AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Version

 

A GREEMENT AND P LAN OF M ERGER

by and among

B AK B ONE S OFTWARE I NCORPORATED ,

C HICKASAW A CQUISITION C ORPORATION ,

C HICKASAW A CQUISITION C ORPORATION II,

C OLD S PARK , I NC . AND

THE S TOCKHOLDER R EPRESENTATIVE

Dated as of May 11, 2009

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

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TABLE OF CONTENTS

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TABLE OF CONTENTS

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E XHIBITS  & S CHEDULES

Schedules:

Schedule A Key Stockholders

Schedule 2.7(a) Allocation Certificate

Schedule 6.2(g) Third Party Consents

Schedule 6.2(k) Key Employees

Exhibits :

Exhibit A Stockholder Agreement

Exhibit B Opinion of Counsel to the Company

Exhibit C Charter Amendment

 

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A GREEMENT AND P LAN OF M ERGER AND R EORGANIZATION

This A GREEMENT AND P LAN OF M ERGER AND R EORGANIZATION (this “ Agreement ”) is dated as of May 11, 2009 (the “ Execution Date ”), among B AK B ONE S OFTWARE I NCORPORATED , a Canadian corporation (“ Parent ”), C HICKASAW A CQUISITION C ORPORATION , a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ Merger Sub ”), C HICKASAW A CQUISITION C ORPORATION II , a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ Merger Sub II ”), C OLD S PARK , I NC . , a Delaware corporation (the “ Company ”), and, with respect to Section 7.6 only, Tom Neustaetter as Stockholder Representative. Each of Parent, Merger Sub, Merger Sub II and the Company is a “ Party ” and together, the “ Parties .”

R ECITALS :

W HEREAS , the respective Boards of Directors of Parent, Merger Sub, Merger Sub II and the Company have approved and declared advisable and in the best interests of each corporation and its respective stockholders this Agreement and the transactions contemplated thereby, including the merger of Merger Sub with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth herein;

W HEREAS , pursuant to the Merger, among other things, and subject to the terms and conditions of this Agreement, (i) all of the issued and outstanding capital stock of the Company shall be converted into the right to receive the consideration set forth herein, and (ii) all of the issued and outstanding options to purchase capital stock of the Company shall terminate in the manner set forth herein;

W HEREAS , as soon as reasonably practicable following the Merger, Parent shall adopt an agreement and plan of merger and reorganization whereby the Company will be merged with and into Merger Sub II, with such corporation surviving the Second Merger as a wholly-owned subsidiary of Parent (the “ Second Merger ”);

W HEREAS , the Board of Directors of the Company has unanimously determined that the Merger is fair to, and in the best interests of, the Stockholders, and approved and declared advisable this Agreement, the Merger and the transactions contemplated hereby;

W HEREAS , concurrently with the execution of this Agreement, in order to induce Parent and Merger Sub to enter into this Agreement, the Stockholders of the Company identified on Schedule A (the “ Key Stockholders ”) are entering into stockholder agreements (each in the form attached hereto as Exhibit A (collectively the “ Stockholder Agreements ”)) with Parent; and

W HEREAS , Parent, Merger Sub, Merger Sub II and the Company intend for federal income tax purposes that the Merger and Second Merger (collectively, the “ Reorganization ”), qualify as a “reorganization” described in Section 368(a) of the Code, and that this Agreement constitute a “plan of reorganization” within the meaning of Treasury Regulations Section 1.3682-2(g).

 

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N OW , T HEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

D EFINITIONS ; C ONSTRUCTION

Section 1.1 Definitions . The following capitalized terms as used herein shall have the meanings ascribed to them in this Article I :

“ Agreement ” has such meaning as set forth at the beginning of this Agreement.

“ Affiliate ” means (i) any holder of 10% or more of the capital stock (measured on a fully diluted basis) of a Person, (ii) any director, or executive officer of a Person, (iii) any Person that directly or indirectly controls, is controlled by, or is under common control with, another Person or (iv) any member of the immediate family of any such Persons.

“ Allocation Certificate ” has such meaning as set forth in Section 2.7(c) .

“ Audited Financial Statements ” has such meaning as set forth in Section 3.6(a) .

“ BofA ” has such meaning as set forth in Section 5.18 .

“ Cash Consideration ” has such meaning as set forth in Section 2.6(a) .

“ Cash Election ” has such meaning as set forth in Section 2.7(a) .

“ Certificate of Merger ” has such meaning as set forth in Section 2.2 .

“ Certificates ” has such meaning as set forth in Section 2.9(a) .

“ Charter Amendment ” has such meaning as set forth in Section 6.2(c)(i) .

“ Claim Notice ” has such meaning as set forth in Section 7.3(a) .

“ Closing ” has such meaning as set forth in Section 2.2 .

“ Closing Date ” has such meaning as set forth in Section 2.2 .

“ Closing Date Balance Sheet ” means the unaudited consolidated balance sheet of the Company as of the Closing Date.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Company ” has such meaning as set forth at the beginning of this Agreement.

“ Company Board ” means the Board of Directors of the Company.

“ Company Bylaws ” has such meaning as set forth in Section 3.4(a) .

 

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“ Company Capital Stock ” means the Company Common Stock and Company Preferred Stock.

“ Company Charter ” has such meaning as set forth in Section 3.4(a) .

“ Company Common Stock ” means all outstanding shares of common stock of the Company, par value $0.0001, as of the Closing Date.

“ Company Contract ” means any Contract to which the Company is a party or to which the Company or any of its properties or assets (whether tangible or intangible) is subject or bound.

“ Company Convertible Notes ” means the outstanding convertible promissory notes issued by the Company having an aggregate principal amount of $3,000,000.

“ Company Disclosure Schedule ” means that certain letter dated the date hereof and delivered on the date hereof by the Company to Parent, which relates to this Agreement and is designated therein as the Company Disclosure Schedule.

“ Company Intellectual Property ” shall mean any Intellectual Property that is owned by, or exclusively licensed to, the Company.

“ Company License Agreements ” has such meaning as set forth in Section 3.16(h) .

