Exhibit 10.70
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made and entered into
effective as of this 18th day of January 2000 by and among Fidelity Holdings,
Inc., a Nevada corporation ("Fidelity"); Cars Acquisition, Inc., a Delaware
corporation ("Acquisition Corp."); XxxxXX.xxx, Inc., a Virginia corporation
(together with any of its affiliates, subsidiaries, successors or assigns,
"Cars"); Xxxx X. Xxxxxx, an individual ("Singer"); and each of the persons other
than Singer listed on Schedule A hereto (each, a "Minority Stockholder" and
collectively the "Minority Stockholders" and with Singer the "Stockholders").
W I T N E S S E T H:
WHEREAS, Fidelity is a public company formed for the purpose of
acquiring or purchasing another company or companies; and
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of Fidelity;
and
WHEREAS, Cars is engaged in the business of providing Internet and
cable television advertising and providing full service Internet access (all
such activities of Cars, together with all other business activities of Cars,
being hereinafter referred to as the "Business"); and
WHEREAS, Singer owns 5,100,000 shares (the "Singer Shares") of
Common Stock of Cars, without par value per share ("Cars Common Stock"), which
represents 52.879% of the issued and outstanding Cars Common Stock; and
WHEREAS, the Minority Stockholders own the number of issued and
outstanding shares of Cars Common Stock set forth opposite their names on
Schedule A which, in the aggregate,
consists of 4,544,624 shares of Cars Common Stock (the "Minority Shares") which
represents 47.121% of the issued and outstanding shares of Cars Common Stock;
and
WHEREAS, the Board of Directors of each of Fidelity, Acquisition
Corp., and Cars deem it to be advisable and in the best interests of said
corporations and their respective stockholders that Cars be merged with and into
Acquisition Corp. in exchange for common stock of Fidelity, par value $.01 per
share ("Fidelity Common Stock") in a transaction whereby Acquisition Corp. will
remain a wholly-owned subsidiary of Fidelity (the "Merger"), all in accordance
with the terms of this Agreement and the applicable provisions of the Delaware
General Corporation Law (the "DGCL") and the Virginia Stock Corporation Act (the
"Act"); and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger will be treated as a reorganization within the meaning of Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto wish to make certain representations,
warranties and covenants in connection with the Merger, to prescribe the terms
thereof and the mode of carrying it into effect, and to impose various
conditions precedent thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants hereinafter set forth, the parties
hereto hereby agree as follows:
SECTION I
THE MERGER
1.01. The Merger. At the Effective Time (as defined in subparagraph
1.03 hereof), subject to and upon the terms and conditions of this Agreement and
in accordance with the applicable provisions of the DGCL and the Act, Cars shall
be merged with and into Acquisition Corp., the separate corporate existence of
Cars shall cease, and Acquisition Corp. shall continue as
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the surviving corporation (the "Surviving Corporation"). The Merger shall have
the effects set forth in Section 259 of the DGCL and Section 13.1-721 of the
Act.
1.02. Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section XI hereof, and subject to the satisfaction or waiver of the conditions
set forth in Sections IX and X hereof, the closing of the Merger (the "Closing")
shall take place (i) at the offices of Xxxxxxx Xxxxxx Xxxx & Ball P.C., 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as promptly as practicable (and in any event
within five business days) after the satisfaction or waiver of all of the
conditions set forth in Sections IX and X hereof, or (ii) at such other time,
date and/or place as may be agreed upon by the parties hereto. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date".
1.03. Effective Time . As promptly as practicable after the Closing
Date, Acquisition Corp. and Cars shall (i) file in the office of the Secretary
of State of the State of Delaware and the clerk of the Virginia State
Corporation Commission, a Certificate or Articles of Merger meeting the
requirements of the DGCL and the Act, and (ii) execute, acknowledge, deliver,
file and/or record all such other instruments, and take all such other actions,
as may be required in order to cause the Merger to become effective in
accordance with the provisions of the DGCL and the Act. The later of the date
and time on which the Merger becomes effective in accordance with the applicable
provisions of the DGCL and the Act is hereinafter referred to as the "Effective
Time".
1.04. Corporate Governance.
1.04.1. Certificate of Incorporation. The Certificate of
Incorporation of Acquisition Corp., as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law or such Certificate of
Incorporation.
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1.04.2 By-laws. The By-laws of Acquisition Corp., as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation or the By- laws of the Surviving
Corporation.
1.04.3 Directors . The following persons shall be the initial
members of the Board of Directors of the Surviving Corporation, each to hold
office in accordance with the applicable provisions of law:
Xxxx X. Xxxxxx
Xxxx X. Xxxxxxxxx
C. Xxxxx Xxxxxx, Xx.
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxx
Xxxxx Xxxxx
1.04.4 Officers. The following persons shall be the initial
officers of the Surviving Corporation, each to hold office in accordance with
the applicable provisions of law:
Name Office(s)
---- ---------
Xxxx X. Xxxxxx President, Chief Executive Officer
Xxxxxxx X. Xxxxxxxxx Chief Financial Officer and Treasurer
Xxxxxxxxx X. Book, Esq. Vice President, Legal and Securities
and Secretary
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1.05. Effect of Merger on Securities of Constituent Corporations. As
of the Effective Time, by virtue of the Merger and without any action on the
part of Acquisition Corp., Cars or any of the Stockholders:
1.05.1 Cars Common Stock . Each issued and outstanding share
of common stock of Cars, without par value per share, will be converted into and
become one fully paid and non- assessable share of common stock, par value
$.00001 per share, of the Surviving Corporation.
1.05.2 Cars Common Stock. Subject to the provisions of
subparagraph 1.05.4 below, the holders of Cars Common Stock shall receive an
aggregate 575,862 shares of Fidelity Common Stock (the "Fidelity Common Stock")
as follows:
(a) Common Stock. The holders of each issued and
outstanding share of Common Stock of Cars will receive 0.0597081 shares of
Fidelity Common Stock for each share held; provided, however, that no
Stockholder shall be entitled to receive any fractional shares of Fidelity
Common Stock. The Fidelity Common Stock shall be issued to the holders of Cars
Common Stock, on a pro-rata basis, in accordance with their respective
shareholdings in Cars as set forth on Schedule A hereto.
(b) Options and Warrants. There shall be no issued and
outstanding options or warrants to purchase shares of Cars Common Stock as of
the Closing Date
1.05.3 Cancellation of Certain Shares of Cars Common Stock.
Each and any share of Cars Common Stock that is owned by Cars or by any
subsidiary of Cars, and each share of Cars Common Stock that is owned by
Fidelity, Acquisition Corp. or any other subsidiary of Fidelity, shall be
automatically canceled and retired, and shall cease to exist, and no Fidelity
Common Stock or other consideration shall be delivered in exchange therefor.
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1.05.4 Adjustment of Number of Shares of Fidelity Common Stock
to be Delivered Pursuant to the Merger.
(a) Closing Date Balance Sheet. At the Closing Date,
Cars shall deliver to Fidelity and Acquisition Corp. a pro forma balance sheet
of Cars as of the date three days prior to the Closing Date, prepared in
accordance with generally accepted accounting principles (with the exception of
multi-month Internet plan revenues and liabilities) consistently applied with
past practices and fairly presents Cars' financial condition as of such date and
excluding any liabilities arising as a result of the delay of the Closing due
solely to reasons beyond the reasonable control of Cars, which have been agreed
to by Fidelity (as so adjusted, the "Closing Balance Sheet"). Representatives of
Fidelity (including its auditors) shall be entitled to review, upon reasonable
request, the supporting documentation and any analyses related to the
preparation of the Closing Date Balance Sheet to whatever extent they may elect,
at their cost and expense. In order to enable Fidelity to anticipate and plan
for assumption of the Cars' liabilities that will be shown on the Closing
Balance Sheet, Cars will provide to Fidelity a balance sheet as of the end of
the month immediately preceding the Closing Date as soon as reasonably possible.
(b) Disputes relating to the Closing Balance Sheet. In
the event that Fidelity notifies the Stockholders within 45 days of receipt of
the Closing Balance Sheet that it disputes the calculations contained in the
Closing Balance Sheet, and all of such disputes which have not been resolved by
mutual agreement of Fidelity and a majority in interest of the Stockholders
within 15 days after such notification (which resolution would be binding upon
all of the parties hereto), the matter(s) in dispute shall be, within ten days
thereafter, submitted to a nationally recognized independent accounting firm
selected by Fidelity and a majority in interest of the Stockholders, which firm
shall issue its written determination with respect to all disputed matters
within 30 days after such submission. Such determination shall be final and
binding upon all of the
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parties hereto. The fees of such accounting firm shall be borne one-half by all
of the Stockholders and one-half by Fidelity.
(c) Adjustment of Number of Shares of Fidelity Common
Stock Issuable Pursuant to Merger. If the Closing Balance Sheet indicates a net
shareholder's deficit in excess of $0.00, then, in such event, the aggregate
number of shares of Fidelity Common Stock issuable pursuant to Section 1.05.2 of
this Agreement shall be reduced by a number of shares which is equal to the
quotient obtained by dividing (i) such excess deficit by (ii) the average of the
closing price for one share of Fidelity Common Stock traded on the 20 business
days preceding the Closing Date as reported on the Nasdaq National Stock Market
(the "Fidelity Share Value").
1.05.5 Exchange of Stock Certificates . As of the Effective
Time and subject to the provisions of subparagraph 1.05.9 hereof, each holder of
an outstanding certificate or certificates representing Cars Common Stock shall
receive in exchange therefor, upon surrender of such certificate or certificates
to Fidelity, or if the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates, upon delivery of such agreement, one or
more certificates representing in the aggregate the number of whole shares of
Fidelity Common Stock to which such holder is entitled pursuant to Section
1.05.2 of this Agreement. Until surrendered and exchanged, the outstanding
certificates theretofore representing shares of Cars Common Stock shall be
deemed for all purposes, other than the payment of dividends or other
distributions to stockholders of Fidelity, to represent the number of whole
shares of Fidelity Common Stock to which such holder is entitled pursuant to
Section 1.05.2 of this Agreement. No dividend or other distributions which are
payable to the holders of record of Fidelity Common Stock as of any date
subsequent to the Effective Time shall be paid to the holders of outstanding
unsurrendered certificates theretofore representing shares of Cars
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Common Stock; provided, however, that upon surrender and exchange of such
outstanding certificates as provided above or upon the notification by the
holder to the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and the execution of an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
such certificates, there shall be paid to the record holders of said
certificates the amount (without any interest thereon) of any dividends and
other distributions which became payable to holders of record of Fidelity Common
Stock as of a date between the Effective Time and the date of such surrender and
exchange, inclusive.
1.05.6 Fractional Shares. No fractional shares of Fidelity
Common Stock, and no scrip certificates, shall be issued or delivered in
connection with the Merger, and no fractional share interest shall entitle the
owner thereof to exercise any rights as a stockholder of Fidelity. In lieu of
the issuance or delivery of fractional shares, the aggregate number of shares of
Fidelity Common Stock to which each Stockholder shall be entitled as a result of
the Merger shall be rounded up to the next whole share.
1.05.7 Adjustment. If subsequent to the date hereof but prior
to the Effective Time, Fidelity Common Stock shall be changed into or exchanged
for a different number or kind of shares through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other like change in Fidelity's capitalization, there shall be a
proportionate and appropriate adjustment in the number of shares of Fidelity
Common Stock to be delivered pursuant to the Merger.
1.05.8 No Transfers. Commencing as of the Effective Time,
there shall be no registration of transfers on the records of Cars of any shares
of Cars Common Stock. Subject to the provisions of subparagraph 1.05.9 hereof,
if a certificate for such shares is presented for transfer,
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it shall be exchanged for a certificate representing shares of Fidelity Common
Stock as herein provided.
1.05.9 Withholding of Shares; etc. Anything herein above
contained to the contrary notwithstanding, any certificates representing shares
of Fidelity Common Stock to which a Stockholder is entitled pursuant to Section
1.05.2 of this Agreement may be withheld or legended, in Fidelity's sole
discretion, pending completion of the adjustments referred to in subparagraph
1.05.4 above.
1.05.10 Subsequent Cooperation. At any time and from time to
time after the Effective Time, the last acting officers of Cars, or the
corresponding officers of the Surviving Corporation, may, in the name of Cars,
execute and deliver all such proper deeds, assignments and other instruments and
take or cause to be taken all such further or other action as they may deem
necessary or desirable in order to best perfect or confirm in the Surviving
Corporation title to and possession of all of Cars' properties, rights,
privileges, immunities, powers and purposes, and to otherwise carry out the
purposes of this Agreement.
1.05.11 Escrow Agreement. Fidelity, the Stockholders and
Xxxxxxx Xxxxxx Xxxx & Ball P.C. ("Escrow Agent"), shall execute and deliver at
the Closing an Escrow Agreement, substantially in the form annexed hereto as
Exhibit A (the "Escrow Agreement"), under which an aggregate of 113,557 of the
shares of Fidelity Common Stock ("Escrowed Shares") shall be deposited with the
Escrow Agent by the Significant Stockholders (as defined in the escrow
Agreement). Such Escrowed Shares shall be held (subject to the provisions of the
Escrow Agreement relating to the reduction or release of such shares in a manner
set forth therein) pursuant to the Escrow Agreement for a period ending on the
earlier to occur of (i) the date on which Fidelity files with the Securities and
Exchange Commission its Annual Report on Form 10-K for its 2000 fiscal year,
(ii) the consummation of an IPO (as defined hereinafter) and (iii) April 15,
2001 (or such
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longer period as shall be provided therein in the event a claim for
indemnification is made by Fidelity during such period). Upon termination of the
Escrow Agreement, the balance of the Escrowed Shares, if any, shall be
distributed to the Stockholders pursuant to the Escrow Agreement.
SECTION II
ADDITIONAL AGREEMENTS
2.01. Employment Agreements. At Closing or as soon thereafter as
practicable, the Surviving Corporation will enter into an employment agreement
with Singer substantially in accordance with the term sheet attached hereto as
Exhibit B, (collectively, the "Employment Term Sheet") and Fidelity shall cause
Singer to be elected to the Board of Directors of Computer Business Sciences,
Inc.
