Date ”) at 12:00 a.m. local time at the offices
of PPDA, or such other time or location as PPDA and the Company
shall agree. At the Closing, each of the parties hereto shall
deliver all such documents, instruments, certificates and other
items as may be required under this Agreement or the other Related
Documents (as defined in Section 2.2(b)) or otherwise.
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1.3
|
Effective Date and Time
|
On the Closing Date and subject to
the terms and conditions hereof, articles of merger (collectively,
the “ Articles of Merger ”) complying with the
applicable provisions of the Georgia Business Corporation Act
(“ Georgia Law ”), as applicable, in
substantially the form as attached hereto as Exhibit B
, subject to requirements of form and execution as required by
Georgia Law, as applicable, shall be delivered for filing to the
Secretary of State of the State of Georgia (the “ Georgia
Secretary of State ”). The Merger shall become effective
on the date (the “ Effective Date ”) and at the
time (the “ Effective Time ”) of filing of the
Articles of Merger or at such other time as may be specified in the
Articles of Merger as filed. If the Georgia Secretary of State
requires any changes in the Articles of Merger as a condition to
its filing or to issuing its certificate to the effect that the
Merger is effective, PPDA, the Purchaser, the Company and the
Shareholders will execute any necessary revisions incorporating
such changes, provided such changes are not inconsistent with and
do not result in any substantial change in the terms of this
Agreement.
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1.4
|
Articles of Incorporation of the Surviving
Corporation
|
At the Effective Time, the Articles
of Incorporation of the Company shall be in the form attached
hereto as Exhibit C and shall be the Articles of Incorporation of
the Surviving Corporation. Thereafter, the Articles of
Incorporation of the Surviving Corporation may be amended in
accordance with their terms and as provided by law.
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1.5
|
Bylaws of the Surviving
Corporation
|
At the Effective Time, the Bylaws of
the Company shall be in the form attached hereto as
Exhibit D and
shall be the Bylaws of the Surviving Corporation. Thereafter, the
Bylaws may be amended or repealed in accordance with their terms,
the terms of the Articles of Incorporation of the Surviving
Corporation and as provided by law.
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1.6
|
Merger Consideration; Surrender of
Certificates
|
|
|
1.6.1
|
Merger Consideration
|
As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders
thereof:
(a) All
shares of any class of capital stock of the Company held by the
Company as treasury shares shall be canceled.
(b) Each
share of capital stock of the Company (the “ Shares
”) issued and outstanding immediately prior to the Effective
Time, by virtue of this Agreement and without any action on the
part of the holder thereof, shall be converted into the right to
receive from PPDA the Per Share Merger Consideration.
(c) The
“ Per Share Merger Consideration ” shall mean an
amount equal to the Merger Consideration divided by the number of
Shares. The “ Merger Consideration ” or the
“ Purchase Price ” shall be as defined as the
amounts payable at Closing in accordance with 1.6.1.(c) (i) hereof
along with any earn-ins payments payable on the first day of the
month if and when the underlying milestone is met as described in
Section 1.6.1 (c)(ii) hereof.
(i) The
portion of the Purchase Price payable at the Closing shall be an
amount equal to 24 times ($103,208.8075) which is the 12-month
average monthly income generated by the Company from February 2008
to February 2009 for a total amount due under this section
1.6.1(c)(i) of ($2,477,011.38); and
(ii) the
portion of the Purchase Price payable on the first day of the month
(but no sooner than ten (10) months from the closing date of this
Agreement) after which the Company places two thousand four hundred
(2,400) new merchant accounts with Pipeline Data Processing, Inc.
(“PDP”) subsidiary of PPDA, which such merchant
accounts have been approved by PDP pursuant to that certain
Independent Sales Organization Processing Agreement between PPDA
and the Company (the “Milestone”), shall be an earn-in
equal to 12 times ($103,208.8075) which is the 12-month average
income generated by the Company from February 2008 to February 2009
for a total amount due under this section 1.6.1(c)(ii) of
($1,238,505.69) (the “Milestone Payment”), so long as
the Milestone is achieved before the 13 month anniversary of the
Closing Date. Should the Milestone not be achieved by the 13-month
anniversary of the Closing Date, then the Milestone Payment payable
upon achieving the Milestone shall be reduced by $150,000 each
month thereafter. The Parties agree to act reasonably and in good
faith and
that merchant submission and
merchant approval under current and future underwriting guidelines
shall be consistent with the prior course of conduct among the
Parties.
No interest shall accrue on the
Merger Consideration. If the Merger Consideration (or any portion
thereof) is to be delivered to any person other than the person in
whose name the certificate or certificates representing the Shares
surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the person requesting such exchange
shall pay to PPDA any transfer or other taxes required by reason of
the payment of the Merger Consideration to a person other than the
registered holder of the certificate or certificates so
surrendered, or shall establish to the satisfaction of PPDA that
such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither PPDA nor any other party hereto shall be liable
to a holder of Shares for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat
and similar laws.