“ Company Material Adverse Effect ” means any change or effect that is, or could reasonably be expected to be, materially adverse to (i) the business or the operations, assets, Liabilities, earnings or results of operations, financial projections or forecasts, or the financial condition, of the Company or (ii) the ability of the Company to perform its obligations pursuant to this Agreement and to consummate the Merger and the transactions contemplated hereby in a timely manner except to the extent that any such material adverse effect results from changes in general economic conditions (but only to the extent any such changes do not disproportionately impact the Company). For the purposes of this Agreement, any Company Material Adverse Effect on the business of the Company which is cured by the Company prior to the Effective Time shall not be a Company Material Adverse Effect.

“ Company Multiemployer Plan ” means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or has been obligated to contribute or otherwise may have any liability.

“ Company Option Plan ” means the Company’s 2006 Stock Plan, as amended.

“ Company Options ” means the options to purchase shares of the Company Common Stock issued pursuant to the Company Option Plan.

“ Company Owned Intellectual Property ” shall mean all Intellectual Property owned or purported to be owned by the Company.

“ Company Permits ” has such meaning as set forth in Section 3.11(a) .

 

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“ Company Plan ” means a “pension plan” (as defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a “welfare plan” (as defined in Section 3(1) of ERISA), or any other written or oral bonus, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, restricted stock, stock appreciation right, holiday pay, vacation, retention, severance, medical, dental, vision, disability, death benefit, sick leave, fringe benefit, personnel policy, insurance or other plan, arrangement or understanding, in each case established or maintained by the Company or any of its ERISA Affiliates or as to which the Company or any of its ERISA Affiliates contributes or otherwise may have any liability.

“ Company Preferred Stock ” means all outstanding shares of the Series A Preferred Stock of the Company, par value $0.0001, as of the Closing Date.

“ Company Products ” has such meaning as set forth in Section 3.16(c) .

“ Company Registered Intellectual Property ” shall mean all of the Registered Intellectual Property owned by, or filed in the name of, the Company.

“ Company Securityholders ” has such meaning as set forth in Section 2.6(a) .

“ Compensation Agreements ” has such meaning as set forth in Section 3.14 .

“ Confidentiality Agreement ” has such meaning as set forth in Section 5.5 .

“ Consent Date ” has such meaning as set forth in Section 5.18 .

“ Contaminants” has such meaning as set forth in Section 3.16(n) .

“ Contract ” means any note, bond, mortgage, indenture, lease, contract, insurance policy, covenant or other agreement (written or oral), instrument or commitment, permit, concession, franchise or license.

“ CPR ” has such meaning as set forth in Section 9.8(b) .

“ CPR Rules ” has such meaning as set forth in Section 9.8(b) .

“ Deemed Share Value ” shall mean $0.43 per Parent Common Share.

“ Delayed Cash Initial Payment ” has such meaning as set forth in Section 2.6(a)(i) .

“ DGCL ” means the Delaware General Corporation Law, as amended.

“ Dispute ” has such meaning as set forth in Section 9.8(a) .

“ Dispute Notice ” has such meaning as set forth in Section 9.8(b) .

“ Disputing Party ” has such meaning as set forth in Section 9.8(a) .

“ Dissenting Shares ” has such meaning as set forth in Section 2.8(a) .

 

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“ Dissenting Stockholder ” has such meaning as set forth in Section 2.8(a) .

“ Effective Time ” has such meaning as set forth in Section 2.2 .

“ Election ” has such meaning as set forth in Section 2.7(a) .

“Employee” means any current, former or retired employee, officer or director of the Company.

“ Employment Agreements ” has such meaning as set forth in Section 3.13(a) .

“ Environmental Law ” means any law, past or present and as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, or common law, relating to pollution or protection of the environment, health or safety or natural resources, including those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Substances.

“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any applicable Environmental Law.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) which would be considered a single employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated under those sections or pursuant to Section 4001(b) of ERISA and the regulations promulgated thereunder.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Liabilities ” has such meaning as set forth in Section 7.4(a) .

“ Execution Date ” has such meaning as set forth at the beginning of this Agreement.

“ Expenses ” means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigations, expert witnesses, consultants, accountants, valuation experts and other professionals).

“ Financial Statements ” has such meaning as set forth in Section 3.6(b) .

“ First Subsequent Payment Date ” has such meaning as set forth in Section 2.6(a)(ii)(1) .

“ Form of Election ” has such meaning as set forth in Section 2.7(a) .

“ Fundamental Representations ” has such meaning as set forth in Section 7.1(a) .

“ GAAP ” means United States generally accepted accounting principals, applied on a basis consistent with the basis on which the Financial Statements were prepared.

 

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“ Governmental Authority ” means any United States and/or foreign, federal, state, provincial, local or other governmental authority of any kind or nature, including any department, subdivision, commission, board, bureau, agency or instrumentality thereof, any court and any administrative agency, and any comparable body performing any governmental functions.

“ Hazardous Substances ” means (A) petroleum and petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials and PCBs, and (B) any other chemicals, materials or substances regulated as toxic or hazardous or as a pollutant, contaminant or waste under any applicable Environmental Law.

“ Holdback Amount ” has such meaning as set forth in Section 7.4(a) .

“ In-the-Money Option ” has such meaning as set forth in Section 2.7(e)(i) .

“ Indemnified Parties ” has such meaning as set forth in Section 7.2 .

“ Indemnity Claim ” means the amount of any and all Losses incurred by an Indemnified Party.

“ Indemnity Payment ” means any payment that an Indemnified Party is entitled to receive hereunder as to an Indemnity Claim.

“ Information Statement ” has such meaning as set forth in Section 5.4 .

“ Initial Payment ” has such meaning as set forth in Section 2.6(a)(i) .

“ Intellectual Property ” shall mean any or all of the following and all rights in, arising out of, or associated therewith: (a) all United States, international and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology; (e) domain names, uniform resource locators and other names and locators associated with the Internet; (f) all Software; (g) all industrial designs and any registrations and applications therefor throughout the world; (h) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; (i) all databases and data collections and all rights therein throughout the world; (j) all moral and economic rights of authors and inventors, however denominated, throughout the world, and (k) any similar or equivalent rights to any of the foregoing anywhere in the world.

“ Key Employees ” means the Employees listed on Schedule 6.2(k) .

“ Key Stockholders ” has such meaning as set forth in the Recitals hereof.

