ASSET PURCHASE AGREEMENT
BY AND AMONG,
NEXTGEN DEALER SOLUTIONS, LLC,
HALCYON CONSULTING, LLC
and
MEMBERS OF HALCYON CONSULTING, LLC SIGNATORY HERETO FOR THE LIMITED
PURPOSES STATED HEREIN
January 8, 2017
TABLE OF CONTENTS
|
ARTICLE I
|
PURCHASE AND SALE
|
1
|
|
Section
1.1
|
Purchase and Sale
|
1
|
|
Section
1.2
|
Transaction Consideration
|
5
|
|
Section
1.3
|
Closing Date
|
5
|
|
Section
1.4
|
Closing Date Payment and Deliveries
|
5
|
|
Section
1.5
|
Tax Withholding
|
8
|
|
Section
1.6
|
Required Consents
|
8
|
|
Section
1.7
|
Allocation of Transaction Consideration
|
8
|
|
ARTICLE II
|
REPRESENTATIONS AND WARRANTIES OF HALCYON
|
9
|
|
Section
2.1
|
Organization; Authorization and Enforceability
|
9
|
|
Section
2.2
|
Conflicts; Consents of Third Parties
|
9
|
|
Section
2.3
|
Ownership
|
10
|
|
Section
2.4
|
Broker Fees
|
10
|
|
ARTICLE III
|
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
HALCYON
|
10
|
|
Section
3.1
|
Company Organization and Related Matters
|
10
|
|
Section
3.2
|
Capitalization
|
11
|
|
Section
3.3
|
Conflicts; Consents of Third Parties
|
11
|
|
Section
3.4
|
Financial Statements
|
11
|
|
Section
3.5
|
No Undisclosed Liabilities
|
12
|
|
Section
3.6
|
Absence of Certain Developments
|
12
|
|
Section
3.7
|
Taxes
|
12
|
|
Section
3.8
|
Real Property
|
13
|
|
Section
3.9
|
Tangible Personal Property; Title; Sufficiency of
Assets
|
14
|
|
Section
3.10
|
Intellectual Property
|
15
|
|
Section
3.11
|
Contracts
|
18
|
|
Section
3.12
|
Employee Benefits.
|
18
|
|
Section
3.13
|
Labor
|
20
|
|
Section
3.14
|
Litigation
|
20
|
|
Section
3.15
|
Compliance with Laws; Permits
|
20
|
|
Section
3.16
|
Environmental Matters
|
21
|
|
Section
3.17
|
Insurance
|
21
|
|
Section
3.18
|
Receivables; Payables
|
21
|
|
Section
3.19
|
Products and Services
|
22
|
|
Section
3.20
|
Customers and Suppliers
|
23
|
|
Section
3.21
|
Related Party Transactions
|
23
|
|
Section
3.22
|
Brokers Fees
|
24
|
|
Section
3.23
|
Absence of Certain Business Practices
|
24
|
|
Section
3.24
|
Books and Records
|
24
|
|
Section
3.25
|
Bank Accounts; Powers of Attorney
|
24
|
|
Section
3.26
|
No Misrepresentation
|
24
|
|
Section
3.27
|
Names
|
24
|
|
Section
3.28
|
Not a Foreign Person
|
25
|
|
Section
3.29
|
Investor Status
|
25
|
|
Section
3.30
|
No Other Representations
|
26
|
|
ARTICLE IV
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
26
|
|
Section
4.1
|
Organization
|
26
|
|
Section
4.2
|
Authorization and Enforceability
|
26
|
|
Section
4.3
|
Conflicts; Consent of Third Parties
|
26
|
|
Section
4.4
|
Brokers Fees
|
27
|
|
Section
4.5
|
No Proceedings
|
27
|
|
Section
4.6
|
Issuance of Purchaser Shares
|
27
|
|
Section
4.7
|
No Insolvency
|
27
|
|
Section
4.8
|
No Other Representations
|
27
|
|
ARTICLE V
|
COVENANTS
|
27
|
|
Section
5.1
|
Conduct of Business by the Company Pending the Closing
|
27
|
|
Section
5.2
|
Access to Information
|
30
|
|
Section
5.3
|
Notification of Certain Matters
|
30
|
|
Section
5.4
|
Further Action; Commercially Reasonable Efforts
|
30
|
|
Section
5.5
|
Names and Logos
|
31
|
|
Section
5.6
|
Mail; Payments; Receivables
|
31
|
|
Section
5.7
|
Public Announcements; Confidentiality
|
31
|
|
Section
5.8
|
Exclusivity
|
32
|
|
Section
5.9
|
Non-Competition; Non-Solicitation
|
32
|
|
Section
5.10
|
Payment of Indebtedness, Seller Transaction Expenses, Change of
Control Payments, and Excluded Liabilities
|
34
|
|
Section
5.11
|
Employee and Employee Benefits
|
34
|
|
Section
5.12
|
Pre-Closing Funding
|
35
|
|
ARTICLE VI
|
CONDITIONS TO OBLIGATIONS OF THE PARTIES
|
36
|
|
Section
6.1
|
Conditions to the Obligations of Each Party
|
36
|
|
Section
6.2
|
Conditions to the Obligations of Purchaser
|
36
|
|
Section
6.3
|
Conditions to the Obligations of Seller Parties
|
37
|
|
ARTICLE VII
|
TERMINATION, AMENDMENT AND WAIVER
|
37
|
|
Section
7.1
|
Termination
|
37
|
|
Section
7.2
|
Effect of Termination
|
38
|
|
ARTICLE VIII
|
INDEMNIFICATION
|
38
|
|
Section
8.1
|
Indemnity Obligations of the Company and Halcyon
|
38
|
|
Section
8.2
|
Indemnity Obligations of Halcyon Members
|
39
|
|
Section
8.3
|
Indemnity Obligations of Purchaser
|
40
|
|
Section
8.4
|
Indemnification Procedures
|
40
|
|
Section
8.5
|
Expiration of Representations and Warranties
|
42
|
|
Section
8.6
|
Certain Limitations
|
42
|
|
Section
8.7
|
Additional Security for Indemnification Payments to Purchaser
Indemnitees
|
43
|
|
Section
8.8
|
Treatment of Indemnification Payments
|
43
|
|
Section
8.9
|
Right to Indemnification Not Affected by Knowledge or
Waiver
|
44
|
|
Section
8.10
|
Sole Remedy
|
44
|
|
ARTICLE IX
|
MISCELLANEOUS
|
44
|
|
Section
9.1
|
Certain Definitions
|
44
|
|
Section
9.2
|
Expenses
|
51
|
|
Section
9.3
|
Governing Law
|
51
|
|
Section
9.4
|
Entire Agreement; Amendments and Waivers
|
51
|
|
Section
9.5
|
Section Headings
|
52
|
|
Section
9.6
|
Notices
|
52
|
|
Section
9.7
|
Severability
|
53
|
|
Section
9.8
|
Binding Effect; Assignment; Third-Party Beneficiaries
|
53
|
|
Section
9.9
|
Counterparts
|
53
|
|
Section
9.10
|
Remedies Cumulative
|
54
|
|
Section
9.11
|
Exhibits and Schedules
|
54
|
|
Section
9.12
|
Interpretation
|
54
|
|
Section
9.13
|
Arm’s Length Negotiations
|
54
|
|
Section
9.14
|
Construction
|
55
|
|
Section
9.15
|
Specific Performance
|
55
|
|
Section
9.16
|
Waiver of Jury Trial
|
55
|
|
Section
9.17
|
Time of Essence
|
55
|
Exhibit
A:
Form of Acquisition Note
Exhibit
B:
Form of Bill of Sale
Exhibit
C:
Form of Non-Compete Agreement
Exhibit
D:
Form of Services Agreement with Halcyon
Exhibit
E:
Form of Amendment to Purchaser's Articles of
Incorporation
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT
(this
“
Agreement
”), dated as of
January 8,
2017
, is by and
among Smart Server, Inc., a Nevada corporation (“
Purchaser
”), NextGen
Dealer Solutions, LLC, a Delaware limited liability company (the
“
Company
”), and Halcyon
Consulting, LLC, a Maryland limited liability company
(“
Halcyon
”). The Company
and Halcyon are sometimes referred to herein collectively as the
“
Seller
Parties
” and each as a “
Seller Party
”. Seller
Parties and Purchaser are sometimes referred to herein collectively
as the “
Parties
” and each
individually as a “
Party
.” The members of
Halcyon (“
Halcyon
Members
”) are executing this Agreement for the limited
purposes stated herein. Halcyon and the Halcyon Members are
sometimes referred to herein collectively as the
“
Halcyon
Parties
” and each as a “
Halcyon
Party
”.
WHEREAS
, Halcyon and Cycle are the sole
members of the Company;
WHEREAS
, the Parties desire for
Purchaser to purchase from the Company, and for the Company to sell
to Purchaser, substantially all of the Company's assets, subject to
the terms and conditions set forth herein;
NOW, THEREFORE
, in consideration of the
mutual covenants, representations and warranties made herein and
other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, the Parties agree as
follows:
ARTICLE
I
PURCHASE AND SALE
Section
1.1
Purchase and
Sale
.
(a)
On and subject
to the terms and conditions of this Agreement, at the closing of
the transactions contemplated hereby (the “
Closing
”), the Company
shall sell, assign, transfer, convey, and deliver to Purchaser, and
Purchaser shall purchase and acquire from the Company, all right,
title, and interest of the Company in and to all of its assets,
properties and rights of whatever kind, tangible and intangible,
whether accrued, contingent or otherwise, other than the Excluded
Assets (collectively, the “
Purchased Assets
”),
including the following Purchased Assets:
(i)
all
Owned Intellectual Property
now in existence or under
development
and all rights under the
Intellectual Property Licenses,
and all goodwill represented
thereby and pertaining thereto
;
and
(ii)
all
computer hardware, furniture, furnishings, signage, vehicles,
equipment, machinery, tooling, parts and other tangible personal
property;
(iii)
all
rights under or related to the Real Property Leases, Personal
Property Leases and any other Contract to which such Company is a
party (the “
Included
Contracts
”), provided that: (A) the Included Contracts
will not include those Contracts set forth on
Schedule 1.1(b)(i)
of the
Disclosure Schedule; and (B) in the event any Contract of the
Company is identified following the Closing that is required to be
disclosed in
Section
3.11(a)
of the Disclosure Schedule pursuant to the terms
thereof, but is not so disclosed, Purchaser may at its sole
discretion elect to exclude such Contract from the Purchased Assets
in accordance with
Section
1.1(b)(ii)
and, for the avoidance of doubt, in the event
that Purchaser makes such an election to exclude such Contract,
such Contract shall not be deemed an Included
Contract;
(iv)
all
rights under or related to non-competition, non-solicitation and
restrictive covenant agreements and arrangements (other than any
such agreements or arrangements between the Company on the one side
and Halcyon or Cycle or any Halcyon Member on the other side), and
all invention assignments and work made for hire provisions
regarding the Company, if any, arising by operation of Law or
contract with respect to the relationship between the Company and
any of its current or former employees or independent
contractors;
(v)
all payment rights
and other intangible assets with respect to customer relationships
that are not embodied in written Contracts;
(vi)
all
credits and other similar assets;
(vii)
all
telephone numbers, facsimile numbers, websites, email addresses,
domain names and any similar items;
(viii)
all
instruments and inventory, finished goods, raw materials, work in
progress, packaging, supplies, parts and other
inventories;
(ix)
all
notes receivable, accounts receivable and other receivables (in all
cases, whether or not billed) and all accrued penalties and
interest thereon, and the benefit of any security
therefor;
(x)
copies of all Books
and Records;
(xi)
to
the extent their transfer is permitted by applicable Law, all
Permits, including all applications therefor;
(xii)
all
causes of action, lawsuits, claims and demands, refunds, rights of
recovery, rights of setoff, and rights of recoupment of any nature
available to or being pursued by the Company with respect to the
Purchased Assets or the Assumed Liabilities (including all awards
or proceeds in connection with insurance); and
(xiii)
all
goodwill and going concern value associated with the operation of
the Business and the Purchased Assets.
(b)
Excluded Assets
.
Notwithstanding
Section
1.1(a)
, the Company shall retain its right, title and
interest in and to the following assets (collectively, the
“
Excluded
Assets
”):
(i)
all Contracts and
other assets set forth on
Schedule 1.1(b)(i)
, such
schedule to be agreed upon prior to Closing;
(ii)
in
the event any Contract of the Company is identified following the
Closing that is required to be disclosed in
Section 3.11(a)
of the
Disclosure Schedule, but is not so disclosed, Purchaser may at its
reasonable discretion elect to exclude such Contract from the
Purchased Assets, and such Contract shall thereupon be deemed an
Excluded Asset;
(iii)
the
original Books and Records and the books, instruments, papers, and
records relating exclusively to the Excluded Assets, taxpayer and
other identification numbers, seals, minute books, stock or
membership interest transfer records, and blank stock
certificates;
(iv)
all
Employee Benefit Plans and all assets contained within such
Employee Benefit Plans;
(v)
all of the
Company’s claims for and rights to receive Tax refunds,
credits and any deferred tax income with respect to taxable periods
preceding the Closing, and Tax returns and any notes, worksheets,
files, records or documents relating thereto;
(vi)
all
of the Company’s insurance policies and associated
prepayments, insurance refunds and rights of recovery and all life
insurance policies, if any, and associated prepayments, insurance
refunds, rights of recovery and proceeds thereof;
(vii)
all
rights, claims or causes of action that the Seller Parties may have
against any Person for amounts owing, damages, warranties and the
like pertaining exclusively to the Excluded Assets;
(viii)
all
prepaid expenses, fees and costs, deferred charges, advance
payments, security deposits and prepaid items;
(ix)
the
rights of the Company under this Agreement and the other
Transaction Documents;
(x)
all cash and cash
equivalents, including cash in all bank accounts maintained by the
Company; and
(xi)
the
furniture and personal items in Kartik Kakarala’s office at
the Leased Real Property (as hereinafter defined) and the pool
table.
(c)
Assumption of Certain
Liabilities
. On and subject to the terms and conditions of
this Agreement, at the Closing, Purchaser shall assume and agree to
pay, discharge and perform when due performance obligations of the
Company under Included Contracts solely to the extent that such
obligations, by the terms of such Included Contracts, arise after
the Closing (other than by virtue of a breach, default or violation
of any Included Contract occurring at or prior to the Closing),
relate to periods following the Closing and are by their terms to
be observed, paid, discharged, and performed as the case may be, at
any time after the Closing (collectively, the “
Assumed
Liabilities
”).
(d)
Excluded Liabilities
.
Notwithstanding anything to the contrary in this Agreement,
Purchaser shall not be responsible for any Liabilities of the
Company or any Affiliate of the Company that are not Assumed
Liabilities specifically set forth in
Section 1.1(c)
(such excluded
Liabilities, collectively, the “
Excluded Liabilities
”).
In furtherance of, and not in limitation of, the foregoing, and
notwithstanding anything to the contrary in this Agreement,
Purchaser shall not be responsible for any of the following (each
of which shall also constitute Excluded Liabilities):
(i)
any Liability under
or with respect to Indebtedness of the Company or any third party
or any agreement or instrument relating thereto (including any
guaranty thereof or other contingent obligation with respect
thereto);
(ii)
any
Liability relating to any Excluded Asset;
(iii)
any
Liability (other than liabilities assumed by Purchaser in
accordance with
Section
1.1(c)
) imposed by or in connection with any Law or Permit,
and incurred in connection with (A) conditions existing, events or
acts occurring or omissions of acts occurring on or prior to the
Closing, or (B) any real property, business entities or assets,
whether domestic or foreign, formerly owned, leased, occupied or
operated by or in connection with the Business;
(iv)
any
Liability (other than liabilities assumed by Purchaser in
accordance with
Section
1.1(c)
) or Legal Proceeding caused by, relating to or
arising from any fact, transaction, status, event, circumstance,
occurrence or situation, whether known or unknown, existing,
arising or occurring on or prior to the Closing, or otherwise
attributable to the pre-Closing operation of the
Business;
(v)
any Liability for
any Taxes (A) of the Company or any Affiliate of the Company for
any period or (B) attributable to the conduct of the Business or
ownership of the Purchased Assets on or before the Closing,
regardless of when assessed;
(vi)
any
Liability that was required to be disclosed as a liability under
GAAP on the Balance Sheet, and was not shown as a liability on the
Balance Sheet;
(vii)
any
Liability for deferred compensation, accrued bonuses, transaction
or other bonuses, or severance obligations related to employees,
officers, directors, brokers, bankers, independent contractors or
agents of the Company or any Affiliate of the Company with respect
to the service, engagement or employment, as applicable, of such
Persons prior to the Closing (including such obligations that may
arise in connection with the transactions contemplated
hereby);
(viii)
any
Liability under any Law pertaining to employment and employment
practices of the Company prior to the Closing to the extent they
relate to employees of the Company, including all Laws relating to
wage and hours, overtime compensation, leaves of absence,
unemployment insurance, harassment and discrimination;
(ix)
any
Seller Transaction Expenses or any Liability of any Seller Party
incurred under this Agreement or in connection
herewith;
(x)
any Liability to
any Affiliate of any Seller Party; and
(xi)
any
obligation of the Company to indemnify any Person by reason of the
fact that such Person was a director, officer, manager, employee,
or agent of the Company or was serving at the request of any such
entity as a partner, trustee, director, officer, manager, employee,
or agent of another entity.
Section
1.2
Transaction
Consideration
. The aggregate consideration (collectively,
the “
Transaction
Consideration
”) to be paid by Purchaser for the
Purchased Assets, in addition to the assumption of the Assumed
Liabilities, shall consist of:
(a)
$750,000 in cash;
plus
(b)
a subordinated
secured promissory note issued by Purchaser in favor of the Company
in the amount of $1,333,333 substantially in the form of
Exhibit A
hereto
(the “
Acquisition
Note
”); plus
(c)
1,523,809
unregistered shares of common stock of Purchaser, par value $0.001
per share (the “
Purchaser Shares
”),
issued to the Company free and clear of all Liens (other than any
restrictions under the Securities Act and applicable state
securities laws (“
Blue Sky
Laws
”)).
Section
1.3
Closing
Date
. Unless this Agreement shall have been terminated in
accordance with
Section
7.1
, and subject to the satisfaction or waiver of the
conditions set forth in
ARTICLE VI
, the Closing will
take place at 11:00 a.m., Eastern Standard Time, on the second
Business Day following the satisfaction or waiver of all conditions
set forth in
ARTICLE
VI
, at the offices of Akerman LLP, Three Brickell City
Centre, 98 SE 7th Street, Miami, FL 33131, unless another time,
date and place are agreed to in writing by the Parties (the date of
the Closing, the “
Closing Date
”). The
Closing may occur by the exchange of documents, certificates or
other instruments via facsimile or electronic transmission (in PDF
or other electronic format).
Section
1.4
Closing Date
Payment and Deliveries
.
(a)
On the Closing
Date, the Seller Parties shall deliver to Purchaser:
(i)
a Bill of Sale,
Assignment and Assumption Agreement in the form to be mutually
agreed to and to be attached hereto as
Exhibit B
(the
“
Bill of
Sale
”), duly executed by the Company;
(ii)
the
Lock-Up and Rights Agreement, duly executed by the
Company;
(iii)
the
Purchaser Stockholders Agreement, duly executed by the
Company;
(iv)
a
payoff letter from Cycle and each holder of the Company's
Indebtedness for Borrowed Money providing that all obligations with
respect to such Indebtedness have been satisfied and cancelled and
if such Indebtedness was secured, all Liens securing such
Indebtedness have been released and authorizing the Company or
their designees (or requiring the applicable holder thereof) to
file UCC-3 termination statements or take such other action
necessary to evidence the termination of such Liens;
(v)
each Required
Consent (as defined below);
(vi)
written
evidence in the form satisfactory to Purchaser confirming that the
Company contemporaneously or immediately following the Closing will
repurchase all equity interests from Cycle in consideration of the
Halcyon Note and a cash payment in the amount of
$750,000;
(vii)
written
evidence of termination of that certain Marketing Services
Agreement by and between the Company and Cycle and all obligations
thereunder, in the form satisfactory to Purchaser;
(viii)
a
certificate of the secretary or manager of the Company certifying
to the accuracy and completeness of and attaching (A) the Company's
Governing Documents (in the case of the Company's Certificate of
Formation certified by the Delaware Secretary of State) as in
effect on the Closing Date, (B) a copy of resolutions approving the
execution, delivery and performance of this Agreement and the other
Transaction Documents in the form satisfactory to Purchaser, duly
adopted by the Board of Managers of the Company and Halcyon and
Cycle as the sole members of the Company, and (C) the incumbency of
the managers or officers of the Company signing the Transaction
Documents on behalf of the Company (together with their specimen
signatures);
(ix)
a
good standing certificate for the Company certified by the
Secretary of State of the State of Delaware as of a recent
date;
(x)
an affidavit
described in Section 1445(b)(2) of the Code from the Company in
form and substance reasonably satisfactory to Purchaser, dated as
of the Closing Date; and
(xi)
the
Acquisition Note, duly executed by the Company in acknowledgement
of the terms thereof.
(xii)
a
non-compete agreement between Purchaser and Kartik Kakarala in the
form to be mutually agreed to and to be attached hereto as
Exhibit C
, duly
executed by Kartik Kakarala;
(xiii)
a
services agreement by and between Purchaser and Halcyon in the form
to be mutually agreed to and to be attached hereto as
Exhibit D
(the
“
Services
Agreement
”), duly executed by Halcyon;
(xiv)
a
certificate of the secretary or manager of Halcyon certifying to
the accuracy and completeness of and attaching (A) Halcyon's
Governing Documents (in the case of Halcyon's Certificate of
Formation certified by the Maryland Secretary of State) as in
effect on the Closing Date, (B) a copy of resolutions approving the
execution, delivery and performance of this Agreement and the other
Transaction Documents in the form satisfactory to Purchaser, duly
adopted by the Board of Managers of Halcyon and the members of
Halcyon representing the minimum percentage of Halcyon's membership
interests required to approve the same under Halcyon's Governing
Documents and Maryland law, and (C) the incumbency of the managers
or officers of Halcyon signing the Transaction Documents on behalf
of Halcyon (together with their specimen signatures);
(xv)
a
technology license agreement between Halcyon and Purchaser, in a
mutually agreed upon form, covering all patents and pending patent
applications filed by or on behalf of Halcyon with respect to the
Product and related Intellectual Property (the “
IP License Agreement
”),
duly executed by Halcyon; and
(xvi)
a
good standing certificate for Halcyon certified by the Maryland
Secretary of State as of a recent date.
(b)
On the Closing
Date, Purchaser shall deliver to the Company:
(i)
the cash portion of
the Transaction Consideration by wire transfer of immediately
available funds to an account designated by the Company in writing
at least one day prior to Closing;
(ii)
the
Acquisition Note, duly executed by Purchaser;
(iii)
a
Security Agreement, in a form to be agreed to, duly executed by
Purchaser;
(iv)
an
issued certificate for the Purchaser Shares;
(v)
the Lock-Up and
Rights Agreement, duly executed by Purchaser;
(vi)
the
Purchaser Stockholders Agreement, duly executed by Purchaser and
each of the Persons specified on
Schedule
1.4(b)(vi)
;
(vii)
the
Services Agreement, duly executed by Purchaser;
(viii)
a
certificate of the secretary of Purchaser certifying to the
accuracy and completeness of and attaching (A) its Governing
Documents as in effect on the Closing Date, (B) a copy of
resolutions of Purchaser approving the execution, delivery and
performance of this Agreement and the other Transaction Documents
in the form satisfactory to the Seller Parties, and (C) the
incumbency of the directors or officers signing the Transaction
Documents on behalf of Purchaser (together with their specimen
signatures);
(ix)
the
Bill of Sale, duly executed by Purchaser;
(x)
the IP License
Agreement, duly executed by Purchaser; and
(xi)
a
good standing certificate for Purchaser certified by the Delaware
Secretary of State as of a recent date.
Section
1.5
Tax
Withholding
. Notwithstanding anything in this Agreement to
the contrary, Purchaser shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement
to any Person such amounts as it is required to deduct and withhold
from such Person with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or
any provision of any Law relating to Taxes. To the extent that
amounts are so withheld by Purchaser, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid
to such Person in respect of which such deduction and withholding
was made by Purchaser.
Section
1.6
Required
Consents
. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to
assign or transfer any Purchased Asset or interest therein as to
which (i) an assignment or transfer thereof or an attempt to make
such an assignment or transfer without a Consent (a
“
Required
Consent
”) would constitute a breach or violation
thereof or of applicable Law, or would adversely affect the rights
or obligations thereunder to be assigned or transferred to or for
the account of Purchaser and (ii) such Required Consent shall not
have been obtained with respect to such Purchased Asset or interest
therein prior to the Closing. Any transfer or assignment to
Purchaser by the Company of any such Purchased Asset or interest
therein (a “
Delayed
Asset
”), and any assumption by Purchaser of any
corresponding Assumed Liability, shall be made subject to all such
Required Consents in respect of such Delayed Asset being obtained.