2.02. Cars Initial Public Offering. Upon Closing, Fidelity will
undertake, on a "best efforts" basis, to effectuate an initial public offering
of an aggregate of from $5-10 million of the common stock of either (i) the
Surviving Corporation or (ii) whichever of Fidelity's subsidiaries, Computer
Business Sciences, Inc. or IG2, Inc., if any, may be the parent corporation of
the Surviving Corporation (the "IPO") or the owner of a majority of the assets
of Computerized Auto Resale Services, Inc. or Internet Creations, Inc..
2.03. Cars Loan. Fidelity agrees that prior to and until the
completion of the IPO it will make a series of month-to-month unsecured loans,
without the requirement of any personal guaranty, available to Surviving
Corporation for the purpose of funding Surviving Corporation's excess cash flow
requirements in amounts not to exceed $50,000 in any one month and $500,000 in
the aggregate. Fidelity will make an initial loan in the amount of $50,000 upon
the execution of this Agreement. The initial loan and all subsequent loans shall
be evidenced by a promissory note substantially in the form attached hereto as
Exhibit C (the "Note"). All such loan amounts (the "Loan
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Amounts") shall be repaid to Fidelity upon completion of the IPO from the
proceeds thereof. The parties acknowledge that on December 14, 1999, Fidelity
loaned $50,000 to Cars pursuant to a promissory note (the "1999 Note")
guaranteed by Singer pursuant to a personal guaranty (the "Singer Guaranty").
Fidelity agrees that, effective immediately upon the Effective Time it will
cancel the 1999 Note and release Singer from all obligations pursuant to the
Singer Guaranty provided that all amounts then due to Fidelity under the 1999
Note have added to the principal amount due under the Note.
2.04. Stockholder Agreements. At Closing, the Stockholders
will enter into transfer restriction and optional conversion agreements with
Fidelity in the form attached hereto as Exhibit D ( the "Stockholder
Agreements").
SECTION III
REPRESENTATIONS AND WARRANTIES CONCERNING SINGER
Singer represents and warrants to, and agrees with, Fidelity as follows as
of the Closing Date:
3.01. Ownership of Singer's Shares. Singer is the owner,
beneficially and of record, of all of Singer's Shares and there exists no
pledge, lien, security interest, encumbrance, claim or equity of any kind with
respect to Singer's Shares. Except as otherwise indicated on Schedule 3.01
hereto, Singer is not a party to any stockholders' agreement, partnership
agreement, voting trust or other voting or similar agreement with respect to
Singer's Shares. Singer has full right and authority to transfer Singer's Shares
and, upon delivery of Singer's Shares to Fidelity pursuant to this Agreement,
Fidelity will receive good and marketable title thereto, free and clear of any
pledge, lien, security interest, encumbrance, claim or equity of any kind.
3.02. Authority of Singer. Singer is of full age and has the full
right, capacity, power and authority to enter into this Agreement and all
instruments, certificates, documents and
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agreements to be executed and/or delivered herewith or in connection with the
transactions contemplated hereby or thereby (collectively the "Documents") and
to consummate the transactions contemplated hereby and thereby. This Agreement
and the Documents have been duly executed and delivered by Singer and constitute
valid and binding obligations of Singer, enforceable against Singer in
accordance with their respective terms.
3.03. No Violations. Except as set forth in Schedule 3.03 hereto,
neither the execution and delivery of this Agreement or any of the Documents,
the performance by Singer of his obligations hereunder and thereunder nor the
consummation of the transactions contemplated hereby or thereby will, directly
or indirectly, with or without the giving of notice or the passage of time, or
both (i) violate, or be in conflict with, or constitute a default under, or
cause or permit the termination or the acceleration of the maturity of, any
agreement, personal guarantee, lease, mortgage, debt or obligation of Singer or
require the payment or any pre-payment or other penalty with respect thereto;
(ii) require notice to or the consent of any party to or beneficiary of any
agreement, personal guarantee, lease, mortgage, debt or obligation to which
Singer is a party or by which he or his properties is bound or subject,
including without limitation, any agreement or obligation containing a right of
first refusal or similar right or permitting any party to renegotiate, receive a
refund, modify or otherwise change any such agreement or obligation; (iii)
result in the creation or imposition of any lien, security interest, claim or
other encumbrance upon any property or assets of Singer under any agreement,
personal guarantee, lease, mortgage, debt or obligation to which he is a party
or by which he or his properties is bound or subject; or (iv) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Singer or his properties is or may be bound
or subject.
3.04. Consents and Approvals of Governmental Authorities. Except as
set forth in Schedule 3.04 hereto, no consent, approval or authorization of, or
declaration, filing or registration
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with, any governmental or regulatory authority is required to be made or
obtained by Singer in connection with the execution, delivery or performance by
Singer of this Agreement or the Documents or the consummation by Singer of the
transactions contemplated hereby or thereby.
3.05. Affiliate Transactions. Except as set forth in Schedule 3.05
hereto, Singer has no direct or indirect interest in any firm, corporation,
association or business enterprise which competes with Cars or is a supplier,
client, customer or agent of, or is otherwise engaged in the business engaged in
by, Cars.
3.06. Finders' Fee. There is no investment banker, broker, finder or
other intermediary which has been retained by, or is authorized to act on behalf
of, Singer who might be entitled to any fee or commission from Fidelity or Cars
or any of their affiliates upon the consumma tion of the transactions
contemplated by this Agreement or the Documents.
3.07 Disclosure. Except as would not have a Material Adverse Effect,
as defined in Section IV below, on Cars or the Surviving Corporation, no
representation or warranty of Singer contained in this Agreement or any of the
Documents or in any statement or certificate furnished or to be furnished to
Fidelity or Cars pursuant hereto or thereto in connection with the transactions
con templated hereby or thereby contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements made herein or therein, in the light of the circumstances in
which they were made, not misleading.
SECTION IV
REPRESENTATIONS AND WARRANTIES CONCERNING CARS
When used in connection with Cars, the Surviving Corporation or
Fidelity, or any of their subsidiaries, as the case may be, the term "Material
Adverse Effect" means any change, effect, or circumstance that, individually or
when taken together with all other such changes, effects or
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circumstances that have occurred prior to the occurrence of the Material Adverse
Effect (a) is or is reasonably likely to be materially adverse to the business,
properties, assets (including tangible assets), prospects, financial condition
or results of operations of Cars or Fidelity, or (b) is delaying or preventing
or is reasonably likely to delay or prevent, the consummation of the
transactions contemplated by this Agreement. Except as would not have a Material
Adverse Effect on Cars or the Surviving Corporation, and except as set forth in
the attached Disclosure Schedules, Singer and Cars, jointly and severally,
represent and warrant to, and agree with, Fidelity as follows:
4.01. Description and Lists. Schedules 4.01(a) through 4.01(j)
hereto contain the following information and all such information is true and
correct in all material respects:
(a) Schedule 4.01(a) hereto contains: (i) a brief description of all
interests in real property leased or otherwise used or claimed by Cars, stating
the location of such property and the zoning classification of such property;
(ii) a brief description of the leases and subleases and other instruments
creating or evidencing all such interests in real property; and (iii) a brief
description of any contract or commitment by Cars to hereafter mortgage, lease
or otherwise encumber any real property interests;
(b) Schedule 4.01(b) hereto contains a list of all material
Intangible Property (as hereinafter defined) indicating any applications,
registrations, filings or notices associated therewith and indicating whether
such Intangible Property is owned or licensed and whether any other person has
the right to use the Intangible Property;
(c) Schedule 4.01(c) hereto contains a list and description of: (i)
each lease agreement in excess of $10,000 or having a remaining term of more
than six (6) months from the date hereof to which Cars is a party with respect
to personal property; (ii) each written or oral agreement or understanding of
Cars involving in excess of $10,000 or having a remaining term of more than six
(6) months from the date hereof; and (iii) each purchase order or sales order
(or series of purchase
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orders or sales orders with a single entity or related entities) to which Cars
is a party or parties involving, in each case or in a series of related cases,
in excess of $10,000;
(d) Schedule 4.01(d) hereto contains a list of: (i) the names and
current annual salary rates of all present officers, employees and agents of
Cars having an annual compensation (including, without limitation, benefits and
bonuses) in excess of $35,000 per year (including commissions, benefits and
bonuses); and (ii) all written or oral employment or compensation agreements
with each employee of Cars;
(e) Schedule 4.01(e) hereto contains a list and brief description of
each loan agreement, indenture, mortgage, pledge, conditional sale or other
instrument or arrangement regarding money borrowed or obligations guaranteed by
any Cars or letter of credit issued at the request or on behalf of any Cars;
(f) Schedule 4.01(f) hereto contains a list and identifying number
of every bank in which Cars has an account or safe deposit box and the names of
all persons having power to borrow, discount debt obligations, cash or draw
checks or otherwise act on behalf of Cars in any dealings with such banks;
(g) Schedule 4.01(g) hereto contains copies of the Articles of
Incorporation and By- laws of Cars, each as amended to date;
(h) Schedule 4.01(h) hereto contains a list and brief description
of: (i) all claims for workers compensation during the period from January 1,
1996 through December 31, 1999; and (ii) all claims, investigations, lawsuits,
proceedings, actions and any other form of investigation, arbitration or
litigation now pending or threatened against Cars or which have been pending or
were threatened against Cars at any time during the past five (5) years;
(i) Schedule 4.01(i) hereto contains a list of the names of all
persons holding powers of attorney from, or authorized to act as agents for,
Cars; and
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(j) Schedule 4.01(j) hereto contains a list and brief description of
all policies (including type, carrier and coverage) of fire, theft, liability,
casualty, title, products liability and other forms of insurance held by Cars,
together with a list and brief description of all claims of Cars which have been
submitted to any insurer but have not been finally disposed of.
Singer has furnished, and Singer has used his best efforts to cause
Cars to furnish, to Fidelity true, materially correct and complete copies of all
documents, instruments and agreements which are referred to or otherwise related
to any item referred to in Schedules 4.01(a) through 4.01(j) and all amendments,
modifications, supplements, renewals or consolidations with respect thereto.
4.02. Organization; Authority.
(a) Cars is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia. Cars has full
corporate power and authority to carry on its business as such business is now
being conducted and to own the properties and assets it now owns. Cars is duly
qualified, admitted or licensed to do business as a foreign corporation and is
in good standing in each jurisdiction set forth on Schedule 4.02 hereto. Cars
has not maintained any office or location for the conduct of its business or has
not been qualified to do business in any jurisdiction other than the
jurisdictions set forth on Schedule 4.02, and no jurisdiction has claimed that
Cars is required to be so qualified. Since its inception, the corporate name of
Cars has been "XxxxXX.xxx, Inc." and Cars has neither done business nor has
qualified with any appropriate governmental agencies to conduct its business
under any other name except as set forth in Schedule 4.04.
(b) The corporate records of Cars have been delivered or made
available to Fidelity. Such records are complete, correct and current in all
material respects, with all necessary signatures, and have been maintained in
accordance with good business practices.
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4.03. Capitalization. Schedule 4.03 hereto lists the authorized and
the equitable ownership of the capital stock of Cars (the "Capital Stock") and
the name and number of shares of Capital Stock owned by each shareholder of
Cars. All shares of the issued and outstanding Capital Stock are validly issued,
fully paid and non-assessable, with no personal liability attached to the
ownership thereof. Except as set forth in Schedule 4.03, there are no agreements
or understandings with respect to the voting of the Capital Stock. Except as set
forth on Schedule 4.03, there are no existing rights options, warrants, calls,
puts or similar commitments or arrangements of any character authorized, granted
or issued by Cars relating to the authorized Capital Stock or any other
securities of Cars whereby any person would have a right to acquire or require
Cars to acquire any security of Cars or any interests measured by the income,
profits or other results of the operations or conduct of the business of Cars or
by the value of the Capital Stock or other equity interest of Cars. There are no
shares of Capital Stock held in the treasury of Cars.
4.04. Subsidiaries. Except as set forth in Schedule 4.04, Cars,
directly or indirectly, owns no shares of, or controls or has any interest in,
or has any commitment to purchase any interest in, any other corporation,
partnership or other business enterprise.
4.05. No Violation. Except as set forth in Schedule 4.05 hereto,
neither the execution and delivery of this Agreement or any of the Documents by
Cars, the performance by Cars of its obligations hereunder and thereunder nor
the consummation of the transactions contemplated hereby or thereby will,
directly or indirectly, with or without the giving of notice or lapse of time,
or both: (i) violate any provisions of the Articles of Incorporation or By-laws
of Cars; (ii) violate, or be in conflict with, or constitute a default under, or
cause or permit the termination or the acceleration of the maturity of, any
agreement, lease, mortgage, debt or obligation of Cars or require the payment,
any pre-payment or other penalty with respect thereto; (iii) require notice to
or the consent of any party to any agreement or commitment to which Cars is a
party, or by which it or its properties is
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bound or subject, including without limitation, any agreement or commitment
containing a right of first refusal or similar right or permitting any party to
re-negotiate, receive a refund, modify or otherwise change any agreement or
commitment; (iv) result in the creation or imposition of any security interest,
lien, claim or other encumbrance upon any property or assets of Cars under any
agreement, lease, mortgage, debt or obligation to which it is a party or by
which it or its properties is bound or subject; or (v) violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Cars or its properties is bound or subject.
4.06. Consents and Approvals of Governmental Authorities. Except as
set forth on Schedule 4.06 hereto, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Cars in connection with the
execution or delivery by Cars of this Agreement or the Documents, the
performance by Cars of its obligations hereunder or thereunder or the
consummation by Cars of the transactions contemplated hereby or thereby.
4.07. Financial Statements of Cars. Singer has delivered to Fidelity
materially accurate and complete copies of: (i) Cars' unaudited balance sheets
as of December 31, 1999, 1998 and 1997 and the related statements of operations,
changes in stockholders' equity and cash flow for each of the years then ended,
and the notes thereto, (the "Financial Statements"). The Financial Statements:
(a) present fairly the financial position of Cars at the dates thereof and the
results of its operations for the periods then ended; and (b) have been prepared
in conformity with generally accepted accounting principles consistently applied
(with the exception of multi-month Internet plan revenues and liabilities). All
inventory reflected in the Financial Statements is saleable in the ordinary
course of business at usual and customary prices, subject to normal returns and
markdowns consistent with Cars' past practice and experience. The books of
account and other financial records of Cars are in good order and have been
properly maintained in all material respects.
