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EXHIBIT 10.10
AGREEMENT AND PLAN OF MERGER
AMONG
INTELLIPOST CORPORATION
IPOST ACQUISITION SUBSIDIARY, INC.
AND
ENHANCED RESPONSE TECHNOLOGIES, INC.
DATED AS OF NOVEMBER 30, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I - THE MERGER.............................................................1
SECTION 1.1 The Merger....................................................1
SECTION 1.2 Closing.......................................................1
SECTION 1.3 Effective Time................................................2
SECTION 1.4 Effects of the Merger.........................................2
SECTION 1.5 Article of Incorporation and Bylaws...........................2
SECTION 1.6 Directors.....................................................2
SECTION 1.7 Officers......................................................2
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.....................................2
SECTION 2.1 Effect on Capital Stock.......................................2
SECTION 2.2 Exchange of Certificates......................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES.......................................5
SECTION 3.1 Representations and Warranties of the Company and
Principal Shareholders......................................5
SECTION 3.2 Representations and Warranties of the Company................11
SECTION 3.3 Representations and Warranties of Parent and Sub.............13
SECTION 3.4 Representations and Warranties of Shareholders...............18
SECTION 3.5 Representation of the Company and Principal Shareholders
regarding MotivationNet LLC ("MNET")..............................18
ARTICLE IV - COVENANTS RELATING TO CONDUCT OF BUSINESS............................22
SECTION 4.1 Conduct of Business by Parent and the Company................22
SECTION 4.2 No Solicitation..............................................25
ARTICLE V - ADDITIONAL AGREEMENTS.................................................27
SECTION 5.1 Access to Information; Confidentiality.......................27
SECTION 5.2 Reasonable Efforts; Notification.............................28
SECTION 5.3 Stock Options and Other Employee Benefits....................29
SECTION 5.4 Fees and Expenses............................................30
SECTION 5.5 Public Announcements.........................................30
SECTION 5.6 Tax Treatment................................................30
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ARTICLE VI - CONDITIONS PRECEDENT.................................................30
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger............................................30
SECTION 6.2 Conditions to Obligations of Parent and Sub..................30
SECTION 6.3 Conditions to Obligation of the Company......................31
ARTICLE VII - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES..............32
SECTION 7.1 Survival of Representations..................................32
SECTION 7.2 Agreement of Principal Shareholders
and Shareholders to Indemnify................................32
SECTION 7.3 Notice of Losses.............................................33
SECTION 7.4 Third Party Claims...........................................33
SECTION 7.5 No Recourse Against Company..................................34
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER..................................34
SECTION 8.1 Termination..................................................34
SECTION 8.2 Effect of Termination........................................35
SECTION 8.3 Amendment....................................................35
SECTION 8.4 Extension; Waiver............................................36
ARTICLE IX - GENERAL PROVISIONS...................................................36
SECTION 9.1 Nonsurvival of Representations and Warranties................36
SECTION 9.2 Notices......................................................36
SECTION 9.3 Definitions..................................................37
SECTION 9.4 Interpretation...............................................37
SECTION 9.5 Counterparts.................................................38
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries...............38
SECTION 9.7 Governing Law................................................38
SECTION 9.8 Assignment...................................................38
SECTION 9.9 Enforcement..................................................38
SECTION 9.10 Severability................................................38
EXHIBIT A NON-COMPETITION AGREEMENTS
EXHIBIT B CONSULTING AGREEMENT
EXHIBIT C PARENT DISCLOSURE SCHEDULE
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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3.1(a) Organization, Standing and Corporate Power
3.1(b) Subsidiaries
3.1(c) Capital Structure
3.1(d) Authority; Noncontravention
3.1(e) Absence of Certain Changes or Events
3.1(f) Litigation
3.1(g) Compliance with Laws
3.1(i) Absence of Changes in Benefit Plans
3.1(j) Taxes
3.1(k) Title to Properties
3.1(l) Intellectual Property
3.1(o) Brokers
3.1(p) Equipment and Other Personal Property Leases
3.2(a) Contracts
3.4(a) Ownership of the Common Shares
3.5(a) Organization of MNET
3.5(b) MNET Capital Structure
3.5(d) Authority
3.5(e) MNET Financial Statements and Intercompany Debt
3.5(f) No Undisclosed Liabilities
3.5(g) No Changes
3.5(h) Taxes and Other Returns and Reports
3.5(i) Restrictions of Business Activities
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3.5(j) Intellectual Property
3.5(k) Interested Party Transactions
3.5(l) Compliance with Laws
3.5(m) Litigation
3.5(n) Brokers' and Finders' Fees: Third Party Expenses
3.5(o) Sale of MNET Interests
4.1(b) Conduct of Business by the Company
5.3(b) Individuals Parent will Issue Options to
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 30, 1998, among
INTELLIPOST CORPORATION, a Delaware corporation ("Parent"), IPOST ACQUISITION
SUBSIDIARY, INC., an Illinois corporation and a wholly owned subsidiary of
Parent ("Sub"), ENHANCED RESPONSE TECHNOLOGIES, an Illinois corporation (the
"Company") and the shareholders of the Company, (each a "Shareholder" and
collectively, the "Shareholders", of which Xxxxxx Xxxxxx and Xxxxx Xxxxxx are
"Principal Shareholders").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company, and Shareholders and Parent, acting as the sole stockholder of Sub,
have approved the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, no par value per share, of
the Company ("Company Common Stock"), other than Company Common Stock owned by
Parent, Sub or the Company, will be converted into common stock, par value $.001
per share, of Parent ("Parent Common Stock");
WHEREAS, Parent, Sub, the Principal Shareholders and the Company desire
to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Illinois Business
Corporation Act (the "BCA"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.3). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the BCA. At
the election of Parent, any direct or indirect wholly owned subsidiary (as
defined in Section 8.3) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties hereto agree to execute an
appropriate amendment to this Agreement in order to reflect such substitution.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after
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satisfaction or waiver of the conditions set forth in Article VI (as such date
may be extended, but not for more than 30 days, by the Company, in its sole
discretion) (the "Closing Date"), at the offices of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000,
unless another date or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file with
the Illinois Secretary of State an "Articles of Merger, Consolidation or
Exchange (the "Articles of Merger") executed in accordance with the relevant
provisions of the BCA. The Merger shall become effective at such time as the
Certificate of Merger is issued by the Illinois Secretary of State (the time the
Merger becomes effective being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the BCA.
SECTION 1.5 Article of Incorporation and Bylaws.
(a) The Articles of Incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law, except that the name of the Surviving Corporation
in such Articles of Incorporation will be changed to be Enhanced Response
Technologies, Inc.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
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(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $.001 per share,
of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
share of Company Common Stock that is owned by the Company shall automatically
be canceled and retired and shall cease to exist, and no Parent Common Stock or
other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section
2.2(e), each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted into
0.6445 (such fraction, as it may be adjusted pursuant to the final sentence of
this Section 2.1(c), being referred to as the "Exchange Ratio") of a fully paid
and nonassessable share of Parent Common Stock. As of the Effective Time, all
such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate which immediately prior to the Effective Time represented any
such shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive certificates representing the number of
fully paid and nonassessable shares of Parent Common Stock into which such
shares of Company Common Stock were converted at the Effective Time and any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.2, without interest. Notwithstanding the foregoing, if between the
date of this Agreement and the Effective Time the outstanding shares of Parent
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or any similar
transaction or if Parent pays an extraordinary dividend or makes an
extraordinary distribution, the Exchange Ratio shall be appropriately adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination, exchange or other similar transaction or extraordinary
dividend or distribution.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") whose shares
were converted into Parent Common Stock pursuant to Section 2.1(c), (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Parent and shall be in customary form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by Parent, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive pursuant to the provisions of this Article II
after taking into account all the shares of Company Common Stock then held by
such holder under all
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such Certificates so surrendered, cash in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(d) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(b), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to Parent, such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2(a), each Certificate shall be deemed at any time after the
Effective Time to represent only the shares of Parent Common Stock into which
the shares of Company Common Stock represented thereby were converted at the
Effective Time, and the right to receive cash in lieu of any fractional shares
of Parent Common Stock as contemplated by Section 2.2(d) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.2(b).
No interest will be paid or will accrue on any cash payable pursuant to Sections
2.2(b) or 2.2(d).
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(d) until the holder of record of
such Certificate shall surrender such Certificate. Following surrender of any
such Certificate, there shall be paid to the record holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(c) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued pursuant to this Article II (and any cash
paid pursuant to Section 2.2(b) or 2.2(d)) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock, subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
Parent for any reason, they shall be canceled and exchanged as provided in this
Article II.
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(d) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount, less the amount of any withholding taxes which may be
required thereon, equal to such fraction of a share of Parent Common Stock
multiplied by $0.25.
