Persons: Parent and its subsidiaries (including Merger Subs and,
following the Effective Time, the Surviving Corporations) and their
respective directors, officers and attorneys.
“Indemnity Period” has the meaning
set forth in Section 10.1.
“Indemnifying Party” refers to the
Company Stockholder.
“Intellectual Property” means,
collectively, all worldwide industrial and intellectual property
rights, including (a) patents, industrial design patents,
patent applications, industrial design patent applications, patent
rights, (b) trademarks, trademark registrations and
applications therefor, trade dress rights, trade names, service
marks, service mark registrations and applications therefor,
together with all common law rights and goodwill related to the
foregoing, (c) Internet domain names, Internet and World Wide Web
URLs or addresses, (d) copyrights, copyright registrations and
applications therefor, mask work rights, mask work registrations
and applications therefor, moral rights, and other rights of
authorship or exploitation, (e) franchises and licenses, (f)
inventions, trade secrets, know-how, customer lists, supplier
lists, proprietary processes and formulae, technology, algorithms,
net lists, architectures, structures, screen displays, photographs,
images, layouts, development tools, designs, blueprints,
specifications, technical drawings (or similar information in
electronic format), (g) software source code and object code, and
(h) all documentation and media constituting, describing or
relating to the foregoing, including manuals, programmers’
notes, memoranda and records.
“Investor Representation Statement”
has the meaning set forth in Section 7.4.
“IRS” has the meaning set forth in
Section
3.7(b).
“knowledge” means the knowledge of
a particular fact, circumstance, event or other matter in question
of any executive officer of an entity (collectively, the
“Entity
Representatives”); provided, however, that in the case of either GTS
or GCP, such Entity Representatives shall include, in each case,
the Company Stockholder. Any such Entity Representative will be
deemed to have knowledge of a particular fact, circumstance, event
or other matter if (a) such Entity Representative has actual
knowledge of the fact, circumstance or event or (b) knowledge of
such fact, circumstance or event would be obtained by reasonable
inquiry of his direct reports. With respect to Intellectual
Property, “knowledge” or its variants (i.e.,
“know,” “known”, etc.) does not require any
Person to conduct, have conducted, obtain, or have obtained any
freedom-to-operate opinions or similar opinions of counsel or any
patent, trademark or other Intellectual Property rights clearance
searches.
“Legal Proceeding” means any
action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Authority or any
arbitrator or arbitration panel.
“Liability” or “Liabilities” means debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured, determined or determinable, known or unknown,
including those arising under any law, action or governmental order
and those arising under any Contract.
“Material Adverse Change” and
“Material Adverse
Effect” when used in connection with an entity means
any change, event, circumstance, condition or effect that is or is
reasonably likely to be, individually or in the aggregate,
materially adverse in relation to the condition (financial or
otherwise), capitalization, properties, products, assets (including
intangible assets) and liabilities, taken as a whole, Intellectual
Property, business, operations or results of operations of such
entity and its Subsidiaries, taken as a whole, except to the extent
that any such change, event, condition or effect directly results
from (a) the direct effect of actions by such entity taken at
the direction or request of Parent pursuant to this Agreement,
(b) changes affecting any of the industries in which such
entity operates generally or the United States or worldwide economy
generally (which changes in each case do not disproportionately
affect such entity in any material respect), (c) any change in any
Applicable Law, or any interpretation thereof, (d) any change in
GAAP or other accounting standards, (e) the announcement or
expected completion of the transactions contemplated by this
Agreement or (f) changes caused by acts of terrorism or war
(whether or not declared), sabotage, natural disasters or other
calamity, crisis or geopolitical event occurring after the date
hereof, or (g) the failure, in and of itself, of such entity to
meet any financial forecast, projection, estimate, prediction or
models, whether internal to such entity or otherwise.
“Materials of Environmental
Concern” has the meaning set forth in Section 3.19(b).
“Mergers” has the meaning set forth
in the Recitals.
“Merger Consideration” means the
total consideration the Company Stockholder is entitled to receive
in the aggregate in the Mergers, equal to (a) 300,000 shares of
Parent Common Stock, (b) an amount of shares of Parent Preferred
Stock equal to (i) 180,000 plus (ii) such number of shares
of Parent Preferred Stock representing a value (per original issue
price of $10 per share) equal to the difference between (x)
$1,200,000 and (y) the product of (1) the average 5 trading day
VWAP (as such term is defined in the Certificate of Designations
attached as Exhibit D) of Common Stock
prior to the Closing Date, multiplied by (2) 300,000, but only to
the extent that “(y)” is a lower amount than
“(x)”, and (c) $750,000 in cash.
“Merger Expenses” means the
out-of-pocket costs and expenses incurred by any Company in
connection with its applicable Merger and this Agreement and the
transactions contemplated hereby (including any fees and expenses
of legal counsel, financial advisors, investment bankers and
accountants).
“Merger Securities” has the meaning
set forth in the Section
2.11(b).
“Merger Sub” has the meaning set
forth in the Preamble.
“Merger Sub Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
each Merger Sub by an officer or officers of such Merger Sub at the
Closing pursuant to Article VIII and each agreement
or document (other than this Agreement) that such Merger Sub is to
enter into as a party thereto pursuant to this
Agreement.
“Net Working Capital” means the sum
of a Company’s cash and cash equivalents as of the Effective
Time plus (i)
accounts receivable and the inventory amount, and minus (ii)
accrued payroll and sales commissions and other current expenses
and accounts payable, but not including Tax and deferred revenue of
such Company, the Repaid Indebtedness, the current portion of any
Company Indebtedness and employee bonus payments. Such
Company’s Net Working Capital shall be calculated using the
same accounting methods, policies, principles, practices and
procedures, with consistent classifications, judgments and
estimation methodologies that were used in the preparation of the
Company Financial Statements.
“Notice of Claim” has the meaning
set forth in Section 10.6(a).
“Parent” has the meaning set forth
in the Preamble.
“Parent Ancillary Agreements”
means, collectively, each certificate to be delivered on behalf of
Parent by an officer or officers of Parent at the Closing pursuant
to Article VIII and
each agreement or document (other than this Agreement) that Parent
is to enter into as a party thereto pursuant to this
Agreement.
“Parent Common Stock” means Parent’s common stock,
par value $0.0001 per share.
“Parent Disclosure Schedule” means
such disclosure schedule dated as of the Agreement Date that Parent
may provide to the Companies on the Agreement Date listing any
exceptions to the representations and warranties of Parent and
Merger Subs herein as may be updated or modified from time to time
(each of which exceptions, in order to be effective, shall clearly
indicate the section and, if applicable, the subsection of
Article IV to which
it relates, unless it is reasonably apparent on its face that such
information qualifies another representation and warranty of Parent
and Merger Subs).
“Parent Financial Statements” has
the meaning set forth in Section 4.12.
“Parent Permitted Encumbrances” means
(a) statutory liens for taxes that are not yet due and payable
or being contested in good faith (and for which adequate accruals
or reserves have been established on the Parent Financial
Statements); (b) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements;
(c) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance or
similar programs mandated by Applicable Law; (d) statutory
liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and
other like liens; (e) Encumbrances disclosed on the Parent
Financial Statements; (f) Encumbrances securing the Parent’s
and its Subsidiaries obligations under the credit facility
disclosed in the Parent Financial Statements; (g)
materialmen’s, mechanics’, carriers’,
workmen’s and repairmen’s Encumbrances and other
similar Encumbrances arising in the ordinary course of business
securing obligations; (h) Encumbrances which do not materially
detract from the value or materially interfere with any present or
intended use of such property or assets; or (i) any minor
imperfection of title or similar liens, charges or encumbrances
which individually or in the aggregate with other such liens,
charges and encumbrances does not impair the value of the property
subject to such lien, charge or encumbrance or the use of such
property in the conduct of the business of Parent and its
Subsidiaries.
“Parent Preferred
Stock” means
the Parent’s Series B Preferred Stock, par value $0.0001 per
share, with the rights, powers and obligations set forth on the
Certificate of Designations, substantially in the form attached
hereto as Exhibit
D.
“Parent Stock” means Parent Common Stock and/or
Parent Preferred Stock.
“Permitted Transferees” means the
partners, members, retired partners, retired members, stockholders,
and Affiliates of a Holder, or the estates and immediate family
members of any such partners, retired partners, members, and
retired members and any trusts for the benefit of any of the
foregoing persons, whom, collectively and together with the Holder,
own less than 1% of the outstanding Parent Common Stock (including
any series of Preferred Stock of Parent on an as converted
basis).
“Person” means any individual,
corporation, company, limited liability company, partnership,
limited liability partnership, trust, estate, proprietorship, joint
venture, association, organization, entity or Governmental
Authority.
“Pre-Closing Tax Period” has the
meaning set forth in Section 7.3(a)(i).
“Pre-Closing Taxes” means
(i) all Taxes (or the non-payment thereof) of or imposed on
either Company for a Pre-Closing Tax Period and the portion through
the end of the Closing Date for any Straddle Period, (ii) all
Taxes of any member of an affiliated, consolidated, combined or
unitary group of which either Company (or any predecessor of any of
the foregoing) is or was a member on or prior to the Closing Date,
including pursuant to Treasury Regulations Section 1.1502-6 or
any analogous or similar U.S. state or local, or non-U.S. Law,
(iii) all Taxes imposed upon Company Stockholder arising from
this transaction, and (iv) any and all Taxes of any Person
(other than the Company) imposed on either Company as a transferee
or successor, by Contract or pursuant to any Law, which Taxes
relate to an event or transaction occurring before the
Closing.
“Prohibited Payments” mean any
offer, gift, payment, promise to pay or authorization to pay money
or anything of value to or for the use or benefit of any government
official (including employees and directors of government-owned
companies and other state enterprises), political party, party
official, candidate for public office or employee of a public
international organization in an effort to win or retain business
or secure any improper advantage, except that the term does not
include any payment to a government official, political party,
party official or political candidate that is expressly permitted
under the written laws of the country involved, or any facilitating
payment that is made solely to secure the provision of routine
governmental services.
“Promissory Note” means that
certain Promissory Note executed by GTS as of January 31, 2001 in
the amount of $2,726,791, as amended on March 31, 2003, April 1,
2005 and August 1, 2013.
“Promissory Note Acknowledgment
Letter” has the meaning set forth in Section 2.5(b).
“Public Software” has the meaning
set forth in Section
3.13(q).
“Released Parties” has the meaning
set forth in Section
10.3(i).
“Repaid Indebtedness” has the
meaning set forth in Section 2.5(a).
“Resolution Period” has the meaning
set forth in Section 10.4(c).
“Response Notice” has the meaning
set forth in Section 10.6(c).
“Returns” has the meaning set forth
in Section
3.7(a).
“SEC” means the Securities and Exchange
Commission.
“SEC
Documents” means, with
respect to any Person, each report,
schedule, form, statement or other document filed or required to be
filed with the SEC by such
Person pursuant to
Section 13(a) of the Exchange Act.
“Section 409A” has the meaning set
forth in Section
3.16(t).
“Securities Act” means the
Securities Act of 1933, as amended.
“Significant Customer” has the
meaning set forth in Section 3.20(a).
“Significant Supplier” has the
meaning set forth in Section 3.20(b).
“Stockholder Approvals” has the
meaning set forth in Section 3.4(d).
“Stockholder Indemnitees” has the
meaning set forth in Section 10.9.
“Straddle Period” means any taxable
period beginning before and ending after the Closing
Date.
“Straddle Period Tax Returns” has
the meaning set forth in Section 7.3(a)(ii).
“Subsidiary” means a corporation or
other business entity in which the Companies or Parent owns,
directly or indirectly, at least a 50% interest or that is
otherwise, directly or indirectly, controlled by such
entity.
“Subsidiary Charter Documents” has
the meaning set forth in Section 3.8(d).
“Superior Proposal” has the meaning
set forth in Section 5.7(a).
“Surviving Corporations” has the
meaning set forth in the Recitals.
“Target Net Working Capital Amount”
for GTS and for GCP will be equal to the Estimated Net Working
Capital of each Company delivered in accordance with Section 8.2(i).
“Tax” (and, with correlative
meaning, “Taxes”) means any net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, goods and services, harmonized sales, capital,
unemployed occupation, workers’ compensation, value added, ad
valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or
other tax, governmental fee or other like assessment or charge of
any kind whatsoever, including an escheat obligation, together with
any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Authority responsible for the
imposition of any such tax (domestic or foreign) and shall include
any transferee liability in respect of Taxes, any liability in
respect of Taxes imposed by contract, tax sharing agreement, tax
indemnity agreement or any similar agreement.
“Tax Contest” has the meaning set
forth in Section
7.3(d).
“Texas Law” means the Texas
Business Organizations Code.
“WARN Act” has the meaning set
forth in Section
3.16(p).
“Wells Fargo Credit Facility” means
the secured Account Purchase Agreement with Wells Fargo Bank dated
August 22, 2012.
ARTICLE II
2.1 Conversion/Cancellation of GTS Capital
Stock and GTS Merger Sub Capital Stock. On the terms and
subject to the conditions of this Agreement, at the Effective Time,
by virtue of the Mergers and without any action on the part of
Parent, the Companies, the Merger Subs or Company Stockholder, the
following shall occur:
(a) Conversion
of GTS Common Stock. Each share of
Common Stock of GTS issued and outstanding immediately prior to the
Effective Time will be cancelled and extinguished, and all shares
of Common Stock of GTS shall be automatically converted into the
right to receive the GTS Merger Consideration.
(b) Cancellation of Capital Stock of GTS
Owned by GTS. At the Effective
Time, each share of stock of GTS held by GTS immediately prior to
the Effective Time shall be cancelled and extinguished without any
conversion thereof.
(c) Conversion of GTS Merger Sub Common
Stock. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the GTS Merger and
without any action on the part of Parent, the Companies, the Merger
Subs or Company Stockholder, each share of GTS Merger Sub Common
Stock that is issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock, par value $0.001 per
share, of the GTS Surviving Corporation, and the shares of the GTS
Surviving Corporation into which the shares of GTS Merger Sub
Common Stock are so converted shall be the only shares of GTS
Surviving Corporation that are issued and outstanding immediately
after the Effective Time.
(a) Conversion of GCP Common Stock.
On the terms and subject to the conditions of this Agreement, at
the Effective Time, by virtue of the GCP Merger and without any
action on the part of Parent, the Companies, the Merger Subs or
Company Stockholder, each share of Common Stock of GCP issued and
outstanding immediately prior to the Effective Time will be
cancelled and extinguished, and all shares of Common Stock of GCP
shall be automatically converted into the right to receive the GCP
Merger Consideration.
(b) Conversion of GCP Merger Sub Common
Stock. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the GCP Merger and
without any action on the part of Parent, the Companies, the Merger
Subs or Company Stockholder, each share of GCP Merger Sub Common
Stock that is issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock, par value $0.001 per
share, of the GCP Surviving Corporation, and the shares of the GCP
Surviving Corporation into which the shares of GCP Merger Sub
Common Stock are so converted shall be the only shares of GCP
Surviving Corporation that are issued and outstanding immediately
after the Effective Time.
2.3 Adjustments. In the event of
any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into capital
stock), reorganization, reclassification, combination,
recapitalization or other like change with respect to any Company
Capital Stock occurring after the Agreement Date and prior to the
Effective Time, all references in this Agreement to specified
numbers of shares of any class or series affected thereby, and all
calculations provided for that are based upon numbers of shares of
any class or series (or trading prices therefor) affected thereby,
shall be equitably adjusted to the extent necessary to provide the
parties the same economic effect as contemplated by this Agreement
prior to such stock split, reverse stock split, stock dividend,
reorganization, reclassification, combination, recapitalization or
other like change.
2.4 Allocation of Merger
Consideration. At the Closing,
the Companies shall deliver to Parent a spreadsheet setting forth
the final calculation of the portions of the Merger Consideration
that are payable to the Company Stockholder upon the consummation
of the Mergers or the expiration of the Holdback Period pursuant to
the terms of this Agreement, including Sections 2.1, 2.2 and 2.8 (the “Consideration Spreadsheet”). No
fraction of a share of Parent Common Stock or Parent Preferred
Stock shall be issued by virtue of any Merger.
(a) At the Closing,
Parent, on behalf of GTS, shall pay and discharge in full the
indebtedness of GTS pursuant to the Promissory Note (as amended by
the Promissory Note Payoff and Lien Release Letter (as defined
below)) by (i) wire
transfer of immediately available funds to G & W Ventures,
Inc., formally known as Global Group (“G&W”), an amount equal to
$150,000 and (ii) transfer to G&W of 75,000 shares of Parent Common Stock
received pursuant to the Mergers (the “Repaid
Indebtedness”).
(b) In order to
evidence the satisfaction of the Repaid Indebtedness upon the
payment of the applicable amount and the transfer of equity
pursuant to Section
2.5(a), effective
at the Closing, GTS shall deliver to Parent documents in form
reasonably satisfactory to Parent, from G&W evidencing (1) the
discharge of all obligations constituting such Repaid Indebtedness
and (2) the termination and release of all Encumbrances relating to
the assets and properties of GTS or its Subsidiaries created
pursuant to the Promissory Note, if any, or any guarantee and
collateral agreements (including any security, pledge or fee
agreement) pertaining to such Repaid Indebtedness (the
“Promissory Note
Acknowledgment Letter”), which Promissory Note
Acknowledgment Letter will be in a form reasonably satisfactory to
Parent and shall indicate that G&W has agreed to:
(x) immediately terminate and release all Encumbrances and
return all possessory collateral relating to the assets and
properties of GTS or its Subsidiaries upon receipt of (i) the
amounts of cash and (ii) the number of equity interests of Parent,
in each case as indicated in such Promissory Note Acknowledgment
Letter, (y) authorize GTS or its designee to file releases of
Encumbrances should G&W fail to file such releases within ten
(10) days after the date of the Promissory Note Payoff and Lien
Release Letter, and (z) terminate all guarantees and collateral
agreements (including any security, pledge or fee agreement) with
regard to GTS and its Subsidiaries.
(c) Effective as of the
Closing, the Companies shall obtain a release of any guarantees and
Encumbrances on any assets of the Companies or any of their
Subsidiaries, other than the Companies Permitted Encumbrances (not
including the Encumbrances securing the Companies’
obligations under the Promissory Note which shall be released as
provided for in Section
2.5(b)).
2.6 The Closing. Subject to
termination of this Agreement as provided in Article IX, the Closing shall
take place at the offices of Crowell & Moring LLP at 1001
Pennsylvania Avenue NW, Washington, DC 20004 on the Closing Date.
Concurrently with the Closing or at such later date and time as may
be agreed in writing by Company Stockholder and Parent, the
applicable Certificate of Merger shall be filed with the Office of
the Secretary of State of the State of Delaware in accordance with
Delaware Law, and the applicable Certificate of Merger shall be
filed with the Office of the Secretary of State of the State of
Texas in accordance with Texas Law.
(a) the separate
existence of GTS Merger Sub shall cease and GTS Merger Sub shall be
merged with and into GTS, and GTS shall be the GTS Surviving
Corporation of the GTS Merger pursuant to the terms of this
Agreement and the applicable Certificates of Merger;
(b) the separate
existence of GCP Merger Sub shall cease and GCP Merger Sub shall be
merged with and into GCP, and GCP shall be the GCP Surviving
Corporation of the GCP Merger pursuant to the terms of this
Agreement and the applicable Certificates of Merger;
(c) the Bylaws of each
Merger Sub shall continue unchanged and be the Bylaws of each
Surviving Corporation, as applicable; and
(d) the
members of the Board of Directors of each Merger Sub immediately
prior to the Effective Time shall continue unchanged as the members
of the Board of Directors of each Surviving Corporation, as
applicable, immediately after the Effective Time until their
respective successors are duly elected or appointed and
qualified.
2.8 Surrender of Certificates; Payment of
Merger Consideration. At the Closing,
the Company Stockholder, as holder of record (as of the Effective
Time) of all capital stock of the Companies as evidenced on the
certificate or certificates which immediately prior to the
Effective Time represent all shares of Common Stock of each Company
(collectively, the “Certificates”) shall provide
Parent with such Certificates for cancellation together with any
other documents as Parent shall reasonably require, and Parent
shall promptly deliver and pay, as applicable, to the Company
Stockholder the Merger Consideration which the Company Stockholder
has the right to receive pursuant to the terms of this Agreement,
including Section
2.1 and/or Section
2.2. The cash portion of the Merger Consideration minus the
Holdback Amount will be paid by wire transfer of immediately
available funds to such accounts as may be designated by the
Company Stockholder, in writing to the Parent prior to Closing,
including payment of legal fees, out of the cash portion, to such
account as designated by Decker Jones, P.C., attorneys for the
Company Stockholder. From and after the Effective Time, no shares
of capital stock of any Merger Sub will be deemed to be issued, and
holders of certificates formerly representing any shares of capital
stock of any Merger Sub shall cease to have any rights with respect
thereto except as provided herein or by Applicable Law. At the
Effective Time, the stock transfer books of each Merger Sub shall
be closed and no transfer of any shares of capital stock of any
Merger Sub shall thereafter be made. Notwithstanding anything
herein to the contrary, (i) the Holdback Amount shall be withheld
by Parent from any amounts otherwise payable to the Company
Stockholder, and (ii) the Holdback Deduction shall not exceed the
Holdback Amount. Such portion, if any, of the Holdback Amount, as
reduced by the Holdback Deduction, shall be delivered by Parent to
Company Stockholder after the expiration of the Holdback
Period.
2.9 Tax
Withholding. Parent, its
Affiliates, and its agents shall be entitled to deduct and withhold
from the Merger Consideration or other payment otherwise payable
pursuant to this Agreement to the Company Stockholder, the amounts
required to be deducted and withheld under the Code, or any
provision of state, local or foreign tax law, with respect to the
making of such payment. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Company Stockholder in respect
of whom such deduction and withholding was made.
