|
1
AGREEMENT AND PLAN OF MERGER
by
and among
CUSTOMER ACQUISITION NETWORKS HOLDINGS, INC.,
OPTIONS ACQUISITION SUB, INC.,
OPTIONS NEWSLETTER, INC.,
and
HAGAI SHECHTER
Dated
as of December 18, 2007
TABLE OF CONTENTS
|
ARTICLE I DEFINITIONS
|
1
|
|
|
|
|
ARTICLE II THE MERGER
|
8
|
|
2.1
|
The
Merger
|
8
|
|
2.2
|
Effective
Time
|
8
|
|
2.3
|
Effects
of the Merger
|
8
|
|
2.4
|
Articles
of Incorporation, Bylaws and Directors and
Officers
|
9
|
|
2.5
|
Conversion
of Shares
|
9
|
|
2.6
|
Exchange
of Shares for Merger Consideration
|
9
|
|
2.7
|
Buyer
Common Stock
|
9
|
|
2.8
|
Delivery
of Certificates and Cash.
|
9
|
|
2.9
|
Additional
Purchase Price
|
10
|
|
2.10
|
The
Closing
|
11
|
|
2.11
|
Closing
Deliveries by the Stockholders and the Company
|
11
|
|
2.12
|
Closing
Deliveries by Parent and Buyer
|
13
|
|
2.13
|
Upon
Escrowed Funds; Escrow Agreement
|
14
|
|
2.14
|
Post
Closing Adjustment
|
14
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDERS
|
14
|
|
3.1
|
Organization
and Qualification of the Company.
|
14
|
|
3.2
|
Capitalization.
|
15
|
|
3.3
|
Stock
Ownership by Stockholders
|
15
|
|
3.4
|
Authorization;
Enforceability
|
15
|
|
3.5
|
No
Conflict; Consents.
|
16
|
|
3.6
|
Financial
Statements and Undisclosed Liabilities.
|
16
|
|
3.7
|
Labor
Matters
|
17
|
|
3.8
|
Absence
of Certain Changes or Events
|
17
|
|
3.9
|
Taxes.
|
17
|
|
3.10
|
Material
Contracts
|
19
|
|
3.11
|
Real
and Personal Property; Title to Property; Leases.
|
21
|
|
3.12
|
Condition
and Sufficiency of Tangible Assets
|
21
|
|
3.13
|
Licenses,
Permits and Authorizations
|
22
|
|
3.14
|
Intellectual
Property.
|
22
|
|
3.15
|
Litigation;
Compliance with Laws.
|
23
|
|
3.16
|
Insurance.
|
23
|
|
3.17
|
Employee
Benefit Plans.
|
24
|
|
3.18
|
Transactions
with Affiliates
|
25
|
|
3.19
|
No
Brokers or Finders
|
25
|
|
3.20
|
Accuracy
of Information
|
25
|
|
3.21
|
Receivables
|
26
|
|
3.22
|
Environmental.
|
26
|
|
3.23
|
Restrictions
on Business Activities
|
26
|
|
3.24
|
INTENTIONALLY
OMITTED
|
27
|
|
3.25
|
Absence
of Certain Payments
|
27
|
|
3.26
|
Bank
Accounts
|
27
|
|
3.27
|
Change
of Control Payment.
|
27
|
|
3.28
|
Disclosure
|
27
|
| |
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT
|
27
|
|
4.1
|
Organization
and Authority of Parent and Buyer.
|
27
|
|
4.2
|
Capitalization.
|
28
|
|
4.3
|
Sufficiency
of Funds
|
29
|
|
4.4
|
No
Conflict; Governmental Consents.
|
29
|
|
4.5
|
Financial
Statements; Undisclosed Liabilities.
|
29
|
|
4.6
|
SEC
Reporting
|
29
|
|
4.7
|
Officers
and Directors
|
30
|
|
4.8
|
Registration
Rights; Lock Up
|
30
|
| |
|
|
|
ARTICLE V ADDITIONAL AGREEMENTS
|
30
|
|
5.1
|
Notices
and Consents
|
30
|
|
5.2
|
Taking
of Necessary Action; Further Action
|
31
|
|
5.3
|
Directors’
and Officers’ Indemnification and
Insurance.
|
31
|
|
5.4
|
Further
Assurances
|
32
|
|
5.5
|
Registration
of Securities
|
32
|
|
5.6
|
Conduct
of the Business
|
32
|
|
5.7
|
Software
Escrow Agreement
|
32
|
| |
|
|
|
ARTICLE VI TAX MATTERS
|
32
|
|
6.1
|
Conveyance
Taxes
|
32
|
|
6.2
|
Pre-Closing
Income Tax Returns
|
33
|
|
6.3
|
Straddle
Period Tax Returns
|
33
|
|
6.4
|
Straddle
Period Tax Allocation
|
34
|
|
6.5
|
Tax
Cooperation
|
34
|
|
6.6
|
Required
Notifications
|
34
|
|
6.7
|
Section
368(a) Reorganization
|
35
|
| |
|
|
|
ARTICLE VII INDEMNIFICATION
|
35
|
|
7.1
|
Obligations
of Stockholder.
|
35
|
|
7.2
|
Obligations
of Parent
|
36
|
|
7.3
|
Procedure
|
36
|
|
7.4
|
Survival.
