Exhibit 2.1
AGREEMENT AND PLAN OF
MERGER
by and among
HOUSEVALUES, INC.
JUMBO ACQUISITION,
INC.
and
THE LOAN PAGE,
INC.
Dated as of October 31,
2005
AGREEMENT AND PLAN OF
MERGER
This Agreement and Plan of Merger
(this “ Agreement ”) is made and entered
into as of October 31, 2005, by and among HouseValues, Inc., a
Washington corporation (“ Parent ”),
Jumbo Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Parent (“ Merger Sub ”) and
The Loan Page, Inc., a Delaware corporation (the “
Company ”). Certain capitalized terms used in
this Agreement are defined in Article IX below.
RECITALS
A. The Company, Parent and Merger
Sub believe it advisable and in their respective best interests to
effect a merger of the Merger Sub with and into the Company
pursuant to this Agreement (the “ Merger
”).
B. The Board of Directors and
stockholders of the Company have approved this Agreement and the
Merger as required by applicable law.
C. The Boards of Directors of Parent
and Merger Sub and the sole stockholder of Merger Sub have approved
this Agreement and the Merger as required by applicable
law.
AGREEMENT
In consideration of the terms
hereof, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
Upon the terms and subject to the
conditions hereof, (a) at the Effective Time the separate
existence of Merger Sub shall cease, and Merger Sub shall be merged
with and into the Company (the Company as the surviving corporation
after the Merger is sometimes referred to herein as the “
Surviving Corporation ”), and (b) from and
after the Effective Time, the Merger shall have all the effects of
a merger under the laws of the State of Delaware and other
applicable law.
Subject to the terms and conditions
of this Agreement, the closing of the Merger (the “
Closing ”) shall take place on the earliest
practicable Business Day (the “ Closing Date
”) after the satisfaction or waiver of the conditions set
forth in Articles IV and V at 10 a.m. local time at
the offices of Perkins Coie LLP, 1201 Third Avenue, 48
th
Floor, Seattle,
Washington, or such other date, time or location as Parent and the
Company shall agree.
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1.3
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Effective
Date and Time
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On the Closing Date and subject to
the terms and conditions hereof, the parties hereto shall cause an
appropriate certificate of merger (the “ Certificate of
Merger ”) complying with the applicable provisions of
the Delaware General Corporation Law (“ Delaware
Law ”) to be properly executed and filed with the
Secretary of State of the State of Delaware (the “
Delaware 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 Certificate of Merger or at
such other time as may be specified in the Certificate of Merger as
filed. If the Delaware Secretary of State requires any changes in
the Certificate of Merger as a condition to filing or to issuing
its certificate to the effect that the Merger is effective, Parent,
Merger Sub and the Company will execute any necessary revisions
incorporating such changes, provided such changes are not
inconsistent with and do not result in any material change in the
terms of this Agreement.
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1.4
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Certificate
of Incorporation of the Surviving Corporation
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Unless otherwise specified by Parent
prior to the Effective Time, at the Effective Time, the Certificate
of Incorporation of the Surviving Corporation shall be amended and
restated in its entirety as of the Effective Time to conform to the
certificate of incorporation attached hereto as
Exhibit 1.4 . Thereafter, the Certificate of
Incorporation of the Surviving Corporation may be amended in
accordance with its terms and as provided by law.
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1.5
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Bylaws of
the Surviving Corporation
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Unless otherwise specified by Parent
prior to the Effective Time, at the Effective Time, the Bylaws of
the Surviving Corporation shall be amended and restated to conform
to the bylaws attached hereto as Exhibit 1.5 .
Thereafter, the bylaws may be amended or repealed in accordance
with their terms and the Certificate of Incorporation of the
Surviving Corporation and as provided by law.
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1.6
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Directors
and Officers
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At the Effective Time, the directors
and officers of the Company shall resign and the directors of
Merger Sub shall continue in office as the directors of the
Surviving Corporation, and the officers of Merger Sub shall
continue in office as the officers of the Surviving Corporation,
and such directors and officers shall hold office in accordance
with and subject to the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
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1.7.1
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Merger
Consideration
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As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders
thereof:
(a) Each share of capital stock of
Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock,
$.0001 par value, of the Surviving Corporation.
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(b) All shares of any class of
capital stock of the Company held by the Company as treasury stock
automatically shall be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange
therefor.
(c) Each share of preferred stock,
par value $0.0001 per share, of the Company (“ Company
Preferred Stock ”) issued and outstanding immediately
prior to the Effective Time, other than Dissenting Shares, shall be
converted into the right to receive from Parent an amount in cash
(rounded to the nearest cent), payable at the time and in the
manner set forth in Section 1.7.2, determined by dividing
(i) $5,800,000 (“ Base Merger
Consideration ”), less (A) the amount of any
Company Debt outstanding as of the Closing Date (other than the
Assumed Debt), less (B) any portion of the Escrow Amount that
is credited to Parent pursuant to the Escrow Agreement in respect
of indemnification Claims pursuant to Article VII, less
(C) any portion of the Escrow Amount that is distributed to
individuals other than the holders of Company Preferred Stock
pursuant to the Escrow Agreement, plus or minus (D) any
positive or negative adjustment determined pursuant to
Section 1.7.3 below, by (ii) the total number of shares
of Company Preferred Stock outstanding immediately prior to the
Effective Time (such amount being referred to herein as the “
Merger Consideration ”).