2.10 Tax
Consequences. It is intended by
the parties hereto that the Mergers shall constitute tax-free
reorganization within the meaning of Section 368 of the Code.
Notwithstanding the foregoing, none of Parent, any Merger Sub or
any Company makes any representation or warranty with respect to
any tax consequences to Parent, either Merger Sub, any Company or
the Company Stockholder arising under this Agreement or the
transactions contemplated hereby, and each party hereto shall rely
on its or his own tax advisors as to the tax consequences to it or
him of such transactions.
(a) Legends. Legends reading
substantially as follows shall be placed on each stock certificate
representing Parent Common Stock or Parent Preferred Stock issued
pursuant to either Merger:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE
SECURITIES ACT AND AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) Stop-Transfer Notice. Each
holder (“Holder”, and such definition shall
include any Permitted Transferees to whom shares of Parent Stock
have been transferred) of Parent Stock issued in the Mergers (the
“Merger
Securities”) agrees that, in order to ensure
compliance with the restrictions referred to herein, Parent may
issue appropriate “stop transfer” instructions to its
transfer agent.
(c) Removal of Legend. The Parent
Common Stock issued pursuant to the Mergers will no longer be
subject to the legend referred to in Section 2.11(a) and upon
request of a Holder the Parent shall cause the legend to be removed
following: (i) the registration of the Parent Common Stock
under a registration statement, after such time, Parent shall issue
a blanket instruction to its transfer agent to issue new
certificates (or uncertificated shares), upon exchange from the
Holders of such legended certificates, representing such Parent
Common Stock without the legend referred to in Section 2.11(a), (ii) compliance
by the Holder of the Parent Common Stock with the provisions of SEC
Rule 144, or (iii) upon the lapse of the applicable time
period provided for in SEC Rule 144(d)(1)(ii).
(d) Transfers to Permitted
Transferees. Notwithstanding anything to the contrary
herein, a Holder shall be permitted to transfer, at its sole
discretion, its shares of Parent Stock to any Permitted
Transferee.
2.12 Further
Assurances. If, at any time
before or after the Effective Time, any of the parties hereto
reasonably believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary to
consummate either Merger or to carry out the purposes and intent of
this Agreement at or after the Effective Time, then the Merger
Subs, Parent, the Companies (or the Surviving Corporations, as the
case may be) and their respective officers and directors shall
execute and deliver all such proper deeds, assignments, instruments
and assurances and do all other things reasonably necessary to
consummate the Mergers and to carry out the purposes and intent of
this Agreement.
ARTICLE III
Subject
to the exceptions set forth in a numbered or lettered section of
the Companies Disclosure Schedule and other sections of the
Companies Disclosure Schedule to the extent (a) such
information is cross-referenced in another part of the Companies
Disclosure Schedule, or (b) it is reasonably apparent on the face
of the disclosure that such information qualifies another
representation and warranty of the Companies in the Agreement, each
of GTS, GCP, and Company Stockholder represents and warrants to
Parent, jointly and severally, that the statements contained in
this Article III
are true and correct on and as of the date of this
Agreement:
3.1 Organization and Good
Standing. Each Company and
each of its Subsidiaries, if any, (i) is a corporation or other
organization duly organized, validly existing and in good standing
under the laws of the State of Texas or such other jurisdiction of
its incorporation or organization (except, in the case of good
standing, for entities organized under the laws of any jurisdiction
that does not recognize such concept); (ii) has the requisite power
and authority to own, operate and lease its properties and to carry
on the Company Business; and (iii) is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or
the nature of its activities makes such qualification or licensing
necessary, except, in the case of (ii) and (iii) above, where the
failure to be so qualified, licensed or in good standing or to
obtain requisite power or authority would not reasonably be
expected to have a Material Adverse Effect on such Company; without
limiting the foregoing, each Company and each of its Subsidiaries
is so qualified or licensed in each jurisdiction listed on
Section
3.1 of the
Companies Disclosure Schedule.
3.2 Subsidiaries.
Section
3.2 of the
Companies Disclosure Schedule sets forth each Subsidiary of each
Company as of the Agreement Date, including such Subsidiary’s
jurisdiction of formation, incorporation or organization. All the
outstanding shares of capital stock of, or other equity or voting
interests in, each such Subsidiary are duly authorized, have been
validly issued and are fully paid and nonassessable and are owned
either Company, a wholly-owned Subsidiary of either Company, or
either Company and another wholly-owned Subsidiary of such Company,
free and clear of all material Encumbrances of any kind or nature
whatsoever, other than Company Permitted Encumbrances, except for
restrictions imposed by applicable securities laws. Other than such
Subsidiaries, neither Company nor any of its Subsidiaries owns any
capital stock of, or other equity or voting interests of any nature
in, or any interest convertible, exchangeable or exercisable for,
capital stock of, or other equity or voting interests of any nature
in, any other Person.
(a) Power and Authority. Other than
the Stockholder Approvals, each Company has all requisite corporate
power and corporate authority to enter into, execute, deliver and
perform its obligations under this Agreement and each of the
Company Ancillary Agreements and to consummate the Merger. The
Mergers and the execution, delivery and performance by the
Companies of this Agreement, each of the Company Ancillary
Agreements and all other agreements, transactions and actions
contemplated hereby or thereby, have been duly and validly approved
and authorized by all requisite corporate action on the part of
each Company (other than the Stockholder Approvals) and no other
corporate proceedings on the part of either Company are necessary
to approve this Agreement and each of the Company Ancillary
Agreements or to authorize or consummate the transactions
contemplated hereby or thereby.
(b) Enforceability. This Agreement
has been duly executed and delivered by each Company. This
Agreement and each of the Company Ancillary Agreements are, or when
executed by the applicable Company shall be, assuming the due
authorization, execution and delivery by each other party hereto,
valid and binding obligations of such Company, enforceable against
such Company in accordance with its respective terms, subject to
the effect of (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to rights of creditors generally and (ii) rules
of law and equity governing specific performance, injunctive relief
and other equitable remedies.
(a) Authorized and Outstanding Capital
Stock of GTS. The authorized capital stock of GTS consists
solely of 1,000,000 shares of Common Stock, of which 44,050 shares
of Common Stock are issued and outstanding as of the Agreement
Date, all of which are owned of record and beneficially (as defined
in Exchange Act Rule 13d-3) by the Company Stockholder. No other
shares of Company Capital Stock are issued or outstanding as of the
Agreement Date, and no such other shares shall be issued or
outstanding as of the Closing Date. GTS holds 55,950 treasury
shares. All issued and outstanding shares of Company Capital Stock
have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of and, except under
the agreements to be terminated pursuant to Section 8.1(g) hereof, are
not subject to any right of rescission, right of first refusal or
preemptive right, and have been offered, issued, sold and delivered
by GTS in compliance with all requirements of Applicable Law and
all requirements set forth in applicable Contracts. There is no
Liability for dividends accrued and unpaid by GTS.
(b) Authorized and Outstanding Capital
Stock of GCP. The authorized capital stock of GCP consists
solely of 100,000 shares of Common Stock, of which 44,050 shares of
Common Stock are issued and outstanding as of the Agreement Date,
all of which are owned of record and beneficially (as defined in
Exchange Act Rule 13d-3) by the Company Stockholder. No other
shares of Company Capital Stock are issued or outstanding as of the
Agreement Date, and no such other shares shall be issued or
outstanding as of the Closing Date. GCP holds no treasury shares.
All issued and outstanding shares of Company Capital Stock have
been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of and, except under
the agreements to be terminated pursuant to Section 8.1(g) hereof, are
not subject to any right of rescission, right of first refusal or
preemptive right, and have been offered, issued, sold and delivered
by GCP in compliance with all requirements of Applicable Law and
all requirements set forth in applicable Contracts. There is no
Liability for dividends accrued and unpaid by GCP.
(c) No Other Rights. With respect
to each Company, there are no stock appreciation rights, options,
warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or Contracts outstanding to purchase or
otherwise acquire any shares of Company Capital Stock or any
securities or debt convertible into or exchangeable for Company
Capital Stock or obligating any Company to grant, extend or enter
into any such option, warrant, call, right, commitment, conversion
privilege or preemptive or other right or Contract. Except under
the agreements to be terminated pursuant to Section 8.2(g) hereof, there are no
voting agreements, registration rights, rights of first refusal,
preemptive rights, co-sale rights or other restrictions applicable
to any outstanding securities of any Company. Neither
Company’s authorized capital stock includes any shares of
preferred stock.
(d) Required Vote of Stockholders.
The affirmative vote or consent of the holders of at least two
thirds of the outstanding shares of capital stock, of each Company,
entitled to vote (the “Stockholder Approvals”), are the
only votes or consents of the holders of any class or series of any
Company’s capital stock necessary to adopt this
Agreement.
(e) Consideration Spreadsheet. The
information set forth on the Consideration Spreadsheet is true,
complete and accurate as of the Closing Date and immediately prior
to the Effective Time.
(a) No Consents. Except for the
filings of the applicable Certificates of Merger with the Office of
the Secretary of State of the State of Delaware and the Office of
the Secretary of State of the State of Texas, and those consents,
approvals and notices set forth on Section 3.5(a) of the Companies
Disclosure Schedule, no consents or approvals of or notices to or
filings, declarations or registrations with any Governmental
Authority, any other governmental Person, or any other Person are
necessary in connection with (i) the execution and delivery by the
Companies of this Agreement or any of the Company Ancillary
Agreements or (ii) the consummation by the Companies of the Mergers
or the other transactions contemplated hereby or thereby so as to
permit each Surviving Corporation to continue its Company Business
after the Closing Date (including the consent of any Person
required to be obtained in order to keep any Company Material
Contract between such Person and the applicable Company in effect
following the Mergers or to provide that such Company is not in
breach or violation of any such Company Material Contract following
the Merger), except where the breach or violation or the lack of
consent, approval or notice would not, individually or in the
aggregate, have a Material Adverse Effect on any
Company.
(b) No Conflict. Neither the
execution and delivery of this Agreement or any of the Company
Ancillary Agreements by the Companies, nor the consummation of the
Mergers or any other transaction contemplated hereby or thereby,
shall conflict with, result in a termination or breach, impairment
or violation of (with or without notice or lapse of time, or both),
or constitute a default, or require the consent, release, waiver or
approval of any third party, under: (a) any provision of the
Company Charter Documents, each as currently in effect; (b) any
Applicable Law applicable to any Company or any of its assets or
properties; (c) except as set forth on Section 3.5(a) of the Companies
Disclosure Schedule, any Company Material Contract; or (d) any
privacy policy of any Company, except, in each case, where such
conflict, termination, breach, impairment or violation, default,
consent, or lack of consent, release, waiver or approval would not,
individually or in the aggregate, have a Material Adverse Effect on
any Company.
3.6 Litigation. As of the date of
this Agreement, there is no action, suit, arbitration, mediation,
proceeding, claim or, to its knowledge, investigation pending
against any Company or any of its Subsidiaries (or, to such
Company’s knowledge, against any officer, director, employee
or agent of such Company or any of its Subsidiaries in their
capacity as such or relating to their employment, services or
relationship with such Company or such Subsidiary) before any
Governmental Authority, arbitrator or mediator other than actions,
suits, arbitrations, mediations, proceedings, claims or
investigations that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, nor,
to the knowledge of such Company, has any such action, suit,
arbitration, mediation, proceeding, claim or investigation been
threatened in writing. There is no judgment, decree, injunction,
rule or order of any Governmental Authority, arbitrator or mediator
outstanding against any Company or any of its Subsidiaries. Except
as otherwise provided for in the Companies Disclosure Schedules,
neither Company nor any of its Subsidiaries has an action, suit,
arbitration, mediation, proceeding, claim or investigation pending
against any Governmental Authority or other Person.
3.7 Taxes. For purposes of
this Section
3.7, and all
references to a “Company” shall include either GTS or
GCP and their predecessors and each of their Subsidiaries and their
predecessors.
(a) Each Company,
(i) has properly completed and timely filed all federal and
material foreign, state, provincial, local and municipal tax and
information returns, including all schedules thereto (the
“Returns”)
required to be filed by it, and all such Returns are true and
accurate in all respects (ii) has timely paid all Taxes required to
be paid by it for which payment was due, (iii) has established an
adequate accrual or reserve for the payment of all Taxes payable in
respect of the periods or portions thereof prior to the Balance
Sheet Date (which accrual or reserve as of the Balance Sheet Date
is fully reflected on the Company Balance Sheet) for which payment
has not yet been made and will establish an adequate accrual or
reserve for the payment of all Taxes payable by such Company in
respect of the periods or portion thereof through the Closing Date,
and (iv) has timely made (or will make on a timely basis) all
estimated Tax payments required to be made.
(b) Each Company is
not delinquent in the payment of any Tax or in the filing of any
Returns, and no deficiencies for any Tax have been threatened,
claimed or proposed in writing or assessed against any Company.
Neither Company has received any written notification from the
Internal Revenue Service (“IRS”) or any other taxing
authority regarding any issues that (i) are currently pending
before the IRS or any other taxing agency or authority (including
any sales or use taxing authority) regarding such Company, or (ii)
have been raised by the IRS or other taxing agency or authority and
not yet finally resolved. No Return of either Company is under
audit by the IRS or any other taxing agency or authority and past
audits (if any) have been completed and fully
resolved.
(c) There is not in
effect any waiver by either Company of any statute of limitations
with respect to any Taxes nor has either Company agreed to any
extension of time for filing any Return that has not yet been
filed. Neither Company has consented to extend the period in which
any Tax may be assessed or collected by any taxing agency or
authority.
(d) Each Company has
complied (and until the Closing Date will comply) with all
Applicable Law relating to the payment and withholding of Taxes
(including withholding of taxes pursuant to Sections 1441,
1442, 1445 and 1446 of the Code or similar provisions under any
foreign law), and has, within the time and in the manner prescribed
by Applicable Law, withheld from employee wages and paid over to
the proper taxing agencies and authorities all amounts required to
be so withheld and paid over under all Applicable Law (including
Federal Insurance Contribution Act, Medicare, Federal Unemployment
Tax Act and relevant state income and employment tax withholding
laws), including federal and state income Taxes, and has timely
filed all withholding tax Returns.
(e) Neither Company is
a party to or bound by any tax sharing, tax indemnity, or tax
allocation agreement other than commercial agreements entered into
in the ordinary course of business and the primary subject matter
of which is not Taxes.
(f) Neither Company has
filed any disclosures under Section 6662 of the Code or comparable
provisions of state, local or foreign law to prevent the imposition
of penalties with respect to any Tax reporting position taken on
any Return. Neither Company has participated in, and neither
Company is currently participating in, a “Listed
Transaction” within the meaning of Treasury Regulation
Section 1.6011-4(b), or any transaction requiring disclosure
under a corresponding or similar provision of state, local, or
foreign Tax law.
(g) Neither Company has
liability for the Taxes of any Person (other than such Company)
under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign law) as a transferee
or successor, by contract or otherwise.
(h) Neither Company is
required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any:
(i) change in method of accounting made prior to the Closing
Date, including under Section 481 of the Code (or any similar
provision of applicable Tax law), made prior to the Closing Date;
(ii) closing agreement as described in Section 7121 (or
any similar provision of state, local, or foreign Tax law) executed
prior to the Closing Date; (iii) installment sale or
open transaction disposition made prior to the Closing Date;
(iv) prepaid amount received prior to the Closing Date; of (v)
election under Section 108(i) of the Code (or any similar provision
of applicable Law) made prior to the Closing Date.
(i) Neither Company has
constituted either a “distributing corporation” or a
“controlled corporation” in a distribution of stock
intended to qualify for tax-free treatment under Section 355 of the
Code.
(j) Neither Company has
a permanent establishment or foreign branch outside of its country
of incorporation.
(k) There are no liens
or encumbrances for Taxes on any of the assets of either Company
(other than for current Taxes not yet due and
payable).
(l) GCP has been a
validly electing S corporation within the meaning of Sections 1361
and 1362 of the Code at all times since its formation, and any
Subsidiary of GCP is and has been disregarded as separate from the
Company, or is and has been properly classified as a qualified
subchapter S subsidiary (within the meaning of
Section 1361(b)(3)(B) of the Code) of GCP. Neither GCP
nor any Subsidiary of GCP has, in the past 10 years, (A) acquired
assets from another corporation in a transaction in which
GCP’s Tax basis for such assets was determined, in whole or
in part, by reference to the Tax basis of the acquired assets (or
any other property) in the hands of the transferor or (B) acquired
the stock of any corporation that is a qualified subchapter S
subsidiary.
(a) Financial Statements.
Section
3.8(a) of the
Companies Disclosure Schedule includes the Company Financial
Statements. The Company Financial Statements: (i) are derived
from and are in accordance with the Books and Records of each
Company; (ii) fairly present, in all material respects, the
financial condition of each Company at the dates therein indicated
and the results of operations and cash flows of each Company for
the periods therein specified; and (iii) have been prepared in
accordance with GAAP consistently applied in accordance with each
Company’s practices throughout the periods indicated and with
each other, except for the absence of footnotes. Neither Company
has material Liabilities of a type required to be reflected on a
balance sheet prepared in accordance with GAAP, except for
(v) those shown on the Company Balance Sheet or in the notes
thereto, (w) those incurred after the Balance Sheet Date in the
ordinary course of such Company’s business consistent with
its past practices, (x) Liabilities set forth on Section 3.8(a) of the Companies
Disclosure Schedule or included in the calculation of Merger
Expenses, (y) other undisclosed liabilities which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on such Company; and (z) liabilities
directly incurred under the terms of this Agreement.
(b) Internal Controls; Disclosure
Controls. To each Company’s knowledge, such Company
maintains a system of internal controls designed to provide
reasonable assurance that (i) transactions are executed with
management’s authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements
in accordance with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with
management’s authorization, and (iv) the recorded amount for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. To
each Company’s knowledge, there are no significant
deficiencies or material weaknesses in the design or operation of
such Company’s internal controls which would reasonably be
expected to adversely affect such Company’s ability to
record, process, summarize and report financial data. There is no
fraud in connection with the Company Financial Statements, whether
or not material, that involves management or other employees who
have a significant role in such Company’s internal
controls.
(c) All Accounts Recorded. Neither
Company has engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts
or funds which have been and are reflected in the Books and
Records.
(d) Corporate Records. The stock
records and minute books of each Company that have been made
available to Parent materially reflect all minutes of meetings,
resolutions and other material actions and proceedings of such
Company’s stockholders and board of directors and all
committees thereof, all issuances, transfers and redemptions of
capital stock of such Company and contain true, correct and
complete copies of such Company’s Certificate of Incorporation and
Bylaws, each as amended to date (collectively, the
“Company Charter
Documents”) and the Certificate of Incorporation and
Bylaws, or like organizational documents (collectively,
“Subsidiary Charter
Documents”), of each of its Subsidiaries, and each
such instrument is in full force and effect. Neither Company is in
material violation of any of the provisions of the Company Charter
Documents and each Subsidiary is not in material violation of its
respective Subsidiary Charter Documents.
3.9 Title to
Properties. Except as
otherwise provided for in the Companies Disclosure Schedules, each
Company and each of its Subsidiaries has good and marketable title
to all of its assets and properties (including those shown on the
Company Balance Sheet) free and clear of all Encumbrances, other
than Company Permitted Encumbrances. Such assets are sufficient for
the continued operation of the Companies Business. All properties
used in the operations of the Companies Business are reflected on
the Company Balance Sheet. All machinery, vehicles, equipment and
other tangible personal property owned or leased by each Company
and each of its Subsidiaries or used in the Company Business are,
in all material respects, in good condition and repair, normal wear
and tear excepted. All leases of real or personal property to which
each Company and each of its Subsidiaries is a party afford such
Company a valid leasehold possession of the real or personal
property that is the subject of the lease. Each Company and each of
its Subsidiaries has materially complied with the terms of all
leases to which it is a party and under which it is in occupancy.
Each Company and each of its Subsidiaries enjoy peaceful and
undisturbed possession under all leases of real property. Neither
the Companies nor any of their Subsidiaries owns or has any other
interest in any real property. Section 3.9 of the Companies Disclosure
Schedule sets forth a complete and accurate list and a brief
description of all personal property owned by the Companies and
each of their Subsidiaries with an original purchase price of Ten
Thousand Dollars ($10,000) or greater.
