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REORGANIZATION AGREEMENT
AND
PLAN OF MERGER
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BY AND AMONG
U S INDUSTRIAL SERVICES, INC.,
POINT TO POINT NETWORK SERVICES, INC.,
(A DELAWARE CORPORATION)
POINT TO POINT NETWORK SERVICES, INC.,
(A MASSACHUSETTS CORPORATION)
AND
W. XXXXXXX XXXXXXXX
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EFFECTIVE AS OF JUNE 29, 2001
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..........................................................1
1.1 The Merger...............................................................1
1.2 Conversion of Shares; Merger Consideration...............................2
1.3 Escrow...................................................................3
1.4 No Further Rights........................................................4
1.5 The Closing..............................................................4
1.6 Actions at the Closing...................................................4
1.7 Additional Action........................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF POINT TO POINT AND XXXXXXXX......4
2.1 Organization, Qualification and Corporate Power..........................5
2.2 Capitalization...........................................................5
2.3 Good Title to Point To Point Shares......................................5
2.4 Authorization of Point To Point..........................................5
2.5 Capacity of Xxxxxxxx.....................................................6
2.6 Noncontravention.........................................................6
2.7 No Subsidiaries..........................................................6
2.8 Financial Statements.....................................................6
2.9 Internal Accounting Controls.............................................7
2.10 Undisclosed Liabilities.................................................7
2.11 Absence of Certain Changes..............................................7
2.12 Tax Matters.............................................................9
2.13 Assets..................................................................9
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2.14 Real Property...........................................................9
2.15 Intellectual Property..................................................10
2.16 Inventory..............................................................10
2.17 Real Property Leases...................................................11
2.18 Contracts..............................................................11
2.19 Accounts Receivable....................................................13
2.20 Powers of Attorney.....................................................13
2.21 Insurance..............................................................13
2.22 No Litigation..........................................................13
2.23 No Warranties..........................................................13
2.24 Employees; Labor Matters...............................................14
2.25 Employee Benefits......................................................14
2.26 Environmental Matters..................................................15
2.27 Legal Compliance.......................................................16
2.28 Permits................................................................16
2.29 Certain Business Relationships With Affiliates.........................16
2.30 Brokers' Fees..........................................................16
2.31 Books and Records......................................................16
2.32 Customers and Suppliers................................................16
2.33 Point To Point Action..................................................17
2.34 Government Contracts...................................................17
2.35 Absence of Questionable Payments.......................................17
2.36 Bank Accounts..........................................................17
2.37 Health of Xxxxxxxx.....................................................18
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2.38 Purchase Entirely for Own Account......................................18
2.39 Full Disclosure........................................................18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF USIS AND P2P-DE................18
3.1 Organization............................................................18
3.2 Capitalization..........................................................19
3.3 Authorization of Transaction............................................19
3.4 Noncontravention........................................................19
3.5 Reports and Financial Statements........................................20
3.6 Undisclosed Liabilities.................................................20
3.7 Absence of Certain Changes..............................................20
3.8 Legal Compliance........................................................22
3.9 USIS Action.............................................................22
3.10 Absence of Questionable Payments.......................................22
3.11 Environmental Matters..................................................22
3.12 Full Disclosure........................................................23
ARTICLE IV CONDITIONS TO CONSUMMATION OF MERGER..............................23
4.1 Conditions to Each Party's Obligations..................................23
4.2 Conditions to Obligations of USIS and P2P-DE............................24
4.3 Conditions to Obligations of Point To Point and Xxxxxxxx................24
ARTICLE V INDEMNIFICATION....................................................25
5.1 Indemnification.........................................................25
5.2 Method of Asserting Claims..............................................26
5.3 Survival................................................................27
5.4 Limitations on Indemnification..........................................27
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ARTICLE VI POST-CLOSING COVENANTS AND AGREEMENTS.............................28
6.1 Restriction on Sale of USIS Common Stock................................28
6.2 Non-Competition.........................................................28
6.3 Post-Closing Operation of Surviving Entity..............................30
6.4 Release of Personal Guarantees..........................................30
6.5 Brokers' Fees...........................................................30
ARTICLE VII DEFINITIONS......................................................30
ARTICLE VIII MISCELLANEOUS...................................................32
8.1 Press Releases and Announcements........................................32
8.2 No Third Party Beneficiaries............................................32
8.3 Entire Agreement........................................................32
8.4 Succession and Assignment...............................................32
8.5 Counterparts............................................................33
8.6 Headings................................................................33
8.7 Notices.................................................................33
8.8 Governing Law...........................................................33
8.9 Amendments and Waivers..................................................33
8.10 Severability...........................................................34
8.11 Expenses...............................................................34
8.12 Specific Performance...................................................34
8.13 Submission to Jurisdiction.............................................34
8.14 Construction...........................................................35
8.15 Incorporation of Exhibits and Schedules................................35
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EXHIBITS:
A - Form of Escrow Agreement
B - Form of Investment Representation Letter
C - Form of Employment Agreement with Xxxxxxx Xxxxxxxx
D - Form of Articles of Merger - Massachusetts
E - Form of Certificate of Merger - Delaware
F - Officer's Certificate of Point To Point
G - Form of Election to Receive Cash Consideration
H - Form of Registration Rights Agreement
I - Officers' Certificates of USIS and P2P-DE
DISCLOSURE SCHEDULES
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REORGANIZATION AGREEMENT AND PLAN OF MERGER
This Reorganization Agreement and Plan of Merger (this "AGREEMENT") is
entered into as of June 29, 2001, by and among U S Industrial Services, Inc., a
Delaware corporation ("USIS"), Point To Point Network Services, Inc., a Delaware
corporation and a wholly owned subsidiary of USIS ("P2P-DE"), Point To Point
Network Services, Inc., a Massachusetts corporation ("POINT TO POINT"), and W.
Xxxxxxx Xxxxxxxx, an individual residing in the Commonwealth of Massachusetts
and the sole shareholder of Point To Point ("XXXXXXXX"). USIS, P2P-DE, Point To
Point, and Xxxxxxxx are referred to herein individually as a "PARTY" and
collectively as the "PARTIES."
WITNESSETH:
WHEREAS, Point To Point is currently engaged in the business of
providing fixed communications networking design and build-out services, such as
voice, data, and video, for the communications industry; and
WHEREAS, Point To Point desires to become a wholly owned subsidiary of
USIS, via a merger with P2P-DE in which P2P-DE will be the surviving
corporation, and USIS desires to so acquire Point To Point as a wholly owned
subsidiary, in exchange for cash and shares of common stock of USIS to be paid
to Xxxxxxxx, with the parties intending for such forward triangular merger to
qualify for tax-free treatment (except for any non-stock consideration received
by Xxxxxxxx) under Section 368(a)(2)(D) of the Code (as defined in Article VII),
and for this Agreement to constitute a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual undertakings and covenants herein, and for such other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, Point To Point shall merge (the "MERGER") with and into P2P-DE at the
Effective Date (as defined below). From and after the Effective Date, the
separate corporate existence of Point To Point shall cease and P2P-DE shall
continue as the surviving corporation in the Merger. The "EFFECTIVE DATE" shall
be the date on which both (a) the Secretary of State of the State of Delaware
has issued a certificate of merger with regard to the Merger in accordance with
the relevant provisions of the Delaware General Corporation Law (the "DGCL"),
and (b) the Secretary of State of the Commonwealth of Massachusetts has issued a
certificate of merger with regard to the Merger in accordance with the relevant
provisions of the Massachusetts General Laws (the "MGL"), which is anticipated
to be on the same or immediately following business day
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as the Closing Date. The Merger shall have the effects of a merger as set forth
in the DGCL and the MGL; such effects to include the following, as of the
Effective Date:
(a) The Certificate of Incorporation and Bylaws of P2P-DE
(hereinafter referred to as the "SURVIVING CORPORATION" whenever reference is
made to it as of the Effective Date of the Merger or thereafter) in effect as of
the Effective Date of the Merger shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until amended as therein or by law provided.
(b) The established offices and facilities of Point To Point
immediately prior to the Merger shall become the established offices and
facilities of the Surviving Corporation.
(c) All rights and interests of Point To Point and P2P-DE,
respectively, in and to every type of property shall be transferred to and
vested in the Surviving Corporation by virtue of the Merger without any deed or
other transfer. The Surviving Corporation, as of the Effective Date of the
Merger and without any order or other action on the part of any court or
otherwise, shall hold and enjoy all rights of property, franchises and interests
in the same manner and to the same extent as such rights, franchises, and
interests were held or enjoyed by Point To Point and P2P-DE, respectively,
immediately prior to the Effective Date of the Merger.
(d) The Surviving Corporation shall be liable for all
liabilities of Point To Point and P2P-DE, and all debts, liabilities,
obligations and contracts of Point To Point and of P2P-DE, respectively, matured
or unmatured, whether accrued, absolute, contingent, or otherwise, and whether
or not reflected or reserved against on balance sheets, books of account or
records of Point To Point or P2P-DE, as the case may be, shall be those of and
are hereby expressly assumed by the Surviving Corporation and shall not be
released or impaired by the Merger; and all rights of creditors and other
obligees and all liens on property of either Point To Point or P2P-DE shall be
preserved unimpaired.
(e) The officers and directors of P2P-DE shall serve as the
officers and directors of the Surviving Corporation as of the Effective Date.
(f) Unless contrary to any applicable laws, all corporate
acts, plans, policies, applications, agreements, orders, registrations,
licenses, approvals and authorizations of Point To Point and P2P-DE, their
respective shareholders, Boards of Directors, committees elected or appointed by
their Boards of Directors, officers and agents, which were valid and effective
immediately before the Effective Date of the Merger, shall be taken for all
purposes at and after the Effective Date of the Merger as the acts, plans,
policies, applications, agreements, orders, registrations, licenses, approvals,
and authorizations of the Surviving Corporation and shall be effective and
binding thereon as the same were with respect to Point To Point and P2P-DE
immediately before the Effective Date of the Merger.
