EXECUTION
VERSION
SECURITIES PURCHASE
AGREEMENT
by and
between
DELTATHREE,
INC.
and
D4
HOLDINGS, LLC
February
10, 2009
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (this “ Agreement
”) is dated as of February 10, 2009, and is by and between
(i) deltathree, Inc., a Delaware corporation, with its principal
office at 419 Lafayette Street, New York, New York 10003 (the
“ Company ”) and (ii) D4 Holdings, LLC, a
Delaware limited liability company (the “ Purchaser
”).
WHEREAS,
the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, (i) an aggregate of
39,000,000 shares (the “ Shares ”) of the
authorized but unissued shares of Class A common stock, $0.001 par
value per share, of the Company (the “ Common Stock
”), and (ii) a warrant to purchase up to 30,000,000 shares of
Common Stock, upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS,
the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D (“
Regulation D ”), as promulgated by the U.S.
Securities and Exchange Commission under the Securities Act of
1933, as amended.
NOW,
THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1.
Definitions . As used in this
Agreement, the following terms shall have the following respective
meanings:
(a)
“ Action ” has the meaning set forth in Section
3.12.
(b)
“ Affiliate ” means any Person that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, a Person, as such
terms are used and construed under Rule 144 (as defined
below).
(c)
“ Agreement ” has the meaning set forth in the
preamble hereof.
(d)
“ Alternative Transaction ” has the meaning set
forth in Section 6.13.
(e)
“ Balance Sheet Date ” means September 30,
2008.
(f)
“ Board ” means the board of directors of the
Company.
(g)
“ Bylaws ” means the Amended and Restated Bylaws
of the Company, as amended.
(h)
“ Certificate Amendment ” means that certain
amendment to the Certificate of Incorporation to increase the
amount of authorized Common Stock to an amount sufficient to issue
all of the Warrant Shares pursuant to the Warrant.
(i)
“ Certificate of Incorporation ” means the
Amended and Restated Certificate of Incorporation of the Company,
as amended.
(j)
“ Closing ” has the meaning set forth in Section
2.2.
(k)
“ Closing Date ” has the meaning set forth in
Section 2.2.
(l)
“ Common Stock ” has the meaning set forth in
the recitals to this Agreement.
(m)
“ Company ” has the meaning set forth in the
preamble of this Agreement.
(n)
“ Company Plan ” means
each “employee benefit plan” within the meaning of
Section 3(3) of the United States Employee Retirement Income
Security Act of 1974, as amended (“ ERISA ”),
including, without limitation, multiemployer plans within the
meaning of Section 3(37) of ERISA, and all retirement, profit
sharing, stock option, stock bonus, stock purchase, severance,
fringe benefit, deferred compensation, and other employee benefit
programs, plans, or arrangements, whether or not subject to ERISA,
under which (i) any current or former directors, officers,
employees or consultants of the Company has any present or future right to
benefits and which are contributed to, sponsored by or maintained
by the Company or either of the Subsidiaries, or (ii) the Company
or either of the Subsidiaries has any present or future
liability.
(o)
“ Effective Date ” means the date on which the
Registration Statement covering the resale of the Shares is
initially declared effective by the SEC.
(p)
“ Exchange Act ” means the Securities Exchange
Act of 1934, as amended, and all of the rules and regulations
promulgated thereunder.
(q)
“ Financial Statements ” means the financial
statements of the Company included in the SEC Documents.
(r)
“ Fundamental Representations ” means the
representations and warranties contained in Sections 3.1, 3.2, 3.4
and 3.5.
(s)
“ Governmental Authorizations ” has the meaning
set forth in Section 3.18.
(t)
“ Indemnified Party ” means the party entitled
to indemnification under Section 7.
(u)
“ Indemnifying Party ” means the party obligated
to provide indemnification under Section 7.