(e) No Liability. None of Parent, Sub or the Company shall be
liable to any person in respect of any shares of Parent Common Stock (or
dividends or distributions with respect thereto) or cash in each case properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, Parent
will issue and pay in exchange for such lost, stolen or destroyed Certificate
(i) a certificate representing the shares of Parent Common Stock into which the
shares of Company Common Stock represented by such Certificate were converted
pursuant to Section 2.1, and (ii) any cash in lieu of fractional shares, and
unpaid dividends and distributions on such shares of Parent Common Stock,
pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company and
Principal Shareholders. Except as set forth on the disclosure schedule delivered
by the Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), the Company and the Principal Shareholders, jointly and
severally, represent and warrant to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company and
each of its subsidiaries (as defined in Section 8.3) is a corporation or other
legal entity duly organized, validly existing and in good standing (with respect
to jurisdictions that recognize such concept) under the laws of the jurisdiction
of its incorporation or organization and has all requisite corporate power and
authority to carry on its business as now being conducted. The Company and each
of its subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions that recognize
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such concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate would not have a material
adverse effect (as defined in Section 8.3) on the Company. The Company has
delivered to Parent complete and correct copies of its Certificate of
Incorporation and Bylaws, in each case as amended to the date hereof.
(b) Subsidiaries. The Company has no subsidiaries and does not
own as of the date hereof, directly or indirectly, beneficially or of record,
any shares of capital stock or other equity security of any other entity or any
other similar investment in any other entity.
(c) Capital Structure. The authorized capital stock of the
Company consists of 6,000,000 shares of Company Common Stock. At the close of
business on November 13, 1998 (i) 2,228,000 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 625,000 shares of Company Common Stock were
subject to issuance pursuant to outstanding options to purchase shares of
Company Common Stock. Except as set forth above at the close of business on
November 13, 1998, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to Company Options will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company outstanding having the right to vote (or convertible
into securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth above there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party, or by which it is
bound, obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of the Company or obligating the Company to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are not any
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock or other securities of the
Company. As of the date of this Agreement, and except as contemplated by this
Agreement, there are no shareholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by which it is
bound relating to the voting of any shares of capital stock of the Company. All
of the outstanding capital stock of the Company's subsidiaries is owned by the
Company, directly or indirectly, free and clear of any Lien (as defined in
Section 3.1(d)) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of, any capital stock or other ownership
interests in, or any other equity securities of, any subsidiary of the Company.
As of the date of this Agreement, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company.
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(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
adoption and approval of this Agreement and the approval of the Merger by the
holders of a majority of the shares of Company Common Stock to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement and the Merger, to approval and adoption of this Agreement and
approval of the Merger by the holders of a majority of the shares of Company
Common Stock outstanding on the record date for the Shareholders Meeting. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution, and delivery of this Agreement by Parent and Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and similar
laws, both state and federal, affecting the enforcement of creditors' rights or
remedies in general as from time to time in effect or (ii) the exercise by
courts of equity powers. The execution and delivery of this Agreement by the
Company do not, and the consummation by the Company of the transactions
contemplated by this Agreement and compliance by the Company with the provisions
of this Agreement will not, materially conflict with, or result in any violation
of, or material default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any pledge, adverse claim, lien, charge, encumbrance or security interest of
any kind or nature whatsoever (collectively, "Liens") in or upon any of the
properties or assets of the Company under any provision of (i) the Articles of
Incorporation or Bylaws of the Company, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or its properties or
assets and to which the Company is a party as of the date of this Agreement or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or regulation
applicable to the Company or (B) judgment, order or decree applicable to the
Company or its properties or assets, other than, in the case of clause (ii) and
clause (iii)(A), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on the Company, (y) impair in any material respect the ability of
the Company to perform its obligations under this Agreement, or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any third party, including any
federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required to be made or obtained by the Company at or
before the Effective Time in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (1) the filing of the Articles of
Merger with the Illinois Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, and (2) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, which if not obtained or made, would
not, individually or in the aggregate, have a material adverse effect on the
Company or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
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(e) Absence of Certain Changes or Events. Between September 30,
1998 and the date of this Agreement, there has not occurred (i) any material
adverse change in the Company, (ii) any material change by the Company in its
accounting methods, principles or practices except as required by concurrent
changes in generally accepted accounting principles, (iii) any material
reevaluation by the Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course, or (iv) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of the Company's capital stock.
(f) Litigation. There is no suit, action or proceeding pending,
and no person has overtly threatened in a writing delivered to the Company to
commence any suit, action or proceeding, against or affecting the Company or any
of its subsidiaries that would, individually or in the aggregate, have a
material adverse effect on the Company, nor is there any judgment, decree,
injunction, or order of any Governmental Entity or arbitrator outstanding
against, or, to the knowledge of the Company, pending investigation by any
Governmental Entity involving, the Company or any of its subsidiaries that
individually or in the aggregate would have a material adverse effect on the
Company.
(g) Compliance with Laws. The Company and each of its
subsidiaries is in compliance with all applicable statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any Governmental Entity
(collectively, "Legal Provisions") applicable to their business or operations,
except for instances of possible noncompliance that, individually or in the
aggregate, would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Merger. The Company and each of its
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits"), necessary for them to own, lease or operate
their properties and assets and to carry on their business substantially as now
conducted, and there currently exists no default under, or violation of, any
such Permit, except for the lack of Permits and for defaults under, or
violations of, Permits which lack, default or violation individually or in the
aggregate would not have a material adverse effect on the Company. The Company
has not received any written notice or other written communication from any
Governmental Entity alleging any violation of any Legal Provision by the Company
(except for (A) notices of violations which have been cured or corrected in all
material respects (B) notices which have been rescinded or withdrawn, and (C)
notices which would not have a material adverse effect on the Company).
(h) Labor Matters. As of the date of this Agreement, there are
no collective bargaining agreements or other labor union agreements to which the
Company or any of its subsidiaries is a party, or by which they are bound. The
Company and each of its subsidiaries are in compliance with all federal, state
and local laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice except where the failure to comply, or the engaging in such
practice, would not have a material adverse effect on the Company. As of the
date of this Agreement, there is no unfair labor practice complaint against the
Company or any of its subsidiaries pending, and no person has overtly threatened
in a writing delivered to the Company to commence any unfair labor practices
complaint before the National Labor Relations Board or the United States
Department of Labor. There is no labor strike, slowdown or stoppage in
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progress, and no person has overtly threatened in a writing delivered to the
Company to commence any strike, slowdown or stoppage, against or involving the
Company or any of its subsidiaries. No written agreement restricts the Company
or any of its subsidiaries from relocating, closing or terminating any of its
operations or facilities. Neither the Company nor any of its subsidiaries has,
in the past three years, experienced any labor strike, slowdown or stoppage.
(i) Absence of Changes in Benefit Plans. As of the date of this
Agreement, there has not been any adoption or amendment in any material respect
by the Company or any of its subsidiaries of any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding providing benefits for which
the Company or any of its subsidiaries will be responsible to any current or
former employee, officer or director of the Company (collectively, "Benefit
Plans"). As of the date of this Agreement, there exist no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company and any current or former employee,
officer or director of the Company, which is either currently effective or will
become effective at the Closing Date.
(j) Taxes. Except as set forth on the Company Disclosure
Schedule, as of the date of this Agreement, the Company has filed all tax
returns and reports required to be filed by it and has paid all taxes that are
shown on such tax returns as due and payable. As of the date of this Agreement,
no material deficiencies for any taxes have been proposed, asserted or assessed
against the Company, nor is there, to the knowledge of the Company or the
Principal Shareholders after reasonable inquiry, any reasonable basis for the
assertion of any such deficiency. No requests for waivers of the time to assess
any such taxes are pending as of the date of this Agreement. No material special
charges, penalties, fines, liens, or similar encumbrances are owed by or pending
against the Company with respect to payment of or failure to pay any taxes. The
Company is not a party to any executory agreements extending the period for
assessment or collection of any taxes. Proper amounts have been withheld by the
Company from employee compensation payments for all periods in compliance with
the tax withholding provisions of applicable federal and state laws, except
where the failure to withhold proper amounts would not have a material adverse
effect on the Company. The Company has not taken any action nor does it have any
knowledge of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code. As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever.
(k) Title to Properties.
(i) The Company and each of its subsidiaries has good
title to, or valid leasehold interests in, all its material properties and
assets except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and other
encumbrances that individually or in the aggregate would not materially
interfere with the ability of the Company and its subsidiaries to conduct their
business as currently conducted. All such material assets and properties, other
than assets and
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properties in which the Company or any of its subsidiaries has a leasehold
interest, are free and clear of all Liens except for Liens that (A) are created
or arise in the ordinary course of business, (B) are created, arise or exist
under or in connection with any of the contracts or other matters referred to in
the Company Disclosure Schedule, (C) relate to any taxes or other governmental
charges or levies that are not yet due and payable, (D) relate to, or are
created, arise or exist in connection with, any legal proceeding that is being
contested in good faith, or (E) individually or in the aggregate would not
materially interfere with the ability of the Company and each of its
subsidiaries to conduct their business as currently conducted ("Company
Permitted Liens").
(ii) The Company and each of its subsidiaries are in
compliance in all material respects with the terms of all material leases to
which they are a party and under which they are in occupancy, and all such
leases are in full force and effect except where the failure to be in compliance
or the failure to be in full force and effect would not have a material adverse
effect on the Company. As of the date of this Agreement, the Company and/or one
or more of its subsidiaries enjoys peaceful and undisturbed possession under all
such material leases, except for failures to do so that would not individually
or in the aggregate have a material adverse effect on the Company.
