AGREEMENT AND PLAN OF MERGER
dated as of
February __, 2001
among
RNETHEALTH, INC.
ATN ACQUISITION CORP.
and
ACCESS TELEVISION NETWORK, INC.
TABLE OF CONTENTS
ARTICLE 1
THE MERGER
SECTION 1.01 Certain Definitions 2
SECTION 1.02 The Merger 4
SECTION 1.03 Effective Time 4
SECTION 1.04 Closing 4
SECTION 1.05 Voting Agreement 5
SECTION 1.06 Effect of the Merger 5
SECTION 1.07 Certificate of Incorporation 5
SECTION 1.08 Bylaws 5
SECTION 1.09 Directors and Officers 5
ARTICLE 2
PURCHASE PRICE AND EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01 Purchase Price 5
SECTION 2.02 Effect of the Merger on the Capital
Stock; Adjustments 5
SECTION 2.03 Payment for Shares in the Merger 7
SECTION 2.04 No Fractional Parent Shares 9
SECTION 2.05 Further Assurances 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TARGET COMPANY
SECTION 3.01 Organization and Qualification 10
SECTION 3.02 Capitalization 10
SECTION 3.03 Corporate Authorization 11
SECTION 3.04 Governmental Authorization 12
SECTION 3.05 Non-contravention 12
SECTION 3.06 Subsidiaries and Guaranties 13
SECTION 3.07 Financial Statements 13
SECTION 3.08 Litigation 13
SECTION 3.09 Compliance with Laws 13
SECTION 3.10 Absence of Certain Changes or
Events 14
SECTION 3.11 Title and Condition of Properties 14
SECTION 3.12 Insurance 14
SECTION 3.13 Certain Contracts 14
SECTION 3.14 Employee Benefit Plans; Labor
Matters 15
SECTION 3.15 Finders' Fees 17
SECTION 3.16 Voting Requirements 17
SECTION 3.17 Products Liability 17
SECTION 3.18 Taxes 17
SECTION 3.19 Information Supplied 19
SECTION 3.20 Voting Arrangements 19
SECTION 3.21 Ownership of Shares of Parent
Capital Stock 19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01 Organization and Qualification 20
SECTION 4.02 Capitalization 20
SECTION 4.03 Corporate Authorization 21
SECTION 4.04 Governmental Authorization 21
SECTION 4.05 Non-contravention 22
SECTION 4.06 SEC Reports; Financial Statements 22
SECTION 4.07 Litigation 23
SECTION 4.08 Compliance with Laws 23
SECTION 4.09 Absence of Certain Changes or
Events 23
SECTION 4.10 Insurance 23
SECTION 4.11 Certain Contracts 24
SECTION 4.12 Employee Matters 24
SECTION 4.13 Products Liability 24
SECTION 4.14 Information Supplied 24
SECTION 4.15 Finders' & Valuation Fees Owed by
Parent 24
SECTION 4.16 Voting Requirements 24
ARTICLE 5
COVENANTS
SECTION 5.01 Conduct of Business by the Target
Company 25
SECTION 5.02 Conduct of Business by Parent 27
SECTION 5.03 Pre-Closing Tax Covenants 29
SECTION 5.04 Other Actions 30
SECTION 5.05 [Reserved] 30
SECTION 5.06 Registration Statement;
Securities Laws Compliance 30
SECTION 5.07 Target Company Stockholders Meeting 30
SECTION 5.08 Dissenting Shares 31
SECTION 5.09 Parent Shareholders Meeting 31
SECTION 5.10 Access to Information 32
SECTION 5.11 No Solicitation; Other Offers 32
SECTION 5.12 Best Efforts; Notification 35
SECTION 5.13 Maintenance of Businesses 36
SECTION 5.14 Director Appointments; By-Law
Amendment 36
SECTION 5.15 Directors and Officers
Insurance; Indemnification 36
SECTION 5.16 Public Announcements 36
SECTION 5.17 Further Assurances 37
SECTION 5.18 Notices of Certain Events 37
SECTION 5.19 Regulatory Approvals 38
SECTION 5.20 Tax-Free Reorganization Treatment 38
SECTION 5.21 Other Agreements 38
ARTICLE 6
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligations of Each
Party 38
SECTION 6.02 Conditions to Obligations of the
Target Company 39
SECTION 6.03 Conditions to Obligations of
Parent and Merger Sub 40
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 Termination 41
SECTION 7.02 Amendment 42
SECTION 7.03 Extension; Waiver 42
SECTION 7.04 Procedure for Termination,
Amendment, Extension or Waiver 43
SECTION 7.05 Termination Fee 43
ARTICLE 8
MISCELLANEOUS
SECTION 8.01 Survival of Representations and
Warranties 43
SECTION 8.02 Expenses 43
SECTION 8.03 Notices 43
SECTION 8.04 No Waivers 44
SECTION 8.05 No Joint Venture 45
SECTION 8.06 Successors and Assigns 45
SECTION 8.07 Governing Law 45
SECTION 8.08 Jurisdiction 45
SECTION 8.09 Waiver of Jury Trial 45
SECTION 8.10 Counterparts; Effectiveness;
Benefit 45
SECTION 8.11 Entire Agreement 46
SECTION 8.12 Captions 46
SECTION 8.13 Severability 46
SECTION 8.14 Specific Performance 46
SECTION 8.15 Interpretation 46
SECTION 8.16 Target Company and Parent
Disclosure Memoranda 47
SECTION 8.17 Obligation of Parent and the
Target Company 47
SECTION 8.18 Time is of the Essence 47
INDEX OF DEFINED TERMS
Term Section
affiliate 1.01(a)
Agreement 1.01(b)
beneficially 1.01(c)
Business Combination 5.11(d)(i)
Business Combination Proposal 5.11(d)(ii)
Business Day 1.01(f)
Bylaw Amendment 5.14
Certificate or Certificates 2.03
Certificate of Merger 1.03
Closing 1.04
Closing Date 1.04
Closing Date Balance Sheet 3.18(b)
Code Recitals
Control 1.01(a)
Conversion Ratio 2.02(a)
D&O Insurance 5.15
DGCL 1.01(i)
Disclosure Memoranda 8.16
Effective Time 1.03
ERISA 3.14(a)
ERISA Group 3.14(a)
Exchange Act 1.01(j)
Financial Statements 3.07
GAAP 3.07
Governmental Entity 3.04
knowledge 1.01(k)
Liens 3.01
Material Adverse Effect 1.01(l)
material contracts 3.13, 4.11
Merger Recitals
Merger Consideration 2.02(a)
Merger Sub Recitals
Merger Sub Common Stock 4.02(b)
National 4.15
OTCBB 1.01(m)
Parent Recitals
Parent Common Stock Recitals
Parent Disclosure Memorandum Article 4
Parent Liens 4.01
Parent Preferred Stock Recitals
Parent SEC Reports 4.06(a)
Parent Securities 4.02(c)
Parent Series A Stock Recitals
Parent Series B Stock Recitals
Parent Shareholder Approval 4.16
Parent Shareholders 5.09
Parent Shareholders Meeting 5.09
Paying Agent 2.03
Permits 3.09
person 1.01(p)
Purchase Price 2.01
Registered Parent Common Stock 1.01(q)
Registration Rights Agreement 6.02(e)
Registration Statement 5.06
Returns 1.01(s)
SEC 1.01(t)
Securities Act 1.01(u)
Series B Stock Recitals
Series C Stock Recitals
Services Agreement Recitals
Subsidiary 1.01(v)
Superior Proposal 5.11(d)(iii)
Surviving Corporation Recitals
Target Company Recitals
Target Company Benefit Plans 3.14(a)
Target Company Common Stock Recitals
Target Company Disclosure
Memorandum Article 3
Target Company Securities 3.02(b)
Target Company Stockholder
Approval 3.16
Target Company Stockholders
Meeting 5.07(a)
Target Company Stockholders 5.07(a)
Target Preferred Stock Recitals
Target Stock Option 2.02(d)(1)
Target Warrant 2.02(d)(1)
Taxes 1.01(x)
Unsolicited Business Combination
Proposal 5.11(d)(iv)
Voting Agreement 1.05
Warrant Agreements 2.02(d)(2)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February ____, 2001,
among Access Television Network, Inc., a Delaware corporation (the
"Target Company"), RnetHealth, Inc., a Colorado corporation
("Parent"), and ATN Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS
1. The parties hereto intend that, on the terms and subject to
the conditions set forth herein, Merger Sub will be merged with and
into the Target Company in a reverse triangular merger, with the
Target Company continuing as the surviving corporation (the
"Surviving Corporation") in the merger (the "Merger"). Upon
effectiveness of the Merger, (i) each share of the Target Company's
Common Stock, par value $0.01 per share ("Target Company Common
Stock"), not owned directly by Parent or the Target Company will be
converted into the right to receive shares of Parent's Common Stock,
par value $0.01 per share ("Parent Common Stock"), (ii) each share
of the Target Company's Series B Preferred Stock, par value $0.01
per share (the "Series B Stock"), not owned directly by Parent or
the Target Company will be converted into the right to receive
shares of Parent Series A Stock, as defined in Section 1.01 below,
(iii) each share of the Target Company's Series C Preferred Stock,
par value $0.01 per share (the Series C Stock, together with the
Series B Stock, the "Target Preferred Stock"), not owned directly by
Parent or the Target Company will be converted into the right to
receive shares of Parent Series B Stock, as defined in Section 1.01
below (the Parent Series A Stock, together with the Parent Series B
Stock, the "Parent Preferred Stock") and (iv) outstanding options
and warrants to purchase Target Company Common Stock will be
converted into options or warrants to purchase Parent Common Stock,
all upon the terms and subject to the conditions set forth in this
Agreement.
2. The respective boards of directors of Parent, Merger Sub
and the Target Company have determined that it is in the best
interests of their respective companies and their stockholders to
effect the Merger upon the terms and conditions set forth herein.
3. The parties hereto have also agreed that upon execution of
this Agreement Parent and the Target Company will enter into a
Services Agreement dated as of the date hereof (the "Services
Agreement").
4. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of
section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and this Agreement is intended to be a "plan of
reorganization" within the meaning of the regulations promulgated
under section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
contained in this Agreement, the parties hereto agree as follows:
AGREEMENT
ARTICLE 1
THE MERGER
SECTION 1.01 Certain Definitions. As used in this
Agreement:
(a) The term "affiliate," as applied to any person,
shall mean any other person directly or indirectly controlling,
controlled by, or under common control with, that person; for
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," "under common
control with"), as applied to any person, means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or
otherwise.
(b) "Agreement" means this Agreement and Plan of
Merger.
(c) A person will be deemed to "beneficially" own
securities if such person would be the beneficial owner of such
securities under Rule 13d-3 under the Exchange Act, including
securities which such person has the right to acquire (whether such
right is exercisable immediately or only after the passage of time).
(d) "Business Combination" shall have the meaning set
forth in Section 5.11(d).
(e) "Business Combination Proposal" shall have the
meaning set forth in Section 5.11(e).
(f) "Business Day" means any day on which commercial
banks are open for business in New York, New York other than a
Saturday, a Sunday or a day observed as a holiday in New York, New
York under the laws of the State of New York or the federal laws of
the United States.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "D&O Insurance" shall have the meaning set forth
in Section 5.15.
(i) "DGCL" means the Delaware General Corporation Law.
(j) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) The term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to the Target Company, the
actual knowledge of the Target Company's executive officers, and
with respect to Parent, the actual knowledge of Parent's executive
officers.
(l) "Material Adverse Effect" means, with respect to
any Person, any change, effect, event, occurrence or state of facts
(or any development that has had or is reasonably likely to have any
change or effect) that is materially adverse to the business,
financial condition or results of operations of such Person and its
Subsidiaries, taken as a whole, or which would prevent or materially
delay the consummation of the transactions contemplated hereby;
provided, however, any adverse change, event, development or effect
attributable to the announcement or pendency of the transactions
contemplated by this Agreement (including any cancellations of or
delays in customer agreements, any reduction in sales, any
disruption in supplier, distributor, partner or similar
relationships or any loss of employees) or resulting from or
relating to compliance with the terms of, or the taking of any
action required by, this Agreement or the Services Agreement to the
extent not due to the actions or inactions of the party claimed to
have had a Material Adverse Effect, shall not be taken into account
in determining whether there has been a Material Adverse Effect.
(m) "OTCBB" means Nasdaq's Over-the-Counter Bulletin
Board securities listing.
(n) "Parent Series A Stock" means Parent's Series A
Preferred Stock, par value $0.01, having the rights and preferences
as set forth in Annex D hereto, to be authorized at the Parent
Shareholders Meeting and having an initial liquidation preference in
the aggregate equal to the aggregate liquidation preference,
immediately prior to the Effective Time, of the shares being
exchanged therefor in the Merger.
(o) "Parent Series B Stock" means Parent's Series B
Preferred Stock, par value $0.01, having the rights and preferences
set forth in Annex E hereto, to be authorized at the Parent
Shareholders Meeting and having an initial liquidation preference
equal to the liquidation preference, immediately prior to the
Effective Time, of the shares being exchanged therefor in the
Merger.
(p) The term "person" shall include individuals,
corporations, partnerships, trusts, limited liability companies,
associations, unincorporated organizations, joint ventures, other
entities, groups (which term shall include a "group" as such term is
defined in Section 13(d)(3) of the Exchange Act), labor unions or
Governmental Entities (as such term is defined in Section 3.04
below).
(q) "Registered Parent Common Stock" shall mean shares
of the Parent Common Stock registered for trading with the United
States Securities and Exchange Commission, pursuant to an effective
registration statement on Form S-4.
(r) "Registration Statement" shall have the meaning
set forth in Section 5.06.
(s) "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup
withholding and other payments to third parties.
(t) "SEC" means the Securities Exchange Commission.
(u) "Securities Act" means the Securities Act of 1933,
as amended.