|
37
|
|
7.5
|
Mitigation
|
37
|
|
7.6
|
Consequential
and Other Damages
|
37
|
| |
|
|
|
ARTICLE VIII GENERAL
|
37
|
|
8.1
|
Amendments;
Waivers
|
37
|
|
8.2
|
Schedules;
Exhibits; Integration
|
38
|
|
8.3
|
Governing
Law
|
38
|
|
8.4
|
No
Assignment
|
38
|
|
8.5
|
Headings
|
38
|
|
8.6
|
Counterparts
|
38
|
|
8.7
|
Publicity
and Reports
|
38
|
|
8.8
|
Parties
in Interest
|
38
|
|
8.9
|
Notices
|
38
|
|
8.10
|
Remedies;
Waiver
|
39
|
|
8.11
|
Attorney’s
Fees
|
39
|
|
8.12
|
Severability
|
40
|
|
8.13
|
Entire
Agreement
|
40
|
|
8.14
|
Time
is of the Essence
|
40
|
|
8.15
|
Arbitration
|
40
|
|
8.16
|
Expenses
|
40
|
|
8.17
|
Disclosures
|
40
|
Exhibits
|
Exhibit
A-1
|
Form
of Certificate of Merger
|
|
Exhibit
A-2
|
Form
of Articles of Merger
|
|
Exhibit
B
|
Form
of Employment Agreement
|
|
Exhibit
C
|
Form
of Stockholder Release
|
|
Exhibit
D
|
Form
of Lock-Up Agreement
|
|
Exhibit
E
|
Form
of Invention Assignment Agreement
|
|
Exhibit
F
|
Form
of Broker Release
|
|
Exhibit
G
|
Form
of Escrow Agreement
|
Schedules
|
|
Merger
Consideration
|
|
Schedule
2.11(l)
|
Obligations
and Liabilities of the Company
|
|
Schedule
2.11(q)
|
Employees
Signing Invention Assignment Agreements
|
|
Schedule
3.1
|
Foreign
Qualifications
|
|
Schedule
3.2
|
Capitalization
|
|
Schedule
3.5
|
No
Conflict; Consents
|
|
Schedule
3.6
|
Financial
Statements and Undisclosed Liabilities
|
|
Schedule
3.8
|
Absence
of Certain Changes or Events
|
|
Schedule
3.9
|
Taxes
|
|
Schedule
3.10
|
Material
Contracts
|
|
Schedule
3.11
|
Real
and Personal Property; Title to Property; Lease
|
|
Schedule
3.14
|
Intellectual
Property
|
|
Schedule
3.15
|
Litigation;
Compliance with Laws
|
|
Schedule
3.16
|
Insurance
|
|
Schedule
3.17
|
Employee
Benefit Plans
|
|
Schedule
3.18
|
Transactions
with Affiliates
|
|
Schedule
3.22
|
Environmental
|
|
Schedule
3.26
|
Bank
Account
|
|
|
Change
of Control Payments
|
|
Schedule
4.8
|
Registration
Rights; Lock-Up
|
AGREEMENT AND PLAN OF MERGER
This
Agreement and Plan of Merger is entered into as of
December 18, 2007, by and among CUSTOMER ACQUISITION
NETWORK HOLDINGS, INC., a Delaware corporation (
“Parent” );
OPTIONS ACQUISITION SUB, INC., a Delaware corporation (
“Buyer” );
OPTIONS
NEWSLETTER, INC. ,
a Florida corporation (the “
Company ”);
and HAGAI SHECHTER, the holder of all of the capital stock of the
Company (the
“Stockholder” ).
Parent,
Buyer, Company and the Stockholder is a
“party” and
together are
“parties” to
this Agreement.
R E C I T A L S
WHEREAS,
the Boards of Directors of Parent, Buyer and the Company have
each approved the merger of the Company with and into Buyer,
with Buyer surviving such merger, upon the terms and subject
to the conditions set forth in this Agreement, whereby the
issued and outstanding shares of the capital stock of the
Company will be canceled and retired or converted into the
right to receive the Merger Consideration (as defined
herein);
WHEREAS,
it is intended that, for federal income tax purposes, the
transactions contemplated by this Agreement shall qualify as a
tax-free reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the
“Code” );
and
WHEREAS,
Parent, Buyer, the Company and the Stockholder desire to make
certain representations, warranties, covenants and agreements
in connection with the Merger (as defined below) and also to
prescribe various conditions to the Merger.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending
to be legally bound the parties agree as follows:
ARTICLE I
DEFINITIONS
For
all purposes of this Agreement, except as otherwise expressly
provided,
(a)
the
terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural
as well as the singular,
(b)
all
accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c)
all
references in this Agreement to designated
“Articles,” “Sections” and other
subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d)
pronouns
of either gender or neuter shall include, as appropriate, the
other pronoun forms, and
(e)
the words “herein,” “hereof” and
“hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
As
used in this Agreement and the schedules delivered pursuant to
this Agreement, the following definitions shall
apply:
“AAA Rules” has
the meaning set forth in
Section 8.15 .
“Action” means
any action, complaint, claim, charge, petition, investigation, suit
or other proceeding, whether civil or criminal, in law or in
equity, or before any mediator, arbitrator or Governmental
Entity.
“Additional Purchase Price”
has the meaning set forth in
Section 2.9(a) .
“
Adjustment Amount ”
has the meaning set forth in
Section 2.14 .
“
Adjustment Date ”
has the meaning set forth in
Section 2.14 .
“Affiliate” means
with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
such specified Person.
“Agreement” means
this Agreement and Plan of Merger, as amended or supplemented,
together with all exhibits and schedules attached or incorporated
by reference.
“Approval” means
any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be
obtained from, or any notice, statement or other communication
required to be filed with or delivered to, any Governmental Entity
or any other Person.