(l) Intellectual Property. Except as otherwise set forth on the
Company Disclosure Schedule, the Company owns, or is validly licensed or
otherwise has the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service xxxx
rights, copyrights and other proprietary intellectual property rights and
computer programs (collectively, "Intellectual Property Rights") which are
material to the conduct of the business of the Company and its subsidiaries
taken as a whole. As of the date of this Agreement, no suits, actions or
proceedings are pending, and no person has overtly threatened in a writing
delivered to the Company to commence any suit, action or proceeding, alleging
that the Company or any of its subsidiaries is infringing the rights of any
person with regard to any Intellectual Property Right, except for suits, actions
or proceedings which, individually or in the aggregate, would not have a
material adverse effect on the Company. To the knowledge of the Company, no
person is infringing the rights of the Company or any of its subsidiaries with
respect to any Intellectual Property Right, except for infringements which
individually or in the aggregate, would not have a material adverse effect on
the Company. Neither the Company nor any of its subsidiaries is licensing, or
otherwise granting, to any third party, any rights in or to any Intellectual
Property Rights which would have a material adverse effect on the Company.
(m) Voting Requirements. The affirmative vote of the holders of
a majority of the shares of Company Common Stock outstanding as of the record
date for the Stockholders Meeting is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement.
(n) State Takeover Statutes. The Board of Directors of the
Company has approved the Merger and this Agreement and such approval is
sufficient to render inapplicable to the Merger and this Agreement the
provisions of Section S.H.A. 805 ILCS 5/11 et. seq. of the BCA to the extent, if
any, such SECTION 1s applicable to the Merger and this Agreement To the best of
the Company's knowledge, no other state takeover statute or similar statute or
regulation applies to or purports to apply to the Merger or this Agreement.
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(o) Brokers. Except as set forth on the Company Disclosure
Schedule, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's or financial advisor's fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
(p) Equipment and Other Personal Property Leases. All of the
material items of equipment and personal property leased by the Company or any
of its subsidiaries from any third party is currently used by the Company and/or
one or more of its subsidiaries in the ordinary course of their businesses. All
leases in effect as of the date of this Agreement pursuant to which the Company
leases material items of equipment or other material items of personal property
are valid, subsisting and in full force and effect, and neither the Company nor
any other party thereto is in default of any of its obligations under any of
such leases, except for defaults and failures to be valid, subsisting and in
full force and effect which would not have a material adverse effect on the
Company. No consent to the consummation of the transactions contemplated by this
Agreement is required from the lessors under such leases except for any such
consent the failure to obtain which would not have a material adverse effect on
the Company.
SECTION 3.2 Representations and Warranties of the Company. Except as set
forth on the Company Disclosure Schedule, the Company represents and warrants to
Parent and Sub as follows:
(a) Contracts. Neither the Company nor any of its subsidiaries
is in violation of or in default under (nor does there exist any condition which
upon the passage of time or the giving of notice or both would cause such a
violation of or default under) any lease, permit, concession, franchise, license
or any other contract, agreement, arrangement or understanding to which any of
them is a party or by which any of their properties or assets is bound, except
for violations or defaults that individually or in the aggregate would not have
a material adverse effect on the Company.
(b) ERISA Compliance.
(i) Each Benefit Plan has been administered in
accordance with its terms, and the Company and all the Benefit Plans are all in
compliance with applicable provisions of ERISA and the Code, except where the
failure to so administer the Benefit Plans or to so comply would not have a
material adverse effect on the Company.
(ii) Neither the Company nor any person or entity that,
together with the Company, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (the Company and each such other person or entity, a
"Commonly Controlled Entity") has maintained, contributed or been obligated to
contribute to any Benefit Plan that is subject to Title IV of ERISA; and neither
the Company nor any Commonly Controlled Entity is obligated to make any
contribution, other than discretionary contributions, to any Benefit Plan.
(iii) With respect to any Benefit Plan that is an
"employee welfare benefit plan," (as defined in Section 3(l) of ERISA) there are
no agreements, written or oral, that would prevent any such plan (including any
such plan covering retirees or other former employees) from being
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17
amended or terminated without material adverse effect on the Company on or at
any time after the Effective Time.
(iv) Neither the Company nor any of its subsidiaries
contributes to or has any material liability to the Pension Benefit Guaranty
Corporation or any other person, plan or entity under or with respect to (A) a
pension plan subject to Title IV of ERISA or Section 412 of the Code, or (B) a
multiemployer pension plan, as defined in Section 3(37) of ERISA. Neither the
Company nor any of its subsidiaries maintains an employee welfare benefit plan
providing health or medical benefits for retired employees.
(v) No employee welfare benefit plan of the Company or
any of its subsidiaries provides for continuing benefits or coverage after
termination or retirement from employment, except with respect to any "group
health plan" as defined in Section 4980B(g) of the Code and Section 607 of
ERISA. With respect to any Benefit Plan which is a "group health plan," as so
defined, the Company warrants that in all "qualified events" (including those
resulting from the Merger) occurring prior to or on the Closing Date, the
Company has or will offer to its eligible employees and their "qualified
beneficiaries" the opportunity to elect continuation coverage under Section 602
of ERISA to the extent required by ERISA Sections 601-607 and will provide that
coverage, if elected, at no expense to Parent.
(vi) There is no Benefit Plan covering any employee or
former employee of the Company or any of its subsidiaries that, individually or
collectively, could give rise to the payment of an amount that would not be
deductible pursuant to the terms of Sections 280G or 162 of the Code.
(vii) Neither the Company nor any entity under common
control with the Company has ever participated in or withdrawn from a
multi-employer plan as defined in Section 4001(a)(3) of Title IV of ERISA, and
neither the Company nor any of its subsidiaries has incurred or owes any
liability as a result of any partial or complete withdrawal by any employer from
such a multi-employer plan as described under Sections 4201, 4203, or 4205 of
ERISA.
(viii) No executive officer of the Company or, to the
Company's knowledge, other employee of the Company or any of its subsidiaries is
obligated under any agreement or judgment that would conflict with such
employee's obligation to use his best efforts to promote the interests of the
Company or would conflict with the Company's business as conducted or proposed
to be conducted. No executive officer of the Company or, to the Company's
knowledge, other employee of the Company or any of its subsidiaries is, by
virtue of his or her employment by the Company or any of its subsidiaries, in
material violation of the terms of any employment agreement or any other
agreement relating to such employee's relationship with any previous employer
and no litigation is pending, and no person has overtly threatened in a writing
delivered to the Company to commence any litigation, against the Company with
regard thereto.
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(ix) Schedule 3.2(b)(ix) to the Company Disclosure
Schedule lists all Company Options outstanding as of the date of this Agreement,
showing for each such option: (1) the number of shares issuable under each
option grant, and (2) the exercise price thereof.
(x) No employee of the Company will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement except as described in the
Company Option Plans.
(xi) The deduction of any amount payable pursuant to the
terms of the Benefit Plans will not be subject to disallowance under Section
162(m) of the Code.
SECTION 3.3 Representations and Warranties of Parent and Sub. Except as
set forth on the disclosure schedule delivered by Parent to the Company prior to
the execution of this Agreement (the "Parent Disclosure Schedule"), Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and Illinois, respectively, and has all requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Sub is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate would not have a material
adverse effect on Parent. Parent has delivered to the Company complete and
correct copies of its Certificate of Incorporation and Bylaws and the
Certificate of Incorporation and Bylaws of Sub, in each case as amended to the
date hereof.
(b) Subsidiaries. Parent has no subsidiaries and does not own as
of the date hereof, directly or indirectly, beneficially or of record, any
shares of capital stock or other equity security of any other entity or any
other similar investment in any other entity.
(c) Capital Structure. The authorized stock of Parent consists
of 40,000,000 shares of Common Stock, $0.001 par value, and 10,100,000 shares of
Preferred Stock, $0.001 par value, of which 4,000,000 shares have been
designated Series A Preferred Stock, 1,000,000 shares have been designated
Series B Preferred Stock, 3,000,000 shares have been designated Series C
Preferred Stock, 5,000,000 have been designed as Series D Preferred Stock.
2,596,666 shares of Common Stock, 3,000,000 shares of Series A Preferred Stock,
500,000 shares of Series B Preferred Stock, 2,926,666 shares of Series C
Preferred Stock, warrants to purchase 10,000 shares of Series C Preferred Stock,
and 1,228,642 shares of Series D Preferred Stock shall be issued and outstanding
prior to the Closing Date. All such shares have been duly authorized, and all
such issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. As of the date
hereof, Buyer has reserved 2,000,000 shares of Common Stock for issuance under
its stock option and stock purchase plans and 614,321 shares of Series D
Preferred Stock for issuance upon exercise of outstanding warrants.
