AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “ Agreement ”) is entered into as of November 15, 2005 by and among Integrated Biometric Technology, Inc., a Delaware corporation (the “ Company ”), Integrated Biometric Technology, LLC, a Florida Limited Liability Company (the “ Subsidiary ”), Viisage Technology, Inc., a Delaware corporation (“ Buyer ”) and Charles Carroll, Ivan Tennyson, Richard Spencer and Phillip Sandidge (the “ Stockholders ”).

 

Introduction

 

The Company is a holding company that owns forty percent (40%) of the issued and outstanding membership interests of Subsidiary. Subsidiary is engaged in the business of providing biometric technology, including automated electronic fingerprinting technology to private and governmental customers (the “ Business ”). Aston Capital Partners LP (“ Aston ”) pursuant to a separate Assignment and Assumption Agreement, dated of even date herewith (the “Assignment and Assumption Agreement”), has agreed to sell to Buyer the remaining 60% membership interests of Subsidiary.

 

The Board of Directors of the Buyer has approved forming a wholly-owned Delaware limited liability company to assist in completing the transactions set forth herein (the “Merger Sub” ). The Boards of Directors of the Buyer and the Company have authorized and approved the acquisition of the Company by the Buyer by means of the merger of the Company with and into Merger Sub as provided herein (the “ Merger ”), with Merger Sub continuing as the surviving entity and a wholly-owned subsidiary of Buyer.

 

Stockholders of the Company holding shares with sufficient voting power to adopt this Agreement pursuant to Section 251(c) of the General Corporation Law of the State of Delaware (the “ DGCL ”) and the Company’s certificate of incorporation intend to execute a consent pursuant to Section 228 of the DGCL adopting this Agreement immediately following the execution and delivery of this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Merger; Closing.

 

1.1. Merger.

 

At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Company shall be merged with and into Merger Sub, the separate corporate existence of the Company shall cease, and Merger Sub shall continue as the surviving entity and as a wholly-owned subsidiary of Buyer. The surviving entity after the Merger is sometimes referred to hereinafter as the “ Surviving Entity .”

 

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1.2. Effective Time.

 

Unless this Agreement is earlier terminated pursuant to Section 7.1 hereof, the consummation of the transactions contemplated hereby (the “ Closing ”) will take place at the offices of Choate, Hall & Stewart LLP, Two International Place, Boston, MA 02110, on (a) the latest of (x) December 31, 2005 or (y) two business days after the conditions set forth in Article 6 are satisfied (other than those conditions which by their nature are normally satisfied at the Closing) or waived, but no later than January 30, 2006 or (b) such other date that is agreed to in writing by the Company and Buyer (the “ Closing Date ”). On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger in customary form, with the Secretary of State of the State of Delaware (the “ Certificate of Merger ”), in accordance with the applicable provisions of the DGCL (the time of such filing with the Secretary of State of the State of Delaware shall be referred to herein as the “ Effective Time ”).

 

1.3. Effect of the Merger.

 

At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise agreed to pursuant to the terms of this Agreement, all of the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Entity, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Entity.

 

1.4. Certificate of Formation

 

(a) Unless otherwise determined by Buyer prior to the Effective Time, the Certificate of Formation of the Surviving Entity shall be amended and restated as of the Effective Time to be identical to the of the Merger Sub as in effect immediately prior to the Effective Time, until thereafter amended in accordance with the Delaware Limited Liability Company Act and as provided in such Certificate of Formation; provided, however, that at the Effective Time, Article 1 of the Certificate of Formation of the Surviving Entity shall be amended and restated in its entirety to read as follows: “The name of the limited liability company is IBT, LLC”

 

(b) Unless otherwise determined by Buyer prior to the Effective Time, the operating agreement of Merger Sub, as in effect immediately prior to the Effective Time, shall be the operating agreement of the Surviving Entity at the Effective Time until thereafter amended in accordance with the Delaware Limited Liability Company Act and as provided in the Certificate of Formation of the Surviving Entity and such operating agreement.

 

1.5. Managers, Directors and Officer.

 

(a) Managers of Surviving Entity Unless otherwise determined by Buyer prior to the Effective Time, the managers of Merger Sub immediately prior to the Effective Time shall be the managers of the Surviving Entity immediately after the Effective Time, each to hold the office of a managers of the Surviving Entity in accordance with the provisions of the Delaware Limited Liability Company Act and the Certificate of Formation and operating agreement of the Surviving Entity until their successors are duly elected and qualified.

 

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(b) Directors of Subsidiaries of Surviving Entity . Unless otherwise determined by Buyer prior to the Effective Time, Buyer, the Company and the Surviving Entity shall cause the directors of any Subsidiaries immediately prior to the Effective Time to be the directors of any Subsidiaries immediately after the Effective Time, each to hold office as a director of each such Subsidiary in accordance with the provisions of the laws of the respective state of its incorporation and the respective bylaws of each such Subsidiary.

 

(c) Officers of Subsidiaries of Surviving Entity . Unless otherwise determined by Buyer prior to the Effective Time, Buyer, the Company and the Surviving Entity shall cause the officers of the Company immediately prior to the Effective Time to be the officers of any Subsidiaries immediately after the Effective Time, each to hold office as an officer of each such Subsidiary in accordance with the provisions of the laws of the respective state of its incorporation and the bylaws of each such Subsidiary.

 

1.6. Certain Definitions; Pre-Closing Deliveries.

 

As used herein, the following terms shall have the following meanings:

 

“ Buyer Common Stock ” means the Common Stock of Buyer, $.001 par value.

 

“ Buyer Shares for Company Stockholders ” means 5,000,000 shares of Buyer Common Stock, subject to adjustment pursuant to Section 1.13.

 

“ Certificates ” means stock certificates evidencing ownership of Common Stock.

 

“ Class A Common Stock ” means the Company’s Class A Common Stock, $0.01 par value per share.

 

“ Class B Common Stock ” means the Company’s Class B Common Stock, $0.01 par value per share.

 

“ Common Stock ” means collectively the Class A Common Stock and Class B Common Stock.

 

“ Stockholder ” means a holder of issued and outstanding Common Stock.