(v)
“ Intellectual Property ” means all intellectual
property, including but not limited to (A) inventions (whether
patentable or unpatentable and whether or not reduced to practice),
ideas, research and techniques, technical designs, discoveries and
specifications, improvements, modifications, adaptations, and
derivations thereto, models, and industrial designs, (B) marks,
logos, trade dress, brand names and trade names, assumed names,
corporate names and other indications of origin (whether registered
or unregistered), (C) works of authorship, (D) trade secrets,
know-how and confidential business information, (E) software, (F)
Internet domain names, (G) customer lists, and (H) documentation
related to any of the foregoing, and includes all Intellectual
Property Rights in and to the foregoing. “ Intellectual
Property Rights ” means (i) patents, patent applications,
and patent disclosures, together with reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations
thereof (the “ Patents ”), (ii) trademarks,
service marks, trade name rights and similar rights, (iii) rights
associated with works of authorship, including copyrights (whether
registered or unregistered and any applications for registration
therefor, including any modifications, extensions, or renewals
thereof) and moral rights, (iv) trade secrets, know-how and
confidential business information and rights in any jurisdiction to
limit the use or disclosure thereof by any Person, and (v)
publicity rights.
(w)
“ Investor Rights Agreement ” means that certain
Investor Rights Agreement, the form of which is attached hereto as
Exhibit A , to be entered into by and between the Company
and the Purchaser as of the Closing Date, pursuant to which the
Company, among other things, shall register for resale the Shares
and the Warrant Shares on the terms set forth therein.
(x)
“ Israel Subsidiary ” means deltathree, Ltd., a
company incorporated under the laws of Israel.
(y)
“ knowledge ” (when referring to the Company)
means the actual knowledge of Efraim Baruch, Richard Grant or Peter
Friedman, after reasonable inquiry of such Persons with
administrative or operational responsibility for such facts or
matters in question; provided, however, that if no such reasonable
inquiry is made, then the foregoing individuals will be deemed to
have actual knowledge of those facts or matters that such
individuals would have had if such a reasonable inquiry had been
made.
(z)
“ Material Adverse Effect ” means (a) a material
adverse effect on the legality, validity or enforceability of this
Agreement or any of the other Transaction Documents and the
transactions contemplated hereby and thereby, (b) a material
adverse effect on the assets, liabilities (contingent or
otherwise), business, affairs, operations, or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (c) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under this Agreement or any of the other Transaction
Documents and the transactions contemplated hereby and thereby,
except to the extent that any such material adverse effect arises
out of, results from or is primarily attributable to (i) changes in
conditions in the United States or global economy (except to the
extent such changes affect the Company and the Subsidiaries, taken
as a whole, in a materially disproportionate manner as compared to
other Persons or participants in the industries in which the
Company and the Subsidiaries conduct their business) and (ii) the
negotiation, execution, announcement or consummation of this
Agreement and the transactions contemplated hereby.
(aa)
“ Notice Period ” has the meaning set forth in
Section 9(a)(iii).
(bb)
“ OTCBB ” means the over-the-counter bulletin
board.
(cc)
“ Person ” (whether or not capitalized) means an
individual, entity, partnership, limited liability company,
corporation, association, trust, joint venture, unincorporated
organization or any other form of entity not specifically listed
herein, and any government, governmental department or agency or
political subdivision thereof.
(dd)
“ Purchase Price ” has the meaning set forth in
Section 2.1.
(ee)
“ Purchaser ” has the meaning set forth in the
preamble of this Agreement.
(ff)
“ Registration Statement ” means any
registration statement required to be filed by the Company under
the Securities Act pursuant to the terms of the Investor Rights
Agreement.
(gg)
“ Regulation D ” has the meaning set forth in
the recitals to this Agreement.
(hh)
“ Rule 144 ” means Rule 144 promulgated
under the Securities Act and any successor or substitute rule, law
or provision.
(ii)
“ SEC ” means the Securities and Exchange
Commission.
(jj)
“ SEC Documents ” means the Company’s
annual report filed on Form 10-K for the year ended December 31,
2007, and all reports required to be filed by the Company under the
Exchange Act since March 31, 2008.
(kk)
“ Securities ” means the Shares, the Warrant,
and the Warrant Shares.
