AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MOBILE REACH INTERNATIONAL, INC.,
OBJECTIVE SPECTRUM, INC.
AND
OBJECTIVE SPECTRUM, INC. SHAREHOLDERS
Dated as of August 23, 2005
Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of August 23, 2005, by and among Mobile Reach International,
Inc., a Delaware company (the "Acquiror"), Objective Spectrum, Inc., a North
Carolina corporation (the "Company") and Mark J. Lloyd and Norman E. Lloyd,
stockholders of the Company (the "Owners").
RECITALS
A. The Board of Directors of the Company and the Acquiror believe it
is in the best interests of their respective entities and the equityholders of
their respective entities to enter into a business combination by means of a
statutory merger of the Company with and into the Acquiror (the "Merger") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each outstanding share
of common stock, no par value per share, of the Company (excluding those held in
the treasury of the Company) (the "Company Common Stock") shall be converted
into fifteen thirteenths (15/13 or ~1.15385) (the "Exchange Ratio") shares of
Acquiror's Common Stock.
C. The Company, the Acquiror and the Owners desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(b) of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and to cause the Merger to
qualify as a reorganization under the provisions of Section 368(b) of the
Internal Revenue Code.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
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THE MERGER
1.1 The Merger.At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions set forth in this Agreement and the
applicable provisions of the Delaware General Corporation Law (the "DGCL"), the
Company shall be merged with and into the Acquiror, the separate corporate
existence of the Company shall cease and the Acquiror shall continue as the
surviving entity under the name "Mobile Reach International, Inc.". The
Acquiror, as the surviving entity after the Merger, is hereinafter sometimes
referred to as the "Surviving Entity."
1.2 Closing; Effective Time.The closing of the Merger (the "Closing") shall
take place as soon as practicable after the satisfaction or waiver of each of
the conditions set forth in Article VI or at such other time as the parties
hereto agree (the "Closing Date"). The Closing shall take place at such location
as the parties hereto agree. At the Closing and simultaneously therewith, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger in the form annexed hereto as Exhibit A (the "Certificate of Merger")
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of the DGCL ") (the time of filing of the Certificate of
Merger being the "Effective Time.)
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Agreement and Plan of Merger
1.3 Merger Consideration. Each outstanding share of common stock, no par
value per share, of the Company (excluding those held in the treasury of the
Company) (the "Company Common Stock") shall be converted into fifteen
thirteenths (15/13 or ~1.15385) (the "Exchange Ratio") shares of Acquiror's
Common Stock.
1.4 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Acquiror with control over, all assets,
property, rights, privileges, powers and franchises of the Company, the officers
and directors of the Company and the Acquiror shall, in the name of their
respective corporations or otherwise, take all such lawful and necessary action
as may be requested by the Acquiror.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a document of even date herewith and delivered
by the Company to the Acquiror prior to the execution and delivery of this
Agreement and referring by numbered section (and, where applicable, by lettered
subsection) of the representations and warranties in this Agreement (the
"Company Disclosure Schedule"), the Company represents and warrants to the
Acquiror and Merger Sub as set forth below. Any disclosure included with respect
to a particular representation or warranty shall be deemed to be a disclosure
with respect to all of the Company representations to which it applies, provided
that the application of such disclosure to such other representations and
warranties is either (i) readily apparent from the nature of such disclosure, or
(ii) reasonably indicated in the section of the Company Disclosure Schedule
where such disclosure is actually made.
2.1 Organization, Standing and Power.The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction where it is required by law to be so qualified, except where
such failure to qualify would not have a Material Adverse Effect (as defined in
Section 9.4) on the Company. True, correct and complete copies of the Articles
of Incorporation and Bylaws or other charter documents, as applicable, of the
Company, as amended to date, have been delivered to the Acquiror. The Company is
not in violation of any of the provisions of its Articles of Incorporation or
Bylaws. The Company does not own and never has owned, directly or indirectly,
any equity or similar interest in, or any interest convertible or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
2.2 Capital Structure.
(a) The authorized capital stock of the Company consists of one
million (1,000,000) shares of Common Stock of which three hundred twenty five
thousand (325,000) shares were issued and outstanding as of the date hereof. All
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof,
and are not subject to preemptive rights or rights of first refusal created by
statute, the Articles of Incorporation or Bylaws of the Company or any agreement
to which the Company is a party or by which it is bound. Except for the
agreements contemplated by this Agreement, there are no contracts, commitments
or agreements relating to voting, purchase or sale of the Company's capital
stock (i) between or among the Company and any of its stockholders or (ii)
between or among any of the stockholders of the Company.
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(b) Other than the shares described in (a) above, there are, except as
set forth in Section 2.2 in the Company Disclosure Schedule, no other
outstanding shares of capital stock or other securities of the Company and no
outstanding commitments to issue any shares of capital stock or securities of
the Company after the date hereof. Except for the rights created pursuant to
this Agreement, there are no other options, warrants, calls, rights, commitments
or agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement.
2.3 Authority. Subject to the requisite approval of the Merger and this
Agreement by the Company's stockholders, the Company has all requisite corporate
power and authority to execute and deliver this Agreement and any other
agreement contemplated hereunder (the "Transaction Agreements"), to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of the
Transaction Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity.
2.4 No Conflicts; Required Filings and Consents.
(a) The execution and delivery of the Transaction Agreements by the
Company do not, and the performance by the Company of its obligations hereunder
and thereunder, and the consummation of the Merger will not, (i) conflict with
or violate any provision of the Articles of Incorporation or Bylaws of the
Company, as amended (ii) conflict with or violate any law applicable to the
Company or by which any property or asset of the Company is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
the giving of notice or lapse of time or both could reasonably be expected to
become a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any material property or asset of the Company pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, except where such breach or
default would not have a Material Adverse Effect on the Company or impair the
Company's ability to consummate the transactions contemplated hereby.