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(d) Authority; Noncontravention. Parent and Sub have the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent and
Sub of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This Agreement
has been duly executed and delivered by Parent and Sub, and, assuming the due
authorization, execution, and delivery of this Agreement by the Company,
constitutes a valid and binding obligation of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, except as enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
and similar laws, both state and federal, affecting the enforcement of
creditors' rights or remedies in general as from time to time in effect or (ii)
the exercise by courts of equity powers. The execution and delivery of this
Agreement by Parent and Sub do not, and the consummation by Parent and Sub of
the transactions contemplated by this Agreement and compliance by Parent and Sub
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under any provision of (i) the Certificate of Incorporation or
Bylaws of Parent or Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or Sub or their respective properties
or assets and to which Parent or Sub is a party as of the date of this Agreement
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any (A) statute, law, ordinance, rule or regulation
applicable to Parent or Sub or (B) judgment, order or decree applicable to
Parent, Sub or their respective properties or assets, other than, in the case of
clause (ii) and clause (iii)(A), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (x) have
a material adverse effect on Parent, (y) impair in any material respect the
ability of Parent and Sub to perform their respective obligations under this
Agreement or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be made or obtained by Parent or Sub at or before the
Effective Time in connection with the execution and delivery of this Agreement
(and, in the case of Parent, the Stockholder Agreements) by Parent and Sub or
the consummation by Parent and Sub of the transactions contemplated by this
Agreement (and, in the case of Parent, those contemplated by the Stockholder
Agreements), except for (1) the filing of the Certificate of Merger with the
Illinois Secretary of State and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business and (2)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings, which if not obtained or made, would not, individually
or in the aggregate, have a material adverse effect on Parent or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
(e) Absence of Certain Changes or Events. Between September 30,
1998 and the date of this Agreement, there has not occurred (i) any material
adverse change in Parent, (ii) any material change by Parent in its accounting
methods, principles or practices except as required by concurrent changes in
generally accepted accounting principles, (iii) any material reevaluation by
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off
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notes or accounts receivable other than in the ordinary course, (iv) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's capital
stock.
(f) Litigation. There is no suit, action or proceeding pending,
and no person has overtly threatened in a writing delivered to Parent to
commence any suit, action or proceeding, against or affecting Parent or any of
its subsidiaries that would, individually or in the aggregate, have a material
adverse effect on Parent, nor is there any judgment, decree, injunction, or
order of any Governmental Entity or arbitrator outstanding against, or, to the
knowledge of Parent, pending investigation by any Governmental Entity involving,
Parent or any of its subsidiaries that individually or in the aggregate would
have a material adverse effect on Parent.
(g) Contracts. Neither Parent nor any of its subsidiaries is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice or both would cause such a violation
of or default under) any lease, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding to which any of them is
a party or by which any of their properties or assets is bound, except for
violations or defaults that individually or in the aggregate would not have a
material adverse effect on Parent.
(h) Compliance with Laws.
(i) Parent and each of its subsidiaries is in compliance
with all Legal Provisions applicable to their business or operations, except for
instances of possible noncompliance that, individually or in the aggregate,
would not have a material adverse effect on Parent or prevent or materially
delay the consummation of the Merger. Parent and each of its subsidiaries has in
effect all Permits, necessary for them to own, lease or operate their properties
and assets and to carry on their business substantially as now conducted, and
there currently exists no default under, or violation of, any such Permit,
except for the lack of Permits and for defaults under, or violations of, Permits
which lack, default or violation individually or in the aggregate would not have
a material adverse effect on Parent. As of the date of this Agreement, Parent
has not received any written notice or other written communication from any
Governmental Entity alleging any violation of any Legal Provision by Parent
(except for (A) notices of violations which have been cured or corrected in all
material respects, (B) notices which have been rescinded or withdrawn, and (C)
notices which would not have a material adverse effect on Parent).
(i) Labor Matters. As of the date of this Agreement, there are
no collective bargaining agreements or other labor union agreements to which
Parent or any of its subsidiaries is a party, or by which they are bound. Parent
and each of its subsidiaries are in compliance with all federal, state and local
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor practice
except where the failure to comply, or the engaging in such practice, would not
have a material adverse effect on Parent. As of the date of this Agreement,
there is no unfair labor practice complaint against Parent or any of its
subsidiaries pending, and no person has overtly threatened in a writing
delivered to Parent to commence and unfair labor practices complaint before the
National Labor Relations Board or the United States
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Department of Labor. There is no labor strike, slowdown or stoppage in progress,
and no person has overtly threatened in a writing delivered to Parent to
commence any strike, slowdown or stoppage against or involving Parent or any of
its subsidiaries. No written agreement restricts Parent or any of its
subsidiaries from relocating, closing or terminating any of its operations or
facilities. Neither Parent nor any of its subsidiaries has, in the past three
years, experienced any labor strike, slowdown or stoppage.
(j) Absence of Changes in Benefit Plans. As of the date of this
Agreement, there has not been any adoption or amendment in any material respect
by Parent or any of its subsidiaries of any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding providing benefits for which
Parent or any of its subsidiaries will be responsible to any current or former
employee, officer or director of Parent (collectively, "Parent Benefit Plans").
(k) Taxes. As of the date of this Agreement, Parent has filed
all tax returns and reports required to be filed by it and has paid all taxes
that are shown on such tax returns as due and payable. As of the date of this
Agreement, no material deficiencies for any taxes have been proposed, asserted
or assessed against Parent, nor is there, to the knowledge of Parent after
reasonable inquiry, any reasonable basis for the assertion of any such
deficiency. No requests for waivers of the time to assess any such taxes are
pending as of the date of this Agreement. No material special charges,
penalties, fines, liens, or similar encumbrances are owed by or pending against
Parent with respect to payment of or failure to pay any taxes. Parent is not a
party to any executory agreements extending the period for assessment or
collection of any taxes. Proper amounts have been withheld by Parent from
employee compensation payments for all periods in compliance with the tax
withholding provisions of applicable federal and state laws, except where the
failure to withhold proper amounts would not have a material adverse effect on
Parent. Parent has not taken any action nor does it have any knowledge of any
fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(l) Title to Properties.
(i) Parent and each of its subsidiaries has good title
to, or valid leasehold interests in, all its material properties and assets
except for such as are no longer used or useful in the conduct of its businesses
or as have been disposed of in the ordinary course of business and except for
defects in title, easements, restrictive covenants and other encumbrances that
individually or in the aggregate would not materially interfere with the ability
of Parent and its subsidiaries to conduct their business as currently conducted.
All such material assets and properties, other than assets and properties in
which Parent or any of its subsidiaries has a leasehold interest, are free and
clear of all Liens except for Liens that (A) are created or arise in the
ordinary course of business, (B) are created, arise or exist under or in
connection with any of the contracts or other matters referred to in the Parent
Disclosure Schedule, (C) relate to any taxes or other governmental charges or
levies that are not yet due and payable, (D) relate to, or are created, arise or
exist in connection with, any legal proceeding that is being contested in good
faith, or (E) individually or in the aggregate would not materially interfere
with the
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ability of Parent and each of its subsidiaries to conduct their business as
currently conducted ("Parent Permitted Liens").
(ii) Parent and each of its subsidiaries are in
compliance in all material respects with the terms of all material leases to
which it is a party and under which they are in occupancy, and all such leases
are in full force and effect, except where the failure to be in compliance or
the failure to be in full force and effect would not have a material adverse
effect on Parent. As of the date of this Agreement, Parent and/or one or more of
its subsidiaries enjoys peaceful and undisturbed possession under all such
material leases, except for failures to do so that would not individually or in
the aggregate have a material adverse effect on Parent.
(m) Intellectual Property. Parent owns, or is validly licensed
or otherwise has the right to use all Parent Intellectual Property Rights which
are material to the conduct of the business of Parent and its subsidiaries taken
as a whole. As of the date of this Agreement, no suits, actions or proceedings
are pending, and no person has overtly threatened in a writing delivered to
Parent since January 1, 1997 to commence any suit, action or proceeding,
alleging that Parent or any of its subsidiaries is infringing the rights of any
person with regard to any Intellectual Property Right, except for suits, actions
or proceedings which, individually or in the aggregate, would not have a
material adverse effect on Parent. To the knowledge of Parent, no person is
infringing the rights of Parent or any of its subsidiaries with respect to any
Intellectual Property Right, except for infringements which individually or in
the aggregate, would not have a material adverse effect on Parent. Neither
Parent nor any of its subsidiaries is licensing, or otherwise granting, to any
third party, any rights in or to any Intellectual Property Rights which would
have a material adverse effect on Parent.
(n) Voting Requirements. Assuming the accuracy of the
representations and warranties of the Company, no vote of or other action by the
holders of Parent's Common Stock (or securities convertible into Parent's Common
Stock) is required in connection with the execution, delivery or performance of
this Agreement or the consummation by Parent of any of the transactions
contemplated hereby.
(o) Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's or financial advisor's fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
(p) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
(q) Parent Common Stock. The Parent Common Stock to be issued in
connection with the Merger (including the Parent Common Stock to be issued in
accordance with Article II and the options to purchase Parent Common Stock to be
issued in accordance with Section 5.3(b)) has been duly authorized by all
necessary corporate action, and when issued in accordance with this Agreement,
will be validly issued, fully paid and nonassessable and not subject to
preemptive rights.
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SECTION 3.4 Representations and Warranties of Shareholders. Each
Shareholder hereby severally represents and warrants to Parent and Sub, as to
itself, as follows:
(a) Ownership of the Common Shares. Such Shareholder is the sole
and beneficial owner of the respective Company Shares as set forth opposite such
Shareholder's name in Schedule 3.4, and such Company Shares is owned free and
clear of all liens, encumbrances, charges, security interests, claims and
assessments, and is subject to no restrictions with respect to transferability.
