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| AGREEMENT OF MERGER AND |
| PLAN OF REORGANIZATION |
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BY AND AMONG
COUNTERPATH CORPORATION
COUNTERPATH ACQUISITION CORP.
BRIDGEPORT NETWORKS, INC.
POLARIS VENTURE PARTNERS IV, L.P.
POLARIS VENTURE PARTNERS ENTREPRENEURS FUND
IV, L.P.
GENERAL CATALYST GROUP II, L.P.
GC ENTREPRENEURS FUND II, L.P.
TORONTO DOMINION CAPITAL (USA), INC.
AND
SUMMERHILL VENTURES I L.P.
Dated as of February 1, 2008
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AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
THIS
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “
Agreement ”) is made and entered into on February 1,
2008, by and among COUNTERPATH CORPORATION, a Nevada corporation
(“ Parent ”), COUNTERPATH ACQUISITION CORP., a
Delaware corporation (“ Acquisition Corp. ”),
which is a wholly-owned subsidiary of Parent, BRIDGEPORT NETWORKS,
INC., a Delaware corporation (the “ Company ”),
POLARIS VENTURE PARTNERS IV, L.P., a limited partnership (“
Polaris ”), POLARIS VENTURE PARTNERS ENTREPRENEURS
FUND IV, L.P., a limited partnership (“ Polaris
Venture ”), GENERAL CATALYST GROUP II, L.P., a limited
partnership (“ General Catalyst ”), GC
ENTREPRENEURS FUND II, L.P., a limited partnership (“
GC ”), TORONTO DOMINION CAPITAL (USA), INC., a
corporation (“ Toronto Dominion ”) and
SUMMERHILL VENTURES I, L.P., a limited partnership (“
Summerhill ”).
W I T N E S S E T H :
WHEREAS,
the Board of Directors of each of Acquisition Corp., Parent and the
Company have determined that it is fair to and in the best
interests of their respective corporations and stockholders for
Acquisition Corp. to be merged with and into the Company (the
“ Merger ”) upon the terms and subject to the
conditions set forth herein;
WHEREAS,
the Board of Directors of each of Parent, Acquisition Corp. and the
Company have approved the Merger in accordance with the General
Corporation Law of the State of Delaware (the “ DGCL
”) and upon the terms and subject to the conditions set forth
herein, in the Certificate of Merger attached as Exhibit A
hereto (the “ Certificate of Merger ”).
WHEREAS,
the requisite stockholders of the Company (the “
Stockholders ”) have approved by written consent
pursuant to Section 228(a) of the DGCL this Agreement, the
Certificate of Merger and the transactions contemplated and
described hereby and thereby, including, without limitation, the
Merger, and Parent, as the sole stockholder of Acquisition Corp.,
has approved by written consent pursuant to Section 228(a) of the
DGCL this Agreement, the Certificate of Merger and the transactions
contemplated and described hereby and thereby, including, without
limitation, the Merger;
WHEREAS,
the parties hereto intend that the Merger contemplated herein shall
constitute a taxable sale of the Company under the Internal Revenue
Code of 1986, as amended; and
WHEREAS,
Polaris, Polaris Venture, General Catalyst, GC, Toronto Dominion
and Summerhill (collectively, the “ Company
Shareholders ”) have agreed to enter into this Agreement
in order to represent, warrant and covenant certain matters as set
out herein and to indemnify Parent and Acquisition Corp. from
certain liabilities as set out herein.
NOW,
THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 Merger . Subject to the terms
and conditions of this Agreement and the Certificate of Merger,
Acquisition Corp. shall be merged with and into the Company in
accordance with Section 251 of the DGCL. At the Effective Time (as
defined below), the separate legal existence of Acquisition Corp.
shall cease, and the Company shall be the surviving corporation in
the Merger (sometimes hereinafter referred to as the “
Surviving Corporation ”) and shall continue its
corporate existence under the laws of the State of Delaware under
the name “Bridgeport Networks, Inc.”.
Section 1.2 Effective Time . The Merger
shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware in accordance
with Section 251 of the DGCL. The time at which the Merger shall
become effective as aforesaid is referred to hereinafter as the
“ Effective Time ”.
Section 1.3 Closing . The closing of the
Merger (the “ Closing ”) shall occur
concurrently with the Effective Time (the “ Closing
Date ”). The Closing shall occur at the offices of Clark
Wilson LLP referred to in Section 7.1 hereof. At the Closing, all
of the documents, certificates, agreements, opinions and
instruments referenced in Article 5 will be executed and delivered
as described therein. At the Effective Time, all actions to be
taken at the Closing shall be deemed to be taken
simultaneously.