“Articles of Merger” has
the meaning set forth in
Section 2.2 .
“Assets”
has
the meaning set forth in
Section 3.11(c) .
“Benefit Plans” has
the meaning set forth in
Section 3.17(a) .
“Broker” has
the meaning set forth in
Section 3.19 .
“Business” means
the business of the Company, and shall be deemed to include any of
the following incidents of such business: income, cash flow,
operations, condition (financial or other), assets, anticipated
revenues, prospects, liabilities and personnel.
“Business Day” means
any day that is not a Saturday, a Sunday or other day on which
banks are required or authorized by law to be closed in the New
York, New York.
“Buyer” has
the meaning set forth in the preamble to this
Agreement.
“Calculation Date” has
the meaning set forth in
Section 2.9(a) .
“Cash Portion of Merger Consideration”
means
any cash payable to the Stockholders as Merger
Consideration.
“Certificates” has
the meaning set forth in
Section 2.6 .
“Certificate of Merger” has
the meaning set forth in
Section 2.2 .
“Claim” has
the meaning set forth in
Section 7.3 .
“Claim Notice” has
the meaning set forth in
Section 7.3 .
“Closing” has
the meaning set forth in
Section 2.10 .
“Closing Date” means
the date of the Closing as set forth in
Section 2.10 .
“Code” has
the meaning set forth on the preamble to this
Agreement.
“Common Stock” means
the common stock, par value $0.01 per share, of the
Company.
“Company” has
the meaning set forth on the preamble to this
Agreement.
“Company Financial Statements”
means
the (a) unaudited balance sheets of the Company as of December 31,
2005 and 2006, and the related unaudited statements of income,
changes in Stockholder’ equity, and cash flow for each of the
fiscal years then ended; and (b) unaudited balance sheet of the
Company as of September 30, 2007 (the “
Company Interim Balance Sheet ”)
and the related unaudited statement of income for the nine (9)
months then ended.
“Company Group” means
any “affiliated group” (as defined in Section 1504(a)
of the Code without regard to the limitations contained in Section
1504(b) of the Code) that, at any time before the Closing Date,
includes or has included the Company or any predecessor of or
successor to the Company (or another such predecessor or
successor), or any other group of corporations that, at any time on
or before the Closing Date, files or has filed Tax Returns on a
combined, consolidated or unitary basis with the Company or any
predecessor of or successor to the Company (or another such
predecessor or successor).
“Company Interim Balance Sheet ”
has the meaning set forth in the definition of the Company
Financial Statements.
“Contract” means
any agreement, contract, arrangement, bond, loan commitment,
franchise, indemnity, indenture, instrument, lease, license or
understanding, whether or not in writing.
“December 31, 2006 Company Balance
Sheet” has
the meaning set forth in
Section 3.6(b) .
“DGCL” has
the meaning set forth in
Section 2.1 .
“
DOL ”
has the meaning set forth in
Section 3.17(k) .
“Effective Time” has
the meaning set forth in
Section 2.2 .
“
Equity Plans ”
has the meaning set forth in
Section 4.2 .
“Employee” or
“Employees” means
any individual who is (a) an employee of the Company
immediately prior to the Closing Date and (b) employees of the
Company on any authorized leave of absence, including, without
limitation, short- or long-term disability leave, worker’s
compensation leave or vacation leave as of the Closing
Date.
“Employment Agreement” has
the meaning set forth in
Section 2.11(d) .
“Encumbrance” means
any claim, charge, easement, encumbrance, lease, covenant, security
interest, lien, option, pledge, rights of others, or restriction
(whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or
otherwise, except for any restrictions on transfer generally
arising under any applicable federal or state securities
law.
“Environmental Defect” shall
mean a condition with respect to the Assets that constitutes a
violation of Environmental Law; provided that an Environmental
Defect shall not be deemed to exist for the purposes of this
Agreement unless the estimated Lowest Cost Response for remedying
such Environmental Defect exceeds $25,000.
“Environmental Laws” shall
mean all Laws relating to (a) the control of any potential
pollutant or protection of the air, water, land or protected
species, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation and (c) the
regulation of or exposure to hazardous, toxic or other substances
alleged to be harmful.
“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended,
and the related regulations and published
interpretations.
“
ERISA Affiliate ”
has the meaning set forth in
Section 3.17(a) .
“
Escrowed Funds ”
has the meaning set forth in
Section 2.13 .
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder.
“FS” has
the meaning set forth in
Section 2.1 .
“GAAP” means
generally accepted accounting principles in the United States, as
in effect from time to time.
“Governmental Entity” means
any government or any agency, bureau, board, commission, court,
department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
“Hazardous Materials” means
any “hazardous substance,” “pollutant or
contaminant,” and “petroleum” and “natural
gas liquids” as those terms are defined or used in section
101 of the Comprehensive Environmental Response, Compensation and
Liability Act, and any other material regulated under any
Environmental Law because of its effect or potential effect on
public health and the environment, including without limitation,
PCBs, lead paint, asbestos, urea formaldehyde, radioactive
materials and wastes generated during the production of oil and
gas.
“Indemnified Party” has
the meaning set forth in
Section 7.3 .
“Indemnifying Party” has
the meaning set forth in
Section 7.3 .
“Intellectual Property” has
the meaning set forth in
Section 3.14(a) .
“IRS” means
the United States Internal Revenue Service or any successor entity,
and to the extent relevant, the United States Department of
Treasury.
“
Knowledge
” or
“Known” shall
mean, with respect to Stockholder, the actual knowledge (without
investigation) of the Stockholder.