If there are any Delayed Assets, the Company and the Halcyon shall
use their commercially reasonable efforts to obtain all Required
Consents in respect thereof as promptly as practicable following
the Closing. Until all Required Consents with respect to each
Delayed Asset have been obtained, (i) the Company shall hold the
Delayed Asset on behalf of Purchaser, (ii) the Company and Halcyon
shall cooperate with Purchaser for no additional consideration in
any lawful arrangement (including subleasing or subcontracting, or
performance thereunder by the Company as Purchaser’s agent)
reasonably requested by Purchaser to provide Purchaser with all of
the benefits of or under any such Delayed Asset and (iii) the
Company shall otherwise enforce and perform for the account of
Purchaser and as reasonably directed by Purchaser any other rights
and obligations of the Company arising from such Delayed Asset (and
not waive, alter or amend any of same without the consent of
Purchaser). Halcyon shall cause the Company to comply with its
obligations under this Agreement and to maintain its existence
until all of its obligations pursuant to this
Section 1.6
and otherwise
herein are performed in full and all Delayed Assets are transferred
and assigned hereunder. At such time and on each occasion after the
Closing Date as all Required Consents with respect to a Delayed
Asset have been obtained, such Delayed Asset shall automatically be
transferred and assigned by the Company to Purchaser for no
additional consideration without any further act on the part of any
Party.
Section
1.7
Allocation of
Transaction Consideration
. Attached hereto as
Schedule 1.7
is a schedule
which sets forth the Parties' initial agreed allocation of the
Transaction Consideration paid to the Company pursuant to
Section 1.2
;
provided that Purchaser may use a different allocation if
recommended by Purchaser's auditors; and provided further that if
as a result of such recommendation Purchaser allocates more than
$2,500,000 of the Transaction Consideration to software the Parties
agree to discuss resolution. Sixty (60) days following the Closing,
Purchaser shall provide to the Company a schedule allocating the
Transaction Consideration paid to the Company in accordance with
this Section 1.7 (and Assumed Liabilities, capitalized costs and
other items required to be included in the Transaction
Consideration for federal Income Tax purposes), among the Purchased
Assets of the Company prepared in accordance with the Code Section
1060 and the Treasury Regulations promulgated thereunder. The
Parties agree that they shall report the Transaction Consideration
in a manner entirely consistent with the allocation contemplated in
this
Section 1.7
in
all Tax Returns and forms and in the course of any Tax audit, Tax
review or Tax litigation relating hereto.
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF
HALCYON
Halcyon
represents and warrants to Purchaser that the following statements
are correct and complete as of the date hereof and as of the
Closing Date:
Section
2.1
Organization;
Authorization and Enforceability
. Halcyon is a limited liability
company, duly organized, validly existing and in good standing
under the laws of the State of Maryland with full power and
authority to carry on its business as it is now being conducted and
to own, operate, and lease its properties and assets. Halcyon has
full power and authority, and Halcyon Members have the requisite
legal capacity, to execute and deliver this Agreement and each
other Transaction Document to which it, he or she is a party, and
to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Halcyon of each of the
Transaction Documents to which it is a party have been duly
authorized by all necessary action on the part of Halcyon. This
Agreement and the other Transaction Documents have been duly and
validly executed and delivered by each Halcyon Party who is party
thereto and constitute legal, valid and binding obligations of such
Halcyon Party, enforceable against such Halcyon Party in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting
creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at Law or in equity)
(the “
Standard
Exceptions
”).
Section
2.2
Conflicts; Consents
of Third Parties
. The execution and delivery of this
Agreement and the other Transaction Documents to which any Halcyon
Party is a party, the consummation of the transactions contemplated
hereby or thereby, and compliance by any Halcyon Party with the
provisions hereof or thereof does not and will not, with or without
the passage of time or the giving of notice: (a) conflict with, or
result in the breach of, any provision of the Governing Documents
of Halcyon; (b) conflict with, violate, result in the breach
or termination of, constitute a default under, result in an
acceleration of, constitute a change of control under, or create in
any party the right to accelerate, terminate, modify or cancel, any
Contract to which any Halcyon Party is a party or by which any
Halcyon Party or any of its properties or assets are bound, or
require a Consent from any Person in order to avoid any such
conflict, violation, breach, termination, default or acceleration;
(c) violate any Law or any Order by which a Halcyon Party is bound;
or (d) result in the creation of any Lien upon the properties
or assets of Halcyon. No Consent, Order, waiver, declaration or
filing with, or notification to any Person, including any
Governmental Body, is required on the part of any Halcyon Party in
connection with the execution, delivery and performance of this
Agreement or the other Transaction Documents, or the compliance by
any Halcyon Party with any of the provisions hereof or
thereof.
Section
2.3
Ownership
.
Halcyon is the record and beneficial owner of the Units of the
Company set forth opposite its name in
Section 2.3
of the Disclosure
Schedule free and clear of any Liens (other than restrictions under
the Securities Act and the Blue Sky Laws), which Units constitute
two-thirds of the issued and outstanding equity of the Company, and
Halcyon Members together are the record and beneficial owners of
the percentage of membership interests of Halcyon set forth in
Section 2.3
of the
Disclosure Schedule, free and clear of any Liens (other than
restrictions under the Securities Act and the Blue Sky Laws).
Neither Halcyon Party nor Halcyon's Units in the Company is subject
to any voting trust, proxy or other Contract of any kind relating
to the sale or other transfer of the Company's assets.
Section
2.4
Broker Fees
.
No Halcyon Party has any Liability to pay any fees, commissions or
other amounts to any investment banker, broker, finder or agent
with respect to the transactions contemplated by this
Agreement.
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND HALCYON
The
Company and Halcyon, jointly and severally, represent and warrant
to Purchaser that the following statements are correct and complete
as of the date hereof and as of the Closing Date.
Section
3.1
Company
Organization and Related Matters
.
(a)
The Company is a
limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business. The Company has full
power and authority to execute and deliver this Agreement and each
other Transaction Document to which it is a party, and to
consummate the transactions contemplated hereby and thereby. This
Agreement and the other Transaction Documents have been duly and
validly executed and delivered by the Company and constitute legal,
valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, subject to
Standard Exceptions. The Company is duly qualified or authorized to
do business as a foreign limited liability company and is in good
standing under the Laws of each jurisdiction in which it leases
real property and each other jurisdiction in which the conduct of
its business or the ownership of its properties requires such
qualification or authorization, except where the failure to be so
qualified or authorized would not reasonably be expected to have a
Material Adverse Effect.
(b)
The Company does
not own of record or beneficially, or otherwise have, any direct or
indirect interest in any Person.
(c)
The Company has
delivered to Purchaser complete and correct copies of the Governing
Documents of the Company, as amended, as in effect on the date
hereof.
Section
3.2
Capitalization
.
As of the time immediately
preceding the Closing, Halcyon owns and has good and valid title to
all of the Units and other membership interests of the Company
owned by Halcyon, free and clear of any Liens (other than
restrictions under the Securities Act and the Blue Sky Laws). All
of the Units of the Company owned by Halcyon and Cycle have been
duly and validly authorized and issued, are fully paid and
nonassessable. No such Units have been issued in violation of any
preemptive rights or any applicable securities Laws. Except as set
forth in
Section
3.2
(i)
of
the Disclosure Schedule, (i) the Company has no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, preemptive rights or other
contracts or commitments that could require the Company to issue,
sell, or otherwise cause to become outstanding any of its equity
securities, or securities convertible or exchangeable for, or any
options, warrants, or rights to purchase, any of such equity
securities. Except as set forth in
Section 3.2
(ii)
of the Disclosure
Schedule, to the Company's Knowledge, there are no voting
agreements, voting trusts, proxies, registration rights agreements,
equity holder agreements or other Contracts with respect to the
Company or any of such Units.
Section
3.3
Conflicts; Consents
of Third Parties
. Except as set forth in
Section 3.3
of the Disclosure
Schedule, the execution and delivery of this Agreement and the
other Transaction Documents to which the Company is a party, the
consummation of the transactions contemplated hereby or thereby,
and compliance by the Company with the provisions hereof or thereof
does not and will not, with or without the passage of time or the
giving of notice: (a) conflict with, or result in the breach of,
any provision of the Governing Documents of the Company;
(b) conflict with, violate, result in the breach or
termination of, constitute a default under, result in an
acceleration of, constitute a change of control under, or create in
any party the right to accelerate, terminate, modify or cancel, any
Contract to which the Company is a party or by which the Company or
any of its properties or assets are bound, or require a Consent
from any Person in order to avoid any such conflict, violation,
breach, termination, default or acceleration; (c) violate any Law
or any Order by which the Company is bound; or (d) result in the
creation of any Lien upon the properties or assets of the
Company. Except as set forth in
Section 3.3
of the Disclosure
Schedule, no Consent, Order, waiver, declaration or filing with, or
notification to any Person, including any Governmental Body, is
required on the part of the Company in connection with the
execution, delivery and performance of this Agreement or the other
Transaction Documents, or the compliance by the Company with any of
the provisions hereof or thereof.
Section
3.4
Financial
Statements
. Included in
Section 3.4
of the Disclosure
Schedule are true, correct and complete copies of (i) the
unaudited balance sheets of the Company as at December 31, 2015 and
the related consolidated unaudited statements of income and
retained earnings, stockholders’ equity and cash flows of the
Company for the fiscal year then ended,
(ii) management’s compilation from the Company
accounting system of the consolidated balance sheet of the Company
(the “
Balance
Sheet
”) as at September 30, 2016 (the
“
Balance Sheet
Date
”) and the related consolidated statements of
income and retained earnings, stockholders’ equity and cash
flows of the Company for the nine-month period then ended (together
with all the statements set forth in (i), the “
Financial Statements
”).
The Financial Statements have been prepared from the Books and
Records in accordance with GAAP applied on a consistent basis
throughout the periods indicated, except for the failure to include
the footnotes required by GAAP and subject to normal and
non-recurring year-end adjustments (which will not be material in
the aggregate). The Financial Statements fairly present in all
material respects the financial position and results of operations,
stockholders’ equity and cash flows of the Company as of the
dates and for the periods reflected thereon. The Company maintains
a standard system of accounting established and administered in
accordance with GAAP.
Section
3.5
No Undisclosed
Liabilities
. The Company has no Liabilities (whether
accrued, known or unknown, absolute, contingent or otherwise)
except (a) to the extent specifically reflected and accrued
for or specifically reserved against in the Balance Sheet and (b)
for current Liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business consistent with past custom
and practice (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of Law), (c)
performance obligations arising after the Closing Date under
Contracts entered into in the ordinary course of business, or (d)
Liabilities or obligations disclosed in
Section 3.5
of the Disclosure
Schedule.
Section
3.6
Absence of Certain
Developments
. Since December 31, 2016, there has not been
any Material Adverse Effect and no event, circumstance,
development, state of facts, occurrence, change or effect exists or
has occurred which would reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect, and the
Company has not conducted business other than in the ordinary
course of business consistent with past custom and
practice.
Section
3.7
Taxes
.
Except as set forth in
Section 3.7
of the Disclosure
Schedule:
(a)
The Company has
timely filed with the appropriate taxing authorities all Tax
Returns that it has been required to file. All such Tax Returns are
true, correct and complete in all respects. All Taxes owed by the
Company (whether or not shown on any Tax Return) have been paid.
Adequate reserves have been established on the Financial Statements
to provide for the payment of any Taxes which are not yet due and
payable with respect to the Company for taxable periods or portions
thereof ending on or before the Balance Sheet Date. The Company is
not a beneficiary of any extension of time within which to file any
Tax Return. No written claim has ever been made by an authority
with respect to the Company in a jurisdiction where that Company
does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Liens on any of the assets of
the Company that have arisen in connection with any failure (or
alleged failure) to pay any Tax.
(b)
The Company has
withheld and paid to the appropriate taxing authority or other
Governmental Body all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third
party.
(c)
The Company has not
waived or extended any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to the assessment,
payment or collection of any Tax.
(d)
None of the
properties or assets of the Company is property which, for Tax
purposes, is required to be treated as owned by another Person. The
Company is an obligor on, and no assets have been financed directly
or indirectly by, any tax-exempt bonds. No property or assets of
the Company is “tax-exempt use property” within the
meaning of Section 168(h) of the Code.
(e)
No deficiency or
proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by
any taxing authority or other Governmental Body against the
Company. There has not been, within the past five calendar years,
an audit, examination or written notice of potential examination of
any Tax Returns filed by the Company.
(f)
There is no Legal
Proceeding or audit or claim for refund in progress, pending,
proposed or, to the Company's Knowledge, threatened against or with
respect to the Company regarding Taxes. Neither the Company, nor
Halcyon nor any manager or officer (or employee responsible for Tax
matters) of the Company expects any authority to assess any
additional Taxes for any period for which Tax Returns have been
filed.
(g)
The Company has not
been a member of an affiliated group (as defined in Section 1504 of
the Code), filed or been included in a combined, consolidated or
unitary income Tax Return, or is a partner, member, owner or
beneficiary of any entity treated as a partnership or a trust for
Tax purposes. The Company has no Liability for Taxes of any Person
under Treasury Regulations Section 1.1502-6 or similar state or
local Laws, as a successor or transferee, by contract or
otherwise.
(h)
The Company is not
a party to or bound by any Tax allocation or Tax sharing agreement
or has no contractual obligation to indemnify any other Person with
respect to Taxes.
(i)
True, correct and
complete copies of all income and sales Tax Returns filed by or
with respect to the Company for the taxable period ending on
December 31, 2015 have been delivered or made available to
Purchaser.
(j)
The Company has not
participated in any reportable transaction as contemplated in
Treasury Regulations Section 1.6011-4. The Company has disclosed on
its federal Income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal Income
Tax within the meaning of Section 6662 of the Code.
(k)
The Company is not
subject to Tax or has a permanent establishment in any foreign
jurisdiction.
(l)
The Company has no
pending ruling requests filed by it or on its behalf with any
taxing authority or Governmental Body.
(m)
The Company is, and
has been since its date of formation, a partnership for Income Tax
purposes.
Section
3.8
Real
Property
.
(a)
The Company does
not own and has never owned any real property or interest in real
property.
(b)
Section 3.8(b)
of the
Disclosure Schedule sets forth a true, correct and complete list of
all leases related to real property currently leased by the Company
(individually, a “
Real Property Lease
” and
the real properties specified in such leases being referred to
herein collectively as the “
Leased Properties
”), and
(i) the address of each such Leased Property, and (ii) the use of
each such Leased Property. The Company has a valid, binding and
enforceable leasehold interest under each of the Real Property
Leases, subject to Standard Exceptions. The Company has not
received any written notice of any default or event that with
notice or lapse of time, or both, would constitute a default under
any Real Property Lease and the Company, and, to the
Company’s Knowledge, each other party thereto, are in
compliance with all obligations of such party thereunder. The
Company has not subleased, assigned or otherwise granted to any
Person the right to use or occupy such Leased Properties or any
portion thereof. The Company’s possession and quiet enjoyment
of Leased Property under any Real Property Lease has not been
disturbed and there are no disputes with respect to any Real
Property Lease. The Company has not collaterally assigned or
granted any other Lien in any Real Property Lease or any interest
therein (other than Permitted Liens). There are no Liens on the
estate or interest created by any Real Property Lease (other than
Permitted Liens). The Company has delivered to Purchaser complete
and correct copies of the Real Property Leases, together with all
amendments, modifications or supplements, if any,
thereto.
(c)
To the
Company's Knowledge, the Leased Properties are in compliance with
all applicable building, zoning, subdivision, health and safety and
other land use Laws, including the Americans with Disabilities Act
of 1990, as amended, and all insurance requirements affecting the
Leased Properties (collectively, the “
Real Property Laws
”), and
the current use or occupancy of the Leased Properties or operation
of the Business thereon does not violate any Real Property Laws.
The Company has not received any notice of violation of any Real
Property Law. To the Company's Knowledge, there is no pending or
threatened zoning application or proceeding or condemnation,
eminent domain or taking proceeding with respect to the Leased
Properties.
(d)
The Leased
Properties constitute all interests in real property currently used
or currently held for use in connection with the Business or which
are necessary for the continued operation of the Business as the
Business is currently conducted.
Section
3.9
Tangible Personal
Property; Title; Sufficiency of Assets
.
(a)
Section 3.9(a)
of the
Disclosure Schedule lists all leases of personal property leases
(“
Personal Property
Leases
”) involving annual payments in excess of
$15,000 relating to personal property used by the Company or to
which the Company is a party or by which the properties of the
Company are bound. The Company has delivered to Purchaser complete
and correct copies of the Personal Property Leases, together with
all amendments, modifications or supplements thereto. The Company
has a valid leasehold interest under each of the Personal Property
Leases under which it is a lessee, and there is no default under
any Personal Property Lease by the Company, or, to the Company's
Knowledge, by any other party thereto.
(b)
The Company
(and not any Affiliate thereof) has good and marketable title to
all its assets, free and clear of any and all Liens, except for
Permitted Liens. Such assets include all assets, rights and
interests (i) reasonably required for the continued conduct of the
Business as presently conducted by the Company and (ii) used in
connection with the achievement of the results reflected in the
Financial Statements.
(c)
All tangible
personal property owned by the Company, and all of the items of
tangible personal property used by the Company under the Personal
Property Leases, are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they
are being put, and none of such items of tangible personal property
is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
Section 3.9(c)
of
the Disclosure Schedule lists all of tangible personal property
owned by the Company valued in excess of $5,000.
Section
3.10
Intellectual
Property
.
(a)
The Company
owns, free and clear from all Liens, except for Permitted Liens, or
otherwise possesses legally enforceable rights to use all of the
Intellectual Property used in and/or reasonably necessary to the
conduct of Business. The Intellectual Property owned by the Company
(“
Owned Intellectual
Property
”) and the Intellectual Property licensed to
the Company under the Intellectual Property Licenses (as defined
hereinafter in Section 3.10 (b)) comprise all of the Intellectual
Property that is used in or is reasonably necessary to conduct the
Business.
(b)
Section 3.10(b)
(i)
of the Disclosure Schedule
sets forth a true, correct and complete list of all Owned
Intellectual Property for which a registration or application has
been filed with a Governmental Body, including patents, trademarks,
service marks, domain names, copyrights and trade names, issued by
or registered with, or for which any application for issuance or
registration thereof has been filed with, any Governmental Body.
All required filings and fees related to the Owned Intellectual
Property have been timely filed with and paid to the relevant
Governmental Body and authorized registrars, and all Owned
Intellectual Property is otherwise in good standing. Except as set
forth in
Section
3.10(b)
(ii)
of the Disclosure Schedule, there are no actions that must be taken
by the Company within 180 days of Closing, including responding to
office actions, the payment of any registration, maintenance or
renewal fees or the filing of any documents, applications or
certificates for the purposes of maintaining, perfecting or
preserving or renewing any Owned Intellectual Property.
Section
3.10(b)
(iii)
of the Disclosure Schedule sets forth a complete and correct list
of all written or oral licenses and arrangements (other than
ordinary course licenses of commercially available software),
(A) pursuant to which the use by any Person of Intellectual
Property is permitted by the Company or (B) pursuant to which
the use by the Company of Intellectual Property is permitted by any
Person (collectively, the “
Intellectual Property
Licenses
”). The Intellectual Property Licenses are
valid, binding and enforceable between the Company and the other
parties thereto and are in full force and effect. There is no
default under any Intellectual Property License by the Company, or,
to the Company's Knowledge, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder. The Company,
and, to the Company's Knowledge, each other party thereto are in
compliance with all obligations under each Intellectual Property
License.
(c)
To the Company's
Knowledge, no Person is infringing or misappropriating any
Intellectual Property rights of the Company. The operation of the
Business as it has been conducted since January 1, 2013 and as it
is currently conducted does not infringe or misappropriate, and
will not infringe or misappropriate, when conducted by Purchaser in
substantially the same manner following the Closing, any
Intellectual Property rights of any Person, violate any right of
any Person (including any right to privacy or publicity), or
constitute unfair competition or trade practices under the laws of
any jurisdiction. The Company has not received notice from any
Person claiming that the operation of the Business as it has been
conducted since January 1, 2013 or as it is currently conducted
infringes or misappropriates any Intellectual Property rights of
any Person, violate any right of any Person (including any right to
privacy or publicity), or constitute unfair competition or trade
practices under the laws of any jurisdiction.
(d)
There is no claim
or demand of any Person pertaining to, or any proceeding which is
pending or, to the Company's Knowledge, threatened, that challenges
the rights of the Company in respect of any Owned Intellectual
Property, or claims that any default exists under any Intellectual
Property License.
(e)
No Owned
Intellectual Property or Product of the Company is subject to any
Legal Proceeding, Order or settlement agreement that restricts in
any manner the use, transfer or licensing thereof by the Company or
may affect the validity, use or enforceability of such Owned
Intellectual Property.
(f)
Except as
described in
Section
3.10(f)
(i)
of the Disclosure Schedule, all employees and consultants of the
Company and all other Persons involved in the development of Owned
Intellectual Property, have entered into confidentiality and
assignment of inventions agreements substantially in the form
included in
Section
3.10(f)
(ii)
of the Disclosure Schedule and no Person that has developed or
created software, code or other copyrightable work for the Company
retains any Intellectual Property in the software, code or other
copyrightable work.
(g)
The Company owns
and possesses all source code for all software owned by it and owns
or has valid licenses for all software used in the Business. The
Company has taken all actions customary in the software industry to
document the software which is Owned Intellectual Property and its
operation, such that such software, including its source code and
documentation, have been written in a clear and professional manner
so that they may be understood, modified and maintained in an
efficient manner by competent programmers. To the Company's
Knowledge, neither the Company nor any Person acting on its behalf
has disclosed, delivered or licensed to any Person, agreed to
disclose, deliver or license to any Person, or permitted the
disclosure or delivery to any escrow agent or other Person of, any
source code related to Owned Intellectual Property except for
disclosures to employees, contractors or consultants under
agreements that prohibit use or disclosure except in the
performance of services to the Company. The Company is not a party
to any source code escrow agreement or other agreement requiring
the deposit of source code of any Owned Intellectual
Property.
(h)
The Company has
taken appropriate security measures (i) to safeguard and maintain
the secrecy and confidentiality of the Owned Intellectual Property
that comprises trade secrets or other confidential information, and
(ii) to protect the secrecy of the confidential and proprietary
information and materials used in the Business, and, to the
Company’s Knowledge, there has not been any release,
publication, disclosure or other dissemination of such confidential
and proprietary information and materials except as permitted under
confidentiality and non-disclosure agreements.
(i)
The computer,
information technology and data processing systems, facilities and
services used by the Company, including all software, hardware,
networks, communications facilities, platforms and related systems
and services in the custody or control of the Company
(collectively, “
Systems
”), are (i) free
from all material defects in design, workmanship and materials,
(ii) sufficient for the needs of that Company to conduct the
Business as currently conducted, (iii) sufficient to provide for
the back-up, archival and recovery of the critical business data of
the Company in the event of a disaster, and (iv) in good working
condition to perform all computing, information technology and data
processing operations necessary for the operation of the Company as
currently conducted and perform reliably and in material
conformance with the appropriate specifications or documentation
for such systems. All Systems are owned and operated by and are
under the control of the Company. From and after the Closing Date,
Purchaser will have and be permitted to exercise the same rights
with respect to the Systems as the Company would have had and been
able to exercise had this Agreement not been entered into and the
transactions contemplated hereby not occurred, without the payment
of any additional amounts or consideration other than ongoing fees,
royalties, or payments which the Company would have otherwise been
required to pay anyway. None of the Systems have experienced bugs,
failures, breakdowns, or continued substandard performance in the
past twelve (12) months that has caused any substantial disruption
or interruption in or to the use of any such Systems by the
Company.
(j)
Section 3.10(j)
of the
Disclosure Schedule lists all software that is distributed as
“open source software” or under a similar licensing or
distribution model (including the GNU General Public License (GPL),
GNU Lesser General Public License (LGPL), Mozilla Public License
(MPL), BSD licenses, the Artistic License, the Netscape Public
License, the Sun Community Source License (SCSL) the Sun Industry
Standards License (SISL) and the Apache License) (collectively,
“
Open Source
Software
”) that has been used, linked to and/or
incorporated into any Product in any way and describes the manner
in which such Open Source Software was used and/or incorporated
(such description shall include, without limitation, whether (and
if so, how) the Open Source Software was modified and/or
distributed by the Company and whether (and if so, how) such Open
Source Software was incorporated into and linked in any Product).
