STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of July 2, 1999, by
and among Log on America, Inc., a Delaware corporation ("Buyer"), Xxxxxx Xxxxx,
an individual resident in Massachusetts , Xxxxxx X. Xxxxxxx, an individual
resident in Maine, and Xxxx Xxxxxxx, an individual resident in Maine
(collectively, "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued and
outstanding shares (the "Shares") of capital stock of cyberTours, Inc., a Maine
corporation (the "Company"), for the consideration and on the terms set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Adjustment Amount"--as defined in Section 2.5.
"Annualized Revenues" -means the product of multiplying the revenues of the
Company from the operation of its business for the period covering January 1,
1999 through June 30, 1999, as audited in accordance with GAAP consistently
applied, times 2.0.
"Applicable Contract"--any Contract (a) under which any Acquired Company has or
may acquire any rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability, or (c) by which any Acquired Company or
any of the assets owned or used by it is or may become bound.
"Balance Sheet"--as defined in Section 3.4.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes place.
"Company"--as defined in the Recitals of this Agreement.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Employment Agreement, the
Noncompetition Agreements, the Sellers' Releases, and the Escrow Agreement;
(c) the performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of control over
the Acquired Companies.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages"--as defined in Section 10.2.
"Debt" -means any liability or obligation of the Company of any kind, character,
or description, absolute or contingent, accrued or unaccrued, secured or
unsecured, joint or several, due or to become due, vested or unvested, or
executory, after crediting accounts receivable, prepaid expenses and cash on
hand, as audited through June 30, 1999 in accordance with GAAP consistently
applied.
"Disclosure Letter"--the disclosure letter to be delivered by Sellers to Buyer
within five (5) of the execution and delivery of this Agreement.
"Employment Agreements"--as defined in Section 2.4(a)(iii).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of
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ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or Occupational Safety and
Health Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
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(d) assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Escrow Agreement"--as defined in Section 2.4.
"Facilities"--any leaseholds, or other interests currently or formerly owned or
operated by any Acquired Company and any equipment (including motor vehicles)
currently or formerly owned or operated by any Acquired Company.
"GAAP"--generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"Governmental Authorization"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or other jurisdiction
of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of any
nature.
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"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Materials"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets" --as defined in Section 3.22.
"Interim Balance Sheet"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise become aware
of such fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Noncompetition Agreements"--as defined in Section 2.4(a)(iv).
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"Occupational Safety and Health Law"--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority);
and
(c) such action is similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or group
of Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation and
the bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Plan"--as defined in Section 3.13.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Projected Financial Statements" -means the balance sheets and profit/loss
statements provided to Buyer and attached hereto as Exhibit 1-Projected
Financial Statements.
"Related Person"--with respect to a particular individual:
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(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual or
one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's Family
hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members of
such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"Representative"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
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"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Shares"--as defined in the Recitals of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax Return"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares
from Sellers.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be the product of
Annualized Revenues, plus gross billing derived from 1999-2000 UNE sales
contracts, dated as of July 1, 1999 times 2.0, less Debt as of June 30, 1999,
subject to the Adjustment Amount set forth in Section 2.5 hereof.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Buyer's counsel at 000 Xxxxxxxxxxx Xxxxxx, 10th Fl.,
Providence, Rhode Island, at 10:00 a.m. (local time) on August 15, 1999, or at
such other time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or accompanied by duly
executed stock powers), with signatures guaranteed by a commercial bank or by a
member firm of the New York Stock Exchange, for transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed by Sellers
(collectively, "Sellers' Releases");
(iii) an employment agreement executed by Xxxxxx X. Xxxxxxx ("Employment
Agreement");
(iv) noncompetition agreements in the form of Exhibit 2.4(a)(iv), executed by
Sellers (collectively, the "Noncompetition Agreements"); and
(v) a certificate executed by Sellers representing and warranting to Buyer that
each of Sellers' representations and warranties in this Agreement was accurate
in all respects as of the date of this
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Agreement and is accurate in all respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by Sellers to Buyer prior to the Closing Date in accordance
with Section 5.5); and
(b) Buyer will deliver to Sellers:
(i) 433,333 share certificates in the form of Rule 144 of the Securities Act
stock of Buyer, which stock shall be registered with the Security Exchange
Commission pursuant to Section 4.6 hereof ("Registered Stock"), and distributed
amongst the Sellers;
(ii) share certificates in the form of Rule 144 of the Securities Act stock of
Buyer equal to the balance of the Purchase Price, with such Section 144 stock
being valued at $15.00 per share ("Rule 144 Stock"),to be held by the escrow
agent referred to in Section 2.4(c);
(iii) a certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of Buyer's representations and warranties in
this Agreement was accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made on the Closing
Date; and
(iv) the Employment Agreement, executed by Buyer.
(c) Buyer and Sellers will enter into an escrow agreement in the form of Exhibit
2.4(c) (the "Escrow Agreement") with Xxxxx X. Xxxxxx.
2.5 ADJUSTMENT AMOUNT
The Adjustment Amount shall equal any Debt not set forth on the balance sheet as
of June 30, 1999, as audited in accordance with GAAP consistently applied It
being understood that the Company is in the process of expending sums for
network capacity beyond June 30, 1999; and, the parties will agree whether or
not said sums will constitute Debt hereunder.