(v) "Subsidiary" means any corporation or other legal
entity of which any given person controls (either alone or through
or together with any other Subsidiary), owns, directly or
indirectly, more than 50% of the capital stock or other ownership
interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of
such corporation or other legal entity.
(w) "Superior Proposal" shall have the meaning set
forth in Section 5.11(d)(iii).
(x) "Taxes" shall mean all taxes, however,
denominated, including any interest, penalties or other additions to
tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any
agency, or political subdivision of any such government, which taxes
shall include, without limiting the generality of the foregoing, all
income or profits taxes, payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes,
ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums
and other governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, required to be paid,
withheld or collected.
SECTION 1.02 The Merger. At the Effective Time and upon
the terms and subject to the conditions of this Agreement, Merger
Sub shall be merged with and into the Target Company in accordance
with applicable law, whereupon the separate existence of Merger Sub
shall cease, and the Target Company shall be the Surviving
Corporation. Subject to the terms and conditions of this Agreement,
Parent and Merger Sub agree to use their best efforts to cause the
Effective Time to occur as soon as practicable after the Target
Company Stockholder Meeting with respect to the Merger.
SECTION 1.03 Effective Time. As soon as practicable after
satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Merger, the Target Company and Merger Sub will
file a certificate of merger in the form of Annex A attached hereto
(the "Certificate of Merger"), with the Secretary of State of the
State of Delaware and make all other filings or recordings required
by applicable law in connection with the Merger. The Merger shall
become effective at such time (the "Effective Time") as the
Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or at such later time as may be specified in
the Certificate of Merger.
SECTION 1.04 Closing. The closing of the Merger will take
place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second Business Day after satisfaction or
waiver of the conditions set forth in Article 6 (other than those
conditions that by their nature are to be satisfied at the closing
(the "Closing"), but subject to the fulfillment or waiver of those
conditions) (the "Closing Date"), at the offices of Holme Xxxxxxx &
Xxxx LLP, 0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000-0000, unless
the parties agree to another time, date or place in writing.
SECTION 1.05 Voting Agreement. In connection with the
execution of this Agreement, the Target Company shall deliver as of
the date hereof the Voting Agreement, substantially in the form of
Annex C hereto (the "Voting Agreement") duly executed by Spectrum
Equity Investors II, L.P.
SECTION 1.06 Effect of the Merger. From and after the
Effective Time, the Surviving Corporation shall possess all the
rights, powers, privileges and franchises and be subject to all of
the obligations, liabilities, restrictions and disabilities of the
Target Company and Merger Sub, all as provided under applicable law.
SECTION 1.07 Certificate of Incorporation. At the
Effective Time, the certificate of incorporation of Merger Sub will
continue unchanged and become the certificate of incorporation of
the Surviving Corporation.
SECTION 1.08 Bylaws. At the Effective Time, the bylaws of
Merger Sub will continue unchanged and become the bylaws of the
Surviving Corporation until amended in accordance with applicable
law.
SECTION 1.09 Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, the sole director and
officers of Merger Sub immediately before the Effective Time will
become the sole director and officers of the Surviving Corporation.
ARTICLE 2
PURCHASE PRICE AND
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01 Purchase Price. The aggregate purchase price
(the "Purchase Price") to be paid by Parent shall consist of
(i) 38,906,040 shares of registered Parent Common Stock,
(ii) 601,500 shares of Parent Series A Stock, and
(iii) 235,150 shares of Parent Series B Stock.
SECTION 2.02 Effect of the Merger on the Capital Stock;
Adjustments. At the Effective Time by virtue of the Merger and
without any other action on the part of the holder thereof:
(a) (i) each share of Target Company Common Stock
outstanding immediately prior to the Effective Time shall be
converted into the right to receive 2.0572 shares of Parent Common
Stock (the "Conversion Ratio"), subject to any adjustment provided
for by Section 2.04, (ii) each share of Series B Stock outstanding
immediately prior to the Effective Time shall be converted into the
right to receive 60 shares of Parent Series A Stock, and (iii) each
share of Series C Stock outstanding immediately prior to the
Effective Time shall be converted into the right to receive one
share of Parent Series B Stock, in each case subject to reduction
for any applicable withholding taxes under applicable law and any
applicable stock transfer taxes under applicable law payable by such
holder collectively (the "Merger Consideration"), upon the surrender
of the certificate representing such shares;
(b) each share of Target Company Common Stock owned by
the Target Company or its Subsidiaries, if any, and each share of
Target Company Common Stock owned by Parent or Merger Sub, if any
shall be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor; and
(c) each share of common stock of Merger Sub
outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving
Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares
of capital stock of the Surviving Corporation.
(d) (1) Each option to purchase shares of the Target
Company Common Stock that is outstanding immediately prior to the
Effective Time ("Target Stock Option") shall be assumed by Parent on
the terms set forth in Section 2.02(d)(2) and shall automatically
and without any action by the holder thereof be converted into an
option to purchase shares of Parent Common Stock based on the
Conversion Ratio. Each warrant to purchase shares of the Target
Company Common Stock that is outstanding immediately prior to the
Effective Time ("Target Warrant") shall be assumed by Parent on the
terms set forth in Section 2.02(d)(2) and shall automatically and
without any action by the holder thereof be converted into a warrant
to purchase shares of Parent Common Stock based on the Conversion
Ratio.
(2) Each Target Stock Option that is outstanding
at the Effective Time shall be assumed by Parent and shall be deemed
to constitute an option to acquire, and each Target Warrant that is
outstanding at the Effective Time shall be assumed by Parent and
shall be deemed to constitute a warrant to acquire, on the same
terms and conditions as were applicable under such Target Stock
Option or Target Warrant immediately prior to the Effective Time,
the number of shares of Parent Common Stock as the holder of such
Target Stock Option or Target Warrant would have been entitled to
receive had such holder exercised such Target Stock Option or such
Target Warrant in full immediately prior to the Effective Time (not
taking into account whether such Target Stock Option was in fact
vested and exercisable) at a price per share equal to (a) the
aggregate exercise price for Parent Common Stock otherwise
purchasable pursuant to such Target Stock Option or Target Warrant
divided by (b) the number of shares of Parent Common Stock deemed
purchasable pursuant to such assumed Target Stock Option or Target
Warrant; provided however, that in all events the number of shares
covered by, and the exercise price for, each assumed Target Stock
Option that is an "incentive stock option" (within the meaning of
Section 422 of the Code) shall be determined according to
Section 424 of the Code and the regulations promulgated thereunder,
and provided further, that the number of shares of Parent Common
Stock that may be purchased upon exercise of the assumed Target
Stock Options and Target Warrants shall not include any fractional
share. An assumed Target Stock Option or Target Warrant that
includes a fractional share shall be rounded down to the nearest
whole share. At and after the Effective Time, all assumed Target
Stock Options shall continue to vest according to the terms of such
options in effect immediately prior to the Effective Time. From and
after the Effective Time, Parent shall comply with the terms of the
warrant agreements pursuant to which the Target Warrants were issued
(the "Warrant Agreements") and the Target stock option plans
pursuant to which the Target Stock Options were granted. Parent
shall cause to be taken all corporate action to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the assumed Target Stock Options and Target
Warrants. Parent shall cause the Parent Common Stock subject to the
assumed Target Stock Options and, to the extent required by the
respective Warrant Agreements, subject to the assumed Target
Warrants to be registered under the Securities Act pursuant to a
registration statement on Form S-8 (or any successor or other
appropriate form), and shall use its best efforts to cause the
effectiveness of such registration statement (and the current status
of the prospectus or prospectuses contained therein) to be
maintained for so long as the Target Stock Options and Target
Warrants remain outstanding.
(e) Holders of shares of Target Company Common Stock
and Target Preferred Stock who have complied with all requirements
for perfecting stockholders' rights of appraisal, as set forth in
Section 262(d) of the DGCL, shall be entitled to their rights under
Delaware Law with respect to such rights.
If, between the date hereof and the Effective Time, the
outstanding shares of Parent Common Stock shall have been changed
into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, or if any extraordinary
dividend or distribution is made with respect to the Parent Common
Stock, then the number of shares represented by the Purchase Price
and the Conversion Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares,
extraordinary dividend or distribution or other similar event.
Without limiting the provisions of Section 5.01, if, between
the date hereof and the Effective Time, the outstanding shares of
Target Company Common Stock or Target Preferred Stock shall have
been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, or if
any extraordinary dividend or distribution is made with respect to
the Target Company Common Stock or Target Preferred Stock, then the
Conversion Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, extraordinary dividend or
distribution or other similar event.
SECTION 2.03 Payment for Shares in the Merger. (a) Prior
to the Effective Time, Parent shall appoint an agent (the "Paying
Agent") for the purpose of exchanging certificates representing
shares of Target Company Common Stock, shares of Series B Stock
and/or shares of Series C Stock, as applicable (singly, a
"Certificate," collectively, the "Certificates") for the Merger
Consideration. Prior to the Effective Time, Parent or Merger Sub
shall deposit with the Paying Agent, in trust for the benefit of
holders of Target Company Common Stock, holders of Series B Stock
and/or holders of Series C Stock, as applicable, the Merger
Consideration consisting of the certificates for Parent Common
Stock, Parent Series A Stock and Parent Series B Stock to be issued
upon conversion of the shares of Target Company Common Stock, shares
of Series B Stock or shares of Series C Stock, as applicable.
(b) As soon as reasonably practicable after the
Effective Time, Parent will cause the Paying Agent to send to each
holder of shares of Target Company Common Stock, shares of Series B
Stock and/or shares of Series C Stock, as applicable, at the
Effective Time a letter of transmittal (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass,
only upon proper delivery of the Certificates to the Paying Agent
and will be in such form and have such other provisions as Parent
reasonably specifies) and instructions for use in effecting the
surrender of Certificate(s) for payment therefor.
(c) Each holder of shares of Target Company Common
Stock, shares of Series B Stock and/or shares of Series C Stock, as
applicable, that have been converted into the right to receive the
Merger Consideration will be entitled to receive, upon surrender to
the Paying Agent of a Certificate, together with a properly
completed letter of transmittal, the Merger Consideration in respect
of each share of Target Company Common Stock, each share of Series B
Stock or each share of Series C Stock, as applicable, represented by
such Certificate. Until so surrendered, each such Certificate shall
represent after the Effective Time for all purposes only the right
to receive such Merger Consideration. No interest shall in any
event be due or payable to any holder of shares of Target Company
Common Stock, shares of Series B Stock, or shares of Series C Stock.
(d) If any portion of the Merger Consideration is to
be paid to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition to
such payment that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Paying Agent any
transfer or other taxes required as a result of such payment to a
person other than the registered holder of such Certificate or
establish to the satisfaction of the Paying Agent that such tax has
been paid or is not payable.
(e) Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article 2 such amounts as it
is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign
tax law. If the Surviving Corporation or Parent, as the case may
be, so withholds amounts, such amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the
shares of Target Company Common Stock, shares of Series B Stock,
and/or shares of Series C Stock, as applicable, in respect of which
the Surviving Corporation or Parent, as the case may be, made such
deduction and withholding.
(f) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed
and, if reasonably required by the Parent, the posting by such
person of a bond, in such reasonable amount as the Parent may
direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Paying Agent will pay, in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration to be paid in respect of the shares of Target Company
Common Stock, shares of Series B Stock, or shares of Series C Stock
represented by such Certificate, as contemplated by this Article 2.
(g) All shares of Parent Common Stock and Parent
Preferred Stock issued upon the surrender of Certificates in
accordance with this Section 2.03 shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to the
shares of Target Company Common Stock, shares of Series B Stock, and
shares of Series C Stock theretofore represented by such
Certificates.
(h) Any portion of the Merger Consideration that
remains unclaimed by the holders of shares of Target Company Common
Stock, shares of Series B Stock, and/or shares of Series C Stock, as
applicable, one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged
shares of Target Company Common Stock, shares of Series B Stock,
and/or shares of Series C Stock, as applicable, for the Merger
Consideration in accordance with this Section 2.03 prior to that
time shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration in respect of such shares
without any interest thereon. Notwithstanding the foregoing,
neither the Paying Agent nor any party hereto shall be liable to any
holder of shares of Target Company Common Stock, shares of Series B
Stock, or shares of Series C Stock for any amount paid to a public
official pursuant to applicable abandoned property, escheat or
similar laws.
(i) Parent shall cause all charges and expenses of the
Paying Agent to be paid.
SECTION 2.04 No Fractional Parent Shares. No fractional
shares of Parent Common Stock shall be issued in the Merger. All
shares of Parent Common Stock that a seller of shares of Target
Company Common Stock is entitled to receive as a result of the
Merger shall be aggregated and if a fractional share of Parent
Common Stock results even after such aggregation, such fractional
share shall be rounded to the nearest whole share of Parent Common
Stock, in lieu of the fractional share.
SECTION 2.05 Further Assurances. The Target Company agrees
that if, at any time before or after the Effective Time, Parent
considers or is advised that any further deeds, assignments or
assurances are reasonably necessary or desirable to vest, perfect or
confirm in Parent title to any property or rights of the Target
Company or the Surviving Corporation as provided herein. Parent,
the Surviving Corporation and their proper officers and directors
are hereby authorized by the Target Company to execute and deliver
all such proper deeds, assignments and assurances and to do all
other things necessary or desirable to vest, perfect or confirm
title to such property or rights in Parent and otherwise to carry
out the purposes of this Agreement, in the name of the Target
Company or otherwise. The officers and directors of Parent, the
Target Company and Merger Sub will take all such other lawful and
necessary or desirable action to carry out the purposes of this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TARGET COMPANY
Except as set forth in the disclosure memorandum, the parts of
which are numbered to correspond to the section numbers of this
Agreement, delivered by the Target Company to Parent on or prior to
the date hereof (the "Target Company Disclosure Memorandum"), the
Target Company represents and warrants to Parent and Merger Sub as
follows:
SECTION 3.01 Organization and Qualification. The Target
Company is a corporation duly organized, validly existing and in
good standing under the laws of Delaware and has the requisite
corporate power and authority to carry on its business as now being
conducted. The Target Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not reasonably be expected
to have a Material Adverse Effect on the Company. The Target
Company has made available to Parent complete and correct copies of
its certificate of incorporation and by-laws. Except as otherwise
disclosed in Section 3.01 of the Target Company Disclosure
Memorandum, all of the outstanding shares of Target Company Common
Stock have been validly issued and are fully paid and nonassessable,
free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever
(collectively, "Liens"), and free of any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other
ownership interests, except for restrictions imposed by applicable
securities laws.
