Exhibit 10.17
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
INTRODUCTION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is entered into as of the 14th day of December, 1999 by and among BOL
Acquisition Co. V, Inc., a Connecticut corporation ("BOL") and wholly-owned
first tier subsidiary of XxxxxxxXxxxxx.xxx, Inc., a Delaware corporation ("the
Parent"); the Parent; New England Computer Associates, Inc. ("NECA") and
NECAnet, Inc. ("NECAnet"), both Connecticut corporations, (NECA and NECAnet
sometimes collectively referred to herein as the "Company"); and Xxxxxxx X.
Xxxxxxx and Xxxxxx Xxxxxxx, the owners of all the issued and outstanding stock
of the Company (collectively the "Stockholders").
BACKGROUND
A. BOL and the Company intend to effect a merger of the Company with and into
BOL in accordance with this Agreement and the Connecticut Business Corporation
Act (the "Merger"). Upon consummation of the Merger, the Company will cease to
exist, and BOL will continue to exist as the surviving corporation of the
Merger.
B. It is intended that the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and that this Agreement constitute a plan of reorganization for
such purposes.
C. This Agreement has been adopted and approved by the respective boards of
directors of BOL and the Company, and the Parent and the Stockholders have each
unanimously approved this Agreement by written consent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual and dependent promises
and the representations and warranties hereinafter contained, the parties hereto
agree as follows:
SECTION 1. DESCRIPTION OF THE MERGER TRANSACTION.
1.1 MERGER OF THE COMPANY INTO BOL. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in SECTION 1.2), the Company shall be merged with and into BOL, and the separate
existence of the Company shall cease.
1.2 EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") shall occur at the time a properly executed Certificate of
Merger for the merger of the Company into BOL, conforming to the requirements of
the Connecticut Business Corporation Act (the "Merger Certificate") has been
delivered and accepted for filing by the Secretary of State Connecticut. At the
Effective Time, the Company shall be merged with and into BOL in accordance with
the
Merger Certificate and the separate existence of the Company shall cease and
BOL shall continue as the surviving corporation (the "Surviving Corporation").
1.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
THE SURVIVING CORPORATION. At the Effective Time:
(a) The Articles of Incorporation of BOL shall become the
Articles of Incorporation of the Surviving Corporation; and, subsequent to the
Effective Time, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law.
(b) The bylaws of BOL shall become the bylaws of the
Surviving Corporation; and, subsequent to the Effective Time, such bylaws shall
be the bylaws of the Surviving Corporation until they shall thereafter be duly
amended.
(c) The Board of Directors of the Surviving Corporation
shall be set forth on EXHIBIT 1.3 hereto and shall hold office subject to the
provisions of the laws of the Surviving Corporation's state of incorporation and
of the Articles of Incorporation and bylaws of the Surviving Corporation.
(d) The officers of the Surviving Corporation shall be
set forth on EXHIBIT 1.3 hereto, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and bylaws of the Surviving
Corporation, until his or her successor is elected and qualified.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Connecticut
Business Corporation Act (the "Act"). Except as herein specifically set forth
and as otherwise provided by the Act, the identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities of BOL shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the Company shall be merged with and into BOL, and BOL, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time,
the separate existence of the Company shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and BOL shall
be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and BOL; and the title to any real estate, or interest therein,
whether by deed or otherwise, vested in the Company and BOL, shall not revert or
be in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the Company and BOL and any claim
existing, or action or proceeding pending, by or against the Company or BOL may
be prosecuted as if the Merger had not taken place, or
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the Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of the Company or BOL shall be
impaired by the Merger, and all debts, liabilities and duties of the Company and
BOL shall attach to the Surviving Corporation, and may be enforced against the
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by the Surviving Corporation.
Notwithstanding the foregoing, the Stockholders shall assume all of the
Surviving Corporation's obligations under that certain lease agreement with Gem
Chevrolet, Inc. dated on or about August 17, 1999 for the lease of a 1999
Chevrolet K1500 pick-up truck (the "Stockholders' Assumed Contract").
1.5 MERGER CONSIDERATION; CONVERSION OF SHARES.
(a) As of the Effective Time, all of the shares of
capital stock of the Company ("Company Stock"), issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, shall be automatically converted to,
in the aggregate, shares of common stock of the Parent, par value $.01 per share
("Parent Stock") and cash, as follows (collectively, the "Merger
Consideration"):
(1) $1,575,000 in U.S. currency delivered by check,
wire transfer or other immediately available funds, and
(2) $1,925,000 in unregistered shares of the Parent
Stock. The share certificates representing such shares (except for the "Escrow
Shares", as defined below) shall be delivered to the stockholder's counsel
within five (5) business days of the Closing Date. The actual number of shares
to be delivered hereunder shall be based on the average "NASDAQ National Market
price" of such common stock for the twenty (20) business days ending on the
ninth business day immediately preceding the Closing date. The shares of Parent
Stock delivered hereunder shall constitute "restricted securities" under the
Securities Act of 1933, as amended and be subject to the restrictions on
transfer set forth in this Agreement.
(b) The "average NASDAQ National Market price" shall mean
the average of the closing sales prices or, in case no such reported sale takes
place on any given day, the average of the reported closing bid and asked prices
for such day. In either case, the prices would be as reported by The Nasdaq
Stock Market, Inc.
1.6 DELIVERY OF MERGER CONSIDERATION/ESCROW OF SHARES/SET-OFF.
(a) At the Closing, the Stockholders shall deliver
certificates representing all outstanding shares of Company Stock to counsel for
BOL to hold in escrow until the Effective Time. At the Effective Time, the
Stockholders shall receive the aggregate Merger Consideration set forth in
SECTION 1.5 above provided, however, that a number of shares of Parent Stock
included in the aggregate Merger Consideration with a value of $500,000 (the
"Escrow Shares") shall be delivered into escrow with the Parent's counsel (the
"Escrow Agent") for a period of twelve (12) months from the Closing Date
pursuant to the escrow agreement (the "Escrow Agreement") attached hereto as
EXHIBIT 1.6. In addition to all other rights and remedies of BOL and the
Surviving Corporation for breach by the Company or the Stockholders of the
representations and warranties of the Company and the Stockholders herein, both
at law and in
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equity, the Surviving Corporation shall have the right to set-off
against the Escrow Shares for any claims of the Surviving Corporation arising
under the post-Closing adjustment provisions of SECTION 2 below and/or the
indemnity provisions of SECTION 12 below.