(b) No filing or registration with, or notification to, and no permit,
authorization, consent or approval of, any United States Federal, state or local
or any foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbiter ("Governmental Entity") is
necessary for the execution and delivery of the Transaction Agreements by the
Company or the consummation by the Company of the transactions contemplated by
the Transaction Agreements except, (i) the filing of the Delaware Certificate of
Merger, (ii) such filings, registrations, notifications, permits,
authorizations, consents or approvals that result from the specific legal or
regulatory status of the Acquiror or as a result of any other facts that
specifically relate to the business or activities in which the Acquiror is
engaged other than the business of the Company and (iii) such other filings,
registrations, notices, permits, authorizations, consents and approvals that if
not obtained, made or given would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or impair the Company's ability to
consummate the transactions contemplated hereby or thereby.
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(c) Except as set forth in Section 2.4(c) of the Company Disclosure
Schedule, no consent of any third party is required by reason of the
transactions contemplated by the Transaction Agreements.
2.5 Permits; Compliance with Laws. The Company is in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Governmental Entity necessary for the Company to own, lease and operate its
properties or to offer or perform its services or to develop, produce, store,
distribute and market its products or otherwise to carry on its business as it
is now being conducted (collectively, the "Company Permits"), except where the
failure to have such Company Permits would not have a Material Adverse Effect on
the Company. As of the date of this Agreement, none of the Company Permits has
been suspended or cancelled nor is any such suspension or cancellation pending
or, to the knowledge of the Company, threatened. To the knowledge of the
Company, there are no facts or circumstances which have occurred or are in
existence which constitute a valid basis for the revocation or cancellation of
any Company Permit. The Merger will not result in the suspension or cancellation
of any Company Permit. All of the Company Permits are set forth in Section 2.5
of the Company Disclosure Schedule. The Company is not in conflict with, or in
default or violation of, (i) any law applicable to the Company or by which any
property or asset of the Company is bound or affected or (ii) any Company
Permits, except where such conflict would not have a Material Adverse Effect on
the Company. Since its inception, the Company has not received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of laws.
2.6 Financial Statements. Section 2.6 of the Company Disclosure Schedule
includes true, complete and correct copies of the Company's (i) unaudited
financial statements (balance sheet and income statement) as at, and for the
year ended December 31, 2004, and (ii) unaudited pro forma financial statements
(balance sheet and income statement) as at, and for the six-month period ended,
June 30, 2005 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated and with each other except that the unaudited financial
statements do not contain any footnotes as required by GAAP. The Financial
Statements were prepared from and in accordance with the books and records
maintained by the Company and fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments which will not be material
in nature or in amount. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
GAAP.
2.7 Absence of Certain Changes. Except as set forth on Section 2.7 of the
Company Disclosure Schedule, since December 31, 2004, the Company has conducted
its business only in the ordinary course consistent with past practice and there
has not occurred (i) as of the date hereof, any Material Adverse Effect on the
Company, (ii) any event that could reasonably be expected to prevent or
materially delay the performance of the Company's obligations pursuant to the
Transaction Agreements or the consummation of the Merger by the Company, (iii)
any change by the Company in its accounting methods, principles or practices,
(iv) any declaration, setting aside or payment of any dividend or distribution
in respect of the shares of Company Common Stock or any redemption, purchase or
other acquisition of any of the Company's securities, except for purchase from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of share in connection with any termination of
service to the Company, (v) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
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Agreement and Plan of Merger
payable to any employees, officers, consultants or directors of the Company,
(vi) any issuance or sale of any stock, notes, bonds or other securities, or
entering into any agreement with respect thereto other than Company Options or
capital stock issued upon exercise of Company Options, (vii) any amendment to
the Company's Articles of Incorporation or bylaws, (viii) other than in the
ordinary course of business consistent with past practice, any (A) purchase,
sale, assignment or transfer of any material assets, (B) mortgage, pledge or
existence of any lien, encumbrance or charge on any material assets or
properties, tangible or intangible, except for liens for taxes not yet due and
such other liens, encumbrances or charges which do not, individually or in the
aggregate, have a Material Adverse Effect on the Company, or (C) waiver of any
rights of material value or cancellation or any material debts or claims, (ix)
any incurrence of any material liability (absolute or contingent), except for
current liabilities and obligations incurred in the ordinary course of business
consistent with past practice, (x) any incurrence of any damage, destruction or
similar loss, whether or not covered by insurance, materially affecting the
business or properties of the Company, (xi) any entering into any transaction of
a material nature other than in the ordinary course of business, consistent with
past practice, or (xii) any negotiation or agreement by the Company to do any of
the things described in the preceding clauses (i) through (xi).
2.8 Absence of Undisclosed Liabilities. Except as disclosed on Section 2.8
of the Company Disclosure Schedule and to the extent set forth or reserved
against on the balance sheets of the Company as of June 30, 2005 as reported in
the Financial Statements (the "Company Balance Sheet"), the Company does not
have any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with GAAP, except for those
immaterial liabilities incurred after September 30, 2005 in the ordinary course
of the Company's business consistent with past practice.