-18-
4.08. No Undisclosed Liabilities. Except as set forth in Schedule
4.08 hereto, Cars has no direct or indirect material liability, obligation,
indebtedness, claim, loss, damage or deficiency of any nature, whether absolute,
accrued, contingent or otherwise and whether due or to become due, that were not
reflected in the Financial Statements or in the notes thereto.
4.09. Absence of Certain Changes. Except as set forth in Schedule
4.09 hereto, since the date of the Financial Statements, Cars has conducted its
business only in the ordinary course in a manner consistent with past practices
and has not, except in accordance with ordinary course of business and in a
manner consistent with past practices:
(a) suffered any Material Adverse Effect in its condition (financial
or otherwise), results of operation, assets, properties, liabilities, business
or prospects;
(b) incurred, guaranteed, assumed or became subject to, or entered
into any agreement to incur, guaranty, assume or become subject to, any
obligation or liability, including indebtedness for borrowed money;
(c) created, permitted or allowed, or agreed to create, permit or
allow, any mortgage, assignment, pledge, lien, security interest, encumbrance,
restriction or charge of any kind with respect to its properties, business or
assets;
(d) declared, paid or set aside for payment any dividend or other
distribution or, directly or indirectly, redeemed, purchased or otherwise
acquired or agreed to acquire any shares of Capital Stock or other securities;
(e) written down the value of any inventory or written off as
uncollectible any accounts receivable, or suffered any condemnation, damage,
destruction, loss or other casualty (by destruction, theft or otherwise) of or
to any of its assets or properties of a nature that would interfere with the
ordinary conduct of its business or that involves in excess of $25,000 in the
aggregate (whether or not covered by insurance);
-19-
(f) issued or sold, or agreed to issue or sell, any stock, bonds or
other securities;
(g) sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any tangible asset or any of its Intangible
Property, or canceled or waived, or agreed to cancel or waive any debts due to
it or other claims or rights;
(h) made any change in any method of accounting or accounting
practice employed;
(i) paid, directly or indirectly, prior to the stated due date
thereof, any indebtedness or other obligation or liability owing by it;
(j) conducted its business otherwise than in the ordinary course or
made any material change in the nature of its products or their prices;
(k) experienced any labor dispute, work stoppage or slowdown or
threat thereof by or with respect to its employees;
(l) made any loan, advance or capital contribution to, or investment
in, any person;
(m) entered into any transaction between Cars, on the one hand, and
its directors, officers or stockholders or any affiliate of its directors,
officers or stockholders, on the other hand; or
(n) agreed, whether or not in writing, to do any of the foregoing.
4.10. Leases and other Property.
(a) The leasehold estates listed in Schedule 4.01(a) hereto are all
of the leasehold interests under which Cars is a lessee (or sublessee) of any
real property or interest therein (colle ctively, the "Real Property Leases").
No proceeding is pending or, to the best knowledge of Singer, threatened for the
taking or condemnation of all or any portion of the property demised under the
Real Property Leases. Cars owns good and marketable title to the leasehold
estates and to the Real Property Leases, free and clear of any encroachment,
mortgage, pledge, lien, security interest,
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encumbrance, claim, charge, covenant, conditional limitation or other
restriction of any kind, except for: (i) real property taxes, if any affecting
properties of which the premises demised under the Real Property Leases form a
part, not yet due and payable; and (ii) the matters and exceptions set forth in
Schedule 4.10(a) hereto. There is no brokerage commission or finder's fee due
and unpaid from Singer or Cars with regard to any of the Real Property Leases,
or which will become due any time in the future with regard to any Real Property
Lease.
(b) Except as set forth in Schedule 4.10(b) hereto, there are no
unrecorded covenants, deed restrictions, easements, leases, subleases or rights
of occupancy or mortgages, pledges, liens, security interests, encumbrances,
claims, charges or other restrictions of any kind which encumber the Real
Property Leases or to the knowledge of Singer, any of the properties demised
under the Real Property Leases.
(c) Except as set forth in Schedule 4.10(c) hereto, Cars has good
and marketable title or valid leasehold interests in all machinery, equipment,
tools, supplies, furniture, fixtures, personalty, vehicles, rolling stock and
other tangible personal properties shown as owned or leased by Cars on its books
and records, including without limitation, all the properties and assets
reflected on the Financial Statements and all properties and assets purchased by
and delivered to it since the date of the Financial Statements (except for
properties and assets sold or disposed of since such date in the ordinary course
of business) free and clear of any mortgages, pledges, liens, claims, security
interests or encumbrances of any kind.
(d) Except as set forth in Schedule 4.10(d) hereto, the premises
demised under the Real Property Leases and any other tangible properties and
assets owned, leased or used by Cars in the operation of such premises demised
under the Real Property Leases and the business of Cars are adequate and
sufficient for the current operation of Cars, and such properties now being used
by Cars in its businesses and operations, whether leased or owned, are in good
working order, repair and
-21-
operating condition, are without any defects other than minimal defects which do
not affect the value or use of such properties and have been maintained in
accordance with generally accepted industry practices.
(e) Cars does not have, nor at any time since its inception has had,
title in fee simple to any real property.
4.11. Intangible Property. (a) Schedule 4.11 hereto sets forth a
complete list of (i) all patents, patent applications, trade names and trade and
service marks which have been registered or for which an application for
registration is pending and all writings for which copyright is claimed, has
been recorded or is pending, in each case which are used or held for use by
Singer or Cars, (ii) all license or other agreements pursuant to which any of
Singer or Cars is obligated to pay or entitled to receive royalties or other
fees in connection with the sale, development or licensing of the above and
(iii) all other agreements relating to technology, know-how or processes which
any of Singer or Cars is licensed or authorized to use by others or licenses or
authorizes others to use (the foregoing and all other confidential and
proprietary information of Singer and Cars is hereinafter referred to as
"Intangible Property"). Except as set forth in Schedule 4.11, Cars is the sole
and exclusive holder of all right, title and interest in and to, and is in
possession of all documentation necessary for the effective use of, such
Intangible Property and has sole and exclusive rights (without being
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which they are being used, and no consent
of third parties is required for the use thereof by Cars upon completion of the
transactions contemplated hereby.
(b) No claims have been asserted by any person to the ownership or
use of any Intangible Property or challenging or questioning the validity or
effectiveness of any such license or agreement, and Singer has no knowledge of
any valid basis for any such claim. Except as set forth
-22-
herein, the use of the Intangible Property by Cars does not infringe on the
rights of any person and there are no pending or, to the knowledge of Singer,
threatened claims nor has it been alleged that the Intangible Property is
engaged in such infringements. All of the trademark and trade name
registrations, patents and copyrights listed or required to be listed in
Schedule 4.11 are in full force and effect. No other person has any right to use
any trademark listed or required to be listed in Schedule 4.11 for similar or
related products in competition with the products of Cars, and no other person
is infringing any of the Intangible Property.
4.12. Litigation; Compliance with Laws.
(a) Except as set forth in Schedule 4.12 hereto, there is no action,
suit, proceeding or investigation pending or, to the best knowledge of Singer,
threatened against or involving Cars or any of its assets (whether or not
covered by insurance), and Singer has no knowledge of any basis for the
commencement of any action, suit, proceeding or investigation against Cars.
Except as set forth in Schedule 4.12 hereto, there is no outstanding judgment,
order, writ, injunction or decree against Cars or relating to any of its assets.
(b) Cars has complied and is in compliance with all material laws,
rules, regulations, ordinances, orders, judgments and decrees applicable to its
business, properties, structures or equipment, or to the construction,
maintenance, operation or use thereof and no condition exists which, with or
without the giving of notice or the passage of time, or both, could result in
violation of any such laws, rules, regulations, ordinances, orders, judgments or
decrees currently in effect or in effect at any time prior to the date hereof.
No notice has been received by Singer or Cars with respect to any violation of
any such legal requirements.
(c) Neither Singer nor Cars knows, or has acquired knowledge of, any
statute enacted or any official rule or regulation adopted by a legislative or
administrative body in any jurisdiction, which statute, rule or regulation
specifically addresses, affects or relates to the Business, business
-23-
prospects or operations of Cars and which has had or would have a Materially
Adverse Effect thereon.
4.13. Taxes.
(a) Except as set forth on Schedule 4.13 hereof, and except as would
not have a Material Adverse Effect on Cars or the Surviving Corporation, all
federal, state and local tax and information returns, statements and reports of
any nature whatsoever (collectively "Tax Returns") required to be filed by or
with respect to Cars have been accurately prepared and have been duly and timely
filed. All taxes, including without limitation, levies, imposts, duties, license
and registration fees, income taxes, gross receipt taxes, real estate taxes,
transfer taxes, gains taxes, franchises taxes, sales taxes, use taxes, property
taxes, excise taxes, stamp taxes, value-added taxes, taxes and other imposts
required to be withheld from or paid in respect of employees' salaries and other
withholding taxes and obligations and all deposits required to be made by or
with respect to Cars with respect to such withholding taxes or otherwise, and
other taxes, whether or not measured in whole or in part by net income, due with
respect to such Tax Returns and any additions to taxes, and interest and
penalties with respect thereto (collectively "Taxes") of Cars have been paid, or
adequate provision for the payment thereof has been made on the balance sheet
contained in the Financial Statements. Singer has caused to be paid all Taxes
required to be paid without the filing of Tax Returns. Singer shall use his best
efforts to cause Cars to continue to file all Tax Returns on a timely basis
until the Closing Date and such Tax Returns will be complete and correct as
filed. Except as set forth on Schedule 4.13 hereof, neither Singer nor Cars has
received any notice or notification that any Tax Returns for Cars are now under
examination by the Internal Revenue Service (the "IRS") or any other
governmental authority. No waivers of statutes of limitations are in effect in
respect of any Taxes. Cars is not a "consenting corporation" within the meaning
of Section 341(f) of the Code. Singer has caused Cars to deliver to Fidelity
true, complete and correct copies of all Tax Returns and reports relating to the
operations of Cars for periods ended on or after October 31, 1998 and of all
-24-
reports or other communications received by Cars from the IRS or any other
governmental authority relating to examinations thereof. Cars has neither agreed
nor has been requested to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method initiated by any of Cars and Singer
has no knowledge that the IRS has proposed any such adjustment or change in
accounting method.
4.14. Benefit Plans.
(a) Plans and Material Documents. Schedule 4.14 lists (A) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, whether legally enforceable or not, to which Cars
is a party, with respect to which Cars has any obligation or which are
maintained, contributed to or sponsored by Cars for the benefit of any current
or former employee, officer or director of Cars, and (B) each employee benefit
plan for which Cars could incur liability under Section 4212(c) of ERISA
(collectively, the "Plans"). Each Plan is in writing and Cars has furnished
Fidelity with a complete and accurate copy of each Plan and a complete and
accurate copy of each material document prepared in connection with each such
Plan including, without limitation, (A) a copy of each trust or other funding
arrangement, (B) each summary plan description and summary of material
modifications, (C) the most recently filed Form 5500, (D) the most recently
received IRS determination letter for each such Plan and (E) the most recently
prepared actuarial report and financial statement in connection with each such
Plan. Except as disclosed on Schedule 4.14, there are no other employee benefit
plans, programs, arrangements or agreements, whether formal or informal, whether
in writing or not, to which Cars is a party, with respect to which Cars has any
obligation or which are maintained, contributed to or sponsored by Cars for the
benefit of any current or former employee, officer or
-25-
director of Cars. Cars has no express or implied commitment, whether legally
enforceable or not, (A) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (B) to enter into
any contract or agreement to provide compensation or benefits to any individual
or (C) to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code. No Plan has
been terminated within the last three years.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which Cars incur liability under Section
4063 or 4064 of ERISA (a "Multiple Employer Plan"). None of the Plans provides
for the payment of separation, severance, termination or similar-type benefits
to any person or obligates Cars to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of Cars. Each of the Plans is subject only to the
laws of the United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now and always has
been operated in all respects in accordance with the requirements of all
applicable law, including, without limitation, ERISA and the Code, and all
persons who participate in the operation of such Plans and all Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have always acted
in accordance with the provisions of all applicable law, including, without
limitation, ERISA and the Code. Cars has performed all obligations required to
be performed by it under, is not in any respect in default under or in violation
of, and has no knowledge of any default or violation by any party to, any Plan.
No legal action, suit or claim is pending or threatened with respect to any Plan
(other than
-26-
claims for benefits in the ordinary course) and no fact or event exists that
could give rise to any such action, suit or claim.
(d) Qualification of Certain Plans. Each Plan which is intended to
be qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS after 1985 that is so
qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS after 1985 that is so
exempt, and no fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the qualified status of any such Plan or
the exempt status of any such trust. Each trust maintained or contributed to by
Cars which is intended to be qualified as a voluntary employees' beneficiary
association and which is intended to be exempt from Federal income taxation
under Section 501(c)(9) of the Code has received a favorable determination
letter from the IRS that it is so qualified and so exempt, and no fact or event
has occurred since the date of such determination by the IRS to adversely affect
such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Cars has not incurred any liability
for any excise tax arising under Section 4971, 4972, 4980 or 4980B of the Code
and no fact or event exists which could give rise to any such liability. Cars
has not incurred any liability under, arising out of or by operation of Title IV
of ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including, without limitation, any
liability in connection with (i) the termination or reorganization of any
employee benefit plan subject to Title IV of ERISA or (ii) the withdrawal from
any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists
which could give rise to any such liability. No complete or partial termination
has occurred within the five years preceding the date hereof with respect to any
Plan. No reportable event (within the meaning of Section 4043
-27-
of ERISA) has occurred or is expected to occur with respect to any Plan subject
to Title IV of ERISA. No Plan had an accumulated funding deficiency (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the most recently ended plan year of such Plan. None of the assets
of Cars is the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; Cars has not been required to post any security
under Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or
event exists which could give rise to any such lien or requirement to post any
such security.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could give rise to any
such challenge or disallowance. As of the Closing Date, no Plan which is subject
to Title IV of ERISA will have an "unfunded benefit liability" (within the
meaning of Section 4001(a)(18) of ERISA).