1.2 Conversion of Shares; Merger Consideration. At the Effective Date,
by virtue of the Merger and without any action on the part of any Party or the
holder thereof:
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(a) The 1,000 shares of common stock, $.01 par value per
share, of Point To Point ("POINT TO POINT SHARES") issued and outstanding
immediately prior to the Effective Date, which are 100% owned by Xxxxxxxx, shall
be converted into and represent the right to receive (subject to the provisions
of Section 1.3) all of the following (collectively, the "MERGER CONSIDERATION"):
(i) $677,622 in cash (the "CASH CONSIDERATION");
(ii) 2,000,000 shares of common stock, $.01 par value
per share, of USIS ("USIS COMMON STOCK");
(iii) An earn-out calculated as five times the amount
by which Point To Point's EBITDA (as defined below) for calendar year 2001
exceeds $771,667 (the "EARN-OUT AMOUNT"), payable on or before March 31, 2002,
as follows:
(A) 20% of the Earn-Out Amount shall be paid
in cash; and
(B) the remainder of the Earn-Out Amount
shall be paid in shares of USIS Common Stock, based on a value per share equal
to the closing trading price of the USIS Common Stock on the last trading day of
2001.
"EBITDA" shall mean the earnings of Point To Point
before interest, taxes, depreciation and amortization, determined on an accrual
basis in accordance with U.S. generally accepted accounting principles ("GAAP"),
consistent with the accounting policies, methods, adjustments and accruals by
which 1999 EBITDA was determined to be $771,667.
(b) Xxxxxxxx shall be entitled to receive on the Effective
Date all of the 2,000,000 shares of USIS Common Stock into which his Point To
Point Shares were converted pursuant to this Section 1.2(a) (the "MERGER
SHARES"); provided, however, that 200,000 of the Merger Shares (the "ESCROW
SHARES") shall be delivered to the Escrow Agent and held in escrow subject to
the Escrow Agreement (defined below). The 1,800,000 Merger Shares that are not
Escrow Shares are referred to herein as the "INITIAL SHARES".
(c) Each Point To Point Share held in Point To Point's
treasury immediately prior to the Effective Date and each Point To Point Share
owned beneficially by USIS or P2P-DE shall be cancelled and retired without
payment of any consideration therefor.
1.3 Escrow. On the Closing Date, USIS, the Escrow Agent (as defined in
the Escrow Agreement) and Xxxxxxxx shall enter into an Escrow Agreement
substantially in the form attached hereto as Exhibit A (the "ESCROW Agreement").
On the Closing Date, (i) USIS shall deliver to the Escrow Agent a certificate
issued in Xxxxxxxx'x name representing the Escrow Shares, as described in
Section 1.2(a), for the purpose of securing the indemnification obligations of
Xxxxxxxx set forth in this Agreement and (ii) Xxxxxxxx shall deliver to the
Escrow Agent a stock power in blank, duly executed with his signature. The
Escrow Shares shall be held by the Escrow Agent under the Escrow Agreement
pursuant to the terms thereof. The Escrow Shares shall be held as a trust fund
and shall not be subject to any lien, attachment, trustee process or any other
judicial
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process of any creditor of any party, and shall be held and disbursed solely for
the purposes and in accordance with the terms of the Escrow Agreement.
1.4 No Further Rights. From and after the Effective Date, no Point To
Point Shares shall be deemed to be outstanding, and holders thereof shall cease
to have any rights with respect thereto, except as provided herein or by law.
1.5 The Closing. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Fish & Xxxxxxxxxx
P.C. in Dallas, Texas, commencing at 10:00 a.m. local time on the date of this
Agreement (provided that the physical presence of a party shall not be required
thereat if all appropriate documents required to be delivered by such party have
been received by mail or overnight courier), or, if all of the conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
have not been satisfied or waived by such date, on such mutually agreeable later
date as soon as practicable after the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (the "CLOSING DATE").
1.6 Actions at the Closing. At the Closing, the Parties shall deliver
to each other the various certificates, instruments and documents referred to in
Article IV, (b) Point To Point and P2P-DE shall file with the Secretary of State
of the Commonwealth of Massachusetts and the Secretary of State of the State of
Delaware, respectively, on the most expedited basis available,
articles/certificate of merger with respect to the Merger, as required by the
MGL and the DGCL, (c) Xxxxxxxx shall deliver to USIS for cancellation the
certificate(s) representing his Point To Point Shares (as defined in Section
1.2(a)), (d) USIS shall deliver to Xxxxxxxx the Cash Consideration and
certificate(s) for the Initial Shares, and (d) USIS, Xxxxxxxx and the Escrow
Agent shall execute and deliver the Escrow Agreement and USIS shall deliver to
the Escrow Agent a certificate for the Escrow Shares being placed in escrow (the
"ESCROW") on the Closing Date pursuant to Section 1.3.
1.7 Additional Action. P2P-DE may, at any time after the Effective
Date, take any action, including executing and delivering any document, in the
name and on behalf of itself or Point To Point, in order to consummate the
transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF POINT TO POINT AND XXXXXXXX
Except as set forth in the Disclosure Schedule attached hereto (which
schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, the "DISCLOSURE SCHEDULE"),
Point To Point and Xxxxxxxx jointly and severally represent and warrant to USIS
and P2P-DE, as of the Closing Date and the Effective Date (which representations
and warranties shall survive the Closing to the extent provided in Section 5.3
hereof), as follows:
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2.1 Organization, Qualification and Corporate Power. Point To Point is
a corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the Commonwealth of Massachusetts. Point To Point is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined in Article VII) on the business, business prospects, assets, results of
operations or financial condition of Point To Point. Point To Point has all
requisite corporate power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by it. Point To Point
has furnished to USIS true and complete copies of its Articles of Incorporation
and Bylaws, each as amended and as in effect on the date hereof. On the
Effective Date, Point To Point is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws.
2.2 Capitalization.
(a) On the Effective Date, the authorized capital stock of
Point To Point consists of 200,000 shares of common stock, $.01 par value per
share, of which 1,000 shares are issued and outstanding, all of which are owned
by Xxxxxxxx, and no shares of such stock are held in the treasury of Point To
Point. All of the issued and outstanding Point To Point Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which Point To Point is a party or which are
binding upon Point To Point providing for the issuance, disposition or
acquisition of any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Point To
Point. There are no agreements, voting trusts, proxies, or understandings with
respect to the voting, or registration under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), of any Point To Point Shares. All of the issued
and outstanding Point To Point Shares were issued in compliance with applicable
federal and state securities laws.
(b) There are no equity securities of any class of Point To
Point or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. There are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Point To Point is a party or by which it is bound obligating
Point To Point to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Point To Point or obligating it to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement, including as a result of
the transaction contemplated by this Agreement.
2.3 Good Title to Point To Point Shares. Xxxxxxxx owns beneficially and
of record, and has good and indefeasible title to, his Point To Point Shares,
free of all Security Interests (defined in Article VII), pledges, charges,
liens, or encumbrances of any kind. Xxxxxxxx did not acquire any of his Point To
Point Shares in violation of any preemptive right of any Person (as defined in
Article VII).
2.4 Authorization of Point To Point. Point To Point has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its respective obligations
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hereunder. The performance by Point To Point under this Agreement and the
consummation by Point To Point of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Point To Point and Xxxxxxxx as its sole shareholder. This Agreement has been
duly and validly executed and delivered by Point To Point and, assuming the due
authorization, execution and delivery hereof by both USIS and P2P-DE, including
by USIS as the sole shareholder of P2P-DE, constitutes a valid and binding
obligation of Point To Point, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditor's rights generally,
or by general equitable principles, and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal or state
securities laws.
2.5 Capacity of Xxxxxxxx. Xxxxxxxx has full legal power and capacity to
execute, deliver, and perform this Agreement. This Agreement has been duly and
validly executed and delivered by Xxxxxxxx and constitutes the valid and binding
obligation of his enforceable in accordance with its terms, subject to
bankruptcy, insolvency, moratorium, reorganization, and similar laws affecting
the rights and remedies of creditors generally and to the application of general
equitable principles and judicial discretion.
2.6 Noncontravention. Subject to the filing of the Articles of Merger
and issuance of the Certificate of Merger as required by applicable law and as
set forth on Section 2.6 of the Disclosure Schedule, neither the execution and
delivery of this Agreement by Point To Point, nor the consummation of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Articles of Organization or Bylaws of Point To Point, (b)
require on the part of Point To Point any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or Governmental Authority (as defined in
Article VII), (c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice, consent or waiver under, any Material
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which Point To Point is a party or by which
Point To Point is bound or to which any of its assets is subject, (d) result in
the imposition of any Security Interest upon any assets of Point To Point or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Point To Point or any of its properties or assets.
2.7 No Subsidiaries. There is no corporation, partnership, or other
business enterprise in which Point To Point has any direct or indirect equity
interest.
2.8 Financial Statements. Point To Point has provided to USIS the
unaudited balance sheets and statements of income, changes in shareholders'
equity and cash flows of Point To Point as of and for each of the latest two
completed fiscal years, and as of and for the five-month period ended May 31,
2001, and an interim balance sheet as of May 31, 2001 (the "MOST RECENT BALANCE
SHEET"). Such financial statements (collectively, the "FINANCIAL STATEMENTS")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, fairly present in all Material respects
the financial condition, results of operations and cash flows of Point To Point
as of the respective dates thereof and for the periods referred to
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therein and are consistent in all Material respects with the books and records
of Point To Point. Point To Point has never retained an independent accounting
firm to conduct an audit of its financial statements.
2.9 Internal Accounting Controls. Point To Point (a) keeps books,
records, and accounts that accurately, fairly, and in reasonable detail reflect
its assets and transactions, and (b) maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
accurately and promptly recorded to permit the preparation of its financial
statements, (ii) transactions are executed in accordance with management's
specific or general authorizations, and (iii) access to its assets is permitted
only in accordance with management's general or specific authorization.