3.10 Absence of Certain
Changes. Since December
31, 2016 and other than in the ordinary course of business
consistent with past practice, there has not been, with respect to
either Company or any of its Subsidiaries, any:
(a) Material Adverse
Change or any change, event, circumstance, condition or effect that
would reasonably be expected to result in a Material Adverse
Change;
(b) failure to operate
the Company Business in the ordinary course;
(c) amendment or change
in the Company Charter Documents;
(d) except as otherwise
provided for in the Companies Disclosure Schedules, incurrence,
creation or assumption of (i) any Encumbrance on any of its assets
or properties (other than Company Permitted Encumbrances), (ii) any
Liability for borrowed money, or (iii) any Liability as a
guarantor or surety with respect to the obligations of
others;
(e) acceleration or
release of any vesting condition to the right to exercise any
option, warrant or other right to purchase or otherwise acquire any
shares of its capital stock, or any acceleration or release of any
right to repurchase shares of its capital stock upon the
stockholder’s termination of employment or services with it
or pursuant to any right of first refusal;
(f) payment or
discharge of any Encumbrance on any of its assets or properties, or
payment or discharge of any of its Liabilities, in each case that
was not either shown on the Company Balance Sheet or incurred in
the ordinary course of its business consistent with its past
practices after the Balance Sheet Date in an amount not in excess
of Twenty Five Thousand Dollars ($25,000) for any single Liability
to a particular creditor;
(g) failure to pay any
of its material obligations when due;
(h) purchase, license,
sale, grant, assignment or other disposition or transfer, or any
agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of its assets
(including Company IP Rights (as defined in Section 3.13(a)) and other intangible
assets), properties or goodwill other than the sale or
non-exclusive license of its products or services to its customers
excluding non-disclosure, confidentiality, employee, contractor and
consultant Contracts;
(i) damage, destruction
or loss of any material property or material asset, whether or not
covered by insurance;
(j) declaration,
setting aside or payment of any dividend on, or the making of any
other distribution in respect of, its capital stock, or any split,
combination or recapitalization of its capital stock or any direct
or indirect redemption, purchase or other acquisition of any of its
capital stock or any change in any rights, preferences, privileges
or restrictions of any of its outstanding securities;
(k) except as set forth
on Section 3.10(k)
of the Companies Disclosure Schedule, change or increase in the
cash or equity compensation payable or to become payable to any of
its officers, directors, employees or agents, including with
respect to any bonus, severance, retention, or stock awards, stock
option grants, stock appreciation rights or stock option grants
made to or with any of such officers, directors, employees or
agents;
(l) change with respect
to its management, supervisory or other key personnel, any
termination of employment of a material number of employees, or any
labor dispute or claim of unfair labor practices;
(m) except as otherwise
provided for in the Companies Disclosure Schedules, Liability
incurred by it to any of its officers, directors or stockholders,
except for normal and customary compensation and expense allowances
payable to officers in the ordinary course of its business
consistent with its past practices;
(n) making by it of any
material loan, advance or capital contribution to, or any
investment in, any of its officers, directors or stockholders or
any firm or business enterprise in which any such person had a
direct or indirect material interest at the time of such loan,
advance, capital contribution or investment;
(o) cancellation of any
indebtedness or waiver of any rights of substantial value to it,
other than in the ordinary course of its business consistent with
its past practices;
(p) entering into,
amendment of, relinquishment, termination or nonrenewal by it of
any Company Material Contract (or any other right or obligation)
other than in the ordinary course of its business consistent with
its past practices, any default by it under such Contract (or other
right or obligation), or any written indication or assertion by the
other party thereto of any material problems with its services or
performance under such Company Material Contract (or other right or
obligation) or such other party’s desire to so amend,
relinquish, terminate or not renew any such Company Material
Contract (or other right or obligation);
(q) material change in
the manner in which it extends discounts, credits or warranties to
customers or otherwise deals with its customers;
(r) entering into by it
of any Contract that by its terms requires or contemplates a
current and/or future financial commitment, expense (inclusive of
overhead expense) or obligation on its part that involves in excess
of Fifty Thousand Dollars ($50,000) or that is not entered into in
the ordinary course of its business consistent with its past
practices;
(s) making or entering
into any Contract with respect to any acquisition, sale or transfer
of any material asset of either Company;
(t) any material change
in accounting methods or practices (including any change in
depreciation or amortization policies or rates or revenue
recognition policies) or any revaluation of any of its
assets;
(u) any deferral of the
payment of any accounts payable other than in the ordinary course
of business, consistent with past practices, or any discount,
accommodation or other concession made other than in the ordinary
course of business, consistent with past practices, in order to
accelerate or induce the collection of any receivable;
or
(v) announcement of,
any negotiation by or any entry into any Contract to do any of the
things described in the preceding clauses (a) through (u)
(other than negotiations and agreements with Parent and its
representatives regarding the transactions contemplated by this
Agreement).
3.11 Contracts, Agreements, Arrangements,
Commitments and Undertakings. Sections 3.11(a)-(o) of the Companies
Disclosure Schedule set forth a list of each of the following
Contracts, as of the date hereof, to which either Company or any of
its Subsidiaries is a party or to which either Company, any of its
Subsidiaries or any of their assets or properties are bound (other
than with respect to the plans set forth on Section 3.16(d) of the Companies
Disclosure Schedule):
(a) any Contract
providing for payments (whether fixed, contingent or otherwise) by
or to it in an aggregate amount of Fifty Thousand Dollars ($50,000)
or more;
(b) any dealer,
distributor, OEM (original equipment manufacturer), VAR (value
added reseller), sales representative or similar Contract under
which any third party is authorized to sell, sublicense, lease,
distribute, market or take orders for any of its products, services
or technology;
(c) any Contract
providing for the development of any software, content (including
textual content and visual, photographic or graphics content),
technology or Intellectual Property for (or for the benefit or use
of) it, or providing for the purchase by or license to (or for the
benefit or use of) it of any software, content (including textual
content and visual, photographic or graphics content), technology
or Intellectual Property, which software, content, technology or
Intellectual Property is material in any manner to the Companies
Business and used or incorporated (or is contemplated by it to be
used or incorporated) in connection with any aspect or element of
any product, service or technology of it;
(d) any joint venture
or partnership Contract;
(e) any Contract for or
relating to the employment by it of any director, officer, employee
or consultant or any other type of Contract with any of its
officers, employees or consultants that is not immediately
terminable by it without cost or other Liability, including any
contract requiring it to make a payment to any director, officer,
employee or consultant on account of either Merger, any transaction
contemplated by this Agreement or any Contract that is entered into
in connection with this Agreement;
(f) any indenture,
mortgage, trust deed, promissory note, loan agreement, security
agreement, guarantee or other Contract for or with respect to the
borrowing of money, a line of credit, any currency exchange,
commodities or other hedging arrangement, or a leasing transaction
of a type required to be capitalized in accordance with
GAAP;
(g) any Contract that
restricts it from (1) engaging in any aspect of its business, (2)
participating or competing in any line of business, market or
geographic area, (3) freely setting prices for its products,
services or technologies (including most favored customer pricing
provisions), or (4) soliciting potential employees, consultants,
contractors or other suppliers or customers;
(h) any Contract that
grants any exclusive rights, rights of refusal, rights of first
negotiation or similar rights to any Person;
(i) any Contract
relating to the sale, issuance, grant, exercise, award, purchase,
repurchase or redemption of any shares of its capital stock or
other securities or any options, warrants or other rights to
purchase or otherwise acquire any such shares of capital stock,
other securities or options, warrants or other rights therefor,
except for those Contracts to be terminated pursuant to
Section
8.2(g)
hereof;
(j) any Contract with
any labor union or any collective bargaining agreement or similar
Contract with its employees;
(k) any Contract of
guarantee, support, indemnification, assumption or endorsement of,
or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person other than those made in the
ordinary course of its business;
(l) any Contract in
which its officers, directors or any member of their immediate
families, is directly or indirectly interested (whether as a party
or otherwise);
(m) any Contract
between the Companies;
(n) any Contract
pursuant to which it has acquired a business or entity, or
substantially all of the assets of a business or entity, whether by
way of merger, consolidation, purchase of stock, purchase of assets
or otherwise; or
(o) any other Contract
that is material to it or its business, operations, financial
condition, properties or assets.
A true
and complete copy of each agreement or document, including any
amendments thereto, required by these subsections (a)-(o) of this
Section 3.11 to be listed on
Section
3.11 of the
Companies Disclosure Schedule has been delivered to Parent. As of
the Agreement Date, each of the Company Material Contracts is a
legal, valid and binding obligation of the applicable Company or
its Subsidiary (assuming the due authorization, execution and
delivery by the other parties thereto) and is in full force and
effect and enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar Laws relating to or
affecting creditors generally and by the availability of equitable
remedies (whether in proceedings at law or in equity).
(a) Each Company and
each of its Subsidiaries has performed all material obligations
required to be performed by it to date under the Company Material
Contracts, and there exists no default or event of default or
event, occurrence, condition or act, with respect to either Company
or any of its Subsidiaries, or to the knowledge of either Company,
with respect to any other contracting party, which, with the giving
of notice, the lapse of time or the happening of any other event or
conditions, would reasonably be expected to (i) become a default or
event of default under any Company Material Contract or (ii) give
any third party (1) the right to declare a default or exercise
any remedy under any Company Material Contract, (2) the right
to a rebate, chargeback, refund, credit, penalty or change in
delivery schedule under any Company Material Contract, (3) the
right to accelerate the maturity or performance of any obligation
of either Company under any Company Material Contract, or (4) the
right to cancel, terminate or modify any Company Material Contract,
except in each case for those breaches or defaults which,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on either Company. Neither
Company nor any of its Subsidiaries has received any written notice
or other communication regarding any actual or possible violation
or breach of or default under, or intention to cancel, call a
default under, or modify, any Company Material
Contract.
(b) Except as
listed in Section
3.12(b) of the
Companies Disclosure Schedule, neither Company nor any of its
Subsidiaries is a party to, and no asset or property of either
Company or any of its Subsidiaries is bound or affected by, any
judgment, injunction, order or decree, that restricts or prohibits
either Company, any of its Subsidiaries or, following the Effective
Time, will restrict or prohibit either Surviving Corporation,
Parent or any of its Subsidiaries, from freely engaging in the
Company Business or from competing anywhere in the world (including
any judgments, injunctions, orders or decrees, restricting the
geographic area in which either Company or any of its Subsidiaries
may sell, license, market, distribute or support any products or
technology or provide services or restricting the markets,
customers or industries that either Company or any of its
Subsidiaries may address in operating the Company Business or
restricting the prices which either Company or any of its
Subsidiaries may charge for its products, technology or services
(including most favored customer pricing provisions)), or includes
any grants by either Company or any of its Subsidiaries of
exclusive rights or licenses, rights of refusal, rights of first
negotiation or similar rights.
(a) To either
Company’s knowledge, such Company or its Subsidiaries own or,
to its knowledge, has a right or license to all Intellectual
Property used in any Company Product or Service (as defined in
Section 3.13(c)) or otherwise
sufficient for the conduct of the Company Business (such
Intellectual Property being hereinafter collectively referred to as
the “Company IP
Rights”). Such Company IP Rights are sufficient for
the conduct of the Company Business. As used in this Agreement,
“Company-Owned IP
Rights” means Company IP Rights that are owned by
either Company or its Subsidiaries; and “Company-Licensed IP Rights” means
Company IP Rights that are licensed to either Company or its
Subsidiaries by a third party. The representations of this
Section
3.13(a) do not
constitute Intellectual Property non-infringement representations,
which are covered by Section 3.13(c) below.
(b) Neither the
execution, delivery and performance of this Agreement or the
Company Ancillary Agreements nor the consummation of either Merger
and the other transactions contemplated by this Agreement and/or by
the Company Ancillary Agreements shall, to either Company’s
knowledge: (i) constitute a material breach of or default under any
instrument, license or other Contract of either Company governing
any Company IP Right (collectively, the “Company IP Rights Agreements”);
(ii) cause the forfeiture or termination of, or give rise to a
right of forfeiture or termination of, any Company-Owned IP Right
or Company-Licensed IP Right that is necessary to the operation of
the Company Business; or (iii) materially impair the right of
either Company, its Subsidiaries or either Surviving Corporation to
use, make, market, license, sell, copy, distribute or dispose of
any Company-Owned IP Right or Company-Licensed IP Right that is
necessary to the operation of the Company Business or portion
thereof. Except as set forth in Section 3.13(b) of the Companies
Disclosure Schedule, there are no royalties, honoraria, fees or
other payments payable by either Company or its Subsidiaries to any
third person (other than salaries payable to employees and
independent contractors not contingent on or related to use of
their work product and for fees due to the US PTO or other
Intellectual Property related to a Governmental Authority) as a
result of the ownership, use, manufacture, marketing, license-in,
sale, copying, distribution, or disposition of any Company-Owned IP
Rights or Company-Licensed IP Right that is necessary to the
operation of the Company Business by either Company or its
Subsidiaries, and none shall become payable as a result of the
consummation of the transactions contemplated by this
Agreement.
(c) Section 3.13(c) of the Companies
Disclosure Schedule sets forth a list (by name and version number),
as of the date hereof, of each of the current commercial products
and services designed, developed, produced, manufactured,
assembled, sold, leased, licensed, marketed, distributed or
otherwise made commercially available by the Companies or its
Subsidiaries as of the Agreement Date that are material to the
Companies Business and each product and service currently under
development material to the Companies Business (each
a “Company Product or
Service”). Each Company has the valid right or license
to the Company-Licensed IP Rights used in any Company Product or
Services or otherwise in the conduct of the Company Business.
Neither the operation of the Companies Business nor the use,
development, manufacture, marketing, license, sale, distribution or
furnishing of any Company Product or Service currently used
infringes or misappropriates any Intellectual Property right of any
other party. To the knowledge of the Companies, the use,
development, manufacture, marketing, license, sale distribution or
furnishing of any Company Product or Service currently under
development by the Companies or its Subsidiaries, does not infringe
or misappropriate any Intellectual Property rights of any other
party. There is no pending, or, to the knowledge of the Companies,
threatened, claim or litigation contesting the validity, ownership
or right of the Companies or its Subsidiaries to use, develop,
make, market, license, sell, distribute or furnish any Company
Product or Service, nor has the Companies or its Subsidiaries
received any written notice asserting that any Company Product or
Service or the use, development, manufacture, marketing, licensing,
sale, distribution, furnishing or disposition thereof conflicts
with or infringes the rights of any other party. Each Company and
each of its Subsidiaries has not received any written notice from
any third party alleging it is infringing, or requesting on an
unsolicited basis that it enter into a license under, any third
party patents. None of the Company-Owned IP Rights or Company
Products or Services of the Companies or its Subsidiaries is
subject to any proceeding or outstanding order or stipulation (i)
restricting in any material manner the use, development,
manufacture, marketing, licensing, sale, distribution, furnishing
or disposition by the Companies or its Subsidiaries of any
Company-Owned IP Rights, any Company Product or Service, or which
is reasonably expected to affect the validity, use or
enforceability of any such Company-Owned IP Rights or Company
Product or Service. The foregoing does not apply to office actions
in the ordinary course of prosecution by the US PTO or any other
Intellectual Property related to a Governmental Authority, domestic
or foreign.
(d) Each Company or its
Subsidiaries, to its knowledge, has not taken an action or failed
to take an action that operates in such a way that would give
reasonably be expected to rise to a laches or equitable estoppel
claim by any Person which would result in the avoidance of a claim
of infringement by either Company or its Subsidiaries against any
such Person.
(e) To the
Companies’ knowledge, no current or former employee,
consultant or independent contractor of either Company or any of
its Subsidiaries: (i) is in material violation of any term or
covenant of any employment contract, patent disclosure agreement,
invention assignment agreement, nondisclosure agreement,
noncompetition agreement or any other Contract with any other party
by virtue of such employee’s, consultant’s or
independent contractor’s being employed by, or performing
services for, such Company or any of its Subsidiaries or using
trade secrets or proprietary information of others without
permission; or (ii) has developed any technology, software or
other copyrightable, patentable or otherwise proprietary work for
either Company or any of its Subsidiaries that is subject to any
Contract under which such employee, consultant or independent
contractor has assigned or otherwise granted to any third party any
rights (including Intellectual Property) in or to such technology,
software or other copyrightable, patentable or otherwise
proprietary work. To the knowledge of each Company, neither the
employment of any employee of such Company or any of its
Subsidiaries, nor the use by such Company or any of its
Subsidiaries of the services of any consultant or independent
contractor subjects such Company or any of its Subsidiaries to any
Liability to any third party for improperly soliciting such
employee, consultant or independent contractor to work for such
Company or any of its Subsidiaries.
(f) Each Company and
each of its Subsidiaries has taken steps reasonable under the
circumstances to protect, preserve and maintain the secrecy and
confidentiality of the Company-Owned IP Rights with respect to
which such Company wishes to maintain as confidential and that is
not otherwise disclosed by such Company’s published patents,
patent applications or copyrights and to preserve and maintain all
such Company’s and each of its Subsidiaries’ interests,
proprietary rights and trade secrets in such Company-Owned IP
Rights. Each Company has a policy requiring that all current and
former officers, employees, consultants and independent contractors
of such Company, each of its Subsidiaries, and, to its knowledge,
each of its and their predecessors having access to proprietary
information of such Company, each of its Subsidiaries, and each of
its and their predecessors, to have executed and delivered an
agreement regarding the protection of such proprietary information
and copies of the form of all such agreements have been made
available to Parent or its counsel. Each Company, each of its
Subsidiaries, and each of its and their predecessors has secured
assignments from all of their current and former consultants,
independent contractors and employees who were involved in the
creation or development of any Company-Owned IP Rights material to
such Company, of the rights that otherwise would have been owned by
such persons or that such Company, each of its Subsidiaries, and
each of its and their predecessors did not or does not already own
by operation of law, subject to statutory reversionary rights, and
waivers of any moral rights. No current or former employee,
officer, director, consultant or independent contractor of each
Company, any of its Subsidiaries or, to its knowledge, any of its
or their predecessors, has any right, license, claim or interest
whatsoever in or with respect to any Company-Owned IP Rights,
subject to statutory reversionary rights and waivers of any moral
rights.
(g) Section 3.13(g) of the Companies
Disclosure Schedule contains a true and complete list, as of the
Agreement Date, of (i) all worldwide registrations made by or on
behalf of each Company or any of its Subsidiaries of any patents,
industrial design patents, copyrights, mask works, trademarks,
service marks, Internet domain names or Internet or World Wide Web
URLs or addresses with any Governmental Authority or
quasi-Governmental Authority, including Internet domain name
registries, and (ii) all applications, registrations, and filings
by either Company or any of its Subsidiaries to register the
Company-Owned IP Rights, including all patent applications,
industrial design patent applications, copyright registration
applications, mask work applications and applications for
registration of trademarks and service marks, and where applicable
the jurisdiction in which each of the items of the Company-Owned IP
Rights has been applied for, filed, issued or registered. All
registered patents, industrial design patents, trademarks, service
marks, copyrights and mask work rights that are Company-Owned IP
Rights are presumed valid and subsisting (or, in the case of
applications, applied for), and such Company or its Subsidiaries
are the record owner thereof. All registered patents, industrial
design patents, trademarks and service marks are currently in
compliance with all legal requirements other than any requirement,
that if not satisfied, with respect to a patent or industrial
design patent, would not reasonably be expected to result in a
revocation or lapse or otherwise adversely affect its
enforceability, and, with regard to a trademark or service mark,
would not reasonably be expected to result in a cancellation of
such registration or otherwise adversely affect the use, priority
or enforceability of the trademark or service mark. Each Company or
its Subsidiaries own exclusively, and have good title to, all
copyrighted works that such Company or any of its Subsidiaries
purports to own.
(h) Each Company or its
Subsidiaries owns all right, title and interest in and to all
Company-Owned IP Rights free and clear of all Encumbrances (other
than Company Permitted Encumbrances) and licenses (other than
licenses and rights granted in the ordinary course).
(i) Section 3.13(i)-1 of the Companies Disclosure
Schedule lists all licenses, sublicenses and other Contracts as to
which each Company or any of its Subsidiaries is a party and
pursuant to which any Person is authorized to use any Company-Owned
IP Rights, unless such Contracts are in the form of standard
customer agreements, the forms of which are included in
Section
3.11 of the
Companies Disclosure Schedule and also excluding non-disclosure,
confidentiality, employee, contractor and consultant Contracts.
Except as set forth on Section 3.13(i)-2 of the Companies Disclosure
Schedule, none of the licenses or other Contracts listed in
Section 3.13(i)-1 of the Companies Disclosure
Schedule grants any third party exclusive rights to or under any
Company-Owned IP Rights or grants any third party the right to
sublicense any of such Company-Owned IP Rights. Each Company and
each of its Subsidiaries has not agreed to transfer ownership of
any Intellectual Property that is owned by such Company or any of
its Subsidiaries to any third party, or knowingly permitted such
Company’s or any of its Subsidiaries’ rights in such
Intellectual Property to enter the public domain (other than
through the expiration of registered Intellectual Property at the
end of its statutory term).
(j) Neither Company,
nor any of its Subsidiaries, nor any other party authorized to act
on any of their behalves, has disclosed or delivered to any party,
or permitted the disclosure or delivery to any escrow agent of, any
Company Source Code (as defined below), except for disclosures to
employees, contractors or consultants under binding written
agreements that prohibit use or disclosure except in the
performances of services to such Company or any of its
Subsidiaries, escrows in the ordinary course, and source code open
source detection scans in connection with the transaction
contemplated by this Agreement. To the knowledge of each Company,
no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time, or both) shall, or
would reasonably be expected to, result in the disclosure or
delivery by such Company, or any of its Subsidiaries or any other
party authorized to act on any of their behalves to any party of
any Company Source Code, except for disclosures to employees,
contractors or consultants under binding written agreements that
prohibit use or disclosure except in the performances of services
to such Company or any Subsidiary thereof, escrows in the ordinary
course, and source code open source detection scans in connection
with the transaction contemplated by this Agreement. Section 3.13(j) of the
Companies Disclosure Schedule identifies, as of the Agreement Date,
each Contract pursuant to which each Company or any of its
Subsidiaries has deposited, or is or may be required to deposit,
with an escrow agent or other similar party, any Company Source
Code. As used in this Section 3.13(j),
“Company Source
Code” means, collectively, the source code of any
software or program (i.e., software code in its original, human
readable, un-compiled, form), or any material proprietary
information or algorithm contained in or relating to any software
source code, owned by either Company, or its Subsidiaries. This
paragraph does not apply to any Public Software (as defined
below).
(k) To the knowledge of
each Company, there is no unauthorized use, disclosure,
infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of either
Company or any of its Subsidiaries.
