Exhibit 99.1
------------
MERGER AGREEMENT
BY AND AMONG
GALILEO INTERNATIONAL, INC.,
GALILEO ACQUISITION CO.
AND
XXXX.XXX, INC.
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE I THE MERGER......................................................1
Section 1.1. Merger and the Surviving Corporation............................1
Section 1.2. Conversion of Stock.............................................3
Section 1.3. Escrow..........................................................5
Section 1.4. Treatment of Outstanding Company Stock Options..................8
Section 1.5. Surrender of Certificates.......................................9
Section 1.6. Withholding Rights..............................................10
Section 1.7. Reliance Upon Exemption.........................................10
Section 1.8. Stock Certificate Legend........................................10
Section 1.9. Tax Consequences................................................11
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................11
Section 2.1. Corporate Status of the Company.................................11
Section 2.2. Authority of the Company........................................11
Section 2.3. Capitalization..................................................12
Section 2.4. Equity Interests of the Company.................................13
Section 2.5. Annual Financial Statements Previously Delivered................13
Section 2.6. Interim Financial Statements....................................14
Section 2.7. Operations......................................................14
Section 2.8. Liabilities and Obligations of the Company......................16
Section 2.9. Title...........................................................16
Section 2.10. Inventories....................................................17
Section 2.11. Information and Access.........................................17
Section 2.12. Insurance......................................................17
Section 2.13. Litigation and Claims..........................................18
Section 2.14. Employment Obligations.........................................18
Section 2.15. Compliance with ERISA..........................................19
Section 2.16. Environmental Matters..........................................21
Section 2.17. Union Relations................................................22
Section 2.18. Preservation of Business Relationships.........................22
Section 2.19. Taxes..........................................................22
Section 2.20. Material Agreements............................................24
Section 2.21. No Default under Agreements....................................25
Section 2.22. Compliance with Laws...........................................25
Section 2.23. Licenses, Permits and Approvals................................26
Section 2.24. Accounts Receivable............................................26
Section 2.25. Patents, Trademarks, Etc.......................................26
Section 2.26. Bank Accounts..................................................29
Section 2.27. Real Property Matters..........................................29
Section 2.28. Assets and Properties..........................................30
Section 2.29. Disclosure.....................................................30
Section 2.30. Updating of Schedules..........................................30
Section 2.31. Location of Assets.............................................30
Section 2.32. Proxy Statement................................................30
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF GALILEO AND THE MERGER SUB.......31
Section 3.1. Corporate Status of Galileo.....................................31
Section 3.2. Authority.......................................................31
Section 3.3. Authority of Galileo and Merger Sub.............................31
Section 3.4. Capital Structure...............................................31
Section 3.5. SEC Documents; Galileo Financial Statements.....................31
Section 3.6. No Material Adverse Change......................................32
Section 3.7. Litigation......................................................32
ARTICLE 4 CONDITIONS PRECEDENT TO OBLIGATIONS OF GALILEO AND THE MERGER SUB..32
Section 4.1. Accuracy of Representations, Warranties and Covenants...........32
Section 4.2. HSR Act.........................................................33
Section 4.3. Licenses, Permits, Approvals, Etc...............................33
Section 4.4. Employment Agreements...........................................33
Section 4.5. Approval of Legal Matters by Counsel............................33
Section 4.6. No Adverse Proceedings..........................................33
Section 4.7. Receipt of Closing Documents....................................33
Section 4.8. Approval of Updated Schedules...................................33
Section 4.9. Third Party Consents............................................34
Section 4.10. Company Stockholder Approval...................................34
Section 4.11. Tax Opinion....................................................34
Section 4.12. Dissenting Company Stock.......................................34
Section 3.4. Exemption.......................................................34
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.................34
Section 5.1. Accuracy of Representations, Warranties and Covenants...........34
Section 5.2. HSR Act.........................................................35
Section 5.3. Receipt of Closing Documents....................................35
Section 5.4. Approval of Legal Matters by Counsel............................35
Section 5.5. Company Stockholder Approval....................................35
Section 5.6. Tax Opinion.....................................................35
ARTICLE 6 CLOSING............................................................35
Section 6.1. Date, Time and Place of Closing.................................35
Section 6.2. Documents to be Delivered by the Company to Galileo.............36
Section 6.3. Items to Be Delivered by Galileo................................37
ARTICLE 7 FURTHER AGREEMENTS.................................................38
Section 7.1. Commissions and Expenses of Sale................................38
Section 7.2. Other Acquisition Proposals.....................................38
Section 7.3. Approvals and Consents..........................................38
Section 7.4. Company Stockholder Approval....................................39
Section 7.5. FIRPTA..........................................................39
Section 7.6. Registration Statements.........................................39
ARTICLE 8 AMENDMENT AND TERMINATION..........................................39
Section 8.1. Amendment.......................................................39
Section 8.2. Termination.....................................................39
Section 8.3. Effect of Termination...........................................40
Section 8.4. Waiver..........................................................40
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION....................41
Section 9.1. Survival of Representations and Warranties......................41
Section 9.2. Indemnification by the Company..................................41
ARTICLE 10 REGISTRATION OF GALILEO SHARES....................................42
ARTICLE 11 MISCELLANEOUS PROVISIONS..........................................42
Section 11.1. Notices........................................................42
Section 11.2. Further Assurance..............................................43
Section 11.3. Execution and Counterparts.....................................44
Section 11.4. Headings.......................................................44
Section 11.5. Effectiveness..................................................44
Section 11.6. Miscellaneous..................................................44
Section 11.7. Publicity......................................................44
Schedule 2.3 -- Capital Arrangements/Commitments
Schedule 2.4 -- Equity Interests/Investments
Schedule 2.7 -- Operations
Schedule 2.9 -- Title
Schedule 2.12 -- Insurance
Schedule 2.13 -- Litigation and Claims
Schedule 2.14 -- Employment Matters
Schedule 2.14A -- Independent Contractors
Schedule 2.15 -- Employee Benefit Matters
Schedule 2.16 -- Environmental Matters
Schedule 2.17 -- Union Relations
Schedule 2.19 -- Taxes
Schedule 2.20 -- Material Agreements
Schedule 2.23 -- Licenses, Permits and Approvals
Schedule 2.25 -- Intellectual Property
Schedule 2.26 -- Bank Accounts
Schedule 2.27 -- Real Property Matters
Schedule 2.28 -- Assets and Property
Schedule 2.31. -- Location of Assets
Schedule 4.4 -- List of Employees Who are to Sign Employment Agreements
Schedule 4.9 -- Partial List of Contracts Involving Third Party Consents
Exhibit A -- Certificate of Merger
Exhibit B -- Escrow Agreement
Exhibit C -- Stockholders Representations
Exhibit D -- Legal Opinion of Company's Counsel
Exhibit E -- Legal Opinion of Galileo's Counsel
MERGER AGREEMENT
THIS AGREEMENT is made and entered into as of the 7th day of
February, 2000, by and among GALILEO INTERNATIONAL, INC., a Delaware
corporation (hereinafter referred to as "Galileo"), Galileo Acquisition
Co., a Delaware corporation (hereinafter referred to as the "Merger Sub"), and
Xxxx.xxx, Inc., a Delaware corporation (hereinafter referred to as the
"Company");
WITNESSETH:
WHEREAS, the Merger Sub is a wholly-owned subsidiary of Galileo formed for
the purposes of the transaction contemplated hereunder;
WHEREAS, the respective Boards of Directors of Galileo, the Merger Sub
and the Company have approved the merger of the Company with and into the Merger
Sub described in Article 1 hereof (hereinafter referred to as the "Merger"), and
have determined that the Merger is in the best interests of Galileo, the Merger
Sub and the Company and their respective stockholders;
WHEREAS, for Federal income tax purpose, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (hereinafter referred to as the
"Code");
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. Merger and the Surviving Corporation. (a) Subject to the
terms and conditions of this Agreement, the Company shall be merged with and
into the Merger Sub (which shall be the surviving corporation in the Merger) in
accordance with the General Corporation Law of the State of Delaware. The Merger
shall become effective upon the filing with the Secretary of State of Delaware
of a properly executed certificate of merger with respect thereto in
substantially the form which is attached hereto as Exhibit A and hereby made a
part hereof (hereinafter referred to as the "Certificate of Merger") or at such
later time, if any, as may be agreed to by the parties hereto and specified in
the Certificate of Merger. The time when the Merger shall become effective is
hereinafter referred to as the "Effective Time." For purposes hereof, the term
"Constituent Corporations" shall mean the Merger Sub and the Company and the
term "Surviving Corporation" shall mean the Merger Sub as the corporation
surviving in the Merger.
(b) At the Effective Time, by virtue of the Merger, the Company shall
be merged with and into the Merger Sub, with the Merger Sub being the surviving
corporation, and all the rights, privileges, powers and franchises of each of
the Merger Sub and the Company and all property, real, personal and mixed, and
all debts due on whatever account, including things in action, and all and every
other interest of or belonging to or due to each of the Merger Sub and the
Company shall be vested in the Surviving Corporation and shall be as effectually
the property of the Surviving Corporation as they were of the Merger Sub and the
Company without further act or deed, and the Surviving Corporation shall be
responsible and liable for all the debts, liabilities and duties of each of the
Merger Sub and the Company, all with the full effect provided for in the General
Corporation Law of the State of Delaware. If at any time the Surviving
Corporation shall determine or be advised that any further action is necessary
or desirable to vest in the Surviving Corporation, according to the terms
hereof, title to any property or any rights of the Constituent Corporations or
to carry out the purpose of this Agreement, the last acting officers and
directors of the Company to the extent such persons are available, or the
corresponding officers and directors of the Surviving Corporation, as the case
may be, shall be authorized to take such action.
(c) The certificate of incorporation of the Merger Sub in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation at and after the Effective Time,
until amended in accordance with the provisions thereof and the General
Corporation Law of the State of Delaware, except that at the Effective Time such
certificate of incorporation shall be amended as set forth in the Certificate of
Merger. The Surviving Corporation shall be governed by the laws of the State of
Delaware.
(d) The bylaws of the Merger Sub in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation at and after the
Effective Time, until altered, amended or repealed as provided therein and in
the certificate of incorporation of the Surviving Corporation.
(e) The directors of the Merger Sub in office immediately prior to the
Effective Time shall be the directors of the Surviving Corporation at and after
the Effective Time, until their successors are elected in accordance with the
bylaws of the Surviving Corporation.
(f) The officers of the Merger Sub in office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation at and after
the Effective Time, holding the offices in the Surviving Corporation which they
held in the Merger Sub immediately prior thereto, until their successors are
elected or appointed in accordance with the bylaws of the Surviving Corporation.
(g) From and after the Effective Time, the stock transfer books of the
Merger Sub and of the Company shall be closed with respect to any and all shares
of the capital stock of the Merger Sub and the Company, respectively, which were
issued and outstanding immediately prior to the Effective Time and no transfer
of any such shares shall thereafter be made.