(b) The Stockholders shall deliver to counsel for BOL at
the Closing the certificates representing Company Stock, duly endorsed in blank
by the Stockholders or accompanied by duly executed stock powers, to hold in
escrow until the Effective Time. The Stockholders shall cure any deficiencies
with respect to the endorsement of the certificates or other documents of
conveyance with respect to Company Stock or with respect to the stock powers
accompanying any Company Stock.
(c) At the Effective Time, counsel for BOL shall release
the certificates representing shares of Company Stock to BOL and such
certificates shall be canceled. As of the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of the Company thereafter.
(d) No certificates representing fractional shares of
Parent Stock shall be issued upon the surrender of certificates which, prior to
the Effective Time, represented shares of Company Stock. In lieu of any such
fractional shares, the Stockholders will be paid an amount in cash based on the
average NASDAQ National Market Price (as defined above) of Parent Stock as set
forth in SECTION 1.5(a)(2).
1.7 ALLOCATION. Subject to the adjustments set forth in SECTION 2,
the Merger Consideration shall be allocated as follows: Two Million Nine Hundred
Sixteen Thousand Six Hundred Seventy-Seven Dollars ($2,916,677) to NECA and Five
Hundred Eighty-Three Thousand Three Hundred Thirty-Three Dollars ($583,333) to
NECAnet.
1.8 CLOSING. The closing of the Merger (the "Closing") shall occur
on the third business day after satisfaction or waiver of all of the conditions
set forth in Section 6 hereof at the offices of Xxxxx & Xxxxxxx, LLP, 000 Xxxxx
Xxxx Xxxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000 at 10:00 a.m., or at such other
place and time or date as may be mutually agreed upon by the parties hereto but
in no event later than December 31, 1999. The actual date of the Closing is
referred to herein as the "Closing Date". At the Closing, BOL and the Company
shall take all actions necessary to effect the Merger (including filing the
Merger Certificate which shall become effective at the Effective Time) and to
effect the conversion and delivery of shares referred to in SECTION 1.6 hereof.
SECTION 2. POST CLOSING ADJUSTMENTS
2.1 POST-CLOSING ADJUSTMENT BASED ON THE COMPANY'S CASH-ON-HAND ON
THE CLOSING DATE. On or before the Closing Date, the Company shall (i) to the
extent ascertainable, pay all accrued liabilities relating to periods prior to,
as of and including the Closing Date, and (ii) have cash-on-hand of at least
$20,000 in excess of the amount of such outstanding liabilities (the "Minimum
Cash Requirement"). In the event that the Company prepays any liability which
has not accrued as of the Closing Date, such amount would be credited to the
Minimum Cash
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Requirement. Within thirty (30) days after the Closing (or as soon as
practicable thereafter), the Parent shall review the records and accounts of the
Company and Surviving Corporation and prepare a statement regarding the
Company's outstanding payables and liabilities accrued as of and including the
Closing Date. The Stockholders shall provide such documentation as is reasonably
necessary to evidence payment of the same. To the extent there is a deficiency
in the Minimum Cash Requirement, the Stockholders shall pay to the Surviving
Corporation in cash, dollar-for-dollar the amount of such deficiency within ten
(10) days of the delivery the Minimum Cash Requirement statement, subject to the
dispute resolution procedure set forth in SECTION 2.3.
2.2 POST-CLOSING ADJUSTMENT FOR EXCESS OR DEFICIENCY IN 1999
REVENUES. To the extent that (i) the Surviving Corporation's aggregate audited
revenues for the six (6) months ended December 31, 1999, are less than $700,000
on an accrual basis in accordance with generally accepted accounting principals
("GAAP"), the Merger Consideration shall be reduced by an amount equal to $5.00
for each One Dollar ($1.00) in revenue less than $700,000, and (ii) the
Surviving Corporation's aggregate audited revenues for the six (6) months ended
December 31, 1999 are greater than $700,000 on an accrual basis in accordance
with GAAP, the Merger Consideration shall be increased by an amount equal to
$5.00 for each One Dollar ($1.00) in revenue greater than $700,000. For example,
in the event the Surviving Corporation's aggregate revenues for the six (6)
months ended December 31, 1999, are $650,000, the Merger Consideration payable
to the Stockholders shall be reduced by $250,000 (i.e. the $50,000 shortfall
multiplied by 5.00). Any such adjustment shall be based on an income statement
prepared by the Surviving Corporation's accountants on or before March 31, 1999,
showing the Surviving Corporation's audited revenues for the six (6) months
ended December 31, 1999. To the extent any adjustment in the Merger
Consideration shall be required under this Section 2.2, (a) in the event of a
reduction in the Merger Consideration, the Stockholders shall pay to the
Surviving Corporation 55% of such payment in shares of Parent stock from the
Escrow Shares (provided that such action would not reduce the stock portion of
the Merger Consideration below 45% or otherwise impair the intended tax-free
reorganization structure of the Merger) and 45% of such amount in cash from the
Stockholders directly within ten (10) days of delivery of the final income
statement for 1999 as audited by the Surviving Corporation's accountants
(subject to the dispute resolution procedure set forth in Section 2.3 below), or
(b) in the event of an increase in the Merger Consideration, the Surviving
Corporation shall pay the Stockholders 55% of the amount of such increase in
Parent Stock and 45% in cash within ten (10) days of the delivery of the final
income statement for 1999 as audited by the Surviving Corporation's accountants
(subject to the dispute resolution procedure set forth in Section 2.3 below).
Any payments made in Parent Stock under this subsection in connection with 1999
revenues shall be based on the average NASDAQ National Market price of Parent
Stock for the twenty (20) business days preceding the later of the date of
delivery of the final income statement for 1999 or the resolution of any
disputes relating to such statement.