2.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or, to the knowledge of the Company,
investigation pending before any agency, court or tribunal, foreign or domestic,
or, to the knowledge of the Company, threatened in writing against the Company
or any of its assets or properties or any of its officers or directors (in their
capacities as such). To the knowledge of the Company, there are no events or
circumstances which have occurred or currently are in existence which constitute
a valid basis for any action, suit, proceeding or claim against the Company that
would have a Material Adverse Effect. There is no judgment, decree or order
against the Company, or, to the knowledge of the Company, any of its directors
or officers (in their capacities as such), limiting the conduct of business by
the Company or that could prevent, enjoin, or alter or delay any of the
transactions contemplated by this Agreement or have a Material Adverse Effect.
There is no litigation (including arbitrations) by the Company which is pending
against any other person or entity.
2.10 Restrictions on Business Activities.There is no agreement, judgment,
injunction, order or decree binding upon the Company or any of its assets or
properties which has had or could have the effect of prohibiting or impairing
any current or future business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as currently
conducted or as currently proposed to be conducted by the Company.
2.11 Title to Property.The Company has good and marketable title to all of
its respective assets and properties (real and personal) and interests in assets
and properties (real and personal), reflected in the Company Balance Sheet or
acquired after June 30, 2005 (except assets, properties, interests in properties
and assets sold or otherwise disposed of since June 30, 2005 in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any kind or character, except the lien of current taxes not
yet due and payable. All properties used in the operations of the Company are
reflected in the Company Balance Sheet to the extent GAAP require the same to be
reflected.
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2.12 Intellectual Property.
(a) Section 2.12(a) of the Company Disclosure Schedule contains a true
and complete list of the Company's patents, patent applications, trademarks,
trademark applications, trade names, service marks, service mark applications,
internet domain names, internet domain name applications, copyrights and
copyright registrations and applications and any other filings and formal
actions made or taken pursuant to Federal, state, local and foreign laws by the
Company to protect its interests in the Company Intellectual Property, and
includes details of all due dates for further filings, maintenance, payments or
other actions falling due in respect of the Company Intellectual Property within
six (6) months of the Effective Time. All of the Registered Company Intellectual
Property remain in good standing and, with respect thereto, all fees due have
been paid and all required filings have been made as of the date hereof. The
Company has taken commercially reasonable action in accordance with normal
industry practice to maintain and protect each item described in clause (f) of
the definition of Company Intellectual Property set forth in Section 2.12(l)
below.
(b) The Company Intellectual Property contains only those items and
rights which are: (i) owned by the Company; (ii) in the public domain; or (iii)
rightfully used by the Company pursuant to a valid and enforceable license or
other agreement (the "Company Licensed Intellectual Property"), the parties,
date, term and subject matter of each such license or other agreement (each, a
"License Agreement") being set forth on Section 2.12(b) of the Company
Disclosure Schedule (except for "shrink-wrap" and software commercially
available on reasonable terms to any person for a license fee of no more than
five thousand dollars ($5,000.00)). Other than the Company Licensed Intellectual
Property and except as set forth on Scheduled 2.12(b), the Company has all
right, title and interest in and to the Company Intellectual Property which
includes all rights necessary to carry out the Company's current activities and
the Company's future activities to the extent such future activities are already
planned, including, without limitation, to the extent required to carry out such
activities, rights to make, use, reproduce, modify, adopt, create derivative
works based on, translate, distribute (directly and indirectly), transmit,
display and perform publicly, license, rent and lease and, other than with
respect to the Company Licensed Intellectual Property, assign and sell, the
Company Intellectual Property.
(c) Neither the Company Intellectual Property nor the disclosing,
copying, making, using, or selling of such Company Intellectual Property, or
products or services embodying such Company Intellectual Property, violates or
infringes on any proprietary or personal right of any person such as patent,
design right, trademark, trade name, service mark, trade dress, Internet domain
name, copyright, database right, statistical model, technology, invention,
supplier list, trade secret, know-how, computer software program or application
(collectively "Intellectual Property") of any person, anywhere in the world. The
representations and warranties made in this Section 2.12(c) shall apply to
claims of infringement, misappropriation or violation arising from (i) products
and technology of the Company existing as of the Effective Date or (ii) products
and technology of the Company under development as of the Effective Date up
through the first commercial release of such products or technology. The Company
has not received notice of any pending or threatened claims (i) challenging the
validity, effectiveness or, other than with respect to the Company Licensed
Intellectual Property, ownership by the Company of any Company Intellectual
Property, or (ii) to the effect that the use, or other than with respect to the
Company Licensed Intellectual Property, the distribution, licensing,
sublicensing, sale or any other exercise of rights in the Company Intellectual
Property, product, work, technology or process as now used or offered or
proposed for use, licensing, sublicensing or sale by the Company or its agents
or use by its customers infringes or will infringe on or misappropriate any
intellectual property or other proprietary or personal right of any person. No
such claims have been threatened by any person, nor to the Company's knowledge,
are there any valid grounds for any bona fide claim of any such kind. To the
knowledge of the Company, there is no unauthorized use, infringement or
misappropriation of any Company Intellectual Property by any third party,
employee or former employee or any Company Intellectual Property, other than
Company Licensed Intellectual Property, by any third party.
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(d) Except as set forth on Section 2.12(d) of the Company Disclosure
Schedule, all personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the conception and
development of the Company Intellectual Property on behalf of the Company, have
executed nondisclosure agreements and either (i) have been a party to an
enforceable agreement with the Company in accordance with applicable national
and state law that accords the Company full, effective, exclusive and original
ownership of all tangible and intangible property as "works-for-hire," arising
from the efforts of such personnel, or (ii) have executed appropriate
instruments of assignment in favor of the Company that have conveyed to the
Company full, effective and exclusive ownership of all tangible and intangible
property arising from the efforts of such personnel.