(d) Each share of common stock, par
value $0.0001 per share, of the Company (“ Company
Common Stock ”) issued and outstanding immediately
prior to the Effective Time, other than Dissenting Shares, shall be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(e) Parent shall assume all
obligations of certain stockholders of the Company, in accordance
with the terms of Section 2.3 of that certain Note Purchase
Agreement, by and between Battery Ventures VI, L.P. and
GoldNet Internet Solutions, Inc., dated as of December 22,
2003, with respect to the promissory note made by the Company for
the benefit of GoldNet Internet Solutions, Inc., dated
December 22, 2003, in the principal amount of $1,679,884.72
plus the accrued and unpaid interest thereon (the “
Assumed Debt ”). The provisions of this
Section 1.7.1(e) are intended for the benefit of, and will be
enforceable by, Battery Ventures VI, L.P., together with its
Affiliates and assigns, and are in addition to any other rights
such Persons may have with respect to the subject matter of this
Section 1.7.1(e).
(f) Notwithstanding the foregoing,
at Closing Parent will withhold from the Base Merger Consideration
and deposit with the Escrow Agent an amount in cash equal to
$500,000 (the “ Escrow Amount ”), to be
held and disbursed by the Escrow Agent in accordance with the terms
hereof and of an Escrow Agreement in substantially the form
attached hereto as Exhibit 1.7.1(f) (the “
Escrow Agreement ”) which shall be signed and
delivered by the parties thereto at Closing.
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(g) No Stock Purchase Rights
(including without limitation options, warrants or other rights to
purchase Company Common Stock or Company Preferred Stock) shall
survive the Closing or be assumed, or substituted for, by Parent,
and at the Effective Time all Stock Purchase Rights that have not
been exercised shall terminate in accordance with their terms. Each
outstanding Stock Purchase Right must be exercised in accordance
with its terms prior to the Effective Time or, if not so exercised,
will expire and be automatically cancelled at the Effective Time
and no consideration shall be delivered in exchange
therefor.
(h) Holders of Company Common Stock
and Company Preferred Stock that have complied with all the
requirements for perfecting appraisal rights as required under
Delaware Law and dissenters rights as required under the California
Law (the “ Dissenting Shares ”) shall be
entitled to their appraisal rights under Delaware Law and/or
dissenters rights under California Law with respect to such shares
in lieu of any portion of the Merger Consideration under this
Agreement. Notwithstanding the foregoing, if any holder of
Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) such holder’s appraisal
rights, then, as of the later of the Effective Time and the
occurrence of such event, such holder’s shares shall
automatically cease to be Dissenting Shares and be converted into
and represent only the right to receive the portion of the Merger
Consideration to which such holder is then entitled under this
Agreement, without interest thereon and upon surrender of the
certificate representing such shares in accordance with this
Agreement. Notwithstanding any provision of this Agreement to the
contrary, any Dissenting Shares held by a stockholder that has
perfected such stockholder’s appraisal rights for such shares
in accordance with Delaware Law and/or such stockholder’s
dissenters rights for such shares in accordance with California Law
shall not be converted into the right to receive a portion of the
Merger Consideration. From and after the Effective Time, a holder
of Dissenting Shares shall not have and shall not be entitled to
exercise any of the voting rights or other rights of a stockholder
of the Surviving Corporation. The Company shall give Parent
(i) prompt notice of any written demands for appraisal or
dissenters rights, withdrawals of demands for appraisal or
dissenters rights and any other instruments served pursuant to the
applicable provisions of Delaware Law or California Law relating to
the appraisal process received by the Company, and (ii) the
opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Delaware Law or dissenters rights
under California Law. The Company will not, except with the prior
written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal or dissenters rights or settle
or offer to settle any such demands.
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1.7.2
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Payment of
Merger Consideration and Surrender of Certificates
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(a) On or prior to the Closing Date,
the Company shall deliver to Parent a spreadsheet in the form
attached as Exhibit 1.7.2(a) (the “ Closing
Spreadsheet ”) which shall show: (i) the name
and address of each stockholder of the Company entitled to receive
any portion of the Merger Consideration pursuant to
Section 1.7.1; (ii) the portion of the Merger
Consideration payable to each such stockholder at Closing in
accordance with Section 1.7.1 (rounded to the nearest cent)
(iii) each stockholder’s election to receive such
stockholder’s portion of the Merger Consideration via wire
transfer or check (to the extent known by the
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Company); and (iv) wire instructions for
each such stockholder listed on the Closing Spreadsheet, or the
address at which such stockholder is electing to receive payment of
such stockholder’s portion of the Merger Consideration via
check, as applicable (to the extent known by the
Company).