(l) All Company
Products or Services (excluding those in development) conform in
all material respects to their applicable published product
specifications and product Documentation, and neither Company nor
any of its Subsidiaries has any material Liability (and, to the
knowledge of each Company, there is no particular basis to expect
any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against such
Company or any of its Subsidiaries giving rise to any material
Liability relating to the foregoing). Each Company has made
available to Parent the opportunity to review all Documentation
relating to the testing of the Company Products or Services and
plans and specifications for Company Products or Services currently
under development by such Company or any of its Subsidiaries. Each
Company and each of its Subsidiaries has a policy and procedure for
tracking material bugs, errors and defects of which it becomes
aware in any Company Products or Services, and maintains a database
covering the foregoing. For all software used by each Company or
any of its Subsidiaries in providing Company Products or Services,
or in developing or making available any of the Company Products or
Services, such Company and each of its Subsidiaries has generally
implemented any and all material security patches or upgrades that
to the knowledge of such Company are generally available for that
software.
(m) Except with respect
to demonstration or trial copies, to each Company’s
knowledge, no Company Product or Services made available by such
Company or its Subsidiaries to any Person contains any “back
door,” “time bomb,” “Trojan horse,”
“worm,” “drop dead device,”
“virus” or other malicious software routines or
hardware components designed to permit unauthorized access or to
disable or erase software, hardware or data without the consent of
the user and such Company’s employees and contractors have
not placed any of the foregoing in any Company Product or Service.
The representations of this paragraph do not apply to any license
keys, time-out devices or similar self-help
mechanisms.
(n) To the
Companies’ knowledge, the Company Business as currently
conducted complies in all material respects with all Applicable
Laws whether U.S. or otherwise, regarding encryption technology,
including, without limitation, the import and export
thereof.
(o) Each Company or its
Subsidiaries is not nor has it or they been in the past two years a
member of, or a contributor to or made any commitments or
agreements regarding any patent pool, standards body, standard
setting organization, or similar organization, in each case that
requires or obligates such Company or its Subsidiaries to grant or
offer to any other Person any license or right to any
Company IP Rights, including without limitation any
future Intellectual Property developed, conceived,
made or reduced to practice by such Company or its Subsidiaries or
any Affiliate of the Companies after the date of this
Agreement.
(p) No government
funding, or facilities or personnel of any university, college,
other education institution or research center, or funding from
third parties (other than funds received in consideration for any
capital stock of either Company or pursuant to instruments of
indebtedness for borrowed money) were used in the development, in
whole or in part, of the Company-Owned IP Rights. To the knowledge
of each Company, no current or former employee, consultant or
independent contractor of such Company or any of its Subsidiaries
who was involved in, or who contributed to, the creation or
development of any material Company-Owned IP Rights performed
services for any Governmental Authority, for a university, college
or other education institution or for a research center during a
period of time during which such employee, consultant or
independent contractor was also performing services for such
Company or any of its Subsidiaries.
(q) Except as
provided in of Section 3.13(q) the Companies
Disclosure Schedule, Neither Company, nor any of its Subsidiaries,
has taken or will take any actions that (i) incorporate any Public
Software, in whole or in part, into any Company-Owned IP Right or
any Company Product or Service or any portion thereof;
(ii) use Public Software, in whole or in part, in the
development of any part of any Company-Owned IP Right or any
Company Product or Service or any portion thereof in a manner that
would subject any Company-Owned IP Right or Company Product or
Service, in whole or in part, to all or part of the license
obligations of any Public Software; or (iii) statically combine or
distribute any Company-Owned IP Right as integrated with Public
Software. As used herein, “Public Software” means software
licensed pursuant to terms (1) that grant, or purport to grant, to
any third party any rights or immunities under patents that are
part of the Company-Owned IP Rights or (2) that requires as a
condition of use or distribution of such software on the
disclosure, licensing, or distribution of any Company-owned
proprietary source code for any Company Product or Service
incorporated into, derived from or distributed with such software
and requires that the Company-owned proprietary source code be
disclosed or distributed in source code form, licensed for the
purpose of making derivative works, and redistributable at no
charge and by way of example, shall include, without limitation,
software licensed under GNU’s General Public License (GPL) or
Lesser/Library GPL, the Mozilla Public License, the Netscape Public
License, the Sun Community Source License, the Sun Industry
Standards License, the BSD License, the Artistic License (e.g.,
PERL) and the Apache License.
(r) To the knowledge of
each Company, in the two years prior to the Agreement Date there
has been no failure, breakdown, loss or impairment of, or
unauthorized access to or unauthorized use of, any core information
technology systems of any Company or any of its Subsidiaries that
has resulted in a material disruption or material interruption in
the operation of the business of such Company or any of its
Subsidiaries, the cause of which has not been repaired or remedied.
Each Company and each of its Subsidiaries has in place commercially
reasonable disaster recovery and business continuity plans and
procedures. To the knowledge of each Company, in the two years
prior to the Agreement Date, there has been no unauthorized access
to or unauthorized use of any information technology systems of
either Company or any of its Subsidiaries that has resulted in
unauthorized disclosure of any material confidential information of
such Company or its Subsidiaries to any other Person. Neither
Company is aware of or has been notified in writing of: (i) any
actual, attempted or suspected unauthorized access to or use of any
data of such Company or its Subsidiaries, or any other occurrence
which may compromise the availability, security, integrity or
confidentiality of such data; or (ii) any disclosure, intended,
accidental or otherwise, wherein such data actually is, or may
reasonably be expected to potentially be, acquired by an
unauthorized person or accessed or used in an unauthorized manner;
but in each case always excluding: (a) unsuccessful attempts to
penetrate computer networks or servers maintained by or for such
Company or its Subsidiaries; and (b) immaterial incidents that
occur on a routine basis, such as general “pinging” or
“denial of service” attacks. Instances of good faith
access or use of data by an employee or contractor of such Company
or its Subsidiaries also are excluded, provided that the data is
not used for a purpose unrelated to work performed for such Company
or its Subsidiaries and is not subject to further unlawful or
unauthorized use.
(a) Each Company, each
of its Subsidiaries and each of its and their predecessors is in
material compliance, with all Applicable Law.
(b) To each
Company’s knowledge, such Company, each of its Subsidiaries
and each of its and their predecessors holds all material permits,
licenses and approvals from, and has made all material filings
with, government (and quasi-governmental) agencies and authorities,
that are necessary and/or legally required to be held by it to
conduct the Company Business without any violation of Applicable
Law (“Governmental
Permits”), and all such Governmental Permits are valid
and in full force and effect. Each Company, each of its
Subsidiaries and each of its and their predecessors has complied
with each Governmental Permit to which it is subject. Neither
Company has received any written notice or other written
communication from any Governmental Authority regarding (i) any
actual or possible violation of law or any Governmental Permit or
any failure to comply with any term or requirement of any
Governmental Permit or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification
of any Governmental Permit. Neither Company has knowledge of any
outstanding material violation of any Governmental Permit.
Section
3.14(b) of the
Companies Disclosure Schedule sets forth a true and complete list
of all Governmental Permits held by each Company and each of its
Subsidiaries as of the Agreement Date.
(c) To each
Company’s knowledge, no Governmental Authority has initiated,
and no Governmental Authority has provided written notice to either
Company of any threatened proceeding or investigation into the
business or operations of such Company, any of its Subsidiaries,
any of its or their predecessors and, to the knowledge of each
Company, no such proceedings or investigations are contemplated.
There is no unresolved deficiency, violation or exception claimed
or asserted by any Governmental Authority with respect to any
examination of either Company or any of its
Subsidiaries.
(d) Neither Company,
nor any of its Subsidiaries, its or their predecessors, directors,
officers, agents or employees has, for or on behalf of such Company
or such predecessor or Subsidiary, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended,
(iii) made any Prohibited Payments, (iv) received any payments,
services or gratuities that were not legal to receive, (v) engaged
in any transactions or made or received payments that were not
properly recorded on the accounting books and records of such
Company or its Subsidiaries or properly disclosed on their
respective financial statements, (vi) has maintained any off-book
bank or cash account, or (vii) violated or operated in
noncompliance with any money laundering law, anti-terrorism law or
regulation, anti-boycott regulations or embargo
regulations.
3.15 Certain Transactions and
Agreements. To the knowledge
of each Company, none of the officers and directors of such
Company, and no stockholder of such Company, nor any immediate
family member of an officer or director of such Company, has a
direct ownership interest of more than 2% of the equity ownership
of any firm or corporation that competes with, or does business
with, or has any contractual arrangement with, such Company or any
of its Subsidiaries. Except as otherwise provided for in the
Companies Disclosure Schedules, none of said officers, directors,
stockholders or of immediate family members, is a party to, or
otherwise directly or indirectly interested in any Company Material
Contract.
(a) Except as
otherwise provided for in the Companies Disclosure Schedules, each
Company and each of its Subsidiaries has always been and currently
is in compliance in all material respects with all Applicable Law
and Contracts relating to employment, employment practices,
immigration, wages, hours, and terms and conditions of employment,
including employee compensation matters, and has correctly
classified employees as exempt employees and nonexempt employees
under the Fair Labor Standards Act or any other Applicable Laws. A
complete list as of the Agreement Date of all employees, officers
and consultants of the Companies and each of its Subsidiaries and
their current title and/or job description and compensation (base
compensation and bonuses) is set forth on Section 3.16(a) of the Companies
Disclosure Schedule. To the knowledge of each Company, all
employees of such Company or any of its Subsidiaries are legally
permitted to be employed by such Company or its Subsidiary in the
jurisdiction in which such employee is employed in his or her
current job capacities for the maximum period allowed under
Applicable Law. All independent contractors providing services to
either Company and each of its Subsidiaries have been properly
classified as independent contractors for purposes of federal and
applicable state tax laws, laws applicable to employee benefits and
other Applicable Law. Each Company and each of its Subsidiaries
does not have any employment or consulting Contracts with personnel
providing services in the United States currently in effect that
are not terminable at will (other than agreements with the sole
purpose of providing for the confidentiality of proprietary
information or assignment of inventions), and outside of the United
States, termination of employment or consulting arrangements may
occur upon such notice as may be required under Applicable Law or
the employees’ Contract of employment or consulting services.
To the knowledge of each Company, none of the Critical Employees of
such Company or any of its Subsidiaries have given notice to such
Company or such Subsidiary of an intention to terminate his or her
employment or relationship with such Company or such
Subsidiary.
(b) To the knowledge of
each Company, such Company and each of its Subsidiaries is not now,
nor has ever been, subject to a union organizing effort. Each
Company and each of its Subsidiaries is not subject to any
collective bargaining agreement with respect to any of its
employees, subject to any other Contract with any trade or labor
union, employees’ association or similar organization, and
subject to any current labor disputes. Each Company and each of its
Subsidiaries has good labor relations, and such Company has no
knowledge of any facts indicating that the consummation of either
Merger or any of the other transactions contemplated hereby shall
have a material adverse effect on such labor relations, and has no
knowledge that any of its key employees intends to leave their
employ.
(c) Neither Company nor
any ERISA Affiliate has participated in or had any obligation to
contribute to a pension plan which constitutes, or has since the
enactment of ERISA, constituted, a “multiemployer plan”
as defined in Section 3(37) of ERISA or a “multiple employer
plan” as defined in Section 413(c) of the Code.
(d) Section 3.16(d) of the Companies
Disclosure Schedule lists as of the Agreement Date each employment,
consulting, severance or other similar Contract (other than with
respect to Contracts based on form agreements that have been made
available to Parent, provided that such Contracts do not materially
differ from the forms upon which they are based), each
“employee benefit plan” as defined in Section 3(3) of
ERISA and each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), life
and health benefits (including medical, mental health, dental,
vision and hospitalization), workers’ compensation benefits,
vacation benefits, severance benefits, supplemental unemployment
benefits, material fringe benefits, disability benefits, death
benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, tax equalization, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits for employees, consultants or directors
that is entered into, maintained or contributed to by the Companies
or any ERISA Affiliate or non-U.S. Subsidiary or is sponsored or
maintained by any Governmental Authority and covers any employee or
former employee of each Company, its predecessors or any of its
ERISA Affiliates or non-U.S. Subsidiary. Such Contracts, plans and
arrangements as are described in this Section 3.16(d) are hereinafter
collectively referred to as “Company Benefit
Arrangements.”
(e) Each Company
Benefit Arrangement has been maintained and amended, including its
form, in compliance in all material respects with its terms and
with the requirements prescribed by any and all Applicable Law that
is applicable to such Company Benefit Arrangement. No such Company
Benefit Arrangement is an “employee pension benefit
plan” as defined in Section 3(2) of ERISA that is subject to
Title IV of ERISA. Any investment vehicles used to fund any Company
Benefit Arrangement may be changed at any time upon reasonable
advance notice without incurring a material sales charge, surrender
fee or other similar expense that would be payable in whole or in
part by such Company or any ERISA Affiliate. Each Company has the
right under the terms of each applicable Company Benefit
Arrangement and under Applicable Law to amend or terminate such
Company Benefit Arrangement (or terminate the participation in such
Company Benefit Arrangement by the Companies) without material
Liability to such Company or any ERISA Affiliate and subject to
Applicable Law and to such Company’s or it’s ERISA
Affiliate’s statutory and contractual obligations to pay any
earned and vested benefits thereunder.
(f) Each Company
Benefit Arrangement that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code.
Each Company and each ERISA Affiliate has furnished to Parent
copies of the most recent IRS determination or opinion letters with
respect to each such plan, and no action or event has occurred
since the date of the most recent determination or opinion letter
relating to any such Company Benefit Arrangement that would
adversely affect the tax-qualified status of any such plan or
related trust.
(g) No suit,
administrative proceeding, action or other litigation has been
brought, or to the knowledge of either Company is threatened in
writing against or with respect to any Company Benefit Arrangement
(other than routine claims for benefits under such Company Benefit
Arrangement and administrative appeals of such claims), including
any audit or inquiry by the IRS or the Department of Labor
(“DOL”). No
“prohibited transaction” (as defined in
Section 4975 of the Code or Section 406 of ERISA) has
occurred with respect to any Company Benefit Arrangements and no
set of facts has occurred that is reasonably likely to subject such
Company, any of the its ERISA Affiliates, or any of their employees
to the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or the sanctions imposed under
Title I of ERISA or any other Applicable Law.
(h) All contributions
and payments due from each Company with respect to any of the
Companies Benefit Arrangements, determined in accordance with prior
funding and accrual practices, have been made or have been accrued
on such Company’s financial statements (including the Company
Financial Statements), and no further contributions shall be due or
shall have accrued thereunder as of the Closing Date (other than
contributions accrued in the ordinary course of business,
consistent with past practices, after the Balance Sheet Date as a
result of the operations of such Company after the Balance Sheet
Date). All claims as of the Closing Date made under any
self-insured Company Benefit Arrangement that is an “employee
welfare benefit plan” as defined in Section 3(1) of
ERISA have been paid or, if not paid, will either be paid by such
Company or are or will be the subject of the denial of a claim or
an administrative appeal.
(i) All individuals
who, pursuant to the terms of any Company Benefit Arrangement, are
entitled to participate in any Company Benefit Arrangement, are
currently participating in such Company Benefit Arrangement or have
been offered an opportunity to do so and have declined in
writing.
(j) Neither Company
shall have any material Liability to any employee or to any
organization or any other entity as a result of the termination of
any employee leasing arrangement.
(k) There has been
no amendment to, written interpretation or announcement (whether or
not written) by either Company relating to, or change in employee
participation or coverage under, any Company Benefit Arrangement
that would increase materially the expense of maintaining such
Company Benefit Arrangement above the level of the expense incurred
in respect thereof during the fiscal year ended prior to the date
hereof (other than increased insurance premiums), except any such
amendments that are required under Applicable Law. Except as set
forth on Section
3.16(k) of the
Companies Disclosure Schedule, the execution of this Agreement and
the consummation of the transactions contemplated by this Agreement
will not (either alone or in connection with the termination of
employment or change of position of any employee following or in
connection with the consummation of the Mergers) constitute an
event under any Company Benefit Arrangement that will or may result
in any material payment (whether severance pay or otherwise),
acceleration of payment, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any employee.
(l) Each Company
Benefit Arrangement, to the extent applicable, is in compliance, in
all material respects, with the continuation coverage requirements
of Section 4980B of the Code, Sections 601 through 608 of
ERISA, the Americans with Disabilities Act of 1990, as amended, and
the regulations thereunder, the Health Insurance Portability and
Accountability Act of 1996, as amended, and the regulations
thereunder, the Women’s Health and Cancer Rights Act of 1998,
the Family Medical Leave Act of 1993, as amended, the Mental Health
Parity and Addiction Equity Act of 2008, and the Patient Protection
and Affordable Care Act of 2010, as amended, and the regulations
thereunder, and any other Applicable Law as such requirements
affect either Company, any ERISA Affiliate, and their employees.
There are no outstanding, uncorrected violations under the
Consolidation Omnibus Budget Reconciliation Act of 1985, as
amended, (“COBRA”), with respect to any of
the Companies Benefit Arrangements, covered employees or qualified
beneficiaries that would be reasonably likely to result in a
Material Adverse Effect on either Company, any of its Subsidiaries
or Parent.
(m) No benefit
payable or that may become payable by either Company or any of its
Subsidiaries pursuant to any Company Benefit Arrangement or as a
result of, in connection with or arising under this Agreement or
either Certificate of Merger shall constitute a “parachute
payment” (as defined in Section 280G(b)(2) of the Code) that
is subject to the imposition of an excise tax under Section 4999 of
the Code or that would not be deductible by reason of Section 280G
of the Code. Unless otherwise indicated in Section 3.16(m) of the Companies
Disclosure Schedule, each Company and each of its Subsidiaries is
not a party to any: (i) Contract with any executive officer or
other key employee thereof (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving such Company in the nature of
the applicable Merger or any of the other transactions contemplated
by this Agreement or any Company Ancillary Agreement, (B) providing
any term of employment or compensation guarantee, or (C) providing
severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such
termination of employment other than as required by COBRA (or other
Applicable Law), vacation pay cash-outs or other arrangements
governed by ERISA; or (ii) Contract or plan, including any stock
option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which shall be increased, or the vesting of
benefits of which shall be accelerated, by the occurrence of the
applicable Merger or any of the other transactions contemplated by
this Agreement, or any event subsequent to the Mergers such as the
termination of employment of any person, or the value of any of the
benefits of which shall be calculated on the basis of any of the
transactions contemplated by this Agreement. Each Company and each
of its Subsidiaries has no obligation to pay any material amount or
provide any material benefit to any former employee or officer,
other than obligations (i) for which such Company has established a
reserve for such amount on the Company Balance Sheet and (ii)
pursuant to Contracts entered into after the Balance Sheet Date and
disclosed on Section 3.16(m) of the Companies
Disclosure Schedule.
(n) To the knowledge of
each Company , no employee or consultant of such Company or any of
its Subsidiaries is in material violation of (i) any term of any
employment or consulting Contract or (ii) any term of any other
Contract or any restrictive covenant relating to the right of any
such employee or consultant to be employed by such Company or any
of its Subsidiaries or to use trade secrets or proprietary
information of others. To the knowledge of each Company, the
employment of any employee or consultant by such Company or any of
its Subsidiaries does not subject it to any Liability to any third
party other than Liabilities with respect to employer payroll tax,
employee tax withholding, and Company Benefit
Arrangements.
(o) Each Company and
each of its Subsidiaries has not established any compensation and
benefit plan that is maintained or is required to be maintained or
contributed to by the law or applicable custom or rule of the
relevant jurisdiction, outside of the United States.
(p) In the past two
years, there has been no “mass termination,”
“mass layoff,” “employment loss,” or
“plant closing” as defined by the Workers Adjustment
and Retraining Notification Act (the “WARN Act”) or other Applicable Law
in respect of the either Company or any of its
Subsidiaries.
(q) All filings and
reports as to each Company Benefit Arrangement (including Form 5500
annual reports, summary annual reports, summary plan descriptions
and summaries of material modifications) have been timely submitted
to the IRS, the DOL or other governmental body and/or have been
distributed as required.
(r) All unfunded
Liabilities under all Company Benefit Arrangements (including paid
time off accruals) are fully reflected as liabilities on the
Balance Sheet and will be fully reflected on the books and records
of such Company to which it pertains as of the Closing Date in
accordance with GAAP.
(s) No tax under
Section 4980B or 4980D of the Code has been incurred in respect of
any Company Benefit Arrangement that is a group health plan, as
defined in Section 5000(b)(1) of the Code. With respect to the
employees and former employees of each Company and each ERISA
Affiliate, there are no employee post-retirement medical or health
plans in effect, except as required by Section 4980B of the Code,
or any other post-retirement welfare benefit programs.
(t) Any
“non-qualified deferred compensation plan” (as such
term is defined under Section 409A(d)(1) of the Code and the
guidance issued thereunder) of each Company (to the extent
applicable to any Company employee) under which such Company makes,
is obligated to make, or promises to make any payments or other
awards (each, a “409A
Plan”), has, if subject to Section 409A (or any state
law equivalent) and the regulations and guidance thereunder
(collectively, “Section
409A”), been since January 1, 2006 maintained and
operated in compliance with Section 409A and since January 1, 2010,
each such 409A Plan has been in documentary compliance with Section
409A. No assets have been set aside (directly or indirectly)
outside of the United States for purposes of paying deferred
compensation as described in Code section 409A(b)(1). No 409A Plan
that was originally exempt from application of Section 409A has
been “materially modified” at any time after October 3,
2005. There is no Contract to which the Companies or any of its
subsidiaries is a party covering any employee, consultant, or other
service provider to the Companies or any it subsidiaries, which
individually or collectively requires the Companies or any of its
subsidiaries to pay a Tax gross-up payment to, or otherwise
indemnify or reimburse, any employee for Tax-related payments under
Section 409A.
(u) Each Company and
each of its Subsidiaries is in compliance with worker health and
safety legislation, has fully funded for all premiums arising
pursuant to such legislation, and has paid all such premiums
currently due.