2.10 Undisclosed Liabilities. Except as set forth on Section 2.10 of
the Disclosure Schedule, Point To Point has no liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated and
whether due or to become due, including without limitation any liability for
taxes and interest, penalties, and other charges payable with respect to any
such liability or obligation), except for (a) liabilities shown on the Most
Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent
Balance Sheet in the Ordinary Course of Business (as defined in Article VII) and
not in excess of $50,000 in the aggregate or $10,000 individually and (c)
contractual liabilities incurred in the Ordinary Course of Business that are not
required by GAAP to be reflected on a balance sheet and are disclosed on Section
2.10 of the Disclosure Schedule.
2.11 Absence of Certain Changes. Except as provided for or contemplated
in this Agreement, or disclosed on Section 2.11 of the Disclosure Schedule,
since May 31, 2001, with respect to Point To Point, there has not been:
(a) any transaction not in the Ordinary Course of Business
that has had or could have a Material Adverse Effect;
(b) any change in the business, property, assets, liabilities
(whether absolute, accrued, contingent, or otherwise), operations, liquidity,
income, condition (financial or otherwise), prospects, or net worth of Point To
Point that has had or could have a Material Adverse Effect;
(c) distributions of any assets of any kind to Xxxxxxxx, or a
redemption, or agreement or authorization to redeem any Point To Point Shares;
(d) any damage, destruction, or loss, extraordinary or
otherwise and whether or not covered by insurance, that has had or could have a
Material Adverse Effect;
(e) any amendment permitted or made with regard to any
Material contract, license, or agreement to which Point To Point is a party;
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(f) any acquisition or disposition by Point To Point of any
property or asset, whether real or personal, having a fair market value in an
amount greater than $5,000 individually or $15,000 in the aggregate, other than
in the Ordinary Course of Business;
(g) any Material mortgage, pledge, or subjection to lien,
charge, or encumbrance of any kind or on any of the respective properties or
assets of Point To Point;
(h) except as contemplated in this Agreement, any increase in,
or commitment to increase, the compensation payable or to become payable to any
officer, director, employee, or agent of Point To Point, or any bonus payment or
similar arrangement made to or with any of such officers, directors, employees,
or agents;
(i) any incurrence of, guarantee of, assumption of, or taking
any property subject to, any Material liability;
(j) except as contemplated in this Agreement, any adoption of
a plan or agreement or amendment to any plan or agreement providing any new or
additional benefits for officers, directors, or employees;
(k) any material alteration in the manner of keeping the
books, accounts, or records of Point To Point, or in the accounting practices
therein reflected;
(l) except as contemplated in this Agreement, any release or
discharge of any obligation or liability of any Person to Point To Point of any
nature whatsoever;
(m) any delay by Point To Point in paying any Material debt,
charge, or amount owed by it in excess of 30 days past the date such amount was
due that has had or could have a Material Adverse Effect;
(n) any Material increase or decrease of (i) any amounts
charged for services rendered or products sold by Point To Point; or (ii)
inventory ordered;
(o) any facts or circumstances (other than general economic or
business conditions) that to Point To Point's Knowledge may result in the loss
of customers, suppliers, or vendors, including without limitation, any notices,
statements, or circumstances indicating that any customer, supplier, or vendor
has or will terminate or alter its business relationship with Point To Point;
(p) any loan to any officer, director, shareholder, or any
Affiliate (as defined in Article VII) thereof;
(q) any other event or condition of any character which has
had or could reasonably be expected to have a Material Adverse Effect; or
(r) any agreement or authorization to do any of the above.
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2.12 Tax Matters.
(a) Point To Point has filed all Tax Returns (as defined
below) that it was required to file prior to the date of this Agreement and all
such Tax Returns were correct and complete in all material respects. Point To
Point has paid all Taxes (as defined below) that are shown to be due on any such
Tax Returns. The unpaid Taxes of Point To Point for tax periods through the date
of the Most Recent Balance Sheet do not exceed the accruals and reserves for
Taxes set forth on the Most Recent Balance Sheet. Point To Point has no actual
or potential liability for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities that included
Point To Point during a prior period) other than Point To Point. All Taxes that
either Point To Point is or was required by law to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Authority. For purposes of this Agreement, "TAXES" means all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof. For purposes of this Agreement, "TAX RETURNS" means
all reports, returns, declarations, statements or other information required to
be supplied to a taxing authority in connection with Taxes.
(b) Point To Point has delivered to USIS correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by Point To Point since January 1,
1998. The federal income Tax Returns of Point To Point have never been audited
by the Internal Revenue Service. No examination or audit of any Tax Returns of
Point To Point by any Governmental Authority is currently in progress or, to the
Knowledge (as defined in Article VII) of Point To Point and Xxxxxxxx, threatened
or contemplated. Point To Point has not waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(c) Since September 1, 1998, Point To Point has held the
status of an "S" corporation for federal income Tax purposes.
2.13 Assets. Point To Point owns or leases all tangible assets
necessary and sufficient for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each Material tangible
asset is free from Material defects, has been maintained in all Material
respects in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is suitable for the
purposes for which it presently is used. No asset of Point To Point (tangible or
intangible) is subject to any Security Interest, except as disclosed on Section
2.13 of the Disclosure Schedule.
2.14 Real Property. Except as set forth in Section 2.14 of the
Disclosure Schedule, Point To Point does not own any real property.
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2.15 Intellectual Property.
(a) Point To Point does not hold any registered patents,
trademarks, service marks or copyrights and has not filed any applications
therefore. Point To Point owns or has the right to use all Intellectual Property
(as defined below) necessary for, or used in, the operation of its business as
presently conducted (the "POINT TO POINT INTELLECTUAL PROPERTY"). Each item of
Point To Point Intellectual Property will continue to be owned or available for
use by Point To Point on and after the Effective Date. Point To Point has taken
all reasonable measures to protect the proprietary nature of each item of Point
To Point Intellectual Property, and to maintain in confidence all trade secrets
and confidential information that it owns or uses, including, without
limitation, maintaining all registrations and paying all fees associated
therewith. To the Knowledge of Point To Point and Xxxxxxxx, (a) no other Person
has any rights to any Point To Point Intellectual Property owned by Point To
Point, and (b) no other Person is infringing, violating or misappropriating any
Point To Point Intellectual Property. Point To Point has made available to USIS
complete and accurate copies of all written documentation in Point To Point's
possession relating to claims or disputes known to any of them concerning any
item of Point To Point Intellectual Property. For purposes of this Agreement,
"INTELLECTUAL PROPERTY" means all (i) patents and patent applications, (ii)
copyrights and registrations thereof, (iii) mask works and registrations and
applications for registration thereof, (iv) computer software, data and
documentation, (v) trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research and development
information, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (vi) trademarks, service marks, trade names and
applications and registrations therefor and (vii) other proprietary rights
relating to any of the foregoing.
(b) To the Knowledge of Point To Point, none of the activities
or business presently conducted by Point To Point infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
Person. Point To Point has not received any complaint, claim or notice alleging
any such infringement, violation or misappropriation, and, to the Knowledge of
Point To Point, no such claim has been threatened by any third party.
(c) Point To Point has not licensed, distributed or otherwise
granted any rights to any third party with respect to, any of the Point To Point
Intellectual Property.
(d) Section 2.15(d) of the Disclosure Schedule identifies each
Material item of Point To Point Intellectual Property that is owned by a party
other than Point To Point, and the license or agreement pursuant to which Point
To Point uses it (excluding off-the-shelf software programs licensed by Point To
Point pursuant to "shrink wrap" licenses).
2.16 Inventory. To the Knowledge of Point To Point, all inventory of
Point To Point, whether or not reflected on the Most Recent Balance Sheet,
consists of a quality and quantity that are useable and saleable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written-off or written-down to net realizable
value on the Most Recent Balance Sheet. The quantities of each type of
inventory, whether raw
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materials, work-in-process or finished goods, are not excessive in the present
circumstances of Point To Point. Section 2.16 of the Disclosure Schedule lists
all of Point To Point's work in process (identified by project), the percentage
of completion of each such project, costs incurred to date, and total contract
price with respect to each such project.
2.17 Real Property Leases. Section 2.17 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to Point To
Point. Point To Point has delivered to USIS correct and complete copies of the
leases and subleases (as amended to date) listed in Section 2.17 of the
Disclosure Schedule. With respect to each lease and sublease listed in Section
2.17 of the Disclosure Schedule:
(a) except as set forth on Section 2.17(a) of the Disclosure
Schedule, the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) except as set forth on Section 2.17(b) of the Disclosure
Schedule, the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect on and immediately following the
Effective Date in accordance with the terms thereof as in effect prior to the
Effective Date;
(c) no party to the lease or sublease is in Material breach or
Material default, and no event has occurred which, with notice or lapse of time,
would constitute a Material breach or Material default or permit termination,
modification, or acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(e) Point To Point has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said facilities
as they are currently used; and
(g) nothing has come to the attention of Point To Point or
Xxxxxxxx that the owner of the facility leased or subleased does not have good
and clear record and marketable title to the parcel of real property, free and
clear of any Security Interest, easement, covenant or other restriction, except
for recorded easements, covenants, and other restrictions that do not impair the
intended uses, occupancy or value of the property subject thereto.
2.18 Contracts. Section 2.18 of the Disclosure Schedule lists the
following written agreements to which Point To Point is a party that are in
effect as of the Closing Date (other than agreements contemplated hereby):
(a) any written agreement (or group of related written
agreements) for the lease of personal property from or to third parties
providing for lease payments in excess of $10,000 per annum;
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(b) any written agreement (or group of related written
agreements) for the purchase or sale of raw materials, commodities, supplies,
products or other personal property or for the furnishing or receipt of services
(i) which calls for performance over a period of more than one year, (ii) which
involves more than the sum of $10,000, or (iii) in which Point To Point (A) has
granted manufacturing rights, (B) has granted "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory, (C) has agreed to purchase a minimum quantity of goods or
services, or (D) has agreed to purchase goods or services exclusively from a
certain party;
(c) any written agreement establishing a partnership or joint
venture;
(d) any written agreement (or group of related written
agreements) under which it has created, incurred, assumed, or guaranteed (or may
create, incur, assume, or guarantee) indebtedness (including capitalized lease
obligations) involving more than $15,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or intangible;
(e) any written agreement concerning confidentiality or
noncompetition;
(f) any written agreement involving Xxxxxxxx or his
Affiliates;
(g) any written agreement under which the consequences of a
default or termination could have a Material Adverse Effect on the assets,
business, financial condition, results of operations or future prospects of
Point To Point, taken as a whole; and
(h) any other written agreement (or group of related written
agreements) currently in existence or which any provisions thereof are currently
binding on Point To Point either (x) involving more than $15,000 or (y) not
entered into in the Ordinary Course of Business.