(e) Except as set forth on Section 2.12(e) of the Company Disclosure
Schedule, the Company is not, nor as a result of the execution or delivery of
the Transaction Agreements, or performance of the Company's obligations
hereunder or thereunder, will the Company be, in material violation of any
license, sublicense, agreement or instrument to which the Company is a party or
otherwise bound, nor will execution or delivery of the Transaction Agreements,
or performance of the Company's obligations hereunder or thereunder, cause the
diminution, termination or forfeiture of any of the Company Intellectual
Property.
(f) Section 2.12(f) of the Company Disclosure Schedule contains a true
and complete list of all of the Company's software programs currently used in
the Company's business in any product, technology, service or process (the
"Company Software Programs"). Except for Third Party Software (herein defined
below), the Company owns all right, title and interest in and to such Company
Software Programs free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements, encumbrances or charges of any kind.
Except as set forth in the license agreements listed in Schedule 2.12(b), no (i)
software or other intellectual property in which any third party has a
proprietary interest or (ii) shareware, freeware, open source code or any other
similar software or intellectual property obtained from the Internet or any
other third party source (collectively, "Third Party Software") are incorporated
into the Company Software Programs or are required for the operation of the
Company Software Programs in accordance with its specifications (except for
"shrink-wrap" and software commercially available on reasonable terms to any
person for a license fee of no more than five thousand dollars ($5,000.00)).
Except as set forth in any License Agreement relating to such Third Party
Software, the Company has full and unrestricted rights to use the Third Party
Software that it licenses and has adequate rights to incorporate any Third Party
Software into the Company Software Programs. Except as set forth in Section
2.12(f) of the Company's Disclosure Schedule, neither the transfer of the
Company Software Programs nor any contemplated use of the Company Software
Programs by the Company or any customer of the Company violates any term or
conditions of any License Agreement. Except as set forth in any License
Agreement relating to such Third Party Software, the Company has an unrestricted
right to sublicense the Third Party Software in connection with the Company
Software Programs. Except as disclosed in 2.12(b) of the Company Disclosure
Schedule, the Company is not obligated to pay any royalty, fee, or other payment
to any third party in connection with its use of any Third Party Software.
(g) Except as set forth on Section 2.12(g) of the Company Disclosure
Schedule, the Company has taken reasonable actions in accordance with industry
practice to maintain the confidentiality of the source code and system
documentation relating to the owned Company Software Programs ("Company Source
Code") and (i) has disclosed the Company Source Code only to those of its
employees who have a "need to know" the contents thereof in connection with the
performance of their duties to the Company and who have executed nondisclosure
agreements with the Company; and (ii) has disclosed the Company Source Code only
to those third parties who have executed nondisclosure agreements with the
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Company. No third party has any ownership, license or other right of any kind to
any Company Source Code. The Company Source Code is not subject to any source
code escrow arrangements.
(h) The Company Software Programs (i) have been designed to ensure
year 2000 compatibility, which includes, but is not limited to, date data
century recognition, and calculations that accommodate same century and
multi-century formulas and date values; (ii) operate in accordance with their
specifications prior to, during and after the calendar year 2000 AD; and (iii)
do not end abnormally or provide invalid or incorrect results as a result of
date data, specifically including date data which represents or references
different centuries or more than one century.
(i) Except as set forth on Schedule 2.12(i), the Company Intellectual
Property is free and clear of any and all mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges of any kind.
(j) Except as set forth in Section 2.12(j) of the Company Disclosure
Schedule, the Company does not owe nor will the Company owe any royalties or
other payments to third parties in respect of the Company Intellectual Property.
All royalties or other payments that have accrued prior to the Effective Time
have been paid, or will be paid prior to the Effective Time.
(k) To the knowledge of the Company, the owned Company Software
Programs and other Company Intellectual Property contain no "viruses." For the
purposes of this Agreement, "virus" means any computer code designed to disrupt,
disable or harm in any manner the operation of any software or hardware,
including, without limitation, worms, bombs, backdoors, trojan horses, clocks,
timers, or other disabling device code, designs or routines which causes the
software to be erased, inoperable, or otherwise incapable of being used, either
automatically or upon command by any party.
(l) "Company Intellectual Property" shall mean all of the Company's
(a) inventions (whether patentable or unpatentable and whether or not reduced to
practice), improvements thereto, and patents, patent applications, and patent
disclosures, together with reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (b) design rights, trade
dress, trademarks, trade names, corporate names, logos, service marks, and
Internet domain names (whether or not registered), together with translations,
adaptations, derivations, and combinations thereof and applications,
registrations, and renewals in connection therewith, (c) copyrights (whether or
not registered) and any applications, registrations and renewal in connection
therewith, (d) mask works and applications, registrations, and renewals in
connection therewith, (e) sui generis database rights, statistical models, and
technology, (f) trade secrets and confidential business information (including
know-how and customer and supplier lists, (g) computer software programs or
applications in both source and object code form, databases, technical
documentation of such software programs, registrations and applications for any
of the foregoing, and (h) all other tangible or intangible proprietary
information or materials that were are material to the Company's business or are
currently used in the Company's business in any product, technology or process
(i) currently being or formerly manufactured, published or marketed by the
Company or (ii) previously or currently under development for possible future
manufacturing, publication, marketing or other use by the Company.
(m) "Registered Company Intellectual Property" shall mean all Company
owned or exclusively licensed Company Intellectual Property subject to United
States, international and foreign (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) any mask work registrations and applications to
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register mask works; or (v) other application, certificate, filing,
registration, or other document issued by, filed with, or recorded by, any
state, government or other public legal authority.