SECTION 3.02 Capitalization. (a) The authorized capital
stock of the Target Company consists solely of (i) 40,000,000 shares
of common stock, $0.01 par value per share, and (ii) 5,000,000
shares of Target Preferred Stock of which 10,025 shares have been
designated as Series B Stock and 235,150 shares have been designated
as Series C Stock. As of January 31, 2001, there were outstanding:
(1) 18,912,133 shares of Target Company Common Stock;
(2) 10,025 shares of Series B Stock; (3) 235,150 shares of Series C
Stock; (4) employee stock options to purchase an aggregate of
1,248,971 shares of Target Company Common Stock and (5) warrants to
purchase an aggregate of 2,704,750 shares of Target Company Common
Stock. All shares of Target Preferred Stock are non-voting shares
(except as otherwise provided in the Target Company's Certificate of
Incorporation) and are not convertible into shares of Target Company
Common Stock. Since January 31, 2001, there have been no issuances
of shares of the capital stock of the Target Company or any other
securities of the Target Company. All shares of Target Company
Common Stock outstanding as of the date hereof have been duly
authorized and validly issued and are fully paid and nonassessable.
All shares of Target Company Common Stock issuable upon exercise of
outstanding employee stock options have been duly authorized and,
when issued in accordance with the terms thereof, will be validly
issued and will be fully paid and nonassessable. Section 3.02(a) of
the Target Company Disclosure Memorandum sets forth a complete and
accurate list of all holders of capital stock of the Target Company
or options or warrants to purchase capital stock of the Target
Company and the number of shares represented by such options or
warrants, the exercise price and vesting schedule of such options or
warrants held by each such holder as of the date hereof.
(b) Except as set forth in Section 3.02(a) or in
Section 3.02(b) of the Target Company Disclosure Memorandum, there
are no outstanding (i) shares of capital stock (whether voting or
nonvoting) of the Target Company, (ii) securities of the Target
Company convertible into or exchangeable for shares of capital stock
(whether voting or nonvoting) of the Target Company or (iii) options
or other interests in or rights to acquire from the Target Company
or other obligation of the Target Company to issue, any capital
stock (whether voting or nonvoting) or securities convertible into
or exchangeable for capital stock of the Target Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the
"Target Company Securities").
(c) Except as set forth in Section 3.02(c) of the
Target Company Disclosure Memorandum, there is no: (i) outstanding
preemptive right, stock appreciation right, subscription, option,
call, warrant or right (whether or not currently exercisable) to
acquire from the Target Company or, to the Target Company's
knowledge, from affiliates of the Target Company, any shares of the
capital stock or other securities of the Target Company;
(ii) outstanding security, instrument or obligation issued by the
Target Company or controlled affiliates of the Target Company, that
is or may become convertible into or exchangeable for any shares of
the capital stock or other securities of the Target Company;
(iii) stockholders' rights plan (or similar plan commonly referred
to as a "poison pill") or agreement under which the Target Company
is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities; (iv) agreement to which
the Target Company is party relating to the voting, or except as
contemplated by the terms of the Registration Rights Agreement,
registration of or restricting any person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or
similar right with respect to any shares of the Target Company
Common Stock); (v) liability for dividends accrued but unpaid; or
(vi) condition or circumstance, to the Target Company's knowledge,
that likely would directly or indirectly give rise to or provide a
basis for the assertion of a claim by any person to the effect that
such person is entitled to acquire or receive any shares of capital
stock or other securities of the Target Company, including but not
limited to promises to issue or grant securities of the Target
Company or to recommend to the Target Company's board of directors
to issue or grant securities of the Target Company. The Target
Company has delivered to Parent accurate and complete copies of all
plans pursuant to which the Target Company has ever granted stock
options or warrants.
(d) Except as set forth in Section 3.02(d) of the
Target Company Disclosure Memorandum, to the Target Company's
knowledge: (i) no Target Company stockholder has claimed, to the
Target Company, any interest in any additional shares of capital
stock of the Target Company, or any options, warrants or other
securities of the Target Company, except for the number of shares of
the Target Company Securities which such person is shown to be the
owner of in Section 3.02(a) of the Target Company Disclosure
Memorandum, and (ii) no third party who is not listed in
Section 3.02(a) of the Target Company Disclosure Memorandum has
made, or has, any claim of entitlement, to the Target Company, to
receive any shares of the capital stock of the Target Company, any
warrants or other rights to acquire any capital stock of the Target
Company or any other securities of the Target Company, including
without limitation the Target Preferred Stock.
SECTION 3.03 Corporate Authorization. The Target Company
has the requisite corporate power and authority to enter into this
Agreement and, subject to obtaining any necessary stockholder
approval of the Merger, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by
the Target Company and the consummation by the Target Company of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Target Company,
subject to approval, if necessary, of the Merger by the Target
Company's stockholders in accordance with the DGCL. This Agreement
has been duly executed and delivered by the Target Company and
constitutes a valid and binding obligation of the Target Company,
enforceable against the Target Company in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is
subject to general principles of equity.
SECTION 3.04 Governmental Authorization. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court,
administrative agency, commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity"), is required
by or with respect to the Target Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by
the Target Company or the consummation by the Target Company of the
transactions contemplated hereby, except for (a) the filing of the
Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states
in which the Target Company is qualified to do business, (b) in
connection with any state or local tax which is attributable to the
beneficial ownership of the Target Company's real property, if any,
(c) as may be required by any applicable state securities or "blue
sky" laws or state takeover laws, (d) such filings and consents as
may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by
this Agreement, and (e) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure
of which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to prevent or materially delay the
consummation of any of the transactions contemplated by this
Agreement.
SECTION 3.05 Non-contravention. Except as set forth in
Section 3.05 of the Target Company Disclosure Memorandum, the
execution and delivery of this Agreement by the Target Company do
not, and performance by the Target Company of this Agreement and the
consummation of the transactions contemplated hereby will not
(a) contravene, conflict with, or result in any violation or breach
of any provision of the certificate of incorporation or bylaws of
the Target Company, (b) assuming compliance with the matters
referred to in Section 3.04, contravene, conflict with, or result in
a violation or breach of any provision of any applicable law,
regulation, judgment, injunction, order or decree, (c) require any
consent or other action by any person under, constitute a default
under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss
of any benefit to which the Target Company is entitled under any
provision of any agreement or other instrument binding upon the
Target Company or any license, franchise, permit, certificate,
approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Target Company or
(d) result in the creation or imposition of any Lien on any asset of
the Target Company, except, in the case of clauses (b), (c) and (d),
for such matters as would not, individually or in the aggregate,
reasonably be expected to materially impair the ability of the
Target Company to consummate the transactions contemplated by this
Agreement.
SECTION 3.06 Subsidiaries and Guaranties. The Target
Company does not have any equity interest, direct or indirect, in
any corporation, partnership, joint venture or other business
entity. The Target Company is not a guarantor of any obligation of
a third party, whether or not such third party is related to or
affiliated with the Target Company.
SECTION 3.07 Financial Statements. The Target Company has
delivered to Parent the Target Company's unaudited balance sheet as
of November 30, 2000, audited income statements and cash flow
statements for the years ended March 31, 2000, March 31, 1999,
March 31, 1998, March 31, 1997, March 31, 1996 and March 31, 1995
(the "Financial Statements"). The Financial Statements of the
Target Company have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the
consolidated financial position of the Target Company as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except
for liabilities and obligations incurred in the ordinary course of
business consistent with past practice and liabilities and
obligations under this Agreement or the Services Agreement or
incurred in connection with the transactions contemplated hereby,
the Target Company has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by
GAAP to be set forth on a consolidated balance sheet of the Target
Company or in the notes thereto.
SECTION 3.08 Litigation. Except as set forth in
Section 3.08 of the Target Company Disclosure Memorandum, there is
no suit, action or proceeding pending or, to the knowledge of the
Target Company, overtly threatened in writing against or affecting
the Target Company that individually or in the aggregate, would
reasonably be expected to prevent or substantially delay any of the
transactions contemplated by this Agreement or otherwise prevent the
Target Company from performing its obligations hereunder, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Target
Company having, or which, insofar as reasonably can be foreseen, in
the future would have, any such effect. To the knowledge of the
Target Company, there is no basis for any person, firm, corporation
or entity to assert a claim against the Target Company, or Merger
Sub as successor in interest to the Target Company, based upon:
(a) ownership or rights to ownership of any shares of the Target
Company Common Stock or other securities, (b) any rights as a
securities holder of the Target Company, including, without
limitation, any option, warrant or other right to acquire any
securities of the Target Company, any preemptive rights or any
rights to notice or to vote, or (c) any rights under any agreement
between the Target Company and any securities holder of the Target
Company or former securities holder of the Target Company in such
holder's capacity as such.
SECTION 3.09 Compliance with Laws. Except as set forth in
Section 3.09 of the Target Company Disclosure Memorandum, the Target
Company is in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any
Governmental Entity applicable to their respective businesses or
operations, except for instances of possible non-compliance that,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse effect on the Target Company. The Target
Company has in effect all Federal, state, local and foreign
governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits")
necessary for it to own, lease or operate its properties and assets
and to carry on its business as now conducted, and there has
occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which lack or default
individually or in the aggregate would not reasonably be expected to
have a Material Adverse Effect on the Target Company.
SECTION 3.10 Absence of Certain Changes or Events. Since
March 31, 2000, except as set forth in Section 3.10 of the Target
Company Disclosure Memorandum, the Target Company has conducted its
business only in the ordinary course and (a) there has not occurred
any events or changes that have had, or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect
on the Target Company or its business; and (b) the Target Company
has not taken any action that would have been prohibited under
Section 5.01 hereof.
SECTION 3.11 Title and Condition of Properties. The Target
Company (a) has good and marketable title to or a valid leasehold
interest under a real property or a capitalized lease in all assets
recorded on its balance sheet as of March 31, 2000 free and clear of
all Liens, except for (i) assets disposed of in the ordinary course
of business consistent with past practice since such date,
(ii) Liens disclosed in Section 3.11 of the Target Company
Disclosure Memorandum, (iii) Liens or imperfections of title which
are not, individually or in the aggregate, material in character,
amount or extent and which do not materially detract from the value
or materially interfere with the present or presently contemplated
use of the assets subject thereto or affected thereby, and
(iv) Liens for current taxes not yet due and payable, (b) has a
valid leasehold or other interest in all other assets used by it in
its business, except in each case for exceptions to the foregoing
that would not, individually, or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Target Company.
All of the improvements on real property and fixtures, machinery,
equipment and other tangible personal property and assets owned or
used by the Target Company are in good condition and repair, except
for ordinary wear and tear not caused by neglect, and are usable in
the ordinary course of business, except for any matter otherwise
covered by this sentence which would not, individually or in the
aggregate reasonably be expected to have a Material Adverse Effect
on the Target Company.
SECTION 3.12 Insurance. All material risks of the Target
Company in respect of its business are covered by valid and
currently effective insurance policies or binders of insurance or
programs of self-insurance in such types and amounts as are
reasonable in the context of the businesses and operations engaged
in by the Target Company. The Target Company has paid all premiums
due under such policies and is not in default with respect to its
obligations under any such policies.
SECTION 3.13 Certain Contracts. As of the date hereof,
except as set forth in Section 3.13 of the Target Company Disclosure
Memorandum, the Target Company is not a party to or bound by (i) any
"material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), or (ii) any non-competition agreements
or any other agreements or arrangements that limit or otherwise
restrict the Target Company or any successor thereto from engaging
or competing in any line of business or in any geographic area. All
agreements, obligations and commitments listed in Section 3.13 of
the Target Company Disclosure Memorandum are valid and in full force
and effect, and except as expressly noted, a true and complete copy
of each has been delivered or made available to Parent. Except as
noted in Section 3.13 of the Target Company Disclosure Memorandum,
neither the Target Company nor, to the knowledge of the Target
Company any other party is in breach of or default under any term of
any such agreement, obligation or commitment.
SECTION 3.14 Employee Benefit Plans; Labor Matters.
(a) Except for the plans and arrangements set forth in
Section 3.14 of the Target Company Disclosure Memorandum (the
"Target Company Benefit Plans"), neither the Target Company nor any
member of its ERISA Group (as defined below), now maintains, has
ever maintained or contributed to, or has any plans or commitments
for, any employee benefit plans (as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any other retirement, pension, stock
option, stock appreciation right, profit sharing, incentive
compensation, deferred compensation, savings, thrift, vacation pay,
severance pay, or other employee compensation or benefit plan,
agreement, practice, or arrangement, whether written or unwritten,
whether or not legally binding. "ERISA Group" means a controlled or
affiliated group within the meaning of Section 414(b), (c), (m), or
(o) of the Code, of which the Target Company is, or has within the
last six (6) years been a member. The Target Company has furnished
to Parent correct and complete copies of each Target Company Benefit
Plan (including a detailed written description of any Target Company
Benefit Plan that is unwritten, including a description of
eligibility criteria, participation, vesting, benefits, funding
arrangements and assets and any other provisions relating to the
Target Company) and, with respect to each Target Company Benefit
Plan, (i) the most recent favorable determination letter,
(ii) materials submitted to the Internal Revenue Service in support
of a pending determination letter request or request under the
Employee Plans Compliance Resolution System or the Voluntary
Fiduciary Correction Program, (iii) the most recent letter issued by
the Internal Revenue Service recognizing tax exemption, (iv) each
insurance contract, trust agreement, or other funding vehicle,
(v) the three most recently filed Forms 5500, (vi) the three most
recent actuarial valuations, (vii) materials submitted to the
Department of Labor in support of a pending prohibited transaction
exemption application, (viii) each individual prohibited transaction
exemption granted by the Department of Labor with respect to a
Target Company Benefit Plan within the last six (6) years, and
(ix) each summary plan description or other general explanation or
communication distributed or otherwise provided to employees with
respect to each Target Company Benefit Plan during the past five
(5) years that describes the terms of the Target Company Benefit
Plan.