2.6 ADJUSTMENT PROCEDURE
(a) Sellers will prepare and will cause Xxxxxxx, Xxxxxx & XxXxxxx, PA, the
Company's certified public accountants, to audit consolidated financial
statements ("Closing Financial Statements") of the Company as of June 30, 1999,
including a computation of Debt as of June 30, 1999. Sellers will deliver the
Closing Financial Statements to Buyer Xxxx.xx July 15, 1999. Said Closing
Financial Statements will then be forwarded by Buyer to Xxxxxx & Young, the
Buyer's certified public accountants, to review same to Buyer's satisfaction. If
within forty-five (45) days following delivery of the Closing Financial
Statements, Buyer has not given Sellers notice of its objection to the Closing
Financial Statements (such notice must contain a statement of the basis of
Buyer's objection), then the Debt reflected in the Closing Financial Statements
will be used in computing the Adjustment Amount. If Buyer gives such notice of
objection, then the issues in dispute will be submitted to mutually agreed upon
certified public accountants selected by the parties (the "Accountants"), for
resolution. If issues in dispute are submitted to the
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Accountants for resolution, (i) each party will furnish to the Accountants such
workpapers and other documents and information relating to the disputed issues
as the Accountants may request and are available to that party or its
Subsidiaries (or its independent public accountants), and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (ii) the
determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) Buyer and Sellers will each bear 50% of the fees of the Accountants for
such determination.
(b) On the tenth business day following the final determination of the
Adjustment Amount, if the Purchase Price is less than the aggregate of the
payments made pursuant to Sections 2.4(b), the Rule 144 Stock issued to Sellers
shall be reduced on the basis of $15.00 per share, whereupon the shares shall be
released from specifyEscrow and delivered to Sellers and to Buyer pursuant to
the Escrow Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate list for
each Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational Documents of
each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT; OWN ACCOUNT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms. Upon the
execution and delivery by Sellers of the Escrow Agreement, the Employment
Agreement, the Sellers' Releases, and the Noncompetition Agreements
(collectively, the "Sellers' Closing Documents"), the Sellers' Closing Documents
will constitute the legal, valid, and binding obligations of Sellers,
enforceable against Sellers in accordance with their respective terms. Sellers
have the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing Documents
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and to perform their obligations under this Agreement and the Sellers' Closing
Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of the Acquired Companies, or (B) any resolution
adopted by the board of directors or the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any Acquired Company or either Seller, or any
of the assets owned or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company;
(iv) cause Buyer or any Acquired Company to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired Company to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
(c) Sellers are acquiring the Rule 144 Stock and, initially, until its
registration pursuant to Section 4.6 hereof, the Registered Stock for their own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Each Seller is an "accredited investor" as such
term is defined in Rule 501(a) under the Securities Act. Each Seller is relying
solely on the public information on the Company as filed with the Securities
Exchange Commission, including its Form 10-Q for the quarter ended March 31,
1999, to determine
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whether or not to acquire said stock. Sellers understand and agree that the
certificates representing the Rule 144 Stock and the Registered Stock shall bear
the legend to the effect that said shares have not been registered under the
Securities Act or state securities laws in reliance on exemptions therefrom and,
therefore, the Rule 144 Stock or Registered Stock may not be resold unless an
exemption from registration is available, as opined to by counsel satisfactory
to Buyer, or registration takes place.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 4,000 shares of
common stock, no par value per share, of which 3,000 shares are issued and
outstanding and constitute the Shares. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Shares, free and clear
of all Encumbrances. Xxxxxx Xxxxx owns 1,000 of the Shares; Xxxxxx X. Xxxxxxx
owns 1,000 of the Shares; and, Xxxx Xxxxxxx owns 1,000of the Shares. All of the
outstanding equity securities and other securities of each Acquired Company are
owned of record and beneficially by one or more of the Acquired Companies, free
and clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of any
Acquired Company. All of the outstanding equity securities of each Acquired
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of any Acquired Company.
None of the outstanding equity securities or other securities of any Acquired
Company was issued in violation of the Securities Act or any other Legal
Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
There are no options, warrants or other rights, agreements, arrangements for
commitment of any character to which the Company is a party or obligating the
Company to issue or sell any shares of capital stock of, or other equity
interests in, the Company. There are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any of the capital stock
of the Company or to provide funds to or make any investment in the form of a
loan, capital contribution or otherwise) in any other entity. The Company is not
a party to any agreement granting registration rights to any person or entity
with respect to any equity or debt securities of the Company.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) audited consolidated balance sheets of the
Acquired Companies as of December 31 in each of the years 1997 through 1998, and
the related audited consolidated statements of income, changes in stockholders'
equity, and cash flow for each of the fiscal years then ended, together with the
report thereon of Xxxxxxx, Xxxxxx & McNanamee, PA, independent certified public
accountants and (b) an audited consolidated balance sheet of the Acquired
Companies as of June 30, 1999 (including the notes thereto, the "Balance
Sheet"), and the related consolidated statements of income, changes in
stockholders' equity, Debt and cash flow for the fiscal year then ended,
together with the report thereon of Xxxxxxx, Xxxxxx &
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XxXxxxx, PA, independent certified public accountants.
Such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity, Debt and cash flow
of the Acquired Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Balance Sheet); the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial statements of any Person
other than the Acquired Companies are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Buyer, are complete
and correct and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) of the Securities Act, as amended
(regardless of whether or not the Acquired Companies are subject to that
Section), including the maintenance of an adequate system of internal controls.
The minute books of the Acquired Companies contain accurate and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Acquired
Companies, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Acquired Companies.