2.13 Taxes.
(a) The Company has (i) duly and timely filed or caused to be filed
all Federal, state and local tax returns, statements, reports and forms required
to be filed by the Company and will duly and timely file or cause to be filed
all such applicable tax returns, statements, reports and forms required to be
filed prior to the Effective Date which relate to the Company or with respect to
which the Company is liable or otherwise in any way subject, including, without
limitation, any income, property, sales, use, franchise, added value,
withholding, and social security taxes, and all such tax returns (including all
amendments thereto) (A) are and will be complete, accurate and in accordance in
all material respects with all legal requirements applicable thereto and (B) as
of the time of filing, correctly reflected or will correctly reflect the facts
regarding the income, business assets, operations, activities, status or other
matters of the Company required to be shown thereon, (ii) paid or will pay, when
due, all taxes shown to be due and payable on such returns, or pursuant to any
assessment or otherwise, and (iii) properly accrued, charged or established
adequate reserves on the Financial Statements for all unpaid taxes arising in
respect of any fiscal year of the Company. No tax liabilities, disallowances or
assessments relating to the business, assets or employees or independent
contractors of the Company have been assessed as of the date hereof, and, to the
knowledge of the Company, there is no basis for any such liabilities,
disallowances or assessments. The Company is not delinquent in the payment of
any taxes which would result in the imposition of any charge, lien, encumbrance
or adverse claim of any kind whatsoever on the Company, its properties or assets
or the capital stock of the Company. The Company has properly withheld and/or
paid all withholding, employment or other similar taxes and all unemployment
compensation and similar obligations required to be withheld or paid. The
Company will be responsible for filing any tax return relating to the business
of the Company conducted prior to the Closing.
(b) The Company is not and has never been a United States real
property holding corporation within the meaning of Section 897(c)(2) and Section
897(c)(1)(A)(ii) of the Internal Revenue Code.
(c) Neither the Company nor any of its affiliates has taken or agreed
to take any action (other than actions contemplated by this Agreement) that
could be expected to prevent the Merger from constituting a "reorganization"
under Section 368(b) of the Code. The Company is not aware of any agreement or
plan to which the Company or any of its affiliates is a party or other
circumstances relating to the Company or any of its affiliates that could
reasonably be expected to prevent the Merger from so qualifying as a
reorganization under Section 368(b) of the Code.
2.14 Employee Benefit Plans.
(a) Section 2.14 of the Company Disclosure Schedule lists, with
respect to the Company, (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) each loan to a non-officer employee of the Company, loans to
officers and directors and any stock option, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Internal Revenue Code Section 125) or dependent care (Internal Revenue Code
Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of the Company and that do not generally apply to all employees, and (v) any
employment or executive compensation or severance agreements currently in
effect, written or otherwise, for the benefit of, or relating to, any present or
former employee, consultant or director of the Company (together, the "Company
Employee Plans").
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Agreement and Plan of Merger
(b) The Company has furnished or made available to the Acquiror a copy
of each of the Company Employee Plans and, as applicable, related trust
documents, insurance policies or contracts, and summary plan descriptions, and
has, with respect to each Company Employee Plan which is subject to ERISA
reporting requirements, provided copies of the Form 5500 reports filed for the
last three plan years. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied to the Internal Revenue Service for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination or has been established under a
standardized prototype plan for which an Internal Revenue Service opinion letter
has been obtained by the plan sponsor and is valid as to the adopting employer.
Company has also furnished or made available to the Acquiror the most recent
Internal Revenue Service determination or opinion letter issued with respect to
each such Company Employee Plan, and nothing has occurred since the issuance of
each such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Section 401(a) of
the Internal Revenue Code.
(c) Except as would not have a Material Adverse Effect, (i) each
Company Employee Plan has been administered in accordance with its terms and all
applicable laws, including ERISA and the Code, and (ii) contributions required
to be made under the terms of any of the Company Employee Plans as of the date
of this Agreement have been timely made or, if not yet due, have been properly
reflected on the most recent consolidated balance sheet. With respect to the
Company Employee Plans, no event has occurred and, to the knowledge of Company,
there exists no condition or set of circumstances in connection with which
Company or any Company Subsidiary could be subject to any material liability
(other than for routine benefit liabilities) under the terms of, or with respect
to, such Company Employee Plans, ERISA, the Code or any other applicable law.
(d) Each Company Employee Plan can be amended, terminated or otherwise
discontinued after the date hereof and after the Effective Time in accordance
with its terms, without liability (other than liability for ordinary
administrative expenses typically incurred in a termination event). No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of Company is threatened, against or with respect to any such
Company Employee Plan, including any audit or inquiry by the Internal Revenue
Service or United States Department of Labor (other than routine benefits
claims).
(e) The Company does not currently maintain, sponsor, participate in
or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Internal Revenue Code.
(f) The Company is not a party to, nor has made any contribution to or
otherwise incurred any obligation to contribute to, any "multiemployer plan" as
defined in Section 3(37) of ERISA.
(g) Except as required by applicable law, no Company Employee Plan
provides any of the following retiree or post-employment benefits to any person:
medical, disability or life insurance benefits. Except as would otherwise not
have a Material Adverse Effect, Company is in compliance with the requirements
of the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations (including proposed regulations) thereunder.
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Agreement and Plan of Merger
(h) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of the Company to severance benefits or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or service
provider.
2.15 Employees; Employee Matters.
(a) Section 2.15 of the Company Disclosure Schedule contains a true
and complete list of the names and salaries of all current employees and
independent contractors.