(b) Each Target Company Benefit Plan that is intended to be
a qualified plan has been determined by the Internal Revenue Service
to be so qualified and no circumstances exist that could reasonably
be expected by the Target Company to adversely affect such
qualification. The Company is in compliance in all material
respects with, and each of the Target Company Benefit Plans complies
in form with, and is and has been operation in all material respects
in compliance with, all applicable requirements of law, including
without limitation, ERISA and the Code.
(c) There are no actions, suits, grievances, arbitrations or
other manner of litigation or claim with respect to any Target
Company Benefit Plan (except for claims for benefits made in the
ordinary course of plan administration for which plan administrative
procedures have not been exhausted) pending, threatened or imminent
against or with respect to any Target Company Benefit Plan, any plan
sponsor, or any fiduciary (as such term is defined in Section 3(21)
of ERISA) of such Target Company Benefit Plan, and the Target
Company has no knowledge of any facts that could reasonably be
expected to give rise to any action, grievance, arbitration or other
manner of litigation, or action.
(d) Neither the Target Company nor any member of its ERISA
Group has ever maintained, contributed to, or been obligated to
contribute to any plan that is subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code. Neither
the Target Company nor any member of its ERISA Group has ever
contributed to, been obligated to contribute to, or incurred any
liability to a multiemployer plan (as such term is defined in
Section 3(37) of ERISA).
(e) The consummation of the transactions contemplated by
this Agreement will not give rise to any acceleration of vesting of
options or payments, the acceleration of the time of making any
payments, or the making of any payments, that would in the aggregate
result in an "excess parachute payment" within the meaning of
Section 280G of the Code, the denial of any tax deduction under the
Code, and the imposition of the excise tax under Section 4999 of the
Code.
(f) Neither the Target Company nor any member of its ERISA
Group is or has ever been a party to any collective bargaining or
other labor union contract. No collective bargaining agreement is
being negotiated by the Target Company or any Subsidiary. There is
no pending or threatened labor dispute, strike or work stoppage
against the Target Company or any Subsidiary.
(g) Neither the Target Company nor any Subsidiary is a party
to or is bound by any severance agreements, programs, or policies.
Schedule 3.14 of the Target Company Disclosure Memorandum sets
forth, and the Target Company has furnished to Parent true and
correct copies of (i) all employment agreements with the Target
Company and any Subsidiary, (ii) all agreements with consultants to
the Target Company and any Subsidiary, (iii) all non-competition
agreements with the Target Company or a subsidiary executed by any
employee of the Target Company, (iv) a list of each of the Target
Company employees, with the respective title, salary and location of
employment of each such employee, and (v) all plans, programs,
agreements and other arrangements of the Target Company with or
relating to its directors.
(h) No Target Company Benefit Plan provides retiree welfare
benefits to any person and neither the Target Company nor any
Subsidiary is contractually or otherwise obligated (whether or not
in writing) to provide any person with any welfare benefits upon
retirement or other termination of employment, other than as
required by the provisions of Part 6 of Title I of ERISA and
Section 4980B of the Code, and each such Target Company Benefit Plan
may be amended or terminated by the Target Company or a Subsidiary
at any time without liability to the Target Company or such
Subsidiary.
SECTION 3.15 Finders' Fees. There is no investment banker,
broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of the Target Company who is entitled to
any fee or commission from the Target Company in connection with the
transactions contemplated by this Agreement except for (a) Ladenburg
Xxxxxxxx & Co. Inc., which shall be paid $60,000 in connection with
rendering a fairness opinion and (b) X. Xxxxxx Associates, Inc.
Pursuant to the agreement X. Xxxxxx Associates shall be paid
(i) upon the consummation of a transaction under this Agreement,
that portion of the Merger Consideration represented by
523,200 shares of Parent Common Stock, (ii) an amount equal to 1.1%
of the value to be paid upon the redemption of any Parent Preferred
Stock, if any, at the time of such redemption, and (iii) $14,000.00
as reimbursement for expenses incurred during the commission of
services rendered.
SECTION 3.16 Voting Requirements. The affirmative vote of
the holders of a majority of the outstanding shares of each of the
Target Company Common Stock and the Series B Stock, each voting as
a separate class (the "Target Company Stockholder Approval"),
approving this Agreement is the only vote of the holders of any
class or series of the Target Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this
Agreement.
SECTION 3.17 Products Liability. The Target Company has
not received any written notice relating to any claim involving any
product manufactured, produced, distributed or sold by the Target
Company or any of its Subsidiaries resulting from an alleged defect
in design, manufacture, materials or workmanship, or any alleged
failure to warn, or from any breach of any implied warranties or
representation, other than notices of claims that have been settled
or resolved by the Target Company prior to the date hereof or
notices of claims.
SECTION 3.18 Taxes.
(a) (i) All Returns required to be filed with the
federal government and the States of California and Iowa by or on
behalf of the Target Company have been duly filed on a timely basis
and such Returns (including all attached statements and schedules)
are true, complete and correct in all material respects. All Taxes
shown to be payable on such Returns or on subsequent assessments
that have been received by the Target Company with respect thereto
have been paid in full on a timely basis, and no other Taxes are
payable by the Target Company with respect to items or periods
covered by such Returns (whether or not shown on or reportable on
such Returns) or with respect to any period prior to the Effective
Time. No claim has been made in writing or, to the knowledge of the
Target Company, threatened by, any jurisdiction where the Target
Company does not file Returns that the Target Company is or may be
subject to Taxes in that jurisdiction.
(ii) To the knowledge of the Target Company, the
Target Company has withheld and paid over all material Taxes
required to have been withheld and paid over (including any
estimated taxes) to the federal government and the States of
California and Iowa, and has materially complied with all
information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent
contractor, or other third party.
(iii) To the knowledge of the Target Company,
there are no liens on any of the assets of the Target Company with
respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that are being contested in good faith through
appropriate proceedings and for which appropriate reserves have been
established.
(iv) The Target Company has made available, or
will make available, to Parent complete copies of: (i) all federal
and state income and franchise tax Returns of the Target Company for
the past five years preceding the date hereof, and (ii) all tax
audit reports, statements of deficiencies, closing or other
agreements received by the Target Company or on its behalf relating
to Taxes for the past five years preceding the date hereof.
(v) To the knowledge of the Target Company, the
Target Company has filed all Returns in all jurisdictions, except
such jurisdictions in which failure to file Returns would not have
a Material Adverse Effect on the Target Company.
(b) Except as disclosed in Section 3.18(b) of the
Target Company Disclosure Memorandum: (i) there is no audit of any
Return of the Target Company by a governmental or taxing authority
in process, pending or, to the knowledge of the Target Company,
threatened in writing by any such governmental or taxing authority;
(ii) to the knowledge of the Target Company, no deficiencies exist
or have been asserted or are expected to be asserted with respect to
Taxes of the Target Company, and no written notice has been received
by the Target Company that it has not filed a Return or paid Taxes
required to be filed or paid by it; (iii) to the knowledge of the
Target Company, the Target Company is not a party to any pending
action or proceeding for assessment or collection of Taxes, nor has
such action or proceeding been asserted or threatened against it or
any of its assets; (iv) no waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of the
Target Company; (v) there are no requests for rulings, subpoenas or
requests for information pending with respect to Taxes of the Target
Company; (vi) no power of attorney has been granted by the Target
Company with respect to any matter relating to Taxes; (vii) the
Target Company has never been included in an affiliated group of
corporations, within the meaning of Section 1504 of the Code and has
never been a part of any combined or unitary group for state income
tax purposes; or (viii) the amount of the Target Company's
liability for unpaid Taxes for all periods ending on or before
November 30, 2000 determined on a GAAP basis does not exceed the
amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as of that date, and the amount of the
Target Company's liability for unpaid Taxes for all periods ending
on or before the Closing Date determined on a GAAP basis will not,
to the best of the Target Company's knowledge exceed the amount of
the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals will be reflected on the balance
sheet of the Target Company as of the Closing Date (the "Closing
Date Balance Sheet").
(c) Except as disclosed in Section 3.18(c) of the
Target Company Disclosure Memorandum: (i) the Target Company has
not made an election to treat, and is not required to treat, any
asset as owned by another person for federal income tax purposes or
as tax-exempt bond financed property or tax-exempt use property
within the meaning of Section 168 of the Code; (ii) the Target
Company has not entered into any compensatory agreements as
described in Section 3.14(e); (iii) no election has been made under
Section 338 of the Code with respect to the Target Company and no
action has been taken that would result in any income tax liability
to the Target Company as a result of a deemed election within the
meaning of Section 338 of the Code; (iv) no consent under
Section 341(f) of the Code has been filed with respect to the Target
Company; (v) the Target Company has not agreed, nor is it required
to make, any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise; (vi) the Target Company is
not subject to any joint venture, partnership or other arrangement
or contract that is treated as a partnership for federal income tax
purposes; (vii) the Target Company has not made any of the foregoing
elections and is not required to apply any of the foregoing rules
under any comparable state or local income tax provisions; or
(viii) the Target Company does not have and has never had a
permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and
such foreign country.
(d) The tax Returns provided by the Target Company to
Parent contain in all material respects, as of the respective dates
thereof, accurate and complete information with respect to: (i) all
material tax elections in effect with respect to the Target Company;
(ii) the current tax basis of the assets of the Target Company;
(iii) the net operating losses of the Target Company by taxable
year; (iv) the net capital losses of the Target Company; or (v) the
tax credit carry overs of the Target Company.
(e) The tax Returns provided by the Target Company to
Parent contain in all material respects, as of the respective dates
thereof, accurate and complete information with respect to the net
operating losses, net operating loss carry forwards and other tax
attributes of the Target Company, and the extent to which they are
subject to any limitation under Code Sections 381, 382, 383, or 384,
or any other provision of the Code or the federal consolidated
return regulations (or any predecessor provision of any Code section
or the regulations).
SECTION 3.19 Information Supplied. None of the information
supplied or to be supplied to Parent by the Target Company for
inclusion or incorporation by reference in the Registration
Statement or any amendment thereof or supplement thereto, contains
or will contain any untrue statement of a material fact or omit to
state any material fact required to be so stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
SECTION 3.20 Voting Arrangements. Except for the Voting
Agreement and as set forth in Section 3.20 of the Target Company
Disclosure Memorandum, there are no outstanding stockholder
agreements, voting trusts, proxies or other contracts or agreements
to which the Target Company is a party or, to the Target Company's
knowledge, to which any other person or entity is a party, relating
to the voting of any shares of the Target Company capital stock.
SECTION 3.21 Ownership of Shares of Parent Capital Stock.
Except as set forth under Section 3.21 of the Target Company
Disclosure Memorandum, neither the Target Company nor, to the Target
Company's knowledge, any of the Target Company's affiliates or
associates (as such terms are defined under the Exchange Act):
(a) beneficially owns, directly or indirectly; or (b) is a party to
any contract or agreement for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Parent capital stock
(except for shares of Parent capital stock in the aggregate
representing less than 1% of the outstanding shares of Parent
capital stock).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure memorandum delivered by
the Parent on or prior to the date hereof (the "Parent Disclosure
Memorandum") or in the Parent SEC Reports, as defined in
Section 4.07 herein, Parent and Merger Sub jointly and severally,
represent and warrant to the Target Company that:
SECTION 4.01 Organization and Qualification. Each of
Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of
Parent and Merger Sub is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not reasonably be expected
to have a Material Adverse Effect on either of Parent or Merger Sub.
Each of Parent and Merger Sub has provided to the Target Company
complete and correct copies of its articles or certificate of
incorporation, as the case may be, and of its by-laws. Except as
otherwise disclosed in Section 4.01 of the Parent Disclosure
Memorandum, all of the outstanding shares of the common stock of
Merger Sub have been validly issued and are fully paid and non-
assessable, free and clear of all pledges, claims, heirs, charges,
encumbrances and security interests of any kind or nature
whatsoever, and free of any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership
interests ("Parent Liens"), except for restrictions imposed by
applicable securities laws.
SECTION 4.02 Capitalization. (a) As of the date hereof,
the authorized capital stock of Parent consists of 60,000,000 shares
of common stock, $0.01 par value per share. As of January 31, 2001,
there were outstanding: (1) 43,412,639 shares of Parent Common
Stock; and (2) stock options and warrants to purchase an aggregate
of 14,720,688 shares of Parent Common Stock. Since January 31,
2001, there have been no issuances of shares of the capital stock of
Parent or any other securities of Parent other than issuances of
shares of Parent Common Stock pursuant to options outstanding at
January 31, 2001. All shares of Parent Common Stock outstanding as
of the date hereof have been duly authorized and validly issued and
are fully paid and nonassessable. All shares issuable upon exercise
of outstanding employee stock options have been duly authorized and,
when issued in accordance with the terms thereof, will be validly
issued and will be fully paid and nonassessable.
(b) The authorized capital stock of Merger Sub
consists of 100 shares of common stock, $0.01 par value per share
("Merger Sub Common Stock"). There are 100 shares of Merger Sub
Common Stock outstanding each held by Parent. There are no other
outstanding securities of Merger Sub. All of the outstanding common
stock of Merger Sub has been duly authorized and validly issued and
are fully paid and non assessable.