2.3 DISPUTE RESOLUTION PROCEDURE FOR ADJUSTMENTS BASED ON MINIMUM
CASH REQUIREMENT AND 1999 REVENUES. Notwithstanding anything in this SECTION 2
to the contrary, if the Stockholders dispute any item contained on the Minimum
Cash Requirement statement or the audited 1999 revenues of the Surviving
Corporation, the Stockholders shall notify the Surviving Corporation in writing
of each disputed item (collectively, the "Disputed Amounts"),
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and specify the amount thereof in dispute within thirty (30) business days after
the delivery of the Minimum Cash Requirement statement or the final income
statement for 1999, as the case may be. If the Surviving Corporation and the
Stockholders cannot resolve any such dispute, then such dispute shall be
resolved by an independent nationally recognized accounting firm which is
reasonably acceptable to the Surviving Corporation and the Stockholders (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practical and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between the Surviving Corporation
and the Stockholders so that the Stockholders' aggregate share of such costs
shall bear the same proportion to the total costs that the Disputed Amounts
unsuccessfully contested by the Stockholders (as finally determined by the
Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material
inducement to BOL and the Parent to enter into this Agreement and consummate the
transactions contemplated hereby, the Company and the Stockholders hereby
jointly and severally make to BOL and the Parent the representations and
warranties contained in this SECTION 3.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. NECA and
NECAnet are each a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut with full corporate power
and authority to own or lease the Company's properties and to conduct the
Company's business in the manner and in the places where such properties are
owned or leased and where such business is currently conducted or proposed to be
conducted. The copies of the Certificate of Incorporation of the Company as
amended to date, certified by the Secretary of State for the State of
Connecticut and the bylaws certified by the Secretary of the Company attached as
SCHEDULE 3.2, are complete and correct, and no amendments thereto are pending.
The stock records and minute books of the Company which have heretofore been
delivered to BOL's counsel are correct and complete. The Company is duly
qualified to do business as a foreign corporation in each other jurisdiction in
which it owns, operates or leases real property and in each other jurisdiction
in which the failure to be so qualified or registered would have a material
adverse effect on the properties, assets, business, financial condition and
prospects of the Company.
3.3 SUBSIDIARIES; INVESTMENTS. Except as set forth in SCHEDULE
3.3, the Company has no direct or indirect subsidiaries and owns no securities
issued by any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Except as set forth in SCHEDULE 3.3, neither the Company nor the Stockholders
own nor have any direct or indirect interest in or control over any corporation,
partnership, joint venture or entity of any kind (other than as an owner of less
than 2% of the outstanding common stock of a publicly held company which stock
trades on a national exchange.).
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3.4 CAPITAL STOCK. The total authorized capital stock of the
Company consists solely of the shares listed on SCHEDULE 3.4. All of the issued
and outstanding shares of the Company Common Stock are duly authorized and
validly issued, are fully paid and nonassessable, are owned of record and
beneficially by the Stockholders as set forth in SCHEDULE 3.4 free and clear of
any liens, claims, encumbrances, restrictions, security interests, mortgages,
pledges or other demands, and all such shares were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present
stockholders. No shares of the Company Stock are held in the treasury of the
Company. SCHEDULE 3.4 contains a complete and correct listing of the
stockholders of the Company at the date hereof, together with the number and
class of the capital stock of the Company owned by each such stockholders. There
are no outstanding subscriptions, options, warrants, commitments, preemptive
rights, agreements, arrangements or commitments of any kind for or relating to
the issuance, sale, registration or voting of, or outstanding securities
convertible into or exchangeable for, any shares of capital stock of any class
or other equity interests of the Company. The Company has never acquired any
treasury stock.
3.5 AUTHORITY OF THE COMPANY AND THE STOCKHOLDERS
(a) The Company has full right, power and authority to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by it pursuant to or as contemplated by this Agreement
and to carry out the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Company of this Agreement and each
such other agreement, document and instrument have been duly authorized by the
Company's Board of Directors, and have been approved by the Stockholders by a
unanimous written consent vote. This Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to or as
contemplated by this Agreement (to the extent it contains obligations to be
performed by the Company) constitutes, or when executed, delivered and approved
by the Stockholders will constitute, valid and binding obligations of the
Company, enforceable in accordance with their respective terms. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument:
(i) does not and will not violate any provision of
the Articles of Incorporation or bylaws of the Company;
(ii) to the Company's knowledge does not and will not
violate any laws of the United States, or any state or other
jurisdiction applicable to the Company or require the Company to obtain
any court, regulatory body, administrative agency or other approval,
consent or waiver, or make any filing with, any federal, state, local
or foreign governmental body, agency or official ("Governmental
Entity") that has not been obtained or made, other than the filing of
the Certificate of Merger in accordance with the laws of the State of
Connecticut and except for any other approvals, consents, waivers and
filings that, if not obtained or made, individually or in the
aggregate, would not have a material adverse effect on the properties,
assets, business, financial condition or prospects of the Company; and
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(iii) except as otherwise indicated on SCHEDULE 3.5
hereto, does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right
of termination of any indenture or loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award, whether written or oral, to which the Company is
a party or by which the property of the Company is bound or affected,
or result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets
of the Company, except where such breach, default, acceleration or
right of termination would not have a material adverse effect on the
properties, assets, business, financial condition or prospects of the
Company, and would not result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets of the Company.
(b) The Stockholders have full right, authority and power
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of them pursuant to or as contemplated by
this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument to be
executed and delivered by the Stockholders pursuant to or as contemplated by
this Agreement (to the extent it contains obligations to be performed by such
Stockholders) constitutes, or when executed and delivered will constitute, valid
and binding obligations of the Stockholders enforceable in accordance with their
respective terms, subject to the terms hereof. The execution, delivery and
performance by the Stockholders of this Agreement and each such agreement,
document and instrument:
(i) do not and will not violate any provision of the
Articles of Incorporation or bylaws of the Company;
(ii) do not and will not to Stockholder's knowledge
violate any laws of the United States, or any state or other
jurisdiction applicable to the Stockholders or require the Stockholders
to obtain any approval, consent or waiver of, or to the Stockholder's
knowledge make any filing with, any Governmental Entity that has not
been obtained or made; and
(iii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the Stockholders
are a party or by which the property of such Stockholders is bound or
to which the property of the Stockholders is subject or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the assets or properties of
the Company. Except as disclosed on SCHEDULE 3.5, there are no
stockholder agreements with respect to the ownership or operation of
the Company, and any such agreements shall be terminated prior to the
Closing.
3.6 STATUS OF PROPERTY OWNED OR LEASED.
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(a) REAL PROPERTY. The Company does not own and has never
owned any real property. The real property identified as leased by the Company
on SCHEDULE 3.6(a) is collectively referred to herein as the "Real Property".
The Real Property constitutes all the real property leased by the Company.