(ll)
“ Securities Act ” means the Securities Act of
1933, as amended, and all of the rules and regulations promulgated
thereunder.
(mm)
“ Shares ” has the meaning set forth in the
recitals to this Agreement.
(nn)
“ Subsidiaries ” means, collectively, the Israel
Subsidiary and the U.S. Subsidiary.
(oo)
“ Superior Proposal ” has the meaning set forth
in Section 6.13.
(pp)
“ Transfer Agent Instructions ” means
irrevocable instructions given in writing by the Company to the
Company’s transfer agent to issue an original stock
certificate to the Purchaser for the Shares.
(qq)
“ Transaction Documents ” means, collectively,
this Agreement, the Investor Rights Agreement, the Warrant, and any
other documents or agreements executed in connection with the
transactions contemplated by this Agreement.
(rr)
“ U.S. Subsidiary ” means DME Solutions, Inc., a
corporation incorporated under the laws of the State of New
York.
(ss)
“ Warrant ” means that certain Warrant to
purchase up to 30,000,000 shares of Common Stock, the form of which
is attached hereto as Exhibit B , to be issued by the
Company to the Purchaser as of the Closing Date.
(tt)
“ Warrant Shares ” means the shares of Common
Stock issuable upon exercise of the Warrant.
2.
Purchase and Sale; Closing; Other Agreements .
2.1.
Purchase and Sale . Subject to and upon the terms
and conditions set forth in this Agreement, the Company agrees to
issue and sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, at the Closing, the Shares and the
Warrant for an aggregate purchase price of $1,170,000 (the “
Purchase Price ”).
2.2.
Closing . The closing of the transactions
contemplated under this Agreement (the “ Closing
”) shall take place as soon as possible and within three (3)
business days after the satisfaction or waiver of the conditions
set forth in Section 5 below (unless agreed to otherwise by the
Company and the Purchaser), at the offices of Bingham McCutchen
LLP, 2020 K Street, NW, Washington, D.C., 20006, at 10:00 a.m., or
such other location and time agreed to by the parties
hereto. At the Closing, (a) the Company shall deliver to
the Purchaser an original stock certificate, registered in the
Purchaser’s name, representing the Shares, (b) the Company
shall deliver to the Purchaser the executed Warrant, and (c) the
Purchaser shall deliver to the Company payment of the Purchase
Price by wire transfer of immediately available funds to such
account as set forth on Schedule 2.2 . The date
on which the Closing actually occurs is the “
Closing Date ”.
3.
Representations and Warranties of the Company
. Except as disclosed in the SEC Documents (other than
disclosures in any “risk factors” sections thereof),
the Company hereby represents and warrants to the Purchaser, as of
the date of this Agreement and as of the Closing Date, as
follows:
3.1.
Incorporation . Each of the Company and the
Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the State
of Delaware (or such other applicable jurisdiction of incorporation
or formation), and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the
business conducted or the character of the property owned by it
makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not
result in a Material Adverse Effect. Each of the Company
and the Subsidiaries has all requisite corporate power and
authority to carry on its business as now conducted and to carry
out the transactions contemplated hereby and in the other
Transaction Documents. Neither the Company nor either of
the Subsidiaries is in violation of any of the provisions of its
certificate of incorporation (or other similar corporate formation
or organization document) or bylaws (or other similar corporate
governance document).
3.2.