(a) Jack
and Jana Chevalier (the “Chevaliers”) shall form a new
entity that is 100% owned by the Chevaliers and that will be
referred to herein as “Newco”. The Chevaliers shall not
name Newco “PayPassage”, or any derivative of
“PayPassage” or any name closely similar to
“PayPassage”. PPDA will license to Newco the right to
market products and services under the name
“PayPassage” for a period of five 5 years (subject to
the terms of the automatic renewal under the Processing Agreement.
After the 5 year license expires, PPDA will continue to provide
Newco with such a license to use the PayPassage name in
consideration of a license fee of $1 per year for so long as Newco
continues to place the merchants that it originates with PPDA or
one of its affiliates in accordance with the Processing Agreement.
PPDA will license to Newco the right to market products and
services under the name “Paynet Systems” for a period
of five (5) years, with an automatic renewal clause, in
consideration of a license fee of $1 per year. The terms of the
license of “PayPassage” by PPDA to Newco will be
incorporated into a new ISO Agreement as defined in Section 1.7(b)
hereof.
(b) Newco
shall enter into an exclusive Processing Agreement (the “ISO
Agreement”) with PDP, a subsidiary of PPDA, in the form as
attached hereto as Exhibit F that shall be executed as of the
Closing and that will contain the following terms and
conditions:
(i) The Company and the
Shareholders shall be exclusive agents for the Company and PDP
shall have a right of first refusal for all merchant accounts
originated by Newco subject to the exceptions as explained in
section 1.7(b)(ii). Regarding merchant accounts placed with PDP,
Newco agrees to use its best efforts to utilize PPDA’s
gateway and other services rendered subject to PPDA’s
assurance of competitive pricing and similar technology.
(ii) The right of first refusal
is void to the extent that it is proven that the Milestone was
achieved and that Milestone Payment was not then made. In such an
event, Newco shall be allowed to place merchants with any
competitor of PDP as it so chooses in its sole and absolute
discretion without giving PDP a right of first refusal.
(iii) 75-25 profit split in favor of
Newco over the costs as defined in the ISO Agreement and
interchange charged to PDP by its credit card processors such as
Concord. As of the date upon which Newco places a merchant account
with PDP, Newco shall not be liable for any merchant losses for
that account, including, but not limited to, any losses due to
chargebacks and merchant fraud, other than fraud or material
misrepresentation by Newco.
(iv) PPDA agrees that it shall not
assess a PCI Compliance Fee on any of the PayPassage merchants
until July 1, 2009.
(v) The term of
the ISO Agreement is five years with a one year automatic renewal,
which shall be subject to a 90 day termination clause at the end of
the five year term.
ARTICLE II - REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and each Shareholder
hereby jointly and severally represent and warrant to the Purchaser
and PPDA as follows in this Article II, subject to the
exceptions set forth in the Schedule of Exceptions attached hereto
as Exhibit F (the
“ Schedule of Exceptions ”) (each of which
exceptions (x) shall specifically identify the provision or
provisions of this Article II to which such exception relates
and (y) shall constitute a representation and warranty under
this Article II); provided, however, that each Shareholder
represents and warrants with respect to Sections 2.2(b) and
(c) and 2.27 only with respect to himself or herself.
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2.1
|
Organization and Good Standing
|
(a) The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. The Company
has no subsidiaries. The Company has all requisite corporate power
and authority to own, lease and operate its properties and assets
and to carry on its business as now conducted. The Company is not
qualified to do business as a foreign corporation in any
jurisdiction. There is no other jurisdiction in which the business
the Company is conducting, or the operation, ownership or leasing
of their respective properties, requires the Company to be
qualified to do business as a foreign corporation, except where the
failure to be so qualified has not resulted in, and could not
reasonably be expected to result in, either individually or in the
aggregate, a material adverse effect on the business, results of
operations, assets, liabilities (absolute, accrued, contingent or
otherwise), or condition (financial or other) of the Company (a
“ Company Adverse Effect ”).
(b) The
Company only maintains one office at 5955 Shiloh Road, Suite 100,
Alpharetta, Georgia 30005.
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2.2
|
Authority and Enforceability; Good
Title
|
(a) The
Company has all requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, included but not limited
to the Merger, have been duly authorized by all necessary corporate
and shareholder action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except (i) as
enforcement may be limited by bankruptcy, insolvency or other
similar laws and equitable principles relating to or affecting the
rights of creditors generally from time to time in effect, (ii) as
the availability of indemnification and other remedies may be
limited by federal and state securities laws and (iii) for
limitations imposed by general principles of equity.