 

1.7. Conversion of Common Stock.

 

As of the Effective Time, by virtue of the Merger and without any additional action on the part of any Stockholder,

 

(a) each share of Common Stock outstanding immediately prior to the Effective Time will, except as otherwise provided in this Section 1.7, be cancelled and will cease to exist, and shall be converted into the right to receive a number of shares of Buyer Common Stock equal to (i) the Buyer Shares for Company Stockholders divided by (ii) the number of shares of Common Stock outstanding at the Effective Time;

 

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(b) each Share of Common Stock held by Buyer will remain outstanding as one validly issued, fully paid and non-assessable share of common stock of the Surviving Entity;

 

(c) each share of Common Stock held directly or indirectly by the Company or its Subsidiaries will be cancelled and will cease to exist, and no payment will be made with respect thereto; and

 

(d) each unit of membership interest of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable unit of membership interest of the Surviving Entity, and each certificate of Merger Sub evidencing ownership of any such membership interest shall continue to evidence ownership of such units of membership interests of the Surviving Entity.

 

1.8. Adjustments; Fractional Shares; Withholding; Restricted Shares.

 

(a) Adjustments to Buyer Shares for Company Stockholders . The Buyer Shares for Company Stockholders shall be adjusted to reflect fully the effect of any stock split, reverse split, reclassification, stock dividend (including any dividend or distribution of securities convertible into Buyer Common Stock), reorganization, recapitalization or other like change with respect to Buyer Common Stock occurring after the date hereof and prior to the Effective Time.

 

(b) Fractional Shares . No certificates or scrip representing less than one share of Buyer Common Stock shall be issued upon the surrender or exchange of a Certificate or Certificates which immediately prior to the Effective Time represented outstanding Common Stock. In lieu of any such fractional share, each holder of Common Stock who would have otherwise been entitled to a fraction of a share of Buyer Common Stock upon surrender of Certificates for exchange shall be paid upon such surrender cash (without interest) determined by multiplying (i) the per share closing price on the Nasdaq National Market of Buyer Common Stock on the date of the Effective Time by (ii) the fractional interest of Buyer Common Stock to which such holder would otherwise be entitled. As soon as practical after determining the amount of cash, if any, to be paid to former holders of Common Stock with respect to any fractional shares of Buyer Common Stock, Buyer shall promptly pay such amounts to such holders in accordance with the terms hereof.

 

(c) Withholding . Buyer shall deduct and withhold from any payments to a Stockholder such amounts as may be required to be deducted or withheld on account of such payments or in connection with the consummation of the transactions contemplated hereby under any tax or other legal requirement. To the extent that amounts are so deducted or withheld, the Buyer shall be obligated to make all required withholding tax payments to the applicable tax or other authorities. Such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the stockholder, and the Buyer shall provide to the Company and the Stockholder written notice of the amounts so deducted or withheld.

 

(d) Restricted Securities . The shares of Buyer Common Stock to be issued hereunder constitute “restricted securities” under the federal securities laws, and under such laws may be resold without registration under the Securities Act only in certain limited sets of circumstances. Each certificate evidencing shares of Buyer Common Stock to be issued hereunder shall bear a legend to such effect.

 

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1.9. Dissenting Shares.

 

Notwithstanding any other provision of this Agreement to the contrary, shares of Common Stock that are outstanding immediately prior to the Effective Time and that are held by Stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have properly demanded appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive a portion of the Buyer Shares for Company Stockholders. Such Stockholders instead shall be entitled to receive payment of the appraised value of such shares of Common Stock held by them in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by Stockholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares of Common Stock under such Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, a pro rata share of the Buyer Shares for Company Stockholders.

 

1.10. Surrender of Certificates.

 

The Buyer shall comply with the following provisions applicable to exchange of certificates:

 

(a) At or prior to the Effective Time, each Stockholder shall surrender to the Company for cancellation its Certificates duly endorsed in blank, or accompanied by stock powers (with all necessary transfer taxes paid by, and stamps affixed acquired at the expense of, such stockholder), and signed by the Stockholder exactly as his or her name appears on the face of the Certificate. Upon surrender of a Certificate, at the Closing, the holder of such Certificate shall be entitled to receive in exchange therefor (A) certificates evidencing the number of whole shares of Buyer Common Stock which such holder has the right to receive in respect of shares formerly evidenced by such Certificate and (B) cash in respect of fractional shares as provided in Section 1.8(b) (the sum of (A) and (B) is referred to herein as the “ Closing Merger Consideration ”).

 

(b) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Entity of any shares of Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing shares of Common Stock are presented to the Surviving Entity or the Buyer, such Certificates shall be surrendered and cancelled in return for a pro rata portion of the Closing Merger Consideration in accordance with the terms of this Article 1.

 

(c) In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact and grant of indemnification by the person claiming such Certificate to be lost, stolen or destroyed, each in form and substance reasonably satisfactory to the Buyer, the Buyer shall make the payment with respect to such Certificate to which such person is entitled pursuant to this Article 1.

 

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1.11. Deliveries at Closing by the Company and the Company.

 

At the Closing, and upon satisfaction or waiver of the conditions set forth in Section 6.2, the Company will deliver or cause to be delivered the instruments, consents, certificates and other documents required of it by Section 6.1.

 

1.12. Deliveries at Closing by the Buyer.

 

At the Closing, and upon satisfaction or waiver of the conditions set forth in Section 6.1, the Buyer will deliver or cause to be delivered the instruments, consents, certificates and other documents required of it by Section 6.2.

 

1.13. Post Closing Adjustment.

 

Notwithstanding anything to the contrary contained in this Article 1, the Buyer Shares for Company Stockholders shall be subject to adjustment in accordance with this Section 1.13. In the event that the Average Price is lower than $5.00 per share ($7.00 in the event that revenues of the Subsidiary, calculated in accordance with GAAP, for the year ended December 31, 2006 exceed $75 million), each Stockholder shall have the right and option to receive, for each share of Buyer Common Stock delivered to such Stockholder pursuant to this Agreement, the difference between $5.00 ($7.00 in the event that revenues of the Subsidiary, calculated in accordance with GAAP, for the year ended December 31, 2006 exceed $75 million) and the Average Price to be paid to such Stockholder in Buyer Common Stock (calculated at the Average Price) provided that if the Average Price is less than $2.50, the difference to be paid by Buyer shall be determined as if the Average Price were $2.50.