3.17 Merger
Expenses. (a) Except for
the payment of $100,000 to Exigo Ventures, neither of the Companies
nor any Affiliate of such Company is obligated for the payment of
any brokerage, finder’s or other similar fees or expenses of
any investment banker, broker, finder or similar party in
connection with the origin, negotiation or execution of this
Agreement or in connection with either Merger or any other
transaction contemplated by this Agreement. (b) The legal and
accounting advisors, and any other persons, to whom either Company
currently expects to owe fees and expenses that will constitute
Merger Expenses are set forth on Section 3.17 of the Companies
Disclosure Schedule, and other than the Merger Expenses that will
be due to the entities set forth on Section 3.17 of the Companies
Disclosure Schedule, there are no Merger Expenses.
3.18 Insurance. Each Company and
each of its Subsidiaries maintains as of the Agreement Date the
policies of insurance and bonds set forth in Section 3.18 of the Companies
Disclosure Schedule. Section 3.18 of the Companies
Disclosure Schedule sets forth the name of the insurer under each
such policy and bond, the type of policy or bond, and the coverage
amount and any applicable deductible. There is no material claim
pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such
policies and bonds have been timely paid, and each Company and each
of its Subsidiaries is otherwise in compliance with the terms of
such policies and bonds. Neither Company has knowledge of any
written threatened termination of, or material premium increase
with respect to, any of such policies or bonds. Neither Company nor
any of its Subsidiaries has been refused any insurance with respect
to any aspect of the operations of its business, nor has its
coverage been limited by any insurance carrier to which it has
applied for insurance or with which it has carried insurance. The
activities and operations of each Company and each of its
Subsidiaries have been conducted in a manner so as to materially
conform to all applicable provisions of such policies and bonds.
Each Company has delivered to Parent correct and complete copies of
all such policies of insurance and bonds issued at the request or
for the benefit of such Company.
(a) Each
Company and its predecessors and Affiliates are in material
compliance with all Environmental Laws (as defined below), which
compliance includes the possession by such Companies of all
material permits and other governmental authorizations required
under Environmental Laws and compliance with the terms and
conditions thereof. Each Company has not received any written
notice or other written communication, whether from a Governmental
Authority, citizens groups, employee or otherwise, that alleges
that such Company is not in compliance with any Environmental Law,
and to the knowledge of each Company, there are no circumstances
that may prevent or interfere with the compliance by each Company
with any current Environmental Law in the future. All Governmental
Permits held by each Company as of the Agreement Date pursuant to
any Environmental Law (if any) are identified in Section 3.19 of the Companies
Disclosure Schedule.
(b) For purposes of
this Section 3.19: (i) “Environmental Law” means any
federal, state or local statute, law, regulation or other legal
requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) “Materials of Environmental
Concern” include chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any
other substance that is currently regulated by an Environmental Law
or that is otherwise a danger to health, reproduction or the
environment.
(a) Except as
otherwise provided for in the Companies Disclosure Schedules,
neither Company has any outstanding material disputes concerning
its products and/or services with any customer or distributor. For
purposes of this Agreement, the Companies have disclosed to the
Parent any customer who was one of the 10 largest sources of
revenues for such Company, based on amounts paid or payable in the
year ended December 31, 2015, or to the extent different, the
10 largest sources of revenues for such Company, based on amounts
paid or payable in the year ended December 31, 2016 or during the
seven month period ended July 31, 2017 (each, a “Significant Customer”). Each
Significant Customer, together with the amount of revenues paid or
payable by such Significant Customer to the Companies in the years
ended December 31, 2015 and December 31, 2016, and during the seven
month period ended July 31, 2017, is listed on Section 3.20(a) of the Companies
Disclosure Schedule. Since July 31, 2017 through to the date of
this Agreement, neither Company has received any written notice
from any Significant Customer that such customer shall not continue
as a customer of such Company or any of its Subsidiaries or that
such customer intends to terminate or materially and in a manner
detrimental to such Company or its Subsidiaries modify existing
Contracts with such Company (or the applicable Surviving
Corporation, Parent or any of its Subsidiaries) or that such
customer refuses to make payments for products delivered or
services rendered. Each Company has not had any of its products
returned by a Significant Customer thereof except for normal
warranty returns consistent with past history and those returns
that would not result in a reversal of any material amount of
revenue of such Company.
(b) Neither Company
has outstanding material dispute concerning products and/or
services provided by any supplier who, in the year ended December
31, 2015 was one of the 5 largest suppliers of products and/or
services to such Company, or in the year ended December 31, 2016
was one of the 10 largest suppliers of products and/or
services, in either case based on amounts paid or payable (each, a
“Significant
Supplier”). Each Significant Supplier, together with
the amounts paid or payable by such Company to such Significant
Supplier during the years ended December 31, 2015 or December 31,
2016, is listed on Section 3.20(b) of the Companies
Disclosure Schedule. Since January 1, 2017 through to the date of
this Agreement, neither Company has received any written notice
from any Significant Supplier that such supplier shall not continue
as a supplier to such Company or any of its Subsidiaries or that
such supplier intends to terminate or materially and in a manner
detrimental to such Company or its Subsidiaries modify existing
Contracts with such Company (or the applicable Surviving
Corporation, Parent or any of its Subsidiaries). Each Company has
access, on commercially reasonable terms, to all products and
services reasonably necessary to carry on the Company Business, and
neither Company has knowledge of any reason why it will not
continue to have such access on commercially reasonable
terms.
3.21 Accounts
Receivable. Section 3.21 of the Companies
Disclosure Schedule sets forth a true, correct and complete
itemization of the accounts receivable (including aging) of each
Company and each of its Subsidiaries as of the Agreement Date (the
“Accounts
Receivable”). Section 3.21 of the Companies
Disclosure Schedule sets forth such amounts of accounts receivable
as of the Closing Date of such Company which are subject to
asserted claims by customers and reasonably detailed information
regarding asserted claims made within the last year, including the
type and amounts of such claims. The Accounts Receivable represent
bona fide claims against
debtors for sales, services performed or other charges arising on
or before the respective dates of recording thereof, and all of the
goods delivered and services performed which gave rise to the
Accounts Receivable were delivered or performed in accordance with
applicable orders, Contracts or customer requirements. Each Company
has good and marketable title to its Accounts Receivable free and
clear of all Encumbrances (other than Company Permitted
Encumbrances). All Accounts Receivable have been billed in
accordance with the past practice of such Company and each of its
Subsidiaries consistently applied.
3.22 Inventory. All inventory of
each Company (which includes all raw materials, work in progress
(WIP) and finished products), whether or not reflected in the
Company Balance Sheet consists of a quality and quantity usable and
salable in the ordinary course of business of such Company, except
for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value
in the Company Balance Sheet. The quantities of each item of
inventory are not excessive, but are reasonable in the present
circumstances of such Company. Each Company has good and marketable
title to its inventories free and clear of all Encumbrances (other
than Company Permitted Encumbrances). The inventories do not
include any material amount of inventory that is slow-moving,
obsolete, excess, damaged or otherwise not merchantable or
returnable by vendors for full credit.
3.23 Bank Account. Section 3.23 of the
Companies Disclosure Schedule sets forth the account number and
names of authorised signatories with respect to each account
maintained by or for the benefit of each Company and each of its
Subsidiaries or in connection with its business at any bank or
other financial institution.
3.24 Board
Approval. The Board of
Directors of each Company has, as of the date of this Agreement,
(i) determined that the Merger applicable to such Company is fair
to, advisable and in the best interests of such Company and its
stockholder, (ii) duly approved this Agreement, the applicable
Merger and the other transactions contemplated by this Agreement,
and (iii) determined to recommend that the stockholder of such
Company approve and adopt this Agreement and approve the
Merger.
Except for
(x) Company Indebtedness to be paid at Closing as set forth on
Section 7.6 of the Companies Disclosure
Schedule, and (y) the Company Indebtedness set forth on
Section 3.25 of the
Companies Disclosure Schedule, each Company has not
(i) incurred any Company Indebtedness, (ii) made any
loans or advances to any Person, or (iii) provided any
guarantee or indemnitee of any indebtedness of any other Person.
Section 3.25
of the Companies Disclosure Schedule sets forth complete, current
and accurate information regarding the written arrangement
governing each such Company Indebtedness, the total amount of
indebtedness due under each such arrangement, and the identity of
each counterparty to such arrangement. The Company Stockholder has
provided to Parent complete, current and accurate documentation
related to each Company Indebtedness.
ARTICLE IV
Subject
to the exceptions set forth in a numbered or lettered section of
the Parent Disclosure Schedule and other sections of the Parent
Disclosure Schedule to the extent (a) such information is
cross-referenced in another part of the Parent Disclosure Schedule,
or (b) it is reasonably apparent on the face of the disclosure that
such information qualifies another representation and warranty of
Parent and Merger Subs in the Agreement, Parent and each Merger Sub
represent and warrant to the Companies that the statements
contained in this Article
IV are true and correct on and as of the date of this
Agreement:
4.1 Organization and Good
Standing. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power
and authority to own, operate and lease its properties and to carry
on its business as now conducted and as presently proposed to be
conducted. Each Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Each of Parent, GTS Merger Sub and GCP Merger Sub is duly
qualified or licensed to do business, and is in good standing, in
each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed would not individually or in the
aggregate be material to Parent’s or such Merger Sub’s
ability to consummate the applicable Merger or to perform their
respective obligations under this Agreement, the Parent Ancillary
Agreements and the Merger Sub Ancillary Agreements. None of Parent,
GTS Merger Sub or GCP Merger Sub is in violation of its respective
certificate of incorporation or Bylaws, each as amended to
date.
(a) Power and Authority. Parent has
all requisite corporate power and corporate authority to enter
into, execute, deliver and perform its obligations under this
Agreement and each of the Parent Ancillary Agreements and to
consummate the Mergers. Each Merger and the execution, delivery and
performance by Parent of this Agreement, each of the Parent
Ancillary Agreements and all other agreements, transactions and
actions contemplated hereby or thereby have been duly and validly
approved and authorized by all requisite corporate action on the
part of Parent. Each Merger Sub has all requisite corporate power
and corporate authority to enter into, execute, deliver and perform
its obligations under this Agreement and each of the Merger Sub
Ancillary Agreements and to consummate its applicable Merger. Each
Merger and the execution, delivery and performance by each Merger
Sub of this Agreement, each of the Merger Sub Ancillary Agreements
and all other agreements, transactions and actions contemplated
hereby or thereby have been duly and validly approved and
authorized by all requisite corporate action on the part of the
applicable Merger Sub.
(b) No Consents. No consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Authority, or any other Person,
governmental or otherwise, is necessary or required to be made or
obtained by Parent or either Merger Sub to enable Parent and such
Merger Sub to lawfully execute and deliver, enter into, and perform
its obligations under this Agreement, each of the Parent Ancillary
Agreements and each of the Merger Sub Ancillary Agreements or to
consummate the applicable Merger, except where the breach or
violation or the lack of consent, approval or notice would not,
individually or in the aggregate, have a Material Adverse
Effect.
(c) Enforceability. This Agreement
has been duly executed and delivered by Parent and each Merger Sub.
This Agreement and each of the Parent Ancillary Agreements are, or
when executed by Parent shall be, assuming the due authorization,
execution and delivery by each other party thereto, valid and
binding obligations of Parent, enforceable against Parent in
accordance with their respective terms, subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of
law and equity governing specific performance, injunctive relief
and other equitable remedies. This Agreement and each of the Merger
Sub Ancillary Agreements are, or when executed by the applicable
Merger Sub shall be, assuming the due authorization, execution and
delivery by each other party thereto, valid and binding obligations
of such Merger Sub, enforceable against such Merger Sub in
accordance with their respective terms, subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of
law and equity governing specific performance, injunctive relief
and other equitable remedies.
4.3 No Conflict. Neither the
execution and delivery of this Agreement, any of the Parent
Ancillary Agreements or any of the Merger Sub Ancillary Agreements
by Parent or either Merger Sub, nor the consummation of the Mergers
or any other transaction contemplated hereby or thereby, shall
conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of,
or constitute a default under: (a) any provision of the
Certificate of Incorporation or Bylaws of Parent or either Merger
Sub, each as currently in effect; (b) any Applicable Law applicable
to Parent, any of its Subsidiaries, or either Merger Sub or any of
their respective material assets or properties; or (c) any Contract
to which Parent or either Merger Sub is a party or by which Parent
or either Merger Sub or any of their respective material assets or
properties are bound, except in each case, where such conflict,
termination, breach, impairment, violation, default, consent, or
lack of consent, release, waiver or approval would not,
individually or in the aggregate, have a Material Adverse
Effect.
4.4 Interim Operations of Merger
Sub. Each Merger Sub
was formed by Parent solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as
contemplated by this Agreement. Neither Merger Sub has liabilities
and, except for a subscription agreement pursuant to which all of
its authorized capital stock was issued to Parent, is not a party
to any agreement other than this Agreement and agreements with
respect to the appointment of registered agents and similar
matters.
4.5 Stockholders
Consent. No consent or
approval of the stockholders of Parent is required or necessary for
Parent to enter into this Agreement or to consummate the
transactions contemplated hereby.
4.6 Financial
Capacity. Parent will have
sufficient cash funds on hand or available to it to pay the cash
portion of the Merger Consideration.
4.7 Merger
Consideration. Parent has
reserved a sufficient number of authorized but unissued shares of
Parent Stock for issuance in connection with the Mergers. All
shares of Parent Stock which may be issued as contemplated or
permitted by this Agreement will be, when issued, duly authorized
and validly issued, are fully paid and nonassessable, and will not
be subject to any right of rescission, right of first refusal or
preemptive right, and will be offered, issued, sold and delivered
by the Parent in compliance with all requirements of Applicable
Law.
4.8 Litigation. There is no
material action, suit, arbitration, mediation, proceeding, claim or
investigation pending against the Parent, any of its Subsidiaries,
or either Merger Sub (or, to the Parent’s knowledge, against
any officer, director, employee or agent of the Parent or either
Merger Sub in their capacity as such or relating to their
employment, services or relationship with Parent or either Merger
Sub) before any Governmental Authority, arbitrator or mediator,
nor, to the knowledge of the Parent, has any such action, suit,
arbitration, mediation, proceeding, claim or investigation been
threatened in writing. There is no judgment, decree, injunction,
rule or order of any Governmental Authority, arbitrator or mediator
outstanding against Parent, any of its Subsidiaries, or either
Merger Sub. None of Parent, the Parent’s Subsidiaries, GTS
Merger Sub or GCP Merger Sub has an action, suit, arbitration,
mediation, proceeding, claim or investigation pending against any
Governmental Authority or other Person.
4.9 Reorganization.
None of Parent, any of its Subsidiaries (including each Merger Sub)
nor, to the knowledge of Parent, any of Parent’s Affiliates
has taken or agreed to take any action that would prevent either
Merger from qualifying as a tax-free transaction pursuant to
Section 368 of the Code and Parent is not aware of any agreement,
plan or other circumstance that would prevent the Mergers from
qualifying as a tax-free transaction pursuant to Section 368 of the
Code.
4.10 Capitalization of
Parent. The authorized
capital stock of Parent is as described in the SEC Documents filed
by Parent. As stated therein, the number of shares of Parent Common
Stock outstanding as of August 28, 2017 was 13,934,018 shares, and
the Parent does not hold any shares of treasury stock. As stated in
the Certificate of Designations for Series A Cumulative
Convertible Preferred Stock, the number of shares of Series A
Preferred Stock authorized is 505,000 shares, and the number of
Series A Preferred Stock outstanding as of the Agreement Date
is 502,327 shares. The terms of the Series B Cumulative
Convertible Preferred Stock are set forth in the Certificate of
Designations of the Parent Preferred Stock attached hereto as
Exhibit D. All
issued and outstanding shares of capital stock of Parent, whether
issued and outstanding immediately prior to the Mergers or pursuant
to the Mergers, at the Closing, are duly authorized, and are, or
will be, validly issued, fully paid and nonassessable, not issued
in violation of and not subject to any right of rescission, right
of first refusal or preemptive right, and have been or will be
offered, issued, sold and delivered by the Parent in compliance
with all requirements of Applicable Law and all requirement set
forth in applicable Contracts. Except for the regular quarterly
dividends payable on the Series A Preferred stock of Parent, there
is no Liability for dividends accrued and unpaid by
Parent.
4.11 Board
Approval. Each of the
Boards of Directors
of
the Parent
and
each Merger
Sub have, as of the
Agreement
Date, (i) determined that
the Mergers
are fair
(or in the case of each Merger Sub, that the
applicable Merger is fair) to, advisable
and in the best interests of the Parent and such
Merger
Sub,
respectively, and their respective stockholders,
(ii) duly
approved this Agreement, the
Merger (or in the case of
each Merger
Sub,
the applicable Merger) and the other
transactions contemplated by this Agreement, and
(iii) determined to recommend
that the stockholder of such Merger Sub approve and adopt
this Agreement and approve the
applicable Merger.
4.12 SEC Documents; Parent Financial
Statements. Parent has furnished or made
available to the Companies true and complete
copies of all SEC
Documents filed by it or its
predecessors with the SEC, all in the form so
filed. As of their respective filing dates, such
SEC Documents
filed
by Parent and all
SEC Documents filed after the date
hereof but before the Closing complied or, if filed
after the date hereof, will comply in all material respects with
the requirements of the Securities Act and the
Exchange Act
and the
rules and regulations of the SEC thereunder, as the case
may be, and none of the SEC Documents contained or will
contain any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which
they were made, not misleading, except to the extent such
SEC Documents
have been
corrected, updated or superseded by a document subsequently filed
with the SEC. The financial statements of Parent,
including the notes thereto (the “Parent Financial
Statements”)
comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared
in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and present fairly the consolidated
financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the
periods then ended, it being understood that such financial
statements may be required to be restated from time to
time.
4.13 No Undisclosed
Statements. Neither
Parent nor any of its
Subsidiaries
has
any liabilities or obligations of a
nature, whether accrued, absolute, contingent or otherwise, that
would be required by GAAP to be reflected on a
consolidated balance sheet of Parent, except for
liabilities
or
obligations (a) those shown on the Parent
Financial Statements or in the notes thereto, (b) those incurred
after June 30, 2017 in the ordinary course of the Parent’s
business consistent with its past practices, (c) other undisclosed
liabilities which, individually or in the aggregate, are not
material to Parent and their Subsidiaries, taken as a whole;
(d) liabilities disclosed on SEC Documents filed prior to the
date of this Agreement or otherwise relating to items disclosed
therein; and (e) liabilities directly incurred under the terms of
this Agreement or necessary for providing the financing sufficient
to enable Parent’s performance hereof.
4.14 Subsidiaries. (a) All the
outstanding shares of capital stock of, or other equity or voting
interests in, each Subsidiary of Parent and (b) all the shares of
capital stock of, or other equity or voting interest held by Parent
in each Person in which Parent owns any capital stock of, or other
equity or voting interests of any nature in, or any interest
convertible, exchangeable or exercisable for, capital stock of, or
other equity or voting interests of any nature, each as disclosed
in the SEC Documents filed by Parent, are duly authorized, have
been validly issued and are fully paid and nonassessable and are
owned by the Parent, a wholly-owned Subsidiary of the Parent, or
the Parent and another wholly-owned Subsidiary of the Parent, free
and clear of all material Encumbrances of any kind or nature
whatsoever, other than Parent Permitted Encumbrances, except for
restrictions imposed by applicable securities laws.
ARTICLE V
During
the time period from the Agreement Date until the earlier to occur
of (a) the Closing Date or (b) the termination of this
Agreement in accordance with the provisions of Article IX, the Companies
covenant and agree with Parent as follows:
5.1 Advise of
Changes. Each Company
shall promptly advise Parent in writing of (a) any event
occurring subsequent to the Agreement Date that would render any
representation or warranty of such Company contained in
Article III untrue
or inaccurate such that the condition set forth in Section 8.2 would not be satisfied, (b)
any breach of any covenant or obligation of the Companies pursuant
to this Agreement or any Company Ancillary Agreement such that the
condition set forth in Section 8.2 would not be satisfied, (c)
any Material Adverse Change in such Company or its Subsidiaries, or
(d) any change, event, circumstance, condition or effect that would
reasonably be expected to result in a Material Adverse Effect on
such Company or its Subsidiaries or cause any of the conditions set
forth in Section
8.2 not to be
satisfied; provided, however, that the delivery of
any notice pursuant to this Section 5.1 shall not be deemed to
amend or supplement the Companies Disclosure Schedule.
(a) Each Company shall
use its commercially reasonable efforts to carry on and preserve
its Company Business and its Subsidiaries’ business
relationships with customers, advertisers, suppliers, employees and
others with whom such Company has contractual relations. If either
Company becomes aware of any material deterioration in the
relationship with any customer, key advertiser, key supplier or
employee of such Company, it shall promptly bring such information
to Parent’s attention in writing and, if requested by Parent,
shall exert commercially reasonable efforts to promptly restore the
relationship.
(b) Each Company and
its Subsidiaries shall (i) pay all of their debts and Taxes when
due, subject to good faith disputes over such debts or Taxes and
(ii) pay or perform their other Liabilities when due.
(c) Each Company shall
use its commercially reasonable efforts to assure that such
Company’s and its Subsidiaries’ Contracts entered into
after the Agreement Date will not require the procurement of any
consent, waiver or novation or provide for any material change in
the obligations of any party in connection with, or terminate as a
result of the consummation of, the Merger applicable to such
Company.