Point To Point has delivered to USIS a correct and complete
copy of each written agreement (as amended to date) listed in Section 2.18 of
the Disclosure Schedule. Except (i) to the extent that an exception to (x), (y),
or (z) would not have a Material Adverse Effect, or (ii) as set forth on Section
2.18 of the Disclosure Schedule, with respect to each written agreement so
listed: (x) the written agreement is legal, valid, binding and enforceable and
in full force and effect; (y) the written agreement will continue to be legal,
valid, binding and enforceable and in full force and effect on and immediately
following the Effective Date in accordance with the terms thereof as in effect
prior to the Effective Date, subject to obtaining the consents required by such
arrangement that are listed on Section 2.6 of the Disclosure Schedule; and (z)
no party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement. Except as set
forth on Section 2.18 of the Disclosure Schedule, Point To Point is not party to
any oral contract, agreement or other arrangement that, if reduced to written
form, would be required to be listed in Section 2.18 of the Disclosure Schedule
under the terms of this Section 2.18.
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2.19 Accounts Receivable. To Point To Point's Knowledge, all accounts
receivable of Point To Point reflected on the Most Recent Balance Sheet are
valid receivables subject to no setoffs or counterclaims and are current and
collectible (within 60 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. To Point To Point's Knowledge, all accounts receivable reflected in the
financial or accounting records of Point To Point that have arisen since the
Most Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet. Section
2.19 of the Disclosure Schedule lists an aging schedule of all accounts
receivable, which is accurate in all Material respects.
2.20 Powers of Attorney. Except in connection with tax matters, there
are no outstanding powers of attorney executed on behalf of Point To Point.
2.21 Insurance. Section 2.21 of the Disclosure Schedule sets forth the
name of the insurer, the name of the policyholder, the name of each covered
insured, and the policy number, period of coverage, amount of insurance, and
annual premium in respect of each such policy (including fire, theft, casualty,
general liability, workers compensation, business interruption, environmental,
product liability and automobile insurance policies and bond and surety
arrangements) that Point To Point has carried during the period from January 1,
1999 through the Closing Date. (i) Each such insurance policy is enforceable and
in full force and effect; (ii) such policy will continue to be enforceable and
in full force and effect on and immediately following the Effective Date in
accordance with the terms thereof as in effect prior to the Effective Date,
subject to obtaining any consents required pursuant to such policy that are
listed on Section 2.6 of the Disclosure Schedule; (iii) to Point To Point's
Knowledge, Point To Point is not in breach or default (including with respect to
the payment of premiums or the giving of notices) under such policy, and to
Point To Point's Knowledge, no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit termination,
modification or acceleration, under such policy; and (iv) Point To Point has not
received any notice from the insurer disclaiming coverage or reserving rights
with respect to a particular claim or such policy in general. To Point To
Point's Knowledge, Point To Point has not incurred any loss, damage, expense or
liability covered by any such insurance policy for which it has not properly
asserted a claim under such policy. Point To Point is covered by insurance in
scope and amount customary and reasonable for the business in which it is
engaged.
2.22 No Litigation. Except as set forth in Section 2.22 of the
Disclosure Schedule, there are no investigations, actions, suits, or claims
pending or, to Point To Point's Knowledge, threatened against Point To Point or
Xxxxxxxx involving any of their respective properties or assets, whether at law
or in equity, before or by any foreign, federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency,
instrumentality, or other Person (a "PROCEEDING"), which may have a Material
Adverse Effect upon Point To Point or the Point To Point Shares.
2.23 No Warranties. Except for the one-year warranty provided by Point
To Point in its standard Master Services Agreement, and standard manufacturers'
warranties or warranties implied by law, and except as set forth in Section 2.23
of the Disclosure Schedule, no product
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sold or service provided by Point To Point is subject to any guaranty, warranty,
or other indemnity that, if enforced, either individually or in the aggregate,
would have a Material Adverse Effect on Point To Point.
2.24 Employees; Labor Matters. Section 2.24 of the Disclosure Schedule
contains a list of all employees of Point To Point, along with the position and
the annual rate of compensation of each such person. To the Knowledge of Point
To Point and Xxxxxxxx, no key employee or group of employees of Point To Point
has any plans to terminate employment with Point To Point. Except as set forth
on Section 2.24 of the Disclosure Schedule, there are no disputes, employee
grievances or disciplinary actions pending, or to the Knowledge of Point To
Point, threatened, involving Point To Point and any of its present or former
employees. Except as set forth in Section 2.24, Point To Point has complied with
all provisions of law relating to employment and employment practices, terms and
conditions of employment, wages and hours, the failure to comply with which
would have a Material Adverse Effect upon Point To Point, taken as a whole. To
the Knowledge of Point To Point, Point To Point is not engaged in any unfair
labor practice and it does not have any liability for any arrears of wages or
Taxes or penalties for failure to comply with any such provisions of law. Except
as set forth on Section 2.24 of the Disclosure Schedule, Point To Point is not a
party to or bound by any collective bargaining agreement, and it has not
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes.
2.25 Employee Benefits.
(a) Except as set forth on Section 2.25 of the Disclosure
Schedule, neither Point To Point nor any ERISA Affiliate (as defined below) has
maintained, or contributed to, any Employee Benefit Plan (as defined below). For
purposes of this Agreement, "EMPLOYEE BENEFIT PLAN" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA AFFILIATE" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes Point To Point.
(b) Section 2.25 of the Disclosure Schedule discloses each:
(i) agreement with any director, executive officer or other key employee of
Point To Point (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving Point To
Point of the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan or arrangement
under which any Person may receive
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payments from Point To Point that may be subject to the tax imposed by Section
4999 of the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan binding
Point To Point, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
2.26 Environmental Matters.
(a) Point To Point has complied with all applicable
Environmental Laws (as defined in Article VII), except for violations of
Environmental Laws that do not and will not, individually or in the aggregate,
have a Material Adverse Effect on the assets, business, financial condition,
results of operations or future prospects of Point To Point, taken as a whole.
There is no pending or, to the Knowledge of Point To Point or Xxxxxxxx,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Authority, relating to any Environmental Law involving Point To
Point, except for litigation, notices of violations, formal administrative
proceedings or investigations, inquiries or information requests that will not,
individually or in the aggregate, have a Material Adverse Effect on the assets,
business, financial condition, results of operations or future prospects of
Point To Point, taken as a whole.
(b) To the Knowledge of Point To Point, there have been no
releases of any Materials of Environmental Concern (as defined below) into the
environment at any parcel of real property or any facility formerly or currently
owned, operated or controlled by Point To Point. With respect to any such
releases of Materials of Environmental Concern, Point To Point has given all
required notices to Governmental Authorities (copies of which have been provided
to USIS). Point To Point has no Knowledge of any releases of Materials of
Environmental Concern at parcels of real property or facilities owned, operated
or controlled by persons other than Point To Point that could reasonably be
expected to have an impact on the real property or facilities owned, operated or
controlled by Point To Point. For purposes of this Agreement, "MATERIALS OF
ENVIRONMENTAL CONCERN" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the Federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law.
(c) Point To Point does not possess and does not have access
to any environmental reports, investigations and audits relating to premises
currently or previously owned or operated by Point To Point (whether conducted
by or on behalf of Point To Point or a third party, and whether done at the
initiative of Point To Point or directed by a Governmental Authority or other
third party) which were issued or conducted during the past five years.
(d) Point To Point has never used any solid or hazardous waste
transporters or treatment, storage and disposal facilities, excluding ordinary
trash pick-up.
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2.27 Legal Compliance. Except to the extent the failure to comply would
not have a Material Adverse Effect on Point To Point, Point To Point and the
conduct and operations of its business are in compliance with each law
(including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Authority, which (a) affects or relates
to this Agreement or the transactions contemplated hereby or (b) is applicable
to Point To Point or its business.
2.28 Permits. Section 2.28 of the Disclosure Schedule sets forth a list
of all Material permits, licenses, registrations, certificates, orders or
approvals from any Governmental Authority (including without limitation those
issued or required under Environmental Laws and those relating to the occupancy
or use of owned or leased real property) ("PERMITS") issued to or held by Point
To Point. Except as set forth in Section 2.28 of the Disclosure Schedule, such
listed Permits are the only Permits that are required for Point To Point to
conduct its business as presently conducted or as proposed to be conducted,
except for those the absence of which would not, individually or in the
aggregate, have a Material Adverse Effect on Point To Point, taken as a whole.
Each such Permit is in full force and effect and, to the Knowledge of Point To
Point and Xxxxxxxx, no suspension or cancellation of such Permit is threatened
and there is no basis for believing that such Permit will not be renewable upon
expiration. To the Knowledge of Point To Point, each such Permit will continue
in full force and effect on and following the Effective Date.
2.29 Certain Business Relationships With Affiliates. Except for those
transactions described in Section 2.29 of the Disclosure Schedule, no Affiliate
of Point To Point (a) owns any property or right, tangible or intangible, which
is used in the business of Point To Point, (b) has any claim or cause of action
against Point To Point, or (c) owes any money to, or is owed money by, Point To
Point.
2.30 Brokers' Fees. Point To Point has not entered into any agreement
pursuant to which it would have any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
2.31 Books and Records. Except as set forth on Schedule 2.31, the
minute books and other similar records of Point To Point contains true and
complete records of all actions taken at any meetings of Point To Point's
shareholders, Board of Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such meeting. Except as set
forth on Section 2.31 of the Disclosure Schedule, Point To Point has furnished
or made available to USIS or its representatives for their examination true and
complete copies of Point To Point's minute books and its stock transfer books.