 

For purposes hereof, the “ Average Price ” means the average of the closing bid prices of Viisage’s common stock as reported on NASDAQ Stock Market during the month of February 2007. The per share prices set forth above shall be adjusted for forward and reverse stock splits, recapitalizations and similar transactions occurring after the date hereof. The Buyer shall provide the Stockholders with written notice of the Average Price and shall issues any additional shares owed to the Stockholders as soon as practicable after it has been calculated.

 

1.14. Taking of Necessary Action; Further Action.

 

If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Entity with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, then Buyer, Merger Sub, and the officers, directors and managers of the Company, Buyer and Merger Sub shall be fully authorized in the name of their respective corporations, limited liability companies or otherwise to take, and will take, all such lawful and necessary action.

 

2. Representations and Warranties of the Company.

 

Each representation and warranty contained in this Article 2 is qualified by the disclosures made in the disclosure schedule attached hereto as Schedule 2 (the “ Disclosure Schedule ”). This Article 2 and the Disclosure Schedule shall be read together as an integrated provision. References in this Article 2 to the Company’s “ knowledge ” means, unless provided

 

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otherwise, the (i) the actual knowledge of any of the following individuals: Charles Carroll, Ivan Tennyson, Richard Spencer, Phillip Sandidge and Pat Haley and/or (ii) what any of such named individuals would be reasonably expected to know upon the exercise of reasonable due inquiry. The Company, the Subsidiary and the Stockholders jointly and severally (except with respect to Section 2.32, as to which section each Stockholder represents and warrants severally in his individual capacity) represent and warrant to Buyer that as of the date hereof and the Closing Date:

 

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 Delaware, with full corporate power and authority to carry on the Business as it is now and has since its organization been conducted, and to own, lease or operate its assets and properties. The Subsidiary is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Florida, with full limited liability company power and authority to carry on the Business as it is now and has since its organization been conducting, and to own, lease or operate its assets and properties. The Company and the Subsidiary are each duly qualified to do business and are in good standing in every jurisdiction in which the character of the properties owned or leased by them or the nature of the business conducted by them makes such qualification necessary, except where failure to be so qualified would not have a Material Adverse Effect. For purposes of this Agreement, the term “ Material Adverse Effect ” shall mean (a) a material adverse effect on the financial condition, properties, business, or results of operations of the Company and/or the Subsidiary, taken as a whole, or (b) a material adverse effect on the ability of the Company and/or the Subsidiary to perform its respective material obligations under this Agreement; provided, however, that a Material Adverse Effect shall not include any event, changes, effect, development, condition or occurrence arising out of or relating to (i) general economic or political conditions in the United States of America and (ii) conditions generally applicable to the industry in which the Company or the Subsidiary operates (except in the case of clauses (i) and (ii) above, if the event, change, effect, development, condition or occurrence disproportionately impacts the business, assets, or financial condition of the Company and the Subsidiary, taken as a whole). Schedule 2.1 lists all of the jurisdictions in which the Company and the Subsidiary are qualified to do business.

 

(b) The Company and the Subsidiary have each obtained all licenses, permits, easements, variances, exemptions, consents, certificates, orders, approvals, franchises and other authorizations (collectively, the “ Subsidiary Permits ”) and have taken all actions required by applicable law or regulations of any supra-national, national, state, municipal or local government (including any subdivision, court, administrative agency, competent authority, notified body or commission or other authority thereof) or any quasi-governmental body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority (each a “ Governmental Entity ,” and collectively “ Governmental Entities ”) in connection with their Businesses as now conducted (or to the extent such actions are currently required, in connection with the Businesses reasonably anticipated to be conducted over the next twelve months), except where the failure to obtain any such Subsidiary Permits or to take any such action, individually or in the aggregate, does not and would not reasonably be expected to have a Material Adverse Effect.

 

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2.2. Ownership of Common Stock and Membership Interests.

 

(a) The Stockholders own all of the outstanding capital stock of the Company free and clear of all liens, encumbrances, security interests, pledges, conditional or installment sale agreements, mortgages, charges and/or any other claim of third parties of any kind, except restrictions set forth in the Company Stockholders Agreement, as amended (collectively “ Liens ”). All of the Common Stock of the Company has been, and will be at the Closing, duly authorized, validly issued and outstanding, fully paid and non-assessable. The Company owns 40% of the outstanding membership interests of the Subsidiary (“ Company Membership Interests ”) free and clear of all liens, encumbrances, security interests, pledges, conditional or installment sale agreements, mortgages, charges and/or any other claim of third parties of any kind (collectively “ Liens ”). The remaining 60% of the issued and outstanding membership interests of the Subsidiary (“ Aston Membership Interests ”) were purchased by L-1 Investment Partners, LLC (“L-1”) pursuant to that certain Membership Interest Purchase Agreement dated November 4, 2005 by and among L-1, Company and Subsidiary (the “ Membership Purchase Agreement ”), and thereupon assigned by L-1 to Aston. Aston has agreed to sell to the Buyer the Aston Membership Interests pursuant to the Assignment and Assumption Agreement. After giving effect to the transactions contemplated by this Agreement, the Membership Purchase Agreement and the Assignment and Assumption Agreement, Buyer will own 100% of the membership interests of the Subsidiary. All of the capital stock of the Company and the membership interests of the Subsidiary have been, and will be at the Closing, duly authorized, validly issued and outstanding, fully paid and non-assessable. Neither the Company nor the Subsidiary has granted, issued or agreed to grant or issue and/or will grant, issue or agree to grant or issue any other equity interest in the Subsidiary (except as set forth in the Membership Purchase Agreement) and/or the Company and there are no, nor will there be at the Closing, outstanding options, warrants, subscription rights, securities that are convertible into or exchangeable for, or any other commitments of any character relating to, any equity interest in the Subsidiary and/or the Company (collectively “ Equity Rights ”). No membership interests in the Subsidiary and/or any capital stock or equity interests in the Company are, or will be at the Closing, subject to any right of first refusal, preemptive, subscription or other similar right under any provision of applicable law or any agreement (collectively “ Preemptive Rights ”). There are no voting restrictions or restrictions on transfer of the Company Membership Interests and/or the Aston Membership Interests and/or capital stock or equity interests in the Company (collectively “ Restrictions ”) except as set forth in the Company Stockholders Agreement, as amended, or on Schedule 2.2 .