Capitalization . The authorized capital stock of
the Company consists of (a) 75,000,000 shares of Common Stock, of
which 32,870,105 shares are outstanding as of the date of this
Agreement, (b) 1,000 shares of Class B common stock, par value
$0.001 per share, of which there are no shares outstanding as of
the date of this Agreement, and (c) 25,000,000 shares of preferred
stock, par value $0.001 per share, of which there are no shares
outstanding as of the date of this Agreement. An
aggregate of 6,261,891 shares of the Company’s capital stock
are issuable and reserved for issuance pursuant to option plans or
securities (other than outstanding shares of Common Stock)
exercisable for, or convertible into or exchangeable for, shares of
capital stock of the Company as follows: (i) stock
options to purchase 2,029,015 shares of the Common Stock have been
issued under existing approved stock plans and 304,000 restricted
shares and restricted units have been granted and (ii) 3,928,876
shares are reserved for future issuance under existing approved
stock plans. All shares of the Company’s issued
and outstanding capital stock have been duly authorized, are
validly issued and outstanding, and are fully paid and
non-assessable and were issued in full compliance with applicable
state and federal securities laws and, to the knowledge of the
Company, rights of third parties. Except as set forth on
Schedule 3.2 , there are no existing options, warrants,
calls, preemptive (or similar) rights, subscriptions or other
rights, agreements, arrangements or commitments of any character
obligating the Company to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of the capital stock of the
Company or other equity interests in the Company or any securities
convertible into or exchangeable for such shares of capital stock
or other equity interests, excluding the Shares to be issued to the
Purchaser as contemplated by this Agreement and the Warrant Shares,
and there are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of its
capital stock or other securities or equity
interests. The issuance and sale of the Shares and the
Warrant Shares will not obligate the Company to issue or sell,
pursuant to any pre-emptive right or otherwise, shares of Common
Stock or other securities to any Person (other than the Purchaser)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any outstanding shares of capital stock or other
securities.
3.3.
Registration Rights . The Company has not granted
or agreed to grant to any Person any right (including
“piggy-back” and demand registration rights) to have
any shares of capital stock or other securities of the Company
registered with the SEC or any other governmental authority and no
person has the right to prohibit the Company from filing the
Registration Statement.
3.4.
Authorization; Enforcement . The execution and
delivery of this Agreement and the other Transaction Documents by
the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company. Each of
this Agreement and the other Transaction Documents has been (or
upon delivery will have been) duly executed by the Company, and
when delivered in accordance with the terms hereof, will constitute
a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
may be limited by applicable bankruptcy, insolvency, reorganization
or other laws affecting creditors’ rights generally and by
general equitable principles. The Company has all
requisite corporate power and authority to enter into this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and otherwise to carry out and
perform its obligations under their respective terms.
3.5.
Valid Issuance of the Shares . The Company has a
sufficient number of authorized and unissued shares of Common Stock
for the issuance of the Shares, and the Shares have been duly
authorized and, when issued pursuant to the terms of this
Agreement, will be validly issued, fully paid and nonassessable and
not subject to any encumbrances and restrictions except for
restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws, preemptive rights or any
other similar contractual rights of the stockholders of the Company
or any other Person. Upon the effectiveness of the
Certificate Amendment, the Company will have a sufficient number of
authorized and unissued shares of Common Stock for the issuance of
the Warrant Shares, and the Warrant Shares will be within the
authorized share capital of the Company and, upon issuance in
accordance with the terms of the Warrant, will be validly issued
and fully paid.
3.6.
Financial Statements . At the time of their
filing with the SEC, the Financial Statements and the related notes
thereto complied as to form in all material respects with
applicable accounting requirements and the rules and regulations of
the SEC with respect thereto in effect at the time of
filing. The Financial Statements have been prepared in
accordance with United States generally accepted accounting
principles (“ GAAP ”) applied on a consistent
basis during the periods covered thereby (except as may be
otherwise specified in the Financial Statements or the notes
thereto and except that unaudited financial statements may not be
reconciled to GAAP or contain all footnotes required by GAAP) and
present fairly, in all material respects, the financial position of
the Company and the Subsidiaries and the results of operations and
cash flows as of the date and for the periods indicated therein
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
3.7.
SEC
Documents . As of their respective filing dates, the
SEC Documents complied in all material respects with the
requirements of the Exchange Act, and the rules and regulations
promulgated thereunder, and none of the SEC Documents contains any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under
which they were made, not misleading. All contracts,
agreements, instruments and other documents to which the Company is
a party or to which the property or assets of the Company are
subject are included as part of, or specifically identified in, the
SEC Documents to the extent required by the rules and regulations
of the SEC as in effect at the time of filing, and each such
contract, agreement, instrument and other document is legal, valid,
binding and enforceable against the Company in accordance with
their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting
creditors’ rights generally and by general equitable
principles. Except as set forth on Schedule 3.7 ,
the Company has prepared and filed with the SEC all filings and
reports required by the Securities Act and the Exchange Act to make
the Company’s filings and reports current and timely filed in
all respects.