2.32 Customers and Suppliers. No purchase order or commitment of Point
To Point is in excess of normal requirements, nor are prices provided therein in
excess of current market prices for the products or services to be provided
thereunder. No Material supplier of Point To Point has indicated within the past
year that it will stop, or materially decrease the rate of, supplying materials,
products or services to Point To Point. Section 2.32 of the Disclosure Schedule
sets forth a list of (a) each customer that accounted for more than 5% of the
revenues of Point To Point during the last full fiscal year or the interim
period through June 28, 2001, and the approximate amount of revenues accounted
for by such customer during each such period and
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(b) each supplier that is the sole supplier of any significant product or
component to Point To Point for which there is not a suitable substitute.
2.33 Point To Point Action. The Board of Directors has, by unanimous
written consent in lieu of a meeting, (i) determined that the Merger is fair and
in the best interests of Point To Point and its shareholders, (ii) adopted this
Agreement in accordance with the provisions of the MGL, and (iii) directed that
this Agreement and the Merger be submitted to Xxxxxxxx for his adoption and
approval as sole shareholder and resolved to recommend that Xxxxxxxx vote in
favor of the adoption of this Agreement and the approval of the Merger, which
Xxxxxxxx has approved by unanimous consent.
2.34 Government Contracts. Point To Point has never been, nor as a
result of the consummation of the transactions contemplated by this Agreement is
it reasonable to expect that it will be, suspended or debarred from bidding on
contracts or subcontracts for any agency of the United States government, nor
has such suspension or debarment been threatened or action for such suspension
or debarment been commenced. Point To Point has never been nor is it now being
audited or investigated by the United States Government Accounting Office, the
United States Department of Justice, the United States Department of Defense or
any of its agencies, the Defense Contract Audit Agency or the inspector general
of any agency of the United States government, nor has such audit or
investigation been threatened. There is no valid basis for Point To Point's
suspension or debarment from bidding on contracts or subcontracts for any agency
of the United States government and there is no valid basis for a claim pursuant
to an audit or investigation by the United States Government Accounting Office,
the United States Department of Justice, the United States Department of Defense
or any of its agencies, the Defense Contract Audit Agency or the inspector
general of any agency of the United States government, or any prime contractor.
2.35 Absence of Questionable Payments. To Point To Point's Knowledge,
neither Point To Point nor any director, officer, agent, employee or other
Person acting on behalf of Point To Point has (a) used any of Point To Point's
funds for improper or unlawful contributions, payments, gifts or entertainment,
or made any improper or unlawful expenditures relating to political activity to
government officials or others; (b) accepted or received any improper or
unlawful contributions, payments, gifts or expenditures; (c) directly or
indirectly given or agreed to give any gift or similar benefit to any customer,
contractor, government, employee, or other Person who was or is in a possible
position to help or hinder Point To Point, which gift or benefit (i) might
subject Point To Point to any damages or penalties in any civil or criminal
proceeding, (ii) might have had a Material Adverse Effect, or (iii) might have a
Material Adverse Effect if not continued.
2.36 Bank Accounts. Section 2.36 of the Disclosure Schedule sets forth
the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which Point To Point maintains
safe deposit boxes or accounts of any nature and the names of all persons
authorized to draw thereon, make withdrawals therefrom or have access thereto.
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2.37 Health of Xxxxxxxx. To his Knowledge, Xxxxxxxx is free from any
terminal or disabling disease, affliction, or condition, or any disease,
affliction, or condition that with the passage of time will become a terminal or
disabling disease, affliction, or condition. Xxxxxxxx has no materially adverse
medical history, nor, does he have in his past, any facts, circumstances, or
symptoms that would reasonably indicate, to his Knowledge, that he may have a
terminal or disabling disease, affliction, or condition.
2.38 Purchase Entirely for Own Account. As more fully represented by
Xxxxxxxx in the Investment Representation Letter executed as of the date hereof,
a form of which is attached hereto as Exhibit B, Xxxxxxxx represents to USIS
that the Merger Shares to be issued to Xxxxxxxx hereunder are being acquired for
investment for Xxxxxxxx'x own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Xxxxxxxx has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Xxxxxxxx further represents
that Xxxxxxxx does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person with respect to any of the Merger Shares.
2.39 Full Disclosure. No representation or warranty by Point To Point
or Xxxxxxxx contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of Point To Point or Xxxxxxxx
pursuant to this Agreement contains or will contain any untrue statement of a
Material fact or omits or will omit to state any Material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USIS AND P2P-DE
Except as set forth in the Disclosure Schedule attached hereto (which
schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III, the "USIS DISCLOSURE
SCHEDULE"), USIS and P2P-DE jointly and severally represent and warrant to Point
To Point and Xxxxxxxx, as of the Closing Date and the Effective Date (which
representations and warranties shall survive the Closing to the extent provided
in Section 5.3 hereof), as follows:
3.1 Organization. Both USIS and P2P-DE are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
except as set forth on Section 3.1 of the USIS Disclosure Schedule. Each such
corporation is duly qualified to conduct business and is in corporate and tax
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on USIS or its subsidiaries, taken as a whole, or as set
forth on Section 3.1 of the USIS Disclosure Schedule. Both USIS and P2P-DE have
all requisite corporate power and authority to carry on the business in which
they are engaged and to own and use the properties owned and used by them. USIS
has
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furnished to Point To Point true and complete copies of USIS's and P2P-DE's
Certificate of Incorporation and Bylaws, all as amended and as in effect on the
date hereof. Neither USIS nor P2P-DE is in default under or in violation of any
provision of its Certificate of Incorporation or Bylaws.
3.2 Capitalization. The authorized capital stock of USIS consists of
25,000,000 shares of USIS Common Stock, of which 8,888,982 shares are issued and
outstanding on the date hereof (excluding the Merger Shares), and 1,000,000
shares of preferred stock, $.01 par value per share, of which no shares are
issued and outstanding on the date hereof. All of the issued and outstanding
shares of USIS Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the Merger Shares will
be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, nonassessable and free and clear of all liens, claims,
pledges, options, adverse claims or charges of any nature whatsoever, except for
the Escrow Shares, which shall be subject to the terms of this Agreement and the
Escrow Agreement. All of the outstanding shares of capital stock of P2P-DE are
owned by USIS. As of the date hereof, USIS has outstanding under its stock
option plans option grants and restricted stock purchase rights to purchase
approximately 1,951,000 shares of USIS Common Stock. USIS also has outstanding
warrants to purchase approximately 200,000 shares of USIS Common Stock.
3.3 Authorization of Transaction. Both USIS and P2P-DE have all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated hereby by
USIS and P2P-DE have been duly and validly authorized by all necessary corporate
action on the part of USIS and P2P-DE. This Agreement has been duly and validly
executed and delivered by USIS and P2P-DE and constitutes a valid and binding
obligation of each of them, enforceable against them in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditor's rights generally,
or by general equitable principles, and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal or state
securities laws.
3.4 Noncontravention. Subject to the filing of the Articles of Merger
and issuance of the Certificate of Merger as required by applicable law and as
set forth on Section 3.4 of the USIS Disclosure Schedule, neither the execution
and delivery of this Agreement nor the consummation by USIS or P2P-DE of the
transactions contemplated hereby will (a) conflict with or violate any provision
of the Certificate of Incorporation or Bylaws of USIS or P2P-DE, (b) require on
the part of USIS or P2P-DE any filing with, or permit, authorization, consent or
approval of, any Governmental Authority, other than any filing, permit,
authorization, consent or approval which if not obtained or made would not have
a Material Adverse Effect on the assets, business, financial condition, results
of operations or future prospects of USIS or P2P-DE or on the ability of the
Parties to consummate the transactions contemplated by this Agreement, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any Material contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money,
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instrument of indebtedness, Security Interest or other arrangement to which USIS
or P2P-DE is a party or by which either is bound or to which any of their assets
are subject, other than any conflict, breach, default, acceleration,
termination, modification or cancellation which individually or in the aggregate
would not have a Material Adverse Effect on the assets, business, financial
condition, results of operations or future prospects of USIS or P2P-DE or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement, or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to USIS or P2P-DE or any of their properties or assets.
3.5 Reports and Financial Statements. Point To Point and Xxxxxxxx have
had access to, via the XXXXX system of the U.S. Securities and Exchange
Commission (the "SEC"), each report, schedule and proxy statement filed by USIS
with the SEC dating back to January 1, 1997 (collectively, the "USIS REPORTS").
As of their respective dates, the USIS Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the Knowledge of
senior management of USIS, no Material adverse development has occurred with
respect to USIS's business since its most recently filed Form 10-QSB, except as
disclosed in any USIS Report (including, without limitation, any Form 8-K) filed
or amended after the date of such Form 10-QSB and except for any changes in the
economy in general (or in the overall industry in which USIS operates) or in any
stock market or trading system (including, without limitation, any change in the
value of any trading indices with respect thereto) or as set forth on Section
3.5 of the USIS Disclosure Schedule.
3.6 Undisclosed Liabilities. Except as set forth on Section 3.6 of the
USIS Disclosure Schedule, USIS and P2P-DE have no liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated and
whether due or to become due, including without limitation any liability for
taxes and interest, penalties, and other charges payable with respect to any
such liability or obligation), except for (a) liabilities shown on the balance
sheet contained in USIS's most recently filed Form 10-QSB (the "USIS MOST RECENT
BALANCE SHEET") (b) liabilities that have arisen since the USIS Most Recent
Balance Sheet in the Ordinary Course of Business and not in excess of $50,000 in
the aggregate or $10,000 individually and (c) contractual liabilities incurred
in the Ordinary Course of Business that are not required by GAAP to be reflected
on a balance sheet and are disclosed on Section 3.6 of the USIS Disclosure
Schedule.