 

(b) There are no obligations, contingent or otherwise, of the Company and/or the Subsidiary to repurchase, redeem or otherwise acquire any of the Common Stock, the Company Membership Interests and/or the Aston Membership Interests or to make any investment (in the form of a loan, capital contribution or otherwise) in any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind (collectively “ Person ”). The Company does not own or control any equity security or other interest of any other Person other than the Subsidiary. The Subsidiary does not own or control any equity security or other interest of any other Person. Neither the Company nor the Subsidiary is a party to any agreement (i) requiring it to acquire any securities or ownership interests in any Person; and/or (ii) requiring it to make any investment in and/or to fund in any manner any Person. Since inception, neither the Company nor the Subsidiary has consolidated or

 

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merged with, acquired all or substantially all of the assets of, or acquired the stock of or any interest in any Person. There are no outstanding membership interests held in the Subsidiary’s treasury.

 

(c) Upon consummation of the transactions contemplated hereby at the Closing, the Buyer will own 100% of the membership interests of the Surviving Entity free and clear of all Liens, Equity Rights, Preemptive Rights and/or Restrictions. Upon consummation of the transactions contemplated hereby at the Closing, the Buyer will own 100% of the outstanding membership interests of the Subsidiary free and clear of all Liens, Equity Rights, Preemptive Rights and/or Restrictions.

 

(d) On the date hereof and on the Closing Date immediately prior to the consummation of the Merger, Charles Carroll, Ivan Tennyson, Richard Spencer and Phillip Sandidge own, and will own, 100% of the issued and outstanding shares of the capital stock and equity interests of the Company in the respective amounts set forth on Schedule 2.2(d) .

 

2.3. Authorization of Agreement.

 

The Company and the Subsidiary have all requisite corporate and limited liability company power and authority, respectively, to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement and all other agreements and instruments to be executed by the Company and/or the Subsidiary in connection herewith (together with all other documents to be delivered in connection herewith or therewith, collectively the “ Transaction Documents ”) have (except for Transaction Documents to be executed and delivered solely by Buyer) been duly and validly approved by the Board of Directors of the Company, the Stockholders of the Company and the members of the Subsidiary (the “ Authorizing Parties ”) and no other proceedings on the part of the Company and/or the Subsidiary are necessary to approve this Agreement and to consummate the transactions contemplated hereby or thereby. This Agreement and the other Transaction Documents to be delivered by the Company and/or the Subsidiary have been (or upon execution will have been) duly executed and delivered by the Company and the Subsidiary, have been effectively authorized by all necessary action, corporate or otherwise, and constitute (or upon execution will constitute) legal, valid and binding obligations of the Company and the Subsidiary, enforceable in accordance with their respective terms, except as such enforceability may be limited by general principles of equity and bankruptcy, insolvency and other similar laws relating to creditors’ rights (the “ Bankruptcy Exception .”)

 

2.4. Title to Assets.

 

(a) The Subsidiary is the lawful owner of each of the assets, whether real, personal, mixed, tangible or intangible, comprising and employed in the operation of or associated with the Business, including but not limited to the Owned Intellectual Property as defined in Section 2.6(c) other than those Assets which the Subsidiary leases, in which case the Subsidiary has a valid leasehold interest in such Assets. The Assets owned and/or leased by the Subsidiary (collectively the “ Assets ”) include all of the properties and other assets necessary for the Subsidiary and the Company to conduct the Business in the manner presently conducted. The Assets are sufficient and adequate to conduct the Business as presently conducted, and are free

 

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and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, encumbrances and claims of any kind, except for (a) leases which apply to certain assets which the Subsidiary leases from third parties, (b) security interests and liens consented to in writing by Buyer, (c) any inchoate statutory liens for real and personal property taxes not yet due or payable, and (d) liens, security interests or other encumbrances which are described in Schedule 2.4 (“ Permitted Liens ”). There are no outstanding agreements, options or commitments of any nature obligating the (i) Subsidiary to transfer any of the Assets of the Subsidiary or rights or interests therein to any party; and/or (ii)Company to transfer any of the assets of the Company or rights or interests therein to any party.

 

2.5. Financial Condition and Accounting.

 

(a) Financial Statements . Schedule 2.5 sets forth true and complete copies of (i) the balance sheet of the Subsidiary, as of the twelve month period ended December 31, 2004 and the related statements of income and cash flows for the year then ended, in each case audited by independent public accountants whose reports are attached thereto (the “ Audited Financial Statements ”), (ii) the unaudited balance sheet of the Subsidiary and the related statement of income for the stub period from January 1, 2005 through August 31, 2005 (the “ Unaudited Stub Financial Statements ”) and (iii) the unaudited balance sheets of the Subsidiary, as of the twelve month periods ended December 31, 2003 and 2002 and the related statements of income for the years then ended ( the “ Unaudited Annual Financial Statements ”). The Audited Financial Statements, the Unaudited Stub Financial Statements and the Unaudited Annual Financial Statements present fairly the financial condition and position and operating results of the Subsidiary as of the respective dates thereof and for the periods therein indicated. The Audited Financial Statements, the Unaudited Stub Financial Statements and the Unaudited Annual Financial Statements reflect the consistent application of accounting principles throughout the periods incurred. The Audited Financial Statements (i) were prepared in accordance with the books and records of the Subsidiary; and (ii) were prepared in accordance with generally accepted accounting principles (“ GAAP ”) consistently applied. The Unaudited Stub Financial Statements and the Unaudited Annual Financial Statements (i) were prepared in accordance with the books and records of the Subsidiary; and (ii) were prepared in accordance with GAAP consistently applied other than required footnote disclosures and the required statements of cash flows and certain year end accruals and reserves. The books and records of the Subsidiary are being maintained in accordance with applicable legal and accounting requirements as necessary to permit the preparation of financial statements in accordance GAAP and to maintain asset accountability The Audited Financial Statements, the Unaudited Stub Financial Statements and the Unaudited Annual Financial Statements are collectively referred to in this Agreement as the Financial Statements.