(b) Each
Shareholder is legally competent and has all requisite power and
authority to enter into this Agreement and each of the agreements,
certificates, instruments and documents executed or delivered (or
required to be executed and delivered, as a condition to the
Closing or otherwise) pursuant to the terms of this Agreement by
such Shareholder (collectively, the “ Related
Documents ”), including, without limitation,
(i) Confidentiality and Non-Circumvention agreements and (ii)
the ISO Agreement to be entered into as of the
Closing between PPDA and Newco
and to perform fully such Shareholder’s obligations
hereunder and thereunder. This Agreement has been, and each Related
Document to which each Shareholder is a party has been or will be
at or prior to the Closing, duly executed and delivered by such
Shareholder. This Agreement is, and each other Related Document
will be upon execution and delivery thereof by a Shareholder, a
legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms,
except (i) as enforcement may be limited by bankruptcy, insolvency
or other similar laws and equitable principles relating to or
affecting the rights of creditors generally from time to time in
effect, (ii) as the availability of indemnification and other
remedies may be limited by federal and state securities laws and
(iii) for limitations imposed by general principles of
equity.
(c) Each
Shareholder owns beneficially and of record the Shares set forth
opposite such Shareholder’s name on
Exhibit A hereto,
free and clear of any lien, encumbrance, preemptive right, right of
first offer or refusal, or other prior claim, and delivery by such
Shareholder to the Purchaser of the certificates representing the
Shares at the Closing will transfer to the Purchaser good and valid
title to the Shares and the Purchaser will acquire record and
beneficial ownership of the Shares, free and clear of any lien,
encumbrance, preemptive right, right of first offer or refusal, or
other prior claim.
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2.3
|
Consents and Approvals
|
The execution, delivery and
performance of this Agreement and the Related Documents by the
Company and the Shareholders (as applicable), and the consummation
by the Company and the Shareholders of the transactions
contemplated hereby and thereby, will not (a) constitute a
violation (with or without the giving of notice or lapse of time or
both) of any provision of any statute, law, ordinance, rule,
regulation or administrative ruling or any governmental permit,
franchise or license or any injunction, judgment, order or consent
or similar decree or agreement, whether federal, state, local or
foreign (any of the foregoing being referred to herein as a “
Law ”) applicable to the Company or any Shareholder,
except such violations as would not result in a Company Adverse
Effect and would not have a material adverse effect on the ability
of any Shareholder to consummate the transactions contemplated
hereby, (b) require any consent, approval or authorization of,
or the making of any declaration, filing, registration,
qualification or recording with, any individual, corporation,
partnership, association, trust, joint venture, unincorporated
organization or other entity or any federal, state, provincial,
local, county or municipal government, governmental, regulatory or
administrative agency, department, commission, board, bureau or
other authority or instrumentality, domestic or foreign (“
Governmental Entity ” or “ Person
”) by or on behalf of the Company or any
Shareholder, except for compliance
with the applicable securities laws and the filing of all documents
necessary to consummate the Merger with the Georgia Secretary of
State, and the Delaware Secretary of State, as the case may be,
other than those that have been made or will be timely made, and
except such violations as would not result in a Company Adverse
Effect and would not have a material adverse effect on the ability
of any Shareholder to consummate the transactions contemplated
hereby, (c) result in a breach, violation or default under, an
acceleration or termination of, or any other cause of action under,
or create in any party a right to accelerate, terminate, modify or
cancel (“ Breach ”), any agreement, lease, note,
instrument, contract, arrangement or other restriction,
encumbrance, obligation or liability to which the Company or any
Shareholder is a party or by which the Company or any Shareholder
is bound or to which any of their assets or rights are subject,
except as set forth in Schedule 2.3(c)
of the Schedule of Exceptions and
except such Breaches as shall not cause a Company Adverse Effect.
(d) result in the creation of any Encumbrance (as defined in
Section 2.8(b)) upon, or forfeiture of, any of the Company’s
assets or rights, except such Breaches as shall not cause a Company
Adverse Effect, (e) conflict with or result in a breach of or
constitute a default under any provision of the charter documents
or bylaws of the Company, except such Breaches as shall not cause a
Company Adverse Effect, (f) invalidate or adversely affect any
permit, license or authorization used in the conduct of the
business of the Company, or (g) except as set forth on
Schedule 2.3(g), require any severance payments, stay
bonuses or other special compensation to be made by the Company.
The parties hereto agree that the Company may obtain the written
consents from the third parties listed in Schedule
2.3(c) by the date of
Closing and shall not be deemed in default of this Section 2.3 by
not having such consents as of the date of this Agreement. Neither
PPDA nor Purchaser shall assume any agreements listed on Schedule
2.3(c). PPDA/Purchaser shall assign to the Chevaliers or Newco all
such contracts. It is understood and agreed that should there be a
breach of contract under any such agreement, PPDA/Purchaser shall
have the right to withdraw amounts necessary to cover the breach
from Newco’s residuals and that NewCo shall maintain an
exclusive ISO Agreement or security agreement with PPDA, or its
subsidiary, for the longer of the 4 year term as envisaged by this
Agreement or the term of the agreements assigned to the
Chevaliers/Newco.