 

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“ Knowledge ” means the actual knowledge of any officer or director of the Company and such knowledge as would be reasonably expected to be known by such individuals in the ordinary and usual course of the performance of their professional responsibilities to the Company.

“ Law ” means, as to any Person, any statute, rule, regulation, ordinance, code, guideline, law, judicial decision, determination, order (including any injunction, judgment, writ, award or decree), or consent of the Court, other Governmental Authority or arbitrator, in each case applicable to or binding upon such Person, including the conduct of its business, or any of its assets or revenues to which such Person or any of its assets or revenues are subject.

“ Letter of Transmittal ” has such meaning as set forth in Section 2.9(a) .

“ Liabilities ” or “ Liability ” means any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise.

“ Liens ” has such meaning as set forth in Section 3.10(a) .

“ Losses ” has such meaning as set forth in Section 7.2 .

“ Maximum Cash Initial Payment ” has such meaning as set forth in Section 2.6(a)(i) .

“ Maximum Stock Initial Payment ” has such meaning as set forth in Section 2.6(a)(i) .

“ Merger ” has such meaning as set forth in Recitals hereof.

“ Merger Consideration ” has such meaning as set forth in Section 2.6(a) .

“ Merging Corporations ” means Merger Sub and the Company, collectively.

“ Merger Sub ” has such meaning as set forth at the beginning of this Agreement.

“ Merger Sub II ” has such meaning as set forth in the Recitals hereof.

“ Negotiation Period ” has such meaning as set forth in Section 9.8(a) .

“ Option Consideration ” means, with respect to a Company Option, an amount of the Initial Payment equal to the product of (i) the excess, if any, of the Per Share Common Stock Consideration over the exercise price per share of Company Common Stock of such Company Option and (ii) the number of shares of Company Common Stock subject to such Company Option (whether vested or unvested). The Option Consideration shall be paid in cash.

“ Parachute Payment Waiver ” has such meaning as set forth in Section 5.13(a) .

“ Parent ” has such meaning as set forth at the beginning of this Agreement.

 

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“ Parent Change in Control ” means the occurrence of either of the following events in a single transaction: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Parent representing fifty percent (50%) or more of the total voting power represented by Parent’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by Parent of all or substantially all of Parent’s assets.

“ Parent Common Shares ” means the common shares of Parent.

“ Parent Financial Statements ” has such meaning as set forth in Section 4.5 .

“ Parent Material Adverse Effect ” has such meaning as set forth in Section 4.2 .

“ Parent Representatives ” has such meaning as set forth in Section 5.5 .

“ Parent SEC Documents ” has such meaning as set forth in Section 4.5 .

“ Party ”, and together, “ Parties ”, have such meaning as set forth in the beginning of this Agreement.

“ Per Share Common Stock Consideration ” means that amount of Cash Consideration and Stock Consideration equal to (i) an amount equal to (A) the Merger Consideration plus (B) the total aggregate exercise prices of the Company Options less (C) the total value of the Series A Preferred Stock Liquidation Preference, divided by (ii) the sum of the total number of (A) outstanding shares of Company Common Stock and (B) Company Common Stock underlying Company Options.

“ Person ” means an individual, company, agency, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Authority.

“ Proceedings ” means any claims, controversies, demands, actions, lawsuits, investigations, proceedings or other disputes, formal or informal, including any by, involving or before any arbitrator or any Governmental Authority.

“ Purchase Proposal ” means any proposal for a merger or other business combination involving the Company, or any Subsidiary, or any proposal or offer to acquire in any manner, directly or indirectly, an equity interest in, any voting securities of, or a substantial portion of the assets of the Company, or any Subsidiary, other than the transactions contemplated by this Agreement.

“ Registered Intellectual Property ” shall mean all United States, international and foreign: (a) patents and patent applications (including provisional applications); (b) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks; (c) registered copyrights and applications for copyright registration; and (d) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any Governmental Authority.

 

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“ Reorganization” has such meaning as set forth in the Recitals hereof.

“ Requisite Stockholder Approval ” means the approval of this Agreement and the transactions contemplated thereby by the requisite number of Stockholders required to approve this Agreement and the transactions contemplated hereby as provided by the DGCL and the Company Charter and Company Bylaws.

“ Rule 144 ” means Rule 144 promulgated under the Securities Act.

“ SEC ” means the U.S. Securities and Exchange Commission.

“ Second Merger ” has such meaning as set forth in the Recitals hereof.

“ Second Subsequent Payment Date ” has such meaning as set forth in Section 2.6(a)(ii)(2)

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Series A Preferred Stock Liquidation Preference ” shall mean the product of (i) the number of shares of Series A Preferred Stock outstanding immediately prior to the Closing, including those shares issued upon conversion of the Company Convertible Notes, and (ii) $0.894707.

“ Software ” shall mean any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing and (iv) all user documentation, including user manuals and training materials, relating to any of the foregoing.

“ Stock Consideration ” has such meaning as set forth in Section 2.6(a) .

“ Stock Election ” has such meaning as set forth in Section 2.7(a) .

“ Stockholder Agreements ” has such meaning as set forth in the Recitals hereof.

“ Stockholder Representative ” has such meaning as set forth in Section 7.6(a) .

“ Stockholders ” means the stockholders of the Company.

“ Subsequent Payment(s) ” has such meaning as set forth in Section 2.6(a)(ii)

“ Subsequent Payment Date ” has such meaning as set forth in Section 2.6(a)(ii)(3)

“ Subsidiary ” means any corporation, partnership, limited liability company, joint venture or other legal entity of which Parent or the Company, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, fifty percent (50%) or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, joint venture or other legal entity means.

 

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“ Survival Period ” has such meaning as set forth in Section 7.1(a) .

“ Surviving Corporation ” has such meaning as set forth in Section 2.1 .

“ Tax Claim ” has such meaning as set forth in Section 5.14(d) .

“ Tax Returns ” has such meaning as set forth in Section 3.8(a) .

“ Taxes ” has such meaning as set forth in Section 3.8(a) .

“ Third-Party Claim ” has such meaning as set forth in Section 7.3(c) .

“ Third Subsequent Payment Date ” has such meaning as set forth in Section 2.6(a)(ii)(3)

“ Treasury Regulation ” means the temporary and final regulations promulgated under the Code.