Section 1.4 Certificate of Incorporation,
Bylaws, Directors and Officers .
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(a) |
The Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective Time, attached as
Exhibit B hereto, shall be the Certificate of Incorporation
of the Surviving Corporation from and after the Effective Time
until amended in accordance with applicable law and such
Certificate of Incorporation.
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(b) |
The Bylaws of the Company, as in effect
immediately prior to the Effective Time, attached as Exhibit
C hereto, shall be the Bylaws of the Surviving Corporation from
and after the Effective Time until amended in accordance with
applicable law, the Certificate of Incorporation of the Surviving
Corporation and such Bylaws.
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(c) |
The directors and officers listed in Exhibit
D hereto shall be the directors and officers of the Surviving
Corporation, and each shall hold his or her respective office or
offices from and after the Effective Time until his or her
successor shall have been elected and shall have qualified in
accordance with applicable law, or as otherwise provided in the
Certificate of Incorporation or Bylaws of the Surviving
Corporation.
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Section 1.5 Assets and Liabilities . At
the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of
a private nature, and be subject to all the restrictions,
disabilities and duties of each of Acquisition Corp. and the
Company (collectively, the “ Constituent Corporations
”); and all the rights, privileges, powers
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and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all
debts due to any of the Constituent Corporations on whatever
account, as well as all other things in action or belonging to each
of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as
effectively the property of the Surviving Corporation as they were
of the several and respective Constituent Corporations, and the
title to any real estate vested by deed or otherwise in either of
such Constituent Corporations shall not revert or be in any way
impaired by the Merger; but all rights of creditors and all liens
upon any property of any of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or
contracted by it, subject to any rights the Surviving Corporation
may have against the Company Shareholders under this Agreement.
Section 1.6 Manner and Basis of Converting
Shares .
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(a) |
At the Effective Time:
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(i) |
each share of common stock, par value $0.01 per
share (if applicable rounded up to, the nearest whole share), of
Acquisition Corp. that shall be outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the
right to receive one (1) share of common stock, par value $0.01 per
share, of the Surviving Corporation, so that at the Effective Time,
Parent shall be the holder of all of the issued and outstanding
shares of the Surviving Corporation;
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(ii) |
all issued and outstanding shares of the
Company’s capital stock, including (A) the shares of common
stock, par value $0.01 per share of the Company (the “
Company Common Stock ”) and (B) the shares of
preferred stock, series A-1 voting preferred shares (the “
Company Preferred Stock ”), (the Company Common Stock
and the Company Preferred Stock collectively referred to as the
“ Company Stock ”) (other than shares of Company
Stock as to which appraisal rights are perfected pursuant to the
applicable provisions of the DGCL and not withdrawn or otherwise
forfeited), shall, by virtue of the Merger and without any action
on the part of the holders thereof, be cancelled in the Merger and
cease to exist; and
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(iii) |
each share of Company Stock held in the treasury
of the Company immediately prior to the Effective Time shall be
cancelled in the Merger and cease to exist.
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(b) |
After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Stock that were
outstanding immediately prior to the Effective Time.
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Section 1.7 Operation of Surviving
Corporation . The Company acknowledges that upon the
effectiveness of the Merger, and the material compliance by Parent
and Acquisition Corp. with their respective duties and obligations
hereunder, Parent shall have the absolute and unqualified right to
deal with the assets and business of the Surviving Corporation as
its own property without limitation on the disposition or use of
such assets or the conduct of such business.
ARTICLE 2
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
As of
the Closing and except as set forth in the disclosure statement
signed and dated by Parent and the Company and delivered by the
Company to Parent at Closing (the “ Disclosure
Statement ”), the Company represents and warrants to
Parent and Acquisition Corp., and acknowledges that the Parent and
Acquisition Corp. are relying upon such representations and
warranties, in connection with the execution, delivery and
performance of this Agreement, notwithstanding any investigation
made by or on behalf of Parent and Acquisition Corp., as
follows:
Section 2.1 Organization and Good
Standing . The Company is a corporation duly incorporated,
organized, validly existing and in good standing under the laws of
the State of Delaware and has the requisite corporate power and
authority to own, lease and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in
good standing as a foreign corporation in each of the jurisdictions
in which the Company is otherwise required to do so, except where
the failure to be so qualified would not have a Material Adverse
Effect (as defined below) on the Company. For the purposes of this
Agreement, “ Material Adverse Effect ”
means, when used in connection with an entity, any change, event,
violation, inaccuracy, circumstance or effect that is materially
adverse to the business, assets (including intangible assets),
Liabilities (as defined below), capitalization, ownership,
financial condition or results of operations of such entity or
subsidiaries taken as a whole. For the purposes of this Agreement,
the term “ Liabilities ” includes any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted choate or inchoate, liquidated
or unliquidated, secured or unsecured.