“Law” means
any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any
Order.
“
Letter of Intent ”
means the letter of intent dated October 24, 2007 by and among
the Parent, the Company and the Stockholder.
“Loss” means
any action, cost, damage, disbursement, expense, liability, loss,
deficiency, diminution in value, obligation, penalty or settlement
of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs,
penalties, legal, accounting and other professional fees and
expenses incurred in the investigation, collection, prosecution and
defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified
Person.
“
Lowest Cost Response ”
shall mean the response required or allowed under Environmental
Laws that addresses the condition present at the lowest cost
(considered as a whole taking into consideration
any
material negative impact such response may have on the operations
of the relevant assets and any potential material additional costs
or liabilities that may likely arise a result of such response) as
compared to any other response that is consistent with
Environmental Laws.
“Material Adverse Effect” means,
with respect to any Person, (i) a material adverse effect on
the condition (financial or otherwise), business, prospects,
assets, liabilities, or
results of operations of such Person in an amount individually or
in the aggregate equal to or greater than $10,000; or (ii) a
material adverse effect on the ability of such Person to consummate
the transactions contemplated by this Agreement.
“Material Contract” means
any Contract deemed material by
Section 3.10 .
“Merger” has
the meaning set forth in
Section 2.1 .
“Merger Consideration” has
the meaning set forth in
Section 2.5 .
“Order” means
any decree, injunction, judgment, order, ruling, assessment or writ
of any Governmental Entity.
“Parent” has
the meaning set forth on the preamble to this
Agreement.
“Parent Financial Statements”
means
the unaudited consolidated balance sheet of Parent as of September
30, 2007 and the related unaudited consolidated statement of income
for the nine (9) month period then ended.
“Parent Indemnified Party” has
the meaning set forth in
Section 7.1 .
“Parent Indemnifying Party”
has the meaning set forth in
Section 7.2 .
“Parent Shares” shall
mean shares of common stock, par value $0.01 per share, of Parent
delivered to the Stockholders as part of the Merger
Consideration.
“Payment Date” has
the meaning set forth in
Section 2.14 .
“PBGC” has
the meaning set forth in
Section 3.17(k) .
“Permit” means
any license, permit, franchise, certificate of authority, or order,
or any waiver of the foregoing, required to be issued by any
Governmental Entity.
“
Permitted Encumbrances ”
shall mean, with respect to the Assets, any or all of the
following: (a) Encumbrances securing payment of taxes or
assessments that are, in either case, not yet delinquent; and (b)
Encumbrances set forth in the Company Interim Balance
Sheet.
“Person” means
an association, a corporation, an individual, a partnership, a
limited liability company, a trust or any other entity or
organization, including a Governmental Entity.
“
Principal Market ”
shall mean the OTC Bulletin Board, or if the Parent’s common
stock is listed on another national securities exchange, the
“
Principal Market ”
shall mean such national securities exchange.
“Qualified Plan” has
the meaning set forth in
Section 3.17(b) .
“Real Property” has
the meaning set forth in
Section 3.11(a) .
“Release” means
any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through air, soil, surface water,
ground water, wetlands, land or subsurface strata.
“
Revenue Target” has
the meaning set forth in
Section 2.9(a) .
“SEC” means
the United States Securities and Exchange Commission.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
“Share” and
“Shares” has
the meaning set forth in
Section 2.5 .
“Stockholder” has
the meaning set forth in the preamble to this
Agreement.
“Stockholder Indemnified Party”
has
the meaning set forth in
Section 7.2 .
“Stockholder Indemnifying Party”
has
the meaning set forth in
Section 7.1 .
“Stock Portion of Merger Consideration”
means
that portion of the Merger Consideration that is evidenced by the
Parent Shares issued to the Stockholders as set forth in
Schedule 2.5 .
“
Subsidiary ”
means, with respect to any Person, (a) any corporation 50% or more
of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of
any class or classes of such corporation have or might have voting
power by reason of the happening of any contingency) is at the time
owned by such Person, directly or indirectly through Subsidiaries;
and (b) any partnership, limited liability company, association,
joint venture, trust or other entity in which such Person, directly
or indirectly through Subsidiaries, is either a general partner,
has a 50% or greater equity interest at the time or otherwise owns
a controlling interest.
“Surviving Entity” has
the meaning set forth in
Section 2.1 .
“Tax” (and,
with correlative meaning,
“Taxes” )
means: (i) any federal, state, local or foreign net income,
gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, escheat,
employment, payroll, withholding, alternative or add-on minimum, ad
valorem, value added, transfer, stamp, or environmental tax, or any
other tax, custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount imposed by any
governmental authority; and (ii) any liability of the Company
for the payment of amounts with respect to payments of a type
described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or as a result
of any obligation of the Company under any Tax Sharing Arrangement
or Tax Indemnity Agreement.
“Tax Indemnity Agreement” means
any written or unwritten agreement or arrangement pursuant to which
the Company may be required to indemnify or reimburse another party
for any liability relating to Taxes.
“Tax Return” means
any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including
any information return, claim for refund, amended return or
declaration of estimated Tax.
“Tax Sharing Arrangement” means
any written or unwritten agreement or arrangement for the
allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Tax
Return which includes the Company.
“Threshold” has
the meaning set forth in
Section 7.1(b) .
“Third Party Intellectual Rights”
has
the meaning set forth in
Section 3.14(b) .
ARTICLE II
THE MERGER
2.1
The Merger
.