(b) On the Closing Date, each
stockholder of the Company entitled to any portion of the Merger
Consideration who shall, at the Closing, deliver to Parent for
cancellation the certificate or certificates representing the
Company Preferred Stock held by such stockholder, together with an
executed Letter of Transmittal in the form attached hereto as
Exhibit 1.7.2(b) (the “ Letter of
Transmittal ”), shall be entitled to receive the
portion of the Merger Consideration due to such stockholder at the
Closing as provided in Section 1.7.1, payable by wire transfer
or check in accordance with the instructions set forth in the
Letter of Transmittal. The stock certificate(s) so surrendered
shall forthwith be cancelled and retired and shall cease to
exist.
(c) Promptly after Closing (but in
any case no later than five (5) business days thereafter),
Parent will send a Letter of Transmittal to each stockholder
entitled to any portion of the Merger Consideration other than
those stockholders who tendered their stock certificates and
Letters of Transmittal pursuant to the foregoing paragraph. Within
five (5) Business Days after Parent’s receipt of a
stockholder’s properly executed and completed Letter of
Transmittal, together with one or more stock certificate(s)
representing the shares of Company Preferred Stock held by such
stockholder, Parent will pay to such stockholder, by wire transfer
or check in accordance with the properly completed instructions of
such stockholder in the Letter of Transmittal, the portion of the
Merger Consideration due to such stockholder at Closing as provided
in Section 1.7.1. No interest will be paid or will accrue on
the Merger Consideration payable to any such
stockholder.
(d) If any certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of
that fact, in form and substance reasonably acceptable to Parent,
by the Person claiming such certificate to be lost, stolen or
destroyed, and complying with such other conditions as Parent may
reasonably impose (including the execution of an indemnification
undertaking with respect to the certificate alleged to be lost,
stolen or destroyed), Parent will deliver to such Person that
portion of the Merger Consideration attributable to such
certificate that is payable pursuant to
Section 1.7.1.
(e) If any portion of the Escrow
Amount is determined to be payable to Company stockholders pursuant
to the terms hereof and the Escrow Agreement, such amount shall be
paid on the terms and at the time provided in such Escrow
Agreement.
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1.7.3
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Working
Capital Adjustment
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On the Closing Date, the parties
shall agree on (a) a balance sheet of the Company as of
October 28, 2005, which shall be attached as
Exhibit 1.7.3 (“ Closing Balance
Sheet ”) which shall specify, among other things, the
total amount of Company Debt and Assumed Debt, and (b) a
statement based on such balance sheet showing the Net Working
Capital of the Company as of October 28, 2005, including all
accrued Transaction Costs (the “ NWC Statement
”). Such balance sheet and NWC Statement shall be prepared
from the Company’s books and records in a manner consistent
with the balance sheets of the Company as of December 31, 2004
and August 31, 2005 and in accordance with GAAP (subject to
normal year end adjustments and except for the absence of
footnotes) and shall be certified as such on behalf of the Company
by the Company’s Chief Executive Officer or Chief Financial
Officer. The Company shall provide Parent’s finance and
accounting personnel with access to the Company’s financial
books and records and shall cooperate with such personnel in the
course of preparing such balance sheet and NWC Statement. If the
Net Working Capital of the Company as of the Closing Date shown in
the NWC Statement is greater than $600,000 (“ Target
Net Working Capital ”), then the Merger Consideration
shall be increased, dollar for dollar, by the amount of such
excess, and if the Net Working Capital of the Company as of the
Closing Date shown in the NWC Statement is less than the Target Net
Working Capital, then the Merger Consideration shall be decreased,
dollar for dollar, by the amount of such shortfall.
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1.7.4
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No Further
Transfers
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After the Effective Time, there
shall be no further transfers of any shares of Company Common Stock
or Company Preferred Stock on the stock transfer books of the
Surviving Corporation. If, after the Effective Time, certificates
formerly representing shares of Company Common Stock or Company
Preferred Stock are presented to the Surviving Corporation for
transfer, they shall be forwarded to Parent and shall be canceled
and exchanged in accordance with this Section 1.7, subject, in
the case of Dissenting Shares, to Section 1.7.1(h).
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1.8
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Stockholder
Representative
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The stockholders of the Company and
the parties hereto have agreed that it is desirable to designate a
representative to act on behalf of the stockholders of the Company
for certain limited purposes, as specified herein. By approving the
Merger at a special meeting of stockholders or by written consent
of the stockholders and/or by returning the Letter of Transmittal,
each stockholder of the Company shall be deemed to have irrevocably
authorized and appointed Mark Sherman (or such other person as may
be designated from time to time by Battery Ventures VI, L.P.)
as the Stockholder Representative (the “ Stockholder
Representative ”), and his, her or its representative
to act in his, her or its name, place and stead in such Stockholder
Representative’s sole discretion, to:
(a) negotiate, determine, defend and
settle any disputes that may arise under or in connection with this
Agreement, including, without limitation, with respect to any
Indemnification Claim pursuant to Article VII hereof;
and
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(b) make, execute, acknowledge and
deliver any releases, assurances, receipts, requests, instructions,
notices, agreements, certificates and any other instruments, and
generally do any and all things and take any and all actions that
may be requisite, proper or advisable in connection with this
Agreement or any other Operative Document, including, without
limitation, pursuant to Article VII hereof.