 

(b) Absence of Certain Changes . Except as described in Schedule 2.5 , since December 31, 2004 there has not been any (i) change in the assets, liabilities, financial condition, or operations of the Subsidiary, other than changes in the ordinary course of business, which had or is reasonably expected to have a Material Adverse Effect on such assets, liabilities, financial condition, or operations; (ii) Material Adverse Change; and/or (iii), any event, action, or circumstance of the kind described in Section 4.3 . For purposes of this Agreement, a “ Material Adverse Change ” means any event, circumstance, condition, development or occurrence causing, resulting in, having, or that could reasonably be expected to have, a Material Adverse Effect.

 

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2.6. Certain Property of the Subsidiary and the Company.

 

(a) Real Property . The Subsidiary does not own any real property. Schedule 2.6(a) lists all real properties leased by the Subsidiary.

 

(i) The Subsidiary has good and valid title to the leaseholds in the real properties set forth in Schedule 2.6(a) under written leases (each lease being referred to herein as a “ Real Property Lease ,” and collectively the “ Real Property Leases ”) and each Real Property Lease is a valid and binding obligation of the Subsidiary, enforceable in accordance with its respective terms, except as enforceability may be limited by the Bankruptcy Exception. The Company has provided to the Buyer true and complete copies of the Real Property Leases and all other agreements and documents under which the Subsidiary leases any real property ( collectively with the Real Property Leases the “ Lease Documents ”). The Lease Documents are unmodified and in full force and effect, and there are no other agreements, written or oral, with respect to any real property lease by the Subsidiary other that the Lease Documents.

 

(ii) The Subsidiary is not, and neither the Subsidiary nor the Company have any knowledge that any other party to any Lease Documents, including but not limited to the Real Property Leases, is in default with respect to any material term or condition thereof, and no event has occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration of any obligation of any party thereto or the creation of a lien or encumbrance upon any asset of the Subsidiary.

 

(b) Personal Property . All vehicles, furniture, fixtures, equipment and other items of tangible personal property owned or leased by the Subsidiary and material to the operation of the Business (the “ Personal Property ”) has been maintained in accordance with the past practice of the Subsidiary and generally accepted industry practice and is in good operating condition and repair (normal wear and tear excepted) sufficient to enable the Subsidiary to operate the Business as presently conducted. The Subsidiary holds valid leases in all of the Personal Property leased by it, and the Subsidiary has not granted to any other person or made in favor of any sublease, license or other agreement granting to any person any right to use such property (each such lease, sublease, license or other agreement, a “ Personal Property Lease ,” and collectively the “ Personal Property Leases ”). The Company has provided to the Buyer true and complete copies of the Personal Property Leases and all other agreements and documents under which the Subsidiary leases any personal property ( collectively with the Personal Property Leases the “ Personal Lease Documents ”). The Personal Lease Documents are unmodified and in full force and effect, and there are no other agreements, written or oral, with respect to any personal property lease by the Subsidiary other than the Personal Lease Documents. The Subsidiary is not, and neither the Subsidiary nor the Company have any knowledge that any other party to any Personal Lease Documents, including but not limited to the Personal Property Leases, is in default with respect to any material term or condition thereof, and no event has occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration of any obligation of any party thereto or the creation of a lien or encumbrance upon any asset of the Subsidiary.

 

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(c) Intellectual Property .

 

(i) Schedule 2.6 (c)(i) sets forth a true and complete list of all (a) patents and patent applications, trademarks, trademark registrations and trademark applications, registered copyrights and copyright applications, domain names, Software (as defined in this Section 2.6 (c)(i)) and other Intellectual Property (as defined in this Section 2.6 (c)(i)) that are owned and/or partially owned by the Subsidiary and/or the Company (indicating the percentage of ownership) and material to the business of the Subsidiary (collectively “ Owned Intellectual Property ”) and (b) licenses or sublicenses of Intellectual Property to the Subsidiary and/or the Company, and licenses and sublicenses of Intellectual Property by the Subsidiary or the Company to any third party, in each case that are material to the business of the Subsidiary (collectively “ Licensed Intellectual Property ”). For purposes hereof, “Intellectual Property” means: (i) United States, international, and foreign patents, patent applications and statutory invention registrations, (ii) patentable inventions, discoveries, improvements, ideas, know-how, formula, methodology, processes and technology, (iii) trademarks, service marks, trade names including but not limited to the name “Integrated Biometrics Technology, trade dress, slogans, logos, domain names, and other source identifiers, including registrations and applications for registration thereof, (iv) original works of authorship, copyrightable subject matter, and copyrights, including copyright registrations and/or applications for copyright registration, (v) confidential and/or proprietary information, including trade secrets and/or know-how embodied in any invention, work of authorship, customer list, database, business information, and/or Software, and (vi) inventions, extensions, modifications, or enhancements of the Software or related to the Software. For purposes hereof, “ Software ” means all computer software developed by or on behalf of the Subsidiary and/or the Company, or used by the Subsidiary, including all computer software in any form (such as, source code, object code, assembler code, microcode, etc.), libraries, user-interfaces (including graphical user-interfaces, application programming interfaces (APIs), and other software interfaces), and databases operated by the Subsidiary or used by the Subsidiary in any way, including use in internal Subsidiary operations, testing (including alpha and beta tests), licensing, marketing, sales, and/or in connection with processing customer orders, storing customer information, or storing and archiving data.

 

(ii) The use of the Owned Intellectual Property and the Licensed Intellectual Property by the Subsidiary in the ordinary course of business does not conflict with or infringe upon, violate or misappropriate the Intellectual Property rights of any third party, and no claim has been asserted that the use of such Intellectual Property in the ordinary course of business does or may conflict with or infringe upon, violate or misappropriate the Intellectual Property rights of any third party.