3.8.
Consents . Except for (a) the filing and
effectiveness of the Registration Statement and (b) any
required state “blue sky” law filings in connection
with the transactions contemplated hereunder or under the other
Transaction Documents, all material consents, approvals, orders and
authorizations required on the part of the Company in connection
with the execution or delivery of, or the performance of the
obligations under, this Agreement and the other Transaction
Documents, and the consummation of the transactions contemplated
herein and therein, have been obtained and will be effective as of
the date hereof. The execution and delivery by the
Company of this Agreement and the other Transaction Documents, the
consummation of the transactions contemplated herein and therein,
and the issuance of the Securities do not require the consent or
approval of any third party or any lender to, the Company or, to
the knowledge of the Company, the OTCBB.
3.9.
No
Conflict; Compliance With Laws .
(a)
The
execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents, and the consummation
of the transactions contemplated hereby and thereby, including the
issuance of the Securities, do not and will not (i) conflict with
or violate any provision of the Certificate of Incorporation
(assuming with respect to the issuance of Common Stock upon the
exercise of the Warrant, the effectiveness of the Certificate
Amendment) or Bylaws or the certificate of incorporation (or other
charter documents) or bylaws (or other similar documents) of either
of the Subsidiaries, (ii) breach, conflict with or result in any
violation of or default (or an event that with notice or lapse of
time or both would become a default) under, or give rise to a right
of termination, amendment, acceleration or cancellation (with or
without notice or lapse of time, or both) of any obligation,
contract, commitment, lease, agreement, mortgage, note, bond,
indenture or other instrument or obligation to which the Company or
either of the Subsidiaries is a party or by which they or any of
their properties or assets are bound, except in each case to the
extent such breach, conflict, violation, default, termination,
amendment, acceleration or cancellation does not, and could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, or (iii) to the knowledge of the Company,
result in a violation of any statute, law, rule, regulation, order,
ordinance or restriction applicable to the Company, the
Subsidiaries or any of their properties or assets, or any judgment,
writ, injunction or decree of any court, judicial or quasi-judicial
tribunal applicable to the Company, the Subsidiaries or any of
their properties or assets.
(b)
Except
as set forth on Schedule 3.9(b) , none of the Company or the
Subsidiaries (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
either of the Subsidiaries), nor has the Company or either of the
Subsidiaries received written notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties or assets is
bound (whether or not such default or violation has been waived) or
(ii) is in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, employment and labor matters, and securities regulation
(including the Securities Act and the Exchange Act) except in each
case as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
3.10.
Brokers or Finders . Except as set forth on
Schedule 3.10 , none of the Company or the Subsidiaries has
dealt with any broker or finder in connection with the transactions
contemplated by this Agreement or the other Transaction Documents,
and none of the Company or the Subsidiaries has incurred, or shall
incur, directly or indirectly, any liability for any brokerage or
finders’ fees or agents’ commissions or any similar
charges in connection with this Agreement or the other Transaction
Documents, or any transaction contemplated hereby or
thereby.
3.11.
Over-The-Counter-Bulletin Board . The
Company’s Common Stock is actively traded, and thus quoted,
on the OTCBB, and, to the knowledge of the Company, no circumstance
presently exists which, with notice or the passage of time, or
both, would result in the Company no longer being eligible for
quotation on the OTCBB.
3.12.