(b) The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any material
respect in any unfair labor practice. The Company has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries, and
other payments to employees and consultants; and is not liable for any arrears
of wages or any taxes or any penalty for failure to comply with any of the
foregoing. The Company is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees or consultants (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending
claims against the Company under any workers compensation plan or policy or for
long term disability. To the knowledge of the Company, there are no
controversies pending or basis for such controversies to be pending, between the
Company and any of its respective employees or consultants, which controversies
have or could reasonably be expected to result in an action, suit, proceeding,
claim, arbitration or investigation before any agency, court or tribunal,
foreign or domestic. The Company is not a party to any collective bargaining
agreement or other labor union contract nor does the Company know of any
activities or proceedings of any labor union or to organize any such employees
or consultants.
(c) No employees or consultants of the Company are in violation of any
term of any employment contract, patent disclosure agreement, noncompetition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee or consultant to be employed or engaged by the
Company because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use of trade secrets or proprietary
information of others. No employee or consultant of the Company has given notice
to the Company, nor is the Company otherwise aware, that any such employee or
consultant intends to terminate his or her employment with the Company.
2.16 Interested Party Transactions.The Company is not indebted to any
director, officer, employee, consultant or agent of the Company (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses), and no such person is indebted to the Company (except for
cash advances for ordinary business expenses).
2.17 Insurance.Section 2.17 of the Company Disclosure Schedule lists the
Company's insurance policies. To the Company's knowledge, there are no facts or
circumstances in existence which would prevent the Company from renewing its
existing insurance coverage as and when such policies expire or obtaining
comparable coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and at a cost that would not result in
a Material Adverse Effect. The Company has not been denied any insurance
coverage which it has sought or for which it has applied.
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Agreement and Plan of Merger
2.18 Complete Copies of Materials; Bank Accounts.The Company has delivered
or made available true, correct and complete copies of each document which has
been requested by the Acquiror, its counsel or other advisers in connection with
their legal and accounting review of the Company. The Company has furnished to
the Acquiror a true and complete list setting forth the names and addresses of
all banks, other institutions and state governmental departments at which the
Company has accounts, deposits or the like, and the names of all persons
authorized to draw on or give instructions with respect thereto or holding a
power-of-attorney on behalf of the Company.
2.19 Accounts Receivable.Subject to any reserves set forth in the Financial
Statements, the accounts receivable shown on the Financial Statements represent
and will represent bona fide claims against debtors for sales and other charges,
and are not subject to discount except for normal cash and immaterial trade
discounts. The Company reasonably believes the amount carried for doubtful
accounts and allowances disclosed in the Financial Statements is sufficient to
provide for any losses which may be sustained on realization of the receivables.
2.20 Material Contracts.Except for the contracts described in Section 2.20
of the Company Disclosure Schedule (collectively, the "Material Contracts"),
Company is not a party to or bound by any material contract, including:
(a) any agreement, contract, commitment or understanding (whether
written or oral) to which the Company is a party and which would have a Material
Adverse Effect on the Company;
(b) any sales, advertising, distribution, co-branding, sponsorship or
agency contract;
(c) any continuing contract for the purchase or sale of materials,
supplies, equipment or services involving in the case of any such contract more
than ten thousand dollars ($10,000) per year;
(d) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of ten thousand dollars
($10,000) in the aggregate;
(f) any contract limiting the freedom of the Company to engage in any
line of business or to compete or any contract material to the conduct of the
Company's business which requires the Company to maintain the confidentiality of
any proprietary information of any third party or any other material
confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property, pursuant to which payments in excess of ten thousand dollars
($10,000) remain outstanding;
(h) any employment contract, arrangement or policy (including, without
limitation any collective bargaining contract or union agreement) which may not
be immediately terminated without penalty (or any augmentation or acceleration
of benefits);
(i) any stockholders agreement, voting agreement, registration rights
agreement or other agreement to which the Company or any stockholder of the
Company is a party;
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Agreement and Plan of Merger
(j) any contract with any person or entity with whom the Company does
not deal at arm's length within the meaning of the Internal Revenue Code; or
(k) any agreement 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.
2.21 No Breach of Material Contracts. The Company is not in default and is
entitled to all material benefits under each Material Contract and is not
alleged to be in default in any material respect in respect of any Material
Contract. Each of the Material Contracts is in full force and effect and has not
been amended, and there exists no default or event of default or event,
occurrence, condition or act, with respect to the Company or to the Company's
knowledge with respect to the other contracting party, which, with the giving of
notice, the lapse of time or the happening of any other event or conditions,
would become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered to the
Acquiror.
2.22 Brokers; Expenses.No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission ("Broker Fees") in
connection with the Merger based upon arrangements made by or on behalf of the
Company.
2.23 Representations Complete.None of the representations or warranties
made by the Company herein or in any schedule hereto, including the Company
Disclosure Schedule, or certificate or other document furnished by the Company
or the Stockholders pursuant to this Agreement, contains any untrue statement of
a material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading; provided, however, that the financial
projections delivered by the Company represent only the Company's good faith
estimate of what it reasonably believes and are based upon assumptions that
appeared reasonable at the time such projections were made. The Company does not
make any other representation or warranty regarding such projections other than
as set forth in this Section 2.24.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
The Acquiror represents and warrants to the Company as follows:
3.1 Organization and Standing.The Acquiror is a corporation duly organized,
validly existing and in good standing under the laws of the respective
jurisdictions of their incorporation and have the requisite corporate power to
own their properties and to carry on their business as now being conducted. The
Acquiror is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted or
property owned by them makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect.
3.2 Outstanding Stock. All issued and outstanding shares of capital stock
of the Acquiror have been duly authorized and validly issued and are fully paid
and nonassessable.