Section 1.2. Conversion of Stock. (a) At the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the Merger
Sub, the Company or the holders of any shares of the capital stock of the
Company, each share of the Common Stock, $.001 par value of the Company, Series
A Preferred Stock, $.001 par value, of the Company, Series B Preferred Stock,
$.001 par value, of the Company, Series C Preferred Stock, $.001 par value, of
the Company, and Series D Preferred Stock, $.001 par value, of the Company
issued and outstanding immediately prior to the Effective Time, other than
shares of the capital stock of the Company held by Galileo or any of its
wholly-owned subsidiaries (hereinafter referred to collectively as the "Company
Stock"), shall be cancelled and be extinguished and be converted into and become
a right to receive (hereinafter referred to as the "Merger Consideration"):
(i) cash in the amount equal to the quotient of $119,000,000 divided by
the sum of (x) the aggregate number of shares of the Company Stock issued and
outstanding immediately prior to the Effective Time (hereinafter referred to as
the "Issued and Outstanding Number"), plus (y) the aggregate number of shares of
the Company Stock which the Company would be required to issue to the holders of
any options, warrants, convertible securities or other contracts or rights
existing immediately prior to the Effective Time (but excluding from said number
any shares of the preferred stock of the Company which are included in the
Issued and Outstanding Number pursuant to the foregoing clause (x)) entitling
the holders thereof or parties thereto to acquire shares of the Company Stock
assuming all of such options, warrants, convertible securities or other
contracts or rights were then fully exercisable or convertible and were
exercised or converted (hereinafter said sum is referred to as the
"Fully-diluted Number"), which quotient shall then have subtracted therefrom the
quotient of $21,629,279 divided by the Issued and Outstanding Number (the
aggregate amount of cash payable pursuant to this clause (i) is hereinafter
referred to as the "Merger Cash");
(ii) the right to receive a proportionate amount of distributions
payable to or for the benefit of the holders of the Company Stock pursuant to
the Escrow Agreement (as such term is hereinafter defined) pursuant to which
Galileo or the Merger Sub will deposit $20,000,000 on the Closing Date for the
benefit of the holders of the Company Stock immediately prior to the Effective
Time, which proportionate amount shall be equal to the quotient of the amount of
any such distribution divided by the Issued and Outstanding Number; and
(iii) the right to receive that number of shares of the common stock,
$.001 par value, of Galileo (hereinafter referred to as the "Galileo Common
Stock") which is equal to the quotient of (x) the quotient of $150,000,000
divided by the average of the closing prices for the Galileo Common Stock on the
New York Stock Exchange for the ten trading days preceding the date of this
Agreement (said average closing price is hereinafter referred to as the "Galileo
Common Stock Price") divided by (y) the Fully-diluted Number (the aggregate
number of shares of Galileo Common Stock to be issued pursuant to this clause
(iii) (exclusive of any fractional shares and without taking into consideration
the application of the following proviso) is hereinafter referred to as the
"Merger Shares"); provided, however, that if the sum of (x) the Merger Cash, (y)
the $20,000,000 deposited into the Escrow and (z) any cash payable for
fractional shares pursuant to Section 1.2(d) hereof (hereinafter the sum of (x),
(y) and (z) as calculated without applying the provisions of the second proviso
of this clause (iii) is referred to as the "Adjusted Merger Cash") would exceed
the aggregate value of the Merger Shares, determined by multiplying the average
of the high and low sales prices of a share of Galileo Common Stock on the
Closing Date as reported on the New York Stock Exchange (the "Closing Date
Price") by the number of Merger Shares (hereinafter said aggregate value of the
Merger Shares is referred to as the "Merger Shares Value") then an amount in
cash equal to the sum of one-half of such excess plus $10,000 over the Merger
Shares Value (the "Excess Cash Amount") will not be paid in cash but will be
paid instead in that number of shares of Galileo Common Stock determined by
dividing the Excess Cash Amount by the Closing Date Price (hereinafter referred
to as the "Supplemental Galileo Common Stock"), and such number of shares of
Supplemental Galileo Common Stock divided by the Fully-diluted Number shall be
added to the number of shares of Galileo Common Stock determined in accordance
with the provisions of this clause (iii) preceding this proviso which are to be
paid per share to each holder of the Company Stock; provided, further, that if
the Merger Shares Value would exceed the Adjusted Merger Cash without applying
the provisions of this proviso (hereinafter the amount of such excess is
referred to as the "Excess Merger Shares Value"), Galileo shall have the option
of reducing the number of shares of Galileo Common Stock to be issued for each
share of Company Stock pursuant to this clause (iii) by that number of shares
which is equal to the quotient of that portion of the Excess Merger Shares Value
which the Company elects to pay in cash instead of shares of Galileo Common
Stock pursuant to the provisions of this proviso divided by the Closing Date
Price and then divided by the Fully-diluted Number by paying an additional
amount of cash per share of Company Stock pursuant to Section 1.2(a)(i) equal to
the quotient of that portion of the Excess Merger Shares Value which Galileo
elects to pay in cash instead of shares of Galileo Common Stock pursuant to the
provisions of this proviso divided by the Fully-diluted Number.
(b) Each of the shares of Company Stock held by Galileo or any of its
wholly-owned subsidiaries or the Company or any of its wholly-owned subsidiaries
immediately prior to the Effective Time shall be cancelled and retired at the
Effective Time and no consideration shall be issued in exchange thereof.
(c) Each outstanding share of the common and preferred stock of the
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger, remain issued and outstanding as one share of the
common stock and preferred stock, as the case may be, of the Surviving
Corporation.
(d) Notwithstanding any other provisions of this Agreement, each holder
of shares of Company Stock exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a share of Galileo Common Stock
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Galileo Common Stock multiplied by the Galileo
Common Stock Price. No such holder will be entitled to dividends, voting rights
or any other rights as a stockholder in respect of any fractional share.
(e) Each outstanding share of the Company Stock as to which a written
demand for appraisal is filed in accordance with Section 262 of the General
Corporation Law of the State of Delaware at or prior to the Meeting (as such
term is defined in Section 7.4 hereof) and not withdrawn at or prior to the
Meeting and which is not voted in favor of the Merger shall not be converted
into or represent a right to receive the Merger Consideration unless and until
the holder thereof shall have failed to perfect, or shall have effectively
withdrawn or lost his, her or its right to appraisal of and payment for his, her
or its Company Stock under said Section 262, at which time his, her or its
shares shall be converted into the right to receive the Merger Consideration.
All such shares of Company Stock as to which such a written demand for appraisal
is so filed and not withdrawn at or prior to the Meeting and which are not voted
in favor of the Merger, except any such shares of Company Stock the holder of
which, prior to the Effective Time, shall have effectively withdrawn or lost
his, her or its right of appraisal and payment for his, her or its shares of
Company Stock under said Section 262, are hereinafter referred to as "Dissenting
Company Stock." The Company shall give prompt notice to Galileo upon receipt by
the Company of any written demand for appraisal rights, withdrawal of such
demands, and any other written communications delivered by or to the Company
pursuant to said Section 262, and the Company shall give Galileo the
opportunity, to the extent permitted by law, to direct all negotiation and
proceedings with respect to such demands. The Company shall not voluntarily make
any payment with respect to any demands for appraisal rights and shall not,
except with the prior written consent of Galileo, settle or offer to settle any
such demands. Each holder of Company Stock who becomes entitled, pursuant to
provisions of said Section 262, to payment for his, her or its shares of Company
Stock under the provisions of said Section 262 shall receive payment therefor
from the Surviving Corporation and such shares of Company Stock shall be
cancelled.
Section 1.3. Escrow and Appointment of Stockholder Representative. (a)
On the Closing Date, Galileo or the Merger Sub will deliver in escrow (the
"Escrow") $20,000,000 by wire transfer of immediately available funds to LaSalle
Bank N.A. as escrow agent (hereinafter referred to as the "Escrow Agent"),
pursuant to the terms of an escrow agreement in substantially the form attached
hereto as Exhibit D (the "Escrow Agreement"), said Escrow to be available for
any Losses (as such term is defined in Section 9.2 hereof) for which Galileo may
make a claim pursuant to Section 9.2 hereof.
(b) In the event that the Merger is approved, effective upon such vote,
and without further act of any stockholder of the Company, Xxxxxxxxx Digital
(hereinafter referred to as the "Stockholders Representative") shall be
appointed as agent and attorney-in-fact by and for each person or entity (other
than holders of Dissenting Company Stock) which owned beneficially or of record
any shares of the Company Stock immediately prior to the Effective Time
(hereinafter referred to as the "Escrow Beneficiaries") to give and receive
notices and communications, to authorize payments from the Escrow in
satisfaction of claims by Galileo, to object to such payments, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders Representative for the accomplishment of the foregoing. Such agency
may be changed by the Escrow Beneficiaries from time to time upon not less than
thirty (30) days' prior written notice to Galileo; provided that the
Stockholders Representative may not be removed unless Escrow Beneficiaries
representing at least a two-thirds interest in the Escrow agree in writing to
such removal and to the identity of the substituted Stockholders Representative
. Any vacancy in the position of Stockholders Representative may be filled by
approval in writing of the Escrow Beneficiaries representing at least a majority
in interest of the Escrow. No bond shall be required of the Stockholders
Representative. Notices or communications to or from the Stockholders
Representative shall constitute notice to or from each of the Escrow
Beneficiaries.
(c) The Stockholders Representative shall not be liable for any act
done or omitted under the Escrow Agreement or this Agreement as Stockholders
Representative while acting in good faith and in the exercise of reasonable
judgment. The Escrow Beneficiaries shall jointly and severally indemnify the
Stockholders Representative and hold the Stockholders Representative harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Stockholders Representative and arising out of or in
connection with the acceptance or administration of the Stockholders
Representative's duties under the Escrow Agreement or this Agreement, including
the reasonable fees and expenses of any legal counsel retained by the
Stockholders Representative.
(d) A decision, act, consent or instruction of the Stockholders
Representative shall constitute a decision of all the Escrow Beneficiaries and
shall be final, binding and conclusive upon each of the Escrow Beneficiaries,
and the Escrow Agent, Galileo and the Surviving Corporation may rely upon any
such written decision, consent or instruction of the Stockholders Representative
as being the decision, consent or instruction of each of the Escrow
Beneficiaries. The Escrow Agent, Galileo and the Surviving Corporation are
hereby relieved from any liability to any person or entity for any acts done by
them in accordance with such decision, consent or instruction of the
Stockholders Representative.
(e) If any third party shall notify Galileo or its affiliates hereto
with respect to any matter asserted by such third party against the Company or
the Surviving Corporation (hereinafter referred to as a "Third Party Claim")
which may give rise to a claim by Galileo against the Escrow Fund, then Galileo
shall give notice to the Stockholders Representative within 15 days of Galileo
becoming aware of any such Third Party Claim or of facts upon which any such
Third Party Claim will be based setting forth such material information with
respect to the Third Party Claim as is reasonably available to Galileo;
provided, however, that no delay or failure on the part of Galileo in notifying
the Stockholders Representative shall relieve the Stockholders Representative
and the Escrow Beneficiaries from any obligation hereunder unless the
Stockholders Representative and the Escrow Beneficiaries are thereby materially
prejudiced (and then solely to the extent of such prejudice). The Stockholders
Representative and the Escrow Beneficiaries shall not be liable for any
attorneys' fees and expenses incurred by Galileo in connection with any such
Third Party Claim prior to Galileo's giving notice to the Stockholders
Representative of a Third Party Claim. The notice from Galileo to the
Stockholders Representative shall set forth such material information with
respect to the Third Party Claim as is then reasonably available to Galileo.
(f) In case any Third Party Claim is asserted against the Company or
the Surviving Corporation, and Galileo notifies the Stockholders Representative
thereof pursuant to Section 1.3(e) hereof, the Stockholders Representative and
the Escrow Beneficiaries will be entitled, if the Stockholders Representative so
elects by written notice delivered to Galileo within 15 days after receiving
Galileo's notice, to assume the defense thereof, at the expense of the Escrow
Beneficiaries independent of the Escrow Fund, with counsel reasonably
satisfactory to Galileo so long as:
(i) Galileo has reasonably determined that Losses which
may be incurred as a result of the Third Party Claim do not exceed,
either individually, or when aggregated with all other Third Party
Claims, $20,000,000;
(ii) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(iii) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of Galileo,
likely to establish a precedential custom or practice materially
adverse to the continuing business interests of Galileo or the
Surviving Corporation; and
(iv) counsel selected by the Stockholders Representative is
reasonably acceptable to Galileo.
(g) If the Stockholders Representative and the Escrow Beneficiaries so
assume any such defense, the Stockholder Representatives and the Escrow
Beneficiaries shall conduct the defense of the Third Party Claim actively and
diligently. The Stockholders Representative and the Escrow Beneficiaries shall
not compromise or settle such Third Party Claim or consent to entry of any
judgment in respect thereof without the prior written consent of Galileo, which
consent shall not be unreasonably withheld.
(h) In the event that the Stockholders Representative assumes the
defense of the Third Party Claim in accordance with Section 1.3(f) hereof,
Galileo or its affiliates may retain separate counsel and participate in the
defense of the Third Party Claim, but the fees and expenses of such counsel
shall be at the expense of Galileo unless Galileo or its affiliates shall
reasonably determine that there is a material conflict of interest between or
among Galileo or its affiliates and the Stockholders Representative and the
Escrow Beneficiaries with respect to such Third Party Claim, in which case the
reasonable fees and expenses of such counsel will be borne by the Stockholder
Representatives and the Escrow Beneficiaries out of the Escrow Fund. Galileo or
its affiliates will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim respecting which the
Stockholders Representative and the Escrow Beneficiaries have assumed the
defense thereof pursuant to Section 1.3(f) hereof without the prior written
consent of the Stockholders Representative, which consent shall not be
unreasonably withheld. Galileo will cooperate in the defense of such Third Party
Claim and will provide reasonable access to documents, assets, properties, books
and records reasonably requested by Stockholders Representative and material to
the claim and will make reasonably available all officers, directors and
employees reasonably requested by the Stockholders Representative for
investigation, depositions and trial.
(i) In the event that the Stockholders Representative and the Escrow
Beneficiaries fail or elect not to assume the defense of the Company or the
Surviving Corporation against such Third Party Claim, which Stockholders
Representative and the Escrow Beneficiaries had the right to assume under
Section 1.3(f) hereof, Galileo or its affiliates shall have the right to
undertake the defense and Galileo may compromise or settle such Third Party
Claim or consent to entry of any judgment in respect thereof in any manner it
may deem appropriate (and Galileo or its affiliates need not consult with, or
obtain any consent from, the Stockholders Representative or the Escrow
Beneficiaries, in connection therewith); provided, however, that except with the
written consent of the Stockholders Representative, no settlement of any such
claim or consent to the entry of any judgment with respect to such Third Party
Claim shall alone be determinative of the validity of the claim against the
Escrow Fund. In each case, Galileo, the Stockholders Representative and the
Escrow Beneficiaries will reasonably cooperate with Galileo or its affiliates in
the defense of that claim and will provide reasonable access to documents,
assets, properties, books and records reasonably requested by Galileo and
material to the claim and will make reasonably available all individuals
reasonably requested by Galileo for investigation, depositions and trial.