5.3 Conduct of
Business. Each Company
shall continue to conduct, and shall cause its
Subsidiaries to conduct, its Company Business in the
ordinary and usual course consistent with its and their past
practices, and such Company shall not, and shall cause its
Subsidiaries to not, without Parent’s prior written consent
(which consent may not be unreasonably withheld, conditioned or
delayed):
(a) incur any
indebtedness for borrowed money or guarantee any such indebtedness
of another Person or issue or sell any debt securities or guarantee
any debt securities of another Person other than in connection with
the financing of payroll obligations under the Wells Fargo Credit
Facility, in the ordinary course of business consistent with past
practices;
(b) (i) lend any money,
other than reasonable and normal advances to employees for bona
fide expenses that are incurred in the ordinary course of business
consistent with its past practices, (ii) make any investments in or
capital contributions to, any Person, (iii) forgive or
discharge in whole or in part any outstanding loans or advances, or
(iv) prepay any indebtedness;
(c) enter into any
Company Material Contract, violate, terminate, amend or otherwise
modify or waive any of the material terms of any Company Material
Contract, or enter into any material transaction or take any other
action, in each case not in the ordinary course of business
consistent with its past practices;
(d) place or allow the
creation of any Encumbrance (other than a Company Permitted
Encumbrance) on any of its assets or properties;
(e) sell, lease,
license, transfer or dispose of any assets material to the Company
Business (except for sales or licenses of products in the ordinary
course of business consistent with its past
practices);
(f) except as required
by Applicable Law, by any Contract in effect of the date hereof or
contemplated by this Agreement, (i) pay any special bonus,
increased salary, severance or special remuneration to any officer,
director, employee or consultant, (ii) amend or enter into any
employment or consulting Contract with any such person, or (iii)
adopt or amend any employee or compensation benefit plan, including
any stock purchase, stock issuance or stock option plan, or amend
any compensation, benefit, entitlement, grant or award provided or
made under any such plan (except in each case as required under
ERISA or as necessary to maintain the qualified status of such plan
under the Code);
(g) change any of its
accounting methods;
(h) declare, set aside
or pay any cash or stock dividend or other distribution (whether in
cash, stock or property) in respect of its capital stock, or
redeem, repurchase or otherwise acquire any of its capital stock or
other securities (except for the repurchase of stock from its
employees, directors, consultants or contractors in connection with
the termination of their services at the original purchase price of
such stock), or pay or distribute any cash or property to any of
its stockholders or securityholders or make any other cash payment
to any of its stockholders or securityholders;
(i) terminate, waive or
release any material right or claim;
(j) issue, sell, create
or authorize any shares of its capital stock of any class or series
or any other of its securities, or issue, grant or create any
warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of its capital
stock or any securities that are potentially exchangeable for, or
convertible into, shares of its capital stock;
(k) subdivide, split,
combine or reverse split the outstanding shares of its capital
stock of any class or series or enter into any recapitalization
affecting the number of outstanding shares of its capital stock of
any class or series or affecting any other of its
securities;
(l) merge, consolidate
or reorganize with, acquire, or enter into any other business
combination with any corporation, partnership, limited liability
company or any other entity (other than Parent or Merger Sub),
acquire a substantial portion of the assets of any such entity, or
enter into any negotiations, discussions or agreement for such
purpose;
(m) amend the Company
Charter Documents;
(n) license any of its
technology or Intellectual Property (except for licenses under its
standard customer agreement made in the ordinary course of business
consistent with its past practices, provided that under no
circumstances shall either Company or its Subsidiaries enter into
any software escrow or similar agreement or arrangement), or
acquire any Intellectual Property (or any license thereto)
from any third party (other than shrink wrap and other licenses of
software generally available to the public at a per copy license
fee of less than One Thousand Dollars ($1,000) per
copy);
(o) materially change
any insurance coverage (other than as contemplated in this
Agreement);
(p) (i) agree to any
audit assessment by any taxing authority, (ii) file any material
Return or amendment to any Return unless copies of such Return or
amendment have first been delivered to Parent for its review at a
reasonable time prior to filing, (iii) except as required by
Applicable Law, make or change any election in respect of Taxes or
adopt or change any accounting method in respect of Taxes, or (iv)
enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect
of Taxes, that would, in the case of (i) through (iv), reasonably
be expected to have an adverse effect on Parent or any of its
Affiliates in a tax period ending after the Closing
Date;
(q) except as is
necessary to comply with its obligations pursuant to Section 5.7 below, modify or change the
exercise or conversion rights or exercise or purchase prices of any
of its capital stock, any of its stock options, warrants or other
securities, or accelerate or otherwise modify (i) the right to
exercise any option, warrant or other right to purchase any of its
capital stock or other securities or (ii) the vesting or release of
any shares of its capital stock or other securities from any
repurchase options or rights of refusal held by it or any other
party or any other restrictions;
(r) (i) initiate any
litigation, action, suit, proceeding, claim or arbitration or
(ii) settle or agree to settle any litigation, action, suit,
proceeding, claim or arbitration;
(s) (i) pay, discharge
or satisfy, in an amount in excess of Ten Thousand Dollars
($10,000) in any one case or Thirty Thousand ($30,000) in the
aggregate, any Liability arising otherwise than in the ordinary
course of business, other than (1) the payment, discharge or
satisfaction of Liabilities reflected or reserved against in the
Company Balance Sheet and (2) the payment, discharge or
satisfaction of Merger Expenses, or (ii) make any capital
expenditures, capital additions or capital
improvements;
(t) materially change
the manner in which it extends warranties, discounts or credits to
customers; or
(u) (i) agree to do any
of the things described in the preceding clauses (a)-(u),
(ii) take or agree to take any action which would reasonably
be expected to make any of the Companies’ representations or
warranties contained in this Agreement materially untrue or
incorrect, or (iii) take or agree to take any action which would
reasonably be expected to prevent the Companies from performing or
cause the Companies not to perform one or more covenants required
hereunder to be performed by the Companies;
For
purposes of this Section 5.3, “Company Material Contract”
includes any Contract arising subsequent to the date of this
Agreement that would have been required to be listed on the
Companies Disclosure Schedule pursuant to Section 3.11 had such Contract been in
effect on the date of this Agreement.
5.4 Regulatory
Approvals. Each Company
shall promptly execute and file, or join in the execution and
filing of, any application, notification or other document that may
be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether federal, state,
local or foreign, which may be required in connection with the
consummation of either Merger and the other transactions
contemplated by this Agreement or any Company Ancillary Agreement.
Each Company shall use commercially reasonable efforts to obtain,
and to cooperate with Parent to promptly obtain, all such
authorizations, approvals and consents and shall pay any associated
filing fees payable by such Company with respect to such
authorizations, approvals and consents. Each Company shall promptly
inform Parent of any material communication between such Company or
its Subsidiaries and any Governmental Authority regarding any of
the transactions contemplated hereby. If either Company or any
Affiliate of such Company receives any formal or informal request
for supplemental information or documentary material from any
Governmental Authority with respect to the transactions
contemplated hereby, then such Company shall make, or cause to be
made, as soon as reasonably practicable, a response in compliance
with such request following consultation with
Parent.
5.5 Necessary
Consents. Each Company
shall use its commercially reasonable efforts to obtain prior to
Closing such written consents and authorizations of third parties,
give notices to third parties and take such other actions as may be
necessary or appropriate in order to effect the consummation of the
Mergers and the other transactions contemplated by this Agreement,
to enable the Surviving Corporations (or Parent) to carry on the
Companies Business immediately after the Effective Time and to keep
in effect and avoid the breach, violation of, termination of, or
adverse change to, any Company Material Contract.
5.6 Litigation. Each Company
shall notify Parent in writing promptly after learning of any
material claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration
panel, board or governmental agency, initiated by or against it, or
known by such Company to be threatened against such Company or its
Subsidiaries or any of its officers, directors, employees or
stockholders in their capacity as such.
(a) Neither Company
shall, nor shall it authorize, encourage or permit any of its
officers, directors, employees, Affiliates, agents, advisors
(including any attorneys, financial advisors, investment bankers or
accountants) or other representatives (collectively,
“Company
Representatives”) to, directly or indirectly:
(a) solicit, initiate, or knowingly encourage, facilitate or
induce the making, submission or announcement of any inquiry, offer
or proposal from any Person (other than Parent) concerning any
Alternative Transaction; (b) furnish any nonpublic information
regarding either Company or its Subsidiaries to any Person (other
than Parent and its agents and advisors) in connection with or in
response to any inquiry, offer or proposal for or regarding any
Alternative Transaction (other than to respond to such inquiry,
offer or proposal by indicating that such Company is subject to
this Section
5.7);
(c) enter into, participate in, maintain or continue any
discussions or negotiations with any Person (other than Parent and
its agents and advisors) with respect to any Alternative
Transaction (other than to respond to such inquiry, offer or
proposal by indicating that the Companies are subject to this
Section
5.7); (d) otherwise
cooperate with, facilitate or encourage any effort or attempt by
any Person (other than Parent and its agents and advisors) to
effect any Alternative Transaction; or (e) execute, enter into or
become bound by any letter of intent, memorandum of understanding,
other Contract or understanding between either Company and any
Person (other than Parent) that is related to, provides for or
concerns any Alternative Transaction, provided, however, that in the event that
either Company receives an unsolicited proposal with respect to
such a transaction from any Person (other than Parent and its
designees), such Company may, to the extent it is required to do so
by applicable fiduciary duties confirmed by advice of counsel to
that effect, (a “Superior
Proposal”) enter into discussion or transactions with
or provide information to such Person. If any Company
Representative, whether in his or her capacity as such or in any
other capacity, takes any action that such Company is obligated
pursuant to this Section 5.7(a) to cause such Company
Representative not to take, then such Company shall be deemed for
all purposes of this Agreement to have breached this Section 5.7(a).
(b) Subject to any
reasonable confidentiality obligations, each Company shall notify
Parent within 24 hours after receipt by such Company (or, to the
Companies’ knowledge, by any of the Company Representatives)
of any inquiry, offer or proposal that constitutes an Alternative
Transaction, or any other notice that any Person is considering
making an Alternative Transaction, or any request for nonpublic
information relating to such Company or its Subsidiaries or for
access to any of the properties, books or records of such Company
or its Subsidiaries by any Person or Persons other than Parent
(which notice shall identify the Person or Persons making, or
considering making, such inquiry, offer or proposal) in connection
with a potential Alternative Transaction and shall keep Parent
fully informed of the status and details of any such inquiry, offer
or proposal and any correspondence or communications related
thereto and shall provide to Parent a correct and complete copy of
such inquiry, offer or proposal and any amendments, correspondence
and communications related thereto, if it is in writing, or a
written summary of the material terms thereof, if it is not in
writing. Each Company shall provide Parent with 48 hours prior
notice (or such lesser prior notice as is provided to the members
of the Board of Directors of such Company) of any meeting of the
Board of Directors of such Company at which the Board of Directors
of such Company is reasonably expected to consider any Alternative
Transaction. Each Company shall immediately cease and cause to be
terminated any and all existing activities, discussions and
negotiations with any Persons conducted heretofore with respect to
an Alternative Transaction.
5.8 Access to
Information. Each Company
shall allow Parent and its agents and advisors (which shall include
Parent’s financing sources and their advisors) access at
reasonable times to the files, books, records, technology,
Contracts, personnel and offices of such Company, including any and
all information relating to such Company’s and its
Subsidiaries’ taxes, Contracts, Liabilities, financial
condition and real, personal and intangible property, subject to
the terms of the Confidentiality Agreement between such Company and
Parent dated February 20, 2017 (the “Confidentiality Agreement”). Each
Company shall cause its accountants to cooperate with Parent and
Parent’s agents and advisors in making available all
financial information reasonably requested by Parent and its agents
and advisors, including the right to examine all working papers
pertaining to all financial statements prepared by such
accountants.
5.9 Satisfaction of Conditions
Precedent. Each Company
shall use commercially reasonable efforts to satisfy or cause to be
satisfied all the conditions precedent set forth in Sections 8.1 and 8.2, and such Company shall use
commercially reasonable efforts to cause the Merger applicable to
it and the other transactions contemplated by this Agreement to be
consummated in accordance with the terms of this
Agreement.
(a) Each Company shall
timely provide to holders of capital stock of such Company all
advance notices required to be given to such holders in connection
with this Agreement, the applicable Certificate of Merger, the
applicable Merger and the transactions contemplated by this
Agreement, the applicable Certificate of Incorporation, or other
applicable Contracts and under Applicable Law.
(b) Each Company shall
give all notices and other information required to be given by such
Company to the employees of such Company, any collective bargaining
unit representing any group of employees of such Company, and any
applicable Governmental Authority under the WARN Act, the National
Labor Relations Act, as amended, the Code, COBRA and other
Applicable Law in connection with the transactions contemplated by
this Agreement or other applicable Contracts.
ARTICLE VI
During
the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this
Agreement in accordance with the provisions of Article IX, Parent covenants
and agrees with the Companies as follows:
6.1 Advise of
Changes. Parent shall
promptly advise the Companies in writing of (a) any event
occurring subsequent to the Agreement Date that would render any
representation or warranty of Parent or either Merger Sub contained
in Article IV
untrue or inaccurate such that the condition set forth in
Section 8.3 would not be satisfied, or
(b) any breach of any covenant or obligation of Parent or Merger
Subs pursuant to this Agreement, any Parent Ancillary Agreement or
any Merger Sub Ancillary Agreement such that the condition set
forth in Section 8.3 would not be
satisfied.
6.2 Regulatory
Approvals. Parent shall
promptly execute and file, or join in the execution and filing of,
any application, notification or other document that may be
necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether foreign, federal, state,
local or municipal, which may be required in connection with the
consummation of either Merger and the other transactions
contemplated by this Agreement, any Parent Ancillary Agreement or
any Merger Sub Ancillary Agreement. Parent shall use commercially
reasonable efforts to obtain all such authorizations, approvals and
consents and shall pay any associated filing fees payable by Parent
with respect to such authorizations, approvals and consents. Parent
shall promptly inform the Companies of any material communication
between Parent and any Governmental Authority regarding any of the
transactions contemplated hereby. If Parent or any Affiliate of
Parent receives any formal or informal request for supplemental
information or documentary material from any Governmental Authority
with respect to the transactions contemplated hereby, then Parent
shall make, or cause to be made, as soon as reasonably practicable,
a response in compliance with such request following consultation
with the Companies. Notwithstanding anything in this Agreement to
the contrary, if any administrative or judicial action or
proceeding is instituted (or threatened in writing to be
instituted) challenging any transaction contemplated by this
Agreement as violative of any Applicable Law, it is expressly
understood and agreed that neither Parent nor any of its
Subsidiaries or Affiliates shall be under any obligation to:
(a) litigate or contest any administrative or judicial action
or proceeding or any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent; or (b) make
proposals, execute or carry out agreements or submit to orders
providing for (i) the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets
or categories of assets of Parent, any of its Subsidiaries or
Affiliates or either Company, or the holding separately of the
shares of capital stock of either Surviving Corporation or (ii) the
imposition of any limitation on the ability of Parent or any of its
Subsidiaries or Affiliates to freely conduct their business or own
such assets or to acquire, hold or exercise full rights of
ownership of the shares of either Surviving
Corporation.
6.3 Satisfaction of Conditions
Precedent. Parent shall use
its commercially reasonable efforts to satisfy or cause to be
satisfied all of the conditions precedent that are set forth in
Sections 8.1 and
8.3, and Parent
shall use its commercially reasonable efforts to cause the Mergers
and the other transactions contemplated by this Agreement to be
consummated in accordance with the terms of this Agreement as soon
as reasonably practical.
ARTICLE VII
7.1 Approval of the Company
Stockholder. Each Company
shall promptly after the date hereof take all action necessary in
accordance with Texas Law and such Company’s Charter
Documents to obtain the Stockholder Approvals approving the
applicable Merger as soon as practicable.
7.2 Employees. Exhibit A-2 sets forth a
list of each home office employee of GTS and GCP (collectively, the
“Critical
Employees”). Continued employment or consultancy
opportunities shall be provided on and after the Effective Time to
each Critical Employee, with adjusted titles and responsibilities
to match Parent’s organizational responsibilities structure
and as defined by Parent. Each Company, prior to the Closing, and
each Surviving Corporation, immediately after the Effective Time
and for such period of time as such Surviving Corporation
determines in its sole discretion, shall continue the at-will
employment or other arrangement of the Critical Employees of each
Company and its Subsidiaries at the Effective Time. Each Company
shall cooperate with Parent to affect the transfer of the Critical
Employees as provided above, including but not limited to using all
reasonable efforts to retain existing employees of such Company and
its Subsidiaries through the Effective Time, subject to compliance
with the covenants of each Company hereunder and except that each
Company shall have no obligation to take any action which would
breach any representation and warranty of such Company
hereunder.
7.3 Tax Matters. For purposes of
this Section
7.3, all references
to a “Company” shall also include each of its
Subsidiaries.
(a) Tax Returns.
(i) After the
Closing Date, Company Stockholder shall be responsible for
preparing and filing when due, solely at Company
Stockholder’s expense, all Returns required to be filed by
the Companies for any Tax period ending on or prior to the Closing
Date (a “Pre-Closing Tax
Period”) (including, without limitation, all income
tax Returns for the taxable year ending on the Closing Date and the
short tax year tax return due as a result of the termination of
GCP’s “S” Corp election and the short tax year
tax return due as a result of GTS joining a consolidated group of
companies). Returns prepared by Company Stockholder pursuant to
this Section
7.3(a)(i) shall be
prepared in a manner consistent with past practices of the
Companies unless otherwise required by Law. Company Stockholder
shall provide the Parent with a copy of such Returns (and
supporting schedules) at least twenty (20) days in advance of
the due date for Returns. If the due date for filing any such
Return is within twenty (20) days of the Closing Date, Company
Stockholder shall provide the Parent with a copy of such Return
(and supporting schedules) within a reasonable period of time prior
to the due date. Company Stockholder shall consider any changes and
revisions to such Returns as are reasonably requested by Parent.
Company Stockholder shall cause to be paid to Parent, within a
reasonable time after having received a written request therefore
from Parent, an amount equal to any Taxes to be paid for such
Pre-Closing Tax Period, and Parent shall then pay or cause to be
paid when due all Taxes with respect to any such
Returns.
(ii) Parent shall be responsible for
preparing and filing when due all Returns of the Companies for any
Tax period ending after the Closing Date and shall pay or cause to
be paid when due all Taxes with respect to any such Returns.
Returns prepared and filed by Parent for a Straddle Period
(“Straddle Period Tax
Returns”) shall be prepared in a manner consistent
with past practices of the Companies unless otherwise required by
Law. Parent shall provide Company Stockholder with a copy of such
Straddle Period Tax Returns (and supporting schedules) at least
twenty (20) days in advance of the due date for such Returns. If
the due date for filing any Straddle Period Tax Return is within
twenty (20) days of the Closing Date, Parent shall provide Company
Stockholder with a copy of such Return (and supporting schedules)
within a reasonable period of time prior to the due date. The
Parent shall consider any changes and revisions to such Straddle
Period Tax Returns as are reasonably requested by Company
Stockholder. The Company Stockholder shall cause to be paid to
Parent, within a reasonable time after having received a, written
request therefore from Parent, an amount equal to any Taxes
relating to the portion of a Straddle Period ending on the Closing
Date, as determined in accordance with Section 7.3(c).
(b) Cooperation; Audits. In
connection with the preparation and filing of Returns, audit
examinations, and any administrative or judicial proceedings
relating to any Tax liabilities imposed on either Company, the
Parent and the Company Stockholder shall cooperate fully with each
other, including, without limitation, the furnishing or making
available during normal business hours of records, personnel (as
reasonably required), books of account, powers of attorney or other
materials necessary or helpful for the preparation and filing of
such Returns, the conduct of audit examinations or the defense of
claims by taxing authorities as to the imposition of
Taxes.
(c) Apportionment of Taxes. In
order to apportion appropriately any Taxes relating to the portion
of a Straddle Period ending on the Closing Date, the portion of any
Taxes that are allocable to such period shall be: (A) in the case
of Taxes other than income, sales and use, gross receipts, value
added, employment and withholding Taxes, deemed to be the amount of
such Taxes for the entire Straddle Period multiplied by a fraction
the numerator of which is the number of calendar days in the
Straddle Period ending on (and including) the Closing Date and the
denominator of which is the number of calendar days in the entire
relevant Straddle Period, and (B) in the case of income, sales and
use, gross receipts, withholding, value added and employment Taxes,
deemed equal to the amount that would be payable if the taxable
year or period ended and the books closed at the close of the
Closing Date.
(d) Tax Contests. After the
Closing, each of Parent and the Company Stockholder shall promptly
notify the other in writing of the proposed assessment or the
commencement of any Tax audit or administrative or judicial
proceeding or of any demand or claim, of which such party has been
informed in writing by any Taxing Authority, with respect to either
Company which, if determined adversely to the taxpayer or after the
lapse of time, could (x) be grounds for indemnification pursuant to
Section
10.2 of this
Agreement or (y) otherwise result in a Tax liability or
material reduction in tax attributes with respect to a tax period
beginning before Closing; provided, that failure to so
notify shall not diminish such obligation to indemnify except to
the extent of material prejudice. In the case of a Tax audit
or administrative or judicial proceeding (a “Tax Contest”) that relates solely
to Pre-Closing Tax Periods, the Company Stockholder shall have the
sole right, at its expense, to control the conduct of such Tax
Contest; provided,
that (i) the Company Stockholder shall not settle, discharge,
or otherwise dispose of any such Tax Contest without the prior
written consent of Parent, which shall not be unreasonably
withheld, conditioned, or delayed, and (ii) Parent shall have the
right to fully participate in any such Tax Contest at its own
expense. Parent shall control and shall have the right to
discharge, settle, or otherwise dispose of all other Tax
Contests.