“ Unaudited Financial Statements ” has such meaning as set forth in Section 3.6(b) .

“ Unresolved Amount ” has such meaning as set forth in Section 7.4(d) .

“ Worker Safety Laws ” has such meaning as set forth in Section 3.11(c) .

“ 5% Shareholder ” has such meaning as set forth in Section 5.14(g) .

Section 1.2 Construction . Unless the context of this Agreement clearly requires otherwise, (a) references to the plural include the singular, and references to the singular include the plural, (b) references to any gender include the other gender, (c) the words “include,” “includes” and “including” do not limit the preceding terms or words and will be deemed to be followed by the words “without limitation”, (d) the terms “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, (e) the terms “day” and “days” mean and refer to calendar day(s) and (f) the terms “year” and “years” mean and refer to calendar year(s). Unless otherwise set forth herein, references in this Agreement to (a) any document, instrument or agreement (including this Agreement) include (1) all exhibits, schedules and other attachments thereto, (2) all documents, instruments or agreements issued or executed in replacement thereof and (3) such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or supplemented from time to time in accordance with its terms and in effect at any given time, and (b) a particular Law means such Law as amended, modified, supplemented or succeeded, from time to time and in effect through the Closing Date. All Article, Section, Exhibit and Schedule references herein are to Articles, Sections, Exhibits and Schedules of this Agreement, unless otherwise specified. This Agreement will not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if all Parties had prepared it. All accounting terms not specifically defined herein will be construed in accordance with GAAP.

 

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ARTICLE II

T HE R EORGANIZATION

Section 2.1 The Reorganization . Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (“ Surviving Corporation I ”). At the effective time of the Second Merger and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Surviving Corporation I shall be merged with and into Merger Sub II, the separate corporate existence of Surviving Corporation I shall cease and Merger Sub II shall continue as the surviving entity ( “Surviving Corporation II”, together with Surviving Corporation I, and either of them, the “ Surviving Corporation ”). The Parties hereto each specifically acknowledge and agree that it is intended by each of them that the Reorganization (i.e., the Merger and the Second Merger), taken together as a single, integrated transaction, shall be treated and reported as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code and IRS Revenue Ruling 2001-46, 2001-2 C.B. 321 (and any comparable provisions of any applicable state or local Tax laws); provided, however, that in the event of any determination (as defined in Section 1311 of the Code) that the Reorganization does not so qualify as a “reorganization” then the Parties intend that the Merger and the Second Merger shall each be treated as separate transactions for all federal, state and local Tax purposes, as per IRS Revenue Ruling 90-95, 1990-2 C.B. 67 (and any comparable provisions of any applicable state or local Tax laws).

Section 2.2 Closing; Effective Time . The closing of the Merger (the “ Closing ”) shall take place as promptly as practicable after the execution and delivery of this Agreement by the parties hereto, but no later than two (2) business days following the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are satisfied at Closing, but subject to the waiver of fulfillment of those conditions) at the offices of Morrison & Foerster LLP, 12531 High Bluff Drive, San Diego, California 92130, at 10:00 a.m., local time, or at such other time and place as Parent and the Company shall agree (the “ Closing Date ”). The Parties acknowledge and agree that time is of the essence with respect to the Closing, and will use commercially reasonable efforts to satisfy the conditions set forth in Article VI and effectuate the Closing as soon as commercially practicable. On the Closing Date and subject to the terms and conditions hereof, the Parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger (the “ Certificate of Merger ”) executed in accordance with the relevant provisions of the DGCL, with the Secretary of State of the State of Delaware. The Merger shall become effective at such time as the Certificate of Merger is duly filed with and accepted by the Secretary of State of the State of Delaware, or at such later time as Parent and the Company shall agree and specify in the Certificate of Merger, such time being referred to herein as the “ Effective Time .” Subject to the provisions of this Agreement, promptly following the Merger, but in no event later than thirty (30) days after the Effective Time, a Certificate of Merger for the Second Merger, satisfying the applicable requirements of the DGCL, shall be duly executed by Merger Sub II and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL.

 

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Section 2.3 Effects of the Merger . At the Effective Time, the effect of the Merger shall be as provided by the applicable provisions of the DGCL, this Agreement and the Certificate of Merger. Without limiting the generality of the foregoing and subject thereto, as of the Effective Time, all properties, rights, immunities, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation I, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation I.

Section 2.4 Certificate of Incorporation; Bylaws .

(a) At and following the Effective Time, the Company Charter, as amended by the Charter Amendment, shall be amended to read the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and shall be the certificate of incorporation of the Surviving Corporation I until thereafter changed or amended as provided therein, in connection with the Second Merger, by the DGCL or by applicable Law, except that Article I of the certificate of incorporation of the Surviving Corporation I shall be amended and restated in its entirety to read as follows: “The name of the corporation shall be ColdSpark, Inc.”

(b) At and following the Effective Time, the bylaws of the Surviving Corporation I shall be amended to read the same as the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, and shall be the bylaws of the Surviving Corporation, until amended as provided therein, in connection with the Second Merger, by the DGCL or by applicable Law.

Section 2.5 Directors; Officers .

(a) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation I, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

(b) The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation I and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided by the bylaws of the Surviving Corporation I or as otherwise provided by Law.

Section 2.6 Merger Consideration; Adjustment .

(a) Merger Consideration . The consideration (“ Merger Consideration ”) to be paid by Parent and Merger Sub in the Merger to holders of outstanding shares of Company Capital Stock and Company Options (the “ Company Securityholders ”) shall be $8,125,000 (the “ Cash Consideration ”) and $7,813,005.40 of Parent Common Shares (the “ Stock Consideration ”), subject to adjustment pursuant to Article VII below, payable as follows:

(i) cash in the amount of $1,500,000 (the “ Maximum Cash Initial Payment ”) and 9,117,877 Parent Common Shares (the “ Maximum Stock Initial Payment ” and together with the Maximum Cash Initial Payment, the “ Initial Payment ”) shall be paid by Parent at Closing; provided, however , that (x) $750,000 of the Maximum Cash Initial Payment shall not be paid by Parent until the First Subsequent Payment Date (the “ Delayed Cash Initial

 

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Payment” ); (y) Parent shall pay interest on the Delayed Cash Initial Payment at the interest rate that is the greater of (A) the applicable prime rate as reported in the Wall Street Journal on the Closing Date plus 3.5% or (B) eight percent (8%); and (z) the Delayed Cash Initial Payment may not be deferred pursuant to Section 2.6(a)(ii) .