(i) TITLE. Except as set forth on SCHEDULE 3.6(a), to
the Company's knowledge there are no unrecorded mortgages, deeds of
trust, ground leases, security interests or similar encumbrances,
liens, assessments, licenses, claims, rights of first offer or refusal,
options, or options to purchase, or any covenants, conditions,
restrictions, rights of way, easements, judgments or other encumbrances
or matters affecting title to or the Company's use or occupancy of the
Real Property.
(ii) COMMISSIONS. There are no brokerage or leasing
fees or commissions or other compensation due or payable on an absolute
or contingent basis to any person, firm, corporation, or other entity
with respect to or on account of any of the Company's use or occupancy
of the Real Property, and no such fees, commissions or other
compensation shall, by reason on any existing agreement, become due
after the date hereof.
(iii) PHYSICAL CONDITION. Except as set forth on
SCHEDULE 3.6(a), there is not to the Company's knowledge any (i)
material defect in the physical condition of any of the Real Property,
or (ii) material defect in any material improvements located on or
constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
(including without limitation all heating, ventilating, air
conditioning, plumbing, electrical, elevator, security,
telecommunication, utility, and sprinkler systems) therein, the roofs
or the parking and loading areas (collectively, the "Improvements"). To
the Company's knowledge, all of the Improvements located on or
constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
therein, the roofs and the parking and loading areas are in generally
good operating condition and repair.
(iv) UTILITIES. The Company has not received any
written notice of any termination or impairment of the furnishing of,
or any material increase in rates for, services to any of the Real
Property of water, sewer, gas, electric, telecommunication, drainage or
other utility services, except ordinary and usual rate increases
applicable to all customers (or all customers of a certain class) of a
utility provider. The Company has not, to its knowledge, entered into
any agreement requiring it to pay to any utility provider rates which
are less favorable than rates generally applicable to customers of the
same class as the Company.
(v) COMPLIANCE. Except as set forth on SCHEDULE
3.6(a), the Company has not received any written notice from any
municipal, state, federal or other governmental authority with respect
to any violation of any zoning, building, fire, water, use, health,
environmental or other statute, ordinance, code or regulation issued in
respect of any of the Real Property that has not been heretofore
corrected, and except in either case as set forth in SCHEDULE 3.6(a)
hereto.
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(vi) GOVERNMENT APPROVALS. The Company has not
received any notice of any plan, study or effort by any Governmental
Entity which would adversely affect the present use, zoning or value to
the Company of any of the Real Property or which would modify or
realign any adjacent street or highway in a manner materially adverse
to the Company.
(vii) ZONING. The Company has not received any notice
of any zoning violations.
(viii) SERVICE CONTRACTS. A complete list of all
material existing service, management, supply or maintenance or
equipment lease contracts and other contractual agreements which the
Company is a party to (the "Service Contracts") is set forth on
SCHEDULE 3.6(a). All such Service Contracts are terminable upon no more
than thirty (30) days written notice, at no cost, except as specified
in SCHEDULE 3.6(a).
(b) PERSONAL PROPERTY. A list of each item of the
machinery, equipment and other fixed assets owned or leased by the Company
having a fair market value of at least $5,000 (the "Equipment"), is contained in
SCHEDULE 3.6(b) hereto. All of the Equipment and other machinery, equipment and
personal property of the Company is located on the Real Property or used in the
operation of the Company. Except as specifically disclosed in SCHEDULE 3.6(b) or
in any of the Schedules to this Agreement, the Company has good and marketable
title to all of the personal property owned by it. None of such personal
property or assets is subject to any mortgage, pledge, lien, conditional sale
agreement, security title, encumbrance or other charge except as specifically
disclosed in any Schedule hereto or in the Financial Statements. The Financial
Statements reflect all personal property of the Company, subject to dispositions
and additions in the ordinary course of business consistent with this Agreement.
Except as otherwise specified in SCHEDULE 3.6(b) hereto, all leasehold
improvements, furnishings, machinery and equipment of the Company are in
generally good repair, normal wear and tear excepted, have been well maintained,
and conform in all material respects with all applicable ordinances, regulations
and other laws.
3.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Attached hereto as SCHEDULE 3.7 IS A DRAFT BALANCE
SHEET OF THE COMPANY DATED WITHIN FIVE (5) DAYS OF THE DATE HEREOF (THE "COMPANY
BALANCE SHEET DATE"). (b) As of the date hereof, the Company has no liabilities
of any nature, whether accrued, absolute, contingent or otherwise, (including
without limitation liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to become
due or contingent liabilities arising prior to the date hereof or the Closing,
as the case may be) except liabilities (i) reflected in Schedules furnished to
Parent hereunder on the date hereof or (ii) incurred in the ordinary course of
business of the Company consistent with prior practices.
3.8 TAXES.
(a) The Company has paid or caused to be paid all federal,
state, local, foreign and other taxes, including without limitation income
taxes, estimated taxes, alternative minimum
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taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross receipts
taxes, franchise taxes, capital stock taxes, employment and payroll-related
taxes, withholding taxes, stamp taxes, transfer taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties owed by it
(collectively, "Taxes"), in the amounts indicated on tax returns filed by the
Company through the date hereof or in correspondence received from any federal,
state, local or foreign government taxing authority (other than current accrued
tax liability incurred in the ordinary course of Seller's business).
(b) The Company has in accordance with applicable law
filed all federal, state, local and foreign tax returns required to be filed by
it through the date hereof and all such returns correctly and accurately set
forth the amount of any Taxes relating to the applicable period. For every
taxable period of the Company, the Company has delivered or made available to
Parent complete and correct copies of all federal, state, local and foreign
income tax returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company. SCHEDULE 3.8 attached hereto sets forth all
federal tax elections under the Internal Revenue Code of 1986, as amended (the
"Code"), that are in effect with respect to the Company or for which an
application by the Company is pending.
(c) Neither the Internal Revenue Service ("IRS") nor any
other governmental authority is now asserting in writing or threatening to
assert against the Company any deficiency or claim for additional Taxes or a
claim that the Company is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax. The Company
has not entered into a closing agreement pursuant to Section 7121 of the Code.
(d) Except as set forth in SCHEDULE 3.8 attached hereto,
there has not been any audit of any tax return filed by the Company, no audit of
any tax return of the Company is in progress, and the Company has not been
notified by any tax authority that any such audit is contemplated or pending.