(b) Offering. Such Shareholder has not offered its Company
Shares for sale to any person other than the Parent and Sub.
(c) No Conflict. Such Shareholder's execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby will not, with or without the giving of notice of the lapse
of time, or both, (i) violate any provision of law, rule or regulation, foreign
or domestic, (ii) violate any order, judgement or decree applicable to such
Shareholder, or (iii) violate any contract, agreement or arrangement to which
such Shareholder is a party or by which such Shareholder is bound. No consent,
approval or authorization of, or exemption by, or filing with, any governmental
authority or third party is required to be obtained by such Shareholder in
connection with the execution, delivery and performance by such Shareholder of
this Agreement or the taking of any other action contemplated hereby.
SECTION 3.5 Representation of the Company and Principal Shareholders
regarding MotivationNet LLC ("MNET"). Except as set forth in the disclosure
schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company and the Principal
Shareholders, jointly and severally, represent to Parent with regard to MNET as
follows:
(a) Organization of MNET. To the knowledge of Company and the
Principal Shareholders and except as provided in Schedule 3.5(a), MNET is duly
qualified to do business as now being conducted and is in good standing in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets), financial
condition, results of operations or prospects of MNET (hereinafter referred to
as a "MATERIAL ADVERSE EFFECT").
(b) MNET Capital Structure. The authorized membership interest
of MNET is 34% owned by Enhanced Response Technologies, Inc ("ERT") and 66%
owned by Direct Marketing Technology, Inc. ("DMT"). Except as provided in
Schedule 3.5(b), ERT has good and valid title to its 34% interest in MNET, free
and clear of any liens, claims, charges, pledges, security interests, options,
or other legal or equitable encumbrances.
(c) Subsidiaries. MNET has never had any subsidiaries and does
not own any shares of capital stock or any interest in, or controls, directly or
indirectly, any other corporation, partnership, association, joint venture or
other business entity.
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(d) Authority. To the knowledge of Company and the Principal
Shareholders and except as set forth on Schedule 3.5(d), the execution and
delivery of this Agreement by the Seller and MNET does not, and, as of the
Closing Date, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "CONFLICT") any provision of the Articles of Organization,
Operating Agreement or Bylaws (or comparable organizational document) of MNET.
(e) MNET Financial Statements and Intercompany Debt. Except as
provided in Schedule 3.5(e), MNET has provided a statement of operations and a
balance sheet to DMT as of October 31, 1998 (collectively, the "MNET
FINANCIALS"). The MNET Financials as provided by MNET to DMT are accurate and
correct in all material respects and have been prepared in accordance with GAAP,
applied on a basis consistent throughout the periods indicated and consistent
with each other. The MNET Financials present fairly the financial condition and
operating results of MNET as of the dates and during the periods indicated
therein. The MNET Financials have been prepared in good faith in accordance with
the books and records of MNET and consistent with the accounting policies and
procedures employed by MNET in prior periods.
(f) No Undisclosed Liabilities. Except as set forth in Schedule
3.5(f), MNET has no liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with GAAP), which individually or in the
aggregate, (i) has not been reflected on the face of the balance sheets provided
to DMT by MNET, or (ii) has not arisen in the ordinary course of the business of
MNET since August 31, 1998, consistent with past practices.
(g) No Changes. To the knowledge of ERT and the Principal
Shareholders, and except as set forth in Schedule 3.5(g), since September 30,
1998, there has not been, occurred or arisen, as of the date hereof, any:
(i) transaction by MNET except in the ordinary course of
business as conducted on that date and consistent with past practices;
(ii) amendment or change to the Operating Agreement or
Bylaws (or comparable organizational document) of MNET;
(iii) capital expenditure or commitment of MNET;
(iv) destruction of, damage to or loss of any material
assets, business or customer of MNET (whether or not covered by insurance);
(v) increase in the salary or other compensation payable
or to become payable by MNET to any of the 10 most highly paid employees of
MNET, or the declaration, payment or commitment or obligation of any kind for
the payment by MNET, of a bonus or other additional salary
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or compensation to any such person (other than annual increases consistent with
past practice not exceeding in any one case more than 10% of annual base
salary);
(vi) sale, lease, license or other disposition of any of
the assets or properties of MNET, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(vii) loan by MNET to any person or entity, incurring by
MNET of any indebtedness, guaranteeing by MNET of any indebtedness, issuance or
sale of any debt securities of MNET or guaranteeing of any debt securities of
others by MNET, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practices;
(viii) waiver or release of any material right or claim
of MNET, including any material write-off or other compromise, outside the
ordinary course of business, of any account receivable;
(ix) the commencement of any lawsuit or notice or threat
of commencement of any material lawsuit or proceeding against or investigation
of MNET or its affairs;
(x) notice of any claim of ownership by a third party of
MNET Intellectual Property Rights or of infringement by MNET of any third
party's copyright, patent, trade xxxx, service xxxx, trade secret or other
proprietary right ("INTELLECTUAL PROPERTY");
(xi) material change in pricing set or charged by MNET
to its customers or in pricing or royalties set or charged by persons who have
licensed Intellectual Property to MNET;
(xii) any event or condition of any character that has
or could be reasonably expected to have a Material Adverse Effect on MNET, or
(xiii) negotiation or agreement by MNET or any officer
or employees thereof to do any of the things described in the preceding clauses
(a) through (m) (other than negotiations with DMT, and Buyer and its
representatives regarding the transactions contemplated by this Agreement).
(h) Tax and Other Returns and Reports. Except as provided in
Schedule 3.5(h), MNET as of the Closing Date will have paid or withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other employment related taxes required to be withheld.
(i) Restrictions on Business Activities. Except as provided in
Schedule 3.5(i), there is no agreement (noncompete or otherwise), commitment,
judgment, injunction, order or decree (except for government policies applicable
to all companies engaged in the business in which MNET is engaged) to which MNET
is a party or otherwise binding upon MNET which has or reasonably could be
expected to have the effect of prohibiting or impairing any business practice
MNET, any acquisition of property (tangible or intangible) by MNET or the
conduct of business by MNET. Except as provided in Schedule 3.5(i), all
statutory and other licenses, consents, permits and authorities necessary or
desirable
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for the carrying on of the business of MNET as now carried on have been obtained
and are valid and subsisting and all conditions applicable to any such license,
consent (including any planning consent) permit or authority have been complied
with and none of such licenses, consents, permits or authorities have been
breached or is likely to be suspended, canceled, refused or revoked.
(j) Intellectual Property.
(i) All Intellectual Property owned by MNET will have
been transferred to DMT, or its affiliate, prior to the Closing Date.
(ii) Prior to transfer to DMT, except as provided in
Schedule 3.50), no claims with respect to the MNET Intellectual Property Rights
were asserted or were, to the knowledge of ERT, threatened by any person, nor
are there any valid grounds for any bonafide claims (i) to the effect that the
manufacture, sale, licensing or use of any of the products of MNET infringes on
any copyright, patent, trade xxxx, service xxxx, trade secret or other
proprietary right, (ii) against the use by MNET of any trademarks, service
marks, trade names, trade secrets, copyrights, maskworks, patents, technology,
know-how or computer software programs and applications used in such MNET's
business as currently conducted or as proposed to be conducted, or (iii)
challenging the ownership by MNET, validity or effectiveness of any of the MNET
Intellectual Property Rights.
(k) Interested Party Transactions. Except as set forth on
Schedule 3.5(k), no officer, director, member, stockholder or shareholder of
MNET (nor any ancestor, sibling, descendant or spouse of any of such persons, or
any trust, partnership or corporation in which any of such persons has or has
had an interest), has or has had, directly or indirectly, (i) a material
interest in any entity which furnished or sold, or furnishes or sells, services
or products that MNET furnishes or sells, or proposes to furnish or sell, or
(ii) a material economic interest in any entity that purchases from or sells or
furnishes to MNET, any goods or services; provided, that ownership of no more
than one percent (1%) of the outstanding voting stock of a publicly traded
corporation will not be deemed a "material economic interest in any entity" for
purposes of this Section 3.5(k).
(l) Compliance with Laws. To the knowledge of ERT, MNET has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any foreign, federal,
state or local statute, law, regulation or directive.
(m) Litigation . Except as set forth in Schedule 3.5(m), there
is no action, suit or proceeding of any nature pending or to ERT's knowledge
threatened against MNET, its properties or any of its officers or directors, in
their respective capacities as such. Except as set forth in Schedule 3.5(m), to
the knowledge of the ERT, there is no investigation pending or threatened
against MNET, its properties or any of its officers or directors by or before
any Governmental Entity. No Governmental Entity has at any time challenged or
questioned the legal right of MNET to manufacture, offer or sell any of its
products or services in the present manner or style thereof.