Section 1.4. Treatment of Outstanding Company Stock Options. At the
Effective Time, each outstanding option (hereinafter referred to individually as
an "Option" and collectively as the "Options") to acquire shares of the Common
Stock of the Company issued under or pursuant to The Xxxx.xxx, Inc. 1997 Stock
Plan (hereinafter referred to as the "Company Stock Plan") shall, pursuant to
Section 12(c) thereof, be converted and changed, without any further action on
the part of the Merger Sub, the Company, Galileo or the holders of the Options
into the right to acquire that number of shares of Galileo Common Stock equal to
the product of (i) the number of shares of the Common Stock of the Company into
which said Options were exercisable immediately prior to the Effective Time
multiplied by (ii) the Exchange Ratio (as such term is hereinafter defined);
provided that the exercise price of said Options shall be adjusted to equal the
quotient of (i) the original exercise price of such Option divided by (ii) the
Exchange Ratio. As used herein, the term "Exchange Ratio" shall mean the
quotient of $269,000,000 divided by the Fully-diluted Number and further divided
by the Galileo Common Stock Price. Pursuant to said Section 12(c), Galileo
agrees to assume the Company Stock Plan and all of the outstanding Options upon
the Effective Time, and the Merger Sub hereby consents, and the Board of
Directors of the Company, in its capacity as the Administrator of the Plan, by
approving this Agreement shall be deemed to have consented, to such assumption
pursuant to the provisions of said Section 12(c).
Section 1.5. Surrender of Certificates. (a) Prior to the Effective
Time, Galileo shall appoint Xxxxxx Trust and Savings Bank or one of its
affiliates to act as paying agent in respect of the Merger (said bank, in its
capacity as such paying agent, is hereinafter referred to as the "Paying
Agent").
(b) Promptly following the Effective Time, Galileo shall provide to the
Paying Agent funds necessary to make the cash payments required by Section
1.2(a)(i), and stock certificates representing the shares of Galileo Common
Stock issuable in connection with the Merger pursuant to Section 1.2(a)(iii)
hereof.
(c) As soon as practicable after the Effective Time, the Paying Agent
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Stock (hereinafter referred to individually as a "Certificate" and
collectively as the "Certificates") (i) a letter of transmittal (which (x) shall
specify that delivery shall be effected, and risk of loss of the Certificates
shall pass, only upon delivery of the Certificates to the Paying Agent, (y)
shall provide for the waiver by the person or persons executing the same of any
right of appraisal under the General Corporation Law of the State of Delaware
and (z) shall be in such form and have such other provisions as Galileo may
reasonably specify); and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the amount of cash and number of shares of
Galileo Common Stock per share provided for in Section 1.2(a) hereof. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Galileo, together with such letter of
transmittal, duly executed, and such other documents as may be reasonably
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash and number of shares of
Galileo Common Stock into which the shares of Company Stock theretofore
represented by the Certificate so surrendered shall have been converted pursuant
to the provisions of Section 1.2(a) hereof, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or will accrue on the
cash payable upon the surrender of any Certificate. In the event of a transfer
of ownership of Company Stock which is not registered in the transfer records of
the Company, a check in payment of the proper amount of cash and a certificate
representing the proper number of shares of Galileo Common Stock may be issued
to a transferee if the Certificate representing such Company Stock is presented
to the Paying Agent, accompanied by all documents required and in proper form to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
paragraph, each Certificate shall, subject to the provisions of Section 1.2(d)
hereof, be deemed at and at any time after the Effective Time to represent the
right to receive upon such surrender the Merger Consideration provided for in
Section 1.2(a) hereof. Any funds deposited with the Paying Agent that remain
unclaimed by the former stockholders of the Company for one year after the
Effective Time shall be paid to Galileo upon demand, and any former stockholders
of the Company who have not theretofore complied with the instructions for
surrendering their Certificates shall thereafter look only to Galileo for
payment. Notwithstanding anything to the contrary contained in this Agreement or
otherwise, neither the Paying Agent nor any party hereto shall be liable to a
former holder of Company Stock for any cash or property delivered to a public
official pursuant to applicable escheat or abandoned property laws.
(d) There shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be surrendered and cancelled as provided in paragraph (c) of
this Section.
Section 1.6. Withholdings Rights. Galileo or the Paying Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Stock such amounts
as Galileo or the Paying Agent is required to deduct and withhold with respect
to the making of such payment under any Federal, state or local tax laws. To the
extent that amounts are so withheld by Galileo or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Stock in respect to which such
deduction and withholding was made by Galileo or the Paying Agent.
Section 1.7. Reliance Upon Exemption. The Galileo Common Stock to be
issued pursuant to this Agreement will be issued without registration under the
Securities Act of 1933, as amended (the "Securities Act"), and in reliance upon
an exemption from the registration requirements of the Securities Act. Galileo
will issue shares of Galileo Common Stock pursuant to this Agreement in reliance
upon the representations from each holder of Company Stock substantially in the
form attached to this Agreement as Exhibit C. The Company agrees that each
holder of Company Stock who by himself or herself or which by itself would not
qualify as an "accredited investor," as such term is defined under Rule 501(a)
of the Securities Act, without having a "Purchaser Representative," as such term
is defined under Rule 501(h) of the Securities Act, will have a Purchaser
Representative as so defined.
Section 1.8. Stock Certificate Legend. All certificates
evidencing Galileo Common Stock which are to be issued in connection with
the Merger will bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO
THE PROVISIONS OF SUCH ACT AND STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM IS AVAILABLE AS ESTABLISHED BY A WRITTEN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION.
Section 1.9. Tax Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning
of Section 368 of the Code. The parties hereto adopt this Agreement as a
"plan of reorganization" within the meaning of Treasury Regulations Section
1.368-2(g) and 1.368-3(a).
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
As an inducement to Galileo and the Merger Sub to enter into and
perform their obligations under this Agreement, the Company represents and
warrants to, and covenants and agrees with, Galileo and the Merger Sub as
follows (provided, however, that the individual schedules required by the
following Sections shall be combined into a single disclosure schedule supplied
by the Company to Galileo (the "Disclosure Schedule"), the section number and
subsection and letters of which correspond to the section and subsection numbers
and letters of this Agreement to which they refer, provided that disclosure made
by the Company under any one section of the Disclosure Schedule shall also be
applicable to any other section of the Disclosure Schedule for which the
applicability of such disclosure is manifest):
Section 2.1. Corporate Status. The Company and Travel Industries Inc.,
a Delaware corporation and wholly-owned subsidiary of the Company (hereinafter
referred to as the "Subsidiary"), are each a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with full legal and
corporate power and authority to conduct business as presently being conducted
and as proposed to be conducted by it. The Company and the Subsidiary are each
duly authorized to transact business and in good standing under the laws of the
State of Delaware and each jurisdiction in which the nature of its business
makes such qualification necessary, except where the failure to so qualify would
not have a Material Adverse Effect. As used in this Agreement, the capitalized
term "Material Adverse Effect" means a material adverse effect on the business,
operations, financial condition, assets or properties of the Company or the
Subsidiary which may be reasonably expected to result or has resulted in a
financial detriment to the Company or the Subsidiary of at least $500,000.
Section 2.2. Authority of the Company. The Board of Directors of the
Company has deemed the Merger to be advisable and in the best interests of the
Company's stockholders and the Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of the Merger by
the stockholders of the Company, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to such approval of the Merger by the stockholders of the Company. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by Galileo and the
Merger Sub) constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The execution and
delivery of the Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof 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 the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of the Subsidiary
under, any provision of (i) the certificate of incorporation or by-laws of the
Company, (ii) except as set forth in the Schedules hereto, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or the Subsidiary or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any the Subsidiary or any of
their respective properties or assets.
Section 2.3. Capitalization. (a) The Company has the following
authorized and outstanding shares of capital stock: 25,000,000 authorized shares
of Common Stock, $.001 par value, of the Company, 2,338,611 of which are issued
and outstanding; 4,000,000 authorized shares of Series A Preferred Stock, $.001
par value, of the Company, 4,000,000 of which are issued and outstanding;
2,352,941 authorized shares of Series B Preferred Stock, $.001 par value, of the
Company, 2,352,941 of which are issued and outstanding; 2,592,550 authorized
shares of Series C Preferred Stock, $.001 par value, of the Company, 2,592,550
of which are issued and outstanding; and 2,317,694 authorized shares of Series D
Preferred Stock, $.001 par value, of the Company, 2,317,694 of which are issued
and outstanding. The Company has no other authorized or outstanding shares of
capital stock of any class, series, designation or description.
(b) The Company owns beneficially and of record all of the issued and
outstanding shares of the capital stock of the Subsidiary. The Company agrees
that the Subsidiary will not issue or commit to issue any shares of its capital
stock after the date of this Agreement without the prior written consent of
Galileo.
(c) All of the issued and outstanding shares of the capital stock of
the Company or the Subsidiary are validly issued, fully paid and nonassessable
and were not issued in violation of the preemptive rights of any person.
(d) Except as disclosed in Schedule 2.3 attached hereto or hereby made
a part hereof, there are no outstanding, and immediately prior to the Effective
Time there will be no outstanding, warrants, options, subscriptions, contracts,
preemptive or other rights or other arrangements or commitments obligating the
Company or the Subsidiary to issue any additional shares of the capital stock of
the Company or the Subsidiary, nor are there any securities, debts, obligations
or rights outstanding which are convertible into or exchangeable for shares of
the capital stock of the Company or the Subsidiary. The Company has not issued
any Options under the Company Stock Plan.
(e) From and after the date of this Agreement, except for the issuance
of shares of the Common Stock of the Company pursuant to the exercise of
outstanding and vested Options, neither the Company nor the Subsidiary shall
issue or grant any warrants, options, subscriptions, contracts, preemptive or
other rights or other arrangements or commitments obligating the Company or the
Subsidiary to issue any additional shares of the capital stock of the Company or
the Subsidiary, nor any securities, debts, obligations or rights which are
convertible into or exchangeable for shares of the capital stock of the Company
or the Subsidiary.
(f) From and after the date of this Agreement, the Company agrees not
to amend any provisions of the Company Stock Plan or any of the Options
heretofore or granted thereunder.
Section 2.4. Equity Interests of the Company. Schedule 2.4 attached
hereto and hereby made a part hereof contains a description of all equity
interests or investments which the Company or the Subsidiary has, directly or
indirectly, in any corporation, partnership, limited liability company, joint
venture or other entity.
Section 2.5. Annual Financial Statements Previously Delivered. (a) The
Company has furnished to Galileo copies of audited financial statements of the
Company and the Subsidiary for the fiscal years ended 1997 and 1998, certified
by PriceWaterhouse Coopers LLP, certified public accountants (hereinafter the
audited consolidated financial statements of the Company for the year ended
December 31, 1998, are referred to as the "1998 Financial Statements").
(b) Each of the financial statements referred to in paragraph (a) of
this Section 2.5 has been prepared in accordance with GAAP, is true, correct and
complete in all material respects and fairly presents in all material respects
the financial position of the Company and the Subsidiary, as the case may be, as
of the date thereof or, as the case may be, the results of operations and cash
flows for the periods covered thereby. Each of the balance sheets contained in
said financial statements fully sets forth all material liabilities of whatever
nature of the Company and the Subsidiary, as the case may be, existing as of the
date thereof which, under GAAP, should be set forth therein. Any slow-moving
inventory and non-recoverable work-in-process included in said balance sheets
were written down appropriately and any redundant or obsolete inventory or
materials were wholly written off and the value attributed to the remaining
inventory or materials, including raw materials, work-in-process and finished
goods, does not exceed the lower of cost or net realizable value as at the
respective dates thereof. Under like accounting principles and practices, the
statements of profit and loss constituting a part of said financial statements
correctly state the consolidated revenues and net earnings or losses of the
Company and the Subsidiary for the respective periods covered thereby and
include adequate provision for all taxes.
Section 2.6. Interim Financial Statements. (a) The Company has
furnished to Galileo copies of the Company's unaudited consolidated balance
sheet as of December 31, 1999 (hereinafter referred to as the "Interim Balance
Sheet"), together with a related statement of profit and loss for the period
then ended (hereinafter such Interim Balance Sheet and consolidated statement of
profit and loss are referred to as the "Interim Financial Statements"). The
Company agrees to continue to provide Galileo with additional monthly financial
statements of the type specified in the preceding sentence as soon as
practicable after they are prepared through the Closing Date (hereinafter
referred to as the "Monthly Financial Statements").
(b) The Interim Financial Statements have been prepared, and the
Monthly Financial Statements will be prepared, in accordance with GAAP (except
for the absence of required footnote disclosures and subject to normal year-end
adjustments), are, and with respect to the Monthly Financial Statements will be,
true, correct and complete in all material respects and fairly present in all
material respects the financial position of the Company and the Subsidiary as of
the dates thereof or, as the case may be, the results of operations and cash
flows for the period covered thereby. The Interim Balance Sheet fully sets
forth, and each balance sheet contained in the Monthly Financial Statements will
fully set forth, all material liabilities of whatever nature of the Company and
the Subsidiary, as the case may be, existing as of the respective dates thereof
which, under GAAP, should be set forth therein. Under like accounting principles
and practices, the statement of profit and loss constituting a part of said
Interim Financial Statements correctly states, and constituting a part of the
Monthly Financial Statements will correctly state, the consolidated revenues and
net earnings or losses of the Company and Subsidiary for the period covered
thereby and include, and with respect to the Monthly Financial Statements will
include, adequate provision for all taxes.