(c) Except as set forth in Sections 4.02(a) and
4.02(b), there are no outstanding (i) shares of capital stock or
voting securities of Parent or Merger Sub, (ii) securities of Parent
or Merger Sub convertible into or exchangeable for shares of capital
stock or voting securities of Parent or Merger Sub or (iii) options
or other rights to acquire from Parent or Merger Sub or other
obligation of Parent or Merger Sub to issue, any capital stock,
voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Parent or Merger Sub (the
items in clauses (i), (ii) and (iii) being referred to collectively
as the "Parent Securities"). There are no outstanding obligations
of Parent, Merger Sub or any of their Subsidiaries to repurchase,
redeem or otherwise acquire any of the Parent Securities. Without
limiting the generality of the foregoing, neither Parent, nor Merger
Sub has adopted a shareholder rights plan or similar plan or
arrangement.
SECTION 4.03 Corporate Authorization. Parent and Merger
Sub will, on the Closing Date, have the requisite corporate power
and authority to enter into this Agreement, subject to obtaining the
Parent Shareholder Approval and will, on the Closing Date, have the
requisite corporate power and authority to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions
contemplated hereby will, on the Closing Date, be duly authorized by
all necessary corporate action on the part of Parent and Merger Sub.
This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes a valid and binding obligation of each of
Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms, except that such enforceability (i) may
be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. The
shares of Parent Common Stock and Parent Preferred Stock to be
issued pursuant to the terms of this Agreement will, on the Closing
Date, be duly authorized and adequately reserved and will, when
issued pursuant to the terms of this Agreement, be validly issued,
fully paid and non-assessable and not subject to any preemptive
rights, rights of first refusal or other similar rights. Such
shares of Parent Common Stock will, when issued, be registered under
the Securities Act and the Exchange Act and will, when issued, be
approved for trading on the OTCBB.
SECTION 4.04 Governmental Authorization. Except as set
forth in Section 4.04 of the Parent Disclosure Memorandum, no
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by
or with respect to Parent and Merger Sub in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or
the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except for (a) such reports and information
statements under the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this
Agreement, (b) the filing of the Certificate of Merger with the
Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Parent and Merger Sub
are qualified to do business, (c) in connection with any state or
local tax which is attributable to the beneficial ownership of
Parent's or Merger Sub's real property, if any, (d) as may be
required by any applicable state securities or "blue sky" laws or
state takeover laws, and (e) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure
of which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
on Parent or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
SECTION 4.05 Non-contravention. Except as set forth in
Section 4.05 of the Parent Disclosure Memorandum, the execution and
delivery of this Agreement by Parent and Merger Sub do not, and
performance by Parent and Merger Sub of this Agreement and the
consummation of the transactions contemplated hereby will not
(a) contravene, conflict with, or result in any violation or breach
of any provision of the articles or certificate of incorporation, as
the case may be, or bylaws of Parent or Merger Sub, (b) assuming
compliance with the matters referred to in Section 4.04 hereof,
contravene, conflict with, or result in a violation or breach of any
provision of any applicable law, regulation, judgment, injunction,
order or decree, (c) require any consent or other action by any
person under, constitute a default under, or cause or permit the
termination, cancellation, acceleration or other change of any right
or obligation or the loss of any benefit to which Parent or Merger
Sub is entitled under any provision of any agreement or other
instrument binding upon Parent or Merger Sub or any license,
franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or
business of Parent and Merger Sub or (d) result in the creation or
imposition of any Parent Lien on any asset of Parent or Merger Sub,
except, in the case of clauses (b), (c) and (d), for such matters as
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Parent or Merger Sub or
materially impair the ability of Parent or Merger Sub to consummate
the transactions contemplated by this Agreement.
SECTION 4.06 SEC Reports; Financial Statements.
(a) Parent has filed all required reports, schedules,
forms, statements and other documents with the SEC since October 13,
1999 (the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports complied as to form in all material respects with
the Securities Act, or the Exchange Act as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Reports, and none of the Parent SEC Reports
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The financial statements of Parent included in the
Parent SEC Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-QSB of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the
consolidated financial position of Parent and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Parent SEC Reports, and
except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice and liabilities and
obligations under this Agreement or incurred in connection with the
transactions contemplated hereby, neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by
U.S. generally accepted accounting principles to be set forth on a
consolidated balance sheet of Parent and its consolidated
Subsidiaries or in the notes thereto which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect on Parent.
SECTION 4.07 Litigation. Except as set forth in
Section 4.07 of the Parent Disclosure Memorandum, there is no suit,
action or proceeding pending or, to the knowledge of Parent or
Merger Sub, overtly threatened in writing against or affecting
Parent or Merger Sub that individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Parent
or Merger Sub or its respective business or would prevent or
substantially delay any of the transactions contemplated by this
Agreement or otherwise prevent Parent or Merger Sub from performing
its respective obligations hereunder, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or Merger Sub having, or
which, insofar as reasonably can be foreseen, in the future would
have, any such effect.
SECTION 4.08 Compliance with Laws. Except as set forth in
Section 4.08 of the Parent Disclosure Memorandum, each of Parent and
Merger Sub is in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any
Governmental Entity applicable to their respective businesses or
operations, except for instances of possible noncompliance that,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on either Parent or Merger Sub.
Each of Parent and Merger Sub has in effect all Federal, state,
local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and
rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted,
and there has occurred no default under any such Permit, except for
the lack of Permits and for defaults under Permits which lack or
default individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on either Parent or
Merger Sub.
SECTION 4.09 Absence of Certain Changes or Events. Since
September 30, 2000, except as set forth in Section 4.09 of the
Parent Disclosure Memorandum, each of Parent and Merger Sub has
conducted its respective business only in the ordinary course and
there has not occurred any events or changes that have had, or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on either Parent or Merger Sub.
SECTION 4.10 Insurance. All material risks of each of
Parent and Merger Sub in respect of its business are covered by
valid and currently effective insurance policies or binders of
insurance or programs of self-insurance in such types and amounts as
are reasonable in the context of the businesses and operations
engaged in by each of Parent and Merger Sub. Each of Parent and
Merger Sub has paid all premiums due under such policies and is not
in default with respect to its obligations under any such policies.
SECTION 4.11 Certain Contracts. As of the date hereof,
except as set forth in Section 4.11 of the Parent Company Disclosure
Memorandum, neither Parent nor Merger Sub is a party to or bound by
(i) any "material contracts" (as such term is defined in
Item 601(b)(10) of Regulation S-B of the SEC), or (ii) any material
non-competition agreements or any other agreements or arrangements
that limit or otherwise restrict Parent or Merger Sub or any
successor thereto from engaging or competing in any line of business
or in any geographic area. Except as set forth in Section 4.11 of
the Parent Disclosure Memorandum, as of the date hereof, Parent is
not bound by any agreement providing for the registration of Parent
Common Stock.
SECTION 4.12 Employee Matters. Neither Parent, nor any of
its Subsidiaries has experienced any work stoppages, strikes,
collective labor grievances, other collective bargaining disputes or
claims of unfair labor practices in the last five years which would,
individually or in the aggregate, have a Material Adverse Effect on
Parent. To the knowledge of Parent, there is no organizational
effort presently being made or overtly threatened by or on behalf of
any labor union with respect to the employees of Parent or any of
its Subsidiaries.
SECTION 4.13 Products Liability. Neither Parent nor Merger
Sub has received any written notice relating to any claim involving
any product manufactured, produced, distributed or sold by either of
Parent or Merger Sub resulting from an alleged defect in design,
manufacture, materials or workmanship, or any alleged failure to
warn, or from any breach of any implied warranties or
representation, other than notices of claims that have been settled
or resolved by either of Parent or Merger Sub prior to the date
hereof or notices of claims, which if determined against either of
Parent or Merger Sub would not have a Material Adverse Effect on
either of Parent or Merger Sub or its respective business.
SECTION 4.14 Information Supplied. None of the information
supplied or to be supplied by the Parent for inclusion or
incorporation by reference in the Registration Statement or any
amendment thereof or supplement thereto, contains or will contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they are made, not misleading.
SECTION 4.15 Finders' & Valuation Fees Owed by Parent.
There is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of
Parent who is entitled to any fee or commission from Parent in
connection with the transactions contemplated by this Agreement
except for National Securities Corporation ("National") who Parent
shall pay by wire transfer (i) Twenty Thousand Dollars ($20,000) on
or before the date hereof in connection with valuation services
rendered by National, and (ii) One Hundred Twenty-Seven Thousand,
Eighty Dollars ($127,080) on or before the Closing Date in
connection with merger/acquisition services rendered by National to
Parent.
SECTION 4.16 Voting Requirements. The affirmative vote of
a majority of the outstanding shares of Parent Common Stock (the
"Parent Shareholder Approval"), approving (i) an increase in the
number of shares of Parent Common Stock that Parent is authorized to
issue from 60,000,000 to 120,000,000 shares, (ii) the authorization
of 601,500 shares of Parent Series A Stock with the rights and
preferences set forth in Annex D hereto, (iii) the authorization of
235,150 shares of Parent Series B Stock with the rights and
preferences set forth in Annex E hereto, and (iv) the election of
each of Xxxxxx X. Xxxxx and Xxx Xxxxxxx to Parent's board of
directors is the only vote of the holders of any class or series of
Parent's capital stock necessary to provide for the consummation of
this Agreement and the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS
SECTION 5.01 Conduct of Business by the Target Company.
From the date hereof until the Effective Time, the Target Company
shall conduct its business in the ordinary course and subject to the
Services Agreement, consistent with past practice and shall use its
reasonable best efforts to preserve intact its business
organizations and relationships with third parties and to keep
available the services of its present officers and employees.
Without limiting the generality of the foregoing, except with the
written consent of Parent from the date hereof until the Effective
Time the Target Company shall not:
(a) declare, set aside or pay any dividend or other
distribution with respect to any share of Target Company Common
Stock or Target Preferred Stock;
(b) split, combine or reclassify any of Target Company
Common Stock or Target Preferred Stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(c) repurchase, redeem or otherwise acquire any shares
of capital stock or other securities of, or other ownership
interests in, the Target Company;
(d) (i) issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or sale
(including the grant of any security interests, liens, claims,
pledges, limitations in voting rights, charges or other
encumbrances) of, any shares of any class of its or its
subsidiaries' capital stock (including shares held in treasury), any
securities convertible into or exercisable or exchangeable for any
such shares, or any rights, warrants or options to acquire any such
shares (except for the issuance of shares pursuant to stock-based
awards that are outstanding on the date of this agreement);
(ii) amend or otherwise modify the terms of any such rights,
warrants, options or stock-based awards, the effect of which shall
be to make such terms more favorable to the holders thereof; or
(iii) take any action to accelerate the exercisability or vesting of
any option or other stock-based award.
(e) amend the Target Company's certificate of
incorporation or by-laws or other comparable organizational
documents or amend any material terms of the outstanding securities
of the Target Company;
(f) form any Subsidiary;
(g) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Target Company,
except purchases in the ordinary course of business consistent with
past practice;
(h) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets which are material, individually or in the
aggregate, to the Target Company or its business, except sales in
the ordinary course of business consistent with past practice;
(i) except for the items currently contracted for by
the Target Company and the items contemplated by the Target
Company's most recent capital expenditure budget made available to
Parent, make or agree to make any new capital expenditure or
expenditures other than expenditures which, individually, is in
excess of $60,000 or, in the aggregate, are in excess of $500,000;
(j) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities, or guarantee any debt securities of another person,
except for the endorsement of checks in the normal course of
business and the extension of credit in the normal course of
business, or make any loans, advances or capital contributions to,
or investments in, any other person, other than advances to
employees in accordance with past practice;
(k) (i) increase the compensation payable to or to
become payable to any director or executive officer; (ii) grant any
severance or termination pay to, or enter into or amend any
employment or severance agreement with, any director, officer or
employee; (iii) establish, adopt or enter into any employee benefit
plan or arrangement, whether written or unwritten, or (iv) except as
may be required by applicable law, amend or take any other action
with respect to any Target Company Benefit Plan or any of the plans,
programs, agreements, policies or other arrangements described in
Section 3.14(g) of this Agreement.
(l) adopt any change, other than in the ordinary
course of business consistent with past practice or as required by
GAAP or by law, in its accounting policies, procedures or practices;
(m) make any material tax election or settle or
compromise any material tax liability;
(n) change accounting methods;
(o) pay, discharge, settle or satisfy any claims,
litigation, arbitration, liabilities or other controversies
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) or incurred in the
ordinary course of business consistent with past practice, or waive
any material benefits of, or agree to modify in any material
respect, any confidentiality, standstill or similar agreements to
which the Target Company is a party;
(p) except in the ordinary course of business or as
otherwise permitted by this Section 5.01, (i) enter into any
contract or agreement, (ii) modify, amend or terminate any material
contract or agreement to which the Target Company is a party, or
(iii) waive, release or assign any material rights or claims;
(q) permit any insurance policy naming the Target
Company as a beneficiary or loss payable payee to be canceled or
terminated or change any insurance coverage;
(r) expand the size of the board of directors of the
Target Company, elect or appoint anyone to such board, or form any
committees of such board;
(s) take, or agree to take, any action that would
materially impair the ability of the Target Company, Parent or
Merger Sub to consummate the Merger in accordance with the terms
hereof or materially delay such consummation; and
(t) agree or commit to do any of the foregoing.