The Stockholder Representative will
have no liability to Parent, Merger Sub, the Company or the
Surviving Corporation or the stockholders of the Company with
respect to actions taken or omitted to be taken in its capacity as
Stockholder Representative, except with respect to the Stockholder
Representative’s gross negligence or willful misconduct. The
Stockholder Representative shall be entitled to engage such
counsel, experts and other agents and consultants as it shall deem
necessary in connection with exercising its powers and performing
its function hereunder and (in the absence of bad faith on the part
of the Stockholder Representative) shall be entitled to
conclusively rely on the opinions and advice of such Persons. The
stockholders of the Company listed on the Closing Spreadsheet shall
pay and be responsible for all expenses, disbursements and advances
(including fees and disbursements of its counsel, experts and other
agents and consultants) incurred by the Stockholder Representative
in such capacity, and for indemnification against any losses
arising out of actions taken or omitted to be taken in its capacity
as Stockholder Representative (except for those arising out of the
Stockholder Representative’s gross negligence or willful
misconduct), including the costs and expenses of investigation and
defense of claims.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as is otherwise set forth in
the Company Disclosure Memorandum attached hereto as
Exhibit 2 (the “ Disclosure
Memorandum ”), and in order to induce Parent and
Merger Sub to enter into and perform this Agreement and the Escrow
Agreement, (collectively, together with the Letter of Transmittal
and the Certificate of Merger, the “ Operative
Documents ”), the Company represents and warrants to
Parent and Merger Sub as of the date of this Agreement as follows
in this Article II.
The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware. The Company has all requisite corporate
power and authority to own, operate and lease its properties and
assets, to carry on its business as now conducted, and to enter
into and perform its obligations under this Agreement and the other
Operative Documents to which the Company is a party, and to
consummate the transactions contemplated hereby and thereby. The
Company is duly qualified and licensed as a foreign corporation to
do business and is in good standing in each of the jurisdictions
specified in
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Schedule 2.1 to the Disclosure Memorandum,
which are the only jurisdictions in which the character of the
Company’s properties occupied, owned or held under lease or
the nature of the business conducted by the Company makes such
qualification or licensing necessary, except where failure to be so
licensed or qualified would not, individually or in the aggregate
have a Material Adverse Effect.
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2.2
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Authorization and Enforceability
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All corporate action on the part of
the Company and its officers, directors and stockholders necessary
for the authorization, execution, delivery and performance of this
Agreement and the other Operative Documents to which the Company is
a party, the consummation of the Merger, and the performance of all
the Company’s obligations under this Agreement and the other
Operative Documents to which the Company is a party has been taken.
This Agreement has been, and each of the other Operative Documents
to which the Company is a party at the Closing will have been, duly
executed and delivered by the Company, and this Agreement is, and
each of the other Operative Documents to which the Company is a
party will be at the Closing, a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency,
reorganizations, moratorium and similar laws affecting
creditor’s rights generally, and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity).
(a) The authorized capital stock of
the Company consists solely of 145,000,000 shares of Company Common
Stock and 111,768,493 shares of Company Preferred Stock.
(b) As of the date of this
Agreement, the issued and outstanding capital stock of the Company
consists solely of 923,959 shares of Company Common Stock and
111,768,493 shares of Company Preferred Stock, which are, and as of
the Closing will be, held of record and beneficially as set forth
on Schedule 2.3(b) to the Disclosure Memorandum (setting forth
the names of such holders and the number and class of shares held
by each). Such outstanding shares are, and immediately prior to the
Closing will be, duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable federal
and state securities laws. To the Company’s knowledge, no
Person other than the stockholders holds any interest in any of the
outstanding shares.
(c) There are no outstanding rights
of first refusal or offer, preemptive rights, options, warrants,
conversion rights, other rights or other agreements, either
directly or indirectly, for the purchase or acquisition from the
Company or any stockholder of the Company of any shares of the
Company’s capital stock or any securities or instruments
convertible into or exchangeable for shares of the Company’s
capital stock (collectively, “ Stock Purchase
Rights ”), except Stock Purchase Rights that will
terminate or expire at the Effective Time and not survive the
Closing.
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(d) Except for obligations that will
not survive the Closing, the Company is not a party or subject to
any agreement or understanding and there is no agreement or
understanding between any Persons that affects or relates to the
voting or giving of written consents with respect to any equity
securities of the Company or the voting by any director of the
Company. Except for obligations that will not survive the Closing,
the Company has no contractual or other obligation to register any
of its presently outstanding equity securities or any of its
securities that may hereafter be issued.
(e) All rights of refusal, rights of
first offer, co-sale or tag-along rights, drag-along rights,
registration rights or similar rights granted by the Company with
respect to the Company’s capital stock or Stock Purchase
Rights terminate in accordance with their terms or will be validly
terminated as of the Closing, and copies of any such agreements or
obligations have been provided to Parent.