Section 2.7. Operations. Except as disclosed in Schedule 2.7 attached
hereto and hereby made a part hereof, since December, 1998, there has not been
any Material Adverse Change (as such term is hereinafter defined) and since such
date the Company and the Subsidiary have conducted their respective business in
the usual, regular and ordinary manner and each shall continue, through and
including the Closing Date, to conduct its businesses in such manner, except for
the transaction contemplated hereunder, unless prior written approval for any
variation therefrom shall have first been obtained from Galileo. For purposes of
this Agreement, the capitalized term "Material Adverse Change" means a Material
Adverse Change in the business, operations, financial position, assets and
properties of the Company or the Subsidiary which may result or has resulted in
a financial detriment to the Company or the Subsidiary of at least $500,000.
Except as disclosed in the 1998 Financial Statements, or in Schedule 2.7
attached hereto, for the period from January 1, 1999, to and including the
Closing Date, the following is and will be true with respect to the Company and
the Subsidiary:
(a) All transactions involving the Company and the
Subsidiary have been accurately and fully recorded or otherwise
reflected in the Company's and the Subsidiary's books and records;
(b) No dividend or other distribution of capital, income or
retained earnings has been paid or declared on any shares of capital
stock of the Company, nor has any distribution otherwise been made to
any of the Company's stockholders, in their capacity as stockholders,
directly or indirectly, which involves any assets of the Company;
(c) The Company and the Subsidiary have each followed their
past practices with respect to collection of accounts receivable and
other amounts owing then;
(d) Neither the Company nor the Subsidiary has sold,
exchanged, conveyed or otherwise disposed of, or made subject to lien,
pledge, hypothecation, mortgage or other encumbrance, any of its assets
other than inventory assets sold in the ordinary course of its
business, the disposition of assets which have become worn out,
unserviceable or obsolete and assets sold and replaced with assets of
like use and value;
(e) The Company and the Subsidiary each has paid its debts
and liabilities, including taxes, fees, levies and assessments, in the
ordinary course as they have matured and has not prepaid any of such
debts, liabilities or taxes, in whole or in part;
(f) Neither the Company nor the Subsidiary has incurred any
debt, obligation or liability, other than those incurred in the
ordinary course of its business which are not of a material nature or
amount and which do not or will not presently, with the passage of time
or upon default, subject its assets to any lien, claim, charge,
mortgage or other encumbrance, nor has it undertaken to guarantee, in
whole or in part, any of the debts, obligations or liabilities of any
other party;
(g) Neither the Company nor the Subsidiary has altered,
amended, terminated or discharged any written or oral contract, lease,
plan, commitment or agreement to which it is presently a party (except
for non-material amendments in the ordinary course of business), nor
waived any material right with respect thereto, nor permitted or
consented to such alteration, amendment, termination or discharge, nor
has it committed a breach or default in any of the provisions thereof
except breaches and defaults which in the aggregate will not have a
Material Adverse Effect;
(h) Neither the Company nor the Subsidiary has entered into
any written or oral contract except for contracts entered into in the
ordinary course of business at the prices and upon the terms consistent
with existing market conditions and its past practices and such other
contracts that are in the ordinary course of business and do not
involve more than $25,000 or extend for more than ninety (90) days (or
for more than 90 days if such agreement may be terminated by the
Company or the Subsidiary without penalty, payment or material
detriment) and do not violate any representation, warranty or covenant
of this Agreement;
(i) The Company and the Subsidiary have each
substantially complied with all laws applicable to the conduct of its business;
(j) The Company and the Subsidiary have each conducted its
business only in the usual, regular and ordinary course and in
substantially the same manner as theretofore conducted;
(k) The Company and the Subsidiary have each kept and will
keep in full force and effect through the Closing Date (i) all of the
fire, casualty, liability and other insurance now in effect covering
its assets, properties and business, and (ii) all bonds on employees
and other personnel now in effect;
(l) The Company and the Subsidiary shall each use its best
efforts to (i) preserve its present organization intact, (ii) (without
making any commitment on behalf of Galileo or the Merger Sub) keep
available the services of its present officers, employees and agents,
and (iii) preserve its present relationships with its clients,
suppliers, customers and others having business relationships with the
Company and the Subsidiary, except for normal personnel changes in the
ordinary course of business;
(m) There has not occurred any Material Adverse Change; and
(n) The Company has not taken any action in anticipation of
the consummation of the transactions contemplated hereby whose primary
motivation is to reduce the value of the Company or the Subsidiary as
of the Closing Date to the detriment of Galileo and for the benefit,
directly or indirectly, of one or more of the Stockholders of the
Company or Subsidiary.
Section 2.8. Liabilities and Obligations of the Company. Neither the
Company nor the Subsidiary will have on the Closing Date any liabilities,
contracts, commitments or other obligations, direct or indirect, absolute or
contingent, determined or undetermined which are not reflected, described or
disclosed in (i) the Interim Balance Sheet or (ii) this Agreement or any of the
Schedules attached hereto, except for such matters which have been incurred
since December 31, 1999, in the ordinary course of business and which are not of
a material nature or amount.
Section 2.9. Title. Except as set forth in Schedule 2.9 attached hereto and
hereby made a part hereof, the Company and the Subsidiary each is the owner of
good title to all property and assets, tangible and intangible, which it claims
or otherwise purports to own (including, without limitation, all of its assets
reflected in the Interim Balance Sheet), free and clear of all liabilities,
liens, charges, claims, rights, encumbrances and restrictions on transfers,
except for liabilities, liens, charges, claims, rights, encumbrance and
restrictions on transfers as are not material in amount, or do not materially
detract from the use or value of such property and no financing statement
covering all or any portion of said property or assets and naming the Company or
the Subsidiary as debtor has been filed in any public office, and neither the
Company nor the Subsidiary has signed any financing statement or security
agreement as debtor or borrower which financing statement or security agreement
covers all or any portion of said property or assets.
Section 2.10. Inventories. Except for any obsolete goods and materials of
below standard quality, the items included in the inventory of the Company and
the Subsidiary on the date hereof consist, and on the Closing Date will consist,
solely of items of standard quality which are suitable and merchantable for
filling orders at regular prices in the normal course of business, except for
any obsolete materials or materials of below standard quality, the value of
which has been written down to realizable market value or for which adequate
reserves have been provided on the Interim Balance Sheet.
Section 2.11. Information and Access. Between the date of this Agreement
and the Closing, the Company shall promptly notify Galileo in writing of any
events, occurrences or other matters which become known to the Company relating
to the Company or the Subsidiary which are reasonably likely to have a Material
Adverse Effect. Prior to Closing, Galileo and its agents, attorneys,
accountants, employees, contractors and other authorized representatives shall
have the right, at any time and from time to time, to examine the assets,
properties, books and records of the Company and the Subsidiary and to make such
tests, surveys, investigations and other inspections of the property owned,
operated, leased or controlled by the Company or the Subsidiary in such manner
as Galileo may reasonably deem necessary or desirable. No investigation or
examination by Galileo or any of its agents or representatives of such assets,
properties, books and records of the Company or the Subsidiary shall affect the
representations and warranties of the Company contained in this Agreement.
Section 2.12. Insurance. (a) The Company and the Subsidiary have in
effect such insurance coverage as is described in Schedule 2.12 attached hereto
and hereby made a part hereof, which description includes the name of the
insurer, the policy number, the name of the insureds, and a summary of the type
and amount of coverage and risks insured, and the Company has delivered to
Galileo complete and accurate copies of all such insurance policies. Such
insurance coverage, as to amounts and types of coverage and risks insured, is
adequate for the business of the Company and the Subsidiary as presently
conducted. From the date hereof until the Closing the Company agrees to cause
the Company and the Subsidiary to maintain such insurance coverage respecting
the assets of the Company and the Subsidiary as is necessary to adequately
insure said assets against damage or destruction.
(b) Schedule 2.12 attached hereto and hereby made a part hereof
contains a list and description of all claims involving more than $5,000 made by
the Company or the Subsidiary against the insurance policies held by the Company
or the Subsidiary for the previous three (3) years, including, without
limitation, all product liability claims and workers' compensation claims, but
excepting therefrom claims made by employees of the Company or the Subsidiary
against its health insurance plan carrier, and the Company has delivered to
Galileo complete and accurate copies of all insurance policies held by the
Company for the previous three (3) years.
Section 2.13. Litigation and Claims. (a) Except as set forth in Schedule
2.13 attached hereto and hereby made part hereof, there are no suits, claims,
litigation, arbitration, demands or proceedings pending, asserted in writing or,
to the knowledge of the Company, threatened against or relating to the Company
or the Subsidiary, or its business, properties, assets or activities nor to the
knowledge of the Company is there in existence any judgment or award against the
Company or the Subsidiary related to or affecting its business, properties,
assets or activities. To the knowledge of the Company, neither the Company nor
the Subsidiary is under investigation for violation of any law or regulation
related to or affecting the business, properties, assets or activities of the
Company or the Subsidiary.
(b) Except as set forth in Schedule 2.13, no claims have been asserted
and not resolved or withdrawn against the Company or the Subsidiary in respect
of defects in quality, delays in delivery, completion of contracts, deficiencies
of design, performance of equipment or otherwise relating to liability for
products or services supplied or to be supplied by the Company or the Subsidiary
and, to the knowledge of the Company, no such claims are threatened or
anticipated.
Section 2.14. Employment Obligations. (a) Schedule 2.14 attached hereto
and hereby made a part hereof lists the names, commencement dates of employment
and the current salary and other compensation rates of all present employees of
the Company and the Subsidiary, together with a listing of all other employment
benefits therefor, including, without limitation, personal leave time, accrued
vacation, employee loans and the amount of all profit sharing and pension
benefits, which have accrued for such persons as of the date hereof, an accurate
summary of any pension, profit sharing, bonus, medical benefits, insurance or
similar arrangements for the employees of the Company and the Subsidiary,
salaried or nonsalaried, including any formal or informal plans, the funding
arrangements with regard thereto and all severance pay which would be due each
employee if his or her employment were to be terminated as of the Closing Date.
Except as and to the extent set forth in Schedules 2.14 and 2.15 attached hereto
or otherwise disclosed herein, there are no agreements, contracts or
understandings between the Company and its employees and the Subsidiary and its
employees with respect to employment, wages, expenses, allowances, vacations,
unpaid leave, hours, working conditions, bonuses, salaries, pensions, profit
sharing, medical benefits, insurance benefits, severance pay or otherwise.
(b) Schedule 2.14A attached hereto and hereby made a part hereof
contains a list of the names of all independent contractors who regularly
perform services on behalf of the Company or the Subsidiary and to whom the
Company or the Subsidiary paid more than $20,000 during the previous twelve (12)
months. The parties listed therein are not, and are not deemed to be, employees
of the Company or the Subsidiary for any purpose.
Section 2.15. Compliance with ERISA. (a) Except as set forth in Schedule
2.15 attached hereto, neither the Company nor the Subsidiary is a party to and
does not participate in, sponsor, contribute to or have any obligation to
contribute to, or have any liability or contingent liability with respect to:
(i) Any "employee welfare benefit plan" or "employee pension
benefit plan" (as those terms are respectively defined in Sections 3(1)
and 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including any "multi-employer plan" (as defined in
Section 3(37) of ERISA);
(ii) Any retirement or deferred compensation plan, incentive
compensation plan, stock option plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe
benefit arrangements (hereinafter referred to collectively as "fringe
benefit arrangements") for any employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an "employee benefit plan" (as
defined in Section 3(3) of ERISA); or
(iii) Any employment agreement not terminable on thirty (30)
days or less written notice, without further liability (the items
referred to in, Sections 2.15(a)(i), (ii) and (iii) are sometimes
individually referred to as an "Employee Plan" and collectively as
"Employee Plans").
(b) A true and correct copy of each Employee Plan and all contracts
relating thereto, or to the funding thereof, including, without limitation, all
trust agreements, insurance contracts, investment management agreements,
subscription and participation agreements and record keeping agreements, each as
in effect on the date hereof, have been delivered or will be delivered to
Galileo by the Company. In the case of any Employee Plan which is not in written
form, Galileo has been provided with an accurate description of such Employee
Plan as in effect on the date hereof. A true and correct copy of the most recent
annual report, actuarial report, summary plan description (including any summary
of material modifications issued since such summary plan description) and
Internal Revenue Service determination letter with respect to such Employee
Plan, to the extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not readily
tradable) held with respect to any such Employee Plan has been or will be
supplied to Galileo by the Company, and there have been no material changes,
other than in the ordinary course, in the financial condition in the respective
plans from that stated in the annual reports and actuarial reports supplied.