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Agreement and Plan of Merger
3.3 Authority; Enforceability. The Transaction Documents have been duly
authorized, executed and delivered by The Acquiror and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity. The Acquiror has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.
3.4 Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Acquiror,
the Bulletin Board nor the Acquiror's shareholders is required for the execution
by the Acquiror of the Transaction Documents and compliance and performance by
the Acquiror of its obligations under the Transaction Documents.
3.5 Common Stock. The Company's Common Stock upon issuance are, or will be,
free and clear of any security interests, liens, claims or other encumbrances,
subject to restrictions upon transfer under the 1933 Act and any applicable
state securities laws;
3.6 Litigation. There is no pending or, to the best knowledge of the
Acquiror, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Acquiror
that would affect the execution by the Acquiror or the performance by the
Acquiror of its obligations under the Transaction Documents. Except as disclosed
in the Reports, there is no pending or, to the best knowledge of the Acquiror,
basis for or threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Acquiror which litigation if adversely determined would have a Material Adverse
Effect on the Acquiror.
3.7 Reporting Company. The Acquiror is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act") and has a class of common shares registered
pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the
1934 Act, the Acquiror has filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve months (the
"Reports").
3.8 Information Concerning Company. The Reports contain all material
information relating to the Acquiror and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the Other Written Information or in the Schedules hereto,
there has been no material adverse change in the Acquiror's business, financial
condition or affairs not disclosed in the Reports. The Reports do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
3.9 Stop Transfer. The Company's Common Stock, when issued, will be
restricted securities. The Acquiror will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Common Stock,
except as may be required by any applicable federal or state securities laws.
Page 14 of 22
Agreement and Plan of Merger
ARTICLE IV
----------
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from (and
including) the date of this Agreement and continuing until the Effective Time,
the Company agrees (except as consented to in writing by the Acquiror) to carry
on its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted. The Company agrees to promptly notify the
Acquiror of any event or occurrence not in the ordinary course of business.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Reasonable Efforts and Further Assurances.Each of the parties to this
Agreement shall use its commercially reasonable efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.2 Legends. Each Parent Certificate shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
(i) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR
(ii) AN OPINION OF THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED."
ARTICLE VI
----------
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Consummate the Merger.The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by
agreement of all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No order or injunction
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be in
effect. No proceeding brought by any governmental authority or instrumentality
seeking to prevent or prohibit the consummation of the Merger and the
transactions contemplated hereby shall be pending.
(b) Consents. The Acquiror and the Company shall have obtained all
approvals, waivers and consents, if any, necessary for the consummation of the
Merger and the transactions contemplated hereby.
6.2 Additional Conditions to Obligations of the Company.The obligation of
the Company to consummate the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by the Company:
Page 15 of 22
Agreement and Plan of Merger
(a) Representations, Warranties and Covenants. The representations and
warranties of the Acquiror in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall have been true and correct in all respects)
on and as of the date hereof (except that any representation or warranty that
refers specifically to any other date than the date hereof shall be true and
correct in all material respects as of such other date and the Acquiror shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them prior to the Effective Time.
6.3 Additional Conditions to Obligations of Acquiror.The obligations of the
Acquiror to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, by the Acquiror:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Company in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall have been true in all respects) on and as
of the date hereof (except that any representation or warranty that refers
specifically to any other date than the date hereof shall be true and correct in
all material respects as of such other date and the Company shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by them
prior to the Effective Time.
(b) Certificates and Resolutions. As of the Effective Time, the
Acquiror shall have received from the Company (i) a certificate of existence and
good standing from the state of incorporation as to the corporate status of the
Company, (ii) a true and complete copy of the resolutions, certified by the
Secretary of the Company adopted on behalf of the Company, authorizing the
execution, delivery and performance of this Agreement and all transactions
contemplated hereby and (iii) a true and complete copy of the Company's
Certificate of Incorporation and Bylaws, certified by the Secretary of the
Company.
(c) Third Party Consents. The Acquiror shall have received evidence
reasonably satisfactory to it of the consent or approval of those persons and
entities whose consent or approval shall be required in connection with the
Merger.
(d) No Material Adverse Changes. There shall not have occurred any
material adverse change with respect to the Company's business, operations,
results of operations, condition (financial or otherwise), assets, liabilities,
or prospects.
ARTICLE VII
-----------
INDEMNIFICATION
7.1 Indemnification.Subject to the terms and conditions set forth herein,
from and after the Effective Time, the Company and each of the Owners, jointly
and severally, shall indemnify Acquiror and its respective directors, officers,
employees, agents or advisors, or any of their respective successors and assigns
(the "Acquiror Indemnified Parties"), in respect of, and hold each of them
harmless against, any and all demands, claims, debts, actions, assessments,
judgements, settlements, sanctions, obligations and other liabilities, monetary
damages, fines, taxes, fees, penalties, interest obligations, deficiencies,
losses and expenses (including, without limitation, amounts paid in settlement,
interest, court costs, costs of investigators, reasonable fees and expenses of
Page 16 of 22
Agreement and Plan of Merger
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) ("Damages"), incurred or suffered by them resulting from,
relating to, arising out of or constituting any breach of representation or
warranty or failure to perform any covenant or agreement of the Company
contained, or referred to, in the Transaction Agreements or in any certificate,
agreement, letter or document delivered pursuant hereto, or in connection with
any lawsuit or claim brought against the Company related to actions taken by the
Company prior to the Closing.
7.2 Method of Asserting Claims. All claims for indemnification by any party
entitled to make such claim hereunder (or any of their affiliated parties (each
an "Indemnified Person")) pursuant to this Article VIII shall be made in
accordance with the provisions of this Section 7.2.