The Company has not used and/or incorporated Open Source Software
in any manner that would (i) require the disclosure or
distribution in source code form of any Owned Intellectual
Property, (ii) require the licensing of any Owned Intellectual
Property for the purpose of making derivative works,
(iii) impose any restriction on the consideration to be
charged for the distribution of any Product, (iv) create, or
purport to create, obligations for the Company with respect to
Owned Intellectual Property or grant, or purport to grant, to any
third party, any rights or immunities under Owned Intellectual
Property or (v) impose any other material limitation,
restriction, or condition on the right of the Company to use or
distribute any Product. With respect to any Open Source Software
that is or has been used and/or incorporated by the Company in any
way, the Company has been and is in compliance with all applicable
licenses with respect thereto, the URLs or complete copies of which
have been made available to Purchaser.
Section
3.11
Contracts
.
(a)
Section 3.11(a)
of the
Disclosure Schedule sets forth all of Contracts to which the
Company is a party or by which its or any of its assets are
bound.
(b)
True, correct and
complete copies of the Contracts required to be set forth in
Section 3.11(a)
of
the Disclosure Schedule have previously been and/or will prior to
Closing be provided to Purchaser by the Company. All of the
Contracts disclosed or required to be disclosed in
Section 3.11(a)
of the
Disclosure Schedule shall, following the Closing, remain
enforceable by the Company and, to the Company's Knowledge, binding
on the other parties thereto, without the Consent of any Person.
The Company, and to the Company's Knowledge, each other party
thereto are in compliance with all of their respective obligations
under each such Contract. The Company is not in default, and no
event has occurred which, with the giving of notice or the passage
of time or both, would constitute a default, under any such
Contract or any other obligation owed by the Company, and, to the
Company's Knowledge, no event has occurred which, with the giving
of notice or the passage of time or both, would constitute a
default by any other party to any such Contract. Each of the
Contracts disclosed or required to be disclosed in
Section 3.11(a)
of the
Disclosure Schedule is in full force and effect, is valid and
enforceable in accordance with its terms and, to the Company's
Knowledge, is not subject to any claims, charges, setoffs or
defenses. There are no disputes pending or threatened under any
such Contract.
Section
3.12
Employee
Benefits
.
(a)
Section 3.12(a)
of the
Disclosure Schedule sets forth a complete and correct list of (i)
all “employee benefit plans” as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
(“
ERISA
”), and any other
pension plans or employee benefit agreements, arrangements,
programs or payroll practices (including severance pay, other
termination benefits or compensation, vacation pay, salary, company
awards, equity option, equity purchase, salary continuation for
disability, sick leave, retirement, deferred compensation, bonus or
other incentive compensation, equity purchase arrangements or
policies, hospitalization, medical insurance, life insurance and
scholarship programs) (whether funded or unfunded, written or oral,
qualified or nonqualified), sponsored, maintained or contributed to
or required to be contributed to by the Company or by any trade or
business, whether or not incorporated, that together with the
Company would be deemed a “single employer” within the
meaning of Section 4001 of ERISA (a “
Company ERISA Affiliate
”)
for the benefit of any employee, leased employee, manager,
director, officer, member, shareholder or independent contractor
(in each case either current or former) of the Company or the
Company ERISA Affiliate (“
Employee Benefit Plans
”).
The Company has no Liability or contingent Liability with respect
to any plan, arrangement or practice of the type described in this
Section 3.12(a)
other than the Employee Benefit Plans set forth on
Section 3.12(a)
of the
Disclosure Schedule.
(b)
Neither the Company
nor Company ERISA Affiliates has ever participated in, been
required to contribute to, or otherwise been required to
participate in any plan, program or arrangement subject to Title IV
of ERISA.
(c)
Each of the
Employee Benefit Plans intended to qualify under Section 401(a) or
403(a) of the Code (“
Qualified Plans
”) has
received a determination letter from the IRS to such effect and the
trusts maintained thereto are exempt from federal income taxation
under Section 501 of the Code and nothing has occurred or will
occur through the Closing with respect to any such plan which would
reasonably be expected to cause the loss of such qualification or
exemption. There has been no termination or partial termination of
such Qualified Plan within the meaning of Code Section 411(d)(3)
and the present value of all Liabilities under any such plan will
not exceed the current fair market value of the assets of such plan
(determined using the actuarial assumption used for the most recent
actuarial valuation for such plan).
(d)
All contributions,
reimbursements, accruals and premiums required by Law or by the
terms of any Employee Benefit Plan or any agreement relating
thereto for all periods ending prior to or as of the Closing have
been timely paid or properly accrued on the Balance Sheet and the
Books and Records of the Company.
(e)
True, correct and
complete copies of the following documents, with respect to
each of the Employee Benefit Plans, have been delivered to
Purchaser: (A) any plans and related trust documents (all
amendments thereto), investment management agreements,
administrative service contracts, group annuity contracts,
insurance contracts, collective bargaining agreements and employee
handbooks, (B) the most recent Forms 5500 for the past three years
and schedules thereto, (C) the most recent consolidated financial
statements and actuarial valuations for the past three years, (D)
the most recent IRS determination letters, (E) the most recent
summary plan descriptions (including letters or other documents
updating such descriptions) and (F) written descriptions of all
non-written agreements relating to the Employee Benefit
Plans.
(f)
Each of the
Employee Benefit Plans complies in all material respects with its
terms and all provisions of applicable Law, including ERISA and the
Code, and all reporting requirements have been satisfied on a
timely basis.
(g)
No
“prohibited transaction”, within the meaning of ERISA
or the Code, or breach of any duty imposed on
“fiduciaries” pursuant to ERISA has occurred with
respect to any Employee Benefit Plan.
(h)
Except as set forth
on Section 3.12(a) of the Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby (in each case either alone or
in conjunction with any other event) will, with or without the
passage of time or the giving of notice (i) result in any payment
becoming due to any service provider; (ii) increase any benefits
otherwise payable to any service provider including under any
Employee Benefit Plan; or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
(i)
Each Employee
Benefit Plan that purports to provide benefits which qualify for
tax-favored treatment under Sections 79, 105, 106, 117, 120, 125,
127, 129, and 132 of the Code satisfies the requirements of said
Section(s).
(j)
The Company has
taken such actions necessary with respect to each Employee Benefit
Plan to ensure that no service provider of the Company is subject
to taxes or penalties under Section 409A of the Code.
Section
3.13
Labor
.
(a)
Section 3.13(a)
of the
Disclosure Schedule contains a list of all persons who are
employees, consultants or contractors of the Company as of the date
hereof, and sets forth for each such individual the following: (i)
name, (ii) title or position (including whether full or part time),
(iii) hire date, (iv) current annual or hourly base compensation
rate, (v) commission, bonus or other incentive-based compensation,
and (vi) designation as either exempt or non-exempt from the
overtime requirements of the Fair Labor Standards Act.
(b)
The Company is not,
nor has it ever been, a party to or bound by any labor or
collective bargaining agreement or other Contract with a labor
organization representing any of its employees, and there are no
labor organizations representing, purporting to represent or, to
the Company's Knowledge, attempting to represent any
employee.
(c)
Except for Company
employee Ryan Lamarthe, to the Company's Knowledge, no executive or
employee currently has any plans to terminate employment with the
Company independently of or as a result of the transactions
contemplated by this Agreement. There are no internal complaints or
reports by any current or former employee, consultant or
independent contractor pursuant to the anti-harassment policy of
the Company that are pending or under investigation.
Section
3.14
Litigation
.
Except as set forth in
Section 3.14
of the Disclosure
Schedule, there is no Legal Proceeding currently or in the past
three years, pending or, to the Company's Knowledge, threatened
against the Company (or pending or threatened against any of the
officers, directors or key employees of the Company in relation to
the Company or the Business) before any court or other Governmental
Body or any arbitral tribunal, nor, to the Company’s
Knowledge, is there any basis for any such Legal Proceeding. The
Company has not received any written memorandum or legal advice
from legal counsel retained by the Company to the effect that it is
exposed, from a legal standpoint, to any Liability. The Company has
not engaged in any Legal Proceeding to recover monies due it or for
damages sustained by it. The Company is not subject to any Order of
any Governmental Body.
Section
3.15
Compliance with
Laws; Permits
.
(a)
To the
Company’s Knowledge, the Company has, at all times, been in
compliance with all Laws applicable to it, or the operation, use,
occupancy or ownership of its assets or properties or the conduct
of the Business. The Company has not received written notice from
any Governmental Body of any failure to comply with any Law, and
the Company has no Knowledge of any failure to comply with any Law.
There is no investigation by a Governmental Body pending against
or, to the Company's Knowledge, threatened against the
Company.
(b)
Section 3.15(b)
of the
Disclosure Schedule contains a complete and accurate list of each
Permit that is held by the Company or that otherwise relates to the
Business and the Leased Real Property. Each Permit listed or
required to be listed in
Section 3.15(b)
of the
Disclosure Schedule is valid and in full force and effect. Except
as set forth in
Section
3.15(b)
of the Disclosure Schedule, the Company is, and has
been, in full compliance with all of the terms and requirements of
each of its Permits identified or required to be identified in
Section 3.15(b)
of
the Disclosure Schedule. The Permits identified in
Section 3.15(b)
of the
Disclosure Schedule collectively constitute all of the Permits
necessary to enable the Company to lawfully conduct and operate the
Business and to own and use its assets in the manner in which it
currently owns and uses such assets. The Company currently
maintains all Permits identified or required under the terms of the
Included Contracts.
Section
3.16
Environmental
Matters
. Except as set forth in
Section 3.16
of the Disclosure
Schedule:
(a)
The Company has not
received any request for information pertaining to any
environmental matter from any Governmental Body regarding the
Company, any current or former owned or leased real properties or
any offsite disposal facilities used by the Company.
(b)
The Company has not
incurred, assumed or undertaken any contingent Liability in
connection with any Release of any Hazardous Materials into the
indoor or outdoor environment (whether on-site or off-site) and
there are no facts, circumstances or conditions relating to,
arising out of or attributable to it that could give rise to
Liability under Environmental Laws.
(c)
To the Company's
Knowledge, there is not located at any of the properties of the
Company any (i) underground storage tanks, (ii) asbestos or
asbestos-containing material (iii) equipment containing
polychlorinated biphenyls, (iv) lead-based paint, or (v) mold;
and
(d)
The Company has
delivered to Purchaser all environmentally related audits, studies,
reports, analyses, and results of investigations that have been
performed within the previous fifteen months with respect to the
currently or previously owned, leased or operated properties of the
Company.
Section
3.17
Insurance
.
Section 3.17
of the
Disclosure Schedule includes a true, correct and complete list and
description, including policy number, coverage and deductible, of
all insurance policies owned by the Company, complete copies of
which policies will be delivered to Purchaser by the Company prior
to Closing. Such policies are in full force and effect, all
premiums due thereon have been paid and the Company is not in
default thereunder. Such insurance policies are sufficient for
compliance with all applicable Laws and Contracts to which the
Company is a party or by which it is bound. The Company has not
received any notice of cancellation or intent to cancel or increase
or intent to increase premiums with respect to such insurance
policies nor, to the Company's Knowledge, is there any basis for
any such action.
Section
3.17
of the Disclosure Schedule also contains a true,
correct and complete list of all pending claims and any claims in
the past fifteen months with any insurance company by the Company
and any instances within the previous fifteen months of a denial of
coverage of the Company by any insurance company.
Section
3.18
Receivables;
Payables
.
(a)
The accounts
receivable and notes receivable of the Company reflected in the
Balance Sheet and arising after the date thereof have arisen in
bona fide arm’s-length transactions in the ordinary course of
business consistent with past custom and practice, and, subject to
the allowance for doubtful accounts set forth in the Balance Sheet,
all such receivables are valid and binding obligations of the
account debtors without any counterclaims, setoffs or other
defenses thereto. All such reserves, allowances and discounts were
and are adequate and consistent in extent with the reserves,
allowances and discounts previously maintained by the Company in
the ordinary and usual course of business consistent with past
custom and practice and determined in accordance with GAAP. A true,
accurate and complete list of all accounts receivable and notes
receivable of the Company as of the date hereof is included in
Section 3.18(a)
of
the Disclosure Schedule.
(b)
All accounts
payable of the Company reflected on the Balance Sheet and arising
after the date thereof are the result of bona fide transactions in
the ordinary course of business and have been paid or are not yet
due and payable, except for accounts payable that are being
disputed in good faith in an appropriate manner and for which there
are adequate reserves on the Balance Sheet, or, with respect to
accounts payable arising after the Balance Sheet Date, on the
accounting records of the Company. A true, accurate and complete
list of all accounts payable and notes payable of the Company as of
the date hereof is included in
Section 3.18(b)
of the
Disclosure Schedule.
Section
3.19
Products and
Services
.
(a)
Each Product
developed or sold by the Company has been developed and sold in
accordance with (i) the specifications under which the Product is
normally and has normally been developed and sold, and (ii) the
provisions of all applicable Laws, policies, guidelines and any
other requirements and regulations of all Governmental
Bodies.
(b)
There are no claims
existing or threatened under or pursuant to any warranty, whether
express or implied, on Products sold or maintained by the Company
or with respect to any service provided by the Company. There are
no claims existing and there is no basis for any claim against the
Company for injury to persons or property as a result of the sale,
distribution, manufacture or repair of any Product by the Company,
including claims arising out of the defective or unsafe nature of
its Products.
(c)
Section 3.19(c)
of the
Disclosure Schedule hereto sets forth the terms of the Product
warranties and service warranties of the Company that have been and
are being made for Products sold and/or services provided prior to
or as of the date of this Agreement. There is no basis for Product
or service warranty claims which would result in costs materially
in excess of the reserve for Product and service warranty claims
set forth on the face of the Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the
Company. Except as set forth in
Section 3.19(c)
of the
Disclosure Schedule, no Product developed or sold by the Company
and no service provided by the Company is subject to any guaranty,
warranty, or other indemnity beyond those imposed by applicable
Law. The Company does not have any material Liability arising out
of any injury to Persons or property as a result of any service
provided by the Company, or the ownership, use or possession of any
Products manufactured, repaired, sold or distributed by the
Company. The Products developed or sold by the Company have been,
in all material respects, in conformity with all applicable
contractual commitments and all express and implied
warranties.
Section
3.20
Customers and
Suppliers
.
(a)
Section 3.20(a)
of the
Disclosure Schedule sets forth a complete and correct list of all
customers of the Company for the fiscal year ended December 31,
2016 that represented revenue of more than $25,000 during such
period and the amount of revenue from each such customer during
such period. Except as set forth on
Section 3.20(a)
of the
Disclosure Schedule, since December 31, 2015, no such customer has
cancelled or otherwise terminated, reduced, or threatened to cancel
or terminate or reduce, its relationship with the Company, nor is
there any dispute therewith. To the Company's Knowledge, there is
no reasonable basis to believe that the transactions contemplated
in connection herewith will have an adverse impact on the
relationship between the Company, on the one hand, and any customer
listed in
Section
3.20(a)
of the Disclosure Schedule, on the other hand. The
Company does not hold itself out as, and has never been, a small
business, or a female, foreign nationality, disadvantaged or
minority owned business, or otherwise participated in any similar
set-aside or business program or arrangement.
(b)
Section 3.20(b)
of the
Disclosure Schedule sets forth a complete and correct list of all
suppliers of the Company for the fiscal year ended December 31,
2016 that represented expenditures of $25,000 or more during such
period and the amount of purchase from each such each such supplier
during such period. Except as set forth on
Section 3.20(b)
of the
Disclosure Schedule, since December 31, 2015, no such supplier has
cancelled or otherwise terminated, reduced, or threatened to cancel
or terminate or reduce, its relationship with the Company, nor is
there any dispute therewith.
Section
3.21
Related Party
Transactions
. Except as set forth in Section 3.21 of the
Disclosure Schedule, the Company has not loaned or borrowed any
amounts to or from, and does not have outstanding any Indebtedness
or other similar obligations to or from, any Affiliate of the
Company or any Seller Party or any officer, manager, director,
employee, stockholder or partner of any of them. Except as
described in
Section
3.21
of the Disclosure Schedule, since December 2015,
neither any Seller Party nor any Affiliate of any of them nor any
officer, manager, director, employee, shareholder or partner of any
of them of any of them (i) has owned any direct or indirect
interest of any kind in, or controls or is a manager, director,
officer, employee or partner of, or consultant to, or lender to or
borrower from or has the right to participate in the profits of,
any Person which is (A) a competitor, supplier, distributor,
customer, landlord, tenant, creditor or debtor of the Company, (B)
engaged in a business that competes with the Business, or (C) a
participant in any material transaction to which the Company has
been a party or (ii) has been a party to any Contract with the
Company or engaged in any transaction or business with the Company.
The Company has no Contract or understanding with any Seller Party
or any officer, manager, director, employee, member, shareholder or
partner of the Company, or any Affiliate of any such Person that
relates, directly or indirectly, to the subject matter of any
Transaction Document or the consideration payable thereunder or
that contains any terms, provisions or conditions relating to the
entry into or performance of any Transaction Document by the
Company.
Section
3.22
Brokers
Fees
. Except as set forth in
Section 3.22
of the Disclosure
Schedule, the Company has no Liability to pay any (a) fees,
commissions or other amounts to any investment banker, broker,
finder or agent with respect to the transactions contemplated by
this Agreement, or (b) other Change of Control
Payments.
Section
3.23
Absence of Certain
Business Practices
. Except as set forth in
Section 3.23
of the Disclosure
Schedule, the Company and Halcyon have not, and no Affiliate or
agent of the Company or Halcyon, and no other Person acting on
behalf of or associated with Halcyon or the Company, acting alone
or together, has (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic
benefits, regardless of their nature or type, from any customer,
supplier or employee or agent of any customer or supplier of the
Company; or (b) directly or indirectly given or agreed to give any
money, gift or similar benefit to any customer, supplier or
employee or agent of any customer or supplier of the Company, any
official or employee of any government (domestic or foreign), or
any political party or candidate for office (domestic or foreign),
or other Person who was, is or may be in a position to help or
hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction), in each case
which (i) may subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if
not given in the past, may have had an adverse effect on the
assets, Business, or operations of the Company, or (iii) if not
continued in the future, may adversely affect the assets, business,
or operations of the Company.
Section
3.24
Books and
Records
. The Books and Records, all of which have been
provided or made available to Purchaser, are complete and correct
and represent actual, bona fide transactions and have been
maintained in accordance with sound business practices. A copy of
the minute book of the Company has been provided to
Purchaser.
Section
3.25
Bank Accounts;
Powers of Attorney
.
Section 3.25
of the Disclosure
Schedule sets forth:
(a)
with respect to any
borrowing or investment arrangements, deposit or checking accounts
or safety deposit boxes of the Company, the name of the financial
institution, the type of account and the account number;
and
(b)
the name of each
Person holding a general or special power of attorney from or with
respect to the Company and a description of the terms of each such
power.
Section
3.26
No
Misrepresentation
. No representation or warranty of the
Company contained in this Agreement or any other Transaction
Document or in the Disclosure Schedule hereto or in any certificate
or other instrument furnished to Purchaser in connection herewith
contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained herein
or therein not misleading.
Section
3.27
Names
. All
names under which (i) the Company does, and has during the past
fifteen months done, business and (ii) the Business operates, and
has during the past fifteen months operated, are specified in
Section 3.27
of the
Disclosure Schedule.
Section
3.28
Not a Foreign
Person
. The Company is not a “foreign person”
which would subject Purchaser to the withholding tax provisions of
Section 1445 of the Internal Revenue Code of 1986, as amended, or
which would require Purchaser to notify the U.S. Department of
State, Directorate of Defense Trade Controls, pursuant to the
provisions of 33 C.F.R. § 122.4(a)(2).
Section
3.29
Investor
Status
. Each Seller Party (a) has such knowledge and
experience in financial and business matters, knows of the high
degree of risk associated with investments generally and
particularly investments in the securities of companies such as
Purchaser, and is capable of evaluating the merits and risks of
acquiring and holding the Purchaser Shares, (b) has been given the
opportunity to (i) ask questions of, and receive answers from,
Purchaser concerning matters pertaining to an investment in
Purchaser and (ii) obtain any additional information which
Purchaser can acquire without unreasonable effort or expense that
is necessary to evaluate the merits and risks of an investment in
Purchaser, (c) acknowledges that neither Purchaser nor any of its
officers, directors, employees, agents or stockholders has made any
representations, warranties or guaranties to the Seller Parties
with respect to an investment in Purchaser or rendered any
investment advice to the Company, (d) understands that the
Purchaser Shares are being issued without registration under the
Securities Act under Blue Sky Laws or under the securities laws or
laws of similar import of any other country or jurisdiction, in
reliance upon exemptions provided by the Securities Act, the Blue
Sky Laws and such other securities laws or laws of similar import,
and the regulations promulgated thereunder, (e) agrees that the
Company is the sole party in interest as to the Purchaser Shares to
be acquired by the Company under this Agreement and is acquiring
the Purchaser Shares for the Company’s own account, not with
a view toward the resale or distribution thereof and with the
intent of holding the Purchaser Shares indefinitely, (f) is aware
that there is no assurance that Purchaser’s business or
operations will be successful, and acknowledge that the Purchaser
Shares to be acquired hereunder may currently or in the future have
no monetary value and acknowledge that such parties have been
advised that an acquisition of the Purchaser Shares involves a high
degree of risk and is suitable only for persons of adequate
financial means who have no need for liquidity with respect to the
Purchaser Shares and who can afford the risk of a complete loss of
any value of the Purchaser Shares and acknowledge that such parties
meet such criteria, (g) understands the speculative nature of and
risks involved in the proposed acquisition of Purchaser Shares, (h)
is able to bear the economic risk associated with the Purchaser
Shares for an indefinite period of time, (i) is an
“accredited investor” (as such term is defined in
Regulation D promulgated under the Securities Act, and attached at
Attachment 1
hereto); and (j) acknowledges that Purchaser intends to amend its
Articles of Incorporation after the date hereof substantially in
the form attached as
Exhibit E
hereto (the
"
Articles
Amendment
"), that if Purchaser elects to so amend its
Articles of Incorporation the Company's rights as a stockholder of
Purchaser may be adversely affected as a result of such amendment,
and that each Seller Party has reviewed the Articles Amendment and
consents thereto. The Seller Parties acknowledge that, to the
extent the Purchaser Shares are certificated, the certificate(s)
will include the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FROM THE
ISSUER WITHOUT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”) AND ARE RESTRICTED
SHARES AS THAT TERM IS DEFINED UNDER RULE 144, PROMULGATED UNDER
THE SECURITIES ACT. THESE SHARES MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, DISTRIBUTED, OR OTHERWISE DISPOSED OF IN ANY MANNER
(“TRANSFER”) UNLESS SUCH SHARES ARE REGISTERED UNDER
THE SECURITIES ACT OR EXCEPT PURSUANT TO A VALID EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS AS EVIDENCED BY AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER, STATING THAT THE
TRANSFER WILL NOT RESULT IN A VIOLATION OF THE SECURITIES
ACT
.
Section
3.30
No Other
Representations
. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, NEITHER THE SELLER
PARTIES NOR ANY OF THEIR AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES
OR REPRESENTATIVES ARE HEREBY MAKING ANY REPRESENTATION OR WARRANTY
TO THE PURCHASER, OR ANY OF ITS AFFILIATES, EXPRESS OR IMPLIED, AT
LAW OR IN EQUITY.
ARTICLE
IV
REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser
represents and warrants to the Company that the following
statements are correct and complete as of the date
hereof:
Section
4.1
Organization
.
Purchaser is a corporation, duly organized, validly existing and in
good standing under the Laws of the State of Delaware, and has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business. Purchaser is duly
qualified or authorized to do business as a foreign company and is
in good standing under the Laws of each jurisdiction in which the
conduct of its business or the ownership of its properties requires
such qualification or authorization.
Section
4.2
Authorization and
Enforceability
. The execution, delivery and performance of
this Agreement and Transaction Documents to which Purchaser is a
party have been duly authorized by all necessary action by or on
behalf of Purchaser. Purchaser has full power and authority to
execute and deliver this Agreement and each other Transaction
Document to which it is a party, and to perform its obligations
hereunder and thereunder. This Agreement and each Transaction
Document to which Purchaser is or will be a party has been or will
be duly and validly executed and delivered and constitutes the
valid and legally binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to the
Standard Exceptions.
Section
4.3
Conflicts; Consent
of Third Parties
. Neither the execution and the delivery by
Purchaser of this Agreement and the other Transaction Documents to
which it is a party, nor the consummation of the transactions
contemplated hereby and thereby on the part of Purchaser, will,
with or without the passage of time or the giving of notice (a)
conflict with, or result in the breach of, any provision of the
Governing Documents of Purchaser or (b) conflict with, violate,
result in the breach or termination of, or constitute a default
under, result in an acceleration of, or create in any party the
right to accelerate, terminate, modify or cancel, any Contract to
which Purchaser is a party or by which Purchaser or its properties
or assets are bound.
Section
4.4
Brokers
Fees
. Purchaser has no Liability to pay any fees,
commissions or other amounts to any broker, finder or agent with
respect to the transactions contemplated by this
Agreement.