(g) Certain Employee-Benefits Assets. Each of the guaranteed
investment contracts and other funding contracts with any insurance company that
are held by any of the Plans and any annuity contracts purchased by (i) any of
the Plans or (ii) any pension benefit plans (as defined in Section 3(2) of
ERISA) that provided benefits to any current or former employees of Cars was
issued by an insurance company which received the highest rating from each of
Duff & Xxxxxx Credit Rating Co., Standard & Poor's Insurance Rating Services,
A.M. Best Company and Xxxxx'x Investors Service, Inc., as of the date such
contract was issued, the date hereof and the Closing Date.
(h) Americans With Disability Act. Cars is in material compliance
with respect to the requirements of the American With Disability Act.
(i) Workers Adjustment and Retraining Notification Act. Cars is in
compliance with the requirements of the Workers Adjustment and Retraining
Notification Act ("WARN") and has
-28-
no liabilities pursuant to WARN.
4.15 Labor Matters. Except as set forth in Schedule 4.15: (i) Cars
is not a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by Cars or in the Business, and
currently there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
affect Cars; (ii) there are no controversies, strikes, slowdowns or work
stoppages pending or, to the best knowledge of Cars, threatened between Cars and
any of their respective employees, and Cars has not experienced any such
controversy, strike, slowdown or work stoppage within the past three years;
(iii) Cars has not breached or otherwise failed to comply with the provisions of
any collective bargaining or union contract, and there are no grievances
outstanding against Cars under any such agreement or contract that could have a
material adverse effect on the Business; (iv) there are no unfair labor practice
complaints pending against Cars before the National Labor Relations Board or any
other governmental authority or any current union representation questions
involving employees of Cars that could have a Material Adverse Effect on Cars or
the Surviving Corporation; (v) Cars is currently in material compliance with all
applicable laws, rules and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining and the payment
and withholding of taxes and other sums as required by the appropriate
governmental authority and has withheld and paid to the appropriate governmental
authority or is holding for payment not yet due to such governmental authority
all amounts required to be withheld from such employees of Cars and is not
liable for any arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing; (vi) Cars has paid in full to all employees of
Cars or adequately accrued for in accordance with generally accepted accounting
principles consistently applied all wages, salaries, commissions, bonuses,
benefits and other compensation due to or on behalf of such employees; (vii)
there is no claim with respect to payment of wages, salary or overtime pay that
has been asserted or is now pending or threatened before any governmental
authority with respect to any persons currently
-29-
or formerly employed by Cars; (viii) Cars is not a party to, or otherwise bound
by, any consent decree with, or citation by, any governmental authority relating
to employees or employment practices; (ix) there is no charge or proceeding with
respect to a violation of any occupational safety or health standards that has
been asserted or is now pending or threatened with respect to Cars; and (x)
there is no charge of discrimination in employment or employment practices, for
any reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity Commission, or
any other governmental authority in any jurisdiction in which Cars has employed
employees.
4.16. Purchase and Sale Commitments. The outstanding purchase and
sale commitments of Cars are in conformity with the normal, ordinary and
customary requirements of the business of Cars and the contract prices to which
Cars has agreed in any outstanding purchase or sale commitment are not
excessively high or low, respectively, when compared to current market prices
for the relevant materials, products or services.
4.17. Insurance. The insurance policies set forth in Schedule
3.01(j) are valid and enforceable in accordance with their respective terms, are
in full force and effect and include coverage of the type and in amounts
customarily carried by persons conducting business similar to that of Cars, and
are sufficient to insure against all risks and liabilities described therein and
comply with all legal requirements and agreements to which Cars is a party.
Except as set forth in Schedule 4.17 hereto, the insurance policies shall
continue in full force and effect after the Closing Date with respect to
occurrences occurring prior to the Closing Date. Neither Singer nor Cars has
done or failed to do anything which has or might render any such policies of
insurance void or voidable. Neither Singer nor Cars has received any notice
from, or on behalf of, any insurance carrier issuing such policies that
insurance rates will hereafter be substantially increased, that there will
hereafter be a cancellation, an increase in a deductible (or an increase in
premiums in order to maintain an
-30-
existing deductible) or a non-renewal of any existing policies, or that any
alteration of any equipment or any improvements to real estate leased to or by
Cars, purchase of additional equipment or modification of any of the methods of
doing business of Cars will be required or suggested.
4.18. Contracts.
(a) Schedule 4.18 lists each of the following contracts and
agreements (including oral and informal arrangements) of Singer not listed on
any other Schedule (such contracts and agreements, together with all contracts,
agreements, leases and subleases to which Singer is a party and all agreements
relating to Intellectual Property, being "Contracts"):
(i) all material contracts, agreements, invoices, purchase orders
and other arrangements, whether oral or written, for the purchase of
merchandise, supplies, spare parts, other materials or personal property
with any supplier or for the furnishing of services to Cars or otherwise
related to the Business under the terms of which Cars in the aggregate (A)
is likely to pay more than $25,000 during the calendar year ending
December 31, 1999 or (B) is likely to pay more than $25,000 over the
remaining term of the contract (provided, however, if the aggregate
obligations and liabilities of Cars under contract and agreements that are
not deemed to be "Contracts" by reason of clause (A) or (B) or this
Section 4.18(i) exceed $25,000, then all of such contracts and agreements
shall be disclosed on Schedule 4.18, as well as the Contracts);
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
Cars is a party;
(iii) all material management contracts or contracts with
independent contractors or consultants (or similar arrangements) to which
Cars is a party and which are not cancellable without penalty or further
payment within 30 calendar days of notice of such cancellation;
-31-
(iv) all material indebtedness of Cars;
(v) all material contracts and agreements with any governmental
authority to which Cars is a party;
(vi) all material contracts and agreements with manufacturers to
supply raw materials to Cars;
(vii) all material contracts and agreements that limit the ability
of Cars in any line of business or with any person or entity or in any
geographic area or during any period of time;
(viii) all material contracts, agreements and other arrangements
between or among Cars or any affiliate of Cars; and
(ix) all other contracts, agreements and other arrangements, whether
or not made in the ordinary course of the Business, which are material to
Cars or the conduct of the Business.
(b) Except as disclosed in Schedule 4.18, each Contract: (i) is
valid and binding on the respective parties thereto and is in full force and
effect; (ii) is freely and fully assignable by operation of the Merger to the
Surviving Corporation without penalty or other adverse consequences; and (iii)
upon consummation of the transactions contemplated by this Agreement and the
Documents, except to the extent that any consents set forth in Schedule 4.18 are
not obtained, shall continue in full force and effect without penalty or other
adverse consequence and unaffected by such transaction. Cars is not in breach or
default under the terms of any Contract.
(c) Except as disclosed in Schedule 4.18, to the best knowledge of
Singer and Cars, no other party to any Contract is in breach or default
thereunder.
(d) Except as disclosed in Schedule 4.18, there is no contract,
agreement or other arrangement granting any person any preferential right to
purchase, other than in the ordinary course of the Business consistent with past
practice, any of the properties or assets of Cars.
-32-
4.19. Finders' and Investment Bankers' Fees. Except as set forth in
Schedule 4.19 hereto, there is no investment banker, broker, finder or other
intermediary which has been retained by Singer or Cars who might be entitled to
any fee or commission from Fidelity or any of its affiliates in connection with
the transactions contemplated by this Agreement or the Documents.
4.20. Licenses, Permits and Authorizations. Except as set forth in
Schedule 4.20, Cars has obtained all approvals, authorizations, consents,
licenses, franchises, orders or other permits of all governmental or regulatory
agencies, whether federal, state, local or foreign (collectively, the
"Approvals") necessary to the operation of its business as presently conducted.
Such Approvals are in full force and effect and good standing. Except as set
forth in Schedule 4.20, Cars is not in default under any Approval and there
exists no basis for the termination, suspension or revocation of any of such
Approvals. Except as set forth in Schedule 4.20, the consummation of the
transactions contemplated hereby will not constitute a transfer or assignment of
any such Approval and will not require any filing or registration with or notice
to any governmental authority and all such Approvals shall remain in full force
and effect to the benefit of Cars following the Closing.
4.21 No Dealings with Officers. Except as disclosed in Schedule
4.21, Cars does not, directly or indirectly, have any contractual arrangement
with or commitment to or from any of its stockholders, officers, directors or
employees. Except as disclosed in Schedule 4.21 hereto, without limiting the
generality of the foregoing, no stockholder, officer, director or employee of
Cars was or is, directly or indirectly, a joint investor or coventurer with, or
owner, lessor, lessee, licensor or licensee of any real or personal property,
tangible or intangible, owned or used by Cars, and no such person is, directly
or indirectly, a lender to or debtor of Cars.
4.22 Receivables. Schedule 4.22 is an aged list of the receivables
of Cars ("Receivables") as of December 31, 1999 showing separately those
Receivables that as of such date had been outstanding (i) for 29 days or less,
(ii) 30 to 59 days, (iii) 60 to 89 days, (iv) 90 to 119 days and (v) more than
119 days. Except to the extent, if any, reserved for on the Financial Statements
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or set forth in Schedule 4.22, all Receivables reflected on the Financial
Statements and the Receivables existing on the Closing Date will have arisen
from, the sale of inventory or services to persons not affiliated with Cars and
in the ordinary course of the business consistent with past practice and, except
as reserved against on the Financial Statements, will constitute only valid,
undisputed claims of Cars not subject to valid claims of set-off or other
defenses or counterclaims other than normal cash discounts accrued in the
ordinary course of the Business consistent with past practice. All Receivables
reflected on the Financial Statements (subject to the reserve for bad debts, if
any, reflected on the Financial Statements) will be good and will be
collectible, without resort to litigation or extraordinary collection activity,
within 180 days of the Closing Date.
4.23 Inventories. Subject to amounts reserved therefor on the
Financial Statements, the values at which all inventories are carried on the
Financial Statements reflect the historical inventory valuation policy of Cars
of stating such inventories at the lower of cost (determined on the first-in,
first-out method) or market value. Except as set forth in Schedule 4.23, Cars
has good and marketable title to the inventories free and clear of all
encumbrances. The inventories do not consist of any items held on consignment.
Cars is under no obligation or liability with respect to accepting returns of
items of inventory or merchandise in the possession of its customers other than
in the ordinary course of the Business consistent with past practice. No
clearance or extraordinary sale of the inventories has been conducted since
December 31, 1999. Cars has no manufactured inventory for sale which is not of a
quality and quantity usable in the ordinary course of the Business consistent
with past practice and within a reasonable period of time, nor has Cars changed
the price of any inventory except for (i) reductions to reflect any reduction in
the cost thereof to Cars, (ii) reduction and increases responsive to normal
competitive conditions and consistent with Cars' past sales practices and (iii)
to reflect any increase in the cost thereof to Cars. The inventories are in good
and merchantable condition in all material respects, are suitable and usable for
the purposes for which they are intended and are in a condition such that they
can be sold in the ordinary course of the
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Business consistent with past practice.
4.24 Order Backlog. Schedule 4.24 lists all sales orders which have
been accepted by Cars, and which were open either as of December 31, 1999 or as
of the date hereof. Schedule 4.24 lists all purchase orders which have been
issued by Cars, and which were open either as of December 31, 1999 or as of the
date hereof.
4.25 Customers. Listed in Schedule 4.25 are the names and addresses
of all the customers of the Business which ordered goods or merchandise from
Cars an aggregate purchase price of $25,000 or more during the twelve-month
period ended September 30, 1999 and the amount for which each such customer was
invoiced during such period. Except as disclosed in Schedule 4.25, Cars has not
received any written notice that any significant customer of Cars has ceased, or
will cease, to use the products, equipment, goods or services of Cars or has
substantially reduced, or will substantially reduce, the use of such product,
equipment, goods or services at any time.
4.26 Suppliers. Listed in Schedule 4.26 are the names and addresses
of all the suppliers from which Cars ordered raw materials, supplies,
merchandise and other goods for the Business with an aggregate purchase price of
$25,000 or more during the twelve-month period ended September 30, 1999 and the
amount for which each such supplier invoiced Cars during such period. Except as
disclosed in Schedule 4.26, Cars has not received any written notice that any of
such suppliers will not sell raw materials, supplies, merchandise and other
goods to Cars at any time after the Closing Date on terms and conditions similar
to those imposed on current sales to the Business, subject to general and
customary price increases.
4.27. Software.
(a) Except with respect to software programs licensed to Cars, Cars
is in actual possession of the source code of each software program listed in
Schedule 4.27, and Cars is in possession of all other documentation necessary
for the effective use of each such software. Schedule 4.27 lists, by program,
all third parties which have been provided with the source code to
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any of the software listed in Schedule 4.27.
(b) There are no defects in any of the software offered by Cars in
connection with the Business which would in any material and adverse respect
affect the functioning of any such software in accordance with the
specifications therefor published by Cars or heretofore provided to Fidelity or
any customers or prospective customers of Cars, and each piece of such software,
together with all know-how and processes used in connection therewith, functions
as intended, is in machine readable form, conforms to applicable standards,
contains all current revisions of such software and includes all computer
programs, materials, tapes, know-how, object and source codes and procedures
used by Cars in the conduct of its business.
4.28. Disclosure. Except as would not have a Material adverse Effect
on Cars or the Surviving Corporation, no representation or warranty of Singer or
Cars contained in this Agreement, any of the Documents or in any statement or
certificate furnished or to be furnished to Company pursuant hereto or thereto
in connection with the transactions contemplated hereby or thereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements made herein or therein,
in the light of the circumstances in which they were made, not misleading. To
the Knowledge of Singer, there is no fact or condition which materially
adversely affects, or in the future could materially adversely affect the
condition (financial or otherwise) assets, properties, liabilities, results of
operations, business or prospects of Cars which has not been set forth in this
Agreement or in the Schedules hereto.
SECTION V
REPRESENTATIONS AND WARRANTIES OF FIDELITY AND ACQUISITION CORP.