Section 2.2 Authority . The Company has
all requisite corporate power and authority to execute and deliver
this Agreement and any other document contemplated by this
Agreement (collectively, the “ Company Documents
”) to be signed by the Company and to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of each of the Company Documents by the
Company and the consummation of the transactions contemplated
hereby have been duly authorized by the Company’s Board of
Directors and the Stockholders. No other corporate or shareholder
proceedings on the part of the Company is necessary to authorize
such documents or to consummate the transactions contemplated
hereby. This Agreement has been, and the other Company Documents
when executed and delivered by the Company as contemplated by this
Agreement will be, duly executed and delivered by the Company and
this Agreement is, and the other Company Documents when executed
and delivered by the Company as contemplated hereby will be, valid
and binding obligations of the Company enforceable in accordance
with their respective terms except:
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(a) |
as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights generally;
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(b) |
as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable
remedies; and
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(c) |
as limited by public policy.
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Section 2.3 Capitalization of The Company
. The entire authorized capital stock and other equity securities
of the Company consists of: (i) 28,000,000 shares of Company Common
Stock and (ii) 17,000,000 shares of Company Preferred Stock. As of
the date of this Agreement, there are: (i) 4,071,067 shares of
Company Common Stock issued and outstanding; (ii) 16,736,214 shares
of Company Preferred Stock issued and outstanding; and (iii)
2,381,010 unexercised options outstanding (the “ Company
Options ”); and (iv) 3,610 unexercised warrants
outstanding (the “ Company Warrants ”). All of
the issued and outstanding shares of the Company have been duly
authorized, are validly issued, were not issued in violation of any
pre-emptive rights and are fully paid and non-assessable, are not
subject to pre-emptive rights and were issued in full compliance
with all federal, state, and local laws, rules and regulations.
Except for the Company Stock, the Company Options and the Company
Warrants, there are no outstanding options, warrants,
subscriptions, conversion rights, or other rights, agreements, or
commitments obligating the Company to issue any additional shares
of Company Stock, or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for or
acquire from the Company any shares of Company Stock. Other than
the Second Amended and Restated Stockholders Agreement dated
October 31, 2006, there are no agreements purporting to restrict
the transfer of any of the issued and outstanding shares of the
Company Stock, no voting agreements, shareholders’
agreements, voting trusts, or other arrangements restricting or
affecting the voting of any of the shares of the Company to which
the Company is a party or of which the Company is aware.
Section 2.4 Security Holders of the
Company . At Closing, to the best knowledge of the Company, the
Disclosure Statement contains a true and complete list of the
holders of all issued and outstanding Company Stock, including each
holder’s name, class and number of Company Stock held.
Section 2.5 Directors and Officers of The
Company . The duly elected or appointed directors and the duly
appointed officers of the Company are as set out in the Disclosure
Statement.
Section 2.6 Corporate Records of The
Company . The corporate records of the Company, as required to
be maintained by it pursuant to the laws of the State of Delaware,
are accurate, complete and current in all material respects, and
the minute book of the Company is, in all material respects,
correct and contains all material records required by the laws of
the State of Delaware, in regards to all proceedings, consents,
actions and meetings of the shareholders and the Board of Directors
of the Company.
Section 2.7 Non-Contravention . Neither
the execution, delivery and performance of this Agreement, nor the
consummation of the Merger, will:
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(a) |
conflict with, result in a violation of, cause a
default under (with or without notice, lapse of time or both) or
give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any
material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the material
properties or assets of the Company or any of its subsidiaries
under any term, condition or provision of any loan or credit
agreement, note, debenture, bond, mortgage, indenture, lease or
other agreement, instrument, permit, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries, or any of their respective
material property or assets;
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(b) |
violate any provision of the applicable
incorporation or charter documents of the Company; or
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(c) |
violate any order, writ, injunction, decree,
statute, rule, or regulation of any court or governmental or
regulatory authority applicable to the Company, any of its
subsidiaries or any of their respective material property or
assets.
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Section 2.8 Actions and Proceedings . To
the best knowledge of the Company, there is no basis for and there
is no action, suit, judgment, claim, demand or proceeding
outstanding or pending, or, to the best knowledge of the Company,
threatened against or affecting the Company or which involves any
of the business, or the properties or assets of the Company that,
if adversely resolved or determined, would have a Material Adverse
Effect on the Company. There is no reasonable basis for any claim
or action that, based upon the likelihood of its being asserted and
its success if asserted, would have a Material Adverse Effect on
the Company.
Section 2.9 Compliance .