Section
4.5
No
Proceedings
. No suit, action or other proceeding is pending
before any Governmental Body seeking to restrain or prohibit
Purchaser from entering into this Agreement or to prohibit the
Closing or the performance of any other obligation
hereunder.
Section
4.6
Issuance of
Purchaser Shares
. The issuance of the Purchaser Shares
hereunder is duly authorized and, when issued and delivered in
accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, will have been issued in compliance
with applicable securities Laws or exemptions therefrom, will not
be issued in violation of any preemptive rights of any stockholder
of Purchaser or any other Person and shall be issued and delivered
by Purchaser to the Company, pursuant to this Agreement free of any
Liens, subject to the restrictions set forth herein and applicable
securities Laws. Effective on and immediately after the Closing
Date, the Purchaser Shares shall represent sixteen and eight tenths
percent (16.8%) of the total issued and outstanding shares of stock
of the Purchaser.
Section
4.7
No
Insolvency
. There is no pending or threatened bankruptcy or
insolvency proceedings by or against Purchaser.
Section
4.8
No Other
Representations
. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, NEITHER THE
PURCHASER NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES
OR REPRESENTATIVES IS HEREBY MAKING ANY REPRESENTATION OR WARRANTY
TO THE SELLER PARTIES, OR ANY OF THEIR AFFILIATES, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY.
ARTICLE
V
COVENANTS
Section
5.1
Conduct of Business
by the Company Pending the Closing
. The Company and Halcyon
agree that, between the date of this Agreement and the Closing,
except as expressly contemplated by this Agreement or as set forth
in
Section 5.1
of
the Disclosure Schedule, the business of the Company shall be
conducted in the ordinary course of business and in a manner
consistent with past practice, and the Company shall use its
reasonable efforts (A) to preserve substantially intact the
business organization of the Company, (B) to preserve the assets
and properties of the Company in good repair and condition, (C) to
maintain and protect rights in the Owned Intellectual Property, and
(D) to preserve the current relationships of the Company with
customers, suppliers, licensees, licensors, developers, employees
and independent contractors, in each case in the ordinary course of
business and in a manner consistent with past practice. Except as
expressly contemplated by any other provision of this Agreement or
as set forth in
Section
5.1
of the Disclosure Schedule, Seller Parties agree that
the Company shall not between the date of this Agreement and the
Closing, do any of the following without the prior written consent
of Purchaser:
(a)
amend or otherwise
change its Governing Documents;
(b)
issue, sell,
pledge, dispose of, grant, encumber, or otherwise subject to any
Lien, or authorize such issuance, sale, pledge, disposition, grant
or encumbrance of or subjection to such Lien: (i) any Units or
other securities of the Company, or any options, warrants,
convertible securities or other rights of any kind to acquire any
Units or other securities (including any phantom or profit
interest) of the Company, or (ii) any properties or other assets of
the Company other than the sales of any Product in the ordinary
course of business and in a manner consistent with past
practice;
(c)
declare, set aside,
make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its
Units;
(d)
reclassify,
combine, split, subdivide, redeem, purchase or otherwise acquire,
directly or indirectly, any capital stock of the
Company;
(e)
(i) acquire
(including by merger, consolidation or acquisition of stock or
assets or any other business combination) any corporation,
partnership, other business organization (or any division thereof)
or any property or asset, except assets in the ordinary course of
business and in a manner consistent with past practice; (ii)
authorize, or make any commitment with respect to, any capital
expenditure; (iii) acquire, enter into or extend any option to
acquire, or exercise an option to acquire, real property or
commence construction of, or enter into any Contract to develop or
construct, any real estate projects; (iv) enter into any material
new line of business; or (v) make any material investments in
Persons;
(f)
increase or
accelerate (including acceleration of funding) the compensation
payable or to become payable or the benefits provided to its
current or former directors, officers, consultants, managers or
employees, except for increases in compensation in the ordinary
course of business and in a manner consistent with past practice;
(ii) grant any retention, severance or termination pay to, or enter
into any employment, consulting, management, bonus, change of
control, severance or similar agreement with, any current or former
director, officer, consultant, manager or other employee of the
Company; (iii) establish, adopt, enter into, terminate or amend any
Plan or establish, adopt or enter into any plan, agreement,
program, policy, trust, fund or other arrangement that would be a
Plan if it were in existence as of the date of this Agreement for
the benefit of any current or former director, officer, consultant,
manager or employee except as required by Law; (iv) loan or advance
any money or other property to any current or former director,
officer, consultant, manager or employee of the Company; or (v)
grant any equity or equity based awards;
(g)
change any of the
material accounting policies, practices or procedures used by the
Company as of the date hereof, except as may be required as a
result of a change in applicable Law or in GAAP;
(h)
make any change (or
file for such change) in any method of Tax accounting;
(i)
make, change,
revoke or rescind any Tax election, file any amended Tax Return,
enter into any closing agreement relating to Taxes, waive or extend
the statute of limitations in respect of Taxes, settle or
compromise any claim or dispute relating to Taxes, surrender any
right to claim for a Tax refund or file any Tax Returns
inconsistently with past practice;
(j)
pay, discharge,
waive, settle or satisfy any claim, liability or obligation, other
than the payment, discharge, waiver, settlement or satisfaction of
accounts payable in the ordinary course of business and consistent
with past practice;
(k)
waive, release,
assign, settle or compromise any pending or threatened Legal
Proceeding (i) requiring payment by the Company in excess of
$10,000 individually or $20,000 in the aggregate, unless such
payments are fully covered by the Company’s insurance
policies, or (ii) which adversely affects in any material respect
the ability of the Company to conduct its business in a manner
consistent with past practice;
(l)
enter into,
materially amend or modify or consent to the termination of (other
than a termination in accordance with its terms) any Included
Contract, or (ii) amend, waive, modify or consent to the
termination of (other than a termination in accordance with its
terms) the Company’s rights thereunder;
(m)
make any
expenditure in connection with any advertising or marketing, other
than in the ordinary course of business and consistent with past
practice;
(n)
fail to maintain in
full force and effect the existing insurance policies covering the
Company and its properties, assets and business;
(o)
effectuate a
“plant closing” or “mass layoff,” as those
terms are defined in the WARN Act;
(p)
form a Company
Subsidiary;
(q)
except as required
by this Agreement, repurchase, repay or incur any Indebtedness,
other than ordinary course trade payables;
(r)
amend, modify or
waive any term of any outstanding security of the
Company;
(s)
enter into any
labor or collective bargaining agreement, memorandum of
understanding, grievance settlement or any other agreement or
commitment to or relating to any labor union, except as required by
Law;
(t)
adopt or put into
effect a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company other than as contemplated
hereunder;
(u)
take or agree to
take any action that would or is reasonably likely to result in any
of the representations and warranties of the Company set forth in
this Agreement being untrue or in any of the conditions hereunder
not being satisfied;
(v)
cause or permit any
of the Real Property Leases or any agreement entered into in
connection therewith, including any non-disturbance agreement, to
be amended, modified, extended, renewed or terminated, nor shall
the Company enter into any agreement in connection with the Real
Property Leases (including agreements for or with respect to
improvements or alterations and including the acceptance of
punchlists), or into any new lease, sublease, license or other
agreement for the use or occupancy of any real
property;
(w)
amend the Cycle
Redemption Agreement; or
(x)
authorize, commit
or agree to do any of the foregoing.
Section
5.2
Access to
Information
.
(a)
From the date
of this Agreement until the Closing, the Company shall (and Halcyon
shall cause the Company to): (i) provide to Purchaser and to the
officers, directors, employees, accountants, consultants, legal
counsel, financing sources, agents and other representatives
(collectively, “
Representatives
”) of
Purchaser reasonable access, during normal business hours and upon
reasonable prior notice by Purchaser, to the officers, employees,
agents, properties, offices and other facilities of the Company and
to the books and records thereof, and (ii) furnish promptly to
Purchaser and its Representatives such information concerning the
business, properties, Contracts, assets, liabilities, personnel and
other aspects of the Company as Purchaser or its Representatives
may reasonably request.
(b)
Any actions taken
pursuant to this
Section
5.2
, and/or the failure to take any actions pursuant to this
Section 5.2
shall
not affect any representation or warranty in this Agreement of any
Party or any condition to the obligations of the Parties
hereto.
Section
5.3
Notification of
Certain Matters
. Seller Parties shall give prompt notice to
Purchaser, and Purchaser shall give prompt notice to Seller
Parties, of any failure of Seller Parties, the Company or
Purchaser, as the case may be, to comply with or satisfy any
covenant or agreement to be complied with or satisfied by it
hereunder;
provided
,
however
, that the delivery of
any notice pursuant to this
Section 5.3
shall not limit or
otherwise affect the remedies available hereunder to the party
receiving such notice. In addition, Seller Parties shall give
prompt written notice to Purchaser, and Purchaser shall give prompt
written notice to Seller Parties, of any notice or other
communication (i) from any Person and the response thereto of
alleging that the consent of such Person is or may be required in
connection with this Agreement or the transactions contemplated
hereby or (ii) from any Governmental Body and the response thereto
in connection with this Agreement or the transactions contemplated
hereby.
Section
5.4
Further Action;
Commercially Reasonable Efforts
.
(a)
Seller Parties and
Purchaser shall use their commercially reasonable efforts to take
all action required of it and to do all things necessary, proper or
advisable on its part in order to consummate and make effective the
transactions contemplated by this Agreement and each of the other
Transaction Documents (including satisfaction, but not waiver, of
the conditions set forth in
Article VI
). In the event that
the Company shall fail to obtain any third party consent described
above, the Company and Halcyon shall use reasonable efforts, and
shall take such actions as are reasonably requested by Purchaser
(including, but not limited to, entering into any transition or
other agreements permitting Purchaser or its Subsidiaries following
the Closing to use and operate under, at no cost to Purchaser, the
Company's Permits until such time as Purchaser is able to obtain
any such required consents for itself or its Subsidiaries) to
minimize any adverse effect upon the Business and Purchaser
resulting, or which could reasonably be expected to result, after
the Closing, from the failure to obtain such consent. In addition,
at the request of Purchaser, the Company and Halcyon shall use
reasonable efforts to assist Purchaser in obtaining any estoppel
certificates from any lessor of the Real Property
Leases.
(b)
Notwithstanding
anything to the contrary in this Agreement, in connection with
obtaining any Consent from any Person (other than a Governmental
Body) with respect to the transactions contemplated hereunder, (i)
without the prior written consent of Purchaser, the Company shall
not pay or commit to pay to such Person whose Consent is being
solicited any cash or other consideration, make any commitment or
incur any liability or other obligation due to such Person and (ii)
except as otherwise agreed, none of Purchaser or its Affiliates
shall be required to pay or commit to pay to such Person whose
Consent is being solicited any cash or other consideration, make
any commitment or to incur any liability or other
obligation.
(c)
Following the
Closing, in the event and for so long as Purchaser actively is
involved in, contesting or defending against any Legal Proceeding
in connection with any fact, situation, circumstances, status,
condition, activity, practice, plan, occurrence, event, incident,
action, Tax matter, failure to act, or transaction involving the
Company, each Seller Party shall cooperate reasonably with
Purchaser and Purchaser’s counsel in such involvement,
contest or defense, and provide such testimony and access to the
Company’s books and records as shall be reasonably necessary
in connection with such contest or defense, all at the sole
reasonable cost and expense of Purchaser (unless Purchaser is
entitled to indemnification therefor hereunder).
Section
5.5
Names and
Logos
. From and after the Closing, the Company will change
its name so that it does not include the word “NextGen”
and the Seller Parties will not, and will cause their respective
Affiliates not to, use any names or logos incorporating or similar
to “NextGen” or any derivatives thereof or any other
trade name used in the Business other than at the direction of the
Purchaser.
Section
5.6
Mail; Payments;
Receivables
. From and after the Closing, Seller Parties
agree to refer to Purchaser all customer, supplier, employee or
other inquiries or correspondence relating to the Company or and
the conduct of the Business after the Closing Date. From and after
the Closing, Seller Parties further agree to remit to the Company
all payments on accounts receivable and invoices received by them
or their Affiliates that relate to the Company within five (5)
Business Days after receipt thereof.
Section
5.7
Public
Announcements; Confidentiality
.
(a)
Unless otherwise
required by applicable Law, no Seller Party shall, and each Seller
Party shall cause its Affiliates, agents, representatives and
professionals not to, make any disclosure or public announcements
in respect of this Agreement or the transactions contemplated
hereby (including price and terms) or otherwise communicate with
any news media without the prior written consent of
Purchaser.
(b)
Each Seller Party
and the Halcyon Members, and prior to Closing, Purchaser shall, and
shall cause its respective Affiliates to, hold, and shall use its
reasonable efforts to cause its or their respective representatives
to hold, in confidence (and not disclose or provide access to any
other Person) any and all information, whether written or oral,
concerning the Company or the Business, except to the extent that
such Party can show that such information is generally available to
and known by the public through no fault of such Party or any of
its respective Affiliates or representatives. If a Party bound by
this
Section 5.7(b)
or any of its respective Affiliates or representatives is compelled
to disclose any information by judicial or administrative process
or by other requirements of Law, such Party shall promptly notify
the other Parties in writing and shall disclose only that portion
of such information which such Party is advised by its counsel in
writing is legally required to be disclosed; provided, however,
that such Party shall use its reasonable efforts to obtain an
appropriate protective order or other reasonable assurance that
confidential treatment will be accorded such
information.
Section
5.8
Exclusivity
.
(a)
From the date of
this Agreement until the Closing or, if earlier, the termination of
this Agreement in accordance with its terms, Seller Parties shall
not, and shall cause their Representatives not to, directly or
indirectly: (i) initiate or knowingly solicit the submission of any
inquiries, proposals or offers that constitute or may reasonably be
expected to lead to any Acquisition Proposal (as hereinafter
defined) or engage in any discussions or negotiations with respect
thereto or otherwise knowingly cooperate with or knowingly assist
or participate in, or knowingly facilitate any such inquiries,
proposals, discussions or negotiations, or (ii) approve or
recommend, or publicly propose to approve or recommend, an
Acquisition Proposal or enter into any merger agreement, letter of
intent, agreement in principle, stock purchase agreement, asset
purchase agreement, license agreement, or stock exchange agreement,
option agreement or other similar agreement relating to an
Acquisition Proposal or enter into any agreement or agreement in
principle requiring Seller Parties to abandon, terminate or fail to
consummate the Agreement or breach their obligations hereunder or
propose or agree to do any of the foregoing. Seller Parties shall,
and shall cause their Representatives to, immediately cease and
take any solicitation, knowing encouragement, discussion or
negotiation with any Persons conducted by Seller Parties or any of
their Representatives prior to the date of this Agreement with
respect to any Acquisition Proposal.
(b)
For purposes of
this Agreement, “
Acquisition Proposal
”
means any bona fide offer or proposal, or any indication of
interest in making a bona fide offer or proposal, made by a Person
or group at any time that is structured to permit such Person or
group to acquire, in one transaction or a series of transactions,
beneficial ownership of at least 5% of the assets of, equity
interest in, or business of, the Company, taken as a whole,
pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, license of assets
(including any Owned Intellectual Property) outside the ordinary
course of business, tender offer or exchange offer or similar
transaction, in each case other than the transactions contemplated
hereby.
Section
5.9
Non-Competition;
Non-Solicitation
.
(a)
Each Seller Party
(which, only for purposes of this Section 5.9 includes the Halcyon
Members) acknowledges that it or he is familiar with the trade
secrets and other confidential information of the Company.
Therefore, and in further consideration of the compensation to be
paid to the Company hereunder, each Seller Party agrees to the
covenants set forth in this
Section 5.9
and acknowledges
that Purchaser would not have entered into this Agreement but for
Seller Parties’ agreement to the restrictions set forth in
this
Section
5.9
.
(b)
During the
Restricted Period, neither the Company, nor any Halcyon Party
shall, directly or indirectly, (i) own, operate, lease, manage,
control, engage in, invest in, lend to, own any debt or equity
security of, permit its or his name to be used by, act as
consultant or advisor to, render services for (alone or in
association with any Person) or otherwise assist in any manner
within the Restricted Territory any Person in any business that is
competitive with the Business or (ii) sell or attempt to sell any
product or service that competes with the Business or with any
Product to any Person that is a customer or client of the Company
or of Purchaser as of the Closing Date or was a customer or client
of the Company at any time during the two (2) year period preceding
the Closing Date; provided; however, that nothing herein shall
prohibit the Company or any Halcyon Party from being a passive
beneficial owner of less than two percent (2%) of the outstanding
stock of any publicly-traded corporation, so long as no activities
associated therewith compete with Purchaser. For purposes of this
Agreement, “
Restricted Period
” means
the longer of (i) two (2) years from and after the Closing Date or
(ii) the period during which the Company and the Halcyon Parties
own in the aggregate, beneficially or of record, at least 10% of
the issued and outstanding common stock of Purchaser.
(c)
During the
Restricted Period, neither the Company nor any Halcyon Party shall
directly or indirectly for its own benefit or for the benefit of
any Person other than Purchaser: (i) induce or attempt to induce
any employee of the Purchaser or any Affiliate of Purchaser
(collectively, the “
Purchaser Parties
”) to
leave the employ of, any of the Purchaser Parties, or in any way
interfere with the relationship between any of the Purchaser
Parties and any employee thereof, (ii) hire or engage any person
who is or was within two (2) years an employee of any of the
Purchaser Parties within two (2) years of the Closing Date, or
(iii) induce or attempt to induce any person or entity who is or
was within two (2) years a customer, supplier, licensee, licensor,
franchisee or other business relation of any of the Purchaser
Parties to cease doing business with any of the Purchaser Parties,
or in any way interfere with the relationship between any such
customer, supplier, licensee, licensor, franchisee or business
relation and any of the Purchaser Parties. Notwithstanding the
foregoing, Halcyon and Kartik Kakarala shall not be prohibited from
soliciting for employment or hiring Patrick Smith and/or Ryan
Lamarthe.
(d)
The Parties hereto
acknowledge and agree that Purchaser and each of its Affiliates,
successors and assigns would suffer irreparable harm from a breach
of this
Section 5.9
by Seller Parties and that money damages would not be an adequate
remedy for any such breach. Therefore, in the event a breach or
threatened breach of this
Section 5.9
, Purchaser and each
of its Affiliates or their respective successors and assigns, in
addition to other rights and remedies existing in their favor,
shall be entitled to specific performance, injunctive and other
equitable relief from a court of competent jurisdiction in order to
enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security and at the expense of the
breaching Seller Party, including reasonable attorneys’ fees
and expenses). The restrictive covenants set forth in this
Section 5.9
shall
be construed as agreements independent of any other provision in
this Agreement, and the existence of any claim or cause of action
of such Seller Party against Purchaser, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the
enforcement by Purchaser of any restrictive covenant contained in
this
Section 5.9
.
Purchaser has fully performed all obligations entitling it to the
restrictive covenants set forth in this
Section 5.9
, and such
restrictive covenants therefore are not executory or otherwise
subject to rejection under chapter 11 of title 11 of the United
States Code.
(e)
If the final
judgment of a court of competent jurisdiction declares any term or
provision of this
Section
5.9
to be invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be
enforceable as so modified to cover the maximum duration, scope or
area permitted by Law. In addition, in the event of an alleged
breach or violation by any Seller Party of this
Section 5.9
, the applicable
time period described in clauses (b) and (c) above shall be tolled
with respect to such Seller Party on a day-for-day basis until such
breach or violation has been duly cured. Seller Parties each agree
that the restrictions contained in this
Section 5.9
are
reasonable.
(f)
Notwithstanding
anything contained herein to the contrary, including in Section
5.9(d), upon a monetary default under the Acquisition Note, and the
failure to cure the default after the expiration of any applicable
cure period, the restrictive covenants contained in this
Section
5.9
that restrict any Seller
Party shall lapse and be of no further force or
effect.
Section
5.10
Payment of
Indebtedness, Seller Transaction Expenses, Change of Control
Payments, and Excluded Liabilities
. On or prior to the
Closing Date, Halcyon shall cause the Company to, pay in full all
of (i) the Company's Indebtedness for Borrowed Money, (ii) Seller
Transaction Expenses, and (iii) Change of Control Payments. Halcyon
shall cause the Company to, pay in full all of the Excluded
Liabilities promptly as they become due. To the extent that the
Company fails to pay and discharge any of the obligations listed in
the preceding two sentences on a timely basis, unless such
obligations are being contested in good faith between the Company
and the payee, Purchaser shall, in its discretion, have the right
(but not any obligation) to pay and discharge such obligations if
reasonably necessary to the maintenance of the Business or its
reputation and/or relationships, as reasonably determined by
Purchaser, and the Company shall, and Halcyon shall cause the
Company to, reimburse and indemnify Purchaser for all such
payments.
Section
5.11
Employee and
Employee Benefits
.
(a)
On the Closing
Date, the Company shall terminate its employment relationship with
all employees of the Business set forth on
Section 5.11(a)
of the
Disclosure Schedule. As of the Closing Date, Purchaser shall offer
employment to the Transferred Employees on the terms determined by
Purchaser in its sole discretion. The employees set forth on
Schedule 5.11(a)
who accept employment with Purchaser shall be referred to herein as
“Transferred Employees.” Subject to the obligations set
forth in this
Section
5.11
, nothing in this Agreement shall require Purchaser to
hire any particular employee or limit Purchaser’s ability to
modify the salary or wage level or terminate the employment of any
Transferred Employee at any time and for any reason, including
without cause.
(b)
The Company shall
be solely responsible, and Purchaser shall have no obligations
whatsoever for, any compensation or other amounts payable to any
current or former employee, officer, director, independent
contractor or consultant of the Business, including hourly pay,
commission, bonus, salary, accrued vacation, fringe, pension or
profit sharing benefits or severance pay, for any period relating
to the service with the Company at any time prior to the Closing
Date, and the Company shall, and Halcyon shall cause the Company
to, pay all such amounts to all entitled persons prior to the
Closing Date.
(c)
The Company shall
remain solely responsible for the satisfaction of all claims for
medical, dental, life insurance, health accident or disability
benefits brought by or in respect of current or former employees,
officers, directors, independent contractors or consultants of the
Business or the spouses, dependents or beneficiaries thereof, which
claims relate to events occurring prior to the Closing Date. The
Company also shall remain solely responsible for all worker's
compensation claims of any current or former employees, officers,
directors, independent contractors or consultants of the Business
which relate to events occurring prior to the Closing Date. The
Company shall, and Halcyon shall cause the Company to, pay all such
amounts to the appropriate persons as and when due.
Section
5.12
Pre-Closing
Funding
. Commencing on January 16, 2017 and through the
Closing Date or the date on which this Agreement terminates,
whichever is first to occur, promptly upon the Company's request,
Purchaser shall fund all reasonable ordinary course documented
payroll expenses of the Company up to the maximum amount of $4,000
per week toward U.S. payroll and up to the maximum of $10,000 per
week toward non-U.S. payroll (“Non-US Payroll”), or a
pro-rated portion thereof if the Closing occurs prior to the end of
a week, as long as, with respect to the Non-US Payroll, Purchaser
authorizes the payroll expense in writing. If the authorized Non-US
Payroll exceeds $10,000 per week, then at Closing, Purchaser shall
pay the excess amount to the Company. In the event this Agreement
terminates for any reason, other than the reason set forth in
Section 7.1(f), all amounts advanced by Purchaser to the Company
shall be treated as an unsecured demand loan to the Company
accruing interest at the rate of 12% per annum.
Section
5.13
Limited Transfer of
Note/Purchaser Shares
. Notwithstanding anything contained in
any of the Transaction Documents, including, but not limited to,
the Acquisition Note, the Company shall have the right to
distribute the Acquisition Note and the Purchaser Shares to Halcyon
in compliance with applicable securities Laws, and the Company
and/or Halcyon shall have the further right (a) to pledge the
Acquisition Note to Cycle solely as collateral for the Halcyon
Note, and (b) with prior written notice to Purchaser, to transfer
to those employees of the Company entitled to Class C Profit Units
in the Company participation interest in the Acquisition Note
and/or the number of the Purchaser Shares that the Company is
contractually obligated (after using its commercially reasonable
efforts to offer substitute consideration to such employees) to
distribute to said employees pursuant to the Company’s 2016
Incentive Plan and the Limited Liability Company Agreement of the
Company dated December 10, 2015; provided that the principal amount
of the Acquisition Note and the market value of the Purchaser
Shares (determined based on the price per Purchaser Shares of
$1.75) distributed pursuant to this clause (b) shall in no event
exceed $100,000 in the aggregate.