3.6 TITLE TO PROPERTY; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
leaseholds, or other interests therein owned by any Acquired Company. The
Acquired Companies own all the property and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet and the Interim Balance Sheet,
as the case may be, in the Ordinary Course of Business), and all of the property
and assets purchased or otherwise acquired by the Acquired Companies since the
date of the Balance Sheet (except for personal property acquired and sold since
the date of the Balance Sheet in the Ordinary Course of Business and consistent
with past practice). All material properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet are free and clear of all Encumbrances,
except, with respect to all such property and assets, (a) security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
security interests
14
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, and (c) liens for current taxes not yet due.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The equipment of the Acquired Companies are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Acquired
Companies are sufficient for the continued conduct of the Acquired Companies'
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety (90) days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable 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 in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date,
as the case may be. All inventories not written off have been priced at the
lower of cost or [market] [net realizable value] on a [last in, first out]
[first in, first out] basis. The quantities of each item
15
of inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Acquired
Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed all Tax Returns that
are or were required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to applicable
Legal Requirements. Sellers have delivered or made available to Buyer copies of,
and Part 3.11 of the Disclosure Letter contains a complete and accurate list of,
all such Tax Returns relating to income or franchise taxes filed since January
1, 1996. The Acquired Companies have paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Sellers or any Acquired
Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of each Acquired
Company subject to such Taxes have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through December 31, 1997. Part 3.11 of the Disclosure Letter
contains a complete and accurate list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.11 of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. Part 3.11
of the Disclosure Letter describes all adjustments to the United States federal
income Tax Returns filed by any Acquired Company or any group of corporations
including any Acquired Company for all taxable years since December 31, 1996,
and the resulting deficiencies proposed by the IRS. Except as described in Part
3.11 of the Disclosure Letter, no Seller or Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of any Acquired Company or for which any Acquired
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the respective
books of each Acquired Company are adequate (determined in accordance with GAAP)
and are at least equal to that Acquired Company's liability for Taxes. There
exists no proposed tax assessment against any Acquired Company except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
16
Letter. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by any Acquired Company. All Taxes that any Acquired Company is or was required
by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) any
Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement. No Acquired Company is, or within the five-year period
preceding the Closing Date has been, an "S" corporation] During the consistency
period (as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Buyer), no Acquired Company or target affiliate (as defined in
Section 338(h)(6) of the IRC with respect to the sale of the Shares to Buyer)
has sold or will sell any property or assets to Buyer or to any member of the
affiliated group (as defined in Section 338(h)(5) of the IRC) that includes
Buyer. Part 3.11 of the Disclosure Letter lists all such target affiliates.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, as audited in accordance with GAAP
consistently applied, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of any
Acquired Company, and no event has occurred or circumstance exists that may
result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the meanings set
forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by an Acquired Company or an ERISA Affiliate of an Acquired
Company.
"Company Plan" means all Plans of which an Acquired Company or an ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has participated. All
references to Plans are to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of any Acquired
Company or any ERISA Affiliate of an Acquired Company.
"ERISA Affiliate" means, with respect to an Acquired Company, any other person
that, together with the Company, would be treated as a single employer under IRC
ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or customary
practices,
17
whether or not legally enforceable, to provide benefits, other than salary, as
compensation for services rendered, to present or former directors, employees,
or agents, other than obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the requirements
of IRC ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of ERISA,
29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 3.13(i) of the Disclosure Letter contains a complete and accurate
list of all Company Plans, Company Other Benefit Obligations, and Company VEBAs,
and identifies as such all Company Plans that are (A) defined benefit Pension
Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a complete and accurate
list of (A) all ERISA Affiliates of each Acquired Company, and (B) all Plans of
which any such ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA
Affiliate participates or has participated, or to which any such ERISA Affiliate
contributes or has contributed.
(iii) Part 3.13(iii) of the Disclosure Letter sets forth, for each
Multi-Employer Plan, as of its last valuation date, the amount of potential
withdrawal liability of the Acquired Companies and the Acquired Companies' other
ERISA Affiliates, calculated according to information made available pursuant to
ERISA ss. 4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a calculation of the
liability of the Acquired Companies for post-retirement benefits other than
pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether any Acquired Company
is required by this Statement to disclose such information.
18
(v) Part 3.13(v) of the Disclosure Letter sets forth the financial cost of all
obligations owed under any Company Plan or Company Other Benefit Obligation that
is not subject to the disclosure and reporting requirements of ERISA.
(c) Sellers have delivered to Buyer, or will deliver to Buyer within ten (10)
days of the date of this Agreement:
(i) all documents that set forth the terms of each Company Plan, Company Other
Benefit Obligation, or Company VEBA and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company Plans for which
Sellers or the Acquired Companies are required to prepare, file, and distribute
plan descriptions and summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries regarding Company
Plans, Company Other Benefit Obligations, and Company VEBAs for which a plan
description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which contributions have
been made or obligations incurred (including both pension and welfare benefits)
by the Acquired Companies and the ERISA Affiliates of the Acquired Companies,
and all collective bargaining agreements pursuant to which contributions are
being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company Other Benefit
Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company Plan;
(vi) all insurance policies purchased by or to provide benefits under any
Company Plan;
(vii) all contracts with third party administrators, actuaries, investment
managers, consultants, and other independent contractors that relate to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years preceding the date of this
Agreement by third party administrators, actuaries, investment managers,
consultants, or other independent contractors with respect to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under ERISA ss. 601 et seq.
and IRC ss. 4980B;
(x) the Form 5500 filed in each of the most recent three plan years with respect
to each Company Plan, including all schedules thereto and the opinions of
independent accountants;
(xi) all notices that were given by any Acquired Company or any ERISA Affiliate
of an Acquired
19
Company or any Company Plan to the IRS, the PBGC, or any participant or
beneficiary, pursuant to statute, within the four years preceding the date of
this Agreement, including notices that are expressly mentioned elsewhere in this
Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or the Department of
Labor to any Acquired Company, any ERISA Affiliate of an Acquired Company, or
any Company Plan within the four years preceding the date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the most recent determination
letter for each Plan of the Acquired Companies that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed for each of the
three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Disclosure Letter:
(i) The Acquired Companies have performed all of their respective obligations
under all Company Plans, Company Other Benefit Obligations, and Company VEBAs.
The Acquired Companies have made appropriate entries in their financial records
and statements for all obligations and liabilities under such Plans, VEBAs, and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by any Acquired Company
to any Person with regard to any Plan or Other Benefit Obligation that was not
in accordance with the Plan or Other Benefit Obligation and that could have an
adverse economic consequence to any Acquired Company or to Buyer.