At
the Effective Time and upon the terms and subject to the conditions
of this Agreement and in accordance with Section 252 of the
Delaware Business Corporation Act (the “
DGCL ”)
and Section 607.1105 of the Florida Statutes (the “
FS ”),
the Company shall be merged with and into Buyer (the “
Merger ”).
Following the Merger, Buyer shall continue as the surviving entity
(the “
Surviving Entity ”)
and the separate corporate existence of the Company shall cease.
Parent, as the sole owner of Buyer, hereby approves the Merger and
this Agreement.
2.2
Effective Time
. Subject
to the terms and conditions set forth in this Agreement, on the
Closing Date, the Certificate of Merger substantially in the form
of
Exhibit A-1 (the
“
Certificate of Merger ”)
and the Articles of Merger substantially in the form of
Exhibit A-2 (the
“
Articles of Merger ”)
shall each be duly executed and acknowledged by the Company and
Buyer and thereafter delivered to the Secretary of State of
Delaware and the Secretary of State of Florida, respectively, for
filing. The Merger shall become effective at such time as a
properly executed copy of the Certificate of Merger and Articles of
Merger is duly filed with the Secretary of State of Delaware and
the Secretary of State of Florida, respectively, or such later time
as Parent and the Stockholders may agree upon and as set forth in
the Certificate of Merger and Articles of Merger, respectively (the
time the Merger becomes effective being referred to herein as the
“
Effective Time ”).
2.3
Effects of the Merger
. The
Merger shall have the effects set forth in the DGCL and the FS.
Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Buyer shall
vest in the Surviving Entity, and all debts, liabilities and
obligations of the Company and Buyer shall become the debts,
liabilities and obligations of the Surviving Entity.
2.4
Articles of Incorporation, Bylaws and Directors and
Officers
. The
articles of incorporation of the Company shall, without further
action, be terminated, and the organizational documents of Buyer in
effect at the Effective Time shall be the organizational documents
of the Surviving Entity until amended in accordance with applicable
law. From and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with applicable
law, the directors and the officers of Buyer at the Effective Time
shall become the directors and the officers of the Surviving Entity
and the officers and directors of the Company shall cease to act as
such effective as of the Effective Time.
2.5
Conversion of Shares .
At
the Effective Time, by virtue of the Merger (and without any action
on the part of Buyer or the Company), each
share of common stock, par value $0.01 per share, of the Company
(each a “
Share ”
and, collectively, the “
Shares ”)
issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive a pro rata portion of
the Merger Consideration. The
“
Merger Consideration ”
is as set forth on
Schedule 2.5
attached
hereto, which Merger Consideration is comprised of (i) the Cash
Portion of Merger Consideration, (ii) the Stock Portion of Merger
Consideration, (iii) the Additional Purchase Price.
2.6
Exchange of Shares for Merger Consideration
.
At
the Effective Time, each Share issued and outstanding immediately
prior to the Effective Time shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to
exist, and each certificate previously evidencing any such Shares
(the “
Certificates ”)
shall thereafter represent the right to receive only the amount of
Merger Consideration set forth opposite the Stockholder’s
name as set forth on
Schedule 2.5 .
Each
share of any class of Company capital stock issued and outstanding
immediately prior to the Effective Time that is owned by the
Company (other than shares in trust accounts, security accounts,
custodial accounts and similar holdings like that are beneficially
owned by third parties), shall automatically be canceled and
retired and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange
therefor.
2.7
Buyer Common Stock
. Each
share of Buyer common stock, par value $0.001 per share, held by
Parent immediately prior to the Effective Time will remain issued
and outstanding and will be deemed to be validly issued,
outstanding and non-assessable shares of the Surviving
Entity.
2.8
Delivery of Certificates and Cash .
(a)
Delivery .
At the Closing, the Stockholder shall deliver the
Stockholder’s Certificate(s) to Parent. Upon delivery of a
Certificate for cancellation to Parent, Parent shall deliver in
exchange therefor payment of the Merger Consideration determined in
accordance with
Section 2.5 and
the Cash Portion of Merger Consideration shall be paid by check or
by wire transfer to the respective accounts designated by the
Stockholder and the Certificate(s) so surrendered by the
Stockholder shall forthwith be canceled. If any cash is to be paid
to a name other than that which the Certificate(s) surrendered in
exchange therefor is registered, or in the event of a transfer of
ownership of Shares that is not registered in the transfer records
of the Company, it shall be a condition of payment of the Merger
Consideration that the Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that
the Person requesting such payment shall have paid any transfer and
other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the
Certificate surrendered or shall have established to the
satisfaction of Parent that such tax either has been paid or is not
applicable. Parent reserves the right in its sole discretion to pay
Merger Consideration only to the Person whose name is on the
Certificate(s) surrendered in exchange therefor and registered on
the transfer records of the Company. Until surrendered as
contemplated by this
Section 2.8 ,
each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the
Merger Consideration as contemplated by this
Section 2.8 .
(b)
No Further Registration .
The Merger Consideration paid upon the surrender of Shares in
accordance with the terms hereof shall be deemed to have been paid
in full satisfaction of all rights pertaining to such Shares. From
and after the Effective Time, there shall be no further
registration of transfers on the transfer books of the Surviving
Entity of the Shares that were outstanding immediately prior to the
Effective Time.
(c)
Withholding Taxes .
Parent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable to a holder of Shares pursuant to
the Merger such amounts as Parent is required to deduct and
withhold with respect to the making of such payment under the Code
or any provision of state, local or foreign tax law. To the extent
amounts are so withheld by Parent, the withheld amounts shall be
(i) timely paid to the appropriate Governmental Entity to whom such
taxes are owed and (ii) treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which
the deduction and withholding was made.