(e) The Company
Stockholder shall be entitled to all Tax refunds of the Companies
for any Pre-Closing Tax Period. If Parent or either Company
receives any Tax refund to which Company Stockholder is entitled
pursuant to this Section 7.3(e), Parent will promptly
pay (or cause Company to pay) the amount of such Tax refund to the
Company Stockholder net of the reasonable out-of-pocket costs to
Parent, Company and their respective Affiliates with respect to
such Tax. In the event that any such Tax refund is subsequently
disallowed in whole or part by any tax authority, the Company
Stockholder shall promptly return any such amounts (plus any
interest or penalties, if applicable) to Parent or the Companies,
as applicable.
7.4 Sale of Shares Pursuant to Regulation
D. The parties
hereto acknowledge and agree that the shares of Parent Stock
issuable to the Holders pursuant to Section 2.1(b) hereof shall constitute
“restricted securities” under the Securities Act. All
such Holders shall be accredited investors. The certificates of
Parent Stock shall bear the legend set forth in Section 2.11. It is acknowledged and
understood that Parent is relying on certain written
representations made by each of the Holders. The Companies will
cause each Holder to execute and deliver to Parent an Investor
Representation Statement in the form attached hereto as
Exhibit B (the
“Investor Representation
Statement”) prior to the Closing Date.
7.5 Blue Sky
Laws.
Parent shall take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Stock in connection with
the Mergers. Company shall take such steps as may be necessary to
assist Parent as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Stock in connection with the
Mergers.
7.6 Payment of Company
Indebtedness. At Closing,
Parent shall pay or cause the Surviving Corporations to pay, all
Company Indebtedness set forth on Section 7.6 of the Companies Disclosure
Schedule. Section 7.6 of the Companies Disclosure
Schedule sets forth complete, current and accurate information
regarding the written arrangement governing each such Company
Indebtedness, the total amount of indebtedness due under each such
arrangement, and the identity of each counterparty to such
arrangement.
Parent shall
have the Company Stockholder, Kenny Boner and Gene Rhoades released
at Closing from any personal guarantees related to the Wells Fargo
Credit Facility. Parent shall use commercially reasonable efforts
to have the Company Stockholder and each Key Employee released from
any personal guarantees related to any Company Indebtedness or
liability of the company set forth on either Section 7.6 or Section 3.25 of the Companies
Disclosure Schedule within ninety (90) days after the closing date.
To the extent any personal guarantees relating to such Company
Indebtedness or a Liability of the Company set forth on either
Section 7.6 or Section 3.25 of the Companies
Disclosure Schedule are enforced against the Company Stockholder or
any Key Employee after Closing, Parent hereby agrees to indemnify,
defend, and hold harmless the Company Stockholder and each Key
Employee from any amounts that the Company Stockholder and each Key
Employee are required to pay in connection with the enforcement of
any obligations under such personal guarantees after the Closing
Date, including reasonable attorneys’ fees and expenses
incurred in connection therewith.
ARTICLE VIII
8.1 Conditions to Each Party’s
Obligation to Effect the Mergers. The respective
obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction prior to the Closing Date of
the following conditions:
(a) Governmental Approvals. Other
than the filing of the Certificates of Merger in accordance with
the terms of Section 2.6, all authorizations,
consents, orders or approvals of, or declarations or filings with,
or expirations of waiting periods imposed by, any Governmental
Authority shall have been filed, occurred or been obtained pursuant
to Applicable Law.
(b) Company Stockholder Approvals.
Each Merger and this Agreement shall have been duly and validly
approved and adopted, as required by Applicable Law and the Company
Charter Documents, each as in effect on the date of such approval
and adoption, by the requisite vote of the holders of capital stock
of each Company applicable to such Merger.
(c) No Injunctions or Restraints;
Illegality. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of either Merger or
limiting or restricting the conduct or operation of the business of
either Company by Parent after either Merger shall have been
issued, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic Governmental
Authority, seeking any of the foregoing be pending; nor shall there
be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to either Merger
which makes the consummation of either Merger illegal.
The
obligations of Parent and each Merger Sub to effect the Mergers are
subject to the satisfaction of each of the following conditions,
any of which may be waived in writing exclusively by
Parent:
(a) Representations and Warranties.
The representations and warranties of the Companies set forth in
this Agreement (without modification by any update or modification
to the Companies Disclosure Schedule) that are qualified by
materiality shall be true and correct, and the representation and
warranties of the Companies set forth in this Agreement (without
modification by any update or modification to the Companies
Disclosure Schedule) that are not so qualified shall be true and
correct in all material respects, in each case as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except for changes
contemplated by this Agreement; and Parent shall have received a
certificate signed on behalf of each Company by the Chief Executive
Officer of such Company to such effect.
(b) Performance of Obligations of the
Companies. Each Company shall have performed in all material
respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date; and Parent shall have
received a certificate signed on behalf of each Company by the
Chief Executive Officer of such Company to such
effect.
(c) Government Consents. There
shall have been obtained at or prior to the Closing Date such
permits or authorizations, and there shall have been taken all such
other actions by any Governmental Authority or other regulatory
authority having jurisdiction over the parties and the actions
herein proposed to be taken, as may be required to consummate the
Mergers.
(d) Former Stockholders. No former
holder of capital stock of either Company as of the Closing shall
continue to have or claim to have contingent rights to (i) any
capital stock of either Company, or (ii) any unfunded proceeds or
other consideration resulting from any arrangement related to any
Company and by and between Company Stockholder and such former
holder of capital stock.
(e) Consents. Parent shall have
received duly executed copies of all third party consents,
approvals, assignments, notices, waivers, authorizations or other
certificates set forth in Section 5.5 of the Companies Disclosure
Schedule.
(f) Employment Matters. The
executed Employment Agreements of each of the persons identified
under the heading “Key Employees” on Exhibit A-1 shall continue to
be in full force and effect.
(g) Termination, Modification or
Satisfaction of Company Stockholder Documents and Rights.
Each of the agreements identified on Section 8.2(g) of the Companies
Disclosure Schedule shall have been terminated, effective as of the
Closing, in accordance with their respective terms, and the parties
to the agreements identified on Section 8.2(g) of the
Companies Disclosure Schedule shall have waived all of their
respective rights thereunder, effective as of, and contingent upon,
the Closing.
(h) Resignations of Directors and
Officers. The persons holding the positions of a director of
either Company immediately prior to the Effective Time, shall have
resigned from such positions in writing effective as of the
Effective Time.
(i) Estimated Net Working Capital.
Each Company shall deliver the estimated amount of Net Working
Capital as of Closing (the “Estimated Net Working Capital”)
set forth on the Estimated Working Capital Statement (as defined
below). Prior to the Closing, each Company will provide Parent with
a written statement setting forth the Estimated Net Working Capital
and its components (the “Estimated Working Capital
Statement”).
(j) Consideration Spreadsheet.
Parent shall have received the Consideration Spreadsheet signed by
the Company Stockholder certifying that the Consideration
Spreadsheet is true, complete and accurate as of the Closing Date
and immediately prior to the Effective Time; provided, however, that such receipt
shall not be deemed to be an agreement by Parent that the
Consideration Spreadsheet is accurate and shall not diminish
Parent’s remedies hereunder if the Consideration Spreadsheet
is not accurate.
(k) Company Good Standing
Certificates. Parent shall have received a certificate from
the Office of the Secretary of State of the State of Texas (and
each such other state in which each Subsidiary of each Company is
formed) and each other State in which either Company or any of its
Subsidiaries is qualified to do business as a foreign corporation
certifying that each such Company or its Subsidiary, as applicable,
is in good standing and that all applicable fees of such Company or
Subsidiary through and including the Closing Date have been
paid.
(l) FIRPTA.
Parent shall have received from Company Stockholder a properly
completed and signed statement under Treasury Regulation Section
1.1445-2(b)(2).
(m) No Litigation. There shall not
be pending any suit, action or proceeding against either Company by
any of such Company’s (current and former) stockholders or
any domestic administrative agency or commission or other domestic
Governmental Authority (i) challenging the acquisition by Parent or
Merger Sub of any shares of capital stock of such Company, seeking
to restrain or prohibit the consummation of the Merger applicable
to such Company, or seeking to place limitations on the ownership
of shares of capital stock of such Company (or shares of common
stock of the applicable Surviving Corporation) by Parent or the
applicable Merger Sub or seeking to obtain from such Company,
Parent or Merger Sub any damages that are material in relation to
such Company, (ii) seeking to prohibit or materially limit the
ownership or operation by such Company, Parent or any of
Parent’s Subsidiaries of any material portion of any business
or of any assets of such Company, Parent or any of Parent’s
Subsidiaries, or to compel such Company, Parent or any of
Parent’s Subsidiaries to divest or hold separate any material
portion of any business or of any assets of such Company, Parent or
any of Parent’s Subsidiaries, as a result of the applicable
Merger or (iii) seeking to prohibit Parent or any of Parent’s
Subsidiaries from effectively controlling in any material respect
the business or operations of such Company upon the Effective
Time.
(n) Material Adverse Effect. Since
the Agreement Date, there shall not have occurred and be continuing
a Material Adverse Effect with respect to either
Company.
(o) Promissory Note Payoff and Lien
Release Letter. Parent shall receive the Promissory Note
Payoff and Lien Release Letter in form reasonably satisfactory to
Parent.
(p) Investor Representation
Statement. Parent shall receive an Investor Representation
Statement from each Holder (including Company Stockholder and
G&W) in form reasonably satisfactory to Parent.
(q) Company Indebtedness. Parent
shall receive payoff letters or other documentation in form
satisfactory to Parent from each counterparty set forth on
Section 7.6 of the Companies Disclosure
Schedule.
8.3 Additional Conditions to Obligations
of the Companies. The obligation of
the Companies to effect the Mergers are subject to the satisfaction
of each of the following conditions, any of which may be waived, in
writing, exclusively by the Companies:
(a) Representations and Warranties.
The representations and warranties of Parent and Merger Subs set
forth in this Agreement that are qualified by materiality shall be
true and correct, and the representation and warranties of Parent
and Merger Subs set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; and the
Companies shall have received a certificate signed on behalf of
Parent by an authorized officer of Parent to such
effect.
(b) Performance of Obligations of Parent
and Merger Subs. Parent and Merger Subs shall have performed
in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date; and
the Companies shall have received a certificate signed on behalf of
Parent by an authorized officer of Parent to such
effect.
(c) Government Consents. There
shall have been obtained at or prior to the Closing Date such
permits or authorizations, and there shall have been taken all such
other actions by any Governmental Authority or other regulatory
authority having jurisdiction over the parties and the actions
herein proposed to be taken, as may be required to consummate the
Mergers.
(d) No Litigation. There shall not
be pending any suit, action or proceeding against Parent or any of
its Subsidiaries or by any domestic administrative agency or
commission or other domestic Governmental Authority (i) challenging
the acquisition by Parent or Merger Sub of any shares of capital
stock of the Companies, seeking to restrain or prohibit the
consummation of the Merger applicable to such Companies, or seeking
to place limitations on the ownership of shares of Parent Stock by
any Holder or seeking to obtain from such Company, Parent or Merger
Sub any damages that are material in relation to the Merger, (ii)
seeking to prohibit or materially limit the ownership or operation
by such Company, Parent or any of Parent’s Subsidiaries of
any material portion of any business or of any assets of such
Company, Parent or any of Parent’s Subsidiaries, or to compel
such Company, Parent or any of Parent’s Subsidiaries to
divest or hold separate any material portion of any business or of
any assets of such Company, Parent or any of Parent’s
Subsidiaries, as a result of the applicable Merger or (iii) seeking
to prohibit Parent or any of Parent’s Subsidiaries from
effectively controlling in any material respect the business or
operations of such Company upon the Effective Time.
(e) Material Adverse Effect. Since
the Agreement Date, there shall not have occurred a Material
Adverse Effect on Parent.
(f) Release of Guarantees. Company
Stockholder, Kenny Boner and Gene Rhoades, each shall have received
the release of his guarantee of the Wells Fargo Credit Facility as
described in Section
7.7.
(g) Registration Rights Agreement.
Each Holder shall have received a Registration Rights Agreement
executed by Parent as of the Closing Date in a form reasonably
satisfactory to such Holders.
ARTICLE IX
9.1 Termination by Mutual
Consent. This Agreement
may be terminated at any time prior to the Effective Time by the
mutual written consent of Parent and the Companies.
(a) Either Parent or
the Companies, by giving written notice to the other, may terminate
this Agreement if a court of competent jurisdiction or other
Governmental Authority shall have issued a nonappealable final
order, decree or ruling or taken any other action, in each case
having the effect of permanently restraining, enjoining or
otherwise prohibiting either Merger or any other material
transaction contemplated by this Agreement.
(b) Either Parent or
the Companies, by giving written notice to the other, may terminate
this Agreement if either Merger shall not have been consummated by
midnight in Washington, DC on October 1, 2017; provided, however, that the right to
terminate this Agreement pursuant to this Section 9.2(b) shall not
be available to any party whose breach of a representation or
warranty or covenant made under this Agreement by such party
results in the failure of any condition set forth in Article VIII to be fulfilled or
satisfied on or before such date.
(c) Either Parent or
the Companies, by giving written notice to the other, may terminate
this Agreement at any time prior to the Effective Time if, in the
case of the Companies, Parent has committed a breach, or in the
case of Parent, either Company has committed a breach, of (i) any
of its representations and warranties under Article III or Article IV, as applicable, or
(ii) any of its covenants under Article V or Article VI, as applicable, and
has not cured such breach within ten (10) business days after the
party seeking to terminate this Agreement has given the other party
written notice of such breach and its intention to terminate this
Agreement pursuant to this Section 9.2(c) (provided, however, that no such cure
period shall be available or applicable to any such breach which by
its nature cannot be cured) and if not cured on or prior to the
Closing Date, such breach would result in the failure of any of the
conditions set forth in Article VIII, as applicable, to
be fulfilled or satisfied; provided, however, that the right to
terminate this Agreement under this Section 9.2(c) shall not be available
to a party if the party is at that time in material breach of this
Agreement.
(d) Parent, by giving
written notice to the Companies, may terminate this Agreement if
(i) either Company’s Board of Directors shall have for
any reason recommended, endorsed, accepted or agreed to an
Alternative Transaction or shall have resolved to do any of the
foregoing, or (ii) if an inquiry, offer or proposal for an
Alternative Transaction shall have been made and such
Company’s Board of Directors in connection therewith does not
within five (5) business days of Parent’s request to do so
reconfirm its approval and recommendation of this Agreement and the
transactions contemplated hereby and reject such Alternative
Transaction.
(e) The Companies, by
giving written notice to Parent, may terminate this Agreement (at
any time prior to the approval and adoption of this Agreement by
the required vote of the stockholders of each Company) if either
Company has received a Superior Proposal and the Board of Directors
of such Company determines in its good faith judgment, confirmed by
advice of outside legal counsel, that it is required to recommend
or accept such Superior Proposal provided that such Company has
substantially complied with the provisions of Section 5.7.
9.3 Effect of
Termination. In the event of
termination of this Agreement as provided in Section 9.2, this Agreement shall
forthwith become void and there shall be no liability or obligation
on the part of Parent, either Merger Sub or either Company or their
respective officers, directors, stockholders or Affiliates;
provided,
however, that (i)
the provisions of this Section 9.3 (Effect of Termination) and
Article
XI (Miscellaneous) shall
remain in full force and effect and survive any termination of this
Agreement and (ii) nothing herein shall relieve any party hereto
from liability in connection with any material breach of any of
such party’s representations, warranties or covenants
contained herein.
ARTICLE X
10.1 Survival
Periods. If the Mergers
are consummated, the representations and warranties of the parties
contained in this Agreement and the representations and warranties
set forth in the Companies’ closing certificate referenced in
Section
8.2, respectively,
shall survive the Effective Time, regardless of any investigation
or disclosure made by or on behalf of any of the parties to this
Agreement for a period of eighteen (18) months following the
Closing (the “Indemnity
Period”), except that the representations and
warranties set forth in the Fundamental Representations shall
survive the Effective Time, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this
Agreement for a period of thirty-six (36) months following the
Closing (the “Fundamental
Reps Indemnity Period”); provided, however, that (a) no right to
indemnification pursuant to this Article X in respect of any
claim based upon any breach of any representation or warranty that
is not a Fundamental Representation that is set forth in a Notice
of Claim delivered prior to the expiration of the Indemnity Period
shall be affected by the expiration of such Indemnity Period, and
(b) no right to indemnification pursuant to this Article X in respect of any
claim based upon any breach of any Fundamental Representation that
is set forth in a Notice of Claim delivered prior to the expiration
of the Fundamental Reps Indemnity Period shall be affected by the
expiration of such Fundamental Reps Indemnity Period. If the
Mergers are consummated, all covenants of the parties (including
the covenants set forth in Article V and Article VI) shall expire and be
of no further force or effect as of the Effective Time, except to
the extent such covenants provide that they are to be performed
after the Effective Time, in which case such covenants shall
survive until fully performed or observed in accordance with their
terms. The right to indemnification pursuant to Article X based on any breach or
inaccuracy of such representations and warranties will not be
affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation or
warranty; provided,
however, that the
representations and warranties of the Companies shall be deemed to
be limited by the disclosures set forth in the Companies Disclosure
Schedule and any subsequent updates or modifications thereto
prepared in accordance with the terms hereof. The waiver of any
condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant, will not
affect any right to indemnification that may otherwise exist based
on any breach or inaccuracy of such representations, warranties and
covenants. No claim for indemnification may be asserted after the
expiration of the Indemnity Period (except in the case of fraud).
Nothing in this Section 10.1 shall limit the
application of Section 10.3(d).
10.2 Indemnification by Company
Stockholder. From and after
the Effective Time, Company Stockholder shall indemnify each
Indemnitee (except as provided for in Section 10.3), from and
against any Damages that are directly or indirectly suffered or
incurred by any of the Indemnitees to the extent that such Damages
are the result of or arising out of:
(a) any inaccuracy in
or breach of any representation or warranty made by either
Companies in this Agreement as of the date of this
Agreement;
(b) any inaccuracy in
or breach of any representation or warranty made by either
Companies: (i) in this Agreement as if such representation or
warranty was made on and as of the Closing; or (ii) in either
Company’s closing certificate;
(c) any breach of any
covenant or obligation of either Company or the Company Stockholder
in this Agreement;
(d) any amount by which
the Final Net Working Capital is less than the Target Net Working
Capital Amount, as any shortfall is conclusively determined
pursuant to Section
10.4;
(e) any Pre-Closing
Taxes, which will be paid in accordance with Section 7.3(a)(i);
or
(f) any claim by any
current or former stockholder of any Company.
Neither
Company shall have any liability with respect to this Article X after the Closing and
the Indemnifying Parties will have no right to seek contribution
from the Companies after the Closing with respect to their
indemnification obligations hereunder; provided, however, that the Indemnifying Parties
shall have the right to seek recovery against, including defense
and cost of defense, any Company insurance policy existing as of
the Closing Date that may provide coverage for any Legal Proceeding
described in Section 10.5, or for any
Damages based upon facts described in a Notice of Claim described
in Section 10.6,
hereof.
The
Indemnitees shall take all reasonable steps to mitigate and
otherwise minimize any Damages to the extent reasonably possible
upon and after becoming aware of any event which would reasonably
be expected to result in any Damages.
(a) Deductible. Subject to
Sections
10.3(c) and
10.3(d), no
Indemnitee shall be entitled to be indemnified pursuant to
Section 10.2(a) or
Section 10.2(b) for
any actual or alleged inaccuracy in or breach of any representation
or warranty in this Agreement until such time as the total amount
of all Damages (including the Damages arising from such actual or
alleged inaccuracy or breach and all other Damages arising from any
other actual or alleged inaccuracies or breaches of any
representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or
have otherwise directly or indirectly become subject, exceeds
$25,000 (the “Deductible”) in the aggregate. If
the total amount of Damages exceeds the Deductible, then the
Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for the amount of the Damages in excess
of the Deductible. For the sake of clarity, the Deductible shall
not apply to the indemnities set forth in Sections 10.2(c) through
(f).
(b) Liability Cap. Subject to
Sections
10.3(c) and
10.3(d), the
maximum amount for which an Indemnitee may be indemnified pursuant
to Section 10.2(a)
or Section 10.2(b)
for any actual or alleged inaccuracy in or breach of any
representation or warranty in this Agreement, or Section 10.2(c) for any breach
of any covenant or obligation, shall be $550,000.
(c) Applicability of Deductible.
The limitations set forth in Section 10.3(a) and
Section 10.3(b)
shall not apply: (i) in the event of fraud (whether on the part of
such Indemnifying Party, any other Indemnifying Party, the
Companies or any Entity Representative of the Companies); or (ii)
to any matter also covered by Sections 10.2(c) through
(f).
(d) Exceptions to Limitations. With
respect to Damages arising or resulting from inaccuracies in or
breaches of any of the Fundamental Representations, the maximum
aggregate amount for which Indemnitees may be indemnified pursuant
to this Agreement shall be the maximum number of shares of Parent
Stock included in the Merger Consideration (except in the case of
fraud).
(e) Net Working Capital. There
shall be no obligation on the part of the Indemnifying Parties to
indemnify the Indemnitees under this Article X to the extent that
any claim for indemnification relates to an amount otherwise
included in the calculation of Net Working Capital as of the
Closing.
(f) Change in Applicable Law. There
shall be no obligation to indemnify for any Damages which would not
have arisen but for any alteration or repeal or enactment of any
Applicable Law after the Closing Date.
(g) Determination of Damages. For
purposes of determining the amount of Damages resulting from (i)
any inaccuracy in or breach of any representation or warranty, or
(ii) any breach of any covenant, such Damages shall be determined
without regard to any materiality, Material Adverse Effect or other
similar qualification contained in or otherwise applicable to such
representation, warranty or covenant.