Except as set forth in SCHEDULE 3.8, no extension of time with respect to any
date on which a tax return was or is to be filed by the Company is in force, and
no waiver or agreement by the Company is in force for the extension of time for
the assessment or payment of any Taxes.
(e) (i) The Company has not consented to have the
provisions of Section 341(f)(2) of the Code applied to it, (ii) the Company has
not agreed to, and has not been requested by any governmental authority to, make
any adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise and (iii) the Company has never made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances would obligate it to make any payments, that will
not be deductible under Section 280G of the Code. The Company has disclosed on
its federal income tax returns all positions taken therein that could give rise
to a penalty for underpayment of federal Tax under Section 6662 of the Code. The
Company has never had any liability for unpaid Taxes because it is a member of
an "affiliated group" (as defined in Section 1504(a) of the Code). The Company
has never filed, nor has it ever been required to file, a consolidated, combined
or unitary tax return with any entity. The Company is not a party to any tax
sharing agreement.
11
(f) The Company computes its federal taxable income under
the cash basis method of accounting.
(g) For purposes of this SECTION 3.8, all references to
Sections of the Code shall include any predecessor provisions to such Sections
and any similar provisions of federal, state, local or foreign law.
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
arising prior to the date hereof and thereafter, arose or will arise from valid
sales in the ordinary course of business. Except as set forth in SCHEDULE 3.9,
the Company has no accounts or loans receivable from any person, firm or
corporation which is affiliated with the Company. For purposes hereof,
"affiliate" means any Stockholder, or any business entity which controls, or is
controlled by, or is under common control with the Company.
3.10 INVENTORIES. The Company maintains less than $10,000 of
inventory, all saleable in the ordinary course and stated in accordance with
GAAP.
3.11 ABSENCE OF CERTAIN CHANGES.
Since December 31, 1998, the Company has conducted its business only in
the ordinary course and consistent with past practices and except as disclosed
in SCHEDULE 3.11 there has not been:
(a) Any change in the properties, assets, liabilities,
business, operations, financial condition or prospects of the Company which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been materially adverse with
respect to the Company;
(b) Except for the endorsement of checks in the ordinary
course of business any material contingent liability incurred by the Company as
guarantor or otherwise with respect to the obligations of others or any
cancellation of any material debt or claim owing to, or waiver of any material
right of, the Company;
(c) Any mortgage, encumbrance or lien placed on any of
the properties of the Company which remains in existence on the date hereof or
will remain on the Closing Date except for liens permitted by any current
agreement of the Company with respect to borrowed money;
(d) Any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other disposition, of
any capital assets of the Company costing more than $10,000;
(e) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting any of the properties,
assets or business of the Company;
12
(f) Any declaration, setting aside or payment of any
dividend by the Company, or the making of any other distribution in respect of
the capital stock of the Company, any direct or indirect redemption, purchase or
other acquisition by the Company of its own capital stock, any issuance or sale
of any securities convertible into or exchangeable for debt or equity securities
of the Company or any grant, issuance or exercise of options, warrants,
subscriptions, preemptive rights, agreements, arrangements or commitments of any
kind for or relating to the issuance, sale, registration or voting of any shares
of capital stock of any class or other equity interests of the Company;
(g) Any claim of unfair labor practices asserted against
the Company; any change in the compensation (in the form of salaries, wages,
incentive arrangements or otherwise) payable or to become payable by the Company
to any of its officers, employees, agents or independent contractors other than
customary merit or cost of living increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors; any entering into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any officer, director or employee of the
Company except for employment arrangements providing for salary or wages of less
than $20,000 per annum and any oral agreement terminable at will by the Company;
(h) Any change with respect to the officers or senior
management of the Company, any grant of any severance or termination pay to any
officer or employee of the Company;
(i) Any payment or discharge of a material lien or
liability of the Company which was not incurred in the ordinary course of
business thereafter;
(j) Any obligation or liability incurred by the Company
to any of its officers, directors or stockholders, or any loans or advances made
by the Company to any of its officers, directors, stockholders, except normal
compensation and expense allowances payable to officers or employees;
(k) Any change in accounting methods or practices other
than to comply with new accounting pronouncements, credit practices or
collection policies used by the Company;
(l) Any other transaction entered into by the Company
other than transactions in the ordinary course of business; or
(m) Any agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or require the
Company to take any of the actions specified in paragraphs (i) through (xii)
above.
3.12 BANKING RELATIONS. All of the arrangements which the Company
has with any banking institution are described in SCHEDULE 3.12 attached hereto,
indicating with respect to each of such arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements, safe deposit box,
etc.), the names in which the accounts are held, the
13
account number, and the name of each person, corporation, firm or other entity
authorized in respect thereof.
3.13 PATENTS, TRADE NAMES, TRADEMARKS, COPYRIGHTS AND PROPRIETARY
RIGHTS. All patents, patent applications, trademark registrations, trademark
registration applications, copyright registrations, copyright registration
applications and all material trade names, trademarks, copyrights and other
material proprietary rights owned by or licensed to the Company or used in its
respective business as presently conducted (the "Proprietary Rights") are listed
in SCHEDULE 3.13 attached hereto. Except as indicated on SCHEDULE 3.13, all of
the material patents, registered trademarks and copyrights of the Company and
all of the material patent applications, trademark registration applications and
copyright registration applications of the Company have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights or the corresponding offices of other countries
identified on said schedule. Except as set forth in SCHEDULE 3.13: (a) use of
said patents, trade names, trademarks, copyrights or other proprietary rights in
the ordinary course of business as presently conducted does not require the
consent of any other person and (b) the Company has sufficient title or adequate
rights or licenses to use all material patents, trade names, trademarks,
copyrights, or other proprietary rights used by it in its business as presently
conducted free and clear of any attachments, liens, encumbrances or adverse
claims. The Company has not received written notice that its present or
contemplated activities or products infringe any such patents, trade names,
trademarks or other proprietary rights of others. Except as set forth in
SCHEDULE 3.13: (i) no other person has an interest in or right or license to
use, or the right to license others to use, any of said patents, patent
applications, trade names, trademarks, copyrights or other proprietary rights;
(ii) there are no written claims or demands of any other person pertaining
thereto and no proceedings have been instituted, or are pending or threatened,
which challenge the rights of the Company in respect thereof; (iii) none of the
patents, trade names, trademarks, copyrights or other proprietary rights listed
in said schedule is subject to any outstanding order, decree, judgment or
stipulation, or is being infringed by others; and (iv) no proceeding charging
the Company with infringement of any adversely held patent, trade name,
trademark or copyright has been filed or is threatened to be filed.