SECTION 5.02 Conduct of Business by Parent. From the date
hereof until the Effective Time, Parent shall conduct its business
in the ordinary course and subject to the Services Agreement,
consistent with past practice and shall use its reasonable best
efforts to preserve intact its business organization and
relationships with third parties and to keep available the services
of their present officers and employees. Without limiting the
generality of the foregoing, except with the written consent of the
Target Company, from the date hereof until the Effective Time Parent
shall not:
(a) issue, deliver, award, grant or sell, or authorize
or propose the issuance, delivery, award, grant or sale (including
the grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges or other encumbrances) of, any
shares of Parent Common Stock, or any securities convertible into or
exercisable or exchangeable for shares of Parent Common Stock, or
any rights, warrants or options to acquire any shares of Parent
Common Stock, other than (i) issuances pursuant to stock-based
awards or options that are outstanding on the date hereof or are
granted in accordance with the following clause, or (ii) the
issuance of shares of Parent Company Stock for fair value in cash or
property as a result of an arms-length negotiation with a third
party, the proceeds of which shall be used for Parent working
capital or any other purpose as agreed to in writing by the Target
Company;
(b) issue, deliver or sell any class or series of
securities of Parent which are pari passu or superior in rights and
preferences of either series of the Parent Preferred Stock as
contemplated by this Agreement or that would adversely affect either
series of Parent Preferred Stock if such Parent Preferred Stock were
then outstanding;
(c) grant any registration rights to any person or
entity other than registration rights granted with respect to Parent
Common Stock issued pursuant to Section 5.02(a)(ii) hereof that are
not more favorable than the registration rights to be granted under
the Registration Rights Agreement and that do not conflict or
interfere with the rights to be granted under the Registration
Rights Agreement;
(d) form a subsidiary;
(e) amend its articles of incorporation or by-laws or
other comparable organizational documents or amend any material
terms of the outstanding Parent Securities;
(f) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof or any assets that are material,
individually or in the aggregate, to Parent;
(g) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets (whether by merger, consolidation, sale of
assets or otherwise) which are material, individually or in the
aggregate, to Parent, except sales in the ordinary course of
business consistent with past practice;
(h) except for the items currently contracted for by
Parent and the items contemplated by Parent's most recent capital
expenditure budget made available to the Target Company, make or
agree to make any new capital expenditure or expenditures other than
expenditures which, individually, is in excess of $60,000 or, in the
aggregate, are in excess of $500,000;
(i) incur any indebtedness for borrowed money in
excess of $275,000 per calendar month or in excess of $500,000 in
the aggregate, or guarantee any such indebtedness of another person,
issue or sell any debt securities or warrants or other rights to
acquire any debt securities, or guarantee any debt securities of
another person, except for the endorsement of checks in the normal
course of business and the extension of credit in the normal course
of business, or make any loans, advances or capital contributions
to, or investments in, any other person, other than advances to
employees in accordance with past practice;
(j) adopt any change, other than in the ordinary
course of business consistent with past practice or as required by
the SEC, GAAP or by law, in its accounting policies, procedures or
practices;
(k) make any material tax election or settle or
compromise any material tax liability;
(l) pay, discharge, settle or satisfy any claims,
litigation, arbitration, liabilities or other controversies
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice, or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) included in the Parent
SEC Reports or incurred in the ordinary course of business
consistent with past practice, or waive any material benefits of, or
agree to modify in any material respect, any confidentiality,
standstill or similar agreements to which Parent is a party;
(m) take, or agree to take, any action that would
materially impair the ability of the Target Company, Parent or
Merger Sub to consummate the Merger in accordance with the terms
hereof or materially delay such consummation; and agree or commit to
do any of the foregoing; or
(n) make any material change in its business.
SECTION 5.03 Pre-Closing Tax Covenants.
(a) During the period from the date hereof to the
Closing Date, the Target Company shall prepare and file all Returns
required to be filed by the Target Company on or before the
respective due date of the Return, and shall pay all Taxes
(including estimated Taxes) due on such Return or which are
otherwise required to be paid at any time prior to or during such
period. Such Returns shall be prepared in accordance with the most
recent tax practices as to elections and accounting methods except
for new elections that may be made therein that were not previously
available, subject to Parent's consent (not to be unreasonably
withheld or delayed).
(b) Between the date hereof and the Closing Date, to
the extent the Target Company has knowledge of the commencement or
scheduling of any tax audit, the assessment of any tax, the issuance
of any notice of tax due or any xxxx for collection of any tax, or
the commencement or scheduling of any other administrative or
judicial proceeding with respect to the determination, assessment or
collection of any tax of the Target Company, the Target Company
shall provide prompt notice to Parent of such matter, setting forth
information (to the extent known) describing any asserted tax
liability in reasonable detail and including copies of any notice or
other documentation received from the applicable tax authority with
respect to such matter.
(c) Prior to the closing, the Target Company shall not
take any of the following actions: (i) make, revoke or amend any
tax election other than consistent with past practice; (ii) execute
any waiver of restrictions on assessment or collection of any tax;
or (iii) enter into or amend any agreement or settlement with any
tax authority.
(d) The Target Company shall cause any tax-sharing
agreements, tax indemnity agreements, tax allocation agreements, or
similar agreements with respect to the Target Company, and any power
of attorney with respect to tax matters of the Target Company, to be
terminated prior to the Closing Date so that from and after the
Closing Date the Target Company shall not be bound thereby nor have
any liability thereunder.
(e) Prior to Closing, the Target Company shall provide
Parent with a clearance certificate or similar document that may be
required by any state taxing authority in order to relieve Parent of
any obligation to withhold any portion of the purchase price with
respect to the stock of the Target Company.
SECTION 5.04 Other Actions. The Target Company, Parent and
Merger Sub shall not, and shall not permit any of their respective
Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of their respective
representations and warranties set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming
untrue so as to have a Material Adverse Effect or (iii) any of the
conditions to the Merger set forth in Article 6 not being satisfied
(subject to the Target Company's right to take action specifically
permitted by Section 5.10).
SECTION 5.05 [Reserved]
SECTION 5.06 Registration Statement; Securities Laws
Compliance. As promptly as practicable after the date of this
Agreement, with the cooperation of the Target Company, Parent shall
prepare and file with the SEC a registration statement on Form S-4
(the "Registration Statement"). Each of Parent and the Target
Company shall use its reasonable best efforts to cause the
Registration Statement to be declared effective as promptly as
practicable after it is filed with the SEC. Parent shall also take
any reasonable action required to be taken under any applicable
state securities laws in connection with the issuance of Parent
Common Stock in connection with the Merger. The Target Company
shall furnish all information concerning the Target Company and the
holders of shares of Target Company Common Stock as may be
reasonably requested by Parent in connection with such action. The
Target Company shall promptly notify Parent and update such
information if it becomes aware of any facts that might make it
necessary or appropriate to amend or supplement the Registration
Statement to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law.
Parent shall promptly notify the Target Company of the receipt of
any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Registration
Statement or for additional information and will supply the Target
Company with copies of all correspondence between Parent or any of
its representatives, on the one hand, and the SEC or its staff, on
the other hand, with respect to the Registration Statement or the
Merger.
SECTION 5.07 Target Company Stockholders Meeting.
(a) The Target Company will hold a special meeting
(the "Target Company Stockholders Meeting") or solicit written
consent of the stockholders of the Target Company (the "Target
Company Stockholders") as promptly as practicable after the
Registration Statement is declared effective for the purpose of
voting upon approval of this Agreement, and the Merger. The Target
Company will solicit from the Target Company Stockholders proxies in
favor of the approval of this Agreement and the Merger, and will use
its reasonable best efforts to take all other action necessary or
advisable to secure the vote or consent of the Target Company
Stockholders required by Delaware law to obtain such approvals. The
Target Company Stockholders Meeting shall be called, held and
conducted, and any proxies or stockholder written consents will be
solicited, in compliance with Delaware law, the Target Company's
certificate of incorporation and bylaws, and all other applicable
legal requirements. The Target Company's obligation to call, give
notice of, convene, hold and conduct the Target Company Stockholders
Meeting or solicit a written consent of the stockholders of the
Target Company in accordance with this Section 5.07 shall not be
limited to or otherwise affected by the commencement, disclosure,
announcement or submission to the Target Company of any Business
Combination Proposal (as defined in Section 5.11), or by any
withdrawal, amendment or modification of the recommendation of the
board of directors of the Target Company to the Target Company
Stockholders to approve this Agreement and the Merger.
(b) Notwithstanding anything to the contrary contained
in this Agreement, the Target Company may adjourn or postpone the
Target Company Stockholders Meeting if as of the time for which the
Target Company Stockholders Meeting is originally scheduled there
are insufficient shares of the Target Company Common Stock
represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Target Company Stockholders
Meeting. The Target Company shall ensure that the Target Company
Stockholders Meeting, if held, is called, noticed, convened, held
and conducted prior to and separate from any meeting of the Target
Company Stockholders at which any Business Combination Proposal or
Business Combination is considered or voted upon.
(c) Subject to Section 5.11, (i) the board of
directors of the Target Company shall recommend that the Target
Company Stockholders approve this Agreement and the Merger; (ii) the
Registration Statement and the proxy, shall include a statement to
the effect that the board of directors of the Target Company has
recommended that the Target Company Stockholders approve this
Agreement and the Merger; and (iii) neither the board of directors
of the Target Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify
in a manner adverse to Parent, the recommendation of the board of
directors of the Target Company that the Target Company Stockholders
vote in favor of and approve this Agreement and the Merger.
SECTION 5.08 Dissenting Shares. As promptly as practicable
after the date the proxy statement contained in the Registration
Statement is distributed to the Target Company Stockholders, and
prior to the Closing Date, the Target Company shall furnish Parent
with the name and address of each stockholder of the Target Company
who has up to such time dissented and the number of shares owned by
such stockholder of the Target Company.
SECTION 5.09 Parent Shareholders Meeting.
(a) Prior to the Effective Time, Parent will hold a
special meeting (the "Parent Shareholders Meeting") of the holders
of Parent Common Stock (the "Parent Shareholders") for the purpose
of voting upon (i) an increase in the number of shares of Parent
Common Stock that Parent is authorized to issue from 60,000,000 to
120,000,000 shares, (ii) the authorization of 601,500 shares of
Parent Series A Stock with the rights and preferences set forth in
Annex D hereto, (iii) the authorization of 235,150 shares of Parent
Series B Stock with the rights and preferences set forth in Annex E
hereto and (iv) the election of Xxxxxx X. Xxxxx and Xxx Xxxxxxx to
Parent's board of directors. Parent will solicit from the Parent
Shareholders proxies in favor of the proposals set forth in this
Section 5.09, and will use its reasonable best efforts to take all
other action necessary or advisable to secure the vote of the Parent
Shareholders required by Colorado law to obtain such approval. The
Parent Shareholders Meeting shall be called, held and conducted, and
any proxies will be solicited, in compliance with Colorado law,
Parent's articles of incorporation and bylaws, and all other
applicable legal requirements.
(b) Notwithstanding anything to the contrary contained
in this Agreement, Parent may adjourn or postpone the Parent
Shareholders Meeting if as of the time for which the Parent
Shareholders Meeting is originally scheduled there are insufficient
shares of the Parent Common Stock represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business
of the Parent Shareholders Meeting. Parent shall ensure that the
Parent Shareholders Meeting, if held, is called, noticed, convened,
held and conducted prior to and separate from any meeting of the
Parent Shareholders at which any Business Combination Proposal or
Business Combination is considered or voted upon.
(c) The board of directors of Parent shall recommend
that the Parent Shareholders approve the proposals set forth in this
Section 5.09 and neither the board of directors of the Parent nor
any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify, the recommendation of the
board of directors of the Parent that the Parent Shareholders vote
in favor of and approve the proposals set forth in this Section 5.09
unless this Agreement has been terminated pursuant to the provisions
of Article 7 hereof.
SECTION 5.10 Access to Information. From the date hereof
until the Effective Time and subject to applicable law, the Target
Company and Parent shall (i) give the requesting party, its counsel,
financial advisors, auditors and other authorized representatives
reasonable access to its offices, properties, books and records,
(ii) furnish to the requesting party, its counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons
may reasonably request and (iii) instruct the employees, counsel,
financial advisors, auditors and other authorized representatives of
the disclosing party and its respective Subsidiaries to cooperate
with the requesting party in its investigation of the disclosing
party and its Subsidiaries. Any investigation pursuant to this
section shall be conducted upon two Business Days' prior written
notice to the disclosing party, during regular business hours and in
such manner as not to interfere unreasonably with the conduct of the
business of the disclosing party and its Subsidiaries.
SECTION 5.11 No Solicitation; Other Offers. Except as
otherwise provided herein, from the date hereof until the earlier of
the termination of this Agreement in accordance with the provisions
hereof and the Effective Time (a) the Target Company shall not, and
shall use its reasonable best efforts to ensure that its officers,
directors or employees, or any investment bankers, consultants or
other agents retained by it do not (i) solicit, initiate, or
encourage the submission of any Business Combination Proposal, as
defined below, or (ii) engage in discussions or negotiations or
furnish to any person any information with respect to a Business
Combination or knowingly facilitate any effort or attempt to make a
Business Combination. The Target Company will notify the Parent as
promptly as practicable after receipt by the Target Company of any
Business Combination Proposal or any request for nonpublic
information relating to the Target Company by any person who, to the
knowledge of the Target Company, is making or who has made, a
Business Combination Proposal. The Target Company shall provide
such notice orally and in writing, which notice shall include the
material substantive terms of such request or the material
substantive terms and conditions of any such Business Combination
Proposal. The Target Company shall, and shall use its reasonable
best efforts to cause directors, employees and other agents of the
Target Company to, cease immediately and cause to be terminated all
activities, discussions and negotiations, if any, with any persons
conducted prior to the date hereof with respect to any Business
Combination Proposal and, to the extent within its power, to recover
or cause to be destroyed all information concerning the Target
Company in the possession of such persons and their affiliates,
representatives and advisors. Nothing contained in this Agreement
shall prevent the Target Company from making any disclosure to the
Target Company Stockholders if, in the good faith judgment of the
majority of the disinterested members of the board of directors of
the Target Company, failure to so disclose would be inconsistent
with applicable law.