ARTICLE
VI
CONDITIONS TO
OBLIGATIONS OF THE PARTIES
Section
6.1
Conditions to the
Obligations of Each Party
. The respective obligation of each
Party to consummate the transactions contemplated by this Agreement
is subject to the satisfaction (or written waiver by such Party,
where permissible) on or prior to the Closing Date of the following
conditions:
(a)
No Injunctions
. No temporary
restraining Order, preliminary or permanent injunction or other
Order and no Legal Proceeding shall be in effect or have been
instituted or threatened enjoining, prohibiting or otherwise
preventing, or seeking to enjoin, prohibit or otherwise prevent the
consummation of the transactions contemplated by this
Agreement.
(b)
No Laws
. No Law shall have been
enacted or shall be deemed applicable to the transactions
contemplated by this Agreement that makes the consummation of such
transactions illegal.
Section
6.2
Conditions to the
Obligations of Purchaser
. The obligations of Purchaser to
consummate the transactions contemplated by this Agreement are
subject to the satisfaction or written waiver by Purchaser (where
permissible) of the following additional conditions:
(a)
Performance of Obligations
.
Seller Parties shall have performed in all respects the respective
obligations under this Agreement required to be performed by them
at or prior to the Closing pursuant to the terms
hereof.
(b)
Representations and Warranties
.
All of the representations and warranties of Seller Parties
contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date;
provided
, that
those representations and warranties that are specifically made as
of a particular calendar date shall be so true and correct as of
such date.
(c)
Closing Deliveries
. Seller
Parties shall have delivered to Purchaser each of the documents
listed in
Section
1.4(a)
.
(d)
Audit Completion
. The financial
audit performed by Purchaser on the Company as of the signing of
this Agreement (the “
Audit
”) shall have been
completed to Purchaser's sole satisfaction.
(e)
Completion of Company Searches
.
The results of litigation, judgment and lien searches performed by
Purchaser on the Company as of the signing of this Agreement shall
have been reasonably satisfactory to Purchaser.
(f)
No MAE
. No Material Adverse
Effect shall have occurred and be continuing.
(g)
Cycle Services Agreement
.
Execution and delivery by Cycle of the Cycle Services
Agreement.
(h)
Cycle Redemption Agreement
. No
modification shall have been made to the Membership Interest
Redemption Agreement, except for any modification to which
Purchaser shall have given its express prior written
consent.
(i)
Completion of Disclosure and Other
Schedules
. The Parties shall have agreed on the form and
substance of the Disclosure Schedule and other schedules to this
Agreement.
Section
6.3
Conditions to the
Obligations of Seller Parties
. The obligations of Seller
Parties to consummate the transactions contemplated hereby are
subject to the satisfaction or written waiver by Seller Parties
(where permissible) of the following additional
conditions:
(a)
Performance of Obligations
.
Purchaser shall have performed in all respects its obligations
under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof.
(b)
Representations and Warranties
.
All of the representations and warranties of Purchaser contained in
this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date;
provided
, that those
representations and warranties that are specifically made as of a
particular calendar date shall be so true and correct as of such
date.
(c)
Closing Deliveries
. Purchaser
shall have delivered to Seller Parties each of the documents listed
in Section 1.4(b).
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
Section
7.1
Termination
.
This Agreement may be terminated at any time prior to the Closing,
as follows:
(a)
by mutual written
consent of Purchaser and the Company;
(b)
by either
Purchaser or the Company if the Closing shall not have occurred on
or before February 15, 2017;
provided
, further, however,
that the right to terminate this Agreement under this
Section 7.1(b)
shall not be
available to any Party whose actions in breach of this Agreement or
whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of any of the
conditions set forth in
Article VI
having been
satisfied on or before such date;
(c)
by either Purchaser
or the Company if any Governmental Body shall have enacted, issued,
promulgated, enforced or entered any Order (whether temporary,
preliminary or permanent) or taken any other action (including the
failure to have taken an action) that has become final and
non-appealable and has the effect of making consummation of the
Closing illegal or otherwise preventing or prohibiting consummation
of the transactions contemplated hereby;
(d)
by Purchaser
upon a breach of this Agreement by any Seller Party such that (A)
the conditions set forth in
Section 6.2(a)
or
Section 6.2(b)
would not be
capable of being satisfied and (B) such breach, untruth or
inaccuracy is not capable of being cured or, if reasonably capable
of being cured, has not been cured within 10 days after notice to
Seller Parties;
(e)
by Purchaser if
Purchaser shall have not been able to complete the Audit for
reasons not within reasonable control of Purchaser or if the
results of the Audit shall not have been to Purchaser's
satisfaction; or
(f)
by the Company
upon a breach of this Agreement by Purchaser such that (A) the
conditions set forth in
Section 6.3(a)
or
Section 6.3(b)
would not be
capable of being satisfied and (B) such breach, untruth or
inaccuracy is not capable of being cured or, if reasonably capable
of being cured, has not been cured within 10 days after notice to
Purchaser.
Section
7.2
Effect of
Termination
. In the event of the termination of this
Agreement pursuant to
Section 7.1
(a), (b), (c) or (e)
, all
obligations of the Parties hereunder shall terminate without any
liability to any of the Parties, except that the obligations
contained in
Section
5.7
(Public Announcements),
ARTICLE IX
(Miscellaneous) and
this
Section 7.2
and the obligations of the Company contained in
Section 5.12
(Pre-Closing
Funding) shall survive. In the event of the termination of this
Agreement pursuant to
Section 7.1(d)
or
Section 7.1(f)
, (A) all
obligations of the non-breaching party shall terminate, except that
the obligations contained in
Section 5.7
(Public
Announcements),
ARTICLE
IX
(Miscellaneous) and this
Section 7.2
and the obligations
of the Company contained in
Section 5.12
(Pre-Closing
Funding) shall survive, and (B) the non-breaching party shall be
entitled to exercise all rights and pursue all remedies against the
breaching party, including the remedy of specific
performance.
ARTICLE
VIII
Section
8.1
Indemnity
Obligations of the Company and Halcyon
. Subject to the
limitations set forth herein, from and after the Closing, the
Company and Halcyon, jointly and severally, covenant and agree to
defend, indemnify and hold harmless Purchaser and its Affiliates
and the respective officers, managers, directors, employees,
agents, advisers and representatives of the foregoing
(collectively, the “
Purchaser Indemnitees
”),
from and against, and to pay or reimburse Purchaser Indemnitees
for, any and all claims, Liabilities, obligations, losses, fines,
costs, diminution in value, proceedings or damages, including all
reasonable fees and disbursements of counsel incurred in the
investigation or defense of any of the same or in asserting any of
their respective rights hereunder (collectively,
“
Losses
”),
based on, resulting from, arising out of or relating
to:
(a)
any
misrepresentation or breach of any warranty of the Company or
Halcyon contained in this Agreement or in any certificate or
agreement delivered in connection herewith, it being understood
that, in determining the existence of, and amount of any Losses in
connection with, a claim under this
Section 8.1(a)
, all
representations and warranties shall be read without regard and
without giving effect to any materiality, Material Adverse Effect
or similar qualification contained therein (as if such
qualification were deleted from such representation or
warranty);
(b)
any failure of the
Company or Halcyon to perform any covenant or agreement made or
contained in this Agreement, or fulfill any obligation in respect
thereof;
(c)
any Legal
Proceeding brought by a third party based upon, arising out of or
relating to the operations, properties, assets or obligations of
the Company or any of its respective Affiliates conducted, existing
or arising prior to the Closing Date;
(d)
any Indebtedness as
of the time of Closing, to the extent not paid in full and
discharged by Seller Parties prior to or at the
Closing;
(e)
any Seller
Transaction Expenses to the extent not paid in full and discharged
by Seller Parties at or prior to Closing; and
(f)
any Change of
Control Payments to the extent not paid in full and discharged by
Seller Parties prior to or at the Closing.
Section
8.2
Indemnity
Obligations of Halcyon Members
. Except as provided in this
Section 8.2
, no
Halcyon Member shall be personally liable for indemnification
pursuant to this
Article
VIII
or any other provision of this Agreement. If, other
than (a) as permitted pursuant to this Agreement, or (b) as a
distribution to Halcyon, the Company or Halcyon (x) assigns,
conveys, or otherwise transfers the Acquisition Note or any of the
Purchaser Shares in a non-arms’ length transaction, or (y)
assigns, conveys, or otherwise transfers the proceeds of the sale,
in an arms’ length transaction, of the Acquisition Note or
any of the Purchaser Shares, at any time prior to the third
anniversary of the Closing Date (in either case, a
“Prohibited Transfer”), Halcyon Members shall be
liable, jointly and severally with the other Seller Parties, for
the indemnification pursuant to
Section 8.1
, subject to the
following limitations:
(a)
the maximum
aggregate liability of Halcyon Members for indemnification as a
result of a Prohibited Transfer, (i) described in Section 8.2(y)
above shall be the amount equal to the gross proceeds of such
transaction(s) or, (ii) described in Section 8.2 (x) above shall be
the amount equal to the product of the number of Purchaser Shares
assigned, conveyed or otherwise transferred multiplied by $1.75 in
the case of a transfer of the Shares or the face amount of the
Acquisition Note transferred, as the case may be;
(b)
all limitations
under
Section 8.6
applicable to the Company and Halcyon;
(c)
in no event shall
the aggregate indemnification liability of Halcyon Members for any
matter pursuant to this
Section 8.2
exceed the
indemnification liability of the Company and Halcyon in respect of
the same matter.
Nothing
herein shall limit or impair liability of any Halcyon Member for
fraud.
Section
8.3
Indemnity
Obligations of Purchaser
. Purchaser covenants and agrees to
defend, indemnify and hold harmless the Company from and against
any and all Losses based on, resulting from, arising out of or
relating to:
(a)
any
misrepresentation or breach of any warranty of Purchaser contained
in this Agreement or in any certificate or agreement delivered in
connection herewith, it being understood that, in determining the
existence of, and amount of any Losses in connection with, a claim
under this
Section
8.3(a)
, all representations and warranties shall be read
without regard and without giving effect to any materiality or
similar qualification contained therein (as if such qualification
were deleted from such representation or warranty);
(b)
any failure of
Purchaser to perform any covenant or agreement of Purchaser made or
contained in this Agreement, or fulfill any obligation in respect
thereof; and
(c)
the Assumed
Liabilities;
(d)
the claim of any
third party directly against any Seller Party arising out of any
action of Purchaser conducting the operation of the Business after
the Closing and not related to the actions of the Company, any
Seller Party, or any Halcyon Member or the operation of the
Business prior to Closing.
Section
8.4
Indemnification
Procedures
.
(a)
Third Party Claims
. In the case
of any claim asserted by a third party (a “
Third Party Claim
”)
against a Party entitled to indemnification under this Agreement
(the “
Indemnified
Party
”), notice shall be given by the Indemnified
Party to the Party required to provide indemnification (the
“
Indemnifying
Party
”) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought.
If the Indemnifying Party provides a written notice to the
Indemnified Party within fifteen (15) days after its receipt of
notice of such claim that it will indemnify and hold the
Indemnified Parties harmless from all Losses related to such Third
Party Claim, the Indemnified Party shall permit the Indemnifying
Party (at the expense of such Indemnifying Party) to assume the
defense of such Third Party Claim or any litigation with a third
party resulting therefrom; provided, however, that (i) the
counsel for the Indemnifying Party who shall conduct the defense of
such claim or litigation shall be subject to the approval of the
Indemnified Party, (ii) the Indemnified Party may participate in
such defense at such Indemnified Party’s expense, (iii) the
failure by any Indemnified Party to give notice of a Third Party
Claim to the Indemnifying Party as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation
under this Agreement except and only to the extent that, as a
result of such failure to give notice, the defense against such
claim is materially impaired, and (iv) the reasonable fees and
expenses incurred by the Indemnified Party prior to the assumption
of a Third Party Claim hereunder by the Indemnifying Party shall be
borne by the Indemnifying Party. Except with the prior written
consent of the Indemnified Party, no Indemnifying Party, in the
defense of any Third Party Claim, shall consent to entry of any
judgment or enter into any settlement that provides for injunctive
or other nonmonetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a general
release from any and all liability with respect to such Third Party
Claim. Notwithstanding anything herein to the contrary, the
Indemnifying Party shall not be entitled to assume (or, if
applicable, to maintain) control of the defense against a Third
Party Claim if (1) the claim for indemnification relates to or
arises in connection with any criminal or quasi criminal
proceeding, action, indictment, allegation or investigation; (2)
the claim seeks an injunction, specific performance or any other
equitable or non-monetary relief against the Indemnified Party; (3)
the Indemnified Party reasonably believes an adverse determination
with respect to the Third Party Claim would be materially
detrimental to or materially injure the Indemnified Party’s
reputation or future business prospects; (4) the Indemnified Party
has been advised by counsel that a reasonable likelihood exists of
a conflict of interest between the Indemnifying Party and the
Indemnified Party; (5) the Indemnifying Party fails to vigorously
prosecute or defend such claim, (6) the Indemnifying Party fails to
satisfy the Indemnified Party that it has the financial ability to
satisfy all Third Party Claims; (7) the amount sought in a Third
Party Claim exceeds the maximum amount for which the Indemnifying
Party will be liable in connection with such Third Party Claim
under this Agreement; or (8) the party bringing the claim is a
customer or supplier of the Indemnified Party or the claims relate
to environmental or regulatory matters. If the Indemnifying Party
does not accept the defense of a Third Party Claim within fifteen
(15) days after receipt of the written notice thereof from the
Indemnified Party described above, the Indemnified Party shall have
the full right to defend against any such claim or demand. In any
event, the Indemnifying Party and the Indemnified Party shall
reasonably cooperate in the defense of any Third Party Claim and
the records of each shall be reasonably available to the other with
respect to such defense.
(b)
Non-Third Party Claims
. With
respect to any claim for indemnification hereunder which does not
involve a Third Party Claim, the Indemnified Party will give the
Indemnifying Party written notice of such claim promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought. The Indemnifying Party may acknowledge and
agree by notice to the Indemnified Party in writing to satisfy such
claim within fifteen (15) days of receipt of notice of such claim
from the Indemnified Party. If the Indemnifying Party shall dispute
such claim, the Indemnifying Party shall provide written notice of
such dispute to the Indemnified Party within such fifteen (15) day
period.
(c)
Resolution of Objections
. If
the Indemnified Party and the Indemnifying Party are unable to
agree as to any claim for Losses pursuant to
Section 8.4(a)
or
Section 8.4(b)
, then either
party shall be permitted to submit such dispute for resolution
pursuant to
Section
9.4
.
(d)
Payment
. Claims for Losses
specified in any notice delivered pursuant to
Section 8.4(a)
or
Section 8.4(b)
which the
Indemnifying Party agrees to pay, and claims for Losses the
validity and amount of which have been the subject of judicial
determination or that have been settled with the consent of or by
the Indemnified Party in accordance with the terms of
Section 8.4(a)
are hereinafter
referred to, collectively, as “
Agreed Claims
”. Within
seven (7) Business Days of the determination of the amount of any
Agreed Claim (the “
Satisfaction Deadline
”)
the Indemnifying Party shall pay the amount of the Agreed Claim to
the Indemnified Party. All payments to be made pursuant to this
Section 8.4(d)
shall be paid by wire transfer in immediately available funds to
the bank account or accounts designated by the Indemnified Party in
a notice to the Indemnifying Party prior to such payment. Purchaser
shall also have the setoff rights set forth in
Section 8.7
and may pursue any
recovery for an Agreed Claim against any Seller Party directly or
exercise any other right or remedy available to Purchaser at law or
in equity.
Section
8.5
Expiration of
Representations and Warranties
. All representations and
warranties contained in this Agreement shall survive the Closing
until the first anniversary of the Closing Date; provided, however,
that (a) the representations and warranties stated in
Section 3.7
and
Section 3.12
shall survive the
Closing for the period ending on the date that is sixty (60) days
after the expiration of the applicable statute of limitations
period and (b) the representations and warranties stated in
Section 2.1
,
Section 2.3
,
Section 2.4
,
Section 3.1
,
Section 3.2
, the
first sentence of
Section
3.9(b)
,
Section
3.21
,
Section
3.22
,
Section
4.1
,
Section
4.2
,
Section
4.3
,
Section
4.4
and
Section
4.7
shall survive indefinitely (each of the sections
referred to in (a) and (b), a “
Transactional Rep
”). All
covenants required to have been performed prior to the Closing
shall survive for a period of one year after the Closing Date. All
covenants and agreements required to be performed following the
Closing (including the covenant to indemnify pursuant to
Article VIII
) shall
survive until fully performed pursuant to their terms.
Notwithstanding the foregoing, all claims (and matters relating
thereto) made in writing prior to the expiration of the applicable
survival period shall not thereafter be barred by the expiration of
such survival period and shall survive until finally
resolved.
Section
8.6
Certain
Limitations
. The indemnification provided for in
Section 8.1
,
Section 8.2
and
Section 8.3
shall
be subject to the following limitations:
(a)
The Company and
Halcyon shall not be liable to Purchaser Indemnitees for
indemnification (i) under
Section 8.1(a)
, and (ii) under
Section 8.1(b) to the extent related to breaches of covenants and
agreements to be performed at or prior to Closing, for Losses in
excess of $1,333,333 (the “
Cap
”) in the aggregate.
If Losses under
Section
8.1(a)
and
Section
8.1(b)
for breaches of covenants and agreements to be
performed at or prior to Closing exceed the Cap, the Company and
Halcyon shall be liable for $1,333,333. The Cap shall apply to
claims against the Company, Halcyon and the Halcyon Members in the
aggregate.
(b)
Purchaser shall
not be liable to the Company for indemnification under
Section 8.3(a)
for Losses in
excess of the Cap in the aggregate. If Losses under
Section 8.3(a)
exceed the Cap,
Purchaser shall be liable for $1,333,333.
(c)
Notwithstanding
anything in
Section
8.6
(a)
-
(b)
to the contrary, the Cap
shall not apply to Losses with respect to any breach of the
Transactional Reps.
(d)
The maximum
indemnification obligation of Purchaser under
Section 8.3(a)
for its
Transactional Reps and under
Section 8.3(b)
and
Section 8.3(c)
shall not exceed
the total consideration paid to the Company. The maximum
indemnification obligation of the Company and Halcyon under
Section 8.1(a)
for
their Transactional Reps and under
Sections 8.1(b)-(f)
(except for
Section 8.1(b) pre-closing breaches, which are covered in Section
8.6(a) above), shall not exceed $3,750,000 in the
aggregate.
(e)
Notwithstanding
any other provision of this Agreement to the contrary, no
Indemnified Party shall be entitled to indemnification from the
Indemnifying Party pursuant to this Agreement unless and until the
aggregate of all Losses pertaining thereto exceeds Fifty Thousand
Dollars ($50,000.00) (the “
Loss Threshold
”), after
which the Indemnified Party shall be entitled to indemnification
from the Indemnifying Party for all such Losses including the Loss
Threshold.
(f)
Notwithstanding
anything in this Agreement to the contrary, nothing herein shall
limit or impair liability of any Party for intentional
misrepresentation or fraud.
Section
8.7
Additional Security
for Indemnification Payments to Purchaser
Indemnitees
.
(a)
In addition to
Purchaser's rights and remedies hereunder and under law or equity,
with respect to any Loss payable to any Purchaser Indemnitee, if
the Company or Halcyon fail to satisfy any Agreed Claim amount by
the Satisfaction Deadline, Purchaser may, at its sole election,
after ten (10) days prior written notice to the Company, setoff the
unpaid amount of such Agreed Claim against (i) first, the Purchaser
Shares until either (x) the amount of the Agreed Claim has been
setoff in full, or (y) all of the Purchaser Shares have been
setoff, whichever occurs first; and (ii) second, the amounts owed
under the Acquisition Note. For clarity, the right of setoff in
this
Section 8.7
,
is only security for the Company’s or Halcyon’s
indemnification obligations hereunder and such indemnification
obligations are not in any way be limited to the Purchaser Shares
or the amounts owed to Seller under the Acquisition Note. Purchaser
may, from time to time, take any other remedy and exercise any
other right available to it under this Agreement, at law or in
equity to collect all indemnifiable Losses.
(b)
If Purchaser
exercises its setoff rights under
Section 8.7(a)
against
Purchaser Shares, then such setoff shall be on the basis of the per
share price of the Purchaser Shares equal to the greater of (i)
$1.75 per Purchaser Share, or (ii) the highest price per share that
the shares of common stock of the Purchaser trade for on a
nationally recognized securities exchange on the date of the Setoff
Notice. Purchaser shall provide the Company written notice of such
election and the number of Purchaser Shares that are to be
forfeited by the Company (each such notice, a “
Setoff
Notice
”).
(c)
Within two (2) days
after the receipt of the Setoff Notice, the Company shall, and
Halcyon shall cause the Company to, deliver to Purchaser the
certificate(s), if any, representing the Purchaser Shares to be
forfeited duly endorsed or with stock powers in blank, in form and
substance reasonably acceptable to Purchaser, free and clear of all
Liens (other than the restrictions under the Securities Act and the
Blue Sky Laws). If the Company fails to immediately transfer to
Purchaser all or any portion of the Purchaser Shares to be
forfeited, Purchaser may cancel on the books of Purchaser all or
any portion of the Purchaser Shares set forth in the Setoff Notice.
The Company hereby grants Purchaser an irrevocable limited power of
attorney, coupled with an interest, solely to effect a forfeiture
of the Purchaser Shares as set forth in this Section
8.7.
Section
8.8
Treatment of
Indemnification Payments
. All indemnification payments made
under this Agreement shall be treated by the Parties as an
adjustment to the Transaction Consideration to the extent permitted
by applicable Law.
Section
8.9
Right to
Indemnification Not Affected by Knowledge or Waiver
. The
right to indemnification, payment of Losses or other remedy based
upon breach of representations, warranties, covenants, agreements
or obligations will not be affected by any investigation conducted
with respect to, or knowledge acquired (or capable of being
acquired) at any time, whether before or after the Closing Date,
with respect to the accuracy or inaccuracy of or compliance with
any such representation, warranty, covenant, agreement or
obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or
compliance with any covenant, agreement or obligation, will not
affect the right to indemnification, payment of Losses or other
remedy based on such representations, warranties, covenants,
agreements and obligations.
Section
8.10
Sole Remedy
.
Except for claims based upon fraud or intentional
misrepresentation, from and after the Closing, the indemnification
and setoff rights provided for in this
ARTICLE VIII
shall be the sole
remedy of the Parties for monetary damages with respect to breaches
of this Agreement.
ARTICLE
IX
Section
9.1
Certain
Definitions
.
(a)
For purposes of
this Agreement, the following terms shall have the meanings
specified in this
Section
9.1(a)
:
“
Affiliate
” means, with
respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such
Person.
“
Books
and Records
” means all books and records of the
Company, including files, manuals, price lists, mailing lists,
distributor lists, customer lists, sales and promotional materials,
purchasing materials, documents evidencing intangible rights or
obligations, personnel records, accounting records and litigation
files (regardless of the media in which stored).
“
Business
” means the
development, distribution, licensing and maintenance of inventory
management software for dealerships, similar retailers and
distributors in the powersports, recreational vehicle and marine
industries.
“
Business Day
” means any
day of the year on which national banking institutions in the City
of New York are open to the public for conducting business and are
not required or authorized to close.
“
Change of Control
Payments
” means any and all (i) bonus payments,
retention payments, severance payments or other similar payments
payable as a result of the transactions contemplated hereby, (ii)
investment banking, agent, brokers’ and finders’ and
other similar fees payable as a result of the transactions
contemplated hereby and (iii) amounts payable to obtain any
Consents required to be listed in
Section 3.3
of the Disclosure
Schedule.
“
Code
” shall mean the
Internal Revenue Code of 1986, as amended.
“
Consent
” means any
consent, approval, authorization, waiver, permit, grant, franchise,
concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or
notice to, any Person, including any Governmental
Body.
“
Contract
” means any
contract, indenture, note, bond, loan, mortgage, license,
instrument, lease, understanding, commitment or other arrangement
or agreement, whether written or oral.
“
Cycle
” means Cycle
Express, LLC.
“
Cycle Redemption
Agreement
” means that certain Membership Interest
Redemption Agreement, dated the date hereof, by and among, Cycle,
the Company, and Halcyon.
“
Cycle Services Agreement
”
means a services agreement by and between Purchaser and Cycle on
the terms contemplated in the Cycle Redemption
Agreement.
“
DOL
” means the United
States Department of Labor.
“
Environmental Law(s)
”
means any foreign, federal, state or local statute, regulation,
ordinance, or rule of common law as now or hereafter in effect in
any way or any other legally binding requirement relating to the
environment, natural resources or protection of human health and
safety including the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. § 9601 et
seq.), the Emergency Planning and Right-To-Know Act (42 U.S.C.
§ 11101 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. App. § 1801 et seq.), the Solid Waste Disposal
Act (42 U.S.C. § 6901 et seq.) (including the Resource
Conservation and Recovery Act), the Clean Water Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42 U.S.C.