3.14 TRADE SECRETS AND CUSTOMER LISTS. The Company has the right to
use in the ordinary course of its business as presently conducted, free and
clear of any claims or rights of others, all trade secrets, inventions, customer
lists and secret processes required for or incident to the manufacture or
marketing of all products presently sold, manufactured, licensed, under
development or produced by it, including products licensed from others. Any
payments required to be made by the Company for the use of such trade secrets,
inventions, customer lists and secret processes are described in SCHEDULE 3.14.
The Company is not using or in any way making use of any confidential
information or trade secrets of any third party, including without limitation, a
former employer of any present or past employee of the Company or any of the
predecessors of the Company.
3.15 CONTRACTS.
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(a) Except for contracts, commitments, plans, agreements
and licenses described in SCHEDULE 3.15 (complete and accurate copies of which
have been delivered to the Parent), the Company is neither a party to nor
subject to:
(i) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, severance or termination pay, collective
bargaining or the like, or any contract or agreement with any labor
union;
(ii) any employment contract or contract for services
which requires the payment of $20,000 or more annually or which is not
terminable within thirty (30) days by the Company without liability for
any penalty or severance payment other than pursuant to the Company's
severance policies existing on the date hereof;
(iii) any contract or agreement for the purchase of
any commodity, material or equipment except purchase orders in the
ordinary course for less than $10,000 each;
(iv) any other contracts or agreements creating any
obligation of the Company of $10,000 or more with respect to any such
contract;
(v) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a
particular product from a supplier;
(vi) any contract or agreement which by its terms
does not terminate or is not terminable by the Company or any successor
or assign within six months after the date hereof without payment of a
penalty;
(vii) any contract or agreement for the sale or lease
of its products or services not made in the ordinary course of
business;
(viii) any contract with any sales agent or
distributor of products of the Company or any subsidiary;
(ix) any contract containing covenants limiting the
freedom of the Company to compete in any line of business or with any
person or entity;
(x) any contract or agreement for the purchase of any
fixed asset for a price in excess of $10,000 whether or not such
purchase is in the ordinary course of business;
(xi) any license agreement (as licensor or licensee);
15
(xii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money and any related security agreement;
(xiii) any contract or agreement with any officer,
employee, director or stockholder of the Company or with any persons or
organizations controlled by or affiliated with any of them;
(xiv) any partnership, joint venture, or other
similar contract, arrangement or agreement; or
(xv) any registration rights agreements, warrants,
warrant agreements or other rights to subscribe for securities, any
voting agreements, voting trusts, shareholder agreements or other
similar arrangements or any stock purchase or repurchase agreements or
stock restriction agreements.
(b) All material contracts, agreements, leases and
instruments to which the Company is a party or by which the Company is obligated
are valid and are in full force and effect and constitute legal, valid and
binding obligations of the Company and the other parties thereto, enforceable in
accordance with their respective terms. Neither the Company nor to the Company's
knowledge any other party to any contract, agreement, lease or instrument of the
Company is in default in complying with any provisions thereof, and no condition
or event or facts exists which, with notice, lapse of time or both would
constitute a default thereof on the part of either of the Company or on the part
of any other party thereto in any such case that could have a material adverse
effect on the properties, assets, financial condition or prospects of either of
the Company. SCHEDULE 3.15 indicates whether any of the agreements, contracts,
commitments or other instruments and documents described therein requires
consent or approval to be transferred to the Surviving Corporation as a result
of the transactions contemplated herein.
3.16 LITIGATION. SCHEDULE 3.16 hereto lists all currently pending
and to the Company's knowledge threatened litigation and governmental or
administrative proceedings or investigations to which the Company is a party.
Except for matters described in SCHEDULE 3.16, there is no litigation or
governmental or administrative proceeding or investigation pending or to the
Company's knowledge threatened against the Company which may have an adverse
effect on the properties, assets, business, financial condition or prospects of
the Company or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
3.17 COMPLIANCE WITH LAWS. The Company has not received notice of a
violation or alleged violation of applicable statutes, ordinances, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Company, and except as set forth
in SCHEDULE 3.17 hereto, to the Company's knowledge, the Company is currently in
compliance in all material respects with all such statutes, ordinances, orders,
rules or regulations, and there is no valid basis for any claim that the Company
is not in such compliance with any such statute, ordinance, order, rule or
regulation.
16
3.18 INSURANCE. The Company has delivered to counsel to BOL true
and correct copies of each insurance policy (including policies providing
property, casualty, Liability, and workers' compensation coverage and bond and
surety arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years. With respect to each such insurance policy: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby, (iii) neither the Seller nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (iv) no party to the policy has
repudiated any provision thereof. SCHEDULE 3.18 describes any self-insurance
arrangements affecting the Seller.
3.19 WARRANTY AND RELATED MATTERS. There are no existing or
threatened in writing, product liability, warranty or other similar claims
against the Company alleging that any of its products or services are defective
or fail to meet any product or service warranties except as disclosed in
SCHEDULE 3.19 hereto. The Company has not received notice of any statements,
citations, correspondence or decisions by any Governmental Entity stating that
any product manufactured, marketed or distributed at any time by the Company
(the "Company Products") is defective or unsafe or fails to meet any product
warranty or any standards promulgated by any such Governmental Entity. There
have been no recalls ordered by any such Governmental Entity with respect to any
Company Product. There is no (i) fact relating to any Company Product that may
impose upon the Company a duty to recall any Company Product or a duty to warn
customers of a defect in any Company Product, (ii) latent or overt design,
manufacturing or other defect in any Company Product, or (iii) liability for
warranty or other claim or return with respect to any Company Product except in
the ordinary course of business consistent with the past experience of the
Company for such kind of claims and liabilities.