The authorized capital stock of the
Company consists solely of 1,000 shares of common stock, no
par value per share (“ Company Common Stock ”),
of which 1,000 shares are issued and outstanding. Such issued
and outstanding shares of Company Common Stock constitute the
Shares. All such issued and outstanding shares of Company Common
Stock have been duly authorized and validly issued, are fully paid
and nonassessable, were not issued in violation of and are not
subject to any preemptive or other similar rights, and are held
beneficially and of record by the
Shareholders. There are no
outstanding or authorized subscriptions, options, warrants, calls,
rights (including preemptive or similar rights), convertible or
exchangeable securities or commitments or other agreements of any
character which obligate or may obligate the Company to issue any
additional shares of capital stock or any securities convertible
into, exercisable for, exchangeable for or otherwise evidencing the
right to acquire any shares of capital stock of the Company. There
is no agreement or charter or bylaw provision which obligates or
may obligate the Company to purchase or redeem any securities or
options, warrants or other rights to acquire securities of the
Company. The Company has provided the Purchaser with true and
complete copies of all certificates or other documents or
instruments evidencing or representing the Shares. Immediately
prior to the Closing, (i) the Company will have no outstanding
equity securities other than the Shares and (ii) the Company
shall have no obligation to pay any dividends or other
Distributions (as defined in Section 2.7(i)). There are no
shareholders’ agreements, voting agreements, voting trusts or
other agreements or understandings to which the Company or any
Shareholder is a party or by which the Company or any Shareholder
is bound relating to the voting of, giving of written consents with
respect to, or the placing of any restrictions on, any shares of
capital stock of the Company. None of the Shares is subject to any
right of first refusal, right of first offer, co-sale right, other
restriction on transfer or other agreement or obligation of any
kind with respect to any sale, transfer or other disposition of
such Shares. The Shares were issued in compliance with all
applicable federal, state and other laws.
The Company has delivered to PPDA
balance sheets and statements of operations, retained earnings and
cash flows of the Company (collectively, the “Financial
Statements”) as of and for the fiscal years ended
December 31, 2008 and 2007. The Company maintains a system of
accounting and internal controls which is adequate for its
business, and the Company is not aware of, and have not been
advised by any independent accounting firm of, any material
weaknesses or reportable conditions in its accounting or internal
control systems. The Financial Statements of the Company fairly
present the financial position, results of operations and changes
in cash flows of the Company as of the dates and for the periods
indicated, subject to normal, recurring, period-end adjustments
which will not be material individually or in the
aggregate.
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2.6
|
Undisclosed Liabilities
|
(a) The
Company has no liabilities or obligations of any kind (absolute,
accrued, contingent or otherwise) which should be reflected or
reserved against under generally accepted accounting principles
applicable in the relevant
jurisdiction and which are not
reflected or reserved against in the balance sheet of the Company
dated December 31, 2008, except liabilities and obligations which
are not material either individually (which the parties agree shall
mean, for the purpose of this Section 2.6 only, US$5,000) or in the
aggregate (which the parties agree shall mean, for the purpose of
this Section 2.6 only, US$10,000) or were incurred since December
31, 2008 in the ordinary course of business. As of December 31,
2008, the Company had, and as of the Closing the Company will have,
no Debt (as defined below) except as set forth in the Financial
Statements.
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2.7
|
Absence of Certain Changes or
Events
|
Except as set forth in
Schedule 2.7 of
the Schedule of Exceptions, the Company has not since January 1,
2009, directly or indirectly:
(a) taken
any action or entered into or agreed to enter into any transaction,
agreement or commitment (other than this Agreement and the Related
Documents) other than in the ordinary course of business,
consistent with past practice;
(b) sold,
leased or licensed to others or otherwise disposed of any material
amount of assets or rights (except for sales of inventory in the
ordinary course of business);
(c) entered
into any contract, agreement or other binding obligation, other
than this Agreement and the Related Documents, relating to
(i) the purchase of any equity securities or options, warrants
or other rights to acquire equity securities of any Person,
(ii) the purchase of assets either material in amount or
constituting a business, or (iii) any merger, consolidation or
other business combination;
(d) canceled
or compromised any Debt or other material obligation owing to the
Company or any claim in excess of US$10,000 individually or
US$25,000 in the aggregate, waived or released any right in excess
of US$10,000 individually or US$25,000 in the aggregate, or
instituted, settled or agreed to settle any actual or threatened
litigation, arbitration, legal proceeding, investigation or similar
dispute (provided that such dollar limitations set forth in this
paragraph (d) shall not apply with respect to any matter involving
an affiliate or employee of the Company);
(e) granted,
other than in the ordinary course of business and consistent with
past practice, any increase in the compensation of directors,
officers, employees or consultants (including any such increase
pursuant to any employment
agreement or bonus, pension,
profit-sharing, lease payment or other plan or commitment) or any
increase in the compensation payable or to become payable to any
director, officer, employee or consultant, or experienced any
actual or threatened employee strikes, work stoppages, slow-downs