§ 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. § 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.),
the Safe Drinking Water Act (42 U.S.C. § 300(f) et seq.), the
Lead-Based Paint Exposure Reduction Act (42 U.S.C. § 2681 et
seq.), and the Occupational Safety and Health Act (29 U.S.C.
§ 651 et seq.), and all Laws of a similar nature, and the
rules and regulations promulgated pursuant thereto, each as
amended.
“
GAAP
” means United States
generally accepted accounting principles as in effect from time to
time.
“
Governing Documents
”
means, with respect to any particular entity: (i) if a corporation,
the articles or certificate of incorporation and the bylaws; (ii)
if a general partnership, the partnership agreement and any
statement of partnership; (iii) if a limited partnership, the
limited partnership agreement and the certificate of limited
partnership; (iv) if a limited liability company, the articles of
organization and operating agreement; (v) if another type of
Person, any other charter or similar document adopted or filed in
connection with the creation, formation or organization of the
Person; (vi) all equity holders’ agreements, voting
agreements, voting trust agreements, joint venture agreements,
registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person
or relating to the rights, duties and obligations of the equity
holders of any Person; and (vii) any amendment or supplement to any
of the foregoing.
“
Governmental Body
” means
any government or governmental or regulatory authority or body
thereof, or political subdivision thereof, whether federal, state,
local or foreign, or any agency, instrumentality or authority
thereof, or any court or arbitrator (public or private) or tribunal
of competent jurisdiction.
“
Halcyon Note
” means a
subordinated secured promissory note issued by Halcyon in favor of
Cycle in the amount of $250,000 substantially in the form agreed by
Halcyon and Cycle.
“
Hazardous Material(s)
”
means any substance, material or waste which is regulated by the
United States, the foreign jurisdictions in which the Company
conducts business, or any state, local or foreign Governmental Body
including petroleum and its by-products, asbestos or
asbestos-containing material, polychlorinated biphenyls, lead-based
paint, and any material or substance which is defined as a
“hazardous waste,” “hazardous substance,”
“hazardous material,” “restricted hazardous
waste,” “industrial waste,” “solid
waste,” “contaminant,” “pollutant,”
“special waste,” “toxic material,”
“toxic waste” or “toxic substance”, or any
substance the presence, use, handling, storage or disposal is
prohibited under any provision of Environmental Law.
“
Income Taxes
” means the
United States federal income Tax and any state, local or non-United
States net income Tax or any franchise or business profit Tax
incurred in lieu of a Tax on net income.
“
Indebtedness
” means, with
respect to the Company at any applicable time of determination,
without duplication: (i) all obligations for borrowed money; (ii)
all obligations evidenced by bonds, debentures, notes or other
similar instruments or debt securities; (iii) all obligations under
swaps, hedges or similar instruments; (iv) all obligations in
respect of letters of credit or bankers’ acceptances; (v) all
obligations, contingent or otherwise, arising from deferred
compensation arrangements, severance or bonus plans or
arrangements, Employee Benefit Plans, employment agreements or
similar arrangements payable as a result of the consummation of the
transactions contemplated hereby (regardless of whether any
additional event, in addition to the consummation of the
transactions contemplated hereby, is required to give rise to such
obligations); (vi) all obligations secured by a Lien; (vii) all
guaranties in connection with any of the foregoing; (viii) all
obligations recorded or required to be recorded as capital leases
in accordance with GAAP as of the date of determination of such
Indebtedness; (ix) all obligations for the deferred purchase price
of property or services or the acquisition of a business or portion
thereof, whether contingent or otherwise, as obligor or otherwise,
at the maximum amount payable in respect thereof, regardless of
whether such amount is contingent on future performance; (x) all
obligations created or arising under any conditional sale or other
title retention agreement with respect to acquired property; (xi)
all deferred rent obligations; (xii) all obligations arising from
cash or book overdrafts; (xiii) all liabilities classified as
non-current liabilities in accordance with GAAP as of the date of
determination of such Indebtedness; and (xiv) all accrued interest,
prepayment premiums, fees, penalties, expenses or other amounts
payable in respect of any of the foregoing.
“
Indebtedness for Borrowed
Money
” means, with respect to the Company, and in each
case, outstanding immediately prior to Closing: (i) indebtedness
for borrowed money; (ii) obligations evidenced by notes, bonds,
debentures or other similar instruments; and (iii) any prepayment
penalties, fees and similar amounts payable in connection with the
repayment of any of the foregoing items.
“
Intellectual Property
”
means: (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and
all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part,
divisions, revisions, extensions, and reexaminations thereof; (ii)
all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and
renewals in connection therewith; (iii) all copyrightable works,
all copyrights, and all applications, registrations and renewals in
connection therewith; (iv) all trade secrets and confidential
information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals); (v) all computer
software (including data and related documentation); (vi) all other
proprietary rights; and (vii) all copies and tangible embodiments
thereof (in whatever form or medium).
“
IRS
” means the United
States Internal Revenue Service.
“
Knowledge
” or words of
similar effect, regardless of case, means, with respect to the
Company, the knowledge of Kartik Kakarala or Srinivas Kakarala who
will be deemed to have knowledge of a particular fact or other
matter if any of them is actually aware of such fact or
matter.
“
Law
” means any federal,
state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement or rule of law of
any Governmental Body.
“
Leased Real Property
”
means the real property leased, subleased, licensed or otherwise
occupied by (i) the Company, as lessee, and (ii) any of Seller
Parties or their Affiliates, each as a lessee, and related to, used
with, or useful to the Business, together with all of the
lessee’s rights to all improvements thereon and to all
strips, gores, easements, privileges, rights-of-way, reversions,
remainders, riparian and other water rights, rights to lands
underlying any adjacent streets or roads, and to other tenements,
hereditaments and appurtenances, if any, pertaining to or accruing
for the benefit of such real property and improvements
thereon.
“
Legal Proceeding
” means
any judicial, administrative or arbitral actions, suits,
proceedings (public or private), claims, hearings, investigations,
charges, complaints, demands or governmental
proceedings.
“
Liability
” means any
liability, obligation or commitment of any nature whatsoever
(whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated,
matured or unmatured, or due or to become due, or otherwise),
including any liability for Taxes.
“
Lien
” means any lien
(including any Tax lien), pledge, mortgage, deed of trust, security
interest, claim, demand, lease, charge, option, warrant, call,
right of first refusal, easement, servitude, transfer restriction
or any other encumbrance, restriction or limitation
whatsoever.
“
Lock-Up and Rights
Agreement
” shall mean the Lock-Up and Rights
Agreement, dated as of the Closing Date, by and between Purchaser
and the Company in a mutually agreed upon form.
“
Material Adverse Effect
”
means, with respect to the Company, any event, occurrence, fact,
condition, change or effect that is, or could reasonably be
expected to become, individually or in the aggregate, materially
adverse to the business, properties, results of operations,
prospects or condition (financial or otherwise) of the Company or
to the ability of the Company to consummate timely the transactions
contemplated hereby, other than changes in the following: (i)
general market, economic or political conditions; (ii) GAAP or
statutory accounting principles; and (iii) acts of terrorism or war
(whether or not declared), except, in each case, to the extent such
changes cause a disproportionate and negative effect on or change
to the Company as compared to the industry in which the Company
operates as a whole.
“
Order
” means any order,
injunction, judgment, decree, ruling, writ, assessment or
arbitration award.
“
Permit
” means any
approval, consent, license, certificate, accreditation, permit,
waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body
or pursuant to Law.
“
Permitted Liens
” means
(i) liens for real estate or personal property Taxes not yet due
and payable or being contested in good faith by appropriate
procedures as disclosed herein and for which there are adequate
accruals or reserves on the Balance Sheet, (ii) liens arising under
equipment leases with third parties set forth in
Section 3.9(a)
of the
Disclosure Schedule, which were entered into in the ordinary course
of business consistent with past practices which are not,
individually or in the aggregate, material to the Business or the
assets of the Company.
“
PBGC
” means the Pension
Benefit Guaranty Corporation or any successor agency.
“
Person
” means any
individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
“
Product
” means each
software product or service offered, distributed, repaired or sold
by the Company, and any other products or services with respect to
which the Company has any property rights or beneficial
interest.
“
Purchaser Stockholders
Agreement
” means the Stockholders' Agreement of
Purchaser by and among Purchaser and certain of its stockholders in
a form in effect as of the date hereof, except that such agreement
may be amended as of the Closing Date to add provisions related
drag-along rights (including an obligation to drag-along other
signatories thereto with respect any direct sale of Purchaser's
stock representing a majority of the issued and outstanding common
stock of Purchaser), and right of first offer applicable to each
stockholder signatory for as long as such stockholder owns,
directly or indirectly, at least 10% of issued and outstanding
common stock of Purchaser.
“
Release
” means any actual
or threatened release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, migration or
leaching into the indoor or outdoor environment, or into or out of
any property.
“
Restricted Territory
”
means anywhere in the United States.
“
Securities Act
” means the
Securities Act of 1933, as amended.
“
Seller Transaction
Expenses
” means any and all legal, accounting,
consulting, investment advisory, brokers and other fees, costs and
expenses of the Company relating to the transaction contemplated
hereby.
“
Subsidiary
” means, with
respect to any Person, any corporation, limited liability company,
partnership, association, trust or other form of legal entity of
which (i) more than fifty percent (50%) of the voting power of the
outstanding voting securities are directly or indirectly owned by
such Person or (ii) such Person or any Subsidiary of such Person is
a general partner (excluding partnerships in which such party or
any Subsidiary of such Person does not have a majority of the
voting interests in such partnership).
“
Tax
” or
“
Taxes
”
means any federal, state, provincial, local or foreign income,
alternative minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods
and services, excise, customs duties, transfer, conveyance,
mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of
the Code or any analogous or similar provision of any state, local
or foreign Law or regulation), real property, personal property, ad
valorem, intangibles, unclaimed property, rent, occupancy, license,
occupational, employment, unemployment insurance, social security,
disability, workers’ compensation, payroll, health care,
withholding, estimated or other similar tax, duty or other
governmental charge or assessment or deficiencies thereof, and
including any interest, penalties or additions to tax attributable
to the foregoing.
“
Tax Return
” means any
return, report, declaration, form, claim for refund or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
“
Transaction Documents
”
means, with respect to any Person, this Agreement together with any
other agreements, instruments, certificates and documents executed
by such Person in connection herewith or therewith or in connection
with the transactions contemplated hereby or thereby.
“
WARN
” means the Worker
Adjustment and Retraining Notification Act, as
amended.
(b)
Each of the
following terms is defined in the Section set forth opposite such
term:
|
Term
|
Section
|
|
Acquisition
Note
|
Section
1.2(b)
|
|
Acquisition
Proposal
|
Section
5.8(b)
|
|
Agreed
Claims
|
Section
8.4(d)
|
|
Articles
Amendment
|
Section
3.29
|
|
Assumed
Liabilities
|
Section
1.1(c)
|
|
Audit
|
Section
6.2(d)
|
|
Balance
Sheet
|
Section
3.4
|
|
Balance Sheet
Date
|
Section
3.4
|
|
Bill
of Sale
|
Section
1.4(a)
|
|
Blue
Sky Laws
|
Section
1.2(c)
|
|
Cap
|
Section
8.6(a)
|
|
Closing
|
Section
1.1(a)
|
|
Closing
Date
|
Section
1.3
|
|
Company
|
Preamble
|
|
Company ERISA
Affiliate
|
Section
3.12(a)
|
|
Delayed
Asset
|
Section
1.6
|
|
Disclosure
Schedule
|
Section
9.11
|
|
Employee Benefit
Plans
|
Section
3.12(a)
|
|
ERISA
|
Section
3.12(a)
|
|
Excluded
Assets
|
Section
1.1(b)
|
|
Excluded
Liabilities
|
Section
1.1(d)
|
|
Financial
Statements
|
Section
3.4
|
|
Halcyon
|
Preamble
|
|
Halcyon
Members
|
Preamble
|
|
Halcyon
Parties
|
Preamble
|
|
Included
Contracts
|
Section
1.1(a)
|
|
Indemnified
Party
|
Section
8.4(a)
|
|
Indemnifying
Party
|
Section
8.4(a)
|
|
Intellectual
Property Licenses
|
Section
3.10(b)
|
|
IP
License Agreement
|
Section
1.4(a)
|
|
Leased
Properties
|
Section
3.8(b)
|
|
Loss
Threshold
|
Section
8.6(e)
|
|
Losses
|
Section
8.1
|
|
Open
Source Software
|
Section
3.10(j)
|
|
Owned
Intellectual Property
|
Section
3.10(a)
|
|
Purchaser
Shares
|
Section
1.2
|
|
Party(ies)
|
Preamble
|
|
Personal Property
Leases
|
Section
3.9(a)
|
|
Purchased
Assets
|
Section
1.1(a)
|
|
Purchaser
|
Preamble
|
|
Purchaser
Shares
|
Section
1.2(c)
|
|
Purchaser
Indemnitees
|
Section
8.1
|
|
Purchaser
Parties
|
Section
5.9(c)
|
|
Qualified
Plans
|
Section
3.12(c)
|
|
Real
Property Laws
|
Section
3.8(c)
|
|
Real
Property Lease
|
Section
3.8(b)
|
|
Required
Consent
|
Section
1.6
|
|
Restricted
Period
|
Section
5.9(b)
|
|
Representatives
|
Section
5.2(a)
|
|
Satisfaction
Deadline
|
Section
8.4(d)
|
|
Securities
Act
|
Section
3.29
|
|
Seller
Parties
|
Preamble
|
|
Services
Agreement
|
Section
1.4(b)
|
|
Setoff
Notice
|
Section
8.7(b)
|
|
Systems
|
Section
3.10(i)
|
|
Third
Party Claim
|
Section
8.4(a)
|
|
Transaction
Consideration
|
Section
1.2
|
|
Transactional
Rep
|
Section
8.5
|
|
Transfer
|
Section
3.29
|
Section
9.2
Expenses
.
Each of the Parties shall bear its own fees, costs and expenses
(including legal, accounting, consulting and investment advisory
fees and expenses) incurred in connection with this Agreement and
the transactions contemplated hereby. All Seller Transaction
Expenses shall be discharged by the Company and Halcyon at or prior
to Closing.
Section
9.3
Governing
Law
. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas (without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other
than the State of Texas). E
ach of the
Parties submits to the exclusive jurisdiction of any state or
federal court within
in
Dallas
County, Texas in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of
the action or proceeding shall be exclusively heard and determined
in any such court. The Parties hereby irrevocably waive, to the
fullest extent permitted by applicable Law, any objection which
they may now or hereafter have to the laying of venue of any such
dispute brought in such court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought.
The court shall award to the
prevailing party in any dispute under this Agreement all of its
costs and expenses, including reasonable attorneys’ fees,
incurred in connection with the proceeding.
Section
9.4
Entire Agreement;
Amendments and Waivers
. This Agreement (including the
schedules and exhibits hereto) represents the entire understanding
and agreement between the Parties with respect to the subject
matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making
specific reference to this Agreement signed by Purchaser, in the
case of an amendment, supplement, modification or waiver sought to
be enforced against Purchaser, or Seller Parties, in the case of an
amendment, supplement, modification or waiver sought to be enforced
against any Seller Party. The waiver by any Party of a breach of
any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of
any other or subsequent breach. No failure on the part of any Party
to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of such right, power or remedy by such Party
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by
Law.
Section
9.5
Section
Headings
. The section headings of this Agreement are for
reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
Section
9.6
Notices
. All
notices and other communications under this Agreement shall be in
writing and shall be given by personal delivery, nationally
recognized overnight courier or certified mail at the following
addresses (or to such other address as a Party may have specified
by notice given to the other Party pursuant to this
provision):
|
If to
the Company:
NextGen
Dealer Solutions, LLC
300 E.
John Carpenter Freeway, Suite 650
Irving,
Texas 75062
Attention:
Kartik Kakarala
|
|
|
With a
copy (which shall not constitute notice) to:
Offit
Kurman, P.A.
8171
Maple Lawn Boulevard, Suite 200
Maple
Lawn, Maryland 20759
Attention:
Glenn D. Solomon, Esquire
|
|
|
If to
Halcyon and/or Halcyon Members:
Halcyon
Consulting, LLC
300 E.
John Carpenter Freeway, Suite 650
Irving,
Texas 75062
Attention:
Kartik Kakarala
And
Halcyon
Consulting, LLC
6021
University Boulevard
Suite
265
Ellicott
City, Maryland 21043
Attention:
Srinivas Kakarala
|
|
|
With a
copy (which shall not constitute notice) to:
Offit
Kurman, P.A.
8171
Maple Lawn Boulevard, Suite 200
Maple
Lawn, Maryland 20759
Attention:
Glenn D. Solomon, Esquire
|
|
|
If to
Purchaser, to:
Smart
Server, Inc.
4521
Sharon Road
Suite
370
Charlotte,
NC 28211
Attn:
Steven Berrard
|
|
|
With a
copy (which shall not constitute notice) to:
Akerman
LLP
Three
Brickell City Centre
98 SE
7
th
Street, Suite 1100
Miami,
FL 33131
Attn:
Scott A. Wasserman
|
|
Any
such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) on the next
Business Day after dispatch, if sent postage pre-paid by nationally
recognized, overnight courier guaranteeing next Business Day
delivery, and (iii) on the fifth (5th) Business Day following the
date on which the piece of mail containing such communication is
posted, if sent by certified mail, postage prepaid, return receipt
requested.
Section
9.7
Severability
.
If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in
effect. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest
extent possible.
Section
9.8
Binding Effect;
Assignment; Third-Party Beneficiaries
. This Agreement shall
be binding upon and shall inure to the benefit of the Parties and
their respective successors and permitted assigns; provided,
however, that no Party may assign its rights and/or obligations
hereunder without the consent of the other Parties. Notwithstanding
the foregoing, Purchaser may assign its rights pursuant to this
Agreement to an Affiliate of Purchaser or to an acquirer of the
Purchaser in a merger, asset sale or sale of ownership interests,
provided, however, any such assignment shall not relieve Purchaser
of its obligations hereunder. In addition, Purchaser may assign any
or all of its rights pursuant to this Agreement to any lender to
Purchaser, as collateral security without the consent of any of the
other Parties. Except as provided in
ARTICLE VIII
with respect to
Persons entitled to indemnification thereunder, nothing in this
Agreement shall create or be deemed to create any third party
beneficiary rights in any Person.
Section
9.9
Counterparts
.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will
constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile,
portable document format or other electronic means shall be
effective as delivery of a manually executed counterpart to this
Agreement.
Section
9.10
Remedies
Cumulative
. Except as otherwise provided herein, no remedy
herein conferred upon a Party hereto is intended to be exclusive of
any other remedy. No single or partial exercise by a Party hereto
of any right, power or remedy hereunder shall preclude any other or
further exercise thereof.
Section
9.11
Exhibits and
Schedules
. The exhibits and schedules referred to herein are
attached hereto and incorporated herein by this reference. The
disclosure schedule delivered by Seller Parties to Purchaser in
connection with the execution of this Agreement (the
“
Disclosure
Schedule
”) shall be arranged to correspond to the
specific sections and subsections of this Agreement. Any
information disclosed in one Section of the Disclosure Schedule
shall be deemed to be disclosed in all other Sections of the
Disclosure Schedule where (i) an express reference thereto is made
or (ii) the information on the face of such disclosure is
sufficient to alert a reasonable person of its applicability to
such other Sections of the Disclosure Schedule. Nothing in the
Disclosure Schedule will be deemed adequate to disclose an
exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in detail. The mere listing (or
inclusion of a copy) of a document or other item in the Disclosure
Schedule will not be deemed adequate to disclose an exception to a
representation or warranty made in this Agreement (unless the
representation or warranty pertains to the existence of the
document or other item itself). The Parties hereto intend that each
representation, warranty and covenant contained herein will have
independent significance. If any Party hereto has breached any
representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party
has not breached will not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty or
covenant.
Section
9.12
Interpretation
.
When a reference is made in this Agreement to an article, section,
paragraph, clause, schedule or exhibit, such reference shall be
deemed to be to this Agreement unless otherwise indicated. The text
of all schedules is incorporated herein by reference. Whenever the
words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” As used herein, words in the singular will be
held to include the plural and vice versa (unless the context
otherwise requires), words of one gender shall be held to include
the other gender (or the neuter) as the context requires, and the
terms “hereof”, “herein”, and
“herewith” and words of similar import will, unless
otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this
Agreement.
Section
9.13
Arm’s Length
Negotiations
. Each Party herein expressly represents and
warrants to all other Parties hereto that (a) said Party has had
the opportunity to seek and has obtained the advice of its own
legal, tax and business advisors before executing this Agreement;
and (b) this Agreement is the result of arm’s length
negotiations conducted by and among the Parties and their
respective counsel.
Section
9.14
Construction
.
The Parties agree and acknowledge that they have jointly
participated in the negotiation and drafting of this Agreement. In
the event of an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by
the Parties and no presumptions or burdens of proof shall arise
favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the
context requires otherwise.
Section
9.15
Specific
Performance
. Each Party acknowledges and agrees that the
other Parties would be damaged irreparably in the event any
provision of this Agreement is not performed in accordance with its
specific terms or otherwise is breached, and therefore a Party
shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in addition to any
other remedy to which such Party may be entitled, at law or in
equity. No limitation herein shall restrict any Party from seeking
and obtaining equitable relief.
Section
9.16
Waiver of Jury
Trial
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section
9.17
Time of
Essence
. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the
essence.
* * * *
*
IN WITNESS WHEREOF
, this Asset Purchase
Agreement has been executed by or on behalf of each of the Parties
as of the day first written above.
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PURCHASER
:
SMART
SERVER, INC.
By
:
/s/ Steven R.
Berrard
Name:
Steven R. Berrard
Title:
CFO
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COMPANY
:
NEXTGEN
DEALER SOLUTIONS, LLC
By
:
/s/ Kartik Kakarala
Name:
Kartik Kakarala
Title:
Manager
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HALCYON
CONSULTING, LLC
By
:
/s/ Kartik Kakarala
Name:
Kartik Kakarala
Title:
Manager
The
undersigned execute this Agreement solely for the limited purpose
of ratifying their agreements set forth herein
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KARTIK KAKARALA
/s/ Kartik Kakaraia
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SRINIVAS KAKARALA
/s/ Srinivas Kakarala
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RumbleON,
INC.
2017 STOCK INCENTIVE PLAN
1.
ESTABLISHMENT,
EFFECTIVE DATE AND TERM
RumbleON, Inc., a
Nevada corporation, hereby establishes the RumbleON, Inc. 2017
Stock Incentive Plan. The Effective Date of the Plan shall be the
later of: (i) the date the Plan was approved by the Board, and (ii)
the date the Plan was approved by stockholders of Company in
accordance with the laws of the State of Nevada. Unless earlier
terminated pursuant to Section 14(k) hereof, the Plan shall
terminate on the tenth anniversary of the Effective Date.
Capitalized terms used herein are defined in Annex A attached
hereto.
2.
PURPOSE
The
purpose of the Plan is to enable the Company to attract, retain,
reward, and motivate Eligible Individuals by providing them with an
opportunity to acquire or increase a proprietary interest in the
Company and to incentivize them to expend maximum effort for the
growth and success of the Company, so as to strengthen the
mutuality of the interests between the Eligible Individuals and the
stockholders of the Company.
3.
ELIGIBILITY
Awards
may be granted under the Plan to any Eligible Individual, as
determined by the Committee from time to time, on the basis of
their importance to the business of the Company, pursuant to the
terms of the Plan.
4.
ADMINISTRATION
(a)
Committee
.
The Plan shall be administered by the Committee, which shall have
the full power and authority to take all actions, and to make all
determinations not inconsistent with the specific terms and
provisions of the Plan and deemed by the Committee to be necessary
or appropriate to the administration of the Plan, any Award granted
or any Award Agreement entered into hereunder. The Committee may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into
effect as it may determine in its sole discretion. The decisions by
the Committee shall be final, conclusive, and binding with respect
to the interpretation and administration of the Plan, any Award, or
any Award Agreement entered into under the Plan.
(b)
Delegation to Officers or
Employees
.
The
Committee may designate officers or employees of the Company to
assist the Committee in the administration of the Plan. The
Committee may delegate authority to officers or employees of the
Company to grant Awards and execute Award Agreements or other
documents on behalf of the Committee in connection with the
administration of the Plan, subject to whatever limitations or
restrictions the Committee may impose and in accordance with
applicable law.
(c)
Designation of
Advisors
.
The
Committee may designate professional advisors to assist the
Committee in the administration of the Plan. The Committee may
employ such legal counsel, consultants, and agents as it may deem
desirable for the administration of the Plan and may rely upon any
advice and any computation received from any such counsel,
consultant, or agent. The Company shall pay all expenses and costs
incurred by the Committee for the engagement of any such counsel,
consultant, or agent.
(d)
Participants Outside the
U.S
.