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2.4
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Subsidiaries
and Affiliates
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The Company does not own or control,
and has not in the past owned or controlled, directly or
indirectly, any corporation, partnership, limited liability company
or other entity. The Company does not own, directly or indirectly,
any ownership, equity, or voting or other interest in, any
corporation, partnership, joint venture or other entity, and has no
agreement or commitment to purchase any such interest.
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2.5
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No
Approvals; No Conflicts
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The execution, delivery and
performance by the Company of this Agreement and the other
Operative Documents to which the Company is a party and the
consummation 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 law
or any judgment, decree, order, regulation or rule of any court or
other Governmental Body applicable to the Company; (b) require
any consent, approval or authorization of, or declaration, filing
or registration with, any Person with respect to the Company,
except for (i) corporate approvals referred to in
Section 2.2 above, (ii) the filing of the Certificate of
Merger with the Delaware Secretary of State, and (iii) the
consents under Contracts listed in Schedule 2.10(d) to the
Disclosure Memorandum); (c) result in a default (with or
without the giving of notice or lapse of time, or both) under, or
acceleration or termination of, or the creation in any party of the
right to accelerate, terminate, modify or cancel, any agreement,
lease, note or other restriction, Encumbrance, obligation or
liability to which the Company is a party or by which it is bound
or to which any assets of the Company are subject; (d) result
in the creation of any Encumbrance upon any assets of the Company;
(e) conflict with or result in a breach of or constitute a
default under any provision of the Certificate of Incorporation or
Bylaws of the Company; or (f) invalidate or render
non-compliant or ineffective under applicable Law any permit,
license or authorization used in the conduct of the business of the
Company, except in the case of this subsection (f) where any
such invalidation, non-compliance or ineffectiveness would not have
a Material Adverse Effect.
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(a) The Company has delivered to
Parent: (i) an audited balance sheet, statement of income and
expense, statement of cash flow and statement of
stockholders’ equity of the Company as of or for the fiscal
year ended December 31, 2004, together with the audit report
thereon of the independent audit firm Gatto, Pope,
Walwick & Katz, LLP (ii) an unaudited balance sheet,
statement of income and expense, statement of cash flow and
statement of stockholders’ equity of the Company as of and
for the nine month period ended September 30, 2005. All the
foregoing financial statements are attached as Exhibit
2.6 hereto and are herein referred to as the “
Financial Statements .” The balance sheet of
the Company as of September 30, 2005 is herein referred to as
the “ Company Balance Sheet .” No
management letters have been received by the Company from its
independent accountants since December 31, 2004 in connection
with their audit of the Company’s financial statements for
the year then ended. The Financial Statements have been prepared in
conformity with GAAP on a basis consistent with prior accounting
periods and fairly present, in all material respects, the financial
position, results of operations and changes in financial position
of the Company as of the dates and for the periods indicated;
provided that the unaudited financials do not contain materials to
be included in notes to financials prepared in accordance with
GAAP, nor do they reflect year end adjustments. All accounts
receivable reflected in the Financial Statements and all accounts
receivable arising subsequent to the date of the Company Balance
Sheet arose in the ordinary course of business and are payable on
ordinary trade terms.
(b) The Company has no liabilities
or obligations of any nature (absolute, contingent or otherwise)
that are not fully reflected or reserved against in the Company
Balance Sheet, except liabilities or obligations incurred since the
date of the Company Balance Sheet in the ordinary course of
business and consistent with past practice and liabilities not
required by GAAP to be disclosed in a balance sheet as of that date
prepared in accordance with GAAP. The Company is not a guarantor,
indemnitor, surety or other obligor of any indebtedness or
obligation of any other Person.
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2.7
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Absence of
Certain Changes or Events
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Except for transactions specifically
contemplated in this Agreement, since September 30, 2005,
neither the Company nor any of its officers or directors in their
representative capacities on behalf of the Company have:
(a) taken any action or entered into
or amended, terminated, granted a waiver under or given consent
with respect to any transaction, agreement or commitment other than
in the ordinary course of business;
(b) forgiven or canceled any
material indebtedness or waived any claims or rights of material
value (including, without limitation, any indebtedness owing by any
stockholder, officer, director, employee or Affiliate of the
Company);
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(c) become subject to any change or
circumstance that has had, or could reasonably be expected to have,
a Material Adverse Effect;
(d) experienced any material
increase in bad debt or doubtful accounts, any material increase in
accounts receivable aging, or any material adverse change in
customer acquisition or retention rates;
(e) made any change in accounting
methods or practices or internal accounting control, inventory,
investment, credit, allowance or Tax procedure or
practices;
(f) made any material write off or
write down, or any determination to make a material write-off or
write down, of any of the assets or properties of the
Company;
(g) declared, paid or set aside for
payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other
securities of the Company, or otherwise permitted the withdrawal by
any of the holders of the Company’s capital stock of any cash
or other assets (real, personal or mixed, tangible or intangible),
in compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with
past practice;
(h) experienced any material
increase of five (5) percent or more in the number or dollar
amount of warranty claims, returns or similar claims affecting
revenue; or
(i) agreed, whether in writing or
otherwise, to take any action described in this
Section 2.7.