or other significant or potentially significant employee relations
issues;
(f) disposed
of or permitted to lapse any rights to the use of any Technology or
IP Rights (as defined in Section 2.14), or disclosed to any
Person or entity without obtaining an appropriate confidentiality
agreement or other appropriate protections any proprietary
information not theretofore a matter of public knowledge, or
entered into or agreed to any sale, assignment, transfer or license
of any Technology or IP Rights or any amendment or change to any
existing license or other agreement relating to Technology or IP
Rights, other than in the ordinary course of business;
(g) (i) made
any material change in any method of accounting or accounting
practice or internal control procedure or, other than in the
ordinary course of business, in its pricing, billing, payment,
collection or credit policies or practices, (ii) granted any
extensions of credit other than in the ordinary course of business,
or (iii) failed to pay any creditor any amount owed to such
creditor when due other than in the ordinary course of business in
connection with bona fide claims or disputes;
(h) made any
gifts of or sold, leased, transferred or exchanged any material
property or rights for less than the fair value thereof;
(i) (i) made,
declared or paid any dividend or other distribution on or in
respect of any equity security of the Company; (ii) purchased,
redeemed or otherwise retired any equity security of the Company;
(iii) made any payment or other distribution on or in respect
of the principal of, interest on, or otherwise relating to,
directly or indirectly, any Debt owing to any affiliate (as such
term is defined in Section 2.17 hereof); or (iv) otherwise
permitted or suffered the withdrawal by any Shareholder of cash or
other assets (real, personal or mixed, tangible or intangible), in
compensation, indebtedness or otherwise, other than payments of
compensation or dividends in the ordinary course of business and
consistent with past practice (any of the foregoing matters
referred to in this subsection (i) being a “
Distribution ;
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|
(j)
|
incurred or otherwise become liable in respect
of any Debt;
|
(k) experienced
any material adverse change in its relationships with employees,
agents, processors, issuers, merchants, customers, distributors, or
suppliers;
(l) acquired
any corporation, partnership, other business organization or
division thereof;
(m) entered into
any transactions otherwise than on an arm’s-length
basis;
(n) entered
into or performed any transaction with any affiliate of the Company
as such term is defined in Section 2.17 hereof;
(o) issued
any equity securities or options, warrants, convertible or
exchangeable securities or other rights to acquire equity
securities of the Company;
(p) made any
single capital expenditure or commitment in excess of US$10,000 for
additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures in excess of
US$25,000 for additions to property, equipment or intangible
capital assets;
(q) entered
into any contract, agreement or other binding obligation to do any
of the things referred to in clauses (a) through (p) above;
or
(r) experienced
any event or series of events which has had or could reasonably be
expected to have, individually or in the aggregate, a Company
Adverse Effect.
For purposes of this
Agreement:
(1) The term
“ Debt ” shall mean, with respect to any Person,
all obligations of such Person (i) for borrowed money,
(ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) under or relating to letters of credit
(including, without limitation, any obligation to reimburse the
letter of credit issuer with respect to amounts drawn under such
instruments), (iv) for the deferred purchase price of goods or
services (other than trade payables or accruals incurred and paid
in the ordinary course of business, but only to the extent that
such payables or accruals are not interest-bearing), (v) under
capital leases, (vi) with respect to check overdrafts,
cash/book overdrafts or otherwise reflected as negative cash in
financial statements of such Person, (vii) for deferred
compensation, (viii) to pay any accrued dividends,
(ix) constituting a stated amount or liquidation preference
amount of any equity security entitled to any preference over the
Company Common Stock, and (x) in the nature of Guarantees (as
defined below) of the obligations described in clauses (i)
through (ix) above of any other Person; and
(2) The term
“ Guarantee ” shall mean the guarantee of any
monetary obligation, including, without limitation, (A) any
guarantee of the payment or
performance of, or any contingent
obligation in respect of, any Debt or other obligation of any other
Person, (B) any other arrangement whereby credit is extended
to one obligor on the basis of any promise or undertaking of
another Person (i) to pay the Debt of such obligor,
(ii) to purchase any obligation owed by such obligor,
(iii) to purchase or lease assets (other than inventory in the
ordinary course of business) under circumstances that would enable
such obligor to discharge one or more of its obligations, or
(iv) to maintain the capital, working capital, solvency or
general financial condition of such obligor, and (C) any liability
as a general partner of a partnership or as a venturer in a joint
venture in respect of Debt or other obligations of such partnership
or venture.
(a)
Schedule 2.8(a) of the Schedule of Exceptions contains a
complete and accurate list of all items of personal property with
an individual value in excess of US$10,000 (excluding for this
purpose the Technology and IP Rights, as defined in
Section 2.14) (the “ Personal Property ”)
owned, leased or used by the Company. The Company owns no real
property. The Company has delivered to the Purchaser true and
complete copies of all deeds, leases, subleases, rental agreements,
notices, memoranda or short forms of leases and related tenant
estoppel certificates, subordination agreements, nondisturbance
agreements, contracts of sale, tenancies, easements, licenses,
certificates of title or other evidence of the Company’s
rights in and to all or any portion of the Personal Property, all
of which are listed in Schedule 2.8(a)
of the Schedule of
Exceptions.