(d)
Certificates .
If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Certificate, Parent shall
deliver in exchange for such lost, stolen or destroyed Certificate
the applicable Merger Consideration with respect
thereto.
2.9
Additional Purchase Price .
(a)
(1)
If
at any time prior to the one-year anniversary of the Closing,
minimum aggregate gross revenues (calculated by the Company in
accordance with GAAP) of $2,626,000 (the “Revenue
Target”) has been earned by the operations of the
Business, then the Stockholder shall be paid $1,000,000 (the
“
Additional Purchase Price ”)
in accordance with Section 2.9(a)(ii) and 2.9(b)
below.
(ii) On
each of the three, six, nine and twelve month anniversaries of
the Closing (as defined below) (each, a “Calculation
Date”), the Stockholder shall receive the same
percentage of the Additional Purchase Price as the actual
revenues achieved from the Business bears to the Revenue
Target (less any portion of Additional Purchase Price
previously paid to the Stockholder); provided, however, that
to the extent that any portion of Additional Purchase Price
shall have been paid and a portion of the Revenue Target upon
which such payment was based shall subsequently be written-off
as a bad debt in accordance with the requirements under GAAP
the amount of such write-off shall be deducted from the
calculation of the percentage of the Revenue Target achieved
on the immediately ensuing Calculation Date.
(b)
The
Stockholder shall have the full authority to conduct the
Business, including the management of day-to-day affairs
thereof, through the period during which any Additional
Purchase Price may be payable, in a manner consistent with the
conduct of the Business before the Closing; provided such
Business is conducted in accordance with applicable Laws.
Within 30 days after the end of any Calculation Date, the
Chief Financial Officer of the Parent shall calculate and
provide a written report to the Stockholder disclosing the
actual results and the amount of gross revenue achieved, and
pay any amount that is due and owing to the Stockholder
hereunder no later than 60 days after the end of the date of
such calculation. Unless written objection is received by the
Parent within 30 days, the report of the Chief Financial
Officer shall be final and binding on the parties, absent
manifest error. All amounts and calculations required shall in
each case be determined in accordance with GAAP.
Notwithstanding the foregoing, the Chief Executive Officer or
Chief Financial Officer of the Parent may accelerate the
Additional Purchase Price payment to the extent that the
Revenue Target has been achieved and sufficient cash has been
collected by the Parent to pay the applicable portion of the
Additional Purchase Price.
(c)
In
the event that, at any time prior to the one-year anniversary
of the Closing, the Stockholder is terminated without
“Cause” as defined in the Employment Agreement (as
defined below) or in the event that the Stockholder resigns
for “Good Reason” as defined in the Employment
Agreement, then any unpaid amount of Additional Purchase Price
shall be deemed to be earned, regardless of any remaining
Revenue Target or the passing of any Calculation Date, and any
unpaid Additional Purchase Price may be payable, shall be paid
by the Parent to the Stockholder within 60 days from the date
of such termination or resignation, as the case may
be.
2.10
The Closing .
Upon the terms and subject to the conditions of this Agreement, the
transactions contemplated by this Agreement shall take place at a
closing (the “
Closing ”)
to be held on or before Friday, January 4, 2008, at the offices of
Haynes and Boone, LLP, legal counsel to Parent and Buyer, located
at 153 E. 53rd Street, Suite 4900, New York, New York 10022, or at
such other place or at such time as the Stockholder and Parent may
mutually agree upon in writing. The parties acknowledge and agree
that, as of the date hereof, all diligence to be conducted by the
parties has been completed, all conditions to closing have been
satisfied and closing deliveries required of the parties in this
Article II have been delivered (the day on which the Closing takes
place being the “
Closing Date ”).
The Closing may, with the consent of all parties, take place by
delivering an exchange of documents by facsimile transmission or
electronic mail with originals to follow by overnight mail service
courier.
2.11
Closing Deliveries by the Stockholders and the
Company
. At
the Closing, against delivery of, among other things, the Merger
Consideration, the Stockholder shall deliver or cause to be
delivered to Parent:
(a)
the
Certificate in accordance with
Section 2.8 ;
(b)
each
in form and substance satisfactory to Parent in its reasonable
discretion, all Approvals of all Governmental Entities and
officials which are necessary for the consummation of the
transactions contemplated by this Agreement and all third
party consents and estoppel certificates identified on
Schedule 3.5 ;
(c)
an
employment agreement with the Surviving Entity duly executed
by Hagai Shechter in the form attached hereto as
Exhibit B (the
“Employment Agreement” );
(d)
a
non-foreign status certificate that would exempt the
transactions contemplated by this Agreement from withholding
pursuant to the provisions of Sections 897 and 1445 of the
Code and the Treasury Regulations promulgated
thereunder;
(e)
All
minute books, seals and other records of the
Company;
(f)
certificates
of the Secretary of State and the taxing authorities of the
State of Florida, dated not more than five (5) days prior to
the Closing Date, attesting to the incorporation and good
standing of the Company as a corporation in its jurisdiction
of incorporation, and to the payment of all state taxes due
and owing thereby;
(g)
copies,
certified by the Secretary of State of Florida, dated not more
than five (5) days prior to the Closing Date, of the Articles
of Incorporation of the Company, and all amendments
thereto;
(h)
copies,
certified the by Secretary or Assistant Secretary of the
Company as of the Closing Date, of the bylaws of the Company,
and all amendments thereto;
(i)
a
release duly executed by the Stockholder in the form of
Exhibit C attached
hereto;
(j)
any
Permits necessary to the operations of the Business amended to
adequately reflect any change of control or other amendment
necessary to reflect the Merger;
(k)
a
lease in a form mutually agreeable to the parties
hereto;
(l)
written
evidence of the termination or cancellation of all guaranties,
reimbursements, “hold harmless,” indemnities and
similar obligations and liabilities of the Company on behalf
of any Person other than the Company, including without
limitation those obligations listed on
Schedule 2.11(l) ;
(m)
resignations
of each of the officers and directors of the Company other
than Hagai Shechter;
(n)
written
direction to the Company’s banks removing the officers
of the Company as an authorized signatory on the
Company’s bank accounts and appointing Bruce Kreindel as
an authorized signatory;
(o)
the
Lock-Up Agreement in the form of
Exhibit D duly
executed by Hagai Shechter;
(p)
minimum
net working capital in the Company’s primary bank
account of $40,000.00 which is sufficient to cover any
outstanding liabilities of the Company on the Closing
Date;
(q)
the
execution and delivery of invention assignment agreement in
the form of Exhibit E duly executed by the individuals listed
on Schedule 2.11(q); and
(r)
the
release from the Broker (as defined below) in the form
of
Exhibit F annexed
hereto; and
(s)
written
evidence of the termination of the Company’s credit
facility with SunTrust Bank and the filing of a related UCC
termination statement.