(ii) the remaining Merger Consideration shall be paid as follows (each of the below payments, a “ Subsequent Payment ” and collectively the “ Subsequent Payments ”):

(1) thirteen (13) months after the Closing Date (the “ First Subsequent Payment Date ”), $1,500,000 in cash and 3,488,383 Parent Common Shares;

(2) twenty-five (25) months after the Closing Date (the “ Second Subsequent Payment Date ”), $1,500,000 in cash and 3,488,383 Parent Common Shares; and

(3) thirty-seven (37) months after the Closing Date (the “ Third Subsequent Payment Date ”, and each of the First Subsequent Payment Date, Second Subsequent Payment Date and Third Subsequent Payment Date, a “ Subsequent Payment Date ”), $3,625,000 in cash and 2,075,137 Parent Common Shares;

provided , however , that Parent may defer payment of the cash portion of a Subsequent Payment to a later Subsequent Payment Date by issuing an additional amount of Parent Common Shares calculated by dividing the amount of the Cash Consideration so deferred by the Deemed Share Value. In the event Parent elects to defer all or a portion of the cash portion of a Subsequent Payment to a later Subsequent Payment Date, then (y) the stock portion of the later Subsequent Payment Date shall be decreased by an amount equal to the number of Parent Common Shares issued upon deferral of the cash portion of a Subsequent Payment pursuant to this paragraph (so that the total dollar amount of Parent Common Shares issued as Merger Consideration shall not exceed $7,813,005.40); and (z) Parent shall pay interest on the amount of Cash Consideration so deferred at the interest rate that is the greater of (A) the applicable prime rate as reported in the Wall Street Journal on the date the Subsequent Payment is owed plus 3.5% or (B) eight percent (8%) and, subject to adjustment pursuant to Article VII , the aggregate Cash Consideration shall be $8,125,000. Interest shall accrue from the date the Subsequent Payment for which a deferral is elected by Parent was due until the date on which the deferred amount of Cash Consideration is paid as part of a Subsequent Payment, and shall be payable in full on the date the Subsequent Payment is made.

(b) No Fractional Shares . In lieu of fractional shares that would otherwise be issued to the Company Securityholders under this Agreement, Company Securityholders that would have been entitled to receive a fractional share shall receive such whole number of shares of Parent Common Shares as is equal to the precise number of Parent Common Shares to which such person would be entitled rounded up to the nearest whole number.

(c) Parent Change in Control . In the event of a Parent Change in Control prior to the Third Subsequent Payment Date, the timing of the payment of all previously unpaid Merger Consideration shall be accelerated and all such payments shall be made to the Company Securityholders (other than Dissenting Stockholders) upon the earlier of (x) the closing of such Parent Change in Control or (y) the Third Subsequent Payment Date.

 

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(d) Adjustments .

(i) If at any time during the period between the date of this Agreement and the Third Subsequent Payment Date, any change in the outstanding shares of capital stock of the Parent shall occur as a result of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or stock distribution, the Stock Consideration and other similarly dependent items shall be equitably adjusted to reflect such change.

(ii) If at any time during the period between the date of this Agreement and the Closing Date, any change in the outstanding shares of capital stock of the Company shall occur as a result of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or stock distribution, the Stock Consideration and other similarly dependent items shall be equitably adjusted to reflect such change.

Section 2.7 Effect on Capital Stock .

(a) Consideration Election . Subject to Section 2.7(b) , each holder of Company Preferred Stock shall be entitled to elect (i) the portion of the Initial Payment to be paid to such holder of Company Preferred Stock in Cash Consideration (a “ Cash Election ”) and (ii) the portion of the Initial Payment to be paid to such holder of Company Preferred Stock in Stock Consideration (a “ Stock Election ”). Any Cash Election or Stock Election shall be referred to herein as an “ Election ,” and shall be made on a form furnished by Parent, Merger Sub and the Company for that purpose (a “ Form of Election ”), included as part of the Information Statement. Holders of Company Preferred Stock shall not be entitled to make any Election with respect to any Subsequent Payments.

(b) Cash Proration; Stock Proration .

(i) If the total amount of Cash Elections would require aggregate cash payments in excess of the Maximum Cash Initial Payment, then each holder of Company Preferred Stock who makes a Cash Election shall receive a pro rata portion (based on the number of shares of Company Preferred Stock covered by Cash Elections) of the Maximum Cash Initial Payment available to be paid to holders of Company Preferred Stock. All shares of Company Preferred Stock subject to a Cash Election, other than shares of Company Preferred Stock converted into the right to receive an Initial Payment of Cash Consideration in accordance with this Section 2.7(b) , shall be converted into the right to receive an Initial Payment of Stock Consideration.

(ii) If the total amount of Stock Elections would require the issuance in the aggregate of a number of Parent Common Shares in excess of the Maximum Stock Initial Payment, then each holder of Company Preferred Stock who makes a Stock Election shall receive a pro rata portion (based on the number of shares of Company Preferred Stock covered by Stock Elections) of the Maximum Stock Initial Payment. All shares of Company Preferred

 

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Stock subject to a Stock Election, other than shares of Company Preferred Stock converted into the right to receive an Initial Payment of Stock Consideration in accordance with this Section 2.7(b)(ii) , shall be converted into the right to receive an Initial Payment of Cash Consideration.

(c) Allocation Certificate . Upon the execution of this Agreement, the Company shall deliver to Parent a certificate (the “ Allocation Certificate ”) of the Company signed by the Chief Executive Officer of the Company certifying, in each case as of the Closing: (i) the identity of each record holder of Company Capital Stock and the number of shares of Company Common Stock and/or Company Preferred Stock held by each such Stockholder; (ii) the identity of each holder of Company Options and the number and type of shares of Company Common Stock subject to each Company Option; (iii) the amount, as determined by the Board of Directors of the Company in good faith, of the Initial Payment (including the amount of the Delayed Cash Initial Payment) and each of the Subsequent Payments to be paid to each Company Securityholder under the Company Charter, the Election and other applicable agreements, expressed in terms of both the Cash Consideration and Stock Consideration to be paid on each such date, provided that the Initial Payment paid to the holders of Company Common Stock shall exclusively consist of Cash Consideration; and (iv) the amount of any required Tax withholding (if any) from the Initial Payment and each Subsequent Payment with respect to each such Company Securityholder, all giving effect to the conversion of all Company Convertible Notes. Such Allocation Certificate shall be deemed the definitive calculation of the Merger Consideration payable to the Company Securityholders (except with respect to changes resulting from adjustments to the Merger Consideration under Section 2.6 and Article VII ).