(b) The
Company has good and marketable title to, or, in the case of
property held under lease or other contractual obligation, a valid
and enforceable right to use under an enforceable lease or license,
all of its properties, rights and assets, whether real or personal
and whether tangible or intangible (including the Personal Property
but excluding Intellectual Property) used or useful in the conduct
of the business of the Company as currently conducted, including,
without limitation, all properties, rights and assets reflected in
the balance sheet of the Company dated December 31, 2008 included
in the Financial Statements (except as sold or otherwise disposed
of since such date in the ordinary course of business), free and
clear of any and all liens, encumbrances, security interests,
pledges, adverse claims, restrictions, covenants, leases,
remainders or other adverse interests of any kind, other than liens
that do not detract from the value of property subject thereto or
impair the operations of the Company (“ Encumbrances
”).
(c) Each
lease, license, rental agreement, contract of sale or other
agreement to which the Personal Property is subject, is valid and
in full force and effect, the Company has complied in all material
respects with its obligations
thereunder, and neither the Company
nor, to the Knowledge of the Company, any other party thereto is in
default thereunder in any material respect, nor is there any event
which, with the giving of notice or lapse of time or both, would
constitute a material default thereunder by the Company or, to the
Knowledge of the Company, any other party thereto.
(d) All
Personal Property is in good working order, operating condition and
state of repair, ordinary wear and tear excepted.
The Company has at all times
complied and is currently in compliance with all Laws applicable to
the Company, its business and the properties owned, leased or used
by the Company, including, without limitation, all Laws relating to
intellectual property protection, antitrust matters, environmental
protection, equal employment opportunity, pension and employee
benefit matters, securities and investor protection matters and
labor and employment matters, except as has not had, and could not
reasonably be expected to have, individually or in the aggregate, a
Company Adverse Effect. The Company has not received notification
of any unasserted present or past unremedied material failure to
comply with any Laws. The manner in which the Company has packaged,
shipped, advertised, labeled, distributed and sold its products
complies in all material respects with all applicable Laws
pertaining thereto.
Schedule 2.10
of the Schedule of Exceptions
contains a complete and accurate list of all of the following
contracts, agreements, instruments and arrangements to which the
Company is a party (a true and complete copy of each of which has
been delivered by the Company to the Purchaser) (the “
Material Contracts ”):
(a) All
collective bargaining agreements and other labor agreements; all
employment, consulting, independent contractor and work made for
hire agreements, all Plans (as defined in Section 2.13(a)) and all
other plans, agreements, arrangements or practices which constitute
or specify compensation or benefits to any of the directors,
officers, employees, consultants or independent contractors of the
Company;
(b) All
contracts, agreements and similar obligations under which the
Company is or may become obligated to pay any legal, accounting,
brokerage, finder’s or similar fees or expenses in connection
with, or to incur any severance pay or special compensation
obligations which would become payable by reason of, this Agreement
or the consummation of the transactions contemplated
hereby;
(c) All
contracts, agreements and similar obligations under which the
Company is or will after the Closing be (i) restricted from
carrying on any business or other activities anywhere in the world
or (ii) bound to participate in any allocation or sharing of
Taxes (as defined in Section 2.12);
(d) All
contracts, agreements and similar obligations (including, without
limitation, options) to (i) sell or otherwise dispose of any
assets or rights of the Company except in the ordinary course of
business or (ii) purchase or otherwise acquire any material
assets or rights except in the ordinary course of
business;
(e) All
contracts, agreements and similar obligations under which the
Company has or will after the Closing have any liability or
obligation to or for the benefit of any Affiliate (as defined in
Section 2.17 hereof) of the Company;
(f) All
contracts, agreements and similar obligations under which the
Company has any liability or obligation for Debt or constituting or
giving rise to a Guarantee of any liability or obligation of any
Person, or under which any Person has any liability or obligation
constituting or giving rise to a Guarantee of any liability or
obligation of the Company (including, without limitation,
partnership and joint venture agreements);
(g) All
contracts, agreements and similar obligations under which the
Company may become obligated to pay any amount in excess of
US$10,000 in respect of indemnification obligations, purchase price
adjustment or otherwise in connection with any (i) acquisition or
disposition of assets other than sales of inventory in the ordinary
course of business, (ii) acquisition or disposition of
securities, (iii) assumption of liabilities or warranty,
(iv) settlement of claims, (v) merger, consolidation or
other business combination, or (vi) any series or group of
related transactions or events of a type specified in subclauses
(i) through (v);
(h) All
license agreements, royalty agreements, software development
agreements, joint venture agreements, distribution agreements,
reseller agreements, supply agreements, manufacturing agreements,
other agreements relating to Technology or IP Rights or pursuant to
which the Company has granted rights or permission to use
Technology or IP Rights of the Company, and similar commercial
arrangements;
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(i)
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All contracts with Governmental
Entities;
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(j) Each
other contract, agreement, instrument, arrangement, commitment or
obligation the unremedied breach of which could reasonably be
expected to have a Company Adverse Effect;
(k)
All contracts with merchants,
processors, suppliers, card companies.