(iii) The Acquired Companies, with respect to all Company Plans, Company Other
Benefits Obligations, and Company VEBAs, are, and each Company Plan, Company
Other Benefit Obligation, and Company VEBA is, in full compliance with ERISA,
the IRC, and other applicable Laws including the provisions of such Laws
expressly mentioned in this Section 3.13, and with any applicable collective
bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and no "prohibited transaction"
under IRC ss. 4975(c) have occurred with respect to any Company Plan.
(B) No Seller or Acquired Company has any liability to the IRS with respect to
any Plan, including any liability imposed by Chapter 43 of the IRC.
(C) No Seller or Acquired Company has any liability to the PBGC with respect to
any Plan or has any liability under ERISA ss. 502 or ss. 4071.
(D) All filings required by ERISA and the IRC as to each Plan have been timely
filed, and all notices and disclosures to participants required by either ERISA
or the IRC have been timely provided.
20
(E) All contributions and payments made or accrued with respect to all Company
Plans, Company Other Benefit Obligations, and Company VEBAs are deductible under
IRC ss. 162 or ss. 404. No amount, or any asset of any Company Plan or Company
VEBA, is subject to tax as unrelated business taxable income.
(iv) Each Company Plan can be terminated within thirty (30) days, without
payment of any additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan.
(v) There has been no establishment or amendment of any Company Plan, Company
VEBA, or Company Other Benefit Obligation.
(vi) No event has occurred or circumstance exists that could result in a
material increase in premium costs of Company Plans and Company Other Benefit
Obligations that are insured, or a material increase in benefit costs of such
Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants or beneficiaries,
no claim against, or legal proceeding involving, any Company Plan, Company Other
Benefit Obligation, or Company VEBA is pending or, to Sellers' Knowledge, is
Threatened.
(viii) No Company Plan is a stock bonus, pension, or profit-sharing plan within
the meaning of IRC ss. 401(a).
(ix) Each Qualified Plan of each Acquired Company is qualified in form and
operation under IRC ss. 401(a); each trust for each such Plan is exempt from
federal income tax under IRC ss. 501(a). Each Company VEBA is exempt from
federal income tax. No event has occurred or circumstance exists that will or
could give rise to disqualification or loss of tax-exempt status of any such
Plan or trust.
(x) Each Acquired Company and each ERISA Affiliate of an Acquired Company has
met the minimum funding standard, and has made all contributions required, under
ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Acquired Companies have paid all amounts due to the PBGC pursuant to
ERISA ss. 4007.
(xiii) No Acquired Company or any ERISA Affiliate of an Acquired Company has
ceased operations at any facility or has withdrawn from any Title IV Plan in a
manner that would subject to any entity or Sellers to liability under ERISA ss.
4062(e), ss. 4063, or ss. 4064.
(xiv) No Acquired Company or any ERISA Affiliate of an Acquired Company has
filed a notice of intent to terminate any Plan or has adopted any amendment to
treat a Plan as terminated. The
21
PBGC has not instituted proceedings to treat any Company Plan as terminated. No
event has occurred or circumstance exists that may constitute grounds under
ERISA ss. 4042 for the termination of, or the appointment of a trustee to
administer, any Company Plan.
(xv) No amendment has been made, or is reasonably expected to be made, to any
Plan that has required or could require the provision of security under ERISA
ss. 307 or IRC ss. 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not waived, exists with
respect to any Company Plan; no event has occurred or circumstance exists that
may result in an accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xvii) The actuarial report for each Pension Plan of each Acquired Company and
each ERISA Affiliate of each Acquired Company fairly presents the financial
condition and the results of operations of each such Plan in accordance with
GAAP.
(xviii) Since the last valuation date for each Pension Plan of each Acquired
Company and each ERISA Affiliate of an Acquired Company, no event has occurred
or circumstance exists that would increase the amount of benefits under any such
Plan or that would cause the excess of Plan assets over benefit liabilities (as
defined in ERISA ss. 4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase.
(xiv) No reportable event (as defined in ERISA ss. 4043 and in regulations
issued thereunder) has occurred.
(xx) No Seller or Acquired Company has Knowledge of any facts or circumstances
that may give rise to any liability of any Seller, any Acquired Company, or
Buyer to the PBGC under Title IV of ERISA.
(xxi) No Acquired Company or any ERISA Affiliate of an Acquired Company has ever
established, maintained, or contributed to or otherwise participated in, or had
an obligation to maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan.
(xxii) No Acquired Company or any ERISA Affiliate of an Acquired Company has
withdrawn from any Multi-Employer Plan with respect to which there is any
outstanding liability as of the date of this Agreement. No event has occurred or
circumstance exists that presents a risk of the occurrence of any withdrawal
from, or the participation, termination, reorganization, or insolvency of, any
Multi-Employer Plan that could result in any liability of either any Acquired
Company or Buyer to a Multi-Employer Plan.
(xxiii) No Acquired Company or any ERISA Affiliate of an Acquired Company has
received notice from any Multi-Employer Plan that it is in reorganization or is
insolvent, that increased contributions may be required to avoid a reduction in
plan benefits or the imposition of any excise tax, or that such Plan intends to
terminate or has terminated.
(xxiv) No Multi-Employer Plan to which any Acquired Company or any ERISA
Affiliate of an
22
Acquired Company contributes or has contributed is a party to any pending merger
or asset or liability transfer or is subject to any proceeding brought by the
PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et seq. and IRC ss.
4980B, no Acquired Company provides health or welfare benefits for any retired
or former employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other termination of
service.
(xxvi) Each Acquired Company has the right to modify and terminate benefits to
retirees (other than pensions) with respect to both retired and active
employees.
(xxii) Sellers and all Acquired Companies have complied with the provisions of
ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any director, officer,
employee, or agent of any Acquired Company will be non-deductible to the
Acquired Companies or subject to tax under IRC ss. 280G or ss. 4999; nor will
any Acquired Company be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person.
(xxiv) The consummation of the Contemplated Transactions will not result in the
payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is in full compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation by any Acquired
Company of, or a failure on the part of any Acquired Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of any
Acquired Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) no Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate list of
each Governmental
23
Authorization that is held by any Acquired Company or that otherwise relates to
the business of, or to any of the assets owned or used by, any Acquired Company.