2.12
Closing Deliveries by Parent and Buyer
.
At the Closing, against delivery of, among other things, the
Certificates, Buyer and Parent shall deliver to the applicable
Stockholder:
(a)
the
Merger Consideration;
(b)
stock
certificates evidencing the Stock Portion of Merger
Consideration;
(c)
the
Employment Agreement duly executed by the Parent;
(d)
certificates
of the Secretary of State and the taxing authorities of the
State of Delaware dated not more than five (5) days prior to
the Closing Date, attesting to the incorporation and good
standing of Parent as a corporation in its jurisdiction of
incorporation, and to the payment of all state taxes due and
owing thereby;
(e)
a
copy, certified as of the Closing Date by the Secretary or
Assistant Secretary of Parent, of the bylaws of Parent and all
amendments thereto and resolutions of the Board of Directors
of Parent authorizing Parent’s execution, delivery and
performance of this Agreement, the consummation of the
transactions contemplated herein, and the taking of all such
other corporate action as shall have been required as a
condition to, or in connection with the consummation of the
contemplated transactions;
(f)
certificates
of the Secretary of State and the taxing authorities of the
State of Delaware dated not more than five (5) days prior to
the Closing Date, attesting to the incorporation and good
standing of Buyer as a corporation in its jurisdiction of
incorporation, and to the payment of all state taxes due and
owing thereby;
(g)
a
copy, certified as of the Closing Date by the Secretary or
Assistant Secretary of Buyer, of the resolutions of the Board
of Directors of Buyer authorizing Buyer’s execution,
delivery and performance of this Agreement, the consummation
of the transactions contemplated herein, and the taking of all
such other corporate action as shall have been required as a
condition to, or in connection with the consummation of the
contemplated transactions;
(h)
copies,
certified by the Secretary of State of Delaware, dated not
more than five (5) days prior to the Closing Date, of the
Certificate of Incorporation of Buyer, and all amendments
thereto;
(i)
copies,
certified the by Secretary or Assistant Secretary of Buyer as
of the Closing Date, of the bylaws of Buyer, and all
amendments thereto; and
(j)
the
Certificate of Merger and Articles of Merger duly executed by
Buyer.
2.13
Upon Escrowed Funds; Escrow Agreement
.
At the closing, Parent shall wire $150,000 of the Cash Portion of
Merger Consideration (the “
Escrowed Funds ”)
to a mutually agreed escrow account to secure the
Stockholder’s indemnification obligations hereunder. An
escrow agreement, in the form attached hereto as
Exhibit G ,
will govern all aspects of the Escrowed Funds, including the
release thereof.
2.14
Post Closing Adjustment .
(a)
Upon
the later of (i) the expiration of the Lock-Up Agreement and
(ii) the twelve month anniversary of the Closing Date (the
“
Adjustment Date ”),
in the event that the average closing price for the Parent’s
common stock as quoted on the Principal Market for ten (10)
consecutive trading days prior thereto shall be less than $2.50 per
share, then within thirty (30) days after the Adjustment Date (the
“
Payment Date ”)
the Parent shall pay the Stockholder the Adjustment Amount (as
defined below). As used herein, the “
Adjustment Amount ”
shall be an amount equal to the difference between (i)
$2.5 million and (ii) the product of (A) 1,000,000
multiplied by (B) the average closing price for the
Parent’s common stock as quoted on the Principal Market
between the Adjustment Date and the ten (10) consecutive trading
days prior thereto.
(b)
The
Adjustment Amount shall be payable by the Parent to the
Stockholder, at the option of the Parent, in cash, shares of
the Parent’s common stock or a combination thereof. For
the purpose of this Section 2.14(b), the fair market
value of the Parent’s common stock on the Payment Date
will be based upon the average closing price of the
Parent’s common stock on the Principal Market during the
10 trading days immediately preceding the Adjustment
Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
S
The
Stockholder, represents and warrants to Parent and agrees as
follows:
3.1
Organization and Qualification of the Company
.
(a)
The
Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida. The
Company has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on the Business as it
has been and is currently conducting. The Company is duly
licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or
qualification necessary.