3.7 Absence of Certain Changes. Except as provided for or contemplated
in this Agreement, or disclosed on Section 3.7 of the USIS Disclosure Schedule,
since the date of the USIS Most Recent Balance Sheet, with respect to USIS or
P2P-DE, there has not been:
(a) any transaction not in the Ordinary Course of Business
that has had or could have a Material Adverse Effect;
(b) any change in the business, property, assets, liabilities
(whether absolute, accrued, contingent, or otherwise), operations, liquidity,
income, condition (financial or otherwise), prospects, or net worth of USIS that
has had or could have a Material Adverse Effect;
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(c) distributions of any assets of any kind to stockholders of
USIS, or a redemption, or agreement or authorization to redeem any USIS Shares;
(d) any damage, destruction, or loss, extraordinary or
otherwise and whether or not covered by insurance, that has had or could have a
Material Adverse Effect;
(e) any amendment permitted or made with regard to any
Material contract, license, or agreement to which USIS is a party;
(f) any acquisition or disposition by USIS or its subsidiaries
of any property or asset, whether real or personal, having a fair market value
in an amount greater than $5,000 individually or $15,000 in the aggregate, other
than in the Ordinary Course of Business;
(g) any Material mortgage, pledge, or subjection to lien,
charge, or encumbrance of any kind or on any of the respective properties or
assets of USIS or its subsidiaries;
(h) except as contemplated in this Agreement, any increase in,
or commitment to increase, the compensation payable or to become payable to any
officer, director, employee, or agent of USIS or its subsidiaries, or any bonus
payment or similar arrangement made to or with any of such officers, directors,
employees, or agents;
(i) any incurrence of, guarantee of, assumption of, or taking
any property subject to, any Material liability;
(j) except as contemplated in this Agreement, any adoption of
a plan or agreement or amendment to any plan or agreement providing any new or
additional benefits for officers, directors, or employees;
(k) any material alteration in the manner of keeping the
books, accounts, or records of USIS, or in the accounting practices therein
reflected;
(l) any release or discharge of any obligation or liability of
any Person to USIS of any nature whatsoever;
(m) any delay by USIS or its subsidiaries in paying any
Material debt, charge, or amount owed by it in excess of 30 days past the date
such amount was due that has had or could have a Material Adverse Effect;
(n) any Material increase or decrease of (i) any amounts
charged for services rendered or products sold by USIS or its subsidiaries; or
(ii) inventory ordered;
(o) any facts or circumstances (other than general economic or
business conditions) that to USIS's Knowledge may result in the loss of
customers, suppliers, or vendors,
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including without limitation, any notices, statements, or circumstances
indicating that any customer, supplier, or vendor has or will terminate or alter
its business relationship with USIS or its subsidiaries;
(p) any loan to any officer, director, shareholder, or any
Affiliate thereof;
(q) any other event or condition of any character which has
had or could reasonably be expected to have a Material Adverse Effect; or
(r) any agreement or authorization to do any of the above.
3.8 Legal Compliance. Except to the extent the failure to comply would
not have a Material Adverse Effect on USIS, USIS and its subsidiaries and the
conduct and operations of their businesses are in compliance with each law
(including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Authority, which (a) affects or relates
to this Agreement or the transactions contemplated hereby or (b) is applicable
to USIS or its subsidiaries or their businesses.
3.9 USIS Action. The Board of Directors of P2P-DE has, by unanimous
written consent in lieu of a meeting, (i) determined that the Merger is fair and
in the best interests of P2P-DE and its shareholders, (ii) adopted this
Agreement in accordance with the provisions of the DGCL, and (iii) directed that
this Agreement and the Merger be submitted to USIS for its adoption and approval
as sole shareholder and resolved to recommend that USIS vote in favor of the
adoption of this Agreement and the approval of the Merger, which USIS has
approved by unanimous consent. The Board of Directors of USIS has approved the
merger and the other transactions contemplated under this Agreement and, except
for stockholder approval of the USIS 2001 Stock Option Plan and options granted
thereunder, there are no other corporate approvals required to authorize the
merger and the transactions contemplated by this Agreement.
3.10 Absence of Questionable Payments. To USIS's Knowledge, neither
USIS nor any director, officer, agent, employee or other Person acting on behalf
of USIS has (a) used any USIS funds for improper or unlawful contributions,
payments, gifts or entertainment, or made any improper or unlawful expenditures
relating to political activity to government officials or others; (b) accepted
or received any improper or unlawful contributions, payments, gifts or
expenditures; (c) directly or indirectly given or agreed to give any gift or
similar benefit to any customer, contractor, government, employee, or other
Person who was or is in a possible position to help or hinder USIS, which gift
or benefit (i) might subject USIS to any damages or penalties in any civil or
criminal proceeding, (ii) might have had a Material Adverse Effect, or (iii)
might have a Material Adverse Effect if not continued.
3.11 Environmental Matters.
(a) USIS has complied with all applicable Environmental Laws,
except for violations of Environmental Laws that do not and will not,
individually or in the aggregate, have a Material Adverse Effect on the assets,
business, financial condition, results of operations or future prospects of
USIS, taken as a whole. Except as set forth on Section 3.12 of the USIS
Disclosure
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Schedule, there is no pending or, to the Knowledge of USIS, threatened civil or
criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Authority, relating to any Environmental Law involving USIS, except for
litigation, notices of violations, formal administrative proceedings or
investigations, inquiries or information requests that will not, individually or
in the aggregate, have a Material Adverse Effect on the assets, business,
financial condition, results of operations or future prospects of USIS, taken as
a whole.
(b) To the Knowledge of USIS, there have been no releases of
any Materials of Environmental Concern into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by USIS. With respect to any such releases of Materials of
Environmental Concern, USIS has given all required notices to Governmental
Authorities (copies of which have been provided to Point To Point). USIS has no
Knowledge of any releases of Materials of Environmental Concern at parcels of
real property or facilities owned, operated or controlled by persons other than
USIS that could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by USIS.
3.12 Full Disclosure. No representation or warranty by USIS or P2P-DE
contained in this Agreement, and no statement contained in the USIS Disclosure
Schedule or any other document, certificate or other instrument delivered to or
to be delivered by or on behalf of USIS pursuant to this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
ARTICLE IV
CONDITIONS TO CONSUMMATION OF MERGER
4.1 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect adversely the right of USIS to own,
operate or control any of the assets and operations of Point To Point following
the Merger, and no such judgment, order, decree, stipulation or injunction shall
be in effect;
(b) the execution by USIS, Xxxxxxxx and the Escrow Agent of
the Escrow Agreement substantially in the form set forth in Exhibit A attached
hereto;
(c) Xxxxxxxx shall have entered into an Employment Agreement
with Point To Point substantially in the form set forth in Exhibit C attached
hereto;
(d) The Parties shall have duly executed and delivered this
Agreement; and
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(e) The Parties shall have delivered executed Articles of
Merger or Certificate of Merger, as the case may be, pursuant to the MGL and
DGCL in substantially the forms attached hereto as Exhibits D and E.
4.2 Conditions to Obligations of USIS and P2P-DE. The obligation of
both USIS and P2P-DE to consummate the Merger is subject to the satisfaction of
the following additional conditions:
(a) Point To Point shall have obtained any waiver, permit,
consent, approval, or other authorization, and effected any registration, filing
or notice, set forth on Schedule 4.2(a);
(b) Point To Point shall have performed or complied with the
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Effective Date;
(c) USIS shall have received from Xxxxxxxx the Investment
Representation Statement substantially in the form set forth in Exhibit B
attached hereto;
(d) USIS shall have received an Officer's Certificate from
Point To Point in substantially the form attached hereto as Exhibit F;
(e) USIS shall have received executed Elections to Receive
Cash Consideration in the form attached hereto as Exhibit G from each
participant in the Point To Point 1998 Executive Incentive Compensation Plan
(the "1998 PLAN"), and arrangements reasonably satisfactory to USIS to terminate
the 1998 Plan simultaneously with the Closing;
(f) all actions to be taken by Point To Point and Xxxxxxxx in
connection with the consummation of the transactions contemplated hereby and all
certificates, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to USIS and P2P-DE.
4.3 Conditions to Obligations of Point To Point and Xxxxxxxx. The
obligation of both Point To Point and Xxxxxxxx to consummate the Merger is
subject to the satisfaction of the following additional conditions:
(a) USIS and Xxxxxxxx shall have entered into a Registration
Rights Agreement with USIS substantially in the form set forth in Exhibit H
attached hereto (the "REGISTRATION RIGHTS AGREEMENT");
(b) both USIS and P2P-DE shall have performed or complied with
its agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Effective Date;
(c) Point To Point shall have received Officer's Certificates
from USIS and P2P-DE in substantially the form attached hereto as Exhibit I;
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(d) USIS shall have delivered to Point To Point a unanimous
written consent of USIS's Board of Directors whereby Xxxxx X. Xxxxxxxx is
authorized to issue stock options to key employees of Point To Point to
purchase, in the aggregate, 200,000 shares of USIS Common Stock, pursuant to
USIS's 2001 Stock Plan. The size of the individual grants of such stock options
shall be determined by Xxxxx X. Xxxxxxxx, in his sole discretion, and all grants
of stock options under the 2001 Stock Plan shall be subject to the approval by
USIS's stockholders of the 2001 Stock Plan.
(e) arrangements reasonably satisfactory to Xxxxxxxx shall
have been made to pay off, simultaneously with the Closing, all amounts owed to,
and to deposit cash in an amount equal to the letter of credit issued by,
Citizens Bank for which Xxxxxxxx has provided his personal guarantee; and
(f) all actions to be taken by USIS and P2P-DE in connection
with the consummation of the transactions contemplated hereby and all
certificates, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Point To Point and Xxxxxxxx.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification.