 

(iii) The Subsidiary is the exclusive owner of the entire and unencumbered right, title and interest in each item of Owned Intellectual Property in the United States and worldwide (with the exception of the Owned Intellectual Property covered by the Subsidiary’s agreements with Lockheed Martin Corporation (“ Lockheed ”) which is 50% owned by the Subsidiary and 50% owned by Lockheed), and the Subsidiary is entitled to use all such Owned Intellectual Property in the ordinary course of business in the United States and worldwide, subject only to the terms of the licenses of the Owned Intellectual Property granted by the Subsidiary. The Subsidiary has the right to use each item of Licensed Intellectual Property as provided in the license agreements therefore, and the Subsidiary is entitled to use all such

 

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Licensed Intellectual Property in the ordinary course of business, subject only to the terms of the licenses of the Licensed Intellectual Property granted by the licensors thereof. The Company has provided to the Buyer true and complete copies of all agreements and documents with respect to the Licensed Intellectual Property and the Owned Intellectual Property.

 

(iv) The Owned Intellectual Property and the Licensed Intellectual Property include all of the Intellectual Property and Software used in the Business and the ordinary day-to-day operations of the Subsidiary, and there are no other items of Intellectual Property or Software that are material to the Business and/or such ordinary day-to-day operations. The Owned Intellectual Property and, to the knowledge of the Company and the Subsidiary, any Intellectual Property licensed to the Subsidiary under the Licensed Intellectual Property, is subsisting, valid and enforceable, and has not be adjudged invalid or unenforceable in whole or part.

 

(v) No legal proceedings have been asserted, are pending, or, to the knowledge of the Company and/or the Subsidiary, threatened against the Subsidiary and/or the Company (i) based upon or challenging or seeking to deny or restrict the use by the Subsidiary and/or the Company of any of the Owned Intellectual Property or Licensed Intellectual Property, (ii) alleging that any services provided by, processes used by, or products manufactured or sold by the Subsidiary and/or the Company infringe upon or misappropriate any Intellectual Property right of any third party, or (iii) alleging that any Intellectual Property licensed under the Licensed Intellectual Property infringes upon any Intellectual Property right of any third party or is being licensed or sublicensed in conflict with the terms of any license or other agreement.

 

(vi) To the knowledge of the Company and/or the Subsidiary , no person is engaging in any activity that infringes upon the Owned Intellectual Property or any Intellectual Property licensed to the Subsidiary and/or the Company under the Licensed Intellectual Property. Except as set forth in Schedule 2.6 (c)(vi), the Subsidiary has not granted any license or other right to any third party with respect to the Owned Intellectual Property or Licensed Intellectual Property. The consummation of the transactions contemplated by this Agreement will not result in the termination, cancellation and/or or impairment of any of the Owned Intellectual Property and/or the Licensed Intellectual Property.

 

(vii) The Subsidiary has delivered or made available to the Buyer correct and complete copies of all the licenses and sublicenses of the Licensed Intellectual Property to which the Company and/or the Subsidiary is a party. With respect to each such license and sublicense:

 

(a) such license and sublicense is valid and binding and in full force and effect and represents the entire agreement between the respective licensor and licensee with respect to the subject matter of such license or sublicense;

 

(b) such license or sublicense will not cease to be valid and binding and in full force and effect on terms identical to those currently in effect as a result of the consummation of the transactions contemplated by this Agreement, nor will the consummation of the transactions contemplated by this Agreement constitute a breach or default under such license or sublicense or otherwise give the licensor or sublicensor a right to terminate such license or sublicense;

 

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(c) neither the Company nor the Subsidiary (i) received any notice of termination or cancellation under such license or sublicense; (ii) received any notice of a breach or default under such license or sublicense, which breach has not been cured, nor (iii) granted to any other third party any rights, adverse or otherwise, under such license or sublicense that would constitute a breach of such license or sublicense; and

 

(d) neither the Company, the Subsidiary, nor, to the Company’s and/or Subsidiary’s knowledge, any other party to such license or sublicense is in breach or default in any material respect, and, to the Company’s and/or the Subsidiary’s knowledge, no event has occurred that, with notice or lapse of time would constitute such a breach or default or permit termination, modification or acceleration under such license or sublicense.

 

(viii) To the Company’s knowledge, the Software is free of all viruses, worms, Trojan horses and other material known contaminants, and does not contain any bugs, errors, or problems of a material nature that disrupt its operation or have an adverse impact on the operation of other software programs or operating systems, and no rights in the Software have been transferred to any third party.

 

(ix) The Subsidiary has the right to use all software development tools, library functions, compilers, and other third party software that is material to the business of the Subsidiary, or that is required to operate or modify the Software.

 

(x) The Company and the Subsidiary have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of its customer lists and customer information, trade secrets and other confidential Intellectual Property. To the knowledge of the Company and the Subsidiary (a) there has been no misappropriation of any material trade secrets or other material confidential Intellectual Property of the Company and/or the Subsidiary by any Person, (b) no employee, independent contractor or agent of the Company and/or the Subsidiary has misappropriated any trade secrets of any other Person in the course of such performance as an employee, independent contractor or agent and (c) no employee, independent contractor or agent of the Company and/or the Subsidiary is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of Intellectual Property.

 

(xi) No current and former employee, director, and/or officer of the Company and/or the Subsidiary has any rights whatsoever to any of the Owned Intellectual Property and/or the Licensed Intellectual Property. Neither the Company nor the Subsidiary believes it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company and/or the Subsidiary, except for inventions, trade secrets or proprietary information that have been assigned to the Subsidiary.