Absence of Litigation . There is no action, suit,
inquiry, notice of violation, proceeding, or investigation nor, to
the knowledge of the Company, is any of the above threatened
against the Company, the Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (each an “ Action ”)
which (a) adversely affects or challenges the legality, validity or
enforceability of this Agreement or any of the other Transaction
Documents or any of the transactions contemplated hereby or
thereby, including the issuance of the Securities, or (b) except as
set forth on Schedule 3.12 , could reasonably be expected to
result in a Material Adverse Effect. Except as set forth
on Schedule 3.12 , none of the Company or the Subsidiaries,
nor, to the knowledge of the Company, any director or officer
thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty associated with such
director or officer’s service to or association with the
Company. To the knowledge of the Company, there has not
been and there is not pending or threatened, any investigation by
the SEC involving the Company or any current or former director or
officer of the Company associated with such director or
officer’s service to or other association with the
Company. The SEC has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or either of the Subsidiaries under the
Exchange Act or the Securities Act.
3.13.
No
Undisclosed Liabilities; Indebtedness
. Except as set forth on Schedule 3.13 , since
the Balance Sheet Date, other than liabilities and obligations
arising in the ordinary course of business, the Company and the
Subsidiaries have incurred no liabilities or obligations, whether
known or unknown, asserted or unasserted, fixed or contingent,
accrued or unaccrued, mature or unmatured, liquidated or
unliquidated, or otherwise, except for liabilities or obligations,
that, individually or in the aggregate, do not or would not
reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.13 ,
the Company has no indebtedness outstanding as of the date hereof
and is not in default with respect to any outstanding indebtedness
or any instrument relating thereto.
(a)
Personal Property . Each of the Company and the
Subsidiaries has good and marketable title to, or has valid rights
to lease or otherwise use, all items of personal property that are
material to the business of the Company and the Subsidiaries, free
and clear of all liens and encumbrances except those, if any,
reflected in the Financial Statements, incurred in the ordinary
course of business.
(b)
Real Property . Each of the Company and the
Subsidiaries has good and marketable title to, or has valid rights
to lease or otherwise use, all the real property that is material
to the business of the Company and the Subsidiaries, free and clear
of all liens and encumbrances except those, if any, reflected in
the Financial Statements, incurred in the ordinary course of
business. Any real property and facilities held under
lease by the Company or either of the Subsidiaries are held by it
or them under valid, subsisting and enforceable leases (subject to
laws of general application relating to bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors’
rights generally and other equitable remedies) with which the
Company and the Subsidiaries are in compliance in all material
respects. To the knowledge of the Company, the real
property used by the Company and/or either of the Subsidiaries is
being used by the Company and/or either of the Subsidiaries, as
applicable, in compliance with all applicable zoning and other
laws, including licensing standards, health and safety code
regulations, fire regulations and any other applicable city, county
or state regulations.
3.15.
Labor Relations .
(a)
Except
as set forth on Schedule 3.15(a) , no labor or employment
dispute exists or, to the knowledge of the Company, is imminent or
threatened, with respect to any of the Company’s past or
present employees or consultants, that has, or could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b)
Since
January 1, 2006, to the extent there has been any “mass
layoff” or “plant closing” as defined by the
Worker Adjustment and Retraining Notification Act of 1988 (the
“ WARN Act ”) in respect of the Company or
either of the Subsidiaries, or the Company or either of the
Subsidiaries has been affected by any transactions or engaged in
layoffs or employment terminations sufficient in number to trigger
application of any state, local or foreign law or regulation which
is similar to the WARN Act, such layoffs, closings or employment
terminations have been in material compliance with the WARN Act and
such other applicable state, local and foreign laws.
3.16.
Intellectual Property .
(a)
All
patents, registered trademarks, registered trade names, registered
service marks and registered copyrights held by the Company or the
Subsidiaries are valid and subsisting. All necessary
registration, maintenance and renewal fees to date in connection
with the foregoing have been paid and all necessary documents and
certificates in connection with the foregoing have been filed with
the relevant patent, copyright, trademark or other authorities in
the United States or foreign jurisdictions, as the case may be, for
the purposes of perfecting, prosecuting and maintaining the
foregoing. To the extent there are any actions that are
required to be taken by Company within one hundred twenty (120)
days of the date of this Agreement with respect to any of the
foregoing, the Company will do so in consultation with the
Purchaser.