(a) Schedule 2.8(a) to the
Disclosure Memorandum sets forth (i) all income Tax Returns
filed by or on behalf of the Company with any jurisdiction for
which the applicable statute of limitations on assessment and
collection has not expired, and (ii) all jurisdictions in
which the Company is required to pay sales, use, excise or property
Taxes.
(b) The Company (i) has timely
filed on or before the applicable due date with each appropriate
Governmental Body all Tax Returns required to be filed by or with
respect to it, and all such Tax Returns have been properly
completed in compliance with applicable legal requirements and are
correct and complete, and (ii) has fully and timely paid, or
has made adequate provision on the Financial Statements in
accordance with GAAP for, all Taxes required to be paid by or with
respect to it (whether or not such Taxes have been reflected on any
Tax Return). All Taxes attributable to all Pre-Closing Tax Periods,
whether due and owing or to become due and owing, will not exceed
the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected in the NWC
Statement. All Taxes that the Company has been required by law to
withhold or to collect for payment have been duly withheld and
collected, and have been paid over to the appropriate Governmental
Body in compliance with all applicable legal requirements,
and
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the Company has complied with all information
reporting and backup withholding requirements under all applicable
legal requirements, including maintenance of required records with
respect thereto.
(c) There are no pending or, to the
Company’s knowledge, threatened Claims by any Governmental
Body with respect to Taxes relating to the Company; (ii) no
extension or waiver of the limitation period applicable to any Tax
Return of the Company is in effect or has been requested;
(iii) all deficiencies claimed, proposed or asserted or
assessments made as a result of any examinations by any
Governmental Body of the Tax Returns of, or with respect to, the
Company has been fully paid or fully settled; (iv) there are
no liens for Taxes upon any of the assets of the Company, except
liens for current Taxes not yet due and payable; (v) the
Company is not and will not be required to include any adjustment
in taxable income for any Tax period pursuant to Section 481
or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring,
or accounting methods employed, prior to the date of this
Agreement; and (vii) no power of attorney that currently is in
effect has been granted by the Company with respect to any Tax
matter.
(d) The Company (i) has not
been a member of any Affiliated Group that filed or was required to
file a consolidated, combined or unitary Tax Return, and
(ii) is not and will not be liable for Taxes of any Person
(other than its own Taxes) by reason of contract, agreement,
assumption, transferee liability, operation of law, Treasury
Regulations Section 1.15026 (or any predecessor or successor
thereof or any similar provision of law) or otherwise. The Company
has not made any payment or payments, is not obligated to make any
payment or payments and is not a party to, sponsor of or
participating employer in any agreement or Employee Benefit Plan
that could obligate it, the Surviving Corporation or Parent to make
any payment or payments that could constitute an “excess
parachute payment,” as defined in Section 280G of the
Code (or any similar provision of state, local or foreign law) or
that would otherwise not be deductible under Section 162 or
Section 404 of the Code.
(e) The Company has delivered or
made available to Parent correct and complete copies of all Tax
Returns for which the statute of limitations has not expired, and
all audit reports and statements of deficiencies assessed against
or agreed to by it.
(f) The Company is not and has not
been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code.
(g) The Company is not and has never
been a party to or bound by any Tax indemnity agreement, Tax
sharing agreement, Tax allocation agreement or similar
contract.
(h) No Claim has been made by a
Governmental Body in a jurisdiction where the Company does not file
Tax Returns that is or may be subject to taxation by that
jurisdiction.
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(i) The Company is not a party to
any joint venture, partnership, other arrangement or contract which
could be treated as a partnership for federal income Tax
purposes.
(j) The Company has not distributed
stock of another Person, or had its stock distributed by another
Person, in a transaction that was purported or intended to be
governed in whole or in part by Section 355 or
Section 361 of the Code.
(k) The Company has not, in any year
for which the statute of limitations has not expired,
(i) taken a reporting position on a Tax Return that, if not
sustained, would be reasonably likely to give rise to a penalty for
substantial understatement of federal income Tax under
Section 6662 of the Code (or any similar provision of state,
local or foreign law), or (ii) participated in a reportable
transaction within the meaning of Section 1.60114(b) of the
Treasury Regulations.
(l) The Company has not entered into
a transaction that is being accounted for under the installment
method of Section 453 of the Code or similar provision of
state, local or foreign law, and there is no taxable income of the
Company that will be reportable in the taxable period beginning
after the Closing Date that is attributable to a transaction or
event that occurred prior to the Closing.
(a) The Company owns no real
property other than the leasehold interests described on
Schedule 2.9(a) to the Disclosure Memorandum, which contains a
complete and accurate list of all real property owned, leased or
currently being used by the Company (the “ Real
Property ”). The Company has delivered to Parent true
and complete copies of all written leases, subleases, rental
agreements, contracts of sale, tenancies or licenses relating to
the Real Property. The Company has not entered into any oral
leases, subleases, rental agreements, contracts of sale, tenancies
or licenses to which the Real Property is subject.
(b) The Company has delivered to
Parent true and complete copies of all leases, subleases, rental
agreements, contracts of sale, tenancies or licenses to which the
Personal Property is subject.