Fidelity and Acquisition Corp. hereby jointly and severally
represent and warrant to, and agree with, Cars and the Stockholders as follows:
5.01. Organization; Etc. Each of Fidelity and Acquisition Corp. is a
corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Fidelity and Acquisition Corp. has full
corporate power and authority to carry on its business as such business is now
being conducted and to own the properties and assets it now owns.
5.02. Authority of Fidelity and Acquisition Corp. Each of Fidelity
and Acquisition Corp. has full corporate power and authority to enter into this
Agreement and the Documents applicable to it and to consummate the transactions
contemplated hereby and thereby. Each of the Boards of Directors of Fidelity and
Acquisition Corp. has taken all action required to authorize the execution and
delivery of this Agreement and the Documents by Fidelity and Acquisition Corp.,
the performance of the obligations of Fidelity and Acquisition Corp. hereunder
and thereunder and the consummation by Fidelity and Acquisition Corp. of the
transactions contemplated hereby and there by. No other corporate proceedings on
the part of Fidelity or Acquisition Corp. are necessary to authorize the
execution and delivery by Fidelity and Acquisition Corp. of this Agreement or
the Documents or the performance by either Fidelity or Acquisition Corp. of its
obligations hereunder or thereunder. This Agreement is, and each Document will
be, a valid and binding agreement of Fidelity and Acquisition Corp., enforceable
against them in accordance with their terms.
5.03. No Violation. Neither the execution and delivery of this
Agreement or any of the Documents, the performance by Fidelity or Acquisition
Corp. of its obligation hereunder and thereunder nor the consummation of the
transactions contemplated hereby or thereby will, directly or indirectly, with
or without the giving of notice or lapse of time, or both: (i) violate any
provisions of the respective Certificate of Incorporation or By-laws of Fidelity
or Acquisition Corp.; (ii) violate, or be in conflict with, or constitute a
default under, or cause or permit the termination or the acceleration of the
maturity of, any agreement, lease, mortgage, debt or obligation of Fidelity or
Acquisition Corp. or require the payment, any pre-payment or other penalty with
respect thereof; (iii) require notice to or the consent of any party to any
agreement or commitment to which either Fidelity or Acquisition Corp. is a
party, or by which it or its properties is bound or subject, including without
limitation, any lease, license or any agreement containing a right of first
refusal or similar right or permitting any such party to re-negotiate, receive a
refund, modify or otherwise change any agreement or commitment; (iv) result in
the creation or imposition of any security interest, lien,
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claim or other encumbrance upon any property or assets of Fidelity or
Acquisition Corp., as the case may be, under any agreement or commitment to
which either of them is a party or by which either of them or their properties
is bound or subject; or (v) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority to which either
Fidelity or Acquisition Corp. or their properties is bound or subject.
5.04. Finders' and Investment Bankers' Fees. There is no investment
banker, broker, finder or other intermediary which has been retained by Fidelity
or Acquisition Corp. who might be entitled to any fee or commission from Cars,
the Stockholders or any of their affiliates in connection with the transactions
contemplated by this Agreement or the Documents.
5.05. Fidelity Common Stock. When issued to the Stockholders, the
Fidelity Common Stock will be fully paid and non-assessable.
5.06 Tax Covenant. It is contemplated by the parties that the Merger
will qualify as a tax free transaction pursuant to Section 368 (a) (2) (D) of
the Code ("Tax Free Transaction"). Both prior to the Merger and thereafter,
Fidelity shall: (1) prepare its books and records and file all tax returns and
schedules thereto reflecting the Merger in a manner consistent with the
treatment of the transaction as a Tax Free Transaction; (2) provide timely to
the Stockholders such tax information, reports, returns or schedules as they may
reasonably require to assist them in reporting the Merger as a Tax Free
Transaction; and (3) aid the Stockholders in defense of any assertion by the
Internal Revenue Service (the "IRS") that the Merger is not a Tax Free
Transaction and defend against all assertions that the Merger is not a Tax Free
Transaction. This covenant shall survive the Closing.
SECTION VI
INDEMNIFICATION
6.01 Indemnification by Singer. Singer agrees to indemnify and hold
Fidelity harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of any matter indemnified pursuant hereto,
(collectively,
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"Damages") which Fidelity may sustain, suffer or incur and which arise out of,
are caused by, relate to, or result or occur from or in connection with the
breach by him of any representation, warranty or covenant made by him in this
Agreement or in any agreement or instrument executed and delivered pursuant
hereto. The foregoing indemnification shall also apply to direct claims for
indemnification by Fidelity and/or Acquisition Corp. Anything herein above
contained to the contrary notwithstanding, the indemnification obligation of
Singer pursuant to this Section 6.01 shall not exceed the lesser of (i) the sum
of the dollar value of 287,931 shares of Fidelity Common Stock received by
Singer (valued in accordance with Section 1.05.2) or (ii) $3,125,000 (the
"Maximum Indemnification"). No party shall be entitled to indemnification under
this Section 6.01 until the aggregate amount of Damages incurred by such party
exceeds $50,000, in which event such party shall be entitled to indemnification
for the entire aggregate cumulative amount of all Damages up to an amount not to
exceed the Maximum Indemnification. No claim for indemnification pursuant to
this section 6.01 may be made after December 31, 2001. Any such liability shall
be paid to Fidelity in cash or in shares of Fidelity Common. The form of the
payment shall be determined by the indemnifying party.
6.02 Indemnification by Fidelity. Fidelity shall indemnify and hold
the Stockholders harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecutor defense of any matter indemnified pursuant hereto),
which they may sustain, suffer or incur and which arise out of, are caused by,
relate to, or result or occur from or in connection with the breach by Fidelity
or Acquisition Corp. of any representation, warranty or covenant made by it in
this Agreement or in any agreement or instrument executed and delivered pursuant
hereto. The foregoing indemnification shall also apply to direct claims by the
Stockholders against Fidelity or Acquisition Corp. Any such liability shall be
paid to the Stockholders in cash,
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or at the option of Fidelity, in shares of Fidelity Common Stock. Anything
herein above contained to the contrary notwithstanding, the indemnification
obligation of Fidelity and Acquisition Corp. pursuant to this Section 6.02 shall
not exceed the Maximum Indemnification. No party shall be entitled to
indemnification under this Section 6.02 until the aggregate amount of Damages
incurred by such party exceeds $50,000, in which event such party shall be
entitled to indemnification for the entire aggregate cumulative amount of all
Damages up to an amount not to exceed the Maximum Indemnification. No claim for
indemnification pursuant to this section 6.02 may be made after December 31,
2001.
6.03 Third Party Claims. If a claim by a third party is made against
any party or parties hereto and the party or parties against whom said claim is
made intends to seek indemnification with respect thereto under Sections 6.01 or
6.02, the party or parties seeking such indemnification shall promptly notify
the indemnifying party or parties, in writing, of such claim; provided, however,
that the failure to give such notice promptly shall not affect the rights of the
indemnified party or parties hereunder unless such failure materially and
adversely affects the indemnifying party or parties. The indemnifying party or
parties shall have ten days after said notice is given to elect, by written
notice given to the indemnified party or parties, to undertake, conduct and
control, through counsel of their own choosing (subject to the consent of the
indemnified party or parties, such consent not to be unreasonably withheld) and
at their sole risk and expense, the good faith settlement or defense of such
claim, and the indemnified party or parties shall cooperate with the
indemnifying parties in connection therewith; provided, however, (i) in the case
of any or all of the Stockholders as the indemnifying party or parties, they
shall not permit to exist any lien, encumbrance or other adverse change upon any
of the assets of Cars, and (ii) the indemnified party or parties shall be
entitled to participate in such settlement or defense through counsel chosen by
the indemnified party or parties, provided that the fees and expenses of such
counsel shall be borne by the indemnified party or parties. So long as the
indemnifying party or parties are contesting any such
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claim in good faith, the indemnified party or parties shall not pay or settle
any such claim; provided, however, that notwithstanding the foregoing, the
indemnified party or parties shall have the right to pay or settle any such
claim at any time, provided that in such event they shall waive any right of
indemnification therefor against the indemnifying party or parties. If the
indemnifying parties do not make a timely election to undertake the good faith
defense or settlement of the claim as aforesaid, or if the indemnifying parties
fail to proceed with the good faith defense or settlement of the matter after
making such election, then, in either such event, the indemnified party or
parties shall have the right to contest, settle or compromise the claim at their
exclusive discretion, at the risk and expense of the indemnifying parties.
SECTION VII
CONDUCT OF BUSINESS PENDING CLOSING
From and after the date hereof until the Closing, and except as
otherwise specifically contemplated by this Agreement and the Documents and the
Schedules and Exhibits hereto or thereto, or consented to or approved by
Fidelity in writing, Cars shall and Singer shall cause Cars to, conform to the
following:
7.01. Regular Course of Business. Except as otherwise contemplated
by this Agreement or to the extent waived or agreed to by Fidelity in writing,
Cars shall, and Singer shall cause Cars to, carry on its business in the same
manner as heretofore conducted, and shall not engage in any transaction or
activity, enter into any agreement or make any commitment: (i) with Singer, any
Minority Stockholder or any officer, director or employee of Cars, or any person
affiliated with any of the foregoing; or (ii) except in the ordinary course of
business.
7.02. Amendments. No change or amendment shall be made in the
Articles of Incorporation, By-laws or other governing instrument of Cars.
7.03. Capital Changes. Except as set forth in Schedule A hereto,
Cars shall not issue or sell rights (including, without limitation, conversion
rights), options, warrants to purchase or to
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subscribe to, or enter into any arrangement or contract with respect to, any
shares of any of its Stock or any other securities of, or equity interest in,
Cars.
7.04. Dividends; Redemptions. Cars shall not declare, pay or set
aside for payment any dividend or other distribution in respect to any of its
Stock or directly or indirectly redeem, purchase or otherwise acquire any shares
of any of its Stock.
7.05. Organization. Cars shall use its best efforts to preserve its
properties, assets, and legal and business relationships with its employees,
suppliers, customers and others having business relations with Cars.
7.06. Contracts. Except for purchase and sales orders entered into
in the ordinary course of business, no contracts or commitments involving,
individually, in excess of $25,000 (or $50,000 in the aggregate), or having a
term of more than one (1) year, shall be entered into by or on behalf of Cars,
including without limitation, any contract or commitment: (i) to acquire
additional real property or any interest therein; (ii) to dispose of, amend,
modify, terminate or encumber any Real Property Lease, or any interest therein
or sublease the premises demised thereunder; (iii) to enter into any lease for
additional real property; or (iv) to amend, modify, extend, renew or waive any
right with respect to any existing agreement or arrangement involving (or which,
as the result of such amendment, modification, extension, renewal or waivers
would involve) in excess of $25,000 or having an unexpired term in excess of one
(1) year.
7.07. Consultation with Fidelity. To the fullest extent practicable,
Cars shall cause its executive officers to consult with and consider the views
of Fidelity in any material decisions related to operating its business through
the Closing Date.
7.08. Maintain Properties. Cars will maintain its properties and
assets, whether owned or leased, in good repair, order and condition, reasonable
wear and tear excepted.
7.09. Compensation. Cars will not grant any increase in compensation
to any officer, employee or agent or enter into or amend any Plan or any
employment or consulting agreement.
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7.10. Indebtedness/Loans. Except for loans to Cars from Fidelity as
contemplated by this Agreement, Cars will not create, incur or assume any
indebtedness (including without limitation, under existing lines of credit and
revolving loans) other than in the ordinary course of business and in an amount
not to exceed $50,000 in the aggregate, or guarantee or otherwise become liable
with respect to any indebtedness for borrowed money. Cars will not make any
capital expenditures in excess of $50,000 in the aggregate and will not make any
loan, advance, capital contribution to or investment in, any other person.
7.11. Taxes. Except for Taxes contested in good faith, Cars will pay
all Taxes upon its income, properties and business as they become due and
prepare and timely file all Tax Returns and other returns and reports which are
required to be filed in respect of Taxes.
7.12. No Disposition or Encumbrance. Cars shall not sell, lease,
mortgage, pledge or otherwise dispose of or agree to sell, lease, mortgage,
pledge or otherwise dispose of any asset or properties of Cars other than sales,
leases, mortgages, pledges and dispositions of assets and properties except in
the ordinary course of business.
7.13. Insurance. Cars will maintain insurance upon its business and
properties and insurance in respect of the kinds of risks currently insured
against, in accordance with its current practice.
7.14. No Mergers. Cars will not and shall not agree to merge or
consolidate with any other corporation, or acquire any stock, business, or
substantially all or any substantial portion of the property or assets of, any
other person, firm, association, corporation or other business organization.
7.15. No Breach. Neither Cars Stockholder shall do any act or omit
to do any act which, with or without the giving of notice or the passage of
time, or both, would result in a breach of or default under any contract,
commitment or obligation of Cars.
7.16. Due Compliance. Cars will duly comply with all laws applicable
to it and to the conduct of its Business and its Plans.
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7.17. Accounting Practice. Cars shall not change any method of
accounting practice currently employed by Cars.
SECTION VIII
ADDITIONAL COVENANTS AND AGREEMENTS
8.01. Continued Effectiveness of Representations and Warranties;
Advice of Change.
(a) From the date hereof through the Closing Date, Singer will
promptly advise Fidelity, in writing, upon obtaining knowledge of: (i) any event
which occurred on or prior to the date of execution of this Agreement that is
not disclosed herein and any event which occurs after the date of this
Agreement, in each case that would, under this Agreement or any Exhibit or
Schedule delivered pursuant hereto, have been required to be disclosed on the
date of execution of this Agreement by Singer and Cars; and (ii) any change in
the business, operations, prospects, properties, assets or condition, financial
or otherwise, of Cars.
(b) From the date hereof through the Closing Date, Singer shall use,
and shall use his best efforts to cause Cars to use, their respective
commercially reasonable best efforts to conduct their affairs in such a manner
so that, except as otherwise contemplated or permitted by this Agreement, the
representations and warranties contained in Sections IV, and V hereof shall
continue to be true and correct on and as of the Closing Date as if made on and
as of the Closing Date and Singer shall promptly notify Fidelity of any event,
condition or circumstance occurring from the date hereof through the Closing
Date that would constitute a material violation or breach by Singer of any of
such representations and warranties.