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(a) |
To the best knowledge of the Company, the
Company is in compliance with, is not in default or violation in
any material respect under, and has not been charged with or
received any notice at any time of any material violation of any
statute, law, ordinance, regulation, rule, decree or other
applicable regulation to the business or operations of the
Company;
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(b) |
To the best knowledge of the Company, the
Company is not subject to any judgment, order or decree entered in
any lawsuit or proceeding applicable to its business and operations
that would have a Material Adverse Effect on the Company;
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(c) |
The Company has duly filed all reports and
returns required to be filed by it with governmental authorities
and has obtained all governmental permits and other governmental
consents, except as may be required after the execution of this
Agreement or where the failure to do so would not have a Material
Adverse Effect on the Company. All of such permits and consents are
in full force and effect, and no proceedings for the suspension or
cancellation of any of them, and no investigation relating to any
of them, is pending or to the best knowledge of the
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Company, threatened, and none of them will be
affected in a material adverse manner by the consummation of the
Merger; and
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(d) |
The Company has operated in material compliance
with all laws, rules, statutes, ordinances, orders and regulations
applicable to its business. The Company has not received any notice
of any violation thereof, neither is the Company nor the Company
Shareholders aware of any valid basis therefore.
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Section 2.10 Filings, Consents and
Approvals . No filing or registration with, no notice to and no
permit, authorization, consent, or approval of any public or
governmental body or authority or other Person (as defined below)
is necessary for the consummation by the Company of the Merger
contemplated by this Agreement. For the purposes of this Agreement,
“ Person ” means any individual, partnership,
firm, corporation, limited liability company, association, trust,
unincorporated organization or other entity.
Section 2.11 Assets and Liabilities . The
assets and liabilities of the Company consist of those set out in
the Disclosure Statement.
Section 2.12 Financial Representations .
The consolidated audited balance sheet for the Company as delivered
to Parent for the Company’s fiscal year ended December 31,
2005, the consolidated unaudited balance sheets for the
Company’s fiscal years ended December 31, 2006 and 2007,
together with related statements of income, cash flows, and changes
in shareholder’s equity for such fiscal years (collectively,
the “ Company Financial Statements ”):
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(a) |
are in accordance with the books and records of
the Company;
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(b) |
present fairly the financial condition of the
Company as of the respective dates indicated and the results of
operations for such periods; and
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(c) |
have been prepared in accordance with United
States generally accepted accounting principles applied in a manner
consistent with prior periods (“ GAAP ”).
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The Company has not received any advice or
notification from its independent certified public accountants that
the Company has used any improper accounting practice that would
have the effect of not reflecting or incorrectly reflecting in the
Company Financial Statements or the books and records of the
Company, any properties, assets, Liabilities, revenues, or
expenses. The books, records, and accounts of the Company
accurately and fairly reflect, in reasonable detail, the assets,
and Liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account, or used any funds of the
Company, except for transactions, bank accounts, and funds which
have been and are reflected in the normally maintained books and
records of the Company.
Section 2.13 Absence of Undisclosed
Liabilities . Other than the costs and expenses incurred in
connection with the negotiation and consummation of the Merger,
including Liabilities and obligations in respect of the termination
of the employment of those Company employees set out in writing to
Parent on or prior to Closing (the “ Terminated
Employees ”), the Company does not
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have any material Liabilities or obligations
either direct or indirect, matured or unmatured, absolute,
contingent or otherwise that exceed $50,000, which:
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(a) |
are not set forth in the Company Financial
Statements, the Disclosure Statement or have not heretofore been
paid or discharged;
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(b) |
did not arise in the regular and ordinary course
of business under any agreement, contract, commitment, lease or
plan specifically disclosed in writing to Parent; or
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(c) |
have not been incurred in amounts and pursuant
to practices consistent with past business practice, in or as a
result of the regular and ordinary course of its business since the
date of the last Company Financial Statements.
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Section 2.14 Tax Matters .