(b)
Each
of the Company and the Subsidiaries owns, or is validly licensed or
otherwise has the right to use, and solely with respect to that
which is owned by the Company or either of the Subsidiaries free
and clear of any liens and encumbrances, all Intellectual Property
used by or necessary for the Company to carry on its business as
currently conducted, except where the failure to so own or validly
license any such Intellectual Property would not reasonably be
expected to have a Material Adverse Effect. To the
knowledge of the Company, such Intellectual Property constitutes
all the Intellectual Property necessary to the conduct of the
business of the Company and the Subsidiaries as currently conducted
by the Company and the Subsidiaries, including the design,
development, manufacture, use, import and sale of products and
technology and the performance of services.
(c)
To the
knowledge of the Company, neither the Company nor either of the
Subsidiaries has infringed upon or misappropriated any Intellectual
Property or other proprietary information of any other Person that
could reasonably be expected to result in a Material Adverse
Effect. Except as set forth on Schedule 3.16(c) ,
neither the Company nor either of the Subsidiaries has received any
written charge, complaint, claim, demand or notice alleging that
the Company or either of the Subsidiaries has infringed or
misappropriated any Intellectual Property of any other Person nor,
to the knowledge of the Company, is there a reasonable basis for
any such claim. Except as set forth on Schedule
3.16(c) , neither the Company nor either of the Subsidiaries is
party to or the subject of any pending or, to the knowledge of the
Company, threatened, suit, claim, action, or proceeding with
respect to any such infringement or misappropriation. To
the knowledge of the Company, no other Person has infringed upon or
misappropriated any Intellectual Property owned by the Company or
either Subsidiary. Neither the Company nor either of the
Subsidiaries has received any opinion of counsel that a third party
patent applies to any product produced, marketed, licensed, sold or
distributed by the Company or either Subsidiary. Neither
the Company nor either of the Subsidiaries has brought any action,
suit or proceeding for infringement of any Intellectual Property of
the Company or either of the Subsidiaries, or for breach of any
license or agreement involving any of such Intellectual Property,
against any party that remains pending as of the date of this
Agreement, and to the knowledge of the Company as of the date of
this Agreement, there is no unauthorized use, disclosure,
infringement or misappropriation of any such Intellectual Property
by any third party, including any employee or former employee of
the Company or either of the Subsidiaries.
(d)
Neither the Company nor either of the Subsidiaries has transferred
title to, or granted any exclusive license with respect to, any
material Intellectual Property that is used in the business of the
Company or either of the Subsidiaries as currently
conducted.
(e)
The
Company has a policy of obtaining from each employee or consultant
who is or was involved in the creation or development of any
Intellectual Property of the Company an agreement containing an
irrevocable assignment to the Company of the Intellectual Property
created or developed by such employee, and, to the knowledge of the
Company, there are no material breaches of such
policy. Each of the Company and the Subsidiaries has
taken all reasonable steps (based on standard industry practices,
and in the reasonable opinion of the Company) to protect its
Intellectual Property and rights thereunder and, to the knowledge
of the Company, no such rights to Intellectual Property have been
lost or are in jeopardy of being lost as a result of any act or
omission by the Company or either of the
Subsidiaries. The Company does not believe it is or will
be necessary to use any inventions of any of its employees,
consultants or independent contractors made prior to their
employment by, or performance of services for, the Company and the
Subsidiaries.
3.17.
Subsidiaries; Joint Ventures . Except for the
Subsidiaries, the Company has no subsidiaries and does not
otherwise own or control any other Person. The Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each of the Subsidiaries free and clear of all
liens, and all the issued and outstanding shares of capital stock
of each of the Subsidiaries are validly issued and are fully-paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. Except as set
forth on Schedule 3.17 , neither the Company nor either of
the Subsidiaries is a participant in any joint venture,
partnership, or similar arrangement material to its
business.
3.18.