8.02. Reasonable Access. Singer shall (i) afford to Fidelity and its
authorized repre sentatives, during normal business hours, full and free access
to the properties, personnel, books and records of Cars in order that Fidelity
shall have a full opportunity to make such investigation as it shall reasonably
desire to make of the affairs of Cars and to obtain copies of relevant documents
in connection therewith, (ii) provide additional financial and other information
as to the Business as
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Fidelity or its representatives shall request and (iii) otherwise fully
cooperate with Fidelity or its representatives.
8.03. Books and Records. On the Closing Date or within a
commercially reasonable time thereafter, Singer shall cause Cars to deliver to
Fidelity all of the books and records of Cars, including without limitation, the
corporate minute book of Cars.
8.04. Intentionally Omitted.
8.05. Cooperation Regarding Plans. Singer shall use his best efforts
to cause Cars, at Cars' cost, to cooperate with Fidelity and its advisers in
preparing, filing, and diligently pursuing any and all filings, applications, or
notifications that may be necessary or advisable with respect to any of the
Plans in connection with the transactions contemplated by this Agreement.
8.06. Satisfaction of Closing Conditions. Singer shall, and Singer
shall use his best efforts to cause, Cars to use its reasonable business efforts
to cause all of the conditions to the obligations of Singer and Cars set forth
in Section IX and Section X hereof to be satisfied with respect to the Closing.
8.07. Confidentiality; Publicity.
(a) Each of Fidelity, Singer and Cars shall, and shall cause the
respective directors, officers, employees and authorized representatives of
Fidelity and Cars to, hold in strictest confidence and not disclose to others
for any reason whatsoever any information received from Fidelity or Cars or
their respective directors, officers, employees and authorized representatives,
in connection with the transactions contemplated hereby or by the Documents,
except as otherwise required by law.
(b) Neither Cars, nor any Stockholder (nor any of their affiliates
or members of their respective families) shall utilize any confidential
information in connection with the purchase or sale of Fidelity's Common Stock
in open market transactions.
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8.08. Other Offers. From the date hereof until the termination
hereof, Singer shall not, and Singer shall use his best efforts to cause Cars
and its directors, officers, employees, affiliates and their representatives not
to, (i) take any action to solicit or solicit any offer from any person with
respect to any Acquisition Proposal (as hereinafter defined) or (ii) engage in
negotiations with or disclose any nonpublic information relating to Cars or its
business or afford access to the properties, books or records of Cars to any
person with respect to an Acquisition Proposal without the express written
consent of Fidelity. "Acquisition Proposal" means any proposal for a merger or
other business transaction to which Singer, or Cars is or would be a party or
involving the acquisition of any substantial equity interest in, or a
substantial portion of the assets of, Cars or Singer Shares, other than the
transactions contemplated by this Agreement. Singer shall promptly notify
Fidelity if he or Cars receives any inquiry from any person with respect to an
Acquisition Proposal, which notice shall contain the name of the person involved
and the nature of the Acquisition Proposal.
8.09. Additional Instruments. Singer, Cars, the Minority
Stockholders, Fidelity, as the case may be, at the request of one of the others,
at or after the Closing will execute and deliver, or cause to be executed and
delivered, to the other, such documents and instruments as may reasonably be
necessary or desirable to carry out or implement any provision of this
Agreement.
8.10. Litigation. From the date hereof through the Closing Date,
Singer shall promptly notify Fidelity of any actions or proceedings of the type
referred to in Section 4.12 hereof that from the date hereof are threatened or
commenced against Singer, Cars or any director, officer, employee, property or
asset of Singer or Cars, and of any requests for additional information or
documentary materials by any governmental or regulatory body in connection with
the transactions contemplated hereby.
8.11. Consents. Singer shall use his best efforts to obtain all
consents, approvals and waivers of third parties or authorities set forth in
Schedules 3.03, 3.04, 4.06, 4.11, 4.18 and 4.20 hereto and to satisfy the
conditions set forth in Section IX hereof no later than the Closing.
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8.12. Supplements to Exhibits. Singer shall deliver to Fidelity, as
soon as possible after Singer or Cars becomes aware thereof, but not later than
the Closing, supplemental information updating the information set forth in the
Schedules hereto, so that such Schedules supplemented by such information shall
be true and correct as of the Closing Date as if then made, provided that the
foregoing shall not be deemed to permit any transaction not otherwise permitted
by this Agreement or to constitute a waiver by Fidelity of any misrepresentation
or breach by Singer or Cars of any agreement, covenant or warranty made therein.
Singer agrees to disclose to Fidelity any misrepresentation or breach of any
covenant or warranty of Singer or Cars when such breach becomes known any of
them.
SECTION IX
CONDITIONS TO FIDELITY'S OBLIGATIONS
The obligations of Fidelity to consummate the transactions contemplated by
this Agreement and the Documents with respect to the Closing shall be subject to
the satisfaction, on or before the Closing, of each of the following conditions:
9.01. Representations and Warranties. The representations and
warranties made by the Stockholders and Cars in this Agreement and in the
Documents (including all Exhibits and Schedules hereto or thereto), shall be
true and correct, individually and in the aggregate, in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
9.02. Performance. With respect to agreements, covenants,
obligations and conditions required to be performed or complied with by Singer,
the Minority Stockholders and Cars at or prior to the Closing, Singer, the
Minority Stockholders and Cars shall have performed in all material respects,
such agreements, covenants, obligations and conditions, including, without
limitation, the execution and delivery of the agreements contemplated herein.
9.03. Approvals and Filings. All Approvals, consents, authorizations
and approvals
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from, and all declarations, filings and registrations with, third parties and
government agencies required to consummate the transactions contemplated hereby
shall have been obtained or made, shall be in full force and effect and shall be
satisfactory in form and substance to Fidelity.
9.04. Certificates. At Closing, there shall be delivered to Fidelity
certificates in a form acceptable to Fidelity dated the appropriate Closing
Date, and signed by the Stockholders and an officer of Cars, certifying that the
conditions set forth in Sections 9.01, 9.02 and 9.03 hereof have been fulfilled.
9.05. No Injunction. There shall not be in effect any preliminary or
permanent injunction or other order issued by any state or federal court or
governmental body of competent jurisdiction or any statute, rule or regulation
which prevents the transactions contemplated hereby. No action or proceeding
before any court or governmental body shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying out of this
Agreement, the Documents or any of the transactions contemplated hereby or
thereby, declare unlawful the trans actions contemplated by this Agreement or
the Documents or cause such transactions to be rescinded.
9.06. Opinion of Counsel. There shall have delivered to Fidelity an
opinion of Xxxxxxx Xxxx, a Professional Corporation, counsel to the Stockholders
and Cars, dated the Closing Date, in the form of Exhibit I hereto.
9.07. Approval of the Merger by the Stockholders. Holders of at
least ninety-eight percent (98%) of the outstanding voting shares of Cars
Capital Stock shall have consented to the Merger.
9.08. Waiver of Rights as Stockholders. At the Closing, Singer and
each Minority Stockholder shall waive and release, pursuant to waiver and
releases substantially in the form of Exhibit H hereto, any and all rights and
claims each of them may have against Cars, arising out of
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or related to their status as shareholders of Cars.
9.09. Investor Representation Letters. The Stockholders shall have
executed and delivered to Fidelity, investor representation letters, in
substantially the form of Exhibit E attached hereto and made a part hereof.
9.10. Agreements. Singer shall have executed and delivered to
Fidelity, the Employment Term Sheet, in substantially the form of Exhibit B
attached hereto and made a part hereof, and the Stockholders shall have executed
and delivered to Fidelity, the Stockholder Agreements, in substantially the form
of Exhibit D attached hereto and made a part hereof.
SECTION X
CONDITIONS TO STOCKHOLDERS OBLIGATIONS
The obligations of Stockholders to consummate the transactions
contemplated by this Agreement and the Documents shall be subject to the
satisfaction, on or before the Closing of each of the following conditions:
10.01. Representations and Warranties. The representations and
warranties made by Fidelity in this Agreement and in the Documents (including
all Exhibits and Schedules hereto or thereto) shall be true and correct,
individually and in the aggregate, in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
10.02. Performance. With respect to agreements, covenants,
obligations and conditions required to be performed or complied with by Fidelity
at or prior to the Closing, Fidelity shall have performed in the aggregate, in
all material respects, such agreements, covenants, obliga tions and conditions,
including, without limitation, the execution and delivery of the agreements
contemplated herein.
-49-
10.03. Approvals and Filings. All Approvals, consents,
authorizations and approvals from, and all declarations, filings and
registrations with, third parties and government agencies required to consummate
the transactions contemplated hereby and by the Documents, to the extent
required to be obtained by Fidelity, shall have been obtained or made, shall be
in full force and effect and shall be satisfactory in form and substance to
Singer or Cars and their counsel.
10.04. Certificates. At Closing, there shall be delivered to Singer
a certificate, in a form acceptable to Singer, dated the appropriate Closing
Date, and signed by an officer of Fidelity certifying that the conditions set
forth in Sections 10.01, 10.02 and 10.03 have been fulfilled.
10.05. No Injunction. There shall not be in effect any preliminary
or permanent injunction or other order issued by any state or federal court or
governmental body of competent jurisdiction or any statute, rule or regulation
which prevents the transactions contemplated hereby. No action or proceeding
before any court or governmental body shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying out of this
Agreement, the Documents or any of the transactions contemplated hereby or
thereby, declare unlawful the trans actions contemplated by this Agreement or
the Documents or cause such transactions to be rescinded.
10.06. Approval of Proceedings. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby, or incidental thereto, and all other related
legal matters shall have been approved by counsel for Singer.
10.07. Opinion of Counsel for Fidelity. Fidelity shall have
delivered to Singer an opinion of counsel to Fidelity, dated the Closing date,
in the form of Exhibit J hereto.
SECTION XI
TERMINATION
-50-
11.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of Fidelity, Cars, Singer and the Majority in
Interest (as hereinafter defined) of the Minority Stockholders; or
(b) by Singer or Cars after January 31, 2000, if the Closing shall
not have been consummated on or prior to the Closing Date so long as the party
terminating this Agreement pursuant to this Section 11.01(b) has not made any
material misrepresentation or materially breached an agreement, covenant
obligation or condition of such party herein contained and if, and only if, all
Loan Amounts have been repaid; or
(c) by Fidelity, if Singer or Cars shall file a petition or commence
a voluntary case seeking to take advantage of any law relating to bankruptcy,
insolvency, reorganization or similar actions, shall make a general assignment
for the benefit of creditors or a proceeding shall be commenced against Singer
or Cars seeking the reorganization, liquidation, dissolution or winding up of
him or it or the appointment of a trustee or receiver for any such person or his
or its assets which is not dismissed within sixty (60) days after filing; or
(d) By either Fidelity, on the one hand, or Cars and the
Stockholders, on the other hand, if (i) the Merger shall not have been
consummated by January 31, 2000; provided, however, that either Fidelity, on the
one hand, and Cars and the Stockholders on the other hand, may extend such date
until February 29, 2000; provided, further, however, that the right to terminate
this Agreement under this subparagraph 11.01(d)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date, or (ii) a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall
-51-
have used their reasonable best efforts to vacate), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, or (iii) by either party if (b) there has been a breach of a
representation or warranty by the other such that the conditions to this
Agreement cannot be satisfied, or (ii) there has been a willful breach of a
covenant by the other which has not been cured by the breaching party; or
(e) by Singer, and Cars on the one hand, and Fidelity, on the other
hand, in the event the other(s) make a material misrepresentation or breaches a
covenant, agreement, warranty, obligation or condition of such parties herein
contained, but such non-misrepresenting or non- breaching party's election to
terminate shall not limit, waive or prejudice such party's remedies at law, in
equity or pursuant to this Agreement.
(f) In the event this Agreement is terminated as provided in Section
11.01(a), (b), (c) or (d), this Agreement shall become void and of no further
force and effect and no party hereto shall have any further liability to any
other party hereto except that:
(i) In the event of termination of this Agreement by Fidelity due to
the failure of the conditions set forth in Sections 9.01 or 9.02 hereof,
then Singer and Cars shall pay to Fidelity an amount equal to all damages,
losses, costs, expenses (including reasonable attorney fees) and
liabilities incurred in connection with the transactions contemplated in
this Agreement or resulting from the failure of such conditions to occur,
in each case, incurred by Fidelity. Notwithstanding the provisions of the
immediately preceding sentence, if the Closing shall not have occurred as
a result of a breach of any representation or warranty by Singer, any
Minority Stockholder or Cars, such breach occurring without the knowledge
of Singer, such Minority Stockholder or Cars, as the case may be, or a
non-intentional breach by Singer, any Minority Stockholder or Cars of any
covenants or agreements of Singer, any Minority Stockholder or Cars, as
the case may be, so as to constitute a failure of either or
-52-
both of the conditions set forth in Sections 9.01 or 9.02 hereof, then
Fidelity shall be entitled to obtain relief at law or in equity against
Cars for an amount equal to its out-of-pocket expenses incurred in
connection with this Agreement; provided, however, that in the event of a
breach of a representation or warranty giving rise to the failure of the
condition set forth in Section 9.01 hereof or a breach of a covenant or
agreement giving rise to the failure of the condition set forth in Section
9.02 hereof, resulting from the action or failure to act of any third
party or the occurrence of any event or circumstance, which action,
failure to act or occurrence was not within the control of Cars or the
Singer, and, in the case of a breach of representation or warranty, in the
event that such representation or warranty was true as of the date hereof
but became untrue on or prior to the Closing Date, this Agreement shall
forthwith become void and there shall be no liability or further
obligation on the part of any party thereto.
(ii) In the event of the termination of this Agreement by Singer,
the Majority in Interest of the Minority Stockholders and Cars due to the
failure of the conditions set forth in Sections 10.01 and 10.02 hereof,
then Fidelity shall pay to Cars an amount equal to all damages, losses,
costs, expenses (including reasonable attorney fees) and liabilities
incurred by Cars in connection with the transactions contemplated in this
Agreement or resulting from the failure of such conditions to occur,
incurred by Cars as the result of the failure of such conditions to occur.