(d) Effect on Company Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the Company Securityholders:

(i) the shares of Company Preferred Stock issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares), including all shares of Company Preferred Stock issued upon the conversion of all Company Convertible Notes, shall be converted into the right to receive a portion of the Merger Consideration as set forth on the Allocation Certificate, as may be adjusted pursuant to Section 2.6 and Article VII of this Agreement; and

(ii) the shares of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) shall be converted into the right to receive a portion of the Merger Consideration as set forth on the Allocation Certificate, as may be adjusted pursuant to Section 2.6 and Article VII of this Agreement.

(e) Company Options .

(i) By virtue of the Merger and without any action on the part of the Company, Parent or Merger Sub or the holders of Company Options, each Company Option outstanding and unexercised immediately prior to the Effective Time shall be accelerated in full so that each such Company Option is fully vested and exercisable immediately prior to, but contingent upon, the Effective Time. At the Effective Time, each holder of an outstanding and unexercised Company Option with a per share exercise price less than the Per Share Common

 

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Stock Consideration (each, an “ In-the-Money Option ”) shall be eligible to receive the Option Consideration with respect to such In-the-Money Option, rounded down to the nearest whole cent or to the nearest whole share, as applicable, less applicable deductions and withholdings required by Law to be withheld in respect of such payment. Any such required withholdings may be satisfied by withholding a portion of the Cash Consideration payable with respect of such In-the-Money Option, or by a reduction in the number of Parent Common Shares delivered as the Stock Consideration payable with respect to such In-the-Money Option. To the extent that amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the holders of such In-the-Money Options to whom such amounts would otherwise have been paid. Parent shall cause the Surviving Corporation to pay any amounts withheld for withholding Taxes promptly to the appropriate Governmental Authority on behalf of such holder of In-the-Money Options. The Option Consideration shall be payable to each holder of an In-the-Money Option in a lump sum within thirty (30) days after the Effective Time and shall not be subject to the deferred payment provisions of Section 2.6(a) or Article VII . Each Company Option outstanding and unexercised immediately prior to the Effective Time with a per share exercise price greater than or equal to the Per Share Common Stock Consideration shall automatically be cancelled as of the Effective Time without any consideration payable in respect thereof.

(ii) Conditional upon the Closing, each Company Option shall be cancelled and terminated as of the Effective Time in accordance with the Company Option Plan, and no holder of any such Company Option or participant in the Company Option Plan shall have any rights thereafter with respect thereto except as expressly provided in this Section 2.7(c) . Prior to the Effective Time, the Company shall provide notice to each holder of an outstanding Company Option describing the treatment of such Company Option in accordance with Section 2.7(c)(i) . Prior to the Effective Time, the Company Board shall adopt any resolutions and take any actions which are necessary to effectuate this Section 2.7(c) . Conditional upon the Closing, the Company shall (i) take all appropriate or necessary steps to effect the termination of the Company Option Plan as of the Effective Time, and (ii) take all actions necessary so that following the Effective Time, there shall be no outstanding Company Options.

(f) Merger Sub Common Stock . Each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation I and shall constitute the only shares of capital stock of the Surviving Corporation I outstanding immediately after the Effective Time. Each stock certificate of Merger Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation I.

(g) Cancellation of Treasury Stock and Parent-Owned Stock . Each share of Company Common Stock held in the treasury of the Company and any shares of Company Common Stock owned by Parent or by any direct or indirect wholly-owned Subsidiary of Parent or the Company (including any shares of Company Common Stock issued by the Company pursuant to a stock option) immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto.

 

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Section 2.8 Dissenters’ Rights .

(a) Notwithstanding anything in this Agreement to the contrary, if required by the DGCL (but only to the extent required thereby), shares of Company Capital Stock that are issued and outstanding immediately prior to the Effective Time and that are held by a Stockholder (a “ Dissenting Stockholder ”) who properly exercises dissenters rights thereto in accordance with the DGCL (“ Dissenting Shares ”) shall not be converted as described in Section 2.7(b) , but the holder thereof shall only be entitled to such rights as are granted by the DGCL.

(b) If any Stockholder who holds Dissenting Shares as of the Effective Time effectively withdraws or loses (through passage of time, failure to demand or perfect, or otherwise) the right to demand and perfect appraisal rights under the DGCL, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares that were Dissenting Shares shall automatically be converted into and represent only the right to receive any portion of the Merger Consideration pursuant to and subject to Section 2.6 without interest thereon upon surrender of the certificate representing such shares.

(c) The Company shall give Parent (i) prompt notice of any written demands for appraisal of any shares of Company Capital Stock, withdrawals of such demands, and any other instruments or notices served pursuant to the DGCL on the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal of Company Capital Stock, or offer to settle any such demands.

(d) To the extent that the amounts payable (if any) to Dissenting Stockholders for each Dissenting Share pursuant to Section 2.8 is less than the Merger Consideration that would have been received by such Dissenting Stockholders pursuant to Section 2.6 , such difference in value shall be added to the next Subsequent Payment and distributed in accordance with Section 2.6 . To the extent that the amounts payable (if any) to Dissenting Stockholders for each Dissenting Share exceed the amount of Cash Consideration that would have been received by such Dissenting Stockholders pursuant to Section 2.6 , such difference in value shall be deducted by Parent from the next Subsequent Payment.

Section 2.9 Exchange Procedures .