Each Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter is valid and in full force and effect. Except as set forth
in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter;
(iii) no Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:
(i) that has been commenced by or against any Acquired Company or that otherwise
relates to or may affect the business of, or any of the assets owned or used by,
any Acquired Company; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
24
To the Knowledge of Sellers and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or any of the
assets owned or used by any Acquired Company, is subject;
(ii) neither Seller is subject to any Order that relates to the business of, or
any of the assets owned or used by, any Acquired Company; and
(iii) to the Knowledge of Sellers and the Acquired Companies, no officer,
director, agent, or employee of any Acquired Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of any
Acquired Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time) a violation of or failure to comply
with any term or requirement of any Order to which any Acquired Company, or any
of the assets owned or used by any Acquired Company, is subject; and
(iii) no Acquired Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company, is or has
been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the
Balance Sheet, as of June 30, 1999 as audited in accordance with GAAP
consistently applied, the Acquired Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock; grant
of any stock
25
option or right to purchase shares of capital stock of any Acquired Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
any Acquired Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of any Acquired
Company;
(e) damage to or destruction or loss of any asset or property of any Acquired
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to any Acquired Company of at least $1,000;
(g) sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of any Acquired Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of any Acquired Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any Acquired
Company in excess of $1,000;
(i) material change in the accounting methods used by any Acquired Company; or
(j) agreement, whether oral or written, by any Acquired Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate list,
and Sellers have delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services or delivery
of goods or materials by one or more Acquired Companies of an amount or value in
excess of $1,000;
26
(ii) each Applicable Contract that involves performance of services or delivery
of goods or materials to one or more Acquired Companies of an amount or value in
excess of $1,000;
(iii) each Applicable Contract that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of one or more Acquired
Companies in excess of $1,000;
(iv) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $1,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract with respect to
patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other Applicable Contract to or
with any labor union or other employee representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by any
Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way purport to
restrict the business activity of any Acquired Company or any Affiliate of an
Acquired Company or limit the freedom of any Acquired Company or any Affiliate
of an Acquired Company to engage in any line of business or to compete with any
Person;
(ix) each Applicable Contract providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for goods;
(x) each power of attorney that is currently effective and outstanding;
(xi) each Applicable Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by any Acquired
Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of $5,000;
(xiii) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by any Acquired Company other than
in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or written) in
respect of any
27
of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Acquired Companies under the Contracts, and the
Acquired Companies' office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) neither Seller (and no Related Person of either Seller) has or may acquire
any rights under, and neither Seller has or may become subject to any obligation
or liability under, any Contract that relates to the business of, or any of the
assets owned or used by, any Acquired Company; and
(ii) to the Knowledge of Sellers and the Acquired Companies, no officer,
director, agent, employee, consultant, or contractor of any Acquired Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of any
Acquired Company, or (B) assign to any Acquired Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each Contract
identified or required to be identified in Part 3.17(a) of the Disclosure Letter
is in full force and effect and is valid and enforceable in accordance with its
terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is materially in full compliance with all applicable
terms and requirements of each Contract under which such Acquired Company has or
had any obligation or liability or by which such Acquired Company or any of the
assets owned or used by such Acquired Company is or was bound;
(ii) each other Person that has or had any obligation or liability under any
Contract under which an Acquired Company has or had any rights is materially in
full compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) may contravene, conflict with, or result in a violation or
breach of, or give any Acquired Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other Person any
notice or other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default under, any
Contract.
28
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and , to the
Knowledge of Sellers and the Acquired Companies, no such Person has made written
demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision of
products or services by the Acquired Companies have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which any Acquired
Company is a party or under which any Acquired Company, or any director of any
Acquired Company, is or has been covered at any time within the three (3) years
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies of
insurance; and
(iii) any statement by the auditor of any Acquired Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any Acquired Company,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of the Acquired Companies to third parties with respect to
insurance (including such obligations under leases and service agreements) and
identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the current
policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy for an amount
in excess of $10,000, which sets forth:
(A) the name of the claimant;
29
(B) a description of the policy by insurer, type of insurance, and period of
coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that were
self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that provide
coverage to either Seller, any Acquired Company, or any director or officer of
an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and reputable;
(C) taken together, provide adequate insurance coverage for the assets and the
operations of the Acquired Companies for all risks normally insured against by a
Person carrying on the same business or businesses as the Acquired Companies for
all risks to which the Acquired Companies are normally exposed;
(D) are sufficient for compliance with all Legal Requirements and Contracts to
which any Acquired Company is a party or by which any of them is bound;
(E) will continue in full force and effect following the consummation of the
Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of any Acquired Company.
(ii) No Seller or Acquired Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which any
Acquired Company is a party or that provides coverage to any Acquired Company or
director thereof.
(iv) The Acquired Companies have given notice to the insurer of all claims that
may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
30
Except as set forth in part 3.19 of the disclosure letter:
(a) Each Acquired Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, any Acquired Company, or any other Person for whose
conduct they are or may be held responsible, or from which Hazardous Materials
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and the Acquired
Companies, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Sellers or any Acquired Company has or had an interest.