In order to
conform with the provisions of local laws and regulations of
foreign countries which may affect the Awards or the Participants,
the Committee shall have the sole discretion to (i) modify the
terms and conditions of the Awards granted under the Plan to
Eligible Individuals located outside the United States; (ii)
establish subplans with such modifications as may be necessary or
advisable under the circumstances present by local laws and
regulations; and (iii) take any action which it deems advisable to
comply with or otherwise reflect any necessary governmental
regulatory procedures, or to obtain any exemptions or approvals
necessary with respect to the Plan or any subplan established
hereunder.
(e)
Liability and
Indemnification
.
No
Covered Individual shall be liable for any action or determination
made in good faith with respect to the Plan, any Award granted
hereunder or any Award Agreement entered into hereunder. The
Company shall, to the maximum extent permitted by applicable law
and the Articles of Incorporation and Bylaws of the Company,
indemnify and hold harmless each Covered Individual against any
cost or expense (including reasonable attorney fees reasonably
acceptable to the Company) or liability (including any amount paid
in settlement of a claim with the approval of the Company), and
amounts advanced to such Covered Individual necessary to pay the
foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the
Plan, any Award granted hereunder or any Award Agreement entered
into hereunder. Such indemnification shall be in addition to any
rights of indemnification such individuals may have under other
agreements, applicable law or under the Articles of Incorporation
or Bylaws of the Company. Notwithstanding anything else herein,
this indemnification will not apply to the actions or
determinations made by a Covered Individual with regard to Awards
granted to such Covered Individual under the Plan or arising out of
such Covered Individual’s own fraud or bad
faith.
5.
SHARES
OF COMMON STOCK SUBJECT TO PLAN
(a)
Shares
Available for Awards
.
The Common Stock that may be issued
pursuant to Awards granted under the Plan shall be treasury shares
or authorized but unissued shares of the Common Stock. The maximum
number of shares of Common Stock that may be issued pursuant to
Awards granted under the Plan shall be twelve percent (12%) of all
issued and outstanding Common Stock from time to time.
(b)
Certain Limitations on Specific Types
of Awards
.
The
granting of Awards under this Plan shall be subject to the
following limitations:
(i)
With respect to the
shares of Common Stock issuable pursuant to this Section, a maximum
of 768,000 of such shares may be subject to grants of Incentive
Stock Options;
(ii)
With
respect to the shares of Common Stock issuable pursuant to this
Section, a maximum of 768,000 of such shares may be subject to
grants of Options or Stock Appreciation Rights to any one Covered
Employee during any one fiscal year;
(iii)
With
respect to the shares of Common Stock issuable pursuant to this
Section, a maximum of 768,000 of such shares may be subject to
grants of Performance Shares, Restricted Stock, Restricted Stock
Units and Awards of Common Stock to any one Covered Employee during
any one fiscal year; and
(iv)
The
maximum value at Grant Date of grants of Performance Units which
may be granted to any one Covered Employee during any one fiscal
year shall be One Million Dollars ($1,000,000).
(c)
Reduction of Shares Available for
Awards
.
Upon the
granting of an Award, the number of shares of Common Stock
available for issuance under this Section for the granting of
further Awards shall be reduced as follows:
(i)
In connection with
the granting of an Option or Stock Appreciation Right, the number
of shares of Common Stock shall be reduced by the number of shares
of Common Stock subject to the Option or Stock Appreciation
Right;
(ii)
In
connection with the granting of an Award that is settled in Common
Stock, other than the granting of an Option or Stock Appreciation
Right, the number of shares of Common Stock shall be reduced by the
number of shares of Common Stock subject to the Award;
and
(iii)
Awards
settled in cash or property other than Common Stock shall not count
against the total number of shares of Common Stock available to be
granted pursuant to the Plan.
(d)
Cancelled, Forfeited, or Surrendered
Awards
.
Notwithstanding anything to the contrary in this Plan, if any award
under this Plan is cancelled, forfeited or terminated for any
reason prior to exercise, delivery or becoming vested in full, the
shares of Common Stock that were subject to such Award shall, to
the extent cancelled, forfeited or terminated, immediately become
available for future Awards granted under this Plan; provided,
however, that any shares of Common Stock subject to an Award which
is cancelled, forfeited or terminated in order to pay the exercise
price of a stock option, purchase price or any taxes or tax
withholdings on an award shall not be available for future Awards
granted under this Plan.
(e)
Recapitalization
.
If the outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities by reason of
any recapitalization, reclassification, reorganization, stock
split, reverse split, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock of
the Company or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the
Effective Date, an appropriate and proportionate adjustment shall
be made by the Committee to: (i) the aggregate number and kind of
shares of Common Stock available under the Plan (including, but not
limited to, the limits of the number of shares of Common Stock
described in Section 5(b)), (ii) the calculation of the reduction
of shares of Common Stock available under the Plan, (iii) the
number and kind of shares of Common Stock issuable pursuant to
outstanding Awards granted under the Plan and/or (iv) the Exercise
Price of outstanding Options or Stock Appreciation Rights granted
under the Plan. No fractional shares of Common Stock or units of
other securities shall be issued pursuant to any such adjustment
under this Section 5(e), and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to
the nearest whole share or unit. Any adjustments made under this
Section 5(e) with respect to any Incentive Stock Options must be
made in accordance with Code Section 424.
6.
RESTRICTED
STOCK AND RESTRICTED STOCK UNITS
(a)
Grant
of Restricted Stock and Restricted Stock Units
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Restricted Stock or Restricted
Stock Units, in such amounts and on such terms and conditions as
the Committee shall determine in its sole and absolute discretion.
Each grant of Restricted Stock and Restricted Stock Units shall
satisfy the requirements as set forth in this Section.
(b)
Restrictions
.
The Committee shall impose such
restrictions on any Restricted Stock or Restricted Stock Unit
granted pursuant to the Plan as it may deem advisable including,
without limitation, time-based vesting restrictions or the
attainment of Performance Goals. The determination with respect to
achievement of Performance Goals shall be made pursuant to Section
9 hereof.
(c)
Certificates and Certificate
Legend
.
With respect
to a grant of Restricted Stock, the Company may issue a certificate
evidencing such Restricted Stock to the Participant or issue and
hold such shares of Restricted Stock for the benefit of the
Participant until the applicable restrictions expire. The Company
may legend the certificate representing Restricted Stock to give
appropriate notice of such restrictions. In addition to any such
legends, each certificate representing shares of Restricted Stock
granted pursuant to the Plan shall bear the following
legend:
“Shares of
stock represented by this certificate are subject to certain terms,
conditions, and restrictions on transfer as set forth in the
RumbleON, Inc. 2017 Stock Incentive Plan (the “Plan”),
and in an agreement entered into by and between the registered
owner of such shares and RumbleON, Inc. (the
“Company”), dated ___, 20__ (the “Award
Agreement”). A copy of the Plan and the Award Agreement may
be obtained from the Secretary of the Company.”
(d)
Removal of
Restrictions
.
Except
as otherwise provided in the Plan, shares of Restricted Stock shall
become freely transferable by the Participant upon the lapse of the
applicable restrictions. Once the shares of Restricted Stock are
released from the restrictions, the Participant shall be entitled
to have the legend required by paragraph (c) above removed from the
share certificate evidencing such Restricted Stock and the Company
shall pay or distribute to the Participant all dividends and
distributions held in escrow by the Company with respect to such
Restricted Stock, if any.
(e)
Stockholder Rights
.
Unless otherwise provided in an Award
Agreement, until the expiration of all applicable restrictions, (i)
the Restricted Stock shall be treated as outstanding, (ii) the
Participant holding shares of Restricted Stock may exercise full
voting rights with respect to such shares, and (iii) the
Participant holding shares of Restricted Stock shall be entitled to
receive all dividends and other distributions paid with respect to
such shares while they are so held. If any such dividends or
distributions are paid in shares of Common Stock, such shares shall
be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to
which they were paid. Notwithstanding anything to the contrary, at
the discretion of the Committee, all such dividends and
distributions may be held in escrow by the Company (subject to the
same restrictions on forfeitability) until all restrictions on the
respective Restricted Stock have lapsed. Holders of the Restricted
Stock Units shall not have any of the rights of a stockholder,
including the right to vote or receive dividends and other
distributions, until Common Stock shall have been issued in the
Participant’s name pursuant to the Restricted Stock
Units.
(f)
Termination of
Service
.
Unless
otherwise provided in an Award Agreement, if a Participant’s
employment or other service with the Company terminates for any
reason, all unvested shares of Restricted Stock and Restricted
Stock Units held by the Participant and any dividends or
distributions held in escrow by the Company with respect to
Restricted Stock shall be forfeited immediately and returned to the
Company. Notwithstanding this paragraph, to the extent applicable,
all grants of Restricted Stock and Restricted Stock Units that vest
solely upon the attainment of Performance Goals shall be treated
pursuant to the terms and conditions that would have been
applicable under Section
9
as if such grants were Awards of Performance Shares.
Notwithstanding anything in this Plan to the contrary, the
Committee may provide, in its sole and absolute discretion, that
following the termination of employment or other service of a
Participant with the Company for any reason, any unvested shares of
Restricted Stock or Restricted Stock Units held by the Participant
that vest solely upon a future service requirement shall vest in
whole or in part, at any time subsequent to such termination of
employment or other service.
(g)
Payment of Common Stock with respect
to Restricted Stock Units
. Notwithstanding anything to the
contrary herein, unless otherwise provided in the Award agreement,
Common Stock will be issued with respect to Restricted Stock Units
no later than March 15 of the year immediately following the year
in which the Restricted Stock Units are first no longer subject to
a substantial risk of forfeiture as such term is defined in Section
409A of the Code and the regulations issued thereunder (“RSU
Payment Date”). In the event that Participant has elected to
defer the receipt of Common Stock pursuant to an Award Agreement
beyond the RSU Payment Date, then
the Common Stock will be issued at the time
specified in the Award Agreement or related deferral election form.
In addition, unless otherwise provided in the Award Agreement, if
the receipt of Common Stock is deferred past the RSU Payment Date,
Dividend Equivalents on the Common Stock covered by Restricted
Stock Units shall be deferred until the RSU Payment
Date.
7.
OPTIONS
(a)
Grant
of Options
.
Subject
to the terms and conditions of the Plan, the Committee may grant to
such Eligible Individuals as the Committee may determine, Options
to purchase such number of shares of Common Stock and on such terms
and conditions as the Committee shall determine in its sole and
absolute discretion. Each grant of an Option shall satisfy the
requirements set forth in this Section.
(b)
Type of Options
.
Each Option granted under the Plan
may be designated by the Committee, in its sole discretion, as
either (i) an Incentive Stock Option, or (ii) a Non-Qualified Stock
Option. Options designated as Incentive Stock Options that fail to
continue to meet the requirements of Code Section 422 shall be
re-designated as Non-Qualified Stock Options automatically on the
date of such failure to continue to meet such requirements without
further action by the Committee. In the absence of any designation,
Options granted under the Plan will be deemed to be Non-Qualified
Stock Options.
(c)
Exercise Price
.
Subject to the limitations set forth
in the Plan relating to Incentive Stock Options, the Exercise Price
of an Option shall be fixed by the Committee and stated in the
respective Award Agreement, provided that the Exercise Price of the
shares of Common Stock subject to such Option may not be less than
Fair Market Value of such Common Stock on the Grant Date, or if
greater, the par value of the Common Stock.
(d)
Limitation on
Repricing
.
Unless
such action is approved by the Company’s stockholders in
accordance with applicable law: (i) no outstanding Option granted
under the Plan may be amended to provide an Exercise Price that is
lower than the then-current Exercise Price of such outstanding
Option (other than adjustments to the Exercise Price pursuant to
Sections 5(e) and 11); (ii) the Committee may not cancel any
outstanding Option and grant in substitution therefore new Awards
under the Plan covering the same or a different number of shares of
Common Stock and having an Exercise Price lower than the
then-current Exercise Price of the cancelled Option (other than
adjustments to the Exercise Price pursuant to Sections 5(e) and
11); and (iii) the Committee may not authorize the repurchase of an
outstanding Option which has an Exercise Price that is higher than
the then-current fair market value of the Common Stock (other than
adjustments to the Exercise Price pursuant to Sections 5(e) and
11).
(e)
Limitation on Option
Period
.
Subject to
the limitations set forth in the Plan relating to Incentive Stock
Options, Options granted under the Plan and all rights to purchase
Common Stock thereunder shall terminate no later than the tenth
anniversary of the Grant Date of such Options, or on such earlier
date as may be stated in the Award Agreement relating to such
Option. In the case of Options expiring prior to the tenth
anniversary of the Grant Date, the Committee may in its discretion,
at any time prior to the expiration or termination of said Options,
extend the term of any such Options for such additional period as
it may determine, but in no event beyond the tenth anniversary of
the Grant Date thereof.
(f)
Limitations on Incentive Stock
Options
.
Notwithstanding any other provisions of the Plan, the following
provisions shall apply with respect to Incentive Stock Options
granted pursuant to the Plan.
(i)
Limitation on Grants
. Incentive
Stock Options may only be granted to Section 424 Employees. The
aggregate Fair Market Value (determined at the time such Incentive
Stock Option is granted) of the shares of Common Stock for which
any individual may have Incentive Stock Options which first become
vested and exercisable in any calendar year (under all incentive
stock option plans of the Company) shall not exceed $100,000.
Options granted to such individual in excess of the $100,000
limitation, and any Options issued subsequently which first become
vested and exercisable in the same calendar year, shall
automatically be treated as Non-Qualified Stock
Options.
(ii)
Minimum
Exercise Price
. In no event may the Exercise Price of a
share of Common Stock subject an Incentive Stock Option be less
than 100% of the Fair Market Value of such share of Common Stock on
the Grant Date.
(iii)
Ten
Percent Stockholder
. Notwithstanding any other provision of
the Plan to the contrary, in the case of Incentive Stock Options
granted to a Section 424 Employee who, at the time the Option is
granted, owns (after application of the rules set forth in Code
Section 424(d)) stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company, such
Incentive Stock Options (i) must have an Exercise Price per share
of Common Stock that is at least 110% of the Fair Market Value as
of the Grant Date of a share of Common Stock, and (ii) must not be
exercisable after the fifth anniversary of the Grant
Date.
(g)
Vesting Schedule and
Conditions
.
No
Options may be exercised prior to the satisfaction of the
conditions and vesting schedule provided for in the Plan and in the
Award Agreement relating thereto.
(h)
Exercise
.
When the conditions to the exercise
of an Option have been satisfied, the Participant may exercise the
Option only in accordance with the following provisions. The
Participant shall deliver to the Company a written notice stating
that the Participant is exercising the Option and specifying the
number of shares of Common Stock which are to be purchased pursuant
to the Option, and such notice shall be accompanied by payment in
full of the Exercise Price of the shares for which the Option is
being exercised, by one or more of the methods provided for in the
Plan. An attempt to exercise any Option granted hereunder other
than as set forth in the Plan shall be invalid and of no force and
effect.
(i)
Payment
. Payment of the
Exercise Price for the shares of Common Stock purchased pursuant to
the exercise of an Option shall be made by one of the following
methods:
(i)
by cash, certified
or cashier’s check, bank draft or money order;
(ii)
through
the delivery to the Company of shares of Common Stock which have
been previously owned by the Participant for the requisite period
necessary to avoid a charge to the Company’s earnings for
financial reporting purposes; such shares shall be valued, for
purposes of determining the extent to which the Exercise Price has
been paid thereby, at their Fair Market Value on the date of
exercise; without limiting the foregoing, the Committee may require
the Participant to furnish an opinion of counsel acceptable to the
Committee to the effect that such delivery would not result in the
Company incurring any liability under Section 16(b) of the Exchange
Act; or
(iii)
by
any other method which the Committee, in its sole and absolute
discretion and to the extent permitted by applicable law, may
permit, including, but not limited to through a “cashless
exercise sale and remittance procedure” pursuant to which the
Participant shall concurrently provide irrevocable instructions (1)
to a brokerage firm approved by the Committee to effect the
immediate sale of the purchased shares and remit to the Company,
out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for
the purchased shares plus all applicable federal, state and local
income, employment, excise, foreign and other taxes required to be
withheld by the Company by reason of such exercise and (2) to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the
sale.
(j)
Termination of
Employment
.
Unless
otherwise provided in an Award Agreement, upon the termination of
the employment or other service of a Participant with Company for
any reason, all of the Participant’s outstanding Options
(whether vested or unvested) shall be subject to the rules of this
paragraph. Upon such termination, the Participant’s unvested
Options shall expire. Notwithstanding anything in this Plan to the
contrary, the Committee may provide, in its sole and absolute
discretion, that following the termination of employment or other
service of a Participant with the Company for any reason (i) any
unvested Options held by the Participant shall vest in whole or in
part, at any time subsequent to such termination of employment or
other service, and/or (ii) a Participant or the Participant’s
estate, devisee or heir at law (whichever is applicable), may
exercise an Option, in whole or in part, at any time subsequent to
such termination of employment or other service and prior to the
termination of the Option pursuant to its terms that are unrelated
to termination of service. Unless otherwise determined by the
Committee, temporary absence from employment or other service
because of illness, vacation, approved leaves of absence or
military service shall not constitute a termination of employment
or other service.
(i)
Termination for Reason Other Than
Cause, Disability or Death
. If a Participant’s
termination of employment or other service is for any reason other
than death, Disability, Cause or a voluntary termination within
ninety (90) days after occurrence of an event which would be
grounds for termination of employment or other service by the
Company for Cause, any Option held by such Participant may be
exercised, to the extent exercisable at termination, by the
Participant at any time within a period not to exceed ninety (90)
days from the date of such termination, but in no event after the
termination of the Option pursuant to its terms that are unrelated
to termination of service.
(ii)
Disability
.
If a Participant’s termination of employment or other service
with the Company is by reason of a Disability of such Participant,
any Option held by such Participant may be exercised, to the extent
exercisable at termination, by the Participant at any time within a
period not to exceed one (1) year after such termination, but in no
event after the termination of the Option pursuant to its terms
that are unrelated to termination of service; provided, however,
that if the Participant dies within such period, any vested Option
held by such Participant upon death shall be exercisable by the
Participant’s estate, devisee or heir at law (whichever is
applicable) for a period not to exceed one (1) year after the
Participant’s death, but in no event after the termination of
the Option pursuant to its terms that are unrelated to termination
of service.
(iii)
Death
.
If a Participant dies while in the employment or other service of
the Company, any Option held by such Participant may be exercised,
to the extent exercisable at termination, by the
Participant’s estate or the devisee named in the
Participant’s valid last will and testament or the
Participant’s heir at law who inherits the Option, at any
time within a period not to exceed one (1) year after the date of
such Participant’s death, but in no event after the
termination of the Option pursuant to its terms that are unrelated
to termination of service.
(iv)
Termination
for Cause
. In the event the termination is for Cause or is a
voluntary termination within ninety (90) days after occurrence of
an event which would be grounds for termination of employment or
other service by the Company for Cause (without regard to any
notice or cure period requirement), any Option held by the
Participant at the time of such termination shall be deemed to have
terminated and expired upon the date of such
termination.
8.
STOCK
APPRECIATION RIGHTS
(a)
Grant
of Stock Appreciation Rights
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Stock Appreciation Rights, in such
amounts and on such terms and conditions as the Committee shall
determine in its sole and absolute discretion. Each grant of a
Stock Appreciation Right shall satisfy the requirements as set
forth in this Section.
(b)
Terms and Conditions of Stock
Appreciation Rights
.
Unless otherwise provided in an Award Agreement, the terms and
conditions (including, without limitation, the limitations on the
Exercise Price, exercise period, repricing and termination) of the
Stock Appreciation Right shall be substantially identical (to the
extent possible taking into account the differences related to the
character of the Stock Appreciation Right) to the terms and
conditions that would have been applicable under Section 7 above
were the grant of the Stock Appreciation Rights a grant of an
Option.
(c)
Exercise of Stock Appreciation
Rights
.
Stock
Appreciation Rights shall be exercised by a Participant only by
written notice delivered to the Company, specifying the number of
shares of Common Stock with respect to which the Stock Appreciation
Right is being exercised.
(d)
Payment of Stock Appreciation
Right
.
Unless
otherwise provided in an Award Agreement, upon exercise of a Stock
Appreciation Right, the Participant or Participant’s estate,
devisee or heir at law (whichever is applicable) shall be entitled
to receive payment, in cash, in shares of Common Stock, or in a
combination thereof, as determined by the Committee in its sole and
absolute discretion. The amount of such payment shall be determined
by multiplying the excess, if any, of the Fair Market Value of a
share of Common Stock on the date of exercise over the Fair Market
Value of a share of Common Stock on the Grant Date, by the number
of shares of Common Stock with respect to which the Stock
Appreciation Rights are then being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable
with respect to a Stock Appreciation Right by including such
limitation in the Award Agreement.
9.
PERFORMANCE
SHARES AND PERFORMANCE UNITS
(a)
Grant
of Performance Shares and Performance Units
.
Subject to the terms and conditions
of the Plan, the Committee may grant to such Eligible Individuals
as the Committee may determine, Performance Shares and Performance
Units, in such amounts and on such terms and conditions as the
Committee shall determine in its sole and absolute discretion. Each
grant of a Performance Share or a Performance Unit shall satisfy
the requirements as set forth in this Section.
(b)
Performance Goals
.
Performance Goals will be based on
one or more of the following criteria, as determined by the
Committee in its absolute and sole discretion: (i) the attainment
of certain target levels of, or a specified increase in, the
Company’s enterprise value or value creation targets; (ii)
the attainment of certain target levels of, or a percentage
increase in, the Company’s after-tax or pre-tax profits
including, without limitation, that attributable to the
Company’s continuing and/or other operations; (iii) the
attainment of certain target levels of, or a specified increase
relating to, the Company’s operational cash flow or working
capital, or a component thereof; (iv) the attainment of certain
target levels of, or a specified decrease relating to, the
Company’s operational costs, or a component thereof; (v) the
attainment of a certain level of reduction of, or other specified
objectives with regard to limiting the level of increase in all or
a portion of bank debt or other of the Company’s long-term or
short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of cash
balances and/or other offsets and adjustments as may be established
by the Committee; (vi) the attainment of a specified percentage
increase in earnings per share or earnings per share from the
Company’s continuing operations; (vii) the attainment of
certain target levels of, or a specified percentage increase in,
the Company’s net sales, revenues, net income or earnings
before income tax or other exclusions; (viii) the attainment of
certain target levels of, or a specified increase in, the
Company’s return on capital employed or return on invested
capital; (ix) the attainment of certain target levels of, or a
percentage increase in, the Company’s after-tax or pre-tax
return on stockholder equity; (x) the attainment of certain target
levels in the fair market value of the Company’s Common
Stock; (xi) the growth in the value of an investment in the Common
Stock assuming the reinvestment of dividends; and/or (xii) the
attainment of certain target levels of, or a specified increase in,
EBITDA (earnings before income tax, depreciation and amortization).
In addition, Performance Goals may be based upon the attainment by
a subsidiary, division or other operational unit of the Company of
specified levels of performance under one or more of the measures
described above. Further, the Performance Goals may be based upon
the attainment by the Company (or a subsidiary, division, facility
or other operational unit of the Company) of specified levels of
performance under one or more of the foregoing measures relative to
the performance of other corporations. To the extent permitted
under Code Section 162(m) of the Code (including, without
limitation, compliance with any requirements for stockholder
approval), the Committee may, in its sole and absolute discretion:
(i) designate additional business criteria upon which the
Performance Goals may be based; (ii) modify, amend or adjust the
business criteria described herein; or (iii) incorporate in the
Performance Goals provisions regarding changes in accounting
methods, corporate transactions (including, without limitation,
dispositions or acquisitions) and similar events or circumstances.
Performance Goals may include a threshold level of performance
below which no Award will be earned, levels of performance at which
an Award will become partially earned and a level at which an Award
will be fully earned.
(c)
Terms and Conditions of Performance
Shares and Performance Units
.
The applicable Award Agreement shall
set forth (i) the number of Performance Shares or the dollar value
of Performance Units granted to the Participant; (ii) the
Performance Period and Performance Goals with respect to each such
Award; (iii) the threshold, target and maximum shares of Common
Stock or dollar values of each Performance Share or Performance
Unit and corresponding Performance Goals; and (iv) any other terms
and conditions as the Committee determines in its sole and absolute
discretion. The Committee shall establish, in its sole and absolute
discretion, the Performance Goals for the applicable Performance
Period for each Performance Share or Performance Unit granted
hereunder. Performance Goals for different Participants and for
different grants of Performance Shares and Performance Units need
not be identical. Unless otherwise provided in an Award Agreement,
a holder of Performance Units or Performance Shares is not entitled
to the rights of a holder of Common Stock.
(d)
Determination and Payment of
Performance Units or Performance Shares Earned
.