(n) Brokers' and Finders' Fees, Third Party Expenses. Except as
provided in Schedule 3.5(n), MNET has not incurred, nor will MNET incur,
directly or indirectly, any liability for
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brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
(o) Sale of MNET Interests. ERT is the beneficial owner of a 34%
interest in MNET. Except as provided in Schedule 3.5(o), said 34% interest is
owned free and clear of all liens, claims, charges, pledges, security interests,
options, or other legal and equitable encumbrances. Prior to the Closing Date
said 34% interest will be transferred to DMT or its affiliate.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by Parent and the Company.
(a) Conduct of Business by Parent. During the period from the
date of this Agreement to the Effective Time and except (i) to the extent the
Company shall otherwise consent in writing (which consent will not be
unreasonably withheld), (ii) as set forth in the Parent Disclosure Schedule or
(iii) as contemplated or permitted by or not inconsistent with this Agreement,
Parent shall carry on its businesses in the ordinary course consistent with the
manner as heretofore conducted and, to the extent consistent therewith, use
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it. Without limiting the generality of the
foregoing, except as set forth in the Parent Disclosure Schedule or as
contemplated or permitted by or not inconsistent with this Agreement, during the
period from the date of this Agreement to the Effective Time, Parent shall not,
without the written consent of the Company (which consent will not be
unreasonably withheld):
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of Parent or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) amend its Restated Certificate of Incorporation or
Bylaws;
(iii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than in the ordinary
course of business and consistent with past practice pursuant to stock option
plans, employee stock purchase plans and convertible indebtedness in effect as
of the date of this Agreement);
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(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner (including through any of its subsidiaries), any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof, except that this Section 4.1(a)(iv) shall not
prohibit Parent from effecting an acquisition of any other business if (A) such
acquisition would not materially affect the ability of Parent to, or materially
delay Parent's ability to, complete the transactions contemplated by this
Agreement, and (B) such acquisition would involve the issuance by Parent of
equity securities and, when considered together with all other acquisitions
effected by Parent, would not involve the issuance of more than 1,000,000 shares
of Parent's capital stock or securities convertible into or exercisable for more
than 1,000,000 shares of Parent's capital stock;
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any substantial part of its (or
any of its subsidiaries') material properties, assets or business, except sales
made in the ordinary course of business and except for subjecting any of its
properties to Parent Permitted Liens;
(vi) make any material payments outside the ordinary
course of business for purposes of settling any dispute;
(vii) allow Parent or any of its subsidiaries, or any
significant portion of their respective businesses or assets, to be acquired (by
merger, tender offer, purchase or otherwise);
(viii) enter into (directly or through any subsidiary)
any transaction that is extraordinary in nature or magnitude (when compared to
the transactions historically entered into by Parent); or
(ix) authorize any of, or commit or agree to take any
of, the foregoing actions.
(b) Conduct of Business by the Company. During the period from
the date of this Agreement to the Effective Time and except (i) to the extent
Parent shall otherwise consent in writing (which consent will not be
unreasonably withheld), (ii) as set forth in the Company Disclosure Schedule or
(iii) as contemplated or permitted by or not inconsistent with this Agreement,
the Company shall carry on its businesses in the ordinary course consistent with
the manner as heretofore conducted and, to the extent consistent therewith, use
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it. Without limiting the generality of the
foregoing, except as set forth in the Company Disclosure Schedule or as
contemplated or permitted by or not inconsistent with this Agreement, during the
period from the date of this Agreement to the Effective Time, the Company shall
not, without the written consent of Parent (which consent will not be
unreasonably withheld):
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for
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shares of its capital stock, or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) amend its Articles of Incorporation or Bylaws;
(iii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
shares of Company Common Stock upon the exercise of Company Options outstanding
on the date of this Agreement in accordance with the present terms of such
Company Options and the issuance of shares of Company Common Stock upon the
exercise of Company Options granted after the date of this Agreement as
permitted by this Agreement (the "Company Option Plans");
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner (including through any of its subsidiaries), any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof or (y) any asset except in the ordinary course
of business;
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its (or any of its
subsidiaries') material properties, assets, or business except sales made in the
ordinary course of business and except for subjecting any of its properties or
assets to Company Permitted Liens;
(vi) (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person (other than a subsidiary of
the Company), issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any debt securities of
another person (other than a subsidiary of the Company), enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for (i) short-term borrowings incurred in the ordinary
course of business consistent with past practice, (ii) borrowings pursuant to
existing credit facilities in the ordinary course of business or pursuant to any
modifications, renewals or replacements of such credit facilities or (z) make
any loans, advances or capital contributions to, or investments in, any other
person other than a subsidiary of the Company, and other than advances to
employees in the ordinary course of business consistent with past practice;
(vii) make or agree to make any new capital expenditure
or expenditures which are outside the ordinary course of business or
inconsistent with past practice;
(viii) make any material payments outside the ordinary
course of business for purposes of settling any dispute;
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(ix) except in the ordinary course of business, modify,
amend or terminate any material contract or agreement to which the Company is a
party or waive, release or assign any material rights or claims thereunder;
(x) except as required to comply with applicable law and
except for actions which do not materially increase the Company's compensation
expense or benefits to employees taken as a whole, (A) adopt, enter into,
terminate or amend any Benefit Plan or other arrangement for the benefit or
welfare of any director, officer or current or former employee, (B) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases of cash compensation
or cash bonuses in the ordinary course of business consistent with past
practice), (C) pay any benefit not provided for under any Benefit Plan, (D)
except as permitted in clause (B), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan (including
the grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder) or
(E) except as permitted in clauses (A) through (D), take any action to fund or
in any other way secure the payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or Benefit Plan;
(xi) form any subsidiary of the Company;
(xii) allow any of its subsidiaries, or any significant
portion of their respective businesses or assets, to be acquired (by merger,
tender offer, purchase or otherwise);
(xiii) enter into (directly or through any subsidiary)
any transaction that is extraordinary in nature or magnitude (when compared to
the transactions historically entered into by the Company); or
(xiv) authorize any of, or commit or agree to take any
of, the foregoing actions.
(c) Certain Tax Matters. From the date hereof until the
Effective Time, (i) each of the Company and Parent will file all tax returns and
reports ("Post-Signing Returns") required to be filed by it; (ii) each of the
Company and Parent will timely pay all taxes due and payable with respect to
such Post-Signing Returns that are so filed; (iii) each of the Company and
Parent will promptly notify the other of any action, suit, proceeding, claim or
audit (collectively, "Actions") pending against or with respect to such party in
respect of any tax where there is a reasonable possibility of a determination or
decision which would have a material adverse effect on the other party 's tax
liabilities or tax attributes, and the Company will not settle or compromise any
such Action without Parent's consent; and (iv) each of the Company and Parent
will not make any material tax election without the consent of the other (which
consent will not be unreasonably withheld).
SECTION 4.2 No Solicitation.
(a) The Company shall not, nor shall it authorize or instruct
any of its officers, directors or employees or any investment banker, attorney
or other advisor or representative retained by
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it to, directly or indirectly, (i) solicit, initiate or knowingly encourage the
submission of any Takeover Proposal (as hereinafter defined) by any person
(other than Parent or its affiliates or representatives) or (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
non-public information with respect to, or take any other action intended or
reasonably expected to facilitate the making of any inquiry or proposal to the
Company that constitutes, or may reasonably be expected to lead to, any Takeover
Proposal by any person (other than Parent or its affiliates or their respective
representatives); provided, however, that notwithstanding anything to the
contrary contained in this Section 4.2(a) or elsewhere in this Agreement, if, at
any time prior to receipt of the Stockholder Approval, the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that failure to do so would create a substantial risk of liability for breach of
its fiduciary duties to the Company's stockholders under applicable law, the
Company may, in response to a Takeover Proposal that was unsolicited or that did
not otherwise result from a breach of this Section 4.2(a), and subject to
compliance with Section 4.2(c), (x) furnish nonpublic information with respect
to the Company and its subsidiaries to any person pursuant to a customary and
reasonable confidentiality agreement and (y) participate in discussions and
negotiations regarding such Takeover Proposal. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by any officer, director or employee of the Company or any
investment banker, attorney or other advisor or representative of the Company,
acting on behalf of and with the authorization of the Company, shall be deemed
to be a breach of this Section 4.2(a) by the Company. For purposes of this
Agreement, "Takeover Proposal" means any proposal or offer from any person
(other than Parent or its affiliates or their respective representatives) for
any acquisition by such person of a substantial amount of assets of the Company
(other than an acquisition of assets of the Company in the ordinary course of
business or as permitted under the terms of this Agreement) having a fair market
value (as determined by the Board of Directors of the Company in good faith) in
excess of 25% of the fair market value of all the assets of the Company and its
subsidiaries immediately prior to such acquisition or more than a 25% interest
in the total voting securities of the Company or any tender offer or exchange
offer that if consummated would result in any person beneficially owning 25% or
more of any class of equity securities of the Company or any merger,
consolidation, or business combination of the Company with any unaffiliated
third party, other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.2, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Sub, the approval or recommendation by such Board of Directors or any
such committee of this Agreement or the Merger, (ii) approve or recommend any
Takeover Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing or anything else
contained in this Agreement, prior to the adoption and approval of this
Agreement and the approval of the Merger by the holders of a majority of the
shares of Company Common Stock outstanding on the record date for the
Stockholders Meeting, the Board of Directors of the Company, to the extent it
determines in good faith, after consultation with outside counsel, that failure
to do so would create a substantial risk of liability for breach of its
fiduciary duties to the Company's stockholders under applicable law, may (1)
withdraw or modify its approval or recommendation of this Agreement or the
Merger and/or (2) approve or recommend any Takeover Proposal.