(c) No Seller or Acquired Company has Knowledge of any basis to expect, nor has
any of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Sellers or any Acquired
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used, or processed by Sellers, any Acquired Company, or any other Person for
whose conduct they are or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) No Seller or Acquired Company, or any other Person for whose conduct they
are or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or , to the Knowledge of Sellers and
the Acquired Companies, with respect to any other properties and assets (whether
real, personal, or mixed) in which Sellers or any Acquired Company (or any
predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at the
Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained
31
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. No Seller, Acquired Company, any other Person for whose
conduct they are or may be held responsible, or to the Knowledge of Sellers and
the Acquired Companies, any other Person, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the Facilities or any
other properties or assets (whether real, personal, or mixed) in which Sellers
or any Acquired Company has or had an interest except in full compliance with
all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of Sellers and the Acquired
Companies, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Sellers or any Acquired
Company has or had an interest, or to the Knowledge of Sellers and the Acquired
Companies any geologically or hydrologically adjoining property, whether by
Sellers, any Acquired Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by
Sellers or any Acquired Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by Sellers,
any Acquired Company, or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate list of
the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 1999; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under any Acquired
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee or director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Acquired Companies by any such employee or
director. To Sellers' Knowledge, no director, officer, or
32
other key employee of any Acquired Company intends to terminate his employment
with such Acquired Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and accurate
list of the following information for each retired employee or director of the
Acquired Companies, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since January 1, 1999, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since January 1, 1999, there has
not been, there is not presently pending or existing, and to Sellers' Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) the name cyberTours, Inc., all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and discoveries that may
be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask Works"); and
33
(v) all know-how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints (collectively, "Trade Secrets"); owned, used, or licensed by any
Acquired Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains a complete and
accurate list and summary description, including any royalties paid or received
by the Acquired Companies, of all Contracts relating to the Intellectual
Property Assets to which any Acquired Company is a party or by which any
Acquired Company is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
with a value of less than $1,000 under which an Acquired Company is the
licensee. There are no outstanding and, to Sellers' Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for the operation
of the Acquired Companies' businesses as they are currently conducted or as
reflected in the business plan given to Buyer. One or more of the Acquired
Companies is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the right to
use without payment to a third party all of the Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter, all former
and current employees of each Acquired Company have executed written Contracts
with one or more of the Acquired Companies that assign to one or more of the
Acquired Companies all rights to any inventions, improvements, discoveries, or
information relating to the business of any Acquired Company. No employee of any
Acquired Company has entered into any Contract that restricts or limits in any
way the scope or type of work in which the employee may be engaged or requires
the employee to transfer, assign, or disclose information concerning his work to
anyone other than one or more of the Acquired Companies.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a complete and accurate list
and summary description of all Patents. One or more of the Acquired Companies is
the owner of all right, title, and interest in and to each of the Patents, free
and clear of all liens, security interests, charges, encumbrances, entities, and
other adverse claims.
(ii) All of the issued Patents are currently in compliance with formal legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
Closing Date.
(iii) No Patent has been or is now involved in any interference, reissue,
reexamination, or opposition proceeding. To Sellers' Knowledge, there is no
potentially interfering patent or patent
34
application of any third party.
(iv) No Patent is infringed or, to Sellers' Knowledge, has been challenged or
threatened in any way. None of the products manufactured and sold, nor any
process or know-how used, by any Acquired Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have been marked with the
proper patent notice.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a complete and accurate list and
summary description of all Marks. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Marks, free and
clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) All Marks that have been registered with the United States Patent and
Trademark Office are currently in compliance with all formal legal requirements
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition, invalidation, or
cancellation and, to Sellers' Knowledge, no such action is Threatened with the
respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially interfering trademark or
trademark application of any third party.
(v) No Xxxx is infringed or, to Sellers' Knowledge, has been challenged or
threatened in any way. None of the Marks used by any Acquired Company infringes
or is alleged to infringe any trade name, trademark, or service xxxx of any
third party.
(vi) All products and materials containing a Xxxx xxxx the proper federal
registration notice where permitted by law.
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a complete and accurate list
and summary description of all Copyrights. One or more of the Acquired Companies
is the owner of all right, title, and interest in and to each of the Copyrights,
free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) All the Copyrights have been registered and are currently in compliance
with formal legal requirements, are valid and enforceable, and are not subject
to any maintenance fees or taxes or
35
actions falling due within ninety (90) days after the date of Closing.
(iii) No Copyright is infringed or, to Sellers' Knowledge, has been challenged
or threatened in any way. None of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked with the proper
copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation relating to such Trade
Secret is current, accurate, and sufficient in detail and content to identify
and explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) Sellers and the Acquired Companies have taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade Secrets.
(iii) One or more of the Acquired Companies has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to Sellers' Knowledge, have
not been used, divulged, or appropriated either for the benefit of any Person
(other than one or more of the Acquired Companies) or to the detriment of the
Acquired Companies. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
No Acquired Company or director, officer, agent, or employee of any Acquired
Company, or to Sellers' Knowledge any other Person associated with or acting for
or on behalf of any Acquired Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of any Acquired Company or any Affiliate of an Acquired Company, or (iv)
in violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Acquired
Companies.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and no statement
in the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue statement or
omit to state a
36
material fact necessary to make the statements therein or in this Agreement, in
light of the circumstances in which they were made, not misleading.
(c) There is no fact known to either Seller that has specific application to
either Seller or any Acquired Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as either Seller
can reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Acquired Companies (on a
consolidated basis) that has not been set forth in this Agreement or the
Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
No Seller or any Related Person of Sellers or of any Acquired Company has, or
since the first day of the next to last completed fiscal year of the Acquired
Companies has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. No Seller or any Related Person of Sellers or of any
Acquired Company is, or since the first day of the next to last completed fiscal
year of the Acquired Companies has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with any Acquired Company other than business dealings or transactions conducted
in the Ordinary Course of Business with the Acquired Companies at substantially
prevailing market prices and on substantially prevailing market terms, or (ii)
engaged in competition with any Acquired Company with respect to any line of the
products or services of such Acquired Company (a "Competing Business") in any
market presently served by such Acquired Company. Except as set forth in Part
3.25 of the Disclosure Letter, no Seller or any Related Person of Sellers or of
any Acquired Company is a party to any Contract with, or has any claim or right
against, any Acquired Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement and will indemnify and hold
Buyer harmless from any such payment alleged to be due by or through Sellers as
a result of the action of Sellers or its officers or agents.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
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(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Escrow Agreement, and the Employment
Agreement (collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. Buyer has
the absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Buyer's Closing Documents and to perform its obligations
under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the stockholders of
Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 INVESTMENT INTENT
As acknowledged in Section 3.2(c) hereof, each Seller represents that he is
acquiring the common stock of Buyer for investment purposes only and not with
the view to the distribution, resale, subdivision or fractionalization thereof,
and that the transaction contemplated hereby is exempt from the registration
provisions of the Securities Act. Each Seller acknowledges that the Rule 144
Stock and, initially, the Registered Stock are restricted securities as that
term is defined in Rule 144 adopted under the Securities Act and that each
Seller's right to resell said shares is subject to said Rule 144.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
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Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement, except with
International Technology Marketing, Inc. Buyer will indemnify and hold Sellers
harmless from the claim of International Technology Marketing, Inc. and any
other such payment alleged to be due by or through Buyer as a result of the
action of Buyer or its officers or agents.