Compliance with Regulatory Requirements . The
Company and the Subsidiaries possess all certificates, approvals,
authorizations, licenses and permits issued by the appropriate
federal, state, local or foreign regulatory authorities, including
but not limited to the Federal Communications Commission and the
SEC, necessary to conduct their businesses as described in the SEC
Documents, except where the failure to possess such certificates,
approvals, authorizations and permits is not reasonably expected,
individually or in the aggregate, to result in a Material Adverse
Effect (the “ Governmental Authorizations
”), and the Company has not received any written notice of
proceedings relating to the revocation or modification of any
Governmental Authorizations. All the Governmental
Authorizations have been duly issued or obtained and are in full
force and effect, and, to the knowledge of the Company, the Company
and the Subsidiaries are in material compliance with the terms of
all the Governmental Authorizations. The Company and the
Subsidiaries have not engaged in any activity that, to their
knowledge, would cause revocation or suspension of any such
Governmental Authorizations. Neither the execution,
delivery nor performance of this Agreement or any Transaction
Document will adversely affect the status of any of the
Governmental Authorizations. The Company represents and
warrants that, to its knowledge, no regulatory authority has
initiated any regulatory or legal action with respect to any of the
Company’s or the Subsidiaries’ products or
business.
3.19.
Taxes . Except as set forth on Schedule
3.19 , each of the Company and the Subsidiaries has filed (or
has had filed on its behalf), will timely file or will cause to be
timely filed, or has timely filed for an extension of the time to
file, all material Tax Returns (as defined below) required by
applicable law to be filed by it or them prior to or as of the date
hereof, and such Tax Returns are, or will be at the time of filing,
true, correct and complete in all material
respects. Each of the Company and the Subsidiaries has
paid (or has had paid on its behalf) or, where payment is not yet
due, has established (or has had established on its behalf and for
its sole benefit and recourse) or will establish or cause to be
established in accordance with GAAP on or before the date hereof an
adequate accrual for the payment of, all material Taxes (as defined
below) due with respect to any period ending prior to or as of the
date hereof. “ Taxes ” shall mean any
and all taxes, charges, fees, levies or other assessments,
including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement,
unemployment, occupation, use, goods and services, license, value
added, capital, net worth, payroll, profits, franchise, transfer
and recording taxes, fees and charges, and any other taxes,
assessment or similar charges imposed by the Internal Revenue
Service or any taxing authority (whether state, county, local or
foreign) (each, a “ Taxing Authority ”),
including any interest, fines, penalties or additional amounts
attributable to or imposed upon any such taxes or other
assessments. “ Tax Return ” shall
mean any report, return, document, declaration or other information
or filing required to be supplied to any Taxing Authority,
including information returns, any documents with respect to
accompanying payments of estimated Taxes, or with respect to or
accompanying requests for extensions of time in which to file any
such return, report, document, declaration or other
information. To the knowledge of the Company, there are
no claims or assessments pending against the Company or either of
the Subsidiaries for any material alleged deficiency in any Tax,
and neither the Company nor either of the Subsidiaries has been
notified in writing of any material proposed Tax claims or
assessments against the Company or either of the
Subsidiaries. To the knowledge of the Company, no Tax
Return of the Company or the Subsidiaries is or has been the
subject of an examination by a Taxing
Authority. Each of the Company and the
Subsidiaries has withheld from each payment made to any of its past
or present employees, officers and directors, and any other person,
the amount of all material Taxes and other deductions required to
be withheld therefrom and paid the same to the proper Taxing
Authority within the time required by law.
3.20.
Pensions and Benefits .
(a)
Each Company Plan is
included as part of or specifically identified in the SEC Documents
to the extent required by the rules and regulations of the SEC as
in effect at the time of filing.
(b)
With
respect to employee benefit plans, programs, and other arrangements
providing incentive compensation or other benefits similar to those
provided under any Company Plans to any employee or former employee
or dependent thereof, which plan, program or arrangement is subject
to the laws of any jurisdiction outside the United States (“
Foreign Plans ”), (1) the Foreign Plans have been
maintained in all material respects in accordance with all
applicable laws, (2) if intended to qualify for special tax
treatment, the Foreign Plans meet all requirements for such
treatment, (3) if intended to be funded and/or book-reserved, the
Foreign Plans are fully funded and/or book reserved, as
app