All such Material Contracts are
valid, binding and in full force and effect, the Company and, to
the Company’s Knowledge, each other party thereto have
performed in all material respects their obligations thereunder,
and neither the Company nor, to the Company’s Knowledge, any
other party thereto is in default of any material provision
thereunder, nor has there occurred any event or circumstance which
with notice or lapse of time or both would constitute such a
default or event of default, on the part of the Company or, to the
Company’s Knowledge, any other party thereto or give to any
other party thereto the right to terminate or modify in any
material respect any such Material Contract. The Company has not
received written notice that any party to any such Material
Contract intends to cancel, terminate or refuse to renew such
contract or to exercise or decline to exercise any option or right
thereunder.
Except as provided in this
Agreement, there is no contract, agreement or other arrangement
entitling any person or other entity to any profits, revenues or
cash flows of Company or requiring any payments of other
distributions based on such profits, revenues or cash
flows.
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2.11
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Claims and Legal Proceedings
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There are no filed claims, actions,
suits, arbitrations, proceedings or, to the Company’s
Knowledge, unfiled claims or investigations (“ Actions
”) pending or, to the Company’s Knowledge, threatened
against the Company or any Shareholder before or by any
Governmental Entity or any nongovernmental department, commission,
board, bureau, agency or instrumentality or any other body. There
is no Action pending or, to the knowledge of the Company,
threatened against the Company or any Shareholder which seeks
rescission of, seeks to enjoin the consummation of, or otherwise
relates to, this Agreement or any of the transactions contemplated
hereby. There are no outstanding or unsatisfied judgments, orders,
decrees, stipulations or settlements to which the Company or any
Shareholder is a party or by which the Company or any Shareholder
is otherwise bound which imposes any material obligation on the
Company. To the Knowledge of the Company, no event has occurred and
no circumstance, matter or set of facts exists which would
constitute a valid basis for the assertion by any third party of
any claim or Action against any party which could reasonably be
expected to have a Company Adverse Effect. There is no outstanding
or, to the Knowledge of the Company, threatened judgment,
injunction, order or consent or similar decree or agreement of any
Governmental Entity against or naming the Company or any
Shareholder or naming any of their respective properties, rights or
assets that materially affects the Company or its assets or
operations. There are no Actions which have been settled or
resolved by litigation or arbitration within the last three
years.
(a) (i)
All Tax Returns (as defined below) required to be filed by or on
behalf of the Company have been or will be filed on a timely basis
with the appropriate Governmental Entities in all jurisdictions in
which such Tax Returns are required to be filed, and all such Tax
Returns were true, correct and complete in all material respects;
(ii) all Taxes (as defined below) of the Company (whether or
not reflected on any Tax Return) have been fully and timely paid;
(iii) no waivers of statutes of limitation have been given or
requested with respect to the Company in connection with any Tax
Returns covering the Company with respect to any Taxes payable by
it; and (iv) the Company has duly and timely withheld from
employee salaries, wages and other compensation and paid over to
the appropriate Governmental Entities all amounts required to be so
withheld and paid over for all periods under all applicable laws.
There are no tax liens on any of the Company’s property or
assets other than liens for current property taxes not yet
payable.
(b) All
deficiencies asserted or assessments made as a result of any
examinations by the Internal Revenue Service (the “
IRS ”) or any other Governmental Entity of the
federal, foreign, state and local Tax Returns of or covering the
Company have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any Governmental
Entity against the Company, there are no audits or investigations
by any Governmental Entity in progress (of which the Company has
received notice) or, to the knowledge of the Company,
pending.
(c) Neither
the Company nor any other Person on behalf of the Company:
(i) has filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant
to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; or
(iii) has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code (and has filed a
Form 3115) or any similar provision of state, local or foreign
law by reason of a change in accounting method initiated by the
Company or has notice that a Governmental Entity has proposed any
such adjustment or change in accounting method.
(d) The
Company has made available to PPDA complete and correct copies of
all Tax Returns of the Company, except for Tax Returns (i) for
which the statutes of limitation have expired, (ii) Company has
obtained an extension of time to file or (iii) not yet due.
No claim has been made by a Governmental Entity in a jurisdiction
where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction.
(e) The
Company has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code (or any similar
provision of state, local or foreign law).
(f) The
Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section
897(c)(1)(A)(2)(i) of the Code.
(g) The
Company is not a party to any Tax allocation or sharing agreement.