(b) Notwithstanding the first sentence of
Section 5.11(a), the Target Company may negotiate or otherwise
engage in substantive discussions with, and furnish material
nonpublic information to, any person in response to an Unsolicited
Business Combination Proposal by such person if a majority of the
board of directors of the Target Company determines in good faith,
after consultation with outside legal counsel, that the failure to
take such action could reasonably be deemed to be inconsistent with
its fiduciary duties under applicable law, (iii) prior to furnishing
any such material non-public information to, or entering into any
discussions with, such person or group, the Target Company gives
Parent written notice of all material substantive terms of such
Business Combination Proposal and of the Target Company's intent to
furnish nonpublic information to, or enter into discussions with,
such person, and the Target Company receives from such person an
executed confidentiality agreement containing customary terms, and
(iv) contemporaneously with furnishing such material nonpublic
information to such person, the Target Company furnishes such
material nonpublic information to Parent (to the extent not
previously furnished by the Target Company to Parent). As used
herein "material nonpublic information" shall mean information that
is nonpublic and material relating to the operations, assets or
financial condition of the Target Company but shall in no event
include any letters of intent, agreements, correspondence or
discussions relating to the terms of a possible Business
Combination.
(c) Except as permitted in this Section 5.11(c),
neither the board of directors of the Target Company nor any
committee thereof shall (i) withdraw or modify, or publicly propose
to withdraw or modify, in a manner adverse to Parent, or take any
action not explicitly permitted by this Agreement that would be
inconsistent with its approval of the Merger, (ii) approve or
recommend, or publicly propose to approve or recommend, any Business
Combination or (iii) cause the Target Company to enter into any
letter of intent, agreement in principle, acquisition agreement or
similar agreement related to any Business Combination.
Notwithstanding the foregoing, the board of directors of the Target
Company shall be permitted to approve or recommend any Business
Combination and in connection therewith enter into an agreement with
respect to such Business Combination, but only if (x) the Target
Company has received a Superior Proposal which its board of
directors determines in good faith, after consultation with outside
legal counsel, that the failure to take such action could reasonably
be deemed to be inconsistent with its fiduciary duties under
applicable law, and (y) the board of directors of the Target Company
shall have provided to Parent at least three Business Days' prior
written notice (or such lesser prior notice, as provided to the
members of the Target Company's board of directors) of any meeting
of the Target Company's board of directors at which such board of
directors is reasonably expected to consider any Business
Combination Proposal to determine whether such Business Combination
Proposal is a Superior Proposal. Nothing contained in this
Section 5.11 shall limit the Target Company's obligation to hold and
convene the Target Company Stockholders Meeting (regardless of
whether the recommendation of the board of directors of the Target
Company shall have been withheld, withdrawn, amended or modified)
unless this Agreement has been terminated pursuant to the provisions
of Article 7 hereof.
(d) For purposes of this Agreement:
(i) "Business Combination" means any (i) merger,
reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction or
series of related transactions as a result of which either (A) the
stockholders of the subject company prior to such transaction in the
aggregate cease to own at least 50% of the voting securities of the
entity surviving or resulting from such transaction (or the ultimate
parent thereof) or, regardless of the percentage of voting
securities held by such stockholders, if any person shall
beneficially own, directly or indirectly, at least 20% of the voting
securities of such ultimate parent entity, or (B) the individuals
comprising the board of directors prior to such transaction do not
constitute a majority of the board of directors of such ultimate
parent entity, (ii) a sale, lease, exchange, license or transfer or
other disposition of at least 20% of the assets, taken as a whole,
in a single transaction or a series of related transactions, or
(iii) the acquisition, directly or indirectly, by a person who,
after giving effect to such acquisition, owns of record or
beneficially 20% or more of the common stock whether by merger,
consolidation, share exchange, business combination, tender or
exchange offer or otherwise (other than a merger, reorganization,
consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction
upon the consummation of which the stockholders of the subject
company would in the aggregate beneficially own greater than 60% of
the voting securities of such person).
(ii) "Business Combination Proposal" means with
respect to the Target Company, any offer or proposal (other than an
offer or proposal by Parent) relating to a Business Combination.
(iii) "Superior Proposal" means an unsolicited
bona fide written proposal made by a third party to acquire (i) at
least 50% of the voting securities of the Target Company whether by
merger, consolidation, business combination, or (ii) substantially
all of the assets of the Target Company or otherwise, whether for
cash, securities or any other consideration or combination thereof
(including by way of a tender offer or an exchange offer or a two-
step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving the Target Company);
provided, however, that the board of directors of the Target Company
determines in good faith, based on the advice of counsel that such
proposal is more favorable than the transaction contemplated by this
Agreement and that to reject such Superior Proposal would be
reasonably likely to be inconsistent with its fiduciary duties to
the Target Company Stockholders under applicable law.
(iv) "Unsolicited Business Combination Proposal"
means a Business Combination Proposal received by the Target Company
other than as a result of a breach of this Section 5.11 by the
Target Company.
SECTION 5.12 Best Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use their best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents
and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all steps as may be
necessary to avoid an action or proceeding by any Governmental
Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, seeking to have
any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. In connection with and without
limiting the foregoing, the Target Company and its board of
directors and the Merger Sub and its board of directors shall, if
any state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement or the other
transactions contemplated by this Agreement, use their best efforts
to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement. Nothing herein shall
limit or affect the Target Company's taking actions specifically
permitted by Section 5.11(b) and (c).
(b) Subject to the terms and conditions of this
Agreement, in furtherance and not in limitation of the covenants of
the parties contained in Section 5.12(a) if any administrative or
judicial action or proceeding, including any proceeding by a private
party, is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any
applicable law, each of the parties shall cooperate in all respects
with each other and use its respective best efforts in order to
contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this
Agreement.
(c) If any objections are asserted with respect to the
transactions contemplated hereby under any applicable law or if any
suit is instituted by any Governmental Entity or any private party
challenging any of the transactions contemplated hereby as violative
of any applicable law, each of the Target Company and Parent shall
use its best efforts to resolve any such objections or challenge
such Governmental Entity or private party may have to such
transactions so as to permit consummation of the transactions
contemplated by this Agreement.
(d) The existence of the conditions set forth in
Section 6.01 and Section 6.03 shall not limit or diminish Parent's
or Merger Sub's obligations pursuant to this Section 5.12 or relieve
Parent or Merger Sub of any liability or damages that may result
from its breach of its obligations under this Section 5.12.
SECTION 5.13 Maintenance of Businesses. The parties hereto
understand and acknowledge that it is their mutual intent to work
closely together during the period from the date hereof until the
Closing Date. The parties hereto will use their reasonable best
efforts to carry on their respective businesses, and to maintain
relations and goodwill with all of their respective customers,
suppliers, landlords, creditors, licensors, licensees, employees and
other persons having business relationships with the parties, in
substantially the same manner as each of the parties hereto has
prior to the date of this Agreement, except such changes as may be
mutually agreed upon between Parent and the Target Company. The
parties hereto shall confer with each other concerning all
operational matters regarding their respective businesses of a
material nature.
SECTION 5.14 Director Appointments; Bylaw Amendment. At or
prior to the Effective Time, Parent shall use its best efforts to
(i) cause its board of directors to appoint, nominate and recommend
the election of each of Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxxx and Xxx
Xxxxxxx to the board of directors of Parent and (ii) amend its
Bylaws to include the provision set forth in Annex G hereto (the
"Bylaw Amendment").
SECTION 5.15 Directors and Officers Insurance;
Indemnification. Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years from
the Effective Time, the Target Company's current directors and
officers an insurance and indemnification policy that provides
coverage for events occurring through the Effective Time (the "D &
O Insurance") that is no less favorable than the coverage provided
to such directors under the Target Company's existing policy or, if
substantially equivalent insurance coverage is unavailable, the best
available comparable coverage; provided, however, that neither
Parent nor the Surviving Corporation shall be required to pay an
annual premium for the D&O Insurance in excess of two hundred
percent (200%) of the last annual premium paid by the Target
Company prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount. From and after the
Effective Time, Parent (i) agrees to indemnify and hold harmless all
past and present officers and directors of the Target Company to the
same extent that such persons are currently entitled to be
indemnified by the Target Company pursuant to the applicable
provisions of the Target Company's certificate of incorporation or
by-laws or of any Target Company indemnification agreement for the
benefit of any such officers or directors for acts or omissions
occurring at or prior to the Effective Time, including those in
connection with the Merger and (ii) shall advance reasonable
litigation expenses incurred by such officers and directors in
connection with defending any action arising out of such acts or
omissions, and Parent agrees not to amend or modify any of such
provisions after the Effective Time.
SECTION 5.16 Public Announcements. Parent and the Target
Company will consult with each other before issuing any press
release or making any public statement (including any broadly issued
statement or announcement to employees) with respect to this
Agreement or the transactions contemplated hereby and, except as may
be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release
or make any such public statement prior to such consultation.
SECTION 5.17 Further Assurances. At and after the
Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name
and on behalf of the Target Company or Merger Sub, any deeds, bills
of sale, assignments or assurances and to take and do, in the name
and on behalf of the Target Company or Merger Sub, any other actions
and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to
and under any of the rights, properties or assets of the Target
Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
SECTION 5.18 Notices of Certain Events. Each of the Target
Company and Parent shall promptly notify the other of:
(a) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue
or inaccurate so as to have a Material Adverse Effect;
(b) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement;
(c) the Target Company obtaining knowledge of a
material breach by Parent, or Parent obtaining knowledge of a
material breach by the Target Company, of their respective
representations, warranties or covenants hereunder of which the
breaching party has not already given notice pursuant to clauses (a)
or (b) above;
(d) any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(e) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated
by this Agreement;
(f) any actions, suits, claims, investigations,
orders, decrees, complaints or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise
affecting the Target Company, Parent or any of their respective
Subsidiaries that relate to the consummation of the transactions
contemplated by this Agreement; or
(g) the occurrence of any other event which would
reasonably be likely to have a Material Adverse Effect on the Target
Company or the Parent; provided, however, that the delivery of any
notice pursuant to this Section 5.18 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such
notice.
SECTION 5.19 Regulatory Approvals. Each of Parent and the
Target Company agree to execute and file, or join in the execution
and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which
may be reasonably required, or which either Parent or the Target
Company may reasonably request in connection with the consummation
of the transactions provided for in this Agreement. Each of Parent
and the Target Company agree to use reasonable best efforts to
obtain all such authorizations, approvals and consents.
SECTION 5.20 Tax-Free Reorganization Treatment. Each of
Parent and the Target Company shall treat the Merger as a
"reorganization" within the meaning of section 368(a) of the Code.
Neither Parent, Merger Sub nor the Target Company shall take any
action (excluding any action pursuant to the terms of this Agreement
and any action pursuant to the exercise of redemption rights by the
holders of the Parent Preferred Stock) if such action would
jeopardize the qualification of the Merger as a reorganization
within the meaning of section 368(a) of the Code. No party to this
Agreement shall take any position inconsistent with this Section
5.20 on any tax return, in any audit or proceeding or otherwise;
provided however, that Parent's and the Target Company's obligations
under this sentence shall not be applicable in any court proceeding
with respect to the tax treatment of the Merger that is initiated by
the IRS or persons other than Parent or the Target Company unless
one or more holders of Parent Preferred Stock shall have agreed to
reimburse Parent and the Target Company for all costs of such
proceeding.
SECTION 5.21 Other Agreements. Contemporaneously with the
delivery and execution of this Agreement, the parties thereto have
executed and delivered the Services Agreement as set forth in
Annex B hereto.
ARTICLE 6
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligations of Each Party. The
respective obligations of the Target Company, Parent and Merger Sub
to consummate the Merger are subject to the satisfaction or waiver
of the following conditions:
(a) the Registration Statement shall have become
effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or, to the knowledge of
Parent or the Target Company, threatened by the SEC. All necessary
state securities authorizations (including state takeover approvals)
shall have been received unless the failure to receive any such
authorization would not have a Material Adverse Effect on Parent or
the Target Company or the transactions contemplated by this
Agreement;
(b) the Target Company Stockholder Approval shall have
been obtained;
(c) the Parent Shareholder Approval shall have been
obtained;
(d) no statute, rule or regulation shall have been
enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity which prevents the consummation of the Merger or
makes the consummation of the Merger unlawful, and no temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction preventing the
consummation of the Merger shall be in effect; provided, however,
that each of the parties hereto shall have used its respective best
efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any injunction or other order
that may be entered;
(e) there shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the
Merger by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, including but
not limited to satisfaction of all requirements under applicable
federal and state securities laws; and
(f) shares of Parent Common Stock issuable to the
Target Company Stockholders pursuant to the Merger and issuable upon
exercise of the Target Company Options converted pursuant to this
Agreement, shall have been approved for trading and included for
quotation on the OTCBB prior to or simultaneous with the Effective
Time, subject to official notice of issuance.
SECTION 6.02 Conditions to Obligations of the Target
Company. The obligations of the Target Company to consummate the
Merger are subject to the satisfaction or waiver of the following
conditions:
(a) Each representation and warranty of Parent and
Merger Sub contained in Article 4 of this Agreement (disregarding
all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect or any other similar standard
or qualification) shall be true and correct in all respects as of
the Effective Time, as if made at and as of such time (except to the
extent that any such representation or warranty, by its terms, is
expressly limited to a specific date, in which case such
representation or warranty shall not be true and correct as of such
date), and the failure of such representation or warranty to be true
and correct would not reasonably be expected to have a Material
Adverse Effect on Parent or Merger Sub;
(b) Parent and Merger Sub shall have performed in all
material respects all of their agreements contained in this
Agreement required to be performed at or prior to the Effective
Time, and such failure has not had or would not reasonably be
expected to have a Material Adverse Effect on Parent or Merger Sub;
(c) Parent and Merger Sub shall have obtained the
consent or approval of each person whose consent or approval shall
be required to consummate the transactions contemplated hereby under
any indenture, mortgage, evidence of indebtedness, lease or other
agreement or instrument to which Parent or Merger Sub is a party,
except where the failure to obtain the same would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect on Parent or upon the transactions contemplated by
this Agreement; and
(d) All necessary consents or authorizations from
Governmental Entities which may be required in connection with the
transactions contemplated hereby, shall have been received, unless
the failure to receive any such consent or authorization would not
have a Material Adverse Effect on Parent, Merger Sub or the
transactions contemplated by this Agreement, and such consents or
authorizations shall not contain any conditions which would
reasonably be expected to have a Material Adverse Effect on Parent,
Merger Sub or the transactions contemplated by this Agreement.