(a) Xxxxxxxx (in this context, an "INDEMNIFYING PARTY") shall
indemnify USIS, its successors and assigns, and the officers, directors,
Affiliates, employees, controlling persons and agents of USIS and each of their
Affiliates (collectively, the "USIS INDEMNIFIED PERSONS"), and hold each of them
harmless against and in respect of any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) (collectively, "DAMAGES") incurred or suffered by any of them by
reason of (i) a breach of any of the representations or warranties made by Point
To Point or Xxxxxxxx in this Agreement, (ii) the nonperformance (whether partial
or total) of any covenants or agreements made by Point To Point or Xxxxxxxx in
this Agreement, (iii) the failure of Xxxxxxxx to have good, valid and marketable
title to the issued and outstanding Point To Point Shares held by Xxxxxxxx, free
and clear of all liens, claims, pledges, options, adverse claims or charges of
any nature whatsoever, or (iv) any claim by a shareholder or former shareholder
of Point To Point, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (A) ownership or rights to ownership of any shares of
stock of Point To Point; (B) any rights of a shareholder (other than the right
to receive the Merger Consideration pursuant to this Agreement or appraisal
rights under the applicable provisions of the DGCL), including any option,
preemptive rights or rights to notice or
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to vote; (C) any rights under the Articles of Incorporation or Bylaws of Point
To Point; or (D) any claim that his, her or its shares were wrongfully
repurchased by Point To Point.
(b) USIS (in this context, an "INDEMNIFYING PARTY") agrees to
indemnify and to hold harmless Xxxxxxxx, his Affiliates, assigns, heirs, and
legatees (collectively, the "USIS INDEMNIFIED PERSONS"), and hold each of them
harmless against and in respect of any and all Damages incurred or suffered by
them by reason of (i) a breach of any of the representations or warranties made
by USIS or P2P-DE in this Agreement, (ii) the nonperformance (whether partial or
total) of any covenants or agreements made by USIS or P2P-DE in this Agreement,
or (iii) the failure of the Merger Shares (other than the Escrow Shares being
subject to the terms of the Escrow Agreement) to be either duly authorized,
validly issued, fully paid and nonassessable or delivered to Xxxxxxxx by USIS
free and clear of all liens, claims, pledges, options, adverse claims or charges
of any nature whatsoever.
5.2 Method of Asserting Claims.
(a) If any person entitled to indemnification pursuant to
Section 5.1 hereof (an "INDEMNITEE") is threatened in writing with any claim, or
any claim is presented in writing to, or any action or proceeding is formally
commenced against, any of the Indemnitees which may give rise to the right of
indemnification hereunder, the Indemnitee will promptly give written notice
thereof to each indemnifying party; provided, however, that any delay by an
Indemnitee in so notifying the indemnifying party shall not relieve the
indemnifying party of any liability to any of the Indemnitees hereunder except
to the extent that the indemnifying party shall have been actually prejudiced as
a result of such failure.
(b) The indemnifying party or parties, by delivery of written
notice to an Indemnitee within 30 days of notice of claim to indemnity from an
Indemnitee, may elect to assume the defense of such claim, action or proceeding
at the expense of the indemnifying party; provided, however, that (i) unless
such written notice shall be accompanied by a written agreement of each
indemnifying party acknowledging the liability of the indemnifying parties to
the Indemnitees as a result of this Agreement for any indemnified damage which
any Indemnitee might incur or suffer as a result of such claim, action or
proceeding or the contesting thereof, each indemnifying party shall be jointly
and severally liable for the attorneys' fees and expenses of the Indemnitee, if
any, incurred in connection with defending such claim; (ii) counsel undertaking
such defense shall be reasonably acceptable to the Indemnitee; (iii) the
indemnifying parties shall mutually elect to contest such claim, action or
proceeding and shall conduct and settle such contest in a joint manner, and if
the indemnifying parties shall fail at any time to agree, the Indemnitee shall
have no obligation to contest such claim, action or proceeding; and (iv) if the
Indemnitee requests in writing that such claim, action or proceeding not to be
contested, then it shall not be contested but shall not be covered by the
indemnities provided herein. The indemnifying parties may settle an
indemnifiable matter after delivering a written description of the proposed
settlement to and receiving consent from the Indemnitee. In the event the
Indemnitee unreasonably declines to consent to such settlement, then the
Indemnitee shall have no right to indemnification beyond the amount of the
proposed settlement. In the event the indemnifying parties jointly elect to
contest an indemnifiable matter, USIS and Xxxxxxxx shall permit each other
reasonable access to their respective books and records and shall otherwise
cooperate in
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connection with such claim. If the indemnifying parties do not jointly elect to
contest an indemnifiable matter, they shall cooperate with the Indemnitee to the
extent any of them has knowledge of facts or circumstances relating to such
matter, and the Indemnitee shall have the exclusive right to prosecute, defend,
compromise, settle or pay any claim, but the Indemnitee shall not be obligated
to do so; provided, however, that, should the Indemnitee elect not to exercise
its right exclusively to prosecute, defend, compromise, settle or pay such
claim, any indemnifying party may elect to do so at its sole expense.
(c) To secure his obligations pursuant to the provisions of
this Section, Xxxxxxxx agrees to escrow the Escrow Shares, pursuant to the terms
and conditions of the Escrow Agreement. Indemnity obligations hereunder shall be
satisfied, in the case of indemnification of any USIS Indemnified Person, as set
forth in the Escrow Agreement.
5.3 Survival. The representations and warranties of the Parties set
forth in this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until 12 months after the
Effective Date and, except as otherwise provided herein, shall not be affected
by any examination made for or on behalf of any Party or the Knowledge of any of
their respective officers, directors, shareholders, employees or agents.
Notwithstanding the foregoing, the representations and warranties contained in
Section 2.26 relating to environmental matters shall survive the Closing and the
consummation of the transactions contemplated thereby indefinitely; and the
representations and warranties contained in Section 2.12 relating to tax matters
shall survive the Closing and the consummation of the transactions contemplated
thereby and continue until the expiration of the applicable statute of
limitations relating to such tax representations. If a notice is given in
accordance with the Escrow Agreement before expiration of such periods, then
such time period shall be tolled during the pendency of such claim.
5.4 Limitations on Indemnification. Notwithstanding any provision of
this Agreement to the contrary, no USIS Indemnified Persons or Xxxxxxxx
Indemnified Persons shall be entitled to indemnification or to otherwise recover
any amount if the particular claim identifies a Damages of less than $25,000, or
unless and until one or more claims (of whatever individual value) identifying
Damages in excess of $100,000 in the aggregate (the "BASKET AMOUNT") has or have
been delivered to the Indemnifying Party, in which case such USIS Indemnified
Persons or Xxxxxxxx Indemnified Persons shall be entitled to recover all Damages
so identified, provided, however, that the limitations contained in this Section
5.4 shall not apply to any Damages arising out of or relating to (i) intentional
or fraudulent misrepresentations or actions by USIS, P2P-DE, Point To Point, or
Xxxxxxxx in connection with representations and actions pursuant to this
Agreement or (ii) a breach of a covenant or agreement contained in this
Agreement. Notwithstanding the foregoing, in no event shall the liability of any
Indemnifying Party exceed $3,677,622. Furthermore, if any USIS Indemnified
Person seeks indemnification from Xxxxxxxx under Article V, such USIS
Indemnified Person shall seek recourse against Xxxxxxxx by looking solely to the
following specific assets (including any proceeds received by Xxxxxxxx
therefrom) of Xxxxxxxx, and in the following order of priority: first, the
Escrow Shares (valued as set forth in the Escrow Agreement); second, the Cash
Consideration; and lastly, the remaining Merger Shares (valued at $1.50 per
share). Notwithstanding the foregoing, no limitation on indemnification
contained in this Section 5.4 shall apply to any Damages arising out of or
relating to intentional
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misrepresentations or actions constituting fraud by USIS, P2P-DE, Point To
Point, or Xxxxxxxx in connection with representations and actions pursuant to
this Agreement. Furthermore, in the event that any representation or warranty of
a Party (the "NON-COMPLIANT PARTY") is not true as of the Closing Date or a
Party (also a "NON-COMPLIANT PARTY") has not complied with any covenant
contained in this Agreement as of the Closing Date, and written notice of such
untruth or unfulfilled covenant has been delivered to the other parties hereto
and such parties choose to close the Merger, the Non-Compliant Party shall have
no indemnification obligation or other liability with respect to damages or
other expenses of any nature arising in connection with such untruth or
unfulfilled covenant.
ARTICLE VI
POST-CLOSING COVENANTS AND AGREEMENTS
6.1 Restriction on Sale of USIS Common Stock.
(a) Except pursuant to an SEC-registered offering pursuant to
the terms of the Registration Rights Agreement, Xxxxxxxx agrees that, for a
period of 12 months after the Effective Date of the Merger, he will not (i)
sell, offer to sell, pledge, transfer or otherwise dispose of any shares of USIS
Common Stock received by him in the Merger, or (ii) engage in any transaction,
whether or not with respect to any shares of USIS Common Stock or any interest
herein, the intent or effect of which is to reduce the risk of owning the shares
of USIS Common Stock acquired hereunder (including, by way of example and not
limitation, engaging in put, call, short-sale, straddle or similar market
transactions).
(b) All shares of USIS Common Stock subject to the provisions
of paragraph (a) above shall, until the expiration of the stated time period,
bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
THE CONDITIONS SPECIFIED IN THAT CERTAIN REORGANIZATION AGREEMENT AND
PLAN OF MERGER, DATED JUNE 29, 2001, BY AND AMONG W. XXXXXXX XXXXXXXX,
U S INDUSTRIAL SERVICES, INC. (THE "COMPANY"), AND THE OTHER PARTIES
THERETO, A COPY OF WHICH MAY BE INSPECTED AT THE PRINCIPAL OFFICES OF
THE COMPANY OR FURNISHED BY THE COMPANY UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
6.2 Non-Competition. In order to ensure that USIS will realize the
benefits of the transactions contemplated hereby, Xxxxxxxx hereby covenants and
agrees that he will not, during the Restricted Period (defined below):
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(a) directly or indirectly, in any capacity whatsoever,
individually or on behalf of any other person or entity, engage or invest in,
own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing, or control of, be employed by, associated
with, or in any manner connected with, lend his name or any similar name to,
lend his credit to or render services or advice to, any business engaged or
about to become engaged in the Business of USIS, or any of its Affiliates, in
the Market Area (defined below). For purposes of this Agreement, the Business of
USIS and its Affiliates shall mean (i) all those products and services that are
presently or hereafter marketed by Point To Point, or any of its Affiliates, or
that are in the development stage on the later of the last day of the Restricted
Period or the Termination Date (as that term is defined in Xxxxxxxx'x Employment
Agreement with USIS); (ii) the business of providing communications
infrastructure services, including engineering, procurement, and construction
services, to communications companies.