(c) Except as disclosed on Schedule 2.15, as to each Employee Plan:
(i) Each Employee Plan materially complies and has been
administered in substantial compliance with its terms and all
requirements of law and regulation applicable thereto, and neither the
Company nor the Subsidiary has received any notice from any
governmental agency questioning or challenging such compliance;
(ii) Each Employee Plan intended to qualify under Sections
401(a) of the Code is so qualified and substantially complies in form
and in operation with all applicable requirements of Sections 401(a)
and 501(a) of the Code; and no event has occurred which will or could
give reasonably be anticipated to rise to disqualification of any such
plan under such Sections or to a tax under Section 511 of the Code;
(iii) None of the assets of any Employee Plan are invested in
employer securities or employer real property;
(iv) There have been no "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with
respect to any Employee Plan for which no exemption is applicable and
neither the Company nor the Subsidiary has otherwise engaged in any
prohibited transaction;
(v) No Employee Plan is, and neither the Company nor the
Subsidiary has ever maintained or contributed to (i) a "defined benefit
plan" (as defined in Section 3(35) of ERISA), (ii) a "multiemployer
plan" within the meaning of Section 3(37) of ERISA, (iii) a "multiple
employer plan" within the meaning of Code Section 413 or a "multiple
employer welfare arrangement" within the meaning of Section 3(40) of
ERISA, or (iv) a "welfare benefit fund" as defined in Section 419(e) of
the Code, and neither the Company nor the Subsidiary has any liability
under Title IV of ERISA. No Employee Plan provides medical (whether or
not insured), with respect to any current or former employee of the
Company or the Subsidiary after retirement or other termination of
service (other than coverage mandated by applicable law);
(vi) There have been no acts or omissions by the Company or
the Subsidiary which have given rise to or could reasonably be expected
to give rise to fines, penalties, taxes or related charges under
Sections 502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code, for
which the Company may be liable;
(vii) No current or former employee of the Company or the
Subsidiary will be entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any benefits under
any Employee Plan as a result of the transactions contemplated by this
Agreement (either alone or in conjunction with any other event such as
a termination of employment) (other than as a result of any Employee
Plan terminated by the Company or by the request of Galileo) and no
trustee under any "rabbi trust" or similar arrangement in connection
with any Employee Plan will be entitled to any payment as a result of
the transactions contemplated by this Agreement;
(viii) There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the knowledge of the Company,
threatened involving an Employee Plan or the assets of such Employee
Plan, and, to the knowledge of the Company, no facts exist which could
reasonably be expected to give rise to any such actions, suits or
claims (other than routine claims for benefits);
(ix) Each Employee Plan that is a group health plan (including
any plans of current and former affiliates of the Company or the
Subsidiary which must be taken into account under Section 4980B of the
Code or Section 601 of ERISA) have been operated in material compliance
with the group health plan continuation coverage requirements of
Section 4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable; and
(x) Actuarially adequate accruals for all obligations, if
any, under each Employee Plan are reflected in the consolidated balance
sheet of the Company as of December 31, 1998, contained in the 1998
Financial Statements.
Section 2.16. Environmental Matters. (a) Except as set forth in Schedule
2.16 attached hereto, and except as would not result either individually or in
the aggregate in a Material Adverse Effect, no Hazardous Materials (as such term
is hereinafter defined) have been located in or on any of the real property
owned or used by the Company or the Subsidiary (hereinafter referred to as the
"Real Property") in violation of any applicable Environmental Laws (as such term
is hereinafter defined) or have been released into the environment, or
discharged, emitted, placed or disposed of at, on, or under or by the Real
Property, and the Company's operations and the Subsidiary's operations thereon
have complied with all applicable Environmental Laws. To the knowledge of the
Company, none of the Real Property is a facility at which there has been a
release of Hazardous Materials that exceeds or violates any applicable or
relevant and appropriate Environmental Laws. To the knowledge of the Company,
none of the Real Property is discharging oil or poses a substantial threat of a
discharge of oil, within the meaning of the Oil Pollution Act of 1990. The
Company has delivered to Galileo or its agents all assessments, studies,
sampling results, evaluations and other reports concerning any Hazardous
Material, Hazardous Material Activity (as such term is hereinafter defined) or
violation of any Environmental Law pertaining to the Company, the Subsidiary or
the Real Property, which were commissioned by the Company. To the knowledge of
the Company, no underground storage tanks are present at the Real Property. The
Company and the Subsidiary have obtained and possess all permits, licenses,
registrations, approvals and other authorizations required for the operations or
facilities of the Company or respecting the Real Property by any applicable
Environmental Law. Except as set forth in Schedule 2.16, the Company, the
Subsidiary and their operations and, to the knowledge of the Company, the Real
Property are not now, and have not been in the past, a party to or, to the
knowledge of the Company, threatened by any judicial, administrative or
regulatory litigation, claim, proceeding or investigation arising from any
Hazardous Material Activity or the operation or violation of any applicable
Environmental Law. There are no grounds, facts, circumstances or other matters
which might provide a basis for any liability or claim against the Company, the
Subsidiary or the Real Property arising from any Hazardous Material Activity or
the violation of any applicable Environmental Law, except for any liabilities
and claims which in the aggregate will not have a Material Adverse Effect.
(b) The term "Environmental Laws" shall mean any Federal, state,
regional, county, local, governmental, public or private statute, law,
regulation, ordinance, order, consent decree, judgment, permit, license, code,
covenant, deed restriction, common law, or other requirement, pertaining to
protection of the environment, health or safety of persons, natural resources,
conservation, wildlife, waste management, any Hazardous Material Activity, or
pollution (including, without limitation, regulation of releases and disposals
to air, land, water and groundwater), and includes, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act, Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act and Solid and Hazardous
Waste Amendments, Federal Water Pollution Control Act, as amended by the Clean
Water Act, Clean Air Act, as amended, Toxic Substances Control Act, Occupational
Safety and Health Act, Emergency Planning and Community Right-to-Know Act,
National Environmental Policy Act, Safe Drinking Water Act, and any similar or
implementing state law, and all amendments, rules, regulations, promulgated
thereunder. The term "Hazardous Materials" shall mean any hazardous or toxic
chemical, waste, byproduct, pollutant, contaminant, compound, product or
substance, including, without limitation, asbestos, polychlorinated biphenyls,
petroleum (including crude oil or any fraction thereof), and any material the
exposure to, or manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, disposal, abatement, cleanup, removal,
remediation or handling of which, is prohibited, controlled or regulated by any
Environmental Law. The term "Hazardous Material Activity" shall mean any
activity, event or occurrence involving a Hazardous Material, including, without
limitation, the manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, disposal, abatement, cleanup, removal,
remediation or handling of any Hazardous Material.
Section 2.17. Union Relations. Except as disclosed in Schedule 2.17
attached hereto and hereby made a part hereof, no employees of the Company or
the Subsidiary are members of a collective bargaining unit of the Company or the
Subsidiary and there have not been any, and, to the knowledge of the Company,
there are no threatened or, to the knowledge of the Company, contemplated,
attempts to organize for collective bargaining purposes any of the employees of
the Company or the Subsidiary.
Section 2.18. Preservation of Business Relationships. The Company will
use its best efforts (without making any commitment on behalf of Galileo or the
Merger Sub) until the Closing to cause the Company and the Subsidiary to
preserve for Galileo and the Surviving Corporation through and after the Closing
Date the relationships of the Company and the Subsidiary with its employees,
suppliers and customers and others having business relationships with the
Company and the Subsidiary.
Section 2.19. Tax Matters.
(a) For the purposes of this Section, "Tax" or "Taxes" refers to any
and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits. (i) the Company and the Subsidiary have
timely filed all federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to Taxes required to be
filed by the Company and the Subsidiary and have paid all Taxes shown to be due
on such Returns.
(ii) The Company and the Subsidiary as of the Effective Time
will have withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Neither Company nor Subsidiary has been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against the Company or the Subsidiary, nor has the
Company or the Subsidiary executed any waiver of any statute of
limitations on or extending the period for the assessment or collection
of any Tax.
(iv) Except as provided on Schedules 2.19 attached hereto, no
audit or other examination of any Return of the Company or the
Subsidiary is presently in progress, nor has the Company or the
Subsidiary been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by the
Company or the Subsidiary has been proposed formally or informally by
any Tax authority to the Company or the Subsidiary or any
representative thereof and, to the knowledge of Company, no basis
exists for any such adjustment which would be material to the Company.
(vi) Neither the Company nor the Subsidiary has any liability
for unpaid Taxes which has not been accrued for or reserved on the
Interim Balance Sheet, whether asserted or unasserted, contingent or
otherwise, which is material to the Company.
(vii) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering
any employee or former employee of the Company or the Subsidiary that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or
162 of the Code.
(ix) Neither the Company nor the Subsidiary has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by
Company.
(x) the Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xi) No power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes payable by the
Company or the Subsidiary.
(xii) As of the Closing Date, neither the Company nor the
Subsidiary will be affected by or have any obligations under any
tax-sharing or allocation agreement or arrangement.
Section 2.20. Material Agreements. (a) Schedule 2.20 attached hereto and
hereby made a part hereof accurately describes all leases and licenses with
respect to any property, real or personal (whether as landlord, tenant, licensor
or licensee), contracts, guarantees, mortgages, indentures, agreements,
understandings or other commitments, whether oral or written, of the Company or
the Subsidiary or to which the Company or the Subsidiary is a party or by which
the Company or the Subsidiary is bound, other than (x) purchase orders, invoices
and/or statements in the ordinary course of business and involving less than
$100,000 and (y) those leases, contracts, guarantees, mortgages, indentures,
agreements, understandings and commitments individually involving less than
$50,000. The Company has delivered to Galileo complete and accurate copies of
all documents referred to in Schedule 2.20 attached hereto, each of which is in
effect and valid and enforceable in accordance with its terms (hereinafter
referred to collectively as the "Material Agreements"). Neither the Company nor
the Subsidiary has given a power of attorney to any person or entity for any
purpose.
(b) Between the date hereof and the Closing Date, the Company will not,
without the prior written consent of Galileo, which shall not be unreasonably
withheld, enter into, amend or terminate any contract, guarantee, mortgage,
indenture, agreement or other instrument of any of the types referred to in
paragraph (a) of this Section 2.20, other than purchase and sale agreements
respecting the Company's or the Subsidiary's products entered into in the
ordinary course of business.
(c) Except as disclosed in Schedule 2.20, neither the execution of this
Agreement by the Company nor the consummation of the purchase of Company Stock
by Galileo from the Company will modify, amend or terminate any of the rights or
obligations of any of the parties under any of the Material Agreements or
require the consent of any party thereto to remain enforceable by the Company or
the Subsidiary.
(d) Except as disclosed in Schedule 2.20, to the knowledge of the
Company after due inquiry, none of the Material Agreements has or will have a
Material Adverse Effect on the profitability of the Company or the Subsidiary,
or on the use and operation of the assets of the Company or the Subsidiary, and
all Material Agreements have been entered into upon terms in accordance with
customary trade practices of the Company or the Subsidiary.
Section 2.21. No Default under Agreements. Each of the Material
Agreements is, and on the Closing Date will be, in full force and effect and is,
and on the Closing Date will be, enforceable in all material respects against
the Company, the Subsidiary and the other parties thereto, in accordance with
its terms, except as limited by liquidation, bankruptcy, insolvency,
reorganization or similar laws or except to the extent that any of the Material
Agreements shall have expired or terminated pursuant to their terms other than
as a result of a default or breach thereunder by the Company or the Subsidiary.
No default exists under the terms of, and no event has occurred which, with the
lapse of time, the giving of notice or both, would constitute an event of
default under, any of the Material Agreements, except for such minor defaults
which either alone or in the aggregate would not cause the loss of any material
benefit thereunder. Except as described in any of the Schedules attached hereto,
neither the Company nor the Subsidiary is a party to or bound by any purchase
commitments, agreements or understandings of any kind, whether oral or written,
relating to the business of the Company, the Subsidiary or the Company Stock,
except for agreements not required to be listed in Schedule 2.20 hereof, and
executory sales and purchase commitments and contracts relating to the sale of
products or services of the Company or the Subsidiary and the purchase of
material and supplies used by the Company or the Subsidiary entered into in the
ordinary course of business and not in violation of any representation, covenant
or warranty of the Company herein contained.
Section 2.22. Compliance with Laws. The Company and the Subsidiary and
their respective services, practices, xxxxxxxx, employee benefits, properties,
equipment, machinery, buildings used and operations are in compliance in all
materials respects with all applicable Federal, state and local laws, statutes,
ordinances, codes, regulations, rules, orders, restrictions and requirements,
governmental, administrative, judicial and otherwise, including, without
limitation, Environmental Laws and those relating to wages, prices, equal
opportunity, disabilities, environmental protection, safety, health, medical
care, building and zoning, and to the knowledge and belief of the Company, no
changes in any such laws, statutes, ordinances, codes, regulations, rules,
orders, restrictions or requirements have been proposed or are in process with
which Galileo, the Company or the Subsidiary could not comply without any
Material Adverse Effect. All offers and issuances of securities by the Company,
including the granting of stock options, have been made in compliance with all
applicable Federal and state securities laws.
Section 2.23. Licenses, Permits and Approvals. Attached hereto as
Schedule 2.23 and hereby made a part hereof is a list and description of all
licenses, permits, authorizations and approvals required by any Federal, state
or local government's administrative or judicial authorities in connection with
the operation of the business of the Company or the Subsidiary as presently
being conducted, all of which are in full force and effect. The Company and the
Subsidiary shall use its best efforts to assist Galileo in obtaining the
licenses, permits, authorization and approvals necessary or appropriate for the
operation of the business of the Company and the Subsidiary on and after the
Closing Date by Galileo.
Section 2.24. Accounts Receivable. Not less than ninety-seven percent
(97%) of the gross amounts of the accounts receivable of the Company and the
Subsidiary which will exist on the Closing Date will represent valid obligations
to the Company or the Subsidiary fully collectible within 120 days after the
Closing Date and shall not be subject to any setoff or counterclaim.