3.20 FINDER'S FEES. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company or the Stockholders.
3.21 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 3.21 lists all
material permits, registrations, licenses, franchises, certifications and other
approvals (collectively, the "Approvals") required from Governmental Entities in
order for the Company to conduct its business. The Company has obtained all the
Approvals, which are valid and in full force and effect. Except as disclosed on
SCHEDULE 3.21, none of the Approvals is subject to termination by their express
terms as a result of the execution of this Agreement by the Company or the
consummation of the Merger, and no further Approvals will be required in order
to continue to conduct the business currently conducted by the Company
subsequent to the Closing. Except as disclosed in SCHEDULE 3.21 or in any other
schedule hereto, the Company is neither subject to nor bound by any agreement,
judgment, decree or order which may materially and adversely affect its
properties, assets, business, financial condition or prospects.
17
3.22 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 3.22 hereto, no Stockholder, officer, employee or director of the
Company and none of their respective parents, grandparents, spouses, children,
siblings or grandchildren owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor, supplier or customer of the Company
or any organization, person or entity with whom the Company is doing business.
3.23 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 3.23 sets forth a list of every Employee
Program (as defined below) that has been maintained (as such term is further
defined below) by the Company at any time during the three-year period ending on
the date hereof.
(b) Each Employee Program which has been maintained by a
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code, has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and has, in
fact, been qualified under the applicable section of the Code from the effective
date of such Employee Program through and including the Closing (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee Program to lose
such qualification under the applicable Code section.
(c) Except as otherwise disclosed on SCHEDULE 3.23, to
the knowledge of the Stockholders there has not been any failure of any party to
comply with any laws applicable to or the terms of any Employee Programs that
have been maintained by the Company, except for any failures to comply that,
individually or in the aggregate, would not have a material adverse effect on
the properties, assets, business, financial condition or prospects of the
Company. With respect to any Employee Program now or heretofore maintained by
the Company, there has occurred no "prohibited transaction," as defined in
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or breach of any duty under ERISA or
other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan), which could result, directly
or indirectly (including without limitation through any obligation of
indemnification or contribution) in any taxes, penalties or other liability to
the Company or any Affiliate (as defined below). No litigation, arbitration, or
governmental administrative proceeding or investigation or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
(d) Neither the Company nor any Affiliate has ever
maintained any Employee Program subject to Title IV of ERISA.
(e) Except as otherwise disclosed on SCHEDULE 3.23, with
respect to each Employee Program maintained by the Company within the three
years preceding the date hereof, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Parent: (i) all documents embodying or
18
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the date hereof; (ii) the most recent IRS determination or approval letter
with respect to such Employee Program under Code Section 401 or 501(c)(9), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; and (vi) any documents evidencing any loan to an Employee
Program that is a leveraged employee stock ownership plan.
(f) Each Employee Program maintained by the Company as of
the date hereof is subject to amendment or termination by the Board of Directors
of the Company without any further liability or obligation on the part of the
Company to make further contributions to any trust maintained under any such
Employee Program following such termination and the Company has not made any
written or oral representations to the contrary to its employees.
(g) For purposes of this SECTION 3.23:
(i) "Employee Program" means (a) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (b) all stock
option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in subsection (a) above. In
the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization;
(ii) an entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) an entity is an "Affiliate" of a Company for
purposes of this SECTION 3.23 if it would have ever been considered a
single employer with the Company under ERISA Section 4001(b) or part of
the same "controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(c) and
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
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3.24 ENVIRONMENTAL MATTERS.
(a) Except as used in connection with routine maintenance
and as set forth in SCHEDULE 3.24 hereto, (i) the Company has never generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below); (ii) to the knowledge of the Company and the Stockholders no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently leased, or used by the
Company, or has ever come to be located in the soil or groundwater at any such
site; (iii) the Company does not to the Stockholders' knowledge presently own,
operate, lease, or use, nor has it previously owned, operated, leased, or used
any site on which underground storage tanks are or were located; and (iv) no
lien has ever been imposed by any Governmental Entity on any property, facility,
machinery, or equipment owned, operated, leased, or used by the Company in
connection with the presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 3.24 hereto, (i) the
Company has no liability under, nor has the Company ever violated in any
material respect, any Environmental Law (as defined below); (ii) to the Company
and the Stockholder's knowledge any property leased, or used by the Company and
any facilities and operations thereon are presently in compliance in all
material respects with all applicable Environmental Laws; (iii) the Company has
never entered into or been subject to any judgment, consent decree, compliance
order, or administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law (as defined below); and (iv) the Company nor any Company
Stockholder has any reason to believe that any of the items enumerated in clause
(iii) of this paragraph will be forthcoming.
(c) Except as set forth in SCHEDULE 3.24 hereto, to the
knowledge of the Stockholders no site leased, or used by the Company contains
any asbestos or asbestos-containing material, any polychlorinated biphenyls
("pcb's") or equipment containing pcb's, or any urea formaldehyde foam
insulation.
(d) For purposes of this SECTION 3.24, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant, or
contaminant, as defined or regulated under any Environmental Law or any other
substance which may pose a threat to the environment or to human health or
safety; (ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; (iii) "Environmental Law"
shall mean any environmental laws, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, existing as of the date hereof; and
(iv) the Company shall mean and include the Company, its predecessors and all
other entities for whose conduct the Company is or may be held responsible under
any Environmental Law.
3.25 LISTS OF CERTAIN EMPLOYEES AND SUPPLIERS.
20
(a) SCHEDULE 3.25 hereto contains a list of all current
directors and officers of the Company and a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive base salary from the Company during the current fiscal year of $20,000
or more. In each case such schedule includes the current job title and current
base salary of each such individual.
(b) SCHEDULE 3.25 sets forth a true and complete list of
all suppliers of the Company to whom the Company made payments aggregating
$25,000 or more during the most recent complete fiscal year, showing, with
respect to each, the name, address and dollar volume involved.
3.26 EMPLOYEES; LABOR MATTERS. As of the date hereof, the Company
employed the number of full-time employees and part-time employees described on
SCHEDULE 3.26. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth in SCHEDULE 3.26, upon
termination of the employment of any of said employees, the Company will not by
reason of the Merger be liable to any of said employees for so-called "severance
pay" or any other payments. Except as set forth in SCHEDULE 3.26 attached
hereto, the Company has no policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment. The Company is in compliance with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. No charges of employment
discrimination or unfair labor practices have been brought against the Company,
nor are there any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations existing, pending or threatened against or
involving the Company. There are no grievances, complaints or charges that have
been filed against the Company under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement). No collective bargaining
agreements are in effect or are currently being or are about to be negotiated by
the Company. The Company has not received written notice of pending or
threatened changes with respect to the senior management or key supervisory
personnel of the Company.