(b) directly or through an Affiliate, solicit any Person that
is a Current Customer (as defined in Article VII) of USIS or its Affiliates for
purposes of selling products or services to such Person that are in competition
with the products and services offered or sold by USIS or its Affiliates.
(c) employ, either directly or through an Affiliate, any
employee of USIS or its Affiliates or any individual who was an employee of USIS
or its Affiliates during the six months immediately preceding the later of the
last day of the Restricted Period or the Termination Date, and agrees not to
solicit, or contact in any manner that could reasonably be construed as a
solicitation, either directly or through an Affiliate, any employee of USIS or
its Affiliates for the purpose of encouraging such employee to leave or
terminate his or her employment with USIS or its Affiliates.
(d) solicit, either directly or through an Affiliate, a vendor
or supplier of Point To Point for purposes of encouraging such vendor or
supplier to cease or diminish providing products or services to USIS or its
Affiliates, or to change adversely the terms under which such vendor or supplier
provides such products or services to USIS or its Affiliates.
(e) interfere with USIS's relationship with any Person who at
the relevant time is an employee, contractor, supplier, or customer of USIS or
its Affiliates.
(f) Restricted Period. For purposes of this Section 6.2, the
term "RESTRICTED PERIOD" means the three-year period commencing on the date
hereof.
(g) Market Area. For purposes of this Section 6.2, the term
"MARKET AREA" means the area encompassing the Commonwealth of Massachusetts and
the States of Maine and New York.
(h) Reformation. If any covenant in this Section 6.2 is held
to be unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as an arbitrator or
a court of competent jurisdiction may determine to be
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reasonable, not arbitrary, and not against public policy, will be effective,
binding, and enforceable against Xxxxxxxx.
6.3 Post-Closing Operation of Surviving Entity. From the Closing Date
through December 31, 2001, USIS shall cause the Surviving Corporation to be
operated in substantially the same manner as Point To Point was operated prior
to the Closing Date.
6.4 Release of Personal Guarantees. Beginning on the Effective Date,
USIS will indemnify Xxxxxxxx from and against all Damages of any kind under any
outstanding personal guarantees of the Surviving Corporation's obligations
("XXXXXXXX GUARANTEES"). USIS shall use reasonable efforts (including providing
substitute guarantees, re-executing loan and other documents, and paying off
obligations) to obtain a release of all Xxxxxxxx Guarantees.
6.5 Brokers' Fees. USIS or P2P-DE shall be responsible for any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement on account
of any agreement of USIS or P2P-DE.
ARTICLE VII
DEFINITIONS
The following terms as used in this Agreement shall have the meanings
set forth below:
"AFFILIATE" shall mean, as to any Person, any Person controlled by,
controlling, or under common control with such Person, and, in the case of a
Person who is an individual, a member of the family of such individual
consisting of a spouse, sibling, in-law, lineal descendant, or ancestor
(including by adoption), and the spouses of any such individuals. For purposes
of this definition, "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, directly
or indirectly, alone or in concert with others, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of securities, by contract or otherwise, and no Person shall be deemed
in control of another solely by virtue of being a director, officer or holder of
voting securities of any entity. A Person shall be presumed to control any
partnership of which such Person is a general partner.
"CODE" shall mean the Internal Revenue Code of 1986, as amended. All
references herein to sections of the Code shall include any corresponding
provision or provisions of succeeding law.
"CURRENT CUSTOMER" shall mean any Person who is currently utilizing any
product or service sold or provided by USIS or any of its Affiliates; any Person
who utilized any such product or service within the previous 12 months; and any
Person with whom USIS or any of its Affiliates is currently conducting
negotiations concerning the utilization of such products or services.
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"ENVIRONMENTAL LAWS" shall mean laws, including, without limitation,
federal, state, or local laws, ordinances, rules, regulations, interpretations,
and orders of courts or administrative agencies or authorities relating to
pollution, environmental protection, health and safety, or similar laws
(including, without limitation, ambient air, surface water, ground water, land
surface, and subsurface strata), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Federal Clean Water Act ("CWA"), the Safe Drinking Water
Act ("SDWA"), the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Clean Air Act ("CAA"), the Emergency Planning and Community Right
to Know Act ("EPCRA"), the Occupational Safety and Health Act ("OSHA"), and
other laws relating to pollution or protection of the environment, or to the
manufacturing, processing, distribution, use, treatment, handling, storage,
disposal, or transportation of Polluting Substances (defined below).
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
regional, local, or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"KNOWLEDGE" - An individual shall be deemed to have "knowledge" of a
particular fact or other matter if (i) such individual is actually aware of such
fact or other matter, or (ii) a prudent person serving in the same capacity as
such individual would be expected to discover or otherwise become aware of such
fact or other matter in the course of performing the official duties of such
individual. A corporation shall be deemed to have "knowledge" of a particular
fact or other matter if any individual serving as a director or officer (or in
any similar capacity) of the corporation has Knowledge (as set forth above) of
such fact or other matter.
"MATERIAL" when capitalized and used in reference to the business,
products or financial situation of the party to which the reference relates
shall be construed, except as specifically provided, to qualify the matter
referred to herein to matters with an effect on the financial condition of that
party in excess of $25,000. When the word "material" is not capitalized it shall
mean material with respect to the matter referenced. For example, a reference to
a material breach of a particular agreement would mean a breach that is material
with respect to the particular contract (and not necessarily with respect to the
overall business of the party).
"MATERIAL ADVERSE EFFECT" means any development, change, or effect that
is adverse to the business, properties, tangible or intangible assets, net
worth, condition (financial or other), results of operations, or business
prospects of the party to which the reference relates that is Material.
"PERSON" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended, as modified and used in Sections
13(d)(3) and 14(d)(2) of such act.
"POLLUTING SUBSTANCES" shall be construed broadly to include (a)
asbestos, (b) petroleum products or wastes, (c) biomedical or biological wastes,
and (d) all pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or wastes and shall include, without limitation, any
flammable explosives, radioactive materials, oil, hazardous materials, hazardous
or
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solid wastes, hazardous or toxic substances or regulated materials defined in
CERCLA, CWA, SDWA, RCRA, EPCRA, and CAA and/or any other Environmental Laws, as
amended, and in the regulations adopted and publications promulgated thereto;
provided, to the extent that the laws of the State of Massachusetts establish a
meaning for "hazardous substance," "hazardous waste," "hazardous materials,"
"solid waste," or "toxic substance," which is broader than that specified in any
of CERCLA, CWA, SDWA, RCRA, EPCRA, and CAA or other Environmental Laws such
broader meaning shall apply.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien (whether arising by contract or by operation
of law), other than (i) mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, and (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in the
ordinary course of business consistent with past custom and practice and in
amount (including with respect to frequency and amount) ("ORDINARY COURSE OF
BUSINESS") that would not have a Material Adverse Effect, taken as a whole.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
8.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
8.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof, including the letter
of intent dated April 18, 2001, and any nondisclosure agreement entered into
prior to the date hereof.
8.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that P2P-DE may assign its rights, interests and
obligations hereunder to a different newly-formed subsidiary of USIS.
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8.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Facsimile signatures
delivered shall be deemed to constitute originals.
8.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid; one business day after it is sent via a reputable
nationwide overnight courier service; or upon receipt if delivered personally,
in each case to the intended recipient as set forth below:
If to Point To Point or Xxxxxxxx: Copy to:
W. Xxxxxxx Xxxxxxxx Xxxxxxx X. Xxxxxxx, Esq.
c/o Point To Point Network Services, Inc. Xxxxxxx & Xxxxxxx
0 Xxxxxxx Xxxxx Xxxxx 000 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000-0000 Xxxxxxx, XX 00000
If to USIS or P2P-DE: Copy to:
Xxxxx X. Xxxxxxxx J. Xxxx Xxxxx, Esq.
President and CEO Fish & Xxxxxxxxxx P.C.
U S Industrial Services, Inc. 5000 Bank One Center
00000 Xxxxx Xxxx 0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means, but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the party for whom it is intended or
such party refuses delivery via certified mail or express delivery service. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
8.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether
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intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
8.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is 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 after the expiration of the time within
which the judgment may be appealed.
8.11 Expenses. Each of the Parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, and Point To Point shall
have no liability in excess of $25,000 for legal fees pertaining to this
Agreement on the Effective Date; any fees and expenses owed by Point To Point on
the Effective Date in excess of $25,000 shall be recovered by USIS pursuant to
Article V.
8.12 Specific Performance. Each of the Parties acknowledges and agrees
that one or more of the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions of
Section 8.13), in addition to any other remedy to which it may be entitled, at
law or in equity.
8.13 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in New Castle County,
Delaware in any action or proceeding arising out of or relating to this
Agreement, (b) agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court, and (c) agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other Party with respect
thereto. Any Party may make service on another Party by sending or delivering a
copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 8.7. Nothing in this Section 8.13,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law.
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8.14 Construction. The language used in this Agreement shall be deemed
to be the language chosen by the Parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against any Party. 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.
8.15 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
U S INDUSTRIAL SERVICES, INC.
(a Delaware corporation)
By:
-------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
POINT TO POINT NETWORK SERVICES, INC.
(a Delaware corporation)
By:
-------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
POINT TO POINT NETWORK SERVICES, INC.
(a Massachusetts corporation)
By:
-------------------------------------
W. Xxxxxxx Xxxxxxxx
President
-------------------------------------
W. Xxxxxxx Xxxxxxxx, Individually
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