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(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.2, the Company promptly shall advise
Parent orally and in writing of any request to the Company for nonpublic
information which the Company reasonably believes could lead to a Takeover
Proposal or of any Takeover Proposal submitted to the Company, or any inquiry
directed to the Company with respect to or which the Company reasonably believes
could lead to any Takeover Proposal, the material terms and conditions of such
request, Takeover Proposal or inquiry, and the identity of the person making any
such Takeover Proposal or inquiry. The Company will keep Parent informed in all
material respects of the status and details (including amendments or proposed
amendments) of any such Takeover Proposal or inquiry.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Access to Information; Confidentiality. The Company shall
afford to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time or the termination
of this Agreement to all its properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request; provided,
however, that (i) Parent shall not contact, and Parent shall ensure that none of
its officers, employees, accountants, counsel, financial advisors or other
representatives contacts, any employee of the Company or any of its subsidiaries
without the prior authorization of the Company's Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer, and (ii) Parent shall ensure that
none of its employees, accountants, counsel, financial advisors or other
representatives interferes with or otherwise disrupts the business or operations
of the Company while exercising the rights provided under this Section 5.1.
Parent shall afford to the Company, and to the Company's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time or the termination of this Agreement to all its properties, books,
contracts, commitments, personnel and records and, during such period, Parent
shall furnish promptly to the Company (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as the
Company may reasonably request; provided, however, that (i) the Company shall
not contact, and the Company shall ensure that none of its officers, employees,
accountants, counsel, financial advisors or other representatives contacts, any
employee of Parent or any of its subsidiaries without the prior authorization of
Parent's Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer, and (ii) the Company shall ensure that none of its employees,
accountants, counsel, financial advisors or other representatives interferes
with or otherwise disrupts the business or operations of Parent while exercising
the rights provided under this Section 5.1. Parent and Company will each hold,
and will cause their respective officers, employees, accountants, counsel,
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financial advisors and other representatives and affiliates to hold, any and all
information received from the other party, directly or indirectly, in
confidence. The parties have entered into a non-disclosure agreement and all
discussions and information exchanged in the course of this Merger have been
subject to the terms and conditions set forth therein.
SECTION 5.2 Reasonable Efforts; Notification.
(a Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
avoid an action or proceeding by any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties (other than
consents, approval or waivers, the failure to obtain which would not have a
material adverse effect on the Company or Parent, as the case may be), (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement; provided, however, that
notwithstanding anything to the contrary contained in this Section 5.2 or
elsewhere in this Agreement, the Company shall not be required to take any
action or do any thing if the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that the taking of such
action or the doing of such thing would create a substantial risk of liability
for breach of its fiduciary duties to the Company's stockholders under
applicable law. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger or this
Agreement, use all reasonable efforts to ensure that the Merger may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and this Agreement.
(b The Company shall give prompt notice to Parent of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.2(a) would
not be satisfied as a result thereof, or (ii) the failure by it to comply with
or satisfy in any material respect any covenant or agreement to be complied with
or satisfied by it under this Agreement such that the condition set forth in
Section 6.2(b) would not be satisfied as a result thereof; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. Parent shall give prompt notice to the Company
of (i) any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.3(a) would not be satisfied as a result thereof or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under
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this Agreement such that the condition set forth in Section 6.3(b) would not be
satisfied as a result thereof; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
SECTION 5.3 Stock Options and Other Employee Benefits.
(a) Subject to Section 5.3(b), Parent and the Company shall take
all actions necessary to terminate all outstanding options under the Company
Option Plans.
(b The Company shall cause to be delivered to Parent, prior to
the Effective Time, a list specifying those individuals with respect to which
Parent is to issue options to purchase shares of Parent Common Stock pursuant to
this Section 5.3(b) as of the Effective Time (the "Specified Options"). As of
the Effective Time, Parent shall issue, with respect to each Specified Option,
in the name of the holder thereof, an option to purchase the number of shares of
Parent Common Stock listed for each respective individual on Schedule 5.3(b).
(c) All Company Option Plans shall terminate as of the Effective
Time, and the Company shall ensure that following the Effective Time no holder
of a Company Option or any participant in any Company Option Plan shall have any
right thereunder to acquire any capital stock of the Company.
(d) Parent shall ensure that all employees of the Company and
all employees of each of the Company's subsidiaries are allowed and are eligible
to participate in Parent's employee benefit plans after the Effective Time, to
the same extent as if they were employees of Parent. Without limiting the
generality of the foregoing, (i) to the extent that any employee of the Company
or any of the Company's subsidiaries becomes eligible to participate in any
employee benefit plan of Parent after the Effective Time, Parent, the Surviving
Corporation and their subsidiaries shall credit such employee's service with the
Company or its subsidiaries, to the same extent as such service was credited
under the similar employee benefit plans of the Company and its subsidiaries
immediately prior to the Effective Time, for purposes of determining eligibility
to participate in and vesting under, and for purposes of calculating the
benefits under, such employee benefit plan of Parent, and (ii) to the extent
permitted by such employee benefit plan of Parent and applicable law, Parent,
the Surviving Corporation and its subsidiaries shall waive any pre-existing
condition limitations, waiting periods or similar limitations under such
employee benefit plan of Parent and shall provide each such employee with credit
for any co-payments previously made and any deductibles previously satisfied.
(e) Parent shall reserve sufficient shares of Parent Common
Stock for issuance with respect to the employee benefit plans referred to in
this Section 5.3.
(f) This Section 5.3 will survive the consummation of the Merger
and the Effective Time, is intended to benefit and may be enforced by each of
the persons who participate in any of the employee benefit plans referred to in
this Section 5.3, and will be binding on all successors and assigns of Parent
and the Surviving Corporation.
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SECTION 5.4 Fees and Expenses.
(a) All fees and expenses incurred in connection with the
Merger, this Agreement and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, whether or not the Merger
is consummated.
SECTION 5.5 Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
to the extent reasonably practicable, give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.6 Tax Treatment. Each of Parent and the Company shall not
(before or after the Effective Time) take any action and shall not (before or
after the Effective Time) fail to take any action which action or failure to act
would prevent, or would be reasonably likely to prevent, the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code,
and each shall use reasonable efforts to obtain the opinions of counsel referred
to in Sections 6.2(d) and 6.3(d), respectively.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
shares of Company Common Stock outstanding as of the record date for the
Stockholders Meeting.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any U.S.
federal or state court of competent jurisdiction or other material legal
restraint or prohibition issued or promulgated by a U.S. federal or state
Governmental Entity preventing the consummation of the Merger shall be in
effect.
SECTION 6.2 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the following
conditions:
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(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse effect on
the Company shall be disregarded, (ii) any inaccuracy that results from or
relates to general business, economic or industry conditions shall be
disregarded, and (iii) any inaccuracy that results from or relates to the taking
of any action contemplated or permitted by this Agreement or the announcement or
pendency of the Merger shall be disregarded).
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Noncompetition Agreement. At or before the Effective Time,
the Company and the Principal Shareholders shall have executed a Noncompetition
Agreement in substantially the form attached hereto as Exhibit A.
SECTION 6.3 Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse effect on
Parent or Sub shall be disregarded, (ii) any inaccuracy that results from or
relates to general business, economic or industry conditions shall be
disregarded, and (iii) any inaccuracy that results from or relates to the taking
of any action contemplated or permitted or the announcement or pendency of the
Merger by this Agreement shall be disregarded).
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Parent Financing. Parent shall have completed the sale of at
least $2,500,000 of its Series D Preferred Stock (or other equity securities).
(d) Board Representation. Concurrent with the Closing, Parent
shall take all necessary action to elect Xxxxxx Xxxxxx to the Parent's Board of
Directors.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
SECTION 7.1 Survival of Representations. All of Company's, Principal
Shareholders' and the Shareholders' representations and warranties made herein
or pursuant hereto shall be deemed made on and as of the Effective Time as
though such representations and warranties were made on and as of such date, and
all such representations and warranties shall survive the Effective Time and any
investigation, audit or inspection at any time made by or on behalf of any party
hereto, as follows: (a) unless otherwise specified below, representations and
warranties shall survive for a period of one year after the Effective Time; (b)
representations, warranties and covenants for matters relating to title to the
capital stock of Company shall continue in full force and effect in perpetuity.
Notwithstanding anything herein to the contrary, any representation or warranty
which is the subject of a claim which is asserted in writing reasonably and in
good faith prior to the expiration of the applicable period set forth above
shall survive with respect to such claim or dispute until the final resolution
thereof.
SECTION 7.2 Agreement of Principal Shareholders and Shareholders to
Indemnify. The Principal Shareholders hereby jointly and severally, and each of
the Shareholders other than the Principal Shareholders hereby individually,
agree to indemnify, defend and hold harmless Parent, Sub and their officers,
directors, employees, agents and representatives (collectively, the "Indemnified
Persons") from and against and in respect of all demands, losses, claims,
actions or causes of action, assessments, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements, excluding any lost profits, lost revenue or
opportunity costs (collectively, "Losses") resulting from, imposed upon or
incurred by the Indemnified Persons, directly or indirectly, by reason of or
resulting from any misrepresentation or breach of any representation or
warranty, given or made by (i) in the case of the Principal Shareholders or
Company, in Section 3.1 and Section 3.4 of this Agreement, and (ii) in the case
of the Shareholders, in Section 3.4 of this Agreement.