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(a) |
As of the date hereof:
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(i) |
the Company has timely filed all tax returns in
connection with any Taxes (as defined below) which are required to
be filed on or prior to the date hereof, taking into account any
extensions of the filing deadlines which have been validly granted
to the Company, and
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(ii) |
all such returns are true and correct in all
material respects;
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(b) |
the Company has paid all Taxes that have become
or are due with respect to any period ended on or prior to the date
hereof, and has established an adequate reserve therefore on its
balance sheets for those Taxes not yet due and payable, except for
any Taxes the non-payment of which will not have a Material Adverse
Effect on the Company;
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(c) |
to the best knowledge of the Company, the
Company is not presently under or has not received notice of, any
contemplated investigation or audit by any regulatory or
governmental agency of body or any foreign or state taxing
authority concerning any fiscal year or period ended prior to the
date hereof;
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(d) |
all Taxes required to be withheld on or prior to
the date hereof from employees for income Taxes, social security
Taxes, unemployment Taxes and other similar withholding Taxes have
been properly withheld in all material respects and, if required on
or prior to the date hereof, have been deposited with the
appropriate governmental agency;
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(e) |
to the best knowledge of the Company, and except
as disclosed in the Disclosure Statement, the Company Financial
Statements contain full provision for all Taxes including any
deferred Taxes that may be assessed to the Company for the
accounting period ended on December 31, 2007 (the “
Company Accounting Date ”) or for any prior period in
respect of any transaction, event or omission occurring, or any
profit earned, on or prior to the Company Accounting Date or for
any profit earned by the Company on or prior to the Company
Accounting
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Date or for which the Company is accountable up
to such date and all contingent Liabilities for Taxes have been
provided for or disclosed in the Company Financial Statements;
and
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(f) |
for the purposes of this Agreement, “
Taxes ” includes international, federal, state,
provincial and local income taxes, capital gains tax, value-added
taxes, franchise, personal property and real property taxes,
levies, assessments, tariffs, duties (including any customs duty),
business license or other fees, sales, use and any other taxes
relating to the assets of the designated party or the business of
the designated party for all periods up to and including the
Closing Date, together with any related charge or amount, including
interest, fines, penalties and additions to tax, if any, arising
out of tax assessments.
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Section 2.15 Absence of Changes . Except
as set out in the Disclosure Statement, since January 15, 2008, the
execution date of the Letter of Intent, the Company has not:
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(a) |
incurred any Liabilities, other than Liabilities
incurred in the ordinary course of business consistent with past
practice and costs and expenses incurred in connection with the
negotiation and consummation of the Merger, including Liabilities
and obligations in respect of the termination of the employment of
the Terminated Employees, or discharged or satisfied any lien or
encumbrance, or paid any Liabilities, other than in the ordinary
course of business consistent with past practice, or failed to pay
or discharge when due any Liabilities of which the failure to pay
or discharge has caused or will cause any material damage or risk
of material loss to it or any of its assets or properties;
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(b) |
sold, encumbered, assigned or transferred any
material fixed assets or properties;
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(c) |
created, incurred, assumed or guaranteed any
indebtedness for money borrowed, or mortgaged, pledged or subjected
any of the material assets or properties of the Company or its
subsidiaries to any mortgage, lien, pledge, security interest,
conditional sales contract or other encumbrance of any nature
whatsoever;
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(d) |
made or suffered any amendment or termination of
any material agreement, contract, commitment, lease or plan to
which it is a party or by which it is bound, or cancelled, modified
or waived any substantial debts or claims held by it or waived any
rights of substantial value, other than in the ordinary course of
business;
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(e) |
declared, set aside or paid any dividend or made
or agreed to make any other distribution or payment in respect of
its capital shares or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or acquire any of its capital shares or
equity securities;
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(f) |
suffered any damage, destruction or loss,
whether or not covered by insurance, that has had or may be
reasonably expected to have a Material Adverse Effect on the
Company;
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(g) |
received notice or had knowledge of any actual
or threatened labor trouble, termination, resignation, strike or
other occurrence, event or condition of any similar character which
has had or might have a Material Adverse Effect on the Company;
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(h) |
made commitments or agreements for capital
expenditures or capital additions or betterments exceeding in the
aggregate $15,000;
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(i) |
other than in the ordinary course of business,
increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of its employees or directors or made any
increase in, or any addition to, other benefits to which any of its
employees or directors may be entitled;
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(j) |
entered into any transaction other than in the
ordinary course of business consistent with past practice or as
contemplated by this Agreement; or
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(k) |
agreed, whether in writing or orally, to do any
of the foregoing.
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Section 2.16 Absence of Certain Changes or
Events . Since January 15, 2008, the execution date of the
Letter of Intent, there has not been:
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(a) |
a Material Adverse Effect with respect to the
Company; or
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(b) |
any material change by the Company in its
accounting methods, principles or practices.
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Section 2.17 Subsidiaries . Except as set
out in the Disclosure Statement, the Company does not have any
subsidiaries or agreements of any nature to acquire any subsidiary
or to acquire or lease any other business operations.
Section 2.18 Personal Property . The
Company possesses, and has good and marketable title of or adequate
rights to use all property necessary for the continued operation of
the business of the Company as presently conducted and as
represented to Parent, including the capital assets set out in the
Disclosure Statement. All such property is used in the business of
the Company. All such property is in reasonably good operating
condition (normal wear and tear excepted), and is reasonably fit
for the purposes for which such property is presently used. All
material equipment, furniture, fixtures and other tangible personal
property and assets owned or leased by the Company is owned by the
Company free and clear of all liens, security interests, charges,
encumbrances, and other adverse claims, except as disclosed in the
Disclosure Statement.