 

(xii) Neither the execution, delivery nor consummation of this Agreement or the transactions contemplated hereby, nor the carrying on of the Subsidiary’s business after the Closing, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any agreement contract, license covenant or instrument under which any of the Owned and/or Licensed Intellectual Property is owned, used and/or licensed by the

 

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Subsidiary or the Company, including but not limited to agreements and contracts with Lockheed Martin Corporation (“ Lockheed ”). The Company and the Subsidiary have provided to the Buyer true and complete copies of all agreements, contracts and/or licenses of any kind between the Company and/or the Subsidiary and Lockheed (the “ Lockheed Agreements ”). The Subsidiary and Lockheed jointly own all Intellectual Property covered under the Lockheed Agreements (“ Joint Intellectual Property ”). The Subsidiary has the right to utilize any such Joint Intellectual Property in any server, hardware, application and/or any other product as well as modify the Joint Intellectual Property without the permission of Lockheed and without the payment of any consideration, royalties and/or fees of any kind to Lockheed, except as may be required by the Lockheed Agreements.

 

(d) the Company does not own, lease and/or license in any manner any assets, real property, personal property and/or intellectual property of any kind, other than 100% of the issued and outstanding membership interests of the Subsidiary.

 

2.7. No Conflict or Violation.

 

Except as disclosed in Schedule 2.7 , the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to be delivered by the Company and the consummation of the transactions contemplated hereby and thereby do not and will not ( with or without notice or passage of time): (i) violate or conflict with any provision of the charter documents or bylaws of the Company or the Subsidiary; (ii) violate in any material respect any provision or requirement of any domestic or foreign, federal, state, or local law, statute, judgment, order, writ, injunction, decree, award, rule, or regulation of any Governmental Entity applicable to the Company, the Subsidiary and/or the Business; (iii) violate in any material respect, result in a material breach of, constitute (with due notice or lapse of time or both) a material default or cause any material obligation, penalty, premium or right of termination to arise or accrue under any Intellectual Property licenses or agreements and/or any Contract (as hereinafter defined in Section 2.12); (iv) result in the creation or imposition of any Lien of any kind whatsoever upon any of the Membership Interests, the Additional Membership Interests, the Remaining Membership Interests, properties and/or Assets of the Subsidiary or the Business; or (v) result in the cancellation, modification, revocation or suspension of any material license, permit, certificate, franchise, authorization or approval issued or granted by any Governmental Entity (each a “ License ,” and collectively, the “ Licenses ”).

 

2.8. Consents.

 

Schedule 2.8 lists all consents and notices required to be obtained or given by or on behalf of the Company and/or the Subsidiary in connection with the consummation of the transactions contemplated by this Agreement and the Transaction Documents in compliance with all applicable laws, rules, regulations, or orders of any Governmental Entity, the provisions of any material Contract and/or any Intellectual Property license or agreement, and except as set forth on Schedule 2.8 all such consents have been duly obtained and are in full force and effect, except where the failure to obtain such consent will not have a Material Adverse Effect

 

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2.9. Labor and Employment Matters.

 

Except as identified on Schedule 2.9 , there are no employment agreements, collective bargaining agreements or other labor agreements to which the Subsidiary is a party or by which it is bound. The Company and the Subsidiary have provided to the Buyer true and complete copies of all agreements identified on Schedule 2.9 . Schedule 2.9 also sets forth the name, position and salary of all 13 individuals employed by the Subsidiary (exclusive of independent contractors and consultants). The Company has no employees. The Subsidiary is in compliance, and at all times has complied, in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those related to wages, hours, collective bargaining, occupational safety and health, and the payment and withholding of taxes and other sums as required by appropriate Governmental Entities (“ Employment Laws ”) and has withheld and paid to the appropriate Governmental Entities or are holding for payment not yet due to such Governmental Entities, all amounts required to be withheld from employees of the Subsidiary and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing. There is no (i) unfair labor practice complaint against the Subsidiary pending before the National Labor Relations Board or any state or local agency and, to the knowledge of the Company, no such complaint is threatened; (ii) pending, or to the knowledge of the Company, threatened labor strike or other material labor trouble affecting the Subsidiary; (iii) material labor grievance pending or, to the knowledge of the Company, threatened against the Subsidiary; (iv) pending or, to the knowledge of the Company, threatened representation respecting the employees of the Subsidiary by a labor union; (v) pending or, to the knowledge of the Company, threatened arbitration proceedings arising out of or under any collective bargaining agreement to which the Subsidiary is a party; and (vi) claim currently pending or, to the knowledge of the Company, threatened against the Subsidiary alleging the violation of any Employment Laws, or any other asserted or threatened claim whatsoever, whether based in tort, contract or law, arising out of or relating in any way to any person’s employment (actual or alleged), application for employment or termination of employment with the Subsidiary. The Company and the Subsidiary have complied with all laws, rules, statutes, ordinances, regulations and requirements of all Governmental Entities (“ Applicable Laws ”), including, but not limited to, Employment Laws, related to the use of independent contractors and consultants in the conduct of the Business, except for such failures to comply as will not have a Material Adverse Effect. For purposes of this Section 2.9 , “ employees ” includes employees, independent contractors, consulting employees, and other persons filling similar functions. All employees of the Subsidiary reside and perform their job duties solely within the United States, and none of such employees perform services pursuant to a visa or similar authorization.

 

2.10. Employee Plans.

 

(a) Except as disclosed on Schedule 2.10 hereto, all accrued obligations of the Subsidiary, whether arising by operation of law, by contract or past custom, or otherwise, for payments by the Subsidiary to trusts or other funds or to any Governmental Entity, with respect to unemployment compensation benefits, social security benefits or any other benefits or obligations, with respect to employment of employees, independent contractors and/or consultants through the date hereof have been paid or adequate accruals therefor have been made in the Financial Statements, and payments or adequate accruals for all such obligations will be

 

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made through the Closing Date. Except as disclosed on Schedule 2.10 hereto, all reasonably anticipated obligations of the Subsidiary with respect to employees, independent contractors and/or consultants whether arising by operation of law, by contract, by past custom, or otherwise, for salaries, vacation and holiday pay, sick pay, bonuses and other forms of compensation payable to employees in respect of the services rendered by any of them prior to the date hereof have been or will be paid by the Subsidiary prior to the Closing Date or adequate accruals therefor have been made in the Financial Statements, and payments or adequate accruals for all such obligations will be made through the Closing Date.