(a) Surrender of Certificates . Parent shall mail or otherwise deliver to the Stockholders, (i) a letter of transmittal (“ Letter of Transmittal ”), which shall specify that delivery shall be effected, and risk of loss and title to the certificates for Company Capital Stock (the “ Certificates ”) shall pass only upon proper delivery of the Certificates to Parent, (ii) such other customary documents as may be reasonably required pursuant to such instructions and (iii) instructions for use in effecting the surrender of the Certificates and payment therefor. Upon receipt by Parent of a Certificate (together with the Letter of Transmittal and other documents, properly completed and duly executed) at or following the Closing, the holder of such Certificate shall be entitled to such holders’ pro rata portion of the Initial Payment as set forth on the Allocation Certificate, subject to any applicable withholding as required under the Code, or

 

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under any provisions of state, local or foreign Tax law; provided , however , that with respect to the Stock Consideration payable by Parent to the Stockholders at Closing, Parent shall (i) deliver written instructions to its transfer agent as soon as practicable following the Closing Date authorizing the preparation and issuance of such Stock Consideration to the Stockholders and (ii) cause all Parent Common Shares representing such Stock Consideration to be delivered as soon as commercially practicable thereafter.

(b) No Further Ownership Rights in Shares . Upon the payment of the Initial Payment upon the surrender of Certificates representing the ownership of the Company Capital Stock in accordance with the terms of this Article II , such payment shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Capital Stock theretofore represented by such Certificates, subject only to the right to receive the Subsequent Payments, in accordance with the terms and conditions of this Article II and Article VII . At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Capital Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled in exchange for the right to receive the Merger Consideration as provided in this Article II .

(c) Lost, Stolen or Destroyed 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 reasonably required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, or an indemnity agreement reasonably acceptable to Parent, as indemnity against any claim that may be made against them with respect to such Certificate, Parent will pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which the holders thereof are entitled.

Section 2.10 Further Assurances . If at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Merging Corporations, or (b) otherwise to carry out the purposes of this Agreement, the Company or Surviving Corporation, as applicable, and their respective proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of the Merging Corporations, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Merging Corporation or any such Stockholder, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation’s right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such Merging Corporation and otherwise to carry out the purposes of this Agreement.

 

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ARTICLE III

R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

The Company represents and warrants to Parent, Merger Sub and Merger Sub II that the statements contained in this Article III are current and complete, except as set forth in the Company Disclosure Schedule, which Company Disclosure Schedule shall specifically identify the section of this Agreement for which each exception is taken:

Section 3.1 Organization of the Company . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the full corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified or licensed to do business and is in good standing as a foreign corporation in each jurisdiction listed in Section 3.1(a) of the Company Disclosure Schedule and in each jurisdiction in which the conduct of its business or the ownership, leasing, holding or use of its properties makes such qualification necessary except such other jurisdictions where the failure to be so qualified or licensed or in good standing would not have a Company Material Adverse Effect. The Company has delivered a true and correct copy of the Company Charter and Company Bylaws, each as amended to date and in full force and effect on the date hereof, to Parent. The Company has not violated the Company Charter or Company ByLaws in any material respect. Section 3.1(b) of the Company Disclosure Schedule lists every state or foreign jurisdiction in which the Company has facilities, maintains an office or has an Employee. Neither the Company nor its predecessors has conducted any business under or otherwise used for any purpose in any jurisdiction any fictitious name, assumed name, trade name or other name.

Section 3.2 Capitalization .

(a) The authorized capital stock of the Company consists of:

(i) 30,000,000 shares of Company Common Stock, of which, as of the date of this Agreement, 15,630,525 shares were issued and outstanding;

(ii) 7,500,000 shares of Company Preferred Stock, of which, as of the date of this Agreement, 7,264,948 shares are issued or outstanding;

(b) Section 3.2(b) of the Company Disclosure Schedule sets forth a complete and accurate list, as of the date hereof, of (i) the name of each holder of Company Capital Stock, and the domicile address of such holder, (ii) the number of shares of Company Capital Stock held by such holder, (iii) the class or series of such shares, and (iv) for shares other than shares of Company Common Stock, the number of shares of Company Common Stock (if any) into which such shares are convertible. All of the issued and outstanding shares of Company Capital Stock have been duly authorized and validly issued and are fully paid and nonassessable and are not subject to preemptive rights created by Law, the Company Charter, Company Bylaws, or any Company Contract. All of the issued and outstanding shares of Company Capital Stock have been offered, issued and sold by the Company in compliance with all applicable securities Laws. No shares of Company Capital Stock are unvested or subject to a repurchase option, risk of

 

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forfeiture or other similar condition under any applicable restricted stock purchase agreement or other agreement with the Company. There are no declared or accrued but unpaid dividends with respect to any shares of Company Capital Stock.

(c) The Company does not have any outstanding stock options or other equity-based awards under any Company Plan or any other Contract, other than the Company Option Plan. The Company has reserved 4,487,843 shares of Company Common Stock for issuance to employees and directors of, and consultants to, the Company upon the issuance of stock or the exercise of Company Options granted under the Company Option Plan, of which 4,091,027 shares are issuable, as of the date hereof, upon the exercise of outstanding, unexercised Company Options granted under the Company Option Plan. No shares of Company Common Stock or Company Preferred Stock are issuable upon the exercise of outstanding warrants. Section 3.2(c) of the Company Disclosure Schedule sets forth for each outstanding Company Option the name of the holder of such Company Option, the domicile address of such holder, the number of shares of Company Capital Stock issuable upon the exercise of such Company Option, the exercise price of such Company Option and the date of grant of such Company Option. True and complete copies of all Company Contracts relating to or issued under the Company Option Plan have been made available to Parent and such Company Contracts have not been amended, modified or supplemented, and there are no Company Contracts to amend, modify or supplement such agreements or instruments from the forms thereof provided to Parent.

(d) (i) No subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of Company Capital Stock or any other security of the Company, if any, is authorized or outstanding; (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security, other such right or other security of the Company, or to issue or distribute to holders of any shares of Company Capital Stock or other securities any evidences of indebtedness or assets of the Company; (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of Company Capital Stock, or any other security of the Company, if any, or any interest therein, or to pay any dividend or to make any other distribution in respect thereof; (iv) there are no outstanding or authorized stock appreciation, profit participation, restricted stock unit, phantom stock or similar rights with respect to the Company; and (v) the Company has no obligation (contingent or otherwise) to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such subscription, warrant, option, convertible security or other right.