(e) Parent shall have delivered to the Target Company
the duly executed Registration Rights Agreement dated as of the
Closing Date in substantially the form set forth in Annex E hereto
(the "Registration Rights Agreement").
(f) Xxxxxxx X. Xxxxxxxx shall have been appointed to,
and each of Xxxxxx X. Xxxxx and Xxx Xxxxxxx shall have been elected
to Parent's board of directors, and the Bylaw Amendment shall have
been adopted by the Parent.
(g) Parent shall have filed with the Secretary of
State of the State of Colorado, the certificate of designations of
each of the Parent Series A Stock and the Parent Series B Stock in
substantially the form set forth in Annex D and Annex E hereto,
respectively.
(h) No Material Adverse Effect with respect to Parent
shall have occurred.
(i) Parent and the Target Company shall have received
written confirmation from Parent's tax accountants that the Merger
will be reported for federal income tax purposes on Parent's federal
income tax return as a reorganization within the meaning of
section 368(a) of the Code.
(j) Parent shall have delivered such officer's
certificates as the Target Company may reasonably request. The
form, scope and substance of all legal and accounting matters
contemplated hereby and all closing documents delivered pursuant
hereto shall be reasonably acceptable to the Target Company's
counsel.
SECTION 6.03 Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate the
Merger are subject to the satisfaction or waiver of the following
conditions:
(a) Each representation and warranty of Target Company
contained in Article 3 of this Agreement (disregarding all
qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect or any similar standard or
qualification), shall be true and correct in all respects as of the
Effective Time, as if made at and as of such time (except to the
extent that any such representation or warranty, by its terms, is
expressly limited to a specific date, in which case such
representation or warranty shall not be true and correct as of such
date), and the failure of such representation or warranty to be true
and correct would not reasonably be expected to have a Material
Adverse Effect on the Target Company;
(b) The Target Company shall have performed in all
material respects all of its agreements contained in this Agreement
required to be performed at or prior to the Effective Time, and such
failure has not had or would not reasonably be expected to have a
Material Adverse Effect on the Target Company;
(c) The Target Company shall have obtained the consent
or approval of each person whose consent or approval shall be
required to consummate the transactions contemplated hereby under
any indenture, mortgage, evidence of indebtedness, lease or other
agreement or instrument to which the Target Company is a party,
except where the failure to obtain the same would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect on the Target Company or upon the transactions
contemplated by this Agreement; and
(d) All necessary consents or authorizations from
Governmental Entities which may be required in connection with the
transactions contemplated hereby, shall have been received, unless
the failure to receive any such consent or authorization would not
have a Material Adverse Effect on the Target Company or the
transactions contemplated by this Agreement, and such consents or
authorizations shall not contain any conditions which would
reasonably be expected to have a Material Adverse Effect on the
Target Company or the transactions contemplated by this Agreement.
(e) No Material Adverse Effect shall have occurred
with respect to the Target Company.
(f) Parent shall have received sufficient evidence
that the fees described in Section 3.15 have been paid in full by
the Target Company prior to the Closing.
(g) The Target Company shall have delivered such
officer's certificates as Parent may reasonably request. The form,
scope and substance of all legal and accounting matters contemplated
hereby and all closing documents delivered pursuant hereto shall be
reasonably acceptable to Parent's counsel.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 Termination. This Agreement may be terminated,
and the Merger contemplated hereby may be abandoned, at any time
prior to the Effective Time whether before or after approval of the
Merger by the stockholders of Parent and the Target Company:
(a) by mutual written consent of Parent and the Target
Company;
(b) by either the Target Company or Parent if any
court or Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their best efforts to
lift) prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable;
(c) by the Target Company or Parent if the Target
Company Stockholder Approval or the Parent Shareholder Approval
shall not have been obtained by reason of the failure to obtain the
required vote at either the Target Company Stockholders Meeting or
the Parent Shareholders Meeting or of any adjournment thereof at
which such vote was taken;
(d) by either the Target Company or Parent, if such
party is not in material breach of any representation, warranty,
covenant or agreement contained in this Agreement, and such other
party is in material breach of any representation, warranty,
covenant or agreement contained in this Agreement, or if any
representation of such other party will have become untrue, in
either case to an extent that would cause the conditions set forth
in Section 6.02 (for the Target Company) or Section 6.03 (for
Parent) not to be satisfied and such breaching party fails to cure
such material breach within thirty (30) days of written notice of
such material breach from the non-breaching party (except that no
cure period will be provided for a breach which by its nature cannot
be cured);
(e) by the Target Company (i) if the board of
directors of the Target Company receives a Superior Proposal and
satisfies the conditions of Section 5.11, (ii) if Parent announces
a Business Combination at any time prior to the Effective Time; or
(iii) if the Parent Shareholder Approval is not obtained; or
(f) by Parent if, whether or not permitted to do so,
(A) the board of directors of the Target Company shall have
withdrawn or modified in a manner adverse to Parent or Merger Sub
its approval or recommendation of the Merger or this Agreement, or
approved or recommended any Superior Proposal or (B) the Target
Company shall have entered into any agreement, whether or not
binding, to consummate a Business Combination pursuant to any
Superior Proposal.
SECTION 7.02 Amendment. This Agreement may be amended by
the parties hereto at any time before or after the Target Company
Stockholder Approval or the Parent Shareholder Approval shall have
been obtained; provided, however, that after any such approval,
there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
SECTION 7.03 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance
of any of the obligations or other acts of the other party or
parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto on the part of the other party or parties or (c) subject to
the proviso of Section 7.02 hereof, waive compliance with any of the
agreements or conditions contained herein on the part of the other
party or parties; provided, however, that the Target Company may not
waive the requirements of Section 6.02(e) or (f) hereof without the
consent of the holders of a majority of the outstanding Series B
Stock. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.04 Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant to
Section 7.01 hereof, an amendment of this Agreement pursuant to
Section 7.02 hereof subject to the provisions of Section 7.03(c)
hereof, or an extension or waiver pursuant to Section 7.03 hereof
shall, in order to be effective, require in the case of Parent,
Merger Sub or the Target Company, action by its respective board of
directors.
SECTION 7.05 Termination Fee. (a) In the event that the
Target Company terminates this Agreement pursuant to the provisions
of Section 7.01(e)(i) hereof, or Parent terminates this Agreement
pursuant to the provisions of Section 7.01(f) hereof, then the
Target Company shall promptly, but in no event later than five (5)
Business Days after the date of such termination, pay Parent in
immediately available funds a fee equal to $720,000. The payment
provided for in this Section 7.05 shall be treated as liquidated
damages and shall be in lieu of any other payments for damages
incurred by Parent, its directors or its shareholders for
termination of the Agreement pursuant to the provisions of
Section 7.01(e) hereof.
(b) In the event that the Target Company terminates
this Agreement pursuant to the provisions of Section 7.01(e)(iii)
hereof, then Parent shall promptly, but in no event later than five
Business Days after the date of such termination, pay the Target
Company in immediately available funds a fee equal to $720,000.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01 Survival of Representations and Warranties.
The representations, covenants and agreements of the parties hereto
contained herein will remain operative and in full force and effect,
until the Effective Time. This Section 8.01 shall not limit any
covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
SECTION 8.02 Expenses. Except as set forth specifically
herein, each party hereto shall pay its own expenses (including fees
and expenses of legal counsel, investment bankers, brokers or other
representatives or consultants) in connection with the transactions
contemplated hereby (whether or not such transactions are
consummated). In the event of any proceeding to enforce this
Agreement, the prevailing party shall be entitled to receive from
the losing party all reasonable costs and expenses, including the
reasonable fees of attorneys, accountants and other experts,
incurred by the prevailing party in investigating and prosecuting
(or defending) such action at trial or upon any appeal.
SECTION 8.03 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given,
if to Parent or Merger Sub, to:
RnetHealth, Inc.
000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx-Xxxxxxx
Fax: (000) 000-0000
with a copy (which shall not constitute notice)
to:
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
if to the Target Company, to:
Access Television Network, Inc.
0000 Xxxxxxxxx Xxxxx, #0000
Xxxxxx, XX 00000
Attention: Xxx Xxxxx
Fax: (000) 000-0000
with a copy (which shall not constitute notice)
to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
or such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. All such notices, requests and other communications shall
be deemed received on the date of receipt by the recipient thereof
if received prior to 5:00 p.m. in the place of receipt and such day
is a Business Day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been
received until the next succeeding Business Day in the place of
receipt. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice as of the date of such
rejection, refusal or inability to deliver.
SECTION 8.04 No Waivers. No failure or delay by any party
in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.05 No Joint Venture. Nothing contained in this
Agreement will be deemed or construed as creating a joint venture or
partnership between the parties hereto. Except as contemplated by
Section 2.07 hereof, no party hereto is by virtue of this Agreement
authorized as an agent, employee or legal representative of any
other party hereto. No party hereto will have the power to control
the activities and operations of any other party hereto, and the
status of the parties hereto is, and at all times, will continue to
be, that of independent contractors with respect to each other. No
party hereto will have any power or authority to bind or commit any
other.
SECTION 8.06 Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided
that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of
each other party hereto, except that Parent or Merger Sub may
transfer or assign, in whole or from time to time in part, to one or
more of its affiliates, the right to enter into the transactions
contemplated by this Agreement, but no such transfer or assignment
will relieve Parent or Merger Sub of its obligations hereunder.
SECTION 8.07 Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the State of
Delaware, without regard to the conflicts of law rules of such
state.
SECTION 8.08 Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in any federal or state court
located in the State of California, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 8.03 shall
be deemed effective service of process on such party.
SECTION 8.09 WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.10 Counterparts; Effectiveness; Benefit. This
Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Except as provided in Sections 5.12 and 5.15 hereof, no provision of
this Agreement is intended to confer any rights, benefits, remedies,
obligations or liabilities hereunder upon any Person other than the
parties hereto and their respective successors and assigns.
Execution of this Agreement may be made by facsimile signature
which, for all purposes, shall be deemed to be an original
signature.
SECTION 8.11 Entire Agreement. This Agreement, the Target
Company Disclosure Memorandum, the Parent Disclosure Memorandum, the
Voting Agreement, the Registration Rights Agreement and the Services
Agreement constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and supersede all
prior representations, warranties, agreements and understandings,
both oral and written, between the parties with respect to the
subject matter of this Agreement. No prior drafts of this Agreement
or portions thereof shall be admissible into evidence in any action,
suit or other proceeding involving this Agreement
SECTION 8.12 Captions. The captions herein are included
for convenience of reference only and shall be ignored in the
construction or interpretation hereof. For purposes of such
construction, the Agreement will be considered as a whole.
SECTION 8.13 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated so long as
the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner
in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
SECTION 8.14 Specific Performance. The parties hereto
agree that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with the terms hereof and
that the parties shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal or
state court located in the State of California, in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 8.15 Interpretation. When a reference is made in
this Agreement to an Article or Section, such reference shall be to
an Article or Section of this Agreement unless otherwise indicated.
The table of contents to this Agreement is for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in
this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant thereto
unless otherwise defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms
of such terms and to the masculine as well as to the feminine and
neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in
the case of statutes) by succession of comparable successor statutes
and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its
permitted successors and assigns. Each of the parties has
participated in the drafting and negotiation of this Agreement. If
an ambiguity or question of intent or interpretation arises, this
Agreement must be construed as if it is drafted by all the parties
and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of authorship of any of the
provisions of this Agreement.
SECTION 8.16 Target Company and Parent Disclosure
Memoranda. The Target Company Disclosure Memorandum and the Parent
Disclosure Memorandum referred to in this Agreement (the "Disclosure
Memoranda") are hereby incorporated in this Agreement and made a
part of this Agreement for all purposes as if fully set forth in
this Agreement. No disclosure in the Disclosure Memoranda shall be
deemed to be an admission or representation as to the materiality of
the item so disclosed.
SECTION 8.17 Obligation of Parent and the Target Company.
Whenever this Agreement requires Merger Sub to take any action, such
requirement shall be deemed to include an undertaking on the part of
Parent to cause Merger Sub to take such action and a guarantee of
the performance thereof. Whenever this Agreement requires the
Surviving Corporation to take any action, from and after the
Effective Time, such requirement shall be deemed to include an
undertaking on the part of Parent to cause the Surviving Corporation
to take such action and a guarantee of the performance thereof.
SECTION 8.18 Time is of the Essence. The parties hereto
hereby acknowledge and agree that time is of the essence in
connection with the execution, delivery and performance of this
Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
RNETHEALTH, INC., Parent
By: /s/
Name:
Title:
ATN ACQUISITION CORP., Merger Sub
By: /s/
Name:
Title:
ACCESS TELEVISION NETWORK, INC.,
Target Company
By: /s/
Name:
Title:
By: /s/
Name:
Title:
ANNEX A
FORM OF CERTIFICATE OF MERGER
ANNEX B
FORM OF SERVICES AGREEMENT
ANNEX C
FORM OF VOTING AGREEMENT
ANNEX D
DESIGNATIONS OF PARENT SERIES A STOCK
ANNEX E
DESIGNATIONS OF PARENT SERIES B STOCK
ANNEX F
FORM OF REGISTRATION RIGHTS AGREEMENT
ANNEX G
FORM OF AMENDMENT TO PARENT BYLAWS