The Company (i) has not been a member of an affiliated group filing
a consolidated income Tax Return under Section 1501 of the Code (or
any similar provision of state, local or foreign law) and (ii) does
not have any liability for Taxes of any Person under Treasury
Regulations § 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor by
contract or otherwise.
(h) All
transactions between the Company and the Shareholders have, for Tax
purposes, been at arm’s-length and commercially
reasonable.
As used in this Agreement, the
following terms shall have the following meanings:
“ Taxes ” means
all foreign, federal, state, county or local taxes, charges, fees,
levies, imposts, duties, and other assessments, including, but not
limited to, any income, alternative minimum or add-on tax,
estimated, gross income, gross receipts, sales, use, transfer,
transactions, intangibles, ad valorem, value-added, franchise,
registration, title, license, capital, paid-up capital, profits,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, recording, personal property,
federal highway use, commercial rent, environmental (including, but
not limited to, taxes under Section 59(a) of the Code) or the
windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together
with any interest, penalties or additions to tax.
“ Tax Returns ”
means any return, declaration, report, claim or refund, information
return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
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2.13
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Employee Benefit Plans
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(a)
Identification . Schedule 2.13
of the Schedule of Exceptions
contains a complete and accurate list of all employee benefit
plans, programs, policies, commitments and other arrangements
(whether or not set forth in a written
document), including, but not
limited to, all “employee benefit plans,” within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ ERISA ”),
that are maintained by or on behalf of the Company or any
Subsidiary, that provide benefits or compensation to (or for the
benefit of) any active, former or retired employee, director, agent
or independent contractor of the Company or any Subsidiary or their
spouses or dependents or with respect to which the Company or any
Subsidiary has (or could have) any actual or potential liability
(individually, a “ Plan ” and collectively, the
“ Plans ”). With respect to each Plan, the
Company has furnished to PPDA a copy of each Plan (and all
amendments thereto) and copies of all related Plan documents
(including, but not limited to, any trust agreements, insurance
policies and contracts, administrative or investment services
agreements and summary plan descriptions) and, where applicable,
the most recent IRS determination letter issued with respect to
such Plan, the Forms 5500 filed with respect to such Plan for
the last three Plan years and all similar items required by
applicable foreign law. The Parties agree that the current
employees of the Company shall not be Company employees but shall
work directly for Newco (as formed by Shareholders) and that Newco
shall be responsible for the Employee Benefit Plans listed on
Schedule 2.13.
(b) Legal
Compliance . Each Plan has been maintained, operated and
administered in all material respects in compliance with its terms
and with the requirements prescribed by any and all applicable
laws, statutes, orders, rules and regulations, including but not
limited to, ERISA, COBRA, the Code and any similar foreign laws.
Any Plan that is intended to be qualified under Section 401(a)
of the Code or any similar foreign law is the subject of an
unrevoked favorable determination letter as to its qualified status
from the IRS or similar foreign governmental authority, and nothing
has occurred since the date of the most recent such letter issued
with respect to each such Plan that could serve as the basis for
the IRS or similar foreign governmental authority to revoke such
letter or cause such Plan to lose its qualified status. Nothing has
occurred, or is expected by the Company or any of its officers to
occur, that has subjected or could subject the Company, any
Subsidiary or any officer or director of the Company or any
Subsidiary to any tax, penalty or other liability or expense under
Chapter 43 of Subtitle D of the Code, Title I of ERISA,
or any similar foreign law, except for any such taxes, penalties,
liabilities or expenses as are not material either individually
(which the parties agree shall mean, for purposes of this
Section 2.13 only, at least US$10,000) or in the aggregate
(which the parties agree shall mean, for purposes of this
Section 2.13 only, at least US$25,000). None of the Company,
any Subsidiary or any corporation, trade or business with which the
Company or any Subsidiary is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code or any similar
foreign law applicable thereto maintains or contributes to, or has
ever maintained or contributed to (or been
obligated to contribute to), any
employee benefit plan that is covered by Section 302 or
Title IV of ERISA, Section 412 of the Code or any similar
foreign law or that is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or any similar foreign
law. None of the Company, any Subsidiary or any Plan has any
obligation to provide or contribute toward the cost of any health
or other welfare benefits, within the meaning of Section 3(1)
of ERISA, with respect to any current, former or retired employee
after such current, former or retired employee’s retirement
or other termination of employment, except for such benefits that
are mandated by Section 4980B(f) of the Code or Part 6 of
Subtitle B of Title I of ERISA and except for any such
obligations as could not give rise to any liabilities or expenses
to the Company, the Subsidiaries or the Plans that are material
either individually or in the aggregate. Neither the Company nor
any Subsidiary has (or could have) any actual or potential
liability with respect to any employee benefit plans, programs,
policies, commitments or arrangements maintained by or on behalf of
any other person or entity, except for liabilities that are not
material either individually or in the aggregate. No claim, suit,
administrative proceeding, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Plan
activities) has been brought or, to the best knowledge of
the