Section 2.19 Intellectual Property
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(a) |
Intellectual Property Assets . The
Company owns or holds an interest in all intellectual property
assets necessary for the operation of the business of the Company
as it is currently conducted (collectively, the “
Intellectual Property Assets ”), including:
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(i) |
all functional business names, trading names,
registered and unregistered trademarks, service marks, and
applications (collectively, the “ Marks ”);
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(ii) |
all patents, patent applications, and
inventions, methods, processes and discoveries that may be
patentable (collectively, the “ Patents ”);
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(iii) |
all copyrights in both published works and
unpublished works (collectively, the “ Copyrights
”); and
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(iv) |
all know-how, trade secrets, confidential
information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints owned, used,
or licensed by the Company as licensee or licensor (collectively,
the “ Trade Secrets ”).
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(b) |
Agreements . The Disclosure Statement
contains a complete and accurate list of all material contracts and
agreements relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for
any license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of
less than $15,000 under which the Company is the licensee. To the
best knowledge of the Company, there are no outstanding or
threatened disputes or disagreements with respect to any such
agreement.
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(c) |
Intellectual Property and Know-How Necessary
for the Business . Except as set forth in the Disclosure
Statement, the Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free
and clear of all liens, security interests, charges, encumbrances,
and other adverse claims, and has the right to use without payment
to a third party of all the Intellectual Property Assets. Except as
set forth in the Disclosure Statement, all former and current
employees and contractors of the Company have executed written
contracts, agreements or other undertakings with the Company that
assign all rights to any inventions, improvements, discoveries, or
information relating to the business of the Company. No employee,
director, officer or shareholder of the Company owns directly or
indirectly in whole or in part, any Intellectual Property Asset
which the Company is presently using or which is necessary for the
conduct of its business. To the best knowledge of the Company, no
employee or contractor of the Company has entered into any contract
or agreement (except in favor of the Company) that restricts or
limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than the
Company.
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(d) |
Patents . Except as set forth in the
Disclosure Statement, the Company does not hold any right, title or
interest in and to any Patent and the Company has not filed any
patent application with any third party. To the best knowledge of
the Company, none of the products manufactured and sold, nor any
process or know- how used, by the Company infringes or is alleged
to infringe any patent or other proprietary night of any other
Person.
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(e) |
Trademarks . Except as set forth in the
Disclosure Statement, the Company does not hold any right, title or
interest in and to any Mark and the Company has not registered or
filed any application to register any Mark with any third party. To
the best knowledge of the Company, none of the Marks, if any, used
by the Company infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.
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(f) |
Copyrights . The Company is the owner of
all right, title, and interest in and to each of the Copyrights,
free and clear of all liens, security interests, charges,
encumbrances, and other adverse claims. If applicable, all
registered Copyrights are currently in compliance with formal legal
requirements, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days
after the Closing Date. To the best knowledge of the Company, no
Copyright is infringed or has been challenged or threatened in any
way and none of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a third party.
All works encompassed by the Copyrights have been marked with the
proper copyright notice.
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(g) |
Trade Secrets . The Company has taken all
reasonable precautions to protect the secrecy, confidentiality, and
value of its Trade Secrets. The Company has good title or an
absolute right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and to the best
knowledge of the Company, have not been used, divulged, or
appropriated either for the benefit of any Person or to the
detriment of the Company. No Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
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Section 2.20 Insurance . The products
sold by and the assets owned by the Company are insured under
various policies of general product liability and other forms of
insurance consistent with prudent business practices. All such
policies are in full force and effect in accordance with their
terms, no notice of cancellation has been received, and there is no
existing default by the Company, or, except as set forth in the
Disclosure Statement, any event which, with the giving of notice,
the lapse of time or both, would constitute a default thereunder.
All premiums to date have been paid in full.
Section 2.21 Employees and Consultants .
All employees and consultants of the Company have been paid all
salaries, wages, income and any other sum due and owing to them by
the Company, as at the end of the most recent completed pay period
except for accrued but unpaid vacation pay or as set forth in the
Disclosure Statement. The Company is not aware of any labor
conflict with any employees that might reasonably be expected to
have a Material Adverse Effect on the Company. To the best
knowledge of the Company, no employee of the Company is in
violation of any term of any employment contract, non-disclosure
agreement, non-competition agreement or any other contract or
agreement relating to the relationship of such employee with the
Company or any other nature of the business conducted or to be
conducted by the Company.