SECTION XII
MISCELLANEOUS PROVISIONS
12.01. Nature and Survival of Representations and Warranties. All
statements
-53-
contained herein or in any certificate, schedule or other document delivered
pursuant hereto shall be deemed representations and warranties. All
representations and warranties shall survive the Closing until December 31, 2001
and shall not be affected by any investigation at any time made by or on behalf
of any party hereto. If Closing occurs, all representations, warranties,
covenants and agreements of Cars made to Fidelity pursuant to this Agreement and
the Documents shall be deemed to be representations, warranties, covenants and
agreements solely of Singer.
12.02. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the parties hereto;
provided, however, that an amendment of this Agreement may be made on behalf of
all Stockholders by an instrument in writing executed by that number of
Stockholders who are holders of 51% of the issued and outstanding shares of Cars
Common Stock (the "Majority in Interest").
12.03. Waiver. Any breach of any obligation, covenant, agreement or
condition contained herein shall be deemed waived by the non-breaching party,
only by a writing, setting forth with particularity the breach being waived and
the scope of the waiver, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other breach. No failure or duly by
any party in exercising any right, power or privilege hereunder or under the
Documents and no course of dealing by any party shall operate as a waiver and
any right, power or privilege hereunder or under any Document nor shall any
single or partial exercise thereof or the exercise of any other right, power or
privilege.
12.04. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand or a recognized next day
delivery service:
(a) If to Singer, Cars or any Selling Stockholder, to:
-54-
XxxxXX.xxx, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, President
With a copy to:
Xxxxxxx Xxxx, a Professional Corporation
11th Floor, 000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. XxXxxxx, Esq.
or to such other person or address as Singer, Cars or any Selling Stockholder
shall furnish Fidelity in writing.
(b) If to Fidelity to:
Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx, President
with a copy to:
Xxxxxxx Krooks Xxxx & Ball P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
or to such other person or address as Fidelity shall furnish Singer and Cars in
writing.
12.05. Binding Nature; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall
-55-
be assigned by any of the parties hereto without prior written consent of the
other parties; provided, however ,that the rights of Fidelity hereunder may be
assigned to any lender or financing institution as security for a loan or loans
granted or equity raised in order to facilitate participation in the transaction
contemplated herein.
12.06. Governing Law; Submission to Jurisdiction. This Agreement and
the legal relations among the parties hereto shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and performed therein. The parties hereby: (i) in any legal proceeding
brought in connection with this Agreement or any of the Documents or the
transactions contemplated hereby or thereby, irrevocably submit to the
nonexclusive in personam jurisdiction of (A) any state or Federal court of
competent jurisdiction sitting in the State of New York, County of New York or
(B) in the event that any party is a defendant in any legal proceeding in which
he or it seeks to join the other as a third party defendant, then, any state or
Federal court in which such proceeding has properly been brought, and consents
to suit therein; and (ii) the venue of such proceeding shall be brought in the
appropriate state or federal court in New York, New York.
12.07. Public Announcements. Prior to the Closing, except as
required by applicable law the parties hereto agree not to make any disclosure
or public announcement concerning the transactions contemplated hereby without
the prior consent of the other parties hereto; provided, however, that in
connection with the transactions contemplated herein, with respect to any
disclosure or public announcement which a party reasonably deems to be necessary
pursuant to any state or federal law or regulation, such party may make such
disclosure or public announcement without the consent of any other party so long
as the party making such announcement or disclosure has used reasonable efforts
to provide to each other party hereto advance notice of such disclosure or
public announcement. In connection with any disclosure required by law the party
making such disclosure shall use its best efforts to obtain, to the extent
available, confidential treatment with respect to
-56-
information concerning the transaction contemplated herein.
12.08. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the Documents shall be
paid by the party incurring such cost or expense.
12.09. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.10. Headings. The headings contained in this Agreement are
inserted for convenience only and shall not constitute a part hereof.
12.11. Entire Agreement. This Agreement and the Documents together
with the Schedules herein and therein and Exhibits hereto and thereto,
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, documents, negotiations and discussions, whether oral or
written, of the parties hereto.
12.12. Obligations of Predecessors. When any provision of this
Agreement or any Document refers to or contemplates: (i) any agreement, lease,
license, permit or authorization to which Cars is a party or by which its assets
are bound or subject; (ii) any other obligation or duty of Cars of any kind or
nature; or (iii) the existence or absence of any fact or matter such provision
shall be deemed to include, in addition to any contract, document, agreement,
lease, license, permit or authorization or other obligation or duty of Cars or
the existence or absence of any fact or matter; (x) any contract, document,
agreement, lease, license, permit or authorization or other obligation or duty
assigned to or assumed by Cars or its predecessors, directly or indirectly, by
agreement, by operation of law or otherwise and (y) the existence of any fact or
matter to the extent relevant to any such predecessor.
-57-
When any provision of this Agreement or any Document refers to a
"predecessor" such reference shall be deemed to include any corporation,
partnership, joint venture or other business, business organization or entity
which is the predecessor of Cars and shall include any or all of the foregoing
to the extent that Cars is the direct or indirect successor thereof.
12.13. Knowledge of Singer and Cars. When any provision of this
Agreement or any Document refers to or contemplates the knowledge of Singer or
Cars, it shall mean: (i) with respect to any matter relating to third parties,
actual knowledge of Singer and executive officers of Cars with regard to such
third parties; and (ii) with respect to Singer or any of his obligations, rights
or properties, the actual knowledge of Singer.
12.14. Remedies Exclusive. Prior to the Closing, the rights,
remedies and obligations of the parties hereto under this Agreement and the
Documents set forth in Section XI hereof shall be deemed to be exclusive of all
other rights, remedies and obligations under this Agreement and the Documents
that would otherwise be available to the parties hereto. After the Closing, the
rights, remedies and obligations under this Agreement and the Documents of the
parties hereto set forth in Section VI hereof shall be deemed to be exclusive of
all other rights, remedies and obligations under this Agreement and the
Documents that would otherwise be available to the parties hereto.
Notwithstanding the foregoing, the parties agree that the business of Cars is
unique and that remedies at law may be inadequate, and accordingly, Fidelity, in
addition to other remedies it may have, shall have the right to enforce the
obligation of the Singer to consummate the Merger upon the terms contemplated
hereunder by an action or actions for specific performance, injunction or other
appropriate equitable remedies.
12.15. Disclosure on Schedules. For purposes of this Agreement, a
disclosure by any party hereto of any fact on any Schedule shall be deemed a
disclosure on every Schedule of any party hereto to the extent such disclosure
properly could have been made thereon but was not made.
-58-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed the day and year first above written.
--------------------------------------------
Xxxx X. Xxxxxx
XXXXXX.XXX, INC.
By:
----------------------------------------
Xxxx X. Xxxxxx, President
FIDELITY HOLDINGS, INC.
By:
----------------------------------------
Xxxxx Xxxxxxx, Chief Executive Officer
ACQUISITION CORP.
By:
----------------------------------------
Xxxxx Xxxxxxx, Chief Executive Officer
-59-
MINORITY STOCKHOLDERS
--------------------------------------------
C. Xxxxx Xxxxxx, Xx.
Bear Xxxxxxx c/f Xxxx Xxxxxxxxx SEP
XXX (616-48014)
By:
Xxxx X. Xxxxxxxxx
Springfield Land Development Co., L.L.C.
By:
----------------------------------------
Xxxxxx X. Xxxxxx, Xx., Manager
Xxxxxx X. Xxxxxx, Xx. and Xxxxxx X.
Xxxxxx, tenants by the entireties with
right of survivorship as at common law
--------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
--------------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxxx
--------------------------------------------
O. V. Maiden
--------------------------------------------
Xxxx X. Xxxx
Xxxxx Xxxxx & Associates, Ltd.
By:
----------------------------------------
Xxxxx X. Xxxxx
Xxxxxx X. And Xxxxxx X. Xxxxx Trust
By:
----------------------------------------
Xxxxxx X. Xxxxx, Trustee
By:
----------------------------------------
Xxxxxx X. XxXxxx, Trustee
-60-
--------------------------------------------
Xxxxx X. Xxxxxx, D.D.S.
--------------------------------------------
Xxxxx X. Xxxxxx, D.D.S., custodian
for Xxxxxx Xxxxxx, a minor
--------------------------------------------
Xxxxx X. Xxxxxx, D.D.S., custodian
for Xxxxxxxx Xxxxxx, a minor
--------------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------------
X. X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxx, Xx. and Xxxx X. Xxxx,
tenants by the entireties with right of
survivorship as at common law
--------------------------------------------
Xxxxxx X. Xxxx, Xx.
--------------------------------------------
Xxxx X. Xxxx
--------------------------------------------
Xxxxx X. Xxxxxxxx
--------------------------------------------
X. X. Xxxxxxx, XX
--------------------------------------------
Xxxxx X. November
--------------------------------------------
Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxx X. Xxxxx
--------------------------------------------
C. Xxxxx Xxxxxx, III
-61-
Xxxxxx X. Xxxxx and Xxxxxxx X.
Xxxxx, tenants by the entireties with
right of survivorship as at common law
--------------------------------------------
Xxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxxxxxx Xxxxx Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxx
--------------------------------------------
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxxxx, Xx. and Xxxx X.
Xxxxxxx, tenants by the entireties with
right of survivorship as at common
law
--------------------------------------------
Xxxxx X. Xxxxxxx, Xx.
--------------------------------------------
Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx Xxxxxx Xxxxx
Xxxxx X. Xxxxxxxxxxx and Xxxxx X.
Xxxxxxxxxxx, tenants by the entireties
with right of survivorship as at
common law
--------------------------------------------
Xxxxx X. Xxxxxxxxxxx
--------------------------------------------
Xxxxx X. Xxxxxxxxxxx
Xxx Xxxx and Xxxxx X. Xxxx, tenants
by the entireties with right of
survivorship as at common law
--------------------------------------------
Xxx Xxxx
--------------------------------------------
Xxxxx X. Xxxx
--------------------------------------------
-62-
Xxxx Xxxxxx Xxxxxxxx
Xxxxxx X. Xxxxxx and Xxxxx X.
Xxxxxx, tenants by the entireties with
right of survivorship as at common
law
--------------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxx X. Xxxxxx
--------------------------------------------
D. Xxxxxxx Xxxxxxxxx
--------------------------------------------
Xxxx Xxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxx X. Xxxx
Xxxxxx X. Xxxxx, III and Xxxx X.
Xxxxx, tenants by the entireties with
right of survivorship as at common
law
--------------------------------------------
Xxxxxx X. Xxxxx, III
--------------------------------------------
Xxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxx
--------------------------------------------
Xxxx X. Xxxxxx, Xx.
--------------------------------------------
Xxxxxxx X. Xxxxxxx
--------------------------------------------
Xxx X. Xxxxxxxx
-63-
--------------------------------------------
Xxxxx X. Xxxxx
--------------------------------------------
Xxxxxx X. Xxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Xxxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxxx X. Canada
--------------------------------------------
Xxxx X. Xxxxxx
--------------------------------------------
Hooi Min Ong
--------------------------------------------
Xxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
--------------------------------------------
April R. Doom
-64-
SCHEDULE A
Stockholders
Total CarsTV
Stockholder Shares
----------- ------
Xxxx X. Xxxxxx 5,100,000
C. Xxxxx Xxxxxx, Xx. 385,785
Bear Xxxxxxx c/f Xxxx Xxxxxxxxx SEP XXX (616-48014) 385,785
Springfield Land Development Co., L.L.C. 57,868
Xxxxxx X. Xxxxxx & Xxxxxx X. Xxxxxx, TbyEWROS 38,578
Xxxxxxx X. Xxxxxxxxx 38,578
O.V. Maiden 38,578
Xxxx X. Xxxx 38,578
Xxxxx Xxxxx Associates, Ltd. 38,578
Xxxxxx X. and Xxxxxx X. Xxxxx Trust 38,578
Xxxxx Xxxxxx, DDS 38,578
Xxxxx Xxxxxx, DDS, custodian for Xxxxxx Xxxxxx, a minor 19,290
Xxxxx Xxxxxx, DDS, custodian for Xxxxxxxx Xxxxxx, a minor 19,290
Xxxxxx X. Xxxxxx 19,290
X.X. Xxxxxx 19,290
Xxxxxx X. Xxxxxxxxx 19,290
Xxxxxx X. Xxxx & Xxxx X. Xxxx, TbyEWROS 7,716
Xxxxx X. Xxxxxxxx 121,291
X.X. Xxxxxxx, XX 121,291
Xxxxx X. November 40,430
Xxxxxx X. Xxxxxxx 40,430
Xxxxx X. Xxxxx 40,430
C. Xxxxx Xxxxxx, III 231,471
Xxxxxx X. Xxxxx & Xxxxxxx X. Xxxxx, TbyEWROS 964,462
Xxxxxxxxxxx Xxxxx Xxxxx 964,462
Xxxxxxx X. Xxxx 192,892
Xxxxxx X. Xxxxx 96,446
Xxxxx X. Xxxxxxx, Xx. & Xxxx X. Xxxxxxx, TbyEWROS 96,446
Xxxx Xxxxxx Xxxxx 48,223
Xxxxx X. Xxxxxxxxxxx & Xxxxx X. Xxxxxxxxxxx, TbyEWROS 38,578
Xxx Xxxx & Xxxxx X. Xxxx, TbyEWROS 30,863
Xxxx Xxxxxx Xxxxxxxx 30,863
Xxxxxx X. Xxxxxx & Xxxxx X. Xxxxxx, TbyEWROS 23,147
D. Xxxxxxx Xxxxxxxxx 9,259
Xxxx Xxxxxx Xxxxxxx 154,314
Xxxxxxx X. Xxxxxx 23,147
Xxxxx X. Xxxx 7,716
Xxxxxx X. Xxxxx III & Xxxx X. Xxxxx, TbyEWROS 7,716
Xxxxxxx X. Xxxxxxxx 7,716
Xxxx X. Xxxxxx, Xx. 7,716
-65-
Xxxxxxx X. Xxxxxxx 6,173
Xxx X.Xxxxxxxx 6,173
Xxxxx X. Xxxxx 3,858
Xxxxxx X. Xxxx 3,858
Xxxxxx X. Xxxxxx 3,086
Xxxxxxx X. Xxxxxxxxxxx 3,086
Xxxxxxxx X. Xxxxx 3,086
Xxxxxxxx X. Canada 1,543
Xxxx X. Xxxxxx 1,543
Hooi Min Ong 1,543
Xxxxxx X. Xxxxx 772
Xxxxxxx X. Xxxx 3,858
Xxxxxx X. Xxxxxxx, Xx. 1,543
April R. Doom 1,543
-----
Total 9,644,624
-66-
LIST OF SCHEDULES
A. - Stockholders
1.05.2 - Unvested Option Holders
3.01 - Ownership of Singer
3.03 - Singer Violations
3.04 - Singer Consents and Approvals
3.05 - Singer Affiliate Transactions
4.01 (a) - Real Property
(b) - Intangible Property
(c) - Material Agreements
(d) - Employees and Compensation Arrangements
(e) - Debt (Including Security Agreements and Mortgages)
(f) - Banks
(g) - Charter Documents
(h) - Litigation
(i) - Power of Attorney
(j) - Insurance
4.02 - States Where Qualified to do Business
4.03 - Capitalization
4.05 - Violations, Accelerations, Consents
4.06 - Approvals
4.08 - Undisclosed Liabilities
4.09 - Certain Changes
4.10 (a) - Exceptions
(b) - Encumbrances
(c) - Title to Personal Property
(d) - Adequacy and Condition of Property
4.11 - Intellectual Property
4.12 - Litigation
4.13 - Taxes
-67-
4.14 - Benefit Plans
4.15 - Labor Matters
4.17 - Insurance
4.18 - Contracts
4.19 - Finders and Investment Bankers
4.20 - Required Approvals
4.21 - Transactions with Officers
4.22 - Receivables
4.23 - Inventory
4.24 - Orders
4.25 - Customers
4.26 - Suppliers
4.27 - Software
-68-
LIST OF EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Singer Employment Term Sheet
Exhibit C - Cars Promissory Note
Exhibit D - Form of Stockholders Agreement
Exhibit E - Form of Investor Representation Letter
Exhibit F - Form of Shareholders Waiver
Exhibit G - Form of Opinion of Counsel to Singer, the
Company and the Minority Stockholders
Exhibit H - Form of Opinion of Counsel to Fidelity
-69-
Schedule 3.01
CarsTV, Inc. Stockholders Agreement dated December 1, 1998 as
amended August 30, 1999.