(e) There is no Contract between the Company, on the one hand, and any other Person, on the other hand, or, to the Company’s Knowledge, among any holders of the securities of the Company, relating to (i) the sale or transfer (including agreements relating to co-sale rights, “tag-along” or “drag-along” rights), registration under the Securities Act, or voting, of any securities of the Company or (ii) rights of first refusal relating to any securities of the Company.

(f) Section 3.2(f) of the Company Disclosure Schedule sets forth the outstanding principal, accrued interest, applicable rate of interest and the number of shares of Company Preferred Stock into which such shares are convertible of all outstanding Company

 

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Convertible Notes. All Company Convertible Notes will convert into shares of Company Preferred Stock prior to the Closing, and no amounts shall remain payable in respect of the Company Convertible Notes after such conversion.

Section 3.3 Authority . On or prior to the date of this Agreement, the Company Board has approved this Agreement in accordance with the DGCL and the Stockholder Agreements have been executed and delivered by the Stockholders set forth on Schedule A . The Company has all requisite corporate power and authority to enter into this Agreement to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action (including Board action) on the part of the Company, subject to (i) approval and adoption of this Agreement by the holders of the Company Capital Stock as required by the DGCL and (ii) the filing of the Certificate of Merger as required by the DGCL. This Agreement has been duly executed and delivered by the Company and (assuming the valid authorization, execution and delivery of this Agreement by Parent and Merger Sub, and binding effect of this Agreement on Parent and Merger Sub) constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, or by principles governing the availability of equitable remedies.

Section 3.4 Consents and Approvals; No Violation; Litigation .

(a) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, result in any violation of, or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or result in the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company under, any provision of (i) the Restated Certificate of Incorporation of the Company, as amended (the “ Company Charter ”) or the Bylaws of the Company, as amended (the “ Company Bylaws ”), (ii) any Company Contract or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its respective properties or assets, other than, in the case of clauses (ii) or (iii), any such violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Company Material Adverse Effect.

(b) No filing or registration with, or authorization, consent or approval of, any Governmental Authority is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or is necessary for the consummation of the Merger and the other transactions contemplated by this Agreement, except for:

(i) the filing of the Certificate of Merger with the Secretary of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business; and

 

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(ii) such other consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Company Material Adverse Effect.

(c) There is no outstanding claim or other Proceeding pending by or against, or to the Knowledge of the Company threatened by or against, the Company (including at law or in equity or before or by any Governmental Authority or arbitrator). To the Knowledge of the Company, there is no basis for any such claim or other Proceeding. The Company is in compliance in all material respects with all Laws applicable to its business as presently conducted by the Company. No written notice has been received by the Company during the past three (3) years alleging any violation of Law by the Company. The Company has all material permits and registrations necessary for the conduct and operation of its business as currently conducted by the Company, and Section 3.4(c) of the Company Disclosure Schedule sets forth a list of all such permits. The permits listed in Section 3.4(c) of the Company Disclosure Schedule are valid and in full force and effect and, to the Knowledge of the Company, will remain in full force and effect after the Closing and consummation of the transaction contemplated hereby. The Company is in material compliance with the terms and conditions of all said permits.

Section 3.5 Subsidiaries . The Company has no Subsidiaries.

Section 3.6 Financial Statements .

(a) Audited . The Company has delivered to Parent copies of Company’s audited consolidated financial statements as of and for the fiscal years ended December 31, 2008, 2007, and 2006, together with the notes thereto (the “ Audited Financial Statements ”). The Audited Financial Statements were prepared in accordance with GAAP consistently applied throughout the periods indicated, are correct and complete and fairly present the financial position and condition of the Company at the dates thereof and the results of operations of the Company for the periods covered thereby, and contain no material misstatements or omissions.

(b) Unaudited . The Company has delivered to Parent copies of Company’s unaudited consolidated financial statements for the three (3) month period ended March 31, 2009, (the “ Unaudited Financial Statements ”). The Unaudited Financial Statements were prepared in accordance with GAAP on a basis consistent with the Audited Financial Statements and are correct and complete and fairly present the financial position and condition of the Company at the date thereof and the results of operations for the period covered thereby (subject to customary year end adjustments and not including footnotes necessary for presentation in accordance with GAAP) and contain no material misstatements or omissions (the Audited Financial Statements and the Unaudited Financial Statements, together, the “ Financial Statements ”).

(c) Liabilities . The Company does not have Liabilities other than those reflected on the Unaudited Financial Statements, except Liabilities incurred in the ordinary course of business since the date of the Unaudited Financial Statements, none of which individually or in the aggregate has had or would reasonably be expected to have a Company Material Adverse Effect. As of the Effective Time, the Company will not have any Liability to any Employee, director, officer or current or former Company Securityholder.

 

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(d) Internal Controls . The Company maintains a system of internal accounting controls sufficient, based on and consistent with the size and ownership of the Company, to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

Section 3.7 Accounts Receivable . Section 3.7 of the Company Disclosure Schedule sets forth a list of all accounts and notes receivable of the Company as of March 31, 2009 and as of the Closing Date with scheduled dates for each line item. To the Knowledge of the Company, all of the accounts and notes receivable of the Company (i) are set forth in the Financial Statements (net of the applicable reserves): (ii) represent sales actually made or transactions actually effected in the ordinary course of business for goods or services delivered or rendered to unaffiliated customers in bona fide arm’s length transactions; (iii) constitute valid claims; and (iv) are good and collectible at the aggregate recorded amounts thereof (net of such reserves) without right of recourse, defense, deduction, return of goods, counterclaim, or offset and have been or will be collected in the ordinary course of business and consistent with past experience.

Section 3.8 Tax Matters .

(a) All foreign, federal, state, county and local taxes, including, without limitation, income, gross receipts, corporate franchise, stamp, transfer, sales, and use, license, severance, excise, employment (including unemployment compensation contributions), withholding, ad valorem, alternative or add-on minimum, estimated, or any other similar taxes, special charges or levies, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (“ Taxes ”) due and payable by the Company on or before the date of the Financial Statements have been paid (whether disputed or not) or recognized as a liability in the Financial Statements, and the Company has filed all tax returns and reports required to be filed by the Company with all applicable taxing authorities when due (taking into account any granted filing extension requests) (collectively, the “ Tax Returns ”), and such Tax Returns were accurate and complete in all material respects. The Company has withhe