Section 2.22 Real Property . The Company
does not own any real property. Each of the leases, subleases,
claims or other real property interests (collectively, the “
Leases ”) to which the
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Company is a party or is bound, as set out in
the Disclosure Statement, is legal, valid, binding enforceable and
in full force and effect in all material respects. All rental and
other payments required to be paid by the Company pursuant to any
such Leases have been duly paid and no event has occurred which,
upon the passing of time, the giving of notice, or both, would
constitute a breach or default by any party under any of the
Leases. The Leases will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms
following the Closing Date. The Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the Leases or the leasehold property pursuant
thereto.
Section 2.23 Material Contracts and
Transactions . The Disclosure Statement sets forth each
contract, agreement, license, permit, arrangement, commitment or
instrument to which the Company is a party and which is material to
the conduct of the business of the Company (each, a “
Contract ”). Each Contract is in full force and
effect, and there exists no material breach or violation of or
default by the Company under any Contract, or any event that with
notice or the lapse of time, or both, will create a material breach
or violation thereof or default under any Contract by the Company.
To the best knowledge of the Company, and except as set forth in
the Disclosure Statement, the continuation, validity, and
effectiveness of each Contract will in no way be affected by the
consummation of the Merger contemplated by this Agreement. There
exists no actual or threatened termination, cancellation, or
limitation of, or any amendment, modification, or change to any
Contract.
Section 2.24 Certain Transactions . The
Company is not a guarantor or indemnitor of any indebtedness of any
Person.
Section 2.25 No Brokers . The Company has
not incurred any independent obligation or liability to any party
for any brokerage fees, agent’s commissions, or
finder’s fees in connection with the Merger contemplated by
this Agreement.
Section 2.26 Waiver of Rights . The
Company has received the requisite written approvals and waivers of
the Company Shareholders in order to approve and consummate the
Merger under the DGCL, the Company’s Certificate of
Incorporation, as amended, the Company’s Bylaws, as amended,
and any agreement to which they are a party, which may be triggered
as a result of the consummation of the Merger.
Section 2.27 Completeness of Disclosure .
No representation or warranty by the Company and the Company
Shareholders in this Agreement nor any certificate, schedule,
exhibit, statement, document or instrument furnished or to be
furnished to the Company and the Company Shareholders pursuant
hereto contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make any statement herein
or therein not materially misleading.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF PARENT AND ACQUISITION CORP.
As of
the Closing, Parent and Acquisition Corp. represent and warrant to
the Company and the Company Shareholders and acknowledge that the
Company and the Company Shareholders are relying upon such
representations and warranties in connection with the
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execution, delivery and performance of this
Agreement, notwithstanding any investigation made by or on behalf
of the Company and the Company Shareholders, as follows:
Section 3.1 Organization and Good
Standing . Parent is corporation duly incorporated, organized,
validly existing and in good standing under the laws of the State
of Nevada and has all requisite corporate power and authority to
own, lease and to carry on its business as now being conducted.
Parent is duly qualified to do business and is in good standing as
a foreign corporation in each of the jurisdictions in which Parent
is required to do so, except where the failure to be so qualified
would not have a Material Adverse Effect on Parent.
Section 3.2 Organization and Good Standing of
Acquisition Corp. Acquisition Corp. is corporation duly
incorporated, organized, validly existing and in good standing
under the laws of the State of Delaware.
Section 3.3 Acquisition Corp. Acquisition
Corp. is a wholly-owned Delaware subsidiary of Parent that was
formed specifically for the purpose of the Merger and that has not
conducted any business or acquired any property, and will not
conduct any business or acquire any property prior to the Closing
Date, except in preparation for and otherwise in connection with
the transactions contemplated by the Merger and the other
agreements to be made pursuant to or in connection with the
Merger.
Section 3.4 Authority . Parent has all
requisite corporate power and authority to execute and deliver this
Agreement and any other document contemplated by this Agreement
(collectively, the “ Parent Documents ”) to be
signed by Parent and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of each of the Parent Documents by Parent and the
consummation by Parent of the transactions contemplated hereby have
been duly authorized by Parent’s Board of Directors. No other
corporate or shareholder proceedings on the part of Parent is
necessary to authorize such documents or to consummate the
transactions contemplated hereby. This Agreement has been, and the
other Parent Documents when executed and delivered by Parent as
contemplated by this Agreement will be, duly executed and delivered
by Parent and this Agreement is, and the other Parent Documents
when executed and delivered by Parent, as contemplated hereby will
be, valid and binding obligations of Parent enforceable in
accordance with their respective terms except:
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(a) |
as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights generally;
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(b) |
as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable
remedies; and
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(c) |
as limited by public policy.