-70-
Schedule 3.03
Not Applicable
-71-
Schedule 3.04
Not Applicable
-72-
Schedule 3.05
Not Applicable
-73-
Schedule 4.01 (a)
Sublease the premises at 0000 Xxxxxxxxx Xxxx, Xxxxxxxx XX 00000
Lease a retail space in the Old Dominion University student center in Norfolk,
Virginia
Sublease by and between Xxxxxxx X. Xxxxxxxxxx (Landlord), Xxxxxx Sales Company,
Inc., a Florida corporation (Sublessor), and Internet Creations, Inc., a
Virginia corporation (Sublessee) dated September 17, 1997. The sublease and
underlying lease expire 7/01/99.
Commonwealth of Virginia Standard Contract No. 00-000-0000=YB
Not Applicable
-74-
Schedule 4.01 (b)
Patent Pending Titled Automated Internet and Cable Television Auto Sales System,
application number 09/134, 976 filed 8/17/98. Continuing data was added 4/29/99
(application # 09/301, 926 and # 09/301/925) to add Employment and Real Estate
to the Patent Pending.
-75-
Schedule 4.01 (c)
Lease dated 5/22/97 by and between Affiliated Capital Corporation (Lessor) and
Internet Creation, Inc. (Lessee). Lease commenced 6/30/97 and expires 6/29/00.
Lease was for a U.S. Robotics Total Control Chassis, total cost $15,201.
Lease No. 001.9701102.401
Lease dated 7/8/99 by and between Affiliated Capital Corporation (Lessor) and
Internet Creations, Inc. (Lessee). Lease commenced 8/30/99 and expires 8/29/02.
Lease was for a Cisco Model 7200 Router, total cost $22,107.
Lease No. 002.9701102.402
Lease dated 10/27/99 by and between Affiliated Capital Corporation (Lessor) and
Internet Creations, Inc. (Lessee). Lease commenced 10/28/99 and expires
10/27/02. Lease was for Compaq Proliant Server, total cost $23,225.
Lease No. 002.9701102.403
-76-
Schedule 4.01 (d)
Annual Compensation
1) Xxxxxxxxxxx X. Xxxxx $60,000
2) Xxxxxx X. Xxxxxx $40,000
3) J. Xxxxxx Xxxxx $36,000 (plus commissions)
4) Xxxx X. Xxxxxx $95,000
5) Xxxxxxx X. Xxxx $78,000 (includes commissions)
6) Xxxxxxx X. Xxxxxx $36,000 (plus commissions)
7) Xxxxxx X. Xxxxx $40,000
8) Xxxxxx X. Xxxxx $70,000
9) Xxxxxx X. Xxxxx III $36,000 (plus commissions)
10) Xxx Xxxx $45,000 (plus $10,000 bonus potential)
11) Xxxxx X. Xxxxxxx, Xx. $36,000 (plus commissions)
12) C. Xxxxx Xxxxxx, III $48,000 (plus commissions)
13) Xxxx X. Xxxxxxx $70,000
-77-
Schedule 4.01 (e)
Not Applicable
79-
Schedule 4.01 (f)
Wachovia Bank
Account Numbers
7901143255
7911940706
1850042066
1850133817
All Wachovia accounts accessible by: Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxx
First Union
Account Number
2000004787712
Accessible by: Xxxxxx X. Xxxxx
80-
Schedule 4.01 (g)
See Attached
81-
Schedule 4.01 (h)
Not Applicable
82-
Schedule 4.01 (i)
Not Applicable
83-
Schedule 4.01 (j)
Nationwide Insurance (Policy # 53PR194328-3001T)
Internet Creations, Inc.
Commercial Property Coverage $1,000,000
Commercial General Liability Coverage $1,000,000
Commercial Inland Marine Coverage $ 25,000
Personal Property $ 10,000
Fire Damage $ 50,000
Medical Expense (per person) $ 5,000
Cars, Inc. (Policy # 53PR581218-3001T)
Coverage equivalent to above except no Inland Marine Coverage plus
Business Auto Insurance with $500,000 liability
Media Special Perils Advertiser Policy (Policy LS 010906 -
Media/Professional Insurance). For Cable and Internet Advertising E & O.
$1,000,000 liability coverage with $5,000 deductible.
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Schedule 4.02
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Old Dominion University satellite office:
Old Dominion University
Internet Creations, Inc.
Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
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Schedule 4.03
See Attached for Capitalization Schedule - Note that the additional shares will
be issued as a part of Closing and will thus be converted into FDHG shares.
Also - The XxxxXX.xxx, Inc. Stock Incentive Plan, effective June 1, 1999 will be
terminated at Closing.
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Schedule 4.04
XxxxXX.xxx, Inc. has three (3) wholly owned subsidiaries:
Internet Creations, Inc., a Virginia corporation (dba Internet Connections)
Computerized Auto Resale Service, Inc., a Virginia corporation (dba CARS)
Internet Telecommunications, Inc., a Virginia corporation
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Schedule 4.05
The Merger will require a supermajority (98%) approval of all current
XxxxXX.xxx, Inc. shareholders.
88-
Schedule 4.06
Not Applicable
89-
Schedule 4.07
(See Attached)
90-
Schedule 4.08
Not Applicable
91-
Schedule 4.09
4.09 (f)
As a part of closing we intend to issue restricted stock to a number of
employees and stockholders (refer to Schedule 4.03)
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Schedule 4.10 (a) (b) (c) (d)
Not Applicable
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Schedule 4.11
Patent Pending Titled Automated Internet and Cable Television Auto Sales System,
Application No. 09/134, 976, filed 8/17/98 Continuing data was added 4/29/99 (
Application # 09/301, 926 and 09/301, 925) to add Employment and Real Estate to
the Patent Pending
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Schedule 4.12
Not Applicable
95-
Schedule 4.13
Not Applicable
96-
Schedule 4.14
XxxxXX.xxx, Inc. 1999 Stock Incentive Plan, effective June 1, 1999 (Note: This
plan will be terminated as a part of closing)
We currently have a NON-DFI Simple XXX dated 9/11/1998 with Lord, Xxxxxx & Co.
Plan No. is 223 664 and currently only three people participate, but five more
become eligible effective 1/1/2000
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Schedule 4.15
Not Applicable
98-
Schedule 4.17
Not Applicable
99-
Schedule 4.18
1) Agreement dated August 30, 1999 between Net 2000, a Delaware Corporation
and Internet Creations, Inc.
2) Programming Agreement by and between CoxCom, Inc. d/b/a Xxx Communications
Roanoke and XxxxXX.xxx, Inc.
3) Terms and Conditions dated August 19, 1998 by and between Computerized
Auto Resale Service, Inc. and Comcast Cable Communications.
4) Leased Access Programming Agreement dated March 5, 1998 by and between
CoxCom, Inc. d/b/a Xxx Communications Hampton Roads and Computerized Auto
Resale Service, Inc.
5) Agreement for Local Cable Advertising between Adelphia Communications
Corporation dba Media Partners and Computerized Auto Resale Service, Inc.
dated April 23, 1998.
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Schedule 4.19
Not Applicable
101-
Schedule 4.20
Not Applicable
102-
Schedule 4.21
Xxxx X. Xxxxxx has made a number of loans to Computerized Auto Resale Service,
Inc. and Internet Creations, Inc. which are accounted for on their respective
balance sheets.
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Schedule 4.22
See Attached
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Schedule 4.23
Not Applicable
105-
Schedule 4.24
Not Applicable
106-
Schedule 4.25
Internet Creations
Online@VCU
Virginia Commonwealth University $ 326,647.50
X.X. Xxx 000000
Xxxxxxxx, XX 00000-0000
CARS
Xxxxxx Jeep-Eagle $ 59,296.75
0000 X. Xxxxx Xx
Xxxxxxxx, XX 00000
Richmond Ford $ 26,540.44
0000 X. Xxxxx Xx
Xxxxxxxx, XX 00000
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Schedule 4.26
Internet Creations
Adelphia Business Solutions $ 47,944.53
f/k/a Hyperion Communications
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Net2000 Communications $ 33,028.92
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
CARS
Cable Rep Advertising $ 69,000.00
Xxx Cable Roanoke
X.X. Xxx 00000
Xxxxxxx, XX 00000
Comcast Cablevision of Chesterfield $ 55,912.73
0000 Xxxxxxxxxx Xxxxxxxx, Xxxxx 0-X
Xxxxxxxx, XX 00000
Cable Rep - Hampton Roads $ 48,402.34
000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxx, XX 00000
Media Partners $ 151,987.50
Main at Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
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Schedule 4.27
The CARSTV system provides dealerships a single mechanism for maintaining
vehicle inventory on a variety of advertising media. Presently, these media are
Internet web sites, kiosk systems (both in-showroom and mall), window stickers,
and cable television. From a central management interface, dealers are able to
change information on all media in near-real-time. To effect changes on the
various media, the CARSTV system utilizes the thin-client technology offerings
of Citrix Systems, Inc. The tremendous benefit of Citrix is its ability to give
an application high-bandwidth access to all the resources of a LAN and the
Internet as well as access to all the resources of the client (e.g. local files
and printer). In the CARSTV system, this allows the dealership to propagate
inventory changes very quickly. From a Citrix session running the CARSTV
management application, a single click of the mouse sends a dealer's changes
(both database and photos) to the central data warehouse on the LAN. As all
Internet sites produced by CARSTV pull from this warehouse, update of the data
warehouse effectively updates the dealership's search engine. Update of a
dealership's cable television content also relies on the central data warehouse.
Every CARSTV head-end consists of a server connected to the Internet. Another
server on the CARSTV LAN communicates continuously with the head-end servers and
sends updates as changes become available on the data warehouse. In this way,
changes are made available to each head-end in a near-real tiUpdate of. a
dealer's showroom kiosk also relies upon the central data warehouse. This Citrix
software application run by the dealership scans a dealer's kiosk gathering
inventory information. The application compares this information with the latest
data for the dealership on the data warehouse, creates an incremental update,
and installs the update on the kiosk machine. This approach became necessary in
order to provide affiliated dealerships with the ability to cross-sell
inventory. Suppose a dealership has 4 locations and wants to cross-sell from
each location. By scanning the data warehouse, the Citrix software is able to
"see" changes made at all dealer locations and create an incremental update
reflecting only the changes made at each dealership. Once the update is
installed, the showroom kiosk provides both sales staff and customers with the
latest inventory information at all locations. Other features of
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the CARSTV Citrix not yet mentioned include printing window stickers and buyer
guides and reporting on Internet traffic statistics, price comparisons, and
historical logs of web site and station updates. It should also be noted that
this Citrix application can run stand alone at the dealership with all
network-related features disabled. It is our intention, as bandwidth becomes
more readily available, to phase out all such local use. In summary, the CARSTV
system consists of the following software components: kiosk software, management
software running under Citrix, broadcast software running on each head-end, a
data warehouse composed of a Netscape web server linked to a Microsoft SQL
Server, and miscellaneous server applets. Nearly all software developed by
CARSTV is written in Visual Basic 5 and stored procedures. The management
application used by the dealer is presently being migrated from Winframe 1.7 to
MetaFrame 1.8. We are also in process of migrating from Microsoft SQL Server 6.5
to 7.0. Core servers on the CARSTV LAN are all Intel Pentium II class machines
running Microsoft NT. Cable head-end servers are also Pentium II class IBM
servers running NT4. Each head-end server runs the following software: a web
server, miscellaneous cgi- bins, ftp server, CARSTV broadcast software
(generates the actual broadcast seen by viewers), CARSTV UNISERVER (for handling
db and blob updates over the Internet). Additional hardware on each head-end
machine includes a modem, a sound card, and an MPEG-2 decoder card.
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