Schedule 3.1 correctly
lists with respect to the Company its jurisdiction of
incorporation, each jurisdiction in which it is qualified to do
business as a foreign corporation, and its directors and executive
officers. The Stockholder has delivered to Parent complete and
correct copies of the charter and bylaws of the Company as now in
effect as of the Closing Date.
(b)
The
Company owns all assets and rights necessary to conduct the
Business of the Company as presently conducted.
3.2
Capitalization .
(a)
The
authorized capital stock of the Company consists of 15,000,000
shares of Common Stock. As of the date hereof, 1,000 shares of
Common Stock are issued and outstanding and each record owner
of Shares and the number of Shares held by each record owner
is set forth on
Schedule 3.2 .
Except as set forth on
Schedule 3.2 ,
there are no shares of capital stock of the Company issued and
outstanding. All of the Shares have been duly authorized and
validly issued and are fully paid and non-assessable. None of the
Shares was issued in violation of any preemptive rights or is
subject to any preemptive rights of any Person. All of the Shares
have been issued and granted in all material respects in compliance
with applicable securities Laws and other requirements of Law. No
legend or other reference to any Encumbrance appears upon any
certificate representing the Shares, except for customary legends
with respect to transfer restrictions for restricted securities
under federal and Delaware securities Law.
(b)
There
are no outstanding options, warrants, agreements, conversion
rights, preemptive rights or other rights to subscribe for or
purchase from any of the Stockholder, the Company, or any
plans, contracts or commitments providing for the issuance of,
or the granting of rights to acquire, (i) any capital
stock or other ownership interests of the Company, including,
but not limited to the Shares; or (ii) any securities
convertible into or exchangeable for any such capital stock or
other ownership interests. There are no outstanding
contractual obligations or plans of the Stockholder and/or,
the Company to transfer, issue, repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or
other ownership interests of the Company, including, but not
limited to the Shares. The
Company neither owns nor has any contract, agreement or
understanding to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or
ownership interest in any other business.
3.3
Stock Ownership by Stockholders
. The
Stockholder has good and marketable title to, and sole record and
beneficial ownership of, the Shares as listed on
Schedule 3
.
2 and
the Shares are free and clear of any and all covenants, conditions,
marital property rights or other Encumbrances. Upon consummation of
the transactions contemplated by this Agreement, Parent will own
all the issued and outstanding capital stock of the Surviving
Entity free and clear of all Encumbrances, and such capital stock
will be fully paid and non-assessable. There are no voting trusts,
stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of
any of the Shares.
3.4
Authorization; Enforceability
. The
execution, delivery and performance of this Agreement by the
Stockholder and the Company and
the consummation by the Stockholder and the Company of the
transactions contemplated hereby have been duly authorized by all
requisite action on the part of the Stockholder and the Company.
This Agreement has been duly executed and delivered by the
Stockholder and the Company, and assuming due authorization,
execution and delivery by Buyer and Parent, this Agreement
constitutes a valid and binding obligation of the Stockholder and
the Company enforceable against each of the Stockholders and the
Company in accordance with its terms, except to the extent that the
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws, or by equitable
principles relating to the rights of creditors generally
.
3.5
No Conflict; Consents .
(a)
The
execution, delivery and performance of this Agreement by the
Stockholder and the Company do not and will not (i) violate,
conflict with or result in the breach of any provision of the
charter or by-laws of the Company, (ii) except as set forth
in
Schedule 3.5 ,
conflict with or violate in any material respect any Law or Order
applicable to the Stockholder or the Company, or (iii) except as
set forth in
Schedule 3.5 ,
conflict with, result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Shares or on any of the
assets or properties of the Stockholder or the Company pursuant to,
any note, bond, mortgage, indenture, license, permit, lease,
sublease or other Contract to which the Stockholder or the Company
is a party or by which any of the Stock or any of such assets or
properties is bound or affected.
(b)
The
execution, delivery and performance of this Agreement by the
Stockholder and the Company do not and will not require any
Approval or Order of any Governmental Entity.
3.6
Financial Statements and Undisclosed
Liabilities
.
(a)
The
Stockholder has delivered to Parent true, correct and complete
copies of the Company Financial Statements. To the Knowledge
of the Stockholder, any adjustment to the Company Financial
Statements to conform with GAAP applied on a consistent basis
would not result in a Material Adverse Effect on either the
balance sheet or the cumulative profits and losses of the
Company. Such statements of operations and cash flow present
fairly in all material respects the results of operations and
cash flows of the Company for the respective periods covered,
and the balance sheets present fairly in all material respects
the financial condition of the Company as of their respective
dates. Except as disclosed on
Schedule 3.6 ,
since January 1, 2007, there has been no change in any of the
significant accounting policies, practices or procedures of the
Company.
(b)
The
Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued,
contingent, or otherwise), except for liabilities or
obligations reflected or reserved against the December 31,
2006 balance sheet of the Company (the “
December 31, 2006 Company Balance Sheet
”), current liabilities incurred in the ordinary course of
business and consistent with past practice since December 31, 2006
and liabilities that would not be reasonably expected to result in
a Material Adverse Effect on the Company.
3.7
Labor Matters
. The
Company has not entered into any collective bargaining agreements.
With respect to the Company’s employees, there are no
presently pending, or to the Knowledge of the Stockholder,
threatened (x) arbitration proceedings, labor strikes, slowdowns or
stoppages, grievances or other labor disputes; (y) Actions related
to an alleged material violation pertaining to labor relations or
employment matters, including but not limited to claims for unpaid
wages or penalties, discrimination, harassment, or retaliation, or
wrongful discharge in violation of public policy; or (z) any
scheduled vote or application for certification of a collective
bargaining agent or, to the
| 