(h) Sole and Exclusive Remedy. The
parties acknowledge and agree that an Indemnitee’s sole and
exclusive remedy with respect to any and all claims and Damages
(other than claims and Damages arising from fraud) relating to
either Merger or other transactions contemplated by this Agreement,
shall be pursuant to the indemnification provisions and the set off
rights against Parent Stock (including, for the avoidance of doubt,
Parent Common Stock, Parent Preferred Stock, and all proceeds from
any sale of such Parent Stock) issued to Company Stockholder. The
parties hereby expressly acknowledge and agree that any amount of
Damages that any Indemnitee may be entitled to recover under this
Article X (other
than claims and Damages arising from fraud) shall be satisfied
solely by the cancellation of that number of shares of Parent Stock
equal to the amount of such Damages. For purposes of this
Article
X, each share of
Parent Common Stock shall be deemed to be worth the five (5)
trading day VWAP of each share of Parent Common Stock, as
determined immediately prior to such cancellation. In furtherance
of the foregoing, Parent hereby waives (other than in the case of
claims and Damages arising from fraud), to the fullest extent
permitted under Law, any and all rights, claims and causes of
action for any matter relating to the Mergers or other transactions
contemplated by this Agreement it may have against the other
parties hereto and their Affiliates and each of their respective
representatives arising under or based upon any Law, except
pursuant to the indemnification provisions and set off rights set
forth in this Article
X. Nothing in this Section 10.3(h) shall
limit any an Indemnitee’s right to seek and obtain any (a)
equitable relief pursuant to Section 11.5, (b) remedies under the
Ancillary Agreements or (c) remedy on account of any party’s
fraud in any manner whatsoever.
(i) Company Stockholder Waiver and Full
Release. Notwithstanding anything to the contrary herein,
Company Stockholder, on behalf of himself and each former
stockholder of each Company, hereby waives to the fullest extent
permitted under Law, any and all rights, claims and causes of
action (including in connection with the Mergers or other
transactions contemplated by this Agreement) it, he or she may have
against the Parent, any Company, any Merger Sub, any Affiliate of
the foregoing or each of their respective representatives, in each
case except pursuant to the indemnification provisions set forth in
this Section 10.9. Further,
Company Stockholder hereby irrevocably and unconditionally releases
and forever discharges (on behalf of himself and each former
stockholder of each Company) Parent, each Company, their respective
Affiliates and each of their respective current and former
officers, directors, employees, partners, managers, members,
advisors, successors and assigns (collectively, in such capacity,
the “Released
Parties”) of and from any and all actions, causes of
action, suits, proceedings, executions, judgments, duties, debts,
dues, accounts, bonds, contracts and covenants (whether express or
implied), and claims and demands whatsoever whether in law or in
equity relating to (A) the transactions contemplated by this
Agreement and (B) any employment arrangements which Company
Stockholder may have against each of the Released Parties, in
either case in respect of any cause, matter or thing occurring or
arising on or prior to the Closing; provided, that this
Section 10.3(i)
shall not alter, affect or terminate this Agreement or any rights
of Company Stockholder arising hereunder. In addition, nothing in
this Section 10.3(i) shall
affect the right of the Company Stockholder to seek and obtain (a)
equitable relief to which any Person shall be entitled pursuant to
Section
11.5, (b) remedies
under the Ancillary Agreements or (c) remedy on account of any
party’s fraud in any manner whatsoever.
(a) Within ninety
(90) days after the Closing Date, Parent shall prepare and deliver
to the Company Stockholder a statement setting forth its
calculation of Net Working Capital as of the Closing (the
“Final Closing Working
Capital Statement”) and a certificate of the Parent
that the Final Working Capital Statement was prepared using the
same accounting methods, policies, principles, practices and
procedures, with consistent classifications, judgments and
estimation methodologies that were used in the preparation of the
Company Financial Statements.
(b) If the Company
Stockholder disagrees with the Final Closing Working Capital
Statement, the Company Stockholder shall notify Parent in writing
of such disagreement within thirty (30) days after delivery of the
statement, which notice shall describe the nature of any such
disagreement in reasonable detail, identify the specific items
involved and, to the extent practicable, the dollar amount of each
such disagreement and provide reasonable supporting documentation
for each such disagreement (collectively, a “Disagreement Notice”). During the
Company Stockholder review of the Final Closing Working Capital
Statement, the Company Stockholder shall have reasonable access to
any documents, schedules or work papers, to the personnel who
prepared the statement and to other employees of or advisors to the
Parent or either Surviving Corporation to the extent access is
reasonably required for the Company Stockholder to assess the
acceptability of the Final Closing Working Capital Statement. If
the Company Stockholder fails to deliver such notice in such thirty
(30) day period, the Company Stockholder shall have waived its
right to contest, and shall be deemed to have agreed to, the Final
Closing Working Capital Statement.
(c) If the Company
Stockholder notifies Parent of any objections to the Final Closing
Working Capital Statement, the Company Stockholder and Parent
shall, within thirty (30) days following the date of such notice
(the “Resolution
Period”), negotiate in good faith to resolve their
differences and any written resolution by them as to any disputed
item or amount shall be final and binding for all purposes under
this Agreement. If at the conclusion of the Resolution Period, the
Company Stockholder and Parent are unable to resolve all
disagreements identified by the Company Stockholder pursuant to
Section
10.4(a), then such
disagreements shall be submitted for final and binding resolution
to an independent nationally recognized accounting firm selected in
good faith and by mutual agreement of the Company Stockholder and
Parent to resolve such disagreements (the “Accounting Arbitrator”). The
Accounting Arbitrator will only consider those items and amounts
set forth in the Final Closing Working Capital Statement as to
which the Company Stockholder and Parent have disagreed and must
resolve the matter in accordance with the terms and provisions of
this Agreement and shall deliver to the Company Stockholder and
Parent, as promptly as practicable and in any event within
sixty (60) days after its appointment, a written report
setting forth the resolution of any such disagreement determined in
accordance with the terms of this Agreement. The Accounting
Arbitrator shall make its determination based solely on
presentations and supporting material provided by the parties and
not pursuant to any independent review. In reaching its
determination, the only alternatives available to the Accounting
Arbitrator will be to (i) accept the position of the Company
Stockholder, (ii) accept the position of Parent or (iii) accept a
position between those two positions. The determination of the
Accounting Arbitrator shall be final and binding upon the Company
Stockholder and Parent. Judgment may be entered upon the
determination of the Accounting Arbitrator in any court having
jurisdiction over the party against which such determination is to
be enforced. The fees, expenses and costs of the Accounting
Arbitrator shall be borne pro rata as between the Company
Stockholder (on behalf of the Indemnifying Parties), on the one
hand, and Parent, on the other hand, in proportion to the final
allocation made by such Accounting Arbitrator of the disputed items
weighted in relation to the claims made by the Company Stockholder
and Parent, such that the prevailing party pays the lesser
proportion of such fees, costs and expenses.
10.5 Defense of Third Party
Claims. In the event of
the assertion or commencement by any Person of any claim or Legal
Proceeding (whether against either Surviving Corporation, either
Company, Parent or any other Person) with respect to which any
Indemnitee has a right to indemnification pursuant to this
Article X, Company
Stockholder shall have the right, at his election, to proceed with
the defense of such claim or Legal Proceeding on his own with
counsel reasonably satisfactory to the Parent. The parties agree
that, without limiting Company Stockholder’s choice of
counsel, it shall be reasonable for Company Stockholder to use
counsel that he has used in the past. The Parent shall have the
right to participate in the defense of the claim at its own expense
(on behalf of the Indemnifying Parties). If Company Stockholder so
proceeds with the defense of any such claim or Legal
Proceeding:
(a) Company Stockholder
shall keep the Parent reasonably informed as to the status of and
all material developments in the defense;
(b) subject to the
other provisions of Article X, all reasonable
expenses relating to the defense of such claim or Legal Proceeding
shall be borne and paid exclusively by the Indemnifying Parties and
not made subject to the Deductible;
(c) each Indemnitee
shall make available to Company Stockholder any documents and
materials in such Indemnitee Party’s possession or control
that may be necessary to the defense of such claim or Legal
Proceeding, all as reasonably determined by Parent;
and
(d) Company Stockholder
shall not have the right to settle, adjust or compromise such claim
or Legal Proceeding without the consent of Parent, (which consent
shall not be unreasonably withheld or delayed).
(e) If Company
Stockholder does not elect to proceed with the defense of any such
claim or Legal Proceeding, the Parent may proceed with the defense
of such claim or Legal Proceeding with counsel reasonably
satisfactory to Company Stockholder; provided, however, that the
Parent may not settle, adjust or compromise any such claim or Legal
Proceeding without the prior written consent of Company Stockholder
(which consent may not be unreasonably withheld or delayed). Parent
shall give Company Stockholder prompt notice of the commencement of
any such Legal Proceeding against Parent, either Merger Sub or
either Company; provided, however, that any failure on
the part of Parent to so notify the Company Stockholder shall not
limit any of the indemnification obligations set forth in
Article X (except
to the extent such failure materially prejudices the defense of
such Legal Proceeding).
(a) If any Indemnitee
has or claims in good faith to have incurred or suffered, or
believes in good faith that it may incur or suffer, Damages for
which it is or may be entitled to be held harmless, indemnified,
compensated or reimbursed under Article X or for which it is or
may be entitled to a monetary remedy (such as in the case of a
claim based on fraud), such Indemnitee may deliver a notice of
claim (a “Notice of
Claim”) to the Company Stockholder; provided, however, that the failure
timely to give a Notice of Claim shall affect the rights of an
Indemnitee hereunder only to the extent that such failure has a
materially prejudicial effect on the defenses or other rights
available to the Indemnitee. Each Notice of Claim shall: (i) state
that such Indemnitee believes in good faith that such Indemnitee is
or may be entitled to indemnification, compensation or
reimbursement under Article X or is or may
otherwise be entitled to a monetary remedy; (ii) contain a brief
description of the facts and circumstances supporting the
Indemnitee’s claim; and (iii) if practicable, contain a good
faith, non-binding, preliminary estimate of the aggregate amount of
the actual and potential Damages that the Indemnitee believes have
arisen and may arise as a result of such facts and circumstances
(the aggregate amount of such estimate, as it may be modified by
such Indemnitee in good faith from time to time, being referred to
as the “Claimed
Amount”).
(b) During the
30-day period commencing upon delivery by an Indemnitee to the
Company Stockholder of a Notice of Claim (the “Dispute Period”), the Company
Stockholder may deliver to the Indemnitee who delivered the Notice
of Claim a written response (the “Response Notice”) in which the
Company Stockholder: (i) agrees that the full Claimed Amount is
owed to the Indemnitee; (ii) agrees that part, but not all, of the
Claimed Amount (the “Agreed
Amount”) is owed to the Indemnitee; or (iii) indicates
that no part of the Claimed Amount is owed to the Indemnitee. If
the Response Notice is delivered in accordance with clause (ii) or
(iii) of the preceding sentence, the Response Notice shall also
contain a brief description of the facts and circumstances
supporting the Company Stockholder’s claim that only a
portion or no part of the Claimed Amount is owed to the Indemnitee,
as the case may be. Any part of the Claimed Amount that is not
agreed to be owed to the Indemnitee pursuant to the Response Notice
(or the entire Claimed Amount, if the Company Stockholder asserts
in the Response Notice that no part of the Claimed Amount is owed
to the Indemnitee) is referred to in this Agreement as the
“Contested
Amount” (it being understood that the Contested Amount
shall be modified from time to time to reflect any good faith
modifications by the Indemnitee to the Claimed Amount). If a
Response Notice is not received by the Indemnitee prior to the
expiration of the Dispute Period, then the Company Stockholder
shall be conclusively deemed to have agreed that the full Claimed
Amount is owed to the Indemnitee.
10.7 Exercise of Remedies Other Than by
Parent. No Indemnitee
(other than Parent or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise
any other remedy under this Agreement unless Parent (or any
successor thereto or assign thereof) shall have consented to the
assertion of such indemnification claim or the exercise of such
other remedy.
10.8 Certain
Limitations. The amount of any
Damages for which indemnification is provided under this Agreement
shall be net of any Tax benefits realized by an Indemnitee in
connection with such Damages and amounts actually recovered by the
Indemnitees from third parties (including amounts actually
recovered under insurance policies) with respect to such Damages.
Any netting of insurance proceeds may be satisfied by the
Indemnitees assigning any potential insurance claims to the
Indemnifying Parties and, in any event, the potential availability
of insurance proceeds shall not permit delay by the Company
Stockholder in the performance of its duties under this
Article X. Any
Indemnifying Parties hereunder shall be subrogated to the rights of
the Indemnitees as against any relevant insurer. Any Damages
recoverable under this Article X (including with
respect to Net Working Capital) shall be determined without
duplication of recovery by reason of the state of facts giving rise
to such Damages constituting a breach of more than one
representation, warranty, covenant or agreement.
10.9 Parent
Indemnification. Effective at and
after the Effective Time, Parent hereby indemnifies Company
Stockholder and his assignees (collectively, the
“Stockholder
Indemnitees”) against and agrees to hold each of them
harmless from any and all Damages incurred or suffered by the
Stockholder Indemnitees arising out of (a) any inaccuracy in or
material breach of any representation or warranty made by Parent or
either Merger Sub as of the date of this Agreement; (b) any
inaccuracy or breach of any representation or warranty made by
Parent or either Merge Sub (i) in this Agreement as if such
representation or warranty was made as of the Closing; or (ii) in
the Parent’s closing certificate; or (c) any breach of any
covenant or obligation of Parent, either Merger Sub or either
Surviving Corporation in this Agreement; provided, that Parent’s
maximum aggregate liability shall not exceed an amount equal to
$250,000.
ARTICLE XI
11.1 Governing
Law.
The internal laws of the State of Delaware, irrespective of its
conflicts of law principles, shall govern the validity of this
Agreement, the construction of its terms, the interpretation and
enforcement of the rights and duties of the parties hereto and the
consummation and effects of the Mergers; provided, however, that the internal laws
of the State of Texas shall govern the validity of the Mergers in
Texas.
11.2 Assignment; Binding Upon Successors
and Assigns. This Agreement
shall inure to the benefit of the successors and assigns of Parent,
including any successor to, or assignee of, all or substantially
all of the business and assets of Parent. Except as set forth in
the preceding sentence, no party hereto may assign any of its
rights or obligations hereunder without the prior written consent
of the other parties hereto; provided, this provision shall not
apply to an assignment by operation of law to a designated executor
of the Company Stockholder resulting from the death of the Company
Stockholder. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. Any assignment in violation of this provision
shall be void.
11.3 Severability. If any provision
of this Agreement, or the application thereof, shall for any reason
and to any extent be invalid or unenforceable, then the remainder
of this Agreement and the application of such provision to other
persons or circumstances shall be interpreted so as reasonably to
effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that shall achieve, to the
extent possible, the economic, business and other purposes of the
void or unenforceable provision.
11.4 Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall
be an original as regards any party whose signature appears thereon
and all of which together shall constitute one and the same
instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the
signatures of all parties reflected hereon as
signatories.
11.5 Other
Remedies. Except as
otherwise expressly provided herein, any and all remedies herein
expressly conferred upon a party hereunder shall be deemed
cumulative with and not exclusive of any other remedy conferred
hereby or by law on such party, and the exercise of any one remedy
shall not preclude the exercise of any other. The parties hereto
agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any
court of the United States or any State having
jurisdiction.
11.6 Amendments and
Waivers. Any term or
provision of this Agreement may be amended, and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the
performance hereof shall not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This
Agreement may be amended by the parties hereto as provided in this
Section 11.6 at any time before or
after adoption of this Agreement by the Company Stockholder, but,
after such adoption, no amendment shall be made which by Applicable
Law requires the further approval of the Company Stockholder
without obtaining such further approval. At any time prior to the
Effective Time, each Company and Parent may, to the extent legally
allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other, (b) waive any inaccuracies
in the representations and warranties made to it contained herein
or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions for its benefit
contained herein. No such waiver or extension shall be effective
unless signed in writing by the party against whom such waiver or
extension is asserted. The failure of any party to enforce any of
the provisions hereof shall not be construed to be a waiver of the
right of such party thereafter to enforce such
provisions.
11.7 Expenses. Whether or not
the Mergers are successfully consummated, each party shall bear its
respective legal, accountants, and financial advisory fees and
other expenses incurred with respect to this Agreement, the Mergers
and the transactions contemplated hereby, except as otherwise set
forth in this Agreement.
11.8 Attorneys’
Fees. Should suit be
brought to enforce or interpret any part of this Agreement, the
prevailing party shall be entitled to recover, as an element of the
costs of suit and not as damages, reasonable attorneys’ fees
to be fixed by the court (including costs, expenses and fees on any
appeal). The prevailing party shall be entitled to recover its
costs of suit, regardless of whether such suit proceeds to final
judgment.
11.9 Notices. All notices and
other communications required or permitted under this Agreement
shall be in writing and shall be either hand delivered in person,
sent by facsimile, sent by certified or registered first-class
mail, postage pre-paid, or sent by nationally recognized express
courier service. Such notices and other communications shall be
effective upon receipt if hand delivered or sent by facsimile,
three (3) business days after mailing if sent by mail, and one
business day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may
notify the other parties in accordance with this Section 11.9:
If to
the Companies (on or after the Effective Date), or to Parent or
Merger Sub:
Novume
Solutions, Inc.
14420
Albemarle Point Place, Suite 200
Chantilly, VA
20151
Attention :
Robert Berman
with a
copy to:
Crowell
& Moring LLP
1001
Pennsylvania Avenue, NW,
Washington, DC
20004
Attention: Morris
F. DeFeo Jr., Esq.
Fax
No.: (202) 628-5116
If to
the Companies (prior to the Effective Date):
Global
Technical Services Inc. and Global Contract Professionals
Inc.
4000
Sandshell Drive
Ft.
Worth, TX 76137
Attention: Paul
Milligan
with a
copy to:
Decker
Jones, P. C.
801
Cherry Street, Unit #46
Fort
Worth, Texas 76102
Telephone: (817)
336-2400
Attention: Charles
B. Milliken, Esq.
Fax
No.: (817) 336-2181
If to
the Company Stockholder:
Paul
Milligan
[●]
[●]
11.10 Interpretation; Rules of
Construction. When a reference
is made in this Agreement to Exhibits, Sections or Articles, such
reference shall be to an Exhibit to, Section of or Article of this
Agreement, respectively, unless otherwise indicated. The words
“include”, “includes” and
“including” when used herein shall be deemed in each
case to be followed by the words “without limitation”.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. The parties hereto agree that they have been
represented by legal counsel during the negotiation and execution
of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that
ambiguities in an agreement or other document shall be construed
against the party drafting such agreement or document. Any dollar
amount included herein shall not be used as a basis for
interpreting the terms “material,”
“materially,” “materiality,”
“Material Adverse Effect” or any other similar
qualification in this Agreement.
11.11 Third Party Beneficiary
Rights. No provisions of
this Agreement are intended, nor shall be interpreted, to provide
or create any third party beneficiary rights or any other rights of
any kind in any client, customer, employee, Affiliate, stockholder,
partner or any party hereto or any other Person unless specifically
provided otherwise herein and, except as so provided, all
provisions hereof shall be personal solely among the parties to
this Agreement. Each Holder shall be an intended third party
beneficiary solely with regard to the provisions of Section 2.11(c).
11.12 Public
Announcement. Neither Company
shall make any public announcement of any kind regarding the terms
of this Agreement and the transactions contemplated hereby.
Following the date hereof, Parent may issue such press releases,
and make such other public disclosures regarding the Mergers, as it
determines are required or deems appropriate. The Companies and
Parent each confirm that they have entered into the Confidentiality
Agreement and that, subject to the preceding sentence, they are
each bound by, and shall abide by, the provisions of such
Confidentiality Agreement; provided, however, that Parent shall not
be bound by such Confidentiality Agreement after the Closing. If
this Agreement is terminated, the Confidentiality Agreement shall
remain in full force and effect, and all copies of documents
containing confidential information of a disclosing party shall be
returned by the receiving party to the disclosing party or be
destroyed, as provided in the Confidentiality Agreement. G&W
may disclose to its limited partners, members or investors, as
applicable, and to their respective representatives, the terms of
this Agreement or the transactions contemplated by this
Agreement.
11.13 Entire
Agreement. This Agreement,
the exhibits and schedules hereto, the Company Ancillary
Agreements, the Parent Ancillary Agreements and the Merger Sub
Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, among the parties with respect hereto other than
the Confidentiality Agreement. The express terms hereof control and
supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
11.14 Waiver of Jury
Trial. EACH OF PARENT,
GTS MERGER SUB, GCP MERGER SUB, GTS, GCP AND THE COMPANY
STOCKHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE ACTIONS OF PARENT, GTS MERGER SUB, GCP MERGER SUB, GTS, GCP AND
THE COMPANY STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first above
written.
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Novume Solutions, Inc.
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By:
/s/ Robert A.
Berman
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Name:
Robert A. Berman
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Title: Chief
Executive Officer
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Global Technical Services
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Global Contract Professionals
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Merger Sub Inc.
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Merger Sub, Inc.
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By:
/s/ Robert A.
Berman
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By:
/s/ Robert A.
Berman
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Name: Robert
A. Berman
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Name:
Robert A. Berman
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Title: President
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Title:
President
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Global Technical Services Inc.
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Global Contract Professionals Inc.
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By:
/s/ Kenny
Boner
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By:
/s/ Kenny
Boner
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Name: Kenny
Boner
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Name:
Kenny Boner
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Title: President
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Title:
President
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/s/ Paul
Milligan
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PAUL MILLIGAN
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