4.6 REGISTRATION OF REGISTERD STOCK; PUT ELECTION
Buyer hereby agrees to file, no later than ninety (90) days from the Closing
Date, a registration statement under the Securities Act ("Registration Act"),
with the Securities Exchange Commission ("Commission") registering the
Registered Stock for resale. Buyer shall use its reasonable best efforts to
cause the Registration Statement to be declared effective as soon as possible.
Buyer agrees to advise Sellers, within two (2) business days written notice,
when the Registered Stock may be sold pursuant to the Registration Statement.
Buyer may require each of the Sellers to furnish to Buyer such information
regarding such Sellers as Buyer may from time to time reasonably request in
writing with respect to matters concerning Buyer's compliance with the
Securities Act and the Registration Statement filed thereunder. If a Seller does
not furnish such requested information to Buyer or otherwise fails to cooperate
with Buyer to the extent necessary to enable Buyer to comply with its
obligations under the Securities Act, Buyer shall not be obligated to register
Seller's Registered Stock, but shall continue to be obligated to register the
remainder of the Registered Stock. All expenses incident to Buyer's performance
of or compliance with this Section 4.6, including, without limitation, all
Commission and securities exchange or National Association of Securities Dealers
registration and filing fees, fees and expenses or compliance with securities or
blue sky laws, and printing expenses, shall be borne by Buyer.
Buyer agrees that if (a) the closing price of Buyer's common stock, as reflected
on Nasdaq National Market System, is less than $15.00 on the same day that the
Registration Statement is declared effective by the Commission ("Registration
Effective Date"); and (b) the Seller's notify the Buyer by facsimile or
otherwise by 10:00 AM the morning after the Registration Effective Date of their
intention to exercise its put option, the Buyer shall repurchase up to 333,333
shares of the Registered Stock at a price of $15.00 per share.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to each Acquired Company's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such contracts, books and records, and other existing documents and
39
data as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors
with such additional financial, operating, and other data and information as
Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary Course of
Business;
(b) use their Best Efforts to preserve intact the current business organization
of such Acquired Company, keep available the services of the current officers,
employees, and agents of such Acquired Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a material nature; and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Sellers will not, and will cause each
Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause each Acquired Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Acquired Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Sellers' representations and warranties as of the date of this Agreement, or if
such Seller or any Acquired Company becomes aware of the occurrence
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after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by either Seller or any Related Person
of either Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of any Acquired Company, or any of the capital stock of any
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving any Acquired Company.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Related Person to, cooperate with Sellers with respect to all filings
that Sellers are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Letter; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the
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following conditions (any of which may be waived by Buyer, in whole or in
part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Sellers' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
(b) Each of Sellers' representations and warranties in Sections 3.3, 3.4, 3.12,
and 3.24 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all material
respects.
(b) Each document required to be delivered pursuant to Section 2.4 must have
been delivered, and each of the other covenants and obligations in Sections 5.4
and 5.8 must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter, and each
Consent identified in Schedule 4.2, must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxx X. Xxxxxx, Attorney at Law, dated the Closing Date, in
the form of Exhibit 7.4(a);
(b) consent as to the transaction from Kennebunk Savings Bank and Bar Harbor
Trust Company (both parties shall fully cooperate with one another in obtaining
said consent); and
(c) such other documents as Buyer may reasonably request for the purpose of (i)
enabling its counsel to provide the opinion referred to in Section 8.4(a), (ii)
evidencing the accuracy of any of Sellers' representations and warranties, (iii)
evidencing the performance by either Seller of, or the compliance by either
Seller with, any covenant or obligation required to be performed or
42
complied with by such Seller, (iv) evidencing the satisfaction of any condition
referred to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Purchase Price payable for the Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to perform or to
comply with
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pursuant to this Agreement at or prior to the Closing (considered collectively),
and each of these covenants and obligations (considered individually), must have
been performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be delivered by
Buyer pursuant to Section 2.4.
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Xxxxxxxxx X. Xxxxxx and Associates, dated the Closing Date, in
the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the purpose of
(i) enabling their counsel to provide the opinion referred to in Section 7.4(a),
(ii) evidencing the accuracy of any representation or warranty of Buyer, (iii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (ii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
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9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by Buyer in the event that the Balance Sheet, as of June 30, 1999 as audited
in accordance with GAAP consistently applied, is materially different that the
Projected Financial Statements; or,
(e) by Buyer if the Disclosure Letter reveals any material condition not
satisfactory to Buyer and not cured by Sellers.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired; provided,
further, that not withstanding anything to the contrary contained herein,
Buyer's liability herein shall be liquidated in the sum of $200,000, which sum
may be set-off by forgiveness of the principal and interest owed to Buyer by
Company under that certain demand promissory note dated June 25, 1999 evidencing
the principal indebtedness of $200,000 of Company to Buyer.