(c) The Real Property and the
Personal Property include all the properties and assets (whether
real, personal or mixed, tangible or intangible) reflected in the
Company Balance Sheet (except for such properties or assets sold
since the date of the Company Balance Sheet in the ordinary course
of business and consistent with past practice) and all the
properties and assets purchased by the Company since the date of
the Company Balance Sheet. The Real Property and the Personal
Property include all material property used in or reasonably
necessary for the business of the Company as currently conducted.
The Company’s offices and other structures and its Personal
Property are in good repair and working order in all material
respects (normal wear and tear excepted).
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(d) The Company’s leasehold
interest in each parcel of the Real Property is free and clear of
all Encumbrances (other than the terms of the applicable lease),
except for Permitted Encumbrances. Each lease of any portion of the
Real Property is valid, binding and to the knowledge of the
Company, enforceable in accordance with its terms against the
parties thereto and to the knowledge of the Company, against any
other Person with an interest in such Real Property. The Company
has performed in all material respects all obligations imposed on
it thereunder, and neither the Company nor, to the knowledge of the
Company, any other party thereto is in default thereunder, nor to
the knowledge of the Company, is there any event that with notice
or lapse of time, or both, would constitute a default thereunder by
the Company or, to the knowledge of the Company , by any other
party except as has not had and could not reasonably be expected to
have a Material Adverse Effect. The Company has not granted any
lease, sublease, tenancy or license of, or entered into any rental
agreement or contract of sale with respect to, any portion of the
Real Property.
(e) The Personal Property is free
and clear of all Encumbrances, except for Permitted Encumbrances,
and, other than leased Personal Property that is so noted on the
list supplied pursuant to Section 2.9(b), the Company owns
such Personal Property. Each lease, license, rental agreement,
contract of sale or other agreement to which the Personal Property
is subject is valid, binding and, to the knowledge of the Company,
enforceable in accordance with its terms against the parties
thereto, the Company has performed in all material respects all
obligations imposed on it thereunder, and neither the Company nor,
to the knowledge of the Company, any other party thereto is in
default thereunder, nor, to the knowledge of the Company, is there
any event that with notice or lapse of time, or both, would
constitute a default by the Company or, to the knowledge of the
Company, by any other party, except as has not had and could not
reasonably be expected to have a Material Adverse Effect. The
Company has not granted any lease, sublease, tenancy or license of
any portion of the Personal Property, except in the ordinary course
of business.
(a) Schedule 2.10(a) to the
Disclosure Memorandum contains a complete and accurate list of all
Contracts to which the Company is currently a party or by which the
Company is currently bound. True and complete copies of each such
written Contract (or written summaries of the terms of any such
oral Contract) have been delivered to Parent.
(b) All Contracts set forth on
Schedule 2.10(a) to the Disclosure Memorandum are valid,
binding and enforceable in accordance with their terms against the
Company and each other party thereto and are in full force and
effect, the Company has performed in all material respects all
obligations imposed on it thereunder, and neither the Company nor,
to the Company’s knowledge, any other party thereto is in
default thereunder, nor is there any event that with notice or
lapse of time, or both, would constitute a material default by the
Company or, to the Company’s knowledge, any other party
thereunder.
(c) The Company has no: notice or
knowledge that any party to a Contract listed on Schedule 2.10
to the Disclosure Memorandum, or any customer or supplier with
whom
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the Company has conducted at least $10,000 of
business over the last twelve (12) months, intends to cancel,
terminate or refuse to renew its Contract (if such Contract is
renewable) or business relationship with the Company.
(d) The execution and delivery of
this Agreement and the performance of the obligations of the
Company hereunder will not constitute a default under any Contract
and do not require the consent of any other party to any Contract,
except for those consents listed on Schedule 2.10(d) to the
Disclosure Memorandum.
|
2.11
|
Labor and
Employment Matters
|
There are no material labor and/or
employment disputes, employee grievances or disciplinary actions
pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its employees. The Company has
complied in all material respects with all provisions of law
relating to employment and employment practices, terms and
conditions of employment, wages and hours. The Company is not
engaged in any unfair labor practice and has no liability for any
unpaid wages or Taxes or penalties for failure to comply with any
such provisions of law. There is no labor strike, dispute, slowdown
or stoppage pending or, to the Company’s knowledge,
threatened against or involving the Company, and the Company has
not experienced any work stoppage or other labor difficulty since
its incorporation. The Company is not aware of any employee that
intends to terminate his or her employment with the Company. No
collective bargaining agreement is binding on the Company. To the
Company’s knowledge, there are no organizational efforts
presently being made or threatened by or on behalf of any labor
union with respect to employees of the Company. Each employee,
officer, contractor and consultant of the Company has executed a
nondisclosure, noncompetition, nonsolicitation and invention
assignment agreement in the form provided to Parent.