Section 2.25. Intellectual Property. (a) Except as set forth on Schedule
2.25 attached hereto and hereby made a part hereof, the Company or the
Subsidiary, as the case may be, owns, or is licensed, or otherwise possesses
legally enforceable rights, or can obtain such rights without paying more than
$5,000, to use, sell or license, as applicable, all of the following items which
are used in the conduct of the business of the Company and the Subsidiary
(hereinafter referred to as the "Intellectual Property"), excluding in each case
Commercial Software (as defined below): (i) patents, designs, utility models and
applications therefor, patent disclosures and inventions, (ii) trademarks,
service marks, logos, trade dress, trade names, Internet domain names and the
Company's corporate name and registrations and applications for registration
thereof, including the common law rights and goodwill associated therewith,
(iii) rights associated with works of authorship including copyrights and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data and documentation (in both source code and object code form), (vi) trade
secrets and other confidential and proprietary information including, but not
limited to, inventions (whether patentable or unpatentable), know-how and
copyrightable works, (vii) other confidential and proprietary intellectual
property rights, (viii) copies and tangible embodiments of all of the foregoing
(in whatever form or medium), (ix) all renewals, extensions, revivals and
resuscitations thereof and any other patents claiming priority from any of the
foregoing and (x) any rights analogous to those set forth in this Section 2.25
and any other proprietary rights relating to intangible property. Except as
disclosed on Schedule 2.25, the Company or the Subsidiary has licenses for all
Commercial Software used in its business and the Company or the Subsidiary and
neither the Company nor the Subsidiary has any obligation to pay fees, royalties
and other amounts at any time pursuant to any such license. "Commercial
Software" means packaged commercially available software programs generally
available to the trade which have been licensed to the Company or the Subsidiary
pursuant to end-user licenses and which are used in the business of the Company
or the Subsidiary.
(b) Schedule 2.25 sets forth a complete list of all (i) material
licenses, sublicenses and other agreements as to which the Company or the
Subsidiary is a party (as licensor, licensee or otherwise) pursuant to which the
Company, the Subsidiary or any third party is authorized to use, sell,
distribute or license any Intellectual Property, except for the sale or license
of products or services to customers of the Company or the Subsidiary in the
ordinary course of business or with respect to Commercial Software and (ii)
licenses, sublicenses or other agreements with resellers and distributors that
grant non-exclusive rights to use or modify and resell or sublicense object
code. Neither the Company nor the Subsidiary is in material violation of any
such license, sublicense or agreement. Schedule 2.25 lists all written licenses,
sublicenses and other agreements as to which the Company or the Subsidiary is a
party and pursuant to which the Company or the Subsidiary is authorized to use
any patents, patent rights, trademarks, service marks, logos, trade secrets,
copyrights or software of third parties which are incorporated in any existing
product or service of the Company or the Subsidiary.
(c) Except as disclosed on Schedule 2.25, no claims with respect to the
Intellectual Property are pending or, to the knowledge of the Company or the
Subsidiary, threatened by any third party (i) alleging that the manufacture,
sale, licensing or use of any Intellectual Property as now manufactured, sold,
licensed or used by the Company, the Subsidiary or any third party infringes on
any intellectual property rights of any third party, (ii) against the use by the
Company or the Subsidiary of any technology, know-how or computer software used
in the business of the Company or the Subsidiary as currently conducted or (iii)
challenging the validity, enforceability or effectiveness of any such
Intellectual Property or the ownership thereof by the Company or the Subsidiary.
(d) Except as disclosed on Schedule 2.25, the Company has not entered
into any agreement under which the Company or the Subsidiary is restricted (i)
from selling, licensing or otherwise distributing any products or services to
any class or type of customers or through any type of channel in any geographic
area or during any period of time, or (ii) from combining, incorporating,
embedding or bundling or allowing others to combine, incorporate, embed or
bundle any of its products or services with those of a third party.
(e) The Company and the Subsidiary have taken reasonable security
measures to safeguard and maintain trade secrets owned by the Company and the
Subsidiary, as the case may be. There is no claim pending or, to the knowledge
of the Company or the Subsidiary, threatened against the Company or the
Subsidiary with respect to any alleged infringement of any intellectual property
rights owned or alleged to be owned by a third party and no person or entity is
infringing on the Intellectual Property. All officers and employees of the
Company and the Subsidiary who have access to proprietary information have
executed and delivered to the Company or the Subsidiary, as the case may be, an
agreement regarding the protection of proprietary information, and the
assignment to or ownership by the Company or the Subsidiary, as the case may be,
of all Intellectual Property arising from the services performed for the Company
or the Subsidiary, as the case may be, by such persons. No current or prior
officers or employees of the Company or the Subsidiary claim any ownership
interest in any Intellectual Property, the Company or the Subsidiary, as the
case may be. Neither the Company nor the Subsidiary has received notice in the
past three years that any consultant to the Company or the Subsidiary has
claimed an interest in any Intellectual Property as a result of having been
involved in the development of such Intellectual Property while consulting to
the Company or the Subsidiary.
(f) Except as disclosed on Schedule 2.25, (i) the occurrence in or use
by any computer software included in the Intellectual Property, of dates on or
after January 1, 2000 (the "Millennial Dates"), will not materially and
adversely affect the performance of such software with respect to date dependent
data, computations, output or other functions (including, without limitation,
calculating, computing and sequencing) (collectively, the "Date Dependent
Functions") and such software is reasonably expected to create, sort and
generate output data related to or including Millennial Dates without any
material errors or omissions and there is no claim pending or, to the knowledge
of the Company, threatened against the Company or the Subsidiary with respect to
any alleged adverse effect of the Millennial Dates on the performance of any
computer software included in the Intellectual Property with respect to the Date
Dependent Functions or the inability of any computer software included in the
Intellectual Property to create, sort and generate output data related to or
including Millennial Dates without any material errors or omissions and (ii)
computer software included in the Intellectual Property does not contain any
"back door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus"
(as these terms are commonly used in the computer software industry), or other
software features designed to permit unauthorized access, to disable or erase
software or data, or to perform any other similar type of detrimental functions.
(g) No government funding or university or college facilities were used
in the development of the Intellectual Property.
(h) The Company or the Subsidiary, as the case may be, has the
exclusive right to file, procure and maintain all applications and registrations
with respect to the Intellectual Property owned thereby.
(i) All patents and registered trademarks, trade names and copyrights
held by the Company or the Subsidiary are valid and subsisting and the Company
or the Subsidiary has properly marked, or caused to be marked, all products and
services sold or otherwise distributed or rendered with all required or
appropriate notices.
(j) The Company or the Subsidiary, as the case may be, has taken all
commercially reasonable action to maintain and protect each item of Intellectual
Property owned or used by the Company or the Subsidiary.
(k) No patent, statute, rule, regulation, code or standard is pending
or, to the knowledge of the Company or the Subsidiary, proposed, that could have
or has had a Material Adverse Effect on the validity, enforceability, ownership
of or right to use, sell, license or dispose of any Intellectual Property.
(l) None of the material trade secrets of the Company or the Subsidiary
has been disclosed to any person unless such disclosure was necessary and was
made pursuant to a confidentiality agreement.
Section 2.26. Bank Accounts. Schedule 2.26 attached hereto and hereby
made a part hereof sets forth a complete list of the names and addresses of each
bank, savings and loan association, securities firm or other financial
institution in which the Company or the Subsidiary has any savings, checking,
securities, investment or other accounts or maintains a safety deposit box, the
names or other identification of each such account, the account balances as of
the date hereof, and the names or other identification of each person who has
authority to draw on such account or who has access to such safety deposit
boxes.
Section 2.27. Real Property Matters. Except as disclosed in Schedule
2.27 attached hereto and hereby made a part hereof, (i) there are no material
defects in any of the buildings or any fixtures or other improvements located
upon any of the real property owned, leased or used by the Company or by the
Subsidiary (herein referred to as the "Real Property"), whether above, at or
below grade, including, without limitation, any material leakage or seepage in
or from roofs, walls or foundations; (ii) all buildings and improvements located
on the Real Property are free of termite or other material insect infestation;
(iii) all gas, electric, water and other utility lines, sewers, and curbs which
are required in connection with the use of the Real Property have been
installed; (iv) none of the Real Property is located in a flood plain and none
of the improvements located on the Real Property has been flooded in whole or in
substantial part within the past three (3) years; (v) all water, sewer,
plumbing, heating, cooling, air conditioning, sprinkling, gas, cooking,
refrigerating, waste treatment or disposal, communications and electrical
systems and other facilities of whatever nature located on the Real Property are
in normal working order and condition, ordinary wear and tear excepted, and of a
capacity adequate for the Surviving Corporation's continued use thereof after
the Effective Time; and (vi) all buildings and improvements located upon the
Real Property, including, without limitation, any septic tank, field or drain
tiles servicing any building located on the Real Property, and all lagoons,
water retention and detention areas, spray fields and landfills, are in
compliance in all material respects with all Federal, state and local building,
zoning, health, safety and other laws, codes, regulations, ordinances and
restrictions applicable thereto, and there are no written allegations, notices,
suits or judgments relating to violations by the Real Property or any other
buildings or improvements located thereon of any Federal, state and local
building, zoning, health or safety violations which have not been corrected. No
insurer within the past three (3) years has refused to insure any of the Real
Property or conditioned the insuring thereof on the completion of any work which
has not yet been completed. Easements exist sufficient to connect all gas,
electric, water and other utility lines, sewers, communications and electrical
systems and all other facilities located on the fee portion of the Real Property
to existing lines on a public way over any land other than the Real Property on
which such lines are located. There are no pending, or threatened in the form of
written notice to the Company or the Subsidiary, condemnation actions affecting
any of the Real Property.
Section 2.28. Assets and Properties. Schedule 2.28 attached hereto and
hereby made a part hereof lists all of the material machinery, equipment,
vehicles, furniture and other tangible personal property owned, leased or used
by the Company and the Subsidiary in connection with its business. Except as
specifically disclosed in said Schedule 2.28, all of such listed machinery,
equipment, vehicles, furniture and other tangible personal property owned,
leased or used by the Company and the Subsidiary are in normal working order and
condition, ordinary wear and tear excepted. From the date hereof until the
Closing Date, the Company and the Subsidiary agree that such assets shall only
be used in the ordinary course of business and shall be subject only to ordinary
wear and tear.
Section 2.29. Disclosure. Neither any representation or warranty made
herein by the Company nor any written statement, certificate or schedule given
or to be given to Galileo pursuant to this Agreement, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein under
the circumstances under which they were made not misleading. The Company has
made, and will make in good faith prior to the Closing Date, full disclosure in
writing of all material facts known to the Company with respect to the Company
and the Subsidiary and their assets, liabilities and business which a prudent
purchaser of the Company Stock would deem relevant.
Section 2.30. Updating of Schedules. There has been no Material Adverse
Change in any of the matters reflected in any Schedule delivered pursuant to
this Agreement from the respective date thereof to and including the date of
this Agreement. The Schedules which have been delivered by the Company to
Galileo prior to the execution of this Agreement have been prepared by the
Company and will be updated by the Company, as the case may be, to include such
information as of such date, with any and all changes specifically marked, so
that all such Schedules are true, accurate and complete in all material
respects, both as of the date hereof and as of the Closing Date.
Section 2.31. Location of Assets. Except as disclosed in Schedule 2.31,
all of the material, tangible assets and property of the Company are located at
the Company's facility in Englewood, Colorado, and all of the material, tangible
assets and property of the Subsidiary are located at the Subsidiary's facility
in Louisville, Colorado, and, except as disclosed in Schedule 2.31, all of the
assets and property located at the Company's facility in Englewood, Colorado,
and the Subsidiary's facility in Louisville, Colorado, as of the date hereof
(exclusive of the personal property and effects of the employees of the Company
and the Subsidiary and which are not used or useful in the business of the
Company or Subsidiary) and as of the Closing Date are and will be owned by the
Company and neither the Stockholders of the Company or Subsidiary nor any third
party has any interest whatsoever therein or thereto.
Section 2.32. Proxy Statement. The Proxy Statement (as defined in
Section 7.4 hereof) will, at the time it is mailed to the stockholders of the
Company and at the time of the Meeting (as defined in Section 7.4) to be held in
connection with this Agreement will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (except that no representation or warranty is made with respect
to the information contained therein with respect to Galileo).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GALILEO AND THE MERGER SUB
As an inducement to the Company to enter into and perform this
Agreement, Galileo and the Merger Sub covenants, represents and warrants to, and
agrees with, the Company as follows:
Section 3.1. Corporate Status of Galileo. Galileo and the Merger Sub
are corporations duly organized, validly existing and in good standing under the
laws of Delaware, with full corporate power and authority to own, lease and
operate their respective properties and to carry on the business as now being
conducted.
Section 3.2. Authority. Galileo and the Merger Sub have full
legal capacity, power and authority to enter into and perform this Agreement.
Section 3.3. Authority of Galileo and Merger Sub. The execution and
delivery of this Agreement by Galileo and the Merger Sub and the consummation of
the transactions contemplated hereby have been or will be duly authorized by all
necessary corporate action on the part of Galileo and the Merger Sub. This
Agreement has been duly executed and delivered by Galileo and the Merger Sub and
(assuming the valid authorization, execution and delivery of this Agreement by
the Company) constitutes a valid and binding obligation of Galileo and the
Merger Sub enforceable against each of them in accordance with its terms.
Section 3.4. Capital Structure. (a) The authorized stock of Galileo
consists of 250,000,000 shares of Common Stock, of which 89,999,435 shares were
issued and outstanding as of December 31, 1999, 25,000,000 shares of Preferred
Stock, none of which is issued or outstanding, and 3 shares of special voting
preferred stock, of which 3 shares are issued and outstanding. 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.