10. INDEMNIFICATION; REMEDIES
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10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(v), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in this
Agreement (without giving effect to any supplement to the Disclosure Letter),
the Disclosure Letter, the supplements to the Disclosure Letter, or any other
certificate or document delivered by Sellers pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Sellers in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Disclosure Letter,
other than any such Breach that is disclosed in a supplement to the Disclosure
Letter and is expressly identified in the certificate delivered pursuant to
Section 2.4(a)(v) as having caused the condition specified in Section 7.1 not to
be satisfied;
(c) any Breach by either Seller of any covenant or obligation of such Seller in
this Agreement;
(d) any product shipped or manufactured by, or any services provided by, any
Acquired Company prior to the Closing Date;
(e) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with either Seller or any Acquired Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
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The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--ENVIRONMENTAL MATTERS
In addition to the provisions of Section 10.2, Sellers, jointly and severally,
will indemnify and hold harmless Buyer, the Acquired Companies, and the other
Indemnified Persons for, and will pay to Buyer, the Acquired Companies, and the
other Indemnified Persons the amount of, any Damages (including costs of
cleanup, containment, or other remediation) arising, directly or indirectly,
from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of or relating
to: (i) (A) the ownership, operation, or condition at any time on or prior to
the Closing Date of the Facilities or any other properties and assets (whether
real, personal, or mixed and whether tangible or intangible) in which Sellers or
any Acquired Company has or had an interest, or (B) any Hazardous Materials or
other contaminants that were present on the Facilities or such other properties
and assets at any time on or prior to the Closing Date; or (ii) (A) any
Hazardous Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or otherwise
handled by Sellers or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by Sellers or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and regardless
of when any such bodily injury occurred, was incurred, or manifested itself),
personal injury, property damage (including trespass, nuisance, wrongful
eviction, and deprivation of the use of real property), or other damage of or to
any Person, including any employee or former employee of Sellers or any Acquired
Company or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of the Acquired Companies prior to the Closing Date, or from Hazardous
Material that was (i) present or suspected to be present on or before the
Closing Date on or at the Facilities (or present or suspected to be present on
any other property, if such Hazardous Material emanated or allegedly emanated
from any of the Facilities and was present or suspected to be present on any of
the Facilities on or prior to the Closing Date) or (ii) Released or allegedly
Released by Sellers or any Acquired Company or any other Person for whose
conduct they are or may be held responsible, at any time on or prior to the
Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.9 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
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10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions, or (d) any
claim against the Sellers arising from their guarantys of the Company's
borrowing debt with Kennebunk Savings Bank and Bar Harbor Trust Bank, the
Company's capital leases with Cisco Systems, Rave, Advanta, UST Leasing and
Imperial, which debt and leases total approximately $1,154,651 as of July 1,
1999, as well as the following operating leases: Utilities, Inc., Xxxx Atlantic,
Cable & Wireless, Pitney Credit Corporation, and ATT (Lucent technologies).
10.5 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or before August 15,
2000 Buyer notifies Sellers of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer; a claim with
respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before August 15, 2000 Sellers notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Sellers.
10.6 LIMITATIONS ON AMOUNT--SELLERS
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in clause (a), clause (b) or, to the extent relating to
any failure to perform or comply prior to the Closing Date, clause (c) of
Section 10.2 until the total of all Damages with respect to such matters exceeds
$5,000, and then only for the amount by which such Damages exceed $5,000.
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in clause (d) of Section 10.2 until the total of all
Damages with respect to such matters exceeds $5,000, and then only for the
amount by which such Damages exceed $5,000. However, this Section 10.6 will not
apply to any Breach of any of Sellers' representations and warranties of which
either Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by either Seller
of any covenant or obligation, and Sellers will be jointly and severally liable
for all Damages with respect to such
48
Breaches.
10.7 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in clause (a) or (b) of Section 10.4 until the total of
all Damages with respect to such matters exceeds $5,000, and then only for the
amount by which such Damages exceed $5,000. However, this Section 10.7 will not
apply to any Breach of any of Buyer's representations and warranties of which
Buyer had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.
10.8 ESCROW; RIGHT OF SET-OFF
Upon notice to Sellers specifying in reasonable detail the basis for such
set-off, Buyer may set off any amount to which it may be entitled under this
Section 10 against the Escrow Account by giving notice of a Claim in such amount
under the Escrow Agreement. Neither the exercise of nor the failure to exercise
such right of set-off or to give a notice of a Claim under the Escrow Agreement
will constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
10.9 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2, 10.4, or
(to the extent provided in the last sentence of Section 10.3) Section 10.3 of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.9(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in
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connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.
10.10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers will cause the Acquired Companies not to incur
any out-of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
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11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Sellers and Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Sellers will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any written, oral, or other information obtained in confidence from written
information stamped "confidential" when originally furnished by another party or
an Acquired Company in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, Sellers waive, and will upon
Buyer's request cause the Acquired Companies to waive, any cause of action,
right, or claim arising out of the access of Buyer or its representatives to any
trade secrets or other confidential information of the Acquired Companies except
for the intentional competitive misuse by Buyer of such trade secrets or
confidential information.
11.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
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Sellers: Xxxxxx Xxxxx
0 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxxx
0 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 00000
Xxxx Xxxxxxx
Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxx 00000
Buyer: Log On America, Inc.
0 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 000000
Attention: Chief Financial Officer
with a copy to: Xxxxxxxxx X. Xxxxxx, Esq.
000 Xxxxxxxxxxx Xxxxxx, 00xx Xx.
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Facsimile No.: 401.751.0031
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Rhode Island, County of Providence, or, if it has
or can acquire jurisdiction, in the United States District Court for the
District of Rhode Island, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
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11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Letter of Intent between Buyer and Sellers
dated June 1999) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body of this
Agreement and those in the Disclosure Letter (other than an exception expressly
set forth as such in the Disclosure Letter with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
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Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Rhode Island without
regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed or caused to be executed and
delivered this Agreement as of the date first written above.
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Sellers: ___________________ ____________________
Xxxxxx Xxxxx Xxxxxx X. Xxxxxxx
___________________
Xxxx Xxxxxxx
Buyer:
Log On America, Inc.
By:____________________
Xxxxx X. Paolo, President
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