Schedule 2.11 to the Disclosure Memorandum lists the names and
current compensation amounts of all employees and contractors of
the Company. The Company has no, and will not incur any in
connection with the Merger, material obligation or liability for
severance or back pay or bonuses owed or earned through, by virtue
of, in connection with or otherwise relating to the Merger. All
employees of the Company are employed on an “at will”
basis, are eligible to work and are lawfully employed in the United
States.
|
2.12
|
Claims and
Legal Proceedings
|
There are no Claims pending or, to
the knowledge of the Company, threatened or asserted against or
involving the Company or any Employee Benefit Plan before or by any
Person, including without limitation, any consumer protection
Claim, truth in lending action, privacy complaint or Claim or
anti-spam complaint or Claim. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the
Company or any Employee Benefit Plan (or any fiduciary of such
Employee Benefit Plan) is a party. Schedule 2.12 to the
Disclosure Memorandum sets forth, in addition to the
above-referenced items, a description of any Claims that have been
filed, asserted or threatened against the Company or any Employee
Benefit Plan or involved the Company or any Employee
Benefit
-15-
Plan since its inception and a description of
the resolution of any such matters, whether by litigation,
settlement, consent decree or otherwise. The Company has never been
the subject of a consumer protection Claim, truth in lending
action, privacy complaint or Claim or anti-spam complaint or Claim.
The Company’s use of personal information is consistent with
the Company’s privacy policies and, to the Company’s
knowledge, applicable Law. The Company has not, to its knowledge,
had any breach or compromises of its systems, network, computers or
information. The Company has not made any express warranties in
connection with the sale of its products and services except as may
be set forth in any Contract listed on the Disclosure Schedule
against the Company with respect to the period. No officer,
director or stockholder of the Company has any valid basis for any
claim against the Company with respect to the period prior to
Closing that would not be covered by the Company’s director
and officer liability insurance policies as in effect prior to the
Closing Date or referenced in Section 6.3.
|
2.13
|
Employee
Benefit Plans
|
(a) Schedule 2.13 to the
Disclosure Memorandum contains a complete and accurate list of all
Employee Benefit Plans. The Company does not have any agreement or
other obligation, whether formal or informal, to create, enter into
or contribute to any additional Employee Benefit Plan, or to modify
or amend any existing Employee Benefit Plan, except for
modifications or amendments that may be required by applicable law.
There has been no amendment, interpretation or other announcement
(written or oral) by the Company or any other Person relating to,
or change in participation or coverage under, any Employee Benefit
Plan that, either alone or together with other such items or
events, could increase the expense of maintaining such Employee
Benefit Plan (or the Employee Benefit Plans taken as a whole) above
the level of expense incurred with respect thereto for the most
recent fiscal year included in the Financial Statements, except for
routine increases in the ordinary course of business or any
increases associated with termination of any Employee Benefit Plan
as part of this Agreement.
(b) The Company has delivered to
Parent true, correct and complete copies (or, in the case of
unwritten Employee Benefit Plans, summary descriptions) of all of
the Employee Benefit Plans (and all amendments thereto), along
with, to the extent applicable to the particular Employee Benefit
Plan, copies of the following: (i) the three most recent
annual reports (Form 5500 series) filed with respect to such
Employee Benefit Plan; (ii) the most recent summary plan
description, and all summaries of modifications related thereto,
distributed with respect to such Employee Benefit Plan;
(iii) all contracts and agreements (and any amendments
thereto) relating to such Employee Benefit Plan to the extent
currently effective and material, including, without limitation,
all trust agreements, investment management agreements, annuity
contracts, insurance contracts, bonds, indemnification agreements
and service provider agreements; (iv) the most recent
determination, opinion or notification letter issued by the IRS
with respect to such Employee Benefit Plan; (v) the most
recent annual actuarial valuation prepared for such Employee
Benefit Plan; (vi) all material written communications in the
Company’s possession since the Company’s inception
relating to the creation, amendment or termination of such Employee
Benefit Plan, or a material
-16-
increase or decrease in benefits, acceleration
of payments or vesting or other events that could result in
liability to the Company; and (vii) all correspondence to or
from any Governmental Body relating to such Employee Benefit Plan
other than routine correspondence in the ordinary course of
business.
(c) With respect to each Employee
Benefit Plan: (i) such Employee Benefit Plan is, and at all
times has been, established, maintained, administered, operated and
funded in all respects in accordance with its terms and in
compliance all material respects with all applicable requirements
of all applicable laws; (ii) the Company and each other Person
(including, without limitation, each fiduciary) have not been
advised by any authorities of any failure on their part to properly
perform all of their duties and obligations under or with respect
to such Employee Benefit Plan; (iii) neither the Company nor
any fiduciary has engaged in any transaction or acted or failed to
act in a manner that violates the fiduciary requirements of ERISA
or any other applicable law; (iv) no transaction or event has
occurred or is threatened or planned (including any of the
transactions contemplated in or by this Agreement) that constitutes
or could constitute a prohibited transaction under Section 406
or 407 of ERISA or under Section 4975 of the Code for which an
exemption is not available; and (v) the Company has not
incurred, and there exists no condition or set of circumstances to
the Company’s knowledge in connection with which the Company,
the Surviving Corporation or Parent could incur any material
liability or expense (except for routine contributions and benefit
payments) under ERISA, the Code or any other applicable law, with
respect to such Employee Benefit Plan.
(d) Each Employe