(b) The shares of Galileo Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, non-assessable.
Section 3.5. SEC Documents; Galileo Financial Statements. Galileo has
furnished or made available to the Company true and complete copies of all
reports or registration statements filed by it with the U.S. Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934 (the
"Exchange Act") for all periods subsequent to January 1, 1999, all in the form
so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed document
with the SEC. The financial statements of Galileo, including the notes thereto,
included in the SEC Documents (the "Galileo Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of Galileo at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
There has been no change in Galileo accounting policies except as described in
the notes to the Galileo Financial Statements.
Section 3.6. No Material Adverse Change. Since the date of the balance
sheet included in the Galileo's most recently filed report on Form 10-Q or Form
10-K, Galileo has conducted its business in the ordinary course and there has
not occurred: (a) any material adverse change in the financial condition,
liabilities, assets or business of Galileo; (b) any amendment or change in the
Certificate of Incorporation or Bylaws of Galileo; or (c) any damage to,
destruction or loss of any assets of Galileo, (whether or not covered by
insurance) that materially and adversely affects the financial condition or
business of Galileo.
Section 3.7. Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Galileo has received any
notice of assertion against Galileo which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS OF GALILEO AND THE MERGER SUB
The obligations of Galileo and the Merger Sub under this Agreement are,
at Galileo's option, subject to the fulfillment at or prior to the Closing of
each of the following conditions, upon the nonfulfillment of any of which, at
Galileo's option, this Agreement may be terminated with the effect set forth in
Section 8.2 hereof:
Section 4.1. Accuracy of Representations, Warranties and Covenants. The
representations and warranties of the Company set forth in Article 2 hereof
shall be true and accurate in all material respects as of the date when made and
as of the Closing Date, except to the extent necessary to reflect the
consummation of the transactions provided for herein. The Company shall have
duly performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date. The Company shall have delivered to
Galileo a certificate executed by an executive officer dated the day of the
Closing Date and signed by the Company to the effect set forth in this Section
4.1.
Section 4.2. HSR Act. Any applicable waiting period under the HSR Act,
including any extensions thereof, shall have elapsed or have been terminated and
neither the Federal Trade Commission nor the U.S. Department of Justice shall
have taken any action to prevent or delay, or threatened to take any action
which may reasonably be expected to prevent or delay consummation of the
transactions contemplated under this Agreement; and no governmental inquiry
shall have been received that, in the reasonable opinion of Galileo, might be
expected to lead to an action or proceeding to restrain or otherwise challenge
the transactions contemplated herein and therein.
Section 4.3. Licenses, Permits, Approvals, Etc. Galileo shall have
obtained, without significant burden or expense and in form and substance
reasonably satisfactory to Galileo and its legal counsel, all material
governmental, administrative and other licenses, permits, approvals, consents
and authorizations, which, in the reasonable opinion of Galileo, are required or
desirable in connection with the operation of the Surviving Corporation and the
Subsidiary after the Effective Time.
Section 4.4. Employment Agreements. The individuals listed in Schedule
4.4 attached hereto and hereby made a part hereof shall have executed with and
delivered employment agreements to the Surviving Corporation in form and
substance satisfactory to Galileo (hereinafter referred to individually as an
"Employment Agreement" and collectively as the "Employment Agreements").
Section 4.5. Approval of Legal Matters by Counsel. There shall have been
furnished to counsel for Galileo certified copies of such corporate records of
the Company and the Subsidiary and copies of such other documents as such
counsel may reasonably have requested.
Section 4.6. No Adverse Proceedings. There shall be no action, suit,
proceeding or claim instituted or threatened by a third party relating to the
transactions contemplated hereby.
Section 4.7. Receipt of Closing Documents. Galileo shall have received all
of the closing documents referred to in Article 6 hereof.
Section 4.8. Approval of Updated Schedules. All Schedules required to
be provided to Galileo pursuant to Article 2 hereof shall have been updated to
the Closing Date by the Company and delivered to Galileo and any new material
information contained in said updated Schedules shall be satisfactory to Galileo
in its sole discretion and in all respects.
Section 4.9. Third Party Consents. All consents of third parties
reasonably determined by Galileo to be necessary or desirable, including without
limitation with respect to those contracts listed in Schedule 4.9 attached
hereto, shall have been obtained in form and substance reasonably acceptable to
Galileo, including, without limitation, any lessor consents or any consents of
third parties to Material Contracts which have "change of control" or
"non-assignment" provisions.
Section 4.10. Company Stockholder Approval. This Agreement and the Merger
shall have been duly approved and adopted by the requisite vote of the
stockholders of the Company under applicable law.
Section 4.11. Tax Opinion. Galileo shall have received the opinion of
Xxxxxxx and Xxxxxx based upon receipt of customary representations, and
substantially to the effect that the Merger will constitute a reorganization
under Section 368 of the Code. Galileo and the Merger Sub agree to make such
reasonable representations as requested by tax counsel in connection with such
opinion and the opinion referred to in Section 5.6 hereof. Such opinion shall
have been delivered and shall not have been withdrawn or modified in any
material respects.
Section 4.12. Dissenting Company Stock. The aggregate number of shares
of Dissenting Company Stock shall not exceed 10% of the Company Stock
outstanding immediately prior to the Effective Time. The Company shall have
delivered to Galileo a certificate dated the Closing Date and signed by an
authorized officer of the Company to the effect set forth in the first sentence
of this Section.
Section 4.13. Exemption. Galileo shall determine, in its sole discretion,
that the issuance of Galileo Common Stock to all of the holders of the Company
Stock pursuant to this Agreement and the Merger shall be exempt from the
registration provisions of the Securities Act and applicable state securities
law; provided, however, that Galileo will reasonably cooperate with the Company
to seek to find a private placement exemption under the Securities Act and
applicable state securities law in connection with its issuance of the Galileo
Common Stock.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
fulfillment at or prior to the Closing of each of the following conditions, upon
the nonfulfillment of any of which, at its option, this Agreement may be
terminated with the effect set forth in Section 8.2 hereof:
Section 5.1. Accuracy of Representations, Warranties and Covenants. The
representations and warranties of Galileo set forth in Article 3 hereof shall be
true and correct in all material respects as of the date when made and as of the
Closing Date, except to the extent necessary to reflect the consummation of the
transactions provided for herein and except as otherwise specifically permitted
hereby. Galileo shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date. Galileo shall
have delivered to the Company a certificate executed by an executive officer
dated the day of the Closing Date and signed by Galileo to the effect set forth
in this Section 5.1.
Section 5.2. HSR Act. Any applicable waiting period under the HSR Act,
including any extensions thereof, shall have elapsed or have been terminated and
neither the Federal Trade Commission nor the U.S. Department of Justice shall
have taken any action to prevent or delay, or threatened to take any action
which may reasonably be expected to prevent or delay consummation of the
transactions contemplated under this Agreement; and no governmental inquiry
shall have been received that, in the reasonable opinion of the Company, might
be expected to lead to an action or proceeding to restrain or otherwise
challenge the transactions contemplated herein and therein.
Section 5.3. Receipt of Closing Documents. The Company shall have received
all of the closing documents referred to in Article 6 hereof.
Section 5.4. Approval of Legal Matters by Counsel. There shall have
been furnished to counsel for the Company certified copies of such corporate
records of Galileo and the Merger Sub and copies of such other documents as such
counsel may reasonably have requested.
Section 5.5. Company Stockholder Approval. This Agreement and the Merger
shall have been duly approved and adopted by the requisite vote of the
stockholders of the Company under applicable law.
Section 5.6. Tax Opinion. The Company shall have received the opinion
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, based upon receipt of customary
representations, and substantially to the effect that the Merger will constitute
a reorganization under Section 368(a) of the Code. The Company agrees to make
such reasonable representations as requested by tax counsel in connection with
such opinion and the opinion referred to in Section 4.11 hereof. Such opinion
shall have been delivered and shall not have been withdrawn or modified in any
material respect.
ARTICLE 6
CLOSING
Section 6.1. Date, Time and Place of Closing. The closing in respect of
the Merger (herein referred to as the "Closing") shall be held at the offices of
Xxxxxxx and Xxxxxx, 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxx at 9:00 A.M., Chicago
time, on the second business day following the satisfaction of the conditions
set forth in Articles 4 and 5 hereof (other than those conditions specified in
Sections 4.7, 4.8 or 5.3 thereof which by their nature are to first be satisfied
on the Closing Date), but such date shall not be less than 20 days from the date
of this Agreement, or such other date mutually agreed to by the parties (herein
referred to as the "Closing Date"), which date (unless otherwise mutually agreed
by the parties) shall be the day of the Effective Time.
Section 6.2. Documents to Be Delivered by the Company to Galileo. The
Company agrees to deliver to Galileo on the Closing Date the following:
(a) Certificates. The Certificates required to be
delivered pursuant to Sections 4.1 and 4.12 hereof.
(b) Certificate of Merger. The Certificate of Merger
duly executed by an authorized officer of the Company.
(c) Charter Documents. The Certificate of
Incorporation and all amendments thereto of the Company and the
Subsidiary certified by the Secretary of the State of Delaware as of
a date not more than ten (10) days prior to the Closing Date.
(d) Good Standing Certificates. Certificates of good
standing for the Company and the Subsidiary issued by the Secretary of
the State of Delaware as of a date not more than ten (10) days prior to
the Closing Date.
(e) Certificates of Secretarial Officer. Certificates of the
Secretary or an Assistant Secretary of the Company and the Subsidiary
dated the Closing Date with respect to (i) the bylaws of the Company,
(ii) the bylaws of the Subsidiary, (iii) the incumbency of the officers
of the Company and the Subsidiary and (iv) resolutions of the Board of
Directors of the Company authorizing and approving the Merger and this
Agreement and the execution, delivery and performance of any documents
referred to in this Agreement to which the Company is to be a party.
(f) Resignations. Written resignations of those officers and
directors of the Company and the Subsidiary specified by Galileo with
an acknowledgment that such persons do not have any claims for further
compensation from the Company or the Subsidiary.
(g) Legal Opinion. Galileo shall have received a legal
opinion from counsel to the Company in form and substance
reasonably satisfactory to Galileo and its counsel covering the matter
set forth in Exhibit D hereto.
(h) Employment Agreements. The Employment Agreements
executed by the persons listed on Schedule 4.4 in form and substance
reasonably satisfactory to Galileo and its counsel.
(i) Escrow Agreement. The Escrow Agreement executed by the
Company and the Escrow Agent attached hereto.
(j) Disclaimer of Interest Letter. A written agreement from
those officers, directors and employees of the Company specified by
Galileo that they have no interest or claim whatsoever in or to any
programs, software, formulas, patents, copyrights, inventions or other
tangible or intangible property owned or used by the Company or the
Subsidiary in connection with their respective businesses, assigning
any ownership interests therein to the Company and the Surviving
Company, and agreeing not to appropriate or use any such property,
directly or indirectly, for their own benefit.
(k) Representation letters of each holder of Company
Stock substantially in the form attached hereto as Exhibit C.
(l) Such other documents as may reasonably be requested by
Galileo or its counsel to evidence compliance with any federal or state
tax withholding or securities laws.
Section 6.3. Items to Be Delivered by Galileo. Galileo agrees to deliver on
the Closing Date the following:
(a) Cash Portion of Purchase Price. Wire transfer
to the Paying Agent of the cash portion of the Merger Consideration
pursuant to Section 1.2(a)(i) hereof.
(b) Galileo Common Stock. Delivery to the Paying Agent
of stock certificates for the Galileo Common Stock.
(c) Escrow Agreement. The Escrow Agreement executed by
Galileo.
(d) Escrow Deposit. Wire transfer to the Escrow
Agent of the $20,000,000 escrow deposit pursuant to Section 1.3 hereof.
(e) Certificate of Merger. The Certificate of Merger
duly executed by an authorized officer of the Merger Sub.
(f) Legal Opinion. A legal opinion from counsel to
Galileo in form and substance reasonably satisfactory to the Company
and its counsel covering the matters set forth in Exhibit E hereto.
(g) Certificate. Certificate of Galileo, dated the
Closing Date, certifying that the conditions precedent set forth in
Section 5.1 hereof have been fulfilled.
ARTICLE 7
FURTHER AGREEMENTS
Section 7.1. Commissions and Expenses of Sale. In the event that the
Merger is not consummated, each party to this Agreement shall bear its own
legal, accounting and other related expenses in connection with the transactions
provided for herein. The Company represents and warrants to Galileo that, except
for X.X. Xxxxxx & Company, Inc., no broker, finder, agent or similar
intermediary (a "Broker") has acted on behalf of any of the Company or its
stockholders in connection with this Agreement or the transactions contemplated
thereby, and that, except for a fee payable to X.X. Xxxxxx & Company, Inc. (the
"Company's Fee"), there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection therewith based on any agreement,
arrangement or understanding with the Company or its stockholders, or any action
taken by the Company or its stockholders. The Company agrees to pay the
Company's Fee and to indemnify and hold harmless Galileo and the Merger Sub from
any claim or demand for commission or other compensation by any Broker claiming
to have been employed by or on behalf of the Company or its stockholders, and to
bear the cost of legal expenses incurred in defending against any such claim.