Following the end of a Performance
Period, the Committee shall determine the extent to which
Performance Shares or Performance Units have been earned on the
basis of the Company’s actual performance in relation to the
established Performance Goals as set forth in the applicable Award
Agreement and shall certify these results in writing. Unless
otherwise provided in an Award Agreement, the Committee shall
determine in its sole and absolute discretion whether payment with
respect to the Performance Share or Performance Unit shall be made
in cash, in shares of Common Stock, or in a combination
thereof.
(e)
Termination of
Employment
.
Unless
otherwise provided in an Award Agreement, if a Participant’s
employment or other service with the Company terminates for any
reason, all of the Participant’s outstanding Performance
Shares and Performance Units shall be subject to the rules of this
Section.
(i)
Termination for Reason Other Than
Death or Disability
. If a Participant’s employment or
other service with the Company terminates prior to the expiration
of a Performance Period with respect to any Performance Units or
Performance Shares held by such Participant for any reason other
than death or Disability, the outstanding Performance Units or
Performance Shares held by such Participant for which the
Performance Period has not yet expired shall terminate upon such
termination of employment or other service with the Company and the
Participant shall have no further rights pursuant to such
Performance Units or Performance Shares.
(ii)
Termination
of Employment for Death or Disability
. If a
Participant’s employment or other service with the Company
terminates by reason of the Participant’s death or Disability
prior to the end of a Performance Period, the Participant, or the
Participant’s estate, devisee or heir at law (whichever is
applicable) shall be entitled to a payment of the
Participant’s outstanding Performance Units and Performance
Shares, pursuant to the terms of the Plan and the
Participant’s Award Agreement; provided, however, that the
Participant shall be deemed to have earned only that proportion (to
the nearest whole unit or share) of the Performance Units or
Performance Shares granted to the Participant under such Award as
the number of full months of the Performance Period which have
elapsed since the first day of the Performance Period for which the
Award was granted to the end of the month in which the
Participant’s termination of employment or other service,
bears to the total number of months in the Performance Period,
subject to the attainment of the Performance Goals associated with
the Award as certified by the Committee. The remaining Performance
Units or Performance Shares and any rights with respect thereto
shall be canceled and forfeited.
10.
OTHER
AWARDS
Awards
of shares of Common Stock, phantom stock and other Awards that are
valued in whole or in part by reference to, or otherwise based on,
Common Stock, may also be made, from time to time, to Eligible
Individuals as may be selected by the Committee. Such Common Stock
may be issued in satisfaction of Awards granted under any other
plan sponsored by the Company or compensation payable to an
Eligible Individual. In addition, such Awards may be made alone or
in addition to or in connection with any other Award granted
hereunder. The Committee may determine the terms and conditions of
any such Award. Each such Award shall be evidenced by an Award
Agreement between the Eligible Individual and the Company which
shall specify the number of shares of Common Stock subject to the
Award, any consideration therefore, any vesting or performance
requirements, and such other terms and conditions as the Committee
shall determine in its sole and absolute discretion.
11.
CHANGE
IN CONTROL
Upon
the occurrence of a Change in Control, the Committee may, in its
sole and absolute discretion, provide on a case by case basis that
(i) all Awards shall terminate, provided that Participants shall
have the right, immediately prior to the occurrence of such Change
in Control and during such reasonable period as the Committee in
its sole discretion shall determine and designate, to exercise any
Award, (ii) all Awards shall terminate, provided that Participants
shall be entitled to a cash payment equal to the Change in Control
Price with respect to shares subject to the vested portion of the
Award net of the Exercise Price thereof, if applicable, (iii) in
connection with a liquidation or dissolution of the Company, the
Awards, to the extent vested, shall convert into the right to
receive liquidation proceeds net of the Exercise Price (if
applicable), (iv) accelerate the vesting of Awards and (v) any
combination of the foregoing. In the event that the Committee does
not terminate or convert an Award upon a Change in Control of the
Company, then the Award shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring, or
succeeding corporation (or an affiliate thereof).
12.
CHANGE
IN STATUS OF PARENT OR SUBSIDIARY
Unless
otherwise provided in an Award Agreement or otherwise determined by
the Committee, in the event that an entity or business unit which
was previously a part of the Company is no longer a part of the
Company, as determined by the Committee in its sole discretion, the
Committee may, in its sole and absolute discretion: (i) provide on
a case by case basis that some or all outstanding Awards held by a
Participant employed by or performing service for such entity or
business unit may become immediately exercisable or vested, without
regard to any limitation imposed pursuant to this Plan; (ii)
provide on a case by case basis that some or all outstanding Awards
held by a Participant employed by or performing service for such
entity or business unit may remain outstanding, may continue to
vest, and/or may remain exercisable for a period not exceeding one
(1) year, subject to the terms of the Award Agreement and this
Plan; and/or (iii) treat the employment or other services of a
Participant performing services for such entity or business unit as
terminated, if such Participant is not employed by the Company or
any entity that is a part of the Company, immediately after such
event.
13.
REQUIREMENTS
OF LAW
(a)
Violations
of Law
.
The Company
shall not be required to make any payments, sell or issue any
shares of Common Stock under any Award if the sale or issuance of
such shares would constitute a violation by the individual
exercising the Award, the Participant or the Company of any
provisions of any law or regulation of any governmental authority,
including without limitation any provisions of the Sarbanes-Oxley
Act, and any other federal or state securities laws or regulations.
Any determination in this connection by the Committee shall be
final, binding, and conclusive. The Company shall not be obligated
to take any affirmative action in order to cause the exercise of an
Award, the issuance of shares pursuant thereto or the grant of an
Award to comply with any law or regulation of any governmental
authority.
(b)
Registration
.
At the time of any exercise or
receipt of any Award, the Company may, if it shall determine it
necessary or desirable for any reason, require the Participant (or
Participant’s heirs, legatees or legal representative, as the
case may be), as a condition to the exercise or grant thereof, to
deliver to the Company a written representation of present
intention to hold the shares for their own account as an investment
and not with a view to, or for sale in connection with, the
distribution of such shares, except in compliance with applicable
federal and state securities laws with respect thereto. In the
event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to
the Participant (or Participant’s heirs, legatees or legal
representative, as the case may be) upon the Participant’s
exercise of part or all of the Award or receipt of an Award and a
stop transfer order may be placed with the transfer agent. Each
Award shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing,
registration or qualification of the shares subject to the Award
upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of or in connection with, the
issuance or purchase of the shares thereunder, the Award may not be
exercised in whole or in part and the restrictions on an Award may
not be removed unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company in its sole
discretion. The Participant shall provide the Company with any
certificates, representations and information that the Company
requests and shall otherwise cooperate with the Company in
obtaining any listing, registration, qualification, consent or
approval that the Company deems necessary or appropriate. The
Company shall not be obligated to take any affirmative action in
order to cause the exercisability or vesting of an Award, to cause
the exercise of an Award or the issuance of shares pursuant
thereto, or to cause the grant of Award to comply with any law or
regulation of any governmental authority.
(c)
Withholding
.
The Committee may make such
provisions and take such steps as it may deem necessary or
appropriate for the withholding of any taxes that the Company is
required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold
in connection with the grant or exercise of an Award, or the
removal of restrictions on an Award including, but not limited to:
(i) the withholding of delivery of shares of Common Stock until the
holder reimburses the Company for the amount the Company is
required to withhold with respect to such taxes; (ii) the canceling
of any number of shares of Common Stock issuable in an amount
sufficient to reimburse the Company for the amount it is required
to so withhold; (iii) withholding the amount due from any such
person’s wages or compensation due to such person; or (iv)
requiring the Participant to pay the Company cash in the amount the
Company is required to withhold with respect to such
taxes.
(d)
Governing Law
.
The Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Nevada.
14.
GENERAL
PROVISIONS
(a)
Award
Agreements
.
All
Awards granted pursuant to the Plan shall be evidenced by an Award
Agreement. Each Award Agreement shall specify the terms and
conditions of the Award granted and shall contain any additional
provisions as the Committee shall deem appropriate, in its sole and
absolute discretion (including, to the extent that the Committee
deems appropriate, provisions relating to confidentiality,
non-competition, non-solicitation and similar matters). The terms
of each Award Agreement need not be identical for Eligible
Individuals provided that each Award Agreement shall comply with
the terms of the Plan.
(b)
Purchase Price
.
To the extent the purchase price of
any Award granted hereunder is less than par value of a share of
Common Stock and such purchase price is not permitted by applicable
law, the per share purchase price shall be deemed to be equal to
the par value of a share of Common Stock.
(c)
Dividends and Dividend
Equivalents
.
Except
as set forth in the Plan, an Award Agreement or provided by the
Committee in its sole and absolute discretion, a Participant shall
not be entitled to receive, currently or on a deferred basis, cash
or stock dividends, Dividend Equivalents, or cash payments in
amounts equivalent to cash or stock dividends on shares of Common
Stock covered by an Award. The Committee in its absolute and sole
discretion may credit a Participant’s Award with Dividend
Equivalents with respect to any Awards. To the extent that
dividends and distributions relating to an Award are held in escrow
by the Company, or Dividend Equivalents are credited to an Award, a
Participant shall not be entitled to any interest on any such
amounts. The Committee may not grant Dividend Equivalents to an
Award subject to performance-based vesting to the extent that the
grant of such Dividend Equivalents would limit the Company’s
deduction of the compensation payable under such Award for federal
tax purposes pursuant to Code Section 162(m).
(d)
Deferral of Awards
.
The Committee may from time to time
establish procedures pursuant to which a Participant may elect to
defer, until a time or times later than the vesting of an Award,
receipt of all or a portion of the shares of Common Stock or cash
subject to such Award and to receive Common Stock or cash at such
later time or times, all on such terms and conditions as the
Committee shall determine. The Committee shall not permit the
deferral of an Award unless counsel for the Company determines that
such action will not result in adverse tax consequences to a
Participant under Section 409A of the Code. If any such deferrals
are permitted, then notwithstanding anything to the contrary
herein, a Participant who elects to defer receipt of Common Stock
shall not have any rights as a stockholder with respect to deferred
shares of Common Stock unless and until shares of Common Stock are
actually delivered to the Participant with respect thereto, except
to the extent otherwise determined by the Committee.
(e)
Prospective
Employees
.
Notwithstanding anything to the contrary, any Award granted to a
Prospective Employee shall not become vested prior to the date the
Prospective Employee first becomes an employee of the
Company.
(f)
Stockholder Rights
.
Except as expressly provided in the
Plan
or an Award
Agreement, a Participant shall not have any of the rights of a
stockholder with respect to Common Stock subject to the Awards
prior to satisfaction of all conditions relating to the issuance of
such Common Stock, and no adjustment shall be made for dividends,
distributions or other rights of any kind for which the record date
is prior to the date on which all such conditions have been
satisfied.
(g)
Transferability of
Awards
.
A
Participant may not Transfer an Award other than by will or the
laws of descent and distribution. Awards may be exercised during
the Participant’s lifetime only by the Participant. No Award
shall be liable for or subject to the debts, contracts, or
liabilities of any Participant, nor shall any Award be subject to
legal process or attachment for or against such person. Any
purported Transfer of an Award in contravention of the provisions
of the Plan shall have no force or effect and shall be null and
void, and the purported transferee of such Award shall not acquire
any rights with respect to such Award. Notwithstanding anything to
the contrary, the Committee may in its sole and absolute discretion
permit the Transfer of an Award to a Participant’s
“family member” as such term is defined in the Form S-8
Registration Statement under the Securities Act of 1933, as
amended, under such terms and conditions as specified by the
Committee. In such case, such Award shall be exercisable only by
the transferee approved of by the Committee. To the extent that the
Committee permits the Transfer of an Incentive Stock Option to a
“family member”, so that such Option fails to continue
to satisfy the requirements of an incentive stock option under the
Code such Option shall automatically be re-designated as a
Non-Qualified Stock Option.
(h)
Buyout and Settlement
Provisions
.
Except
as prohibited in Section 7(d) of the Plan, the Committee may at any
time on behalf of the Company offer to buy out any Awards
previously granted based on such terms and conditions as the
Committee shall determine which shall be communicated to the
Participants at the time such offer is made.
(i)
Use of Proceeds
.
The proceeds received by the Company
from the sale of Common Stock pursuant to Awards granted under the
Plan shall constitute general funds of the Company.
(j)
Modification or Substitution of an
Award
.
Subject to
the terms and conditions of the Plan, the Committee may modify
outstanding Awards, provided that, except as expressly provided in
the Plan, no modification of an Award shall adversely affect any
rights or obligations of the Participant under the applicable Award
Agreement without the Participant’s consent. Nothing in the
Plan shall limit the right of the Company to pay compensation of
any kind outside the terms of the Plan.
(k)
Amendment and Termination of
Plan
.
The Board may,
at any time and from time to time, amend, suspend or terminate the
Plan as to any shares of Common Stock as to which Awards have not
been granted;
provided,
however,
that the approval of the stockholders of the
Company in accordance with applicable law and the Articles of
Incorporation and Bylaws of the Company shall be required for any
amendment: (i) that changes the class of individuals eligible to
receive Awards under the Plan; (ii) that increases the maximum
number of shares of Common Stock in the aggregate that may be
subject to Awards that are granted under the Plan (except as
permitted under Section 5 or Section 11 hereof); (iii) the approval
of which is necessary to comply with federal or state law
(including without limitation Section 162(m) of the Code and Rule
16b-3 under the Exchange Act) or with the rules of any stock
exchange or automated quotation system on which the Common Stock
may be listed or traded; or (iv) that proposed to eliminate a
requirement provided herein that the stockholders of the Company
must approve an action to be undertaken under the Plan. Except as
expressly provided in the Plan, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of
an Award, alter or impair rights or obligations under any Award
theretofore granted under the Plan. Awards granted prior to the
termination of the Plan may extend beyond the date the Plan is
terminated and shall continue subject to the terms of the Plan as
in effect on the date the Plan is terminated.
(l)
Section 409A and 162(m) of the
Code
.
With respect
to Awards subject to Section 409A or 162(m) of the Code, this Plan
is intended to comply with the requirements of such Sections, and
the provisions hereof shall be interpreted in a manner that
satisfies the requirements of such Sections and the related
regulations, and the Plan shall be operated accordingly. If any
provision of this Plan or any term or condition of any Award would
otherwise frustrate or conflict with this intent, the provision,
term or condition will be interpreted and deemed amended so as to
avoid this conflict.
(m)
Notification of 83(b)
Election
.
If in
connection with the grant of any Award, any Participant makes an
election permitted under Code Section 83(b), such Participant must
notify the Company in writing of such election within ten (10) days
of filing such election with the Internal Revenue
Service.
(n)
Disclaimer of
Rights
.
No provision
in the Plan, any Award granted hereunder, or any Award Agreement
entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ of or other
service with the Company or to interfere in any way with the right
and authority of the Company either to increase or decrease the
compensation of any individual, including any holder of an Award,
at any time, or to terminate any employment or other relationship
between any individual and the Company. The grant of an Award
pursuant to the Plan shall not affect or limit in any way the right
or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or
to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
(o)
Unfunded Status of
Plan
.
The Plan is
intended to constitute an “unfunded” plan for incentive
and deferred compensation. With respect to any payments as to which
a Participant has a fixed and vested interest but which are not yet
made to such Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
(p)
Nonexclusivity of
Plan
.
The adoption
of the Plan shall not be construed as creating any limitations upon
the right and authority of the Board to adopt such other incentive
compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or
specifically to a particular individual or individuals) as the
Board in its sole and absolute discretion determines
desirable.
(q)
Other Benefits
.
No Award payment under the Plan shall
be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any agreement between a
Participant and the Company, nor affect any benefits under any
other benefit plan of the Company now or subsequently in effect
under which benefits are based upon a Participant’s level of
compensation.
(r)
Headings
.
The section headings in the Plan are
for convenience only; they form no part of this Agreement and shall
not affect its interpretation.
(s)
Pronouns
.
The use of any gender in the Plan
shall be deemed to include all genders, and the use of the singular
shall be deemed to include the plural and vice versa, wherever it
appears appropriate from the context.
(t)
Successors and
Assigns
.
The Plan
shall be binding on all successors of the Company and all
successors and permitted assigns of a Participant, including, but
not limited to, a Participant’s estate, devisee, or heir at
law.
(u)
Severability
.
If any provision of the Plan or any
Award Agreement shall be determined to be illegal or unenforceable
by any court of law in any jurisdiction, the remaining provisions
hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in
any other jurisdiction.
(v)
Notices
.
Any communication or notice required
or permitted to be given under the Plan shall be in writing, and
mailed by registered or certified mail or delivered by hand, to the
Company, to its principal place of business, Attention: Human
Resources, and if to the holder of an Award, to the address as
appearing on the records of the Company.
ANNEX
A
DEFINITIONS
“Award”
means any Restricted Stock Unit, Common Stock, Option, Performance
Share, Performance Unit, Restricted Stock, Stock Appreciation Right
or any other award granted pursuant to the Plan.
“Award
Agreement” means a written agreement entered into by the
Company and a Participant setting forth the terms and conditions of
the grant of an Award to such Participant.
“Board”
means the board of directors of the Company.
“Cause”
means, with respect to a termination of employment or other service
with the Company, a termination of employment or other service due
to a Participant’s dishonesty, fraud, or willful misconduct;
provided, however,
that if
the Participant and the Company have entered into an employment
agreement or consulting agreement which defines the term Cause, the
term Cause shall be defined in accordance with such agreement with
respect to any Award granted to the Participant on or after the
effective date of the respective employment or consulting
agreement. The Committee shall determine in its sole and absolute
discretion whether Cause exists for purposes of the
Plan.
“Change in
Control” means: (i) any Person (other than the Company,
any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned,
directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of Company
Common Stock) becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than
fifty percent (50%) or more of the value of the Company’s
then outstanding securities (the “Majority Owner”);
provided, however, that no Change in Control shall occur under this
paragraph (i) unless a person who was not a Majority Owner at some
time after the Effective Date becomes a Majority Owner after the
Effective Date; (ii) a merger, consolidation, reorganization, or
other business combination of the Company with any other entity,
other than a merger or consolidation which would result in the
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than fifty percent (50%) by value of the securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or (iii)the consummation of the sale or
disposition by the Company of all or substantially all of its
assets other than (x) the sale or disposition of all or
substantially all of the assets of the Company to a Person or
Persons who beneficially own, directly or indirectly, at least
fifty percent (50%) or more of the securities of the Company by
value at the time of the sale or (y) pursuant to a spin-off type
transaction, directly or indirectly, of such assets to the
stockholders of the Company.
However, to the
extent that Section 409A of the Code would cause an adverse tax
consequence to a Participant using the above definition, the term
“Change in Control” shall have the meaning ascribed to
the phrase “Change in the Ownership or Effective Control of a
Corporation or in the Ownership of a Substantial Portion of the
Assets of a Corporation” under Treasury Department Regulation
1.409A-3(i)(5), as revised from time to time in either subsequent
regulations or other guidance, and in the event that such
regulations are withdrawn or such phrase (or a substantially
similar phrase) ceases to be defined, as determined by the
Committee.
“Change in
Control Price” means the price per share of Common Stock paid
in any transaction related to a Change in Control of the
Company.
“Code”
means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
“Committee”
means a committee or sub-committee of the Board consisting of two
or more members of the Board, none of whom shall be an officer or
other salaried employee of the Company, and each of whom shall
qualify in all respects as a “non-employee director” as
defined in Rule 16b-3 under the Exchange Act, and as an
“outside director” for purposes of Code Section 162(m).
If no Committee exists, the functions of the Committee will be
exercised by the Board;
provided,
however,
that a Committee shall be created prior to the
grant of Awards to a Covered Employee and that grants of Awards to
a Covered Employee shall be made only by such Committee.
Notwithstanding the foregoing, with respect to the grant of Awards
to non-employee directors, the Committee shall be the
Board.
“Common
Stock” means the Class B common stock, par value $0.001 per
share, of the Company or any other security into which such common
stock shall be changed as contemplated by the adjustment provisions
of Section 5 of the Plan.
“Company”
means RumbleON, the subsidiaries of RumbleON and all other entities
whose financial statements are required to be consolidated with the
financial statements of RumbleON pursuant to United States
generally accepted accounting principles, and any other entity
determined to be an affiliate of RumbleON as determined by the
Committee in its sole and absolute discretion.
“Covered
Employee” means “covered employee” as defined in
Code Section 162(m)(3).
“Covered
Individual” means any current or former member of the
Committee, any current or former officer or director of the
Company, or, if so determined by the Committee in its sole
discretion, any individual designated pursuant to Section
4(c).
“Disability”
means a “permanent and total disability” within the
meaning of Code Section 22(e)(3);
provided, however,
that if a
Participant and the Company have entered into an employment or
consulting agreement which defines the term Disability for purposes
of such agreement, Disability shall be defined pursuant to the
definition in such agreement with respect to any Award granted to
the Participant on or after the effective date of the respective
employment or consulting agreement. The Committee shall determine
in its sole and absolute discretion whether a Disability exists for
purposes of the Plan.
“Dividend
Equivalents” means an amount equal to the cash dividends paid
by the Company upon one share of Common Stock subject to an Award
granted to a Participant under the Plan.
“Eligible
Individual” means any employee, consultant, officer, director
(employee or non-employee director) or independent contractor of
the Company and any Prospective Employee to whom Awards are granted
in connection with an offer of future employment with the
Company.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
“Exercise
Price” means the purchase price per share of each share of
Common Stock subject to an Award.
“Fair Market
Value” means, unless otherwise required by the Code, as of
any date, the last sales price reported for the Common Stock on the
day immediately prior to such date (i) as reported by the national
securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by
the Financial Industry Regulatory Authority, Inc., or if the Common
Stock shall not have been reported or quoted on such date, on the
first day prior thereto on which the Common Stock was reported or
quoted;
provided, however,
that the Committee may modify the definition of Fair Market Value
to reflect any changes in the trading practices of any exchange or
automated system sponsored by the Financial Industry Regulatory
Authority, Inc. on which the Common Stock is listed or traded. If
the Common Stock is not readily traded on a national securities
exchange or any system sponsored by the Financial Industry
Regulatory Authority, Inc., the Fair Market Value shall be
determined in good faith by the Committee.
“Grant
Date” means, unless otherwise provided by applicable law, the
date on which the Committee approves the grant of an Award or such
later date as is specified by the Committee and set forth in the
applicable Award Agreement.
“Incentive
Stock Option” means an “incentive stock option”
within the meaning of Code Section 422.
“Non-Qualified
Stock Option” means an Option which is not an Incentive Stock
Option.
“Option”
means an option to purchase Common Stock granted pursuant to
Sections 6 of the Plan.
“Participant”
means any Eligible Individual who holds an Award under the Plan and
any of such individual’s successors or permitted
assigns.
“Performance
Goals” means the specified performance goals which have been
established by the Committee in connection with an
Award.
“Performance
Period” means the period during which Performance Goals must
be achieved in connection with an Award granted under the
Plan.
“Performance
Share” means a right to receive a fixed number of shares of
Common Stock, or the cash equivalent, which is contingent on the
achievement of certain Performance Goals during a Performance
Period.
“Performance
Unit” means a right to receive a designated dollar value, or
shares of Common Stock of the equivalent value, which is contingent
on the achievement of Performance Goals during a Performance
Period.
“Person”
shall mean any person, corporation, partnership, limited liability
company, joint venture or other entity or any group (as such term
is defined for purposes of Section 13(d) of the Exchange Act),
other than a Parent or subsidiary of the Company.
“Plan”
means this RumbleON, Inc. 2016 Stock Incentive Plan.
“Prospective
Employee” means any individual who has committed to become an
employee or independent contractor of the Company within sixty (60)
days from the date an Award is granted to such
individual.
“Restricted
Stock” means Common Stock subject to certain restrictions, as
determined by the Committee, and granted pursuant to Section 8
hereunder.
“Restricted
Stock Unit” means a right, granted under this Plan, to
receive Common Stock upon the satisfaction of certain conditions,
or if later, at the end of a specified deferral period following
the satisfaction of such conditions.
“Section 424
Employee” means an employee of the Company or any
“subsidiary corporation” or “parent
corporation” as such terms are defined in and in accordance
with Code Section 424. The term “Section 424 Employee”
also includes employees of a corporation issuing or assuming any
Options in a transaction to which Code Section 424(a)
applies.
“Stock
Appreciation Right” means the right to receive all or some
portion of the increase in value of a fixed number of shares of
Common Stock granted pursuant to Section 7 hereunder.
“RumbleON”
means RumbleON, Inc., a Nevada corporation.
“Transfer”
means, as a noun, any direct or indirect, voluntary or involuntary,
exchange, sale, bequeath, pledge, mortgage, hypothecation,
encumbrance, distribution, transfer, gift, assignment or other
disposition or attempted disposition of, and, as a verb, directly
or indirectly, voluntarily or involuntarily, to exchange, sell,
bequeath, pledge, mortgage, hypothecate, encumber, distribute,
transfer, give, assign or in any other manner whatsoever dispose or
attempt to dispose of.