 

(b) Schedule 2.10(b) lists all bonus, pension, stock option, stock purchase, benefit, welfare, profit-sharing, deferred compensation, retainer, consulting, retirement, welfare, disability, vacation, severance, hospitalization, insurance, incentive, deferred compensation and other similar fringe or employee benefit plans, funds, programs or arrangements, whether written or oral, in each of the foregoing cases which cover, are maintained for the benefit of, or relate to any or all current or former employees, managers, members, independent contractors and/or consultants of the Subsidiary, and any other entity (“ ERISA Affiliate ”) related to the Subsidiary under Section 414(b), (c), (m) and (o) of the Internal Revenue Code of 1986, as amended (the “ Code ”) (all of the foregoing are collectively the “ Employee Plans ”), together with all accrued liabilities under such Employee Plans. Neither the Subsidiary nor any ERISA Affiliate of the Subsidiary has any liability or contingent liability with respect to the Employee Plans other than routine claims for benefits, nor will any of the Subsidiary’s assets be subject to any lien, charge or claim relating to the obligations of the Subsidiary with respect to employees or Employee Plans. No party to any Employee Plan is in default with respect to any material term or condition thereof, nor has any event occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration of any obligation of any party thereto. The Company and the Subsidiary have provided to the Buyer true and complete copies of all Employee Plans.

 

(c) Each of the Employee Plans, and the administration thereof, is and has been in material compliance with all Applicable Laws currently in effect, including, without limitation, the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and the Code, and, with respect to each Employee Plan, there is no violation of any reporting or disclosure requirement imposed by any Applicable Law including without limitation, ERISA or the Code. Each of the Subsidiary and its ERISA Affiliates has made full and timely payment of all amounts required to be contributed under the terms of each Employee Plan and Applicable Laws or required to be paid as expenses or benefits under such Employee Plan, and has made adequate provision for reserves on the Financial Statements to satisfy contributions and payments not yet made because they are not yet due under the terms of such Employee Plan. There is no pending claim, action, suit or proceeding that has been asserted or instituted against any Employee Plan, the assets of any Employee Plan, the Subsidiary or the plan administrator or any fiduciary of any Employee Plan in respect of the operation of such Employee Plan (other than routine, uncontested benefit claims) and no Employee Plan is under audit or is the subject of any audit or investigation by any Governmental Entity. No act or omission has occurred and no condition exists with respect to any Employee Plan maintained by the Subsidiary or any ERISA Affiliate that would subject the Subsidiary, any ERISA Affiliate or the Buyer to any (i) fine, penalty, tax or liability imposed under ERISA or the Code (other than liabilities incurred in the ordinary course of business that are consistent with the Code and ERISA, including liabilities for benefits,

 

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contributions, premiums and other similar costs), or (ii) contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Employee Plan. All amendments and actions required to bring each of the Employee Plans into conformity in all material respects with all of the applicable provisions of ERISA and other Applicable Laws have been made or taken except to the extent that such amendments or actions are not required by law to be made or taken until a date after the Closing and are disclosed on Schedule 2.9(c) . Each Employee Plan intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to such effect, no such determination letter has been revoked and revocation has not been threatened, and no such Employee Plan has been amended or operated since the date of its most recent determination letter or application therefor in any respect, and no act or omission has occurred, that would adversely affect its qualification. All contributions or other payments required to be made under the terms of each Employee Plan or otherwise have been timely made. There are no unfunded obligations of any kind for which the Subsidiary is responsible under any Employee Plan.

 

(d) Neither the Subsidiary nor any ERISA Affiliate sponsors or has sponsored, maintained, contributed to, incurred an obligation to contribute to or withdrawn from, any Multi-Employer Plan (as defined in Section 4000(a)(3) of ERISA) or any Multiple Employer Plan (as defined in ERISA Sections 4063 or 4064 or Code Section 413), whether or not terminated, for which any withdrawal or partial withdrawal liability has been or could be incurred, whether or not any such liability has been asserted by or on behalf of any such plan. Neither the Subsidiary nor any ERISA Affiliate sponsors or has ever sponsored, maintained, contributed to or incurred an obligation to contribute to any Employee Plan subject to the provisions of Title IV of ERISA.

 

(e) There are no contracts, agreements, plans or arrangements covering any of the Subsidiary’s employees with “change of control” or similar provisions. There is no contract, agreement, plan or arrangement covering the Subsidiary or any employee, that individually or collectively could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code. Neither the Subsidiary nor any of its ERISA Affiliates has incurred any liability under the Worker Adjustment Retraining and Notification Act or any similar state law relating to employment termination in connection with a mass layoff, plant closing or similar event.

 

(f) Other than routine claims for benefits, there is no claim pending or to the knowledge of the Company, threatened, involving any Employee Plan by any person against such Employee Plan, the Subsidiary or any of its ERISA Affiliates. There is no pending or, to the knowledge of the Company, threatened, proceeding involving any Employee Plan before the IRS, the United States Department of Labor or any other governmental authority.

 

2.11. Litigation.

 

There are no claims, actions, suits, or proceedings of any nature pending or, to the knowledge of the Company and/or the Subsidiary, threatened by or against the Company, the Subsidiary, the managers, or members of the Subsidiary, or any of their respective Affiliates, including without limitation those involving, affecting or relating to (i) the Business, any Assets, properties, prospects and/ or operations of the Subsidiary and/or the Company, (ii) any Contracts, (iii) any Owned Intellectual Property, (iv) any Licensed Intellectual Property, and/or

 

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(v) the transactions contemplated by this Agreement (collectively “ Claims ”). For purposes of this Agreement, “ Affiliate ” shall have the meaning ascribed to such term in Rule 405 under the Securities Act. Neither the Company nor the Subsidiary is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Entity. Neither the Company nor the Subsidiary has any knowledge that any Governmental Entity is currently investigating or planning to investigate the Company and/or the Subsidiary. There is no action, suit, proceeding or investigation by the Subsidiary and/or Company currently pending against any third party or which the Company and/or the Subsidiary intends to initiate.

 

2.12. Certain Agreements.

 

(a) Schedule 2.12 lists all material contracts, subcontracts, agreements, instruments, licenses, sublicenses, commitments, understandings, letters of intent, term sheets and other arrangements to which the Subsidiary and/or the Company currently is a party relating