Galileo represents and warrants to the Company that, except for Xxxxxx Brothers
Inc., no Broker has acted on behalf of Galileo in connection with this Agreement
or the transactions contemplated thereby and that, except for a fee payable to
Xxxxxx Brothers Inc., there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with Galileo, or any action taken by
Galileo. Galileo agrees to indemnify and hold harmless the Company from any
claim or demand for commission or other compensation by any broker claiming to
have been employed by or on behalf of Galileo, and to bear the cost of legal
expenses incurred in defending against any such claim.
Section 7.2. Other Acquisition Proposals. From and after the date
hereof and until the Closing or the date this Agreement is terminated, the
Company shall not, directly or indirectly, solicit or encourage inquiries or
proposals with respect to, or participate in any negotiations or discussions
concerning: (i) any acquisition or purchase of shares of the Company Stock; (ii)
all or a substantial portion of the assets of, or a substantial equity interest
in, the Company or the Subsidiary; or (iii) any merger, consolidation or other
business combination with or involving the Company or the Subsidiary, other than
as contemplated by this Agreement.
Section 7.3. Approvals and Consents. The Company, Galileo and the
Merger Sub shall take all steps reasonably necessary in connection with the
preparation and submission of any premerger notification required under the HSR
Act in connection with the transactions contemplated by this Agreement, such
submission to be filed (with request for early termination) no later than
February 7, 2000, and to obtain the written consent or approval of each and
every governmental agency or third party whose consent or approval shall be
required in order to permit the consummation of the transactions contemplated by
this Agreement.
Section 7.4. Company Stockholder Approval. The Company shall take all
steps necessary to duly call, give notice of, convene and hold a meeting
(hereinafter referred to as the "Meeting") of its stockholders to be held as
promptly as practicable for the purpose of presenting this Agreement for the
approval of, and adoption by, its stockholders. The Company and Galileo will, as
expeditiously as possible, work together to prepare a proxy statement (the
"Proxy Statement") to be delivered to the stockholders of the Company in
connection with the Merger. The Company shall promptly notify Galileo in the
event that any information contained in the Proxy Statement with respect to the
Company becomes untrue or inaccurate in any material respect prior to the
Merger. The Company shall, through its Board of Directors, except to the extent
legally prohibited from doing so in connection with the discharge of the
fiduciary duties of its Board of Directors as advised by its outside counsel,
recommend to its stockholders approval of this Agreement and of the transactions
contemplated hereby. If this Agreement shall be approved and adopted by the
requisite vote of the Company's stockholders, the Company shall immediately
thereafter cause its Secretary to certify the fact of such approval and adoption
on this Agreement, pursuant to the requirement of Section 251(c) of the General
Corporation Law of the State of Delaware.
Section 7.5. FIRPTA. At or prior to the Closing, the Company shall, if
requested by Galileo, deliver to Galileo a notice that the Company Stock is not
a "U.S. Real Property Interest" as defined in accordance with the requirements
of Treasury Regulation Section 1.1445-2(c)(3).
Section 7.6. Registration Statement. Galileo agrees to file a registration
statement on Form S-8 for the shares of Galileo Common Stock issuable pursuant
to the assumed Company Stock Plan no later than two (2) business days after the
Closing Date.
ARTICLE 8
AMENDMENT AND TERMINATION
Section 8.1. Amendment. This Agreement may be amended by the parties
hereto at any time prior to the Effective Time, whether before or after approval
hereof by the stockholders of the Company, but, after such approval by the
stockholders of the Company, no amendment shall be made without the further
approval of such stockholders which (i) alters or changes the amount or kind of
consideration to be received by such stockholders in exchange for or on
conversion of all or any of the shares of Company Stock as a result of the
Merger; (ii) alters or changes any term of the certificate of incorporation of
the Surviving Corporation provided for by this Agreement; or (iii) adversely
affects such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 8.2. Termination. (a) This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
by the stockholders of the Company:
(i) by mutual consent in writing of Galileo and the Company;
or
(ii) by Galileo or by the Company, by giving written notice of
such termination to the other party or parties if, upon the taking of
the vote of the stockholders of the Company contemplated by Section 7.4
hereof, the required approval of such stockholders shall not be
obtained; or
(iii) by Galileo, by giving written notice of such termination
to the Company, (A) if there has been a material breach of any
representation, warranty, or agreement herein on the part of the
Company which has not been cured or adequate assurance of cure given,
in either case within five business days following receipt of notice of
such breach from Galileo, (B) if Galileo determines at any time that
any regulatory approval or consent required by law to be received in
connection with the Merger is unlikely to be received or is unlikely to
be received in time to permit the lawful consummation of the Merger by
April 30, 2000, or contains any conditions or requirements which are
not acceptable to Galileo, or (C) if there shall have occurred or been
proposed, after the date of this Agreement, any change in any law, rule
or regulation, or after the date of this Agreement there shall have
been any decision or action by any court, government or governmental
agency that could reasonably be expected to prevent or materially delay
consummation of the Merger; or
(iv) by the Company, by giving written notice of such
termination to Galileo, if there has been a material breach of any
representation, warranty, or agreement herein on the part of Galileo or
the Merger Sub which has not been cured or adequate assurance of cure
given, in either case within five business days following receipt of
notice from the Company of such breach; or
(v) by Galileo or by the Company, by giving written notice of
such termination to the other party or parties, if the Merger shall not
have been consummated on or before April 30, 2000.
Section 8.3. Effect of Termination. In the event of termination of this
Agreement by any party hereto, there shall be no liability on the part of any
other party hereto; provided, however, that such termination shall not preclude
liability attaching to a party who has caused the termination hereof by an
intentional breach of any of its representations, warranties or covenants
contained in this Agreement or the willful act or willful failure to act in
violation of the terms and provisions of this Agreement.
Section 8.4. Waiver. Any terms or provisions of this Agreement may be
waived in writing at any time by the party which is entitled to the benefits
thereof, or their respective counsel. The failure of either party at any time or
times to require performance of any provision hereof shall in no manner affect
such party's right at a later time to enforce the same. No waiver by any party
of a condition or of the breach of any term, covenant, representation or
warranty of this agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or of the
breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION
Section 9.1. Survival of Representations and Warranties. Any
investigation or examination by Galileo of the business, records, properties or
affairs of the Company or the Subsidiary shall not in any way affect the
representations and warranties of the Company contained in this Agreement,
except in the case of any representations and warranties that Galileo knows to
be untrue as a result of any investigation or examination, and such
representations and warranties herein made by the Company shall be deemed to be
remade at and survive the Closing Date for six months.
Section 9.2. Indemnification by the Company. Subject to the limitations
respecting the survivability of representations and warranties contained in
Section 9.1 hereof, the Company agrees to indemnify and hold Galileo, the Merger
Sub and the Surviving Corporation, and their respective successors and assigns
harmless from and against all liability, loss, cost or expense, including,
without limitation, reasonable attorneys' fees, expenses and costs of litigation
and, in the case of Environmental Laws, the costs and expenses of taking any
investigative, removal or remedial actions (hereinafter referred to individually
as "Loss" and collectively as the "Losses"), which Galileo, the Merger Sub or
the Surviving Corporation or their respective successors or assigns may,
directly or indirectly, sustain by reason of any of the following:
(a) The inaccuracy of any representation or warranty of
the Company herein set forth;
(b) The inaccuracy of any certificate or Schedule to
this Agreement delivered by the Company or the Subsidiary to Galileo
in accordance with the provisions hereof;
(c) The breach of any of the agreements or covenants of the
Company contained herein or in any certificate or other document
delivered by the Company or the Subsidiary to Galileo in accordance
with the terms hereof; and
(d) The inaccuracy of any representations made by
any of the holders of the Company Stock pursuant to the provisions of
Section 1.7 hereof.
Notwithstanding the foregoing, the maximum aggregate liability of the Company to
Galileo for breaches of the representations and warranties of the Company
hereunder shall not exceed $20,000,000 (the "Maximum Liability") and Galileo may
not make a claim against the Company for any such breach or breaches until
Galileo, the Merger Sub or the Surviving Corporation has sustained Losses of at
least $500,000 (the "Claim Threshold") in connection with any such breach or
breaches. After such Claim Threshold has been met, any Losses included in the
calculation of the Claim Threshold shall be recoverable by Galileo to the same
extent as any other Losses. The foregoing limitation on the recovery of Losses
shall not apply to any Losses relating to or resulting from any fraudulent
representations or warranties. The $20,000,000 which is to be deposited into the
Escrow is intended by the parties to serve as the sole source for the recovery
of any Losses recoverable pursuant to the provisions of this Section 9.2.
Galileo may from time to time make a claim for any Loss by requesting the Escrow
Agent to pay to Galileo or the Surviving Corporation the amount thereof from the
funds held by the Escrow Agent under the terms of the Escrow Agreement.
ARTICLE 10
REGISTRATION OF GALILEO SHARES
Subject to the applicable provisions of any preexisting agreement to
which Galileo is a party, Galileo shall prepare and file within 60 days
following the date of Closing, and shall use its reasonable commercial efforts
to have declared effective, at Galileo's expense, a S-3 Registration Statement
relating to 50% of the Galileo Common Stock issued pursuant to this Agreement,
and to maintain the effectiveness of such S-3 Registration Statement through the
earlier of (i) 90 days after the effectiveness of such S-3 Registration
Statement, and (ii) the date on which a prospectus is no longer required to be
delivered under the Securities Act. Galileo shall prepare and file within 90
days after the effective date of such S-3 Registration Statement, and shall use
its reasonable commercial efforts to have declared effective, at Galileo's
expense, a S-3 Registration Statement relating to the remaining 50% of the
Galileo Common Stock issued pursuant to the Agreement, and to maintain the
effectiveness at such S-3 Registration Statement until the earlier of (i) 270
days after the effectiveness of such S-3 Registration Statement, and (ii) the
date on which a prospectus is no longer required to be delivered under the
Securities Act. During the period that either S-3 Registration Statement
referred to in this Article 10 is effective, Galileo shall have the right by
giving written notice to the holders of Galileo Common Stock whose shares are to
be sold pursuant to said S-3 Registration Statement to suspend their right to
effect sales pursuant to such S-3 Registration Statement for valid business
reasons, but only in the event that the officers of Galileo are restricted from
making sales of Galileo Common Stock.
ARTICLE 11
MISCELLANEOUS PROVISIONS
Section 11.1. Notices. Each notice, request, demand, approval or other
communication which may be or is required to be given under this Agreement shall
be in writing in English and shall be deemed to have been properly given when
delivered personally at the address set forth below for the intended party
during normal business hours at such address, when sent by facsimile or other
electronic transmission to the respective facsimile transmission numbers of the
parties set forth below, or when sent by recognized overnight courier service or
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Galileo or Merger Sub: Galileo International, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
With a copy to: Xxxxxxx and Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
If to the Company: Xxxx.xxx, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Confirm: (000) 000-0000
Notices shall be given to such other addressee or address, or both, or by way of
such other facsimile transmission number, as a particular party may from time to
time designate by written notice to the other party hereto. Each notice,
request, demand, approval or other communication which is sent in accordance
with this Section shall be deemed given and received for all purposes of this
Agreement as of three (3) business days after the date of deposit thereof for
air mailing in a duly constituted United States post office or branch thereof,
one business day after deposit with a recognized overnight courier service or
upon confirmation of receipt of any facsimile transmission. Notice given to a
party hereto by any other method shall only be deemed to be given and received
when actually received in writing by such party.
Section 11.2. Further Assurance. Each of the parties hereto hereby
agrees that after the Closing Date it will from time to time, upon the
reasonable request of another party hereto, take such further action as the
other may reasonably request to carry out the Merger and the other transactions
contemplated by this Agreement, including, without limitation, the execution and
delivery of all further evidences and instruments of transfer and assignment.
Section 11.3. Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each and all of which shall be deemed for all
purposes to be one agreement.
Section 11.4. Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
Section 11.5. Effectiveness. This Agreement shall have no force or effect
whatsoever unless and until the same shall have been executed and delivered by
Galileo, the Merger Sub and the Company.
Section 11.6. Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, between the parties hereto with respect to the subject matter
hereof; (b) is not intended to confer upon any other person or entity who or
which is not a party hereto any rights or remedies hereunder; (c) shall be
binding upon and inure to the benefit of Galileo, the Merger Sub and the Company
and their respective successors and assigns; and (d) shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts, of
the State of Delaware.
Section 11.7. Publicity. Galileo and the Company shall use their best
efforts so that the Company and the Subsidiary shall not issue or cause the
publication of any press release or other announcement with respect to this
Agreement, or otherwise make any disclosures relating thereto to the press or
any third party other than their respective attorneys, accountants and other
agents without the prior consent of Galileo and the Company, which consent shall
not be unreasonably withheld; provided, however, that such consent shall not be
required where such release, announcement or disclosure is required by
applicable law or the rules or regulations of a securities exchange, other
self-regulatory authority or governmental agency.
IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed as of the day and year first above written.
GALILEO: COMPANY:
GALILEO INTERNATIONAL, INC. XXXX.XXX, INC.
By /s/ Xxxx X. Xxxxxxx By /s/ Xxxxx Xxxxxxxx
--------------------- -------------------
Its Executive Vice President & CFO Its President & CEO
------------------------------- ----------------
GALILEO ACQUISITION CO.
By /s/ Xxxx X. Xxxxxxx
---------------------
Its President
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