(a) The Indemnified Person shall give prompt written notification to
the party obligated to provide such indemnification (the "Indemnifying Person")
of the commencement of any action, suit or proceeding relating to a third party
claim for which indemnification pursuant to this Article VIII may be sought;
provided, however, that no delay on the part of the Indemnified Person in
notifying the Indemnifying Person shall relieve the Indemnifying Person from any
liability or obligation under this Article VIII unless such notification delay
shall prejudice the Indemnifying Person. Within 30 days after delivery of such
notification, the Indemnifying Person may, upon written notice thereof to the
Indemnified Person, assume control of the defense of such action, suit or
proceeding with counsel reasonably satisfactory to the Indemnified Person (and
the Indemnified Person agrees to execute such documents as are necessary to
permit the Indemnifying Person to control such defense). If the Indemnifying
Person does not so assume control of such defense, the Indemnified Person shall
control such defense. The party not controlling such defense may participate
therein at its own cost and expense; provided, that if the Indemnifying Person
assumes control of such defense and the Indemnified Person is advised by counsel
in writing that the Indemnifying Person and the Indemnified Person may have
materially conflicting interests or different defenses available with respect to
such action, suit or proceeding, the reasonable fees and expenses of counsel to
the parties shall be considered "Damages" for purposes of this Agreement. The
party controlling such defense shall keep the other party advised of the status
of such action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the other party with respect thereto. The
Indemnifying Person shall not agree to any settlement or the entry of a judgment
in any action, suit or proceeding without the prior written consent of the
Indemnified Person.
(b) In determining the amount of any Damage attributable to a breach,
any materiality standard contained in a representation, warranty or covenant of
the Company shall be disregarded.
ARTICLE VIII
------------
GENERAL PROVISIONS
8.1 Survival.The representations and warranties set forth in Articles II
will survive until December 31, 2007, other than the representations and
warranties in Section 2.13 (Taxes), which shall survive until the expiration of
the statute of limitations applicable to claims with respect to the matters
covered thereby. The representations and warranties set forth in Articles III
will survive until December 31, 2005. The agreements set forth in this Agreement
shall terminate at the Effective Time, except that the agreements which by their
terms are to be performed after the Effective Time, shall survive the Effective
Time and the Closing.
Page 17 of 22
8.2 Expenses.All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense, whether or not the
Merger is consummated.
8.3 Notices.All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror, to:
Mobile Reach International, Inc.
2054 Kildaire Farm Road, #353
Cary, North Carolina 27511
Attn: Alan Christopher Johnson, CEO
Fax: (919) 882-9056
with a copy to:
Quick Law Group PC
1035 Pearl Street, #414
Boulder, Colorado 80302
Attn: Jeffrey M. Quick, Esq.
Fax: (303) 845-7315
(b) if to the Company or the Owners, to:
Objective Spectrum, Inc.
102 Parson Woods Lane
Cary, NC 27511
Attention: Mark J. Lloyd
Fax: (919) 363-9100
8.4 Certain Definitions; Interpretation.In this Agreement, any reference to
a "Material Adverse Effect" with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the business,
operations or results of operations, condition (financial or otherwise), assets,
liabilities, or prospects of such entity and its subsidiaries, taking such
entity together with such subsidiaries as a whole. In this Agreement, any
reference to "knowledge of the Company" or "the Company's knowledge" shall mean
the knowledge, after due inquiry, of any of the Company or its officers,
directors, or employees. When a reference is made in this Agreement to a
Section, an Article or an Exhibit, such reference shall be to a Section or
Article of this Agreement or an Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "but are not limited
to," "but is not limited to" and "but not limited to," respectively. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
8.5 Counterparts.This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Page 18 of 22
Agreement and Plan of Merger
8.6 Entire Agreement; Parties in Interest; Nonassignability.This Agreement
and the documents and instruments and other agreements specifically referred to
herein or delivered pursuant hereto, including the Exhibits and Schedules
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
Neither this Agreement nor any right, interest or obligation hereunder may be
assigned (by operation of law or otherwise) by any party without the prior
written consent of the other party and any attempt to do so will be void.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
8.7 Severability.If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
8.8 Remedies Cumulative.Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.9 Governing Law.This Agreement shall be governed by and construed in
accordance with the laws of New York without reference to such state's
principles of conflicts of law.
8.10 Rules of Construction.The parties hereto agree that they have been
represented by counsel during the negotiation, preparation 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 will be construed against the party drafting such agreement or
document.
8.11 Amendment.This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
8.12 Third-Party Beneficiary.The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer upon any other person or entity any rights or remedies.
8.13 Attorneys' Fees.If any action at law or equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which that party may be entitled.
[Signature page to follow.]
Page 19 of 22
IN WITNESS WHEREOF, Objective Spectrum, Inc., Mobile Reach International,
Inc., Mark J. Lloyd and Norman E. Lloyd have caused this Agreement and Plan of
Merger to be executed and delivered, all as of the date first written above.
OBJECTIVE SPECTRUM, INC.
By: /s/ Mark J. Lloyd
--------------------------------
Name: Mark J. Lloyd
Title: President
MOBILE REACH INTERNATIONAL, INC.
By: /s/ A. Christopher Johnson
--------------------------------
Name: A. Christopher Johnson
Title: Chief Executive Officer
/s/ Mark J. Lloyd
-----------------------------------
Mark J. Lloyd
/s/ Norman E. Lloyd
-----------------------------------
Norman E. Lloyd
Exhibit A
Certificate of Merger