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Section 3.5 Capitalization of Parent .
The entire authorized capital stock and other equity securities of
Parent consists of: (i) 415,384,500 shares of common stock with a
par value of $0.001 (the “ Parent Common Stock
”); (ii) 100,000,000 shares of preferred stock with a par
value of $0.001 (the “ Parent Preferred Stock
”); (iii) options to purchase 19,000,000 shares of Parent
Common Stock (the “ Parent Options ”); and (iv)
warrants to purchase 5,000,000 shares of Parent
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Common Stock (the “ Parent Warrants
”). As of the date of this Agreement, there are: (i)
95,108,887 shares of Parent Common Stock issued and outstanding;
(ii) one share of Parent Preferred Stock, designated as a Series A
Special Voting Share issued and outstanding; (iii) 18,248,674
Parent Options outstanding and unexercised; and (iv) 5,000,000
Parent Warrants outstanding and unexercised. In addition, there are
1,849,180 preferred shares of 6789722 Canada Inc., a subsidiary of
Parent, which are exchangeable into 1,849,180 common shares of
Parent (the “ Exchangeable Shares ”). All of the
issued and outstanding shares of Parent Common Stock and Parent
Preferred Stock have been duly authorized, are validly issued, were
not issued in violation of any pre-emptive rights and are fully
paid and non-assessable, are not subject to pre-emptive rights and
were issued in full compliance with all federal, state, and local
laws, rules and regulations. Except for the Parent Common Stock,
Parent Preferred Stock, Parent Options, Parent Warrants and
Exchangeable Shares, there are no outstanding options, warrants,
subscriptions, conversion rights, or other rights, agreements, or
commitments obligating Parent to issue any additional shares of
Parent Common Stock, or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for or
acquire from Parent any shares of Parent Common Stock. There are no
agreements purporting to restrict the transfer of any of the issued
and outstanding shares of Parent, no voting agreements,
shareholders’ agreements, voting trusts, or other
arrangements restricting or affecting the voting of any of the
shares of Parent to which Parent is a party or of which Parent is
aware.
Section 3.6 Directors and Officers of
Parent . The duly elected or appointed directors and the duly
appointed officers of Parent are as listed on Exhibit D.
Section 3.7 Corporate Records of Parent.
The corporate records of Parent, as required to be maintained by it
pursuant to the laws of the State of Nevada, are accurate, complete
and current in all material respects, and the minute book of Parent
is, in all material respects, correct and contains all material
records required by the laws of the State of Nevada in regards to
all proceedings, consents, actions and meetings of the shareholders
and the Board of Directors of Parent.
Section 3.8 Non-Contravention . Neither
the execution, delivery and performance of this Agreement, nor the
consummation of the Merger, will:
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(a) |
conflict with, result in a violation of, cause a
default under (with or without notice, lapse of time or both) or
give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any
material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the material
properties or assets of Parent or any of its subsidiaries under any
term, condition or provision of any loan or credit agreement, note,
debenture, bond, mortgage, indenture, lease or other agreement,
instrument, permit, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or any of their respective material property or
assets;
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(b) |
violate any provision of the applicable
incorporation or charter documents of Parent, any of its
subsidiaries or any applicable laws; or
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(c) |
violate any order, writ, injunction, decree,
statute, rule, or regulation of any court or governmental or
regulatory authority applicable to Parent, any of its subsidiaries
or any of their respective material property or assets.
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Section 3.9 Actions and Proceedings .
Except as disclosed in the Parent SEC Documents (hereinafter
defined), to the best knowledge of Parent, there is no basis for
and there is no action, suit, judgment, claim, demand or proceeding
outstanding or pending, or, to the best knowledge of Parent,
threatened against or affecting Parent or which involves any of the
business, or the properties or assets of Parent that, if adversely
resolved or determined, would have a Material Adverse Effect on
Parent. There is no reasonable basis for any claim or action that,
based upon the likelihood of its being asserted and its success if
asserted, would have a Material Adverse Effect on Parent.
Section 3.10 Compliance .
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(a) |
To the best knowledge of Parent, Parent is in
compliance with, is not in default or violation in any material
respect under, and has not been charged with or received any notice
at any time of any material violation of any statute, law,
ordinance, regulation, rule, decree or other applicable regulation
to the business or operations of Parent;
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(b) |
To the best knowledge of Parent, Parent is not
subject to any judgment, order or decree entered in any lawsuit or
proceeding applicable to its business and operations that would
have a Material Adverse Effect on Parent;
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(c) |
Parent has duly filed all reports and returns
required to be filed by it with governmental authorities and has
obtained all governmental permits and other governmental
consents
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