(a) the liabilities or obligations of the Principal Shareholders
and Shareholders arising out of this Article VII shall commence only following
the incidence of Losses (incurred by any and all Indemnified Persons) of either
$100,000 in the aggregate or $50,000 for any single incidence;
(b) the aggregate indemnification provided by each of the
Principal Shareholders and Shareholders pursuant to this Article VII shall not
exceed the aggregate consideration received by such Principal Shareholder
pursuant to Article I;
(c) the sole remedy of the Indemnified Persons against the
Principal Shareholders and Shareholders for breach or inaccuracy of or any
failure to comply with the provisions of this Agreement is a claim for
indemnification pursuant to this Article VII;
(d) notwithstanding the foregoing, nothing herein shall limit an
Indemnified Person's remedies in the event of fraud or intentional deception on
the part of Company or any Principal
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Shareholder or Shareholder with respect to any of the obligations of Company,
Principal Shareholders or Shareholders under this Agreement.
SECTION 7.3 Notice of Losses.
(a) If an Indemnified Person believes that it has suffered or is
likely to suffer any Losses against which it is indemnified pursuant hereto, it
shall notify the Principal Shareholders promptly in writing describing such
Losses, the amount thereof, if known, and the method of computation of such
Losses, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such Losses have occurred. If
any action at law or suit in equity is instituted by or against a third party
with respect to which any Indemnified Person intends to claim any liability or
expense as Losses under this Article VII, any such Indemnified Person shall
promptly notify the Shareholders of such action or suit. The failure of any
Indemnified Person to give notice as provided herein shall not relieve any
Shareholder of his respective obligations under this Article VII unless such
failure results in actual detriment to such Shareholder, and only to the extent
of such detriment.
(b) In calculating any Losses (i) there shall be no reduction
for any tax benefits with respect to any Losses; and (ii) there shall be no
increase for taxes imposed upon the receipt of any indemnity payment with
respect to any Losses.
(c) The amount to which an Indemnitee shall be entitled under
this Article VII shall be determined (i) by written agreement between the
Indemnified Person and the Shareholders; or (ii) if the Indemnified Person, the
Principal Shareholders and the Shareholders are unable to agree as to any claim
for indemnification hereunder within sixty (60) days, such claim may be referred
to arbitration by either party in accordance with the provisions of Section 7.6
hereof.
SECTION 7.4 Third Party Claims. If a third party asserts a Claim against
any Indemnified Person, the Indemnified Person shall promptly give notice of
such Claim in accordance with Section 7.3 above. The Principal Shareholders
and/or Shareholders shall be entitled to assume the defense of such Claim,
including the employment of counsel reasonably satisfactory to the Indemnified
Person; provided, however, that, in the event that the Indemnified Person
reasonably determines in good faith that such Indemnified Person's interests
with respect to such Claim cannot appropriately be represented by the
Shareholders, such Indemnified Person shall have the right to assume control of
the defense of such Claim and to have such Indemnified Person's reasonable
expenses reimbursed promptly with respect to such Claim. In addition, in the
event that the Principal Shareholders and Shareholders, within a reasonable time
after notice of any such Claim, fail to defend any Indemnified Person, such
Indemnified Person (upon further notice to the Principal Shareholders and
Shareholders) shall have the right to undertake the defense of such Claim for
the account of the Principal Shareholders and Shareholders and to have such
Indemnified Person's reasonable expenses reimbursed promptly with respect to
such Claim. Regardless of which party is controlling the defense of any Claim,
no settlement of such Claim may be agreed to without the written consent of each
of the Indemnified Person, which consent shall not be unreasonably withheld. The
controlling party shall deliver, or cause to be delivered, to the other parties
copies of all correspondence, pleadings, motions, briefs, appeals or other
written
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statements relating to or submitted in connection with the defense of any such
Claim, and timely notices of any hearing or other court proceeding relating to
such Claim.
SECTION 7.5 No Recourse Against Company. The Principal Shareholders and
Shareholders hereby irrevocably waive any and all right to recourse against the
Company with respect to any misrepresentation or breach of any representation,
warranty or indemnity, given or made by the Principal Shareholders and
Shareholders or the Company in this Agreement and any document, certificate and
agreement entered into or delivered pursuant hereto. The Principal Shareholders
and Shareholders shall not be entitled to contribution from, subrogation to or
recovery against the Company with respect to any liability of the Principal
Shareholders and Shareholders or the Company that may arise under or pursuant to
this Agreement or the transactions contemplated hereby.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
December 31, 1998 for any reason; provided, however, that the right to terminate
this Agreement under this Section 8.1(b)(i) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date if such action or failure
to act constitutes a wilful and material breach of this Agreement;
(ii) if any temporary restraining order, preliminary or
permanent injunction or other order issued by any U.S. federal or state court of
competent jurisdiction or other material legal restraint or prohibition issued
or promulgated by a U.S. federal or state Governmental Entity having any of the
effects set forth in Section 6.1(b) shall be in effect and shall have become
final and nonappealable;
(iii) if (A) the Company's stockholders shall have taken
a final vote on a proposal to approve and adopt this Agreement and to approve
the Merger, and (B) the adoption and approval of this Agreement and the approval
of the Merger by the holders of a majority of the shares of Company Common Stock
shall not have been obtained; or
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(iv) if (A) the Board of Directors of the Company or any
committee thereof shall have withheld, withdrawn or modified in a manner adverse
to Parent its approval or recommendation of the Merger or (B) the Board of
Directors of the Company shall have resolved to take any of the foregoing
actions;
(c) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any such representation or warranty of Parent shall have become
inaccurate, in either case such that the conditions set forth in Section 6.3(a)
or Section 6.3(b), as the case may be, would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become
inaccurate; provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent, then (i) the Company may
not terminate this Agreement under this Section 8.1(c) with respect to a
particular breach or inaccuracy prior to or during the 45-day period commencing
upon delivery by the Company of written notice to Parent describing such breach
or inaccuracy, provided Parent continues to exercise reasonable efforts to cure
such breach or inaccuracy and (ii) the Company may not, in any event, terminate
this Agreement under this Section 8.1(c) if such inaccuracy or breach shall have
been cured in all material respects; and, provided further that the Company may
not terminate this Agreement pursuant to this Section 8.1(c) if it shall have
wilfully and materially breached this Agreement; or
(d) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any such representation or warranty of the Company shall have become
inaccurate, in either case such that the conditions set forth in Section 6.2(a)
or Section 6.2(b), as the case may be, would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become
inaccurate; provided, that if such inaccuracy in the Company's representations
and warranties or breach by the Company is curable by the Company, then (i)
Parent may not terminate this Agreement under this Section 8.1(d) with respect
to a particular breach or inaccuracy prior to or during the 45-day period
commencing upon delivery by Parent of written notice to the Company describing
such breach or inaccuracy, provided the Company continues to exercise reasonable
efforts to cure such breach or inaccuracy and (ii) Parent may not, in any event,
terminate this Agreement under this Section 8.1(d) if such inaccuracy or breach
shall have been cured in all material respects; and, provided further that
Parent may not terminate this Agreement pursuant to this Section 8.1(d) if it
shall have wilfully and materially breached this Agreement.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, except to the extent
that such termination results from the wilful and material breach by a party of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
hereto at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of
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such stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time,
any party may to the extent legally allowed (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties made to such party
pursuant to this Agreement or in any document delivered pursuant hereto or (c)
subject to the proviso of Section 8.3, waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties contained in this Agreement or in any certificate
or instrument delivered pursuant hereto shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
Intellipost Corporation
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx
if to the Company, to:
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Enhanced Response Technologies, Inc.
0000 Xxxx Xxxxxxxxx Xxxx #000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
000-000-0000 (Phone)
000-000-0000 (Fax)
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
0000 Xxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
000-000-0000 (Phone)
000-000-0000 (Fax)
SECTION 9.3 Definitions. For purposes of this Agreement:
an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
an "agreement," "arrangement," "contract," "commitment," "plan,"
"purchase order," "understanding" or "undertaking" when used in this Agreement
shall mean a legally binding, written agreement, arrangement, contract,
commitment, plan, purchase order, understanding or undertaking, as the case may
be;
"material adverse change" or "material adverse effect" means,
when used in connection with the Company or Parent, any change or effect that is
materially adverse to the business, financial condition or results of operations
of either the Company and its subsidiaries or Parent and its subsidiaries, taken
as a whole, as the case may be;
"person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
SECTION 9.4 Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
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SECTION 9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitute the entire agreement, and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and are not intended to confer upon any person
other than the parties any rights or remedies.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 9.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court.
SECTION 9.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INTELLIPOST CORPORATION
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: CEO
IPOST ACQUISITION SUBSIDIARY, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CEO
ENHANCED RESPONSE TECHNOLOGIES, INC.
By /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title: President
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