3.27 CUSTOMERS. SCHEDULE 3.27 sets forth any customer who accounted
for more than 5% of the sales of the Company for the most recent complete fiscal
year of the Company (collectively, the "Customers"). No Customer has given
notice to the Company of its intention to terminate, to cancel or otherwise
materially and adversely modify its relationship with the Company or to decrease
materially or limit its usage or purchase of the services or products of the
Company.
3.28 Y2K. The Company has taken all necessary action to assess,
evaluate and correct all of the hardware, software, embedded microchips and
other processing capabilities of computer and telecommunication systems it uses,
either directly or indirectly, including but not limited to computerized
services provided by third parties such as billing and payroll services, to
ensure that such systems will be able to function accurately and without
interruption or ambiguity using date information before, during and after
January 1, 2000.
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3.29 DISCLOSURE. This Agreement, including the Schedules hereto
prepared by the Company and the Stockholders and the Exhibits hereto, neither
contains an untrue statement of material fact nor omits to state a material fact
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading. Any matter disclosed
by the Company and the Stockholders in this Agreement or the Exhibits and/or
Schedules hereto shall be deemed disclosed on each other Schedule or Exhibit
where the inclusion of such item or matter may reasonably be required.
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the
Stockholders covenant and agree as set forth in this SECTION 4.
4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and
the Merger Effective Date, the Stockholders will cause the Company to do and the
Company will do the following, unless Parent shall otherwise consent in writing:
(a) conduct its business only in the ordinary course
consistent with past practices, refrain from changing or introducing any method
of management or operations except in the ordinary course of business and in a
manner consistent with past practices and maintain levels of working capital
consistent with past practices;
(b) refrain from making any purchase, sale or disposition
of any asset or property other than in the ordinary course of business, from
purchasing or selling any capital asset costing more than $5,000 and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its
properties or assets;
(c) refrain from incurring or modifying any contingent
liability as a guarantor or otherwise with respect to the obligations of others,
and from incurring or modifying any other contingent or fixed obligations or
liabilities except in the ordinary course of business and in a manner consistent
with past practices;
(d) refrain from making any change in its incorporation
documents, by-laws or authorized or issued capital stock or from acquiring any
securities issued by any other business organization other than short-term
investments in the ordinary course of business;
(e) refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock, making
any direct or indirect redemption, purchase or other acquisition of its capital
stock, issuing, granting, awarding, selling, pledging, disposing of or
encumbering or authorizing the issuance, grant, award, sale, pledge, disposition
or encumbrance of any shares of, or securities convertible or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or entering into any
agreement or commitment with respect to any of the foregoing;
22
(f) refrain from making any change in the compensation
payable or to become payable to any of its officers, employees or agents, except
for scheduled increases in salary or wages in the ordinary course of business
that are consistent with past practices, or granting any severance or
termination pay to, or establishing, adopting or entering into any agreement or
arrangement providing for severance or termination pay to, or entering into or
amending any employment, or other agreement or arrangement with, any director,
officer or other employee of the Company or any Stockholder or establishing,
adopting or entering into or amending any collective bargaining, bonus,
incentive, deferred compensation, profit sharing, stock option or purchase,
insurance, pension, retirement or other employee benefit plan;
(g) refrain from making any change in its borrowing
arrangements except for paying the Company's outstanding debt, which debt shall
be paid in full prior to the Closing or modifying, amending or terminating any
of its contracts except in the ordinary course of business, or waiving,
releasing or assigning any material rights or claims;
(h) use reasonable efforts to prevent any change with
respect to its management and supervisory personnel or banking arrangements;
(i) use reasonable efforts to keep intact its business
organization and to preserve the goodwill of and business relationships with all
suppliers, customers and others having business relations with it, and to
maintain its properties and facilities, including those held under leases, in as
good a working order and condition as on the date hereof, ordinary wear and tear
excepted;
(j) use reasonable efforts to have in effect and maintain
at all times all insurance of the kind, in the amount and with the insurers set
forth in SCHEDULE 3.18 or equivalent insurance with any substitute insurers
approved by Parent;
(k) refrain from changing accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable) or from
making any tax election or settling or compromising any federal, state, local or
foreign income tax liability;
(l) refrain from entering into any executory agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions; and
(m) permit Parent and its authorized representatives
(including without limitation Parent's attorneys, accountants, and pension and
environmental consultants) to have full access to all of its properties, assets,
books, records, business files, executive personnel, tax returns, contracts and
documents and furnish to Parent and its authorized representatives such
financial and other information with respect to its business or properties as
Parent may from time to time reasonably request.
4.3 CONSENTS AND APPROVALS. Subject to the Parent's obligations
set forth in SECTION 5.2(a), the Company and the Stockholders shall use their
best efforts to obtain or cause to be obtained prior to the Closing Date all
necessary consents and approvals to the performance of the
23
obligations of the Company and the Stockholders under this Agreement, including,
without limitation, the consents and authorizations described in SCHEDULE 3.15
or SCHEDULE 4.3 and such other authorizations, waivers, consents and permits as
may be necessary to transfer to Parent and/or to retain in full force and effect
without penalty subsequent to the Effective Time all contracts, permits,
licenses and franchises of or applicable to the businesses of the Company.
4.4 ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. On the date hereof
the Stockholders will execute and deliver a unanimous written consent in lieu of
a meeting in accordance with applicable law for the purpose of authorizing the
transactions contemplated hereby. The recommendation of the Board of Directors
will remain in effect at all times prior to the Effective Time. The Stockholders
hereby agree to vote all shares of capital stock of the Company held of record
by them or over which the exercise voting control in favor of the Merger, this
Agreement and the consummation of the transactions contemplated hereby and shall
not demand appraisal or dissenter's rights in connection with the merger under
the business corporation laws of the State of Connecticut.
4.5 EXCLUSIVE DEALING. Unless and until the earlier to occur of
the Closing Date or the termination of this Agreement pursuant to SECTION 9,
neither the Company nor the Stockholders shall, nor shall any of them permit any
director, officer, employee or agent of either of them to, directly or
indirectly, (i) take any action to solicit, initiate submission of or encourage,
proposals or offers from any person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) a portion of the assets
of, or any equity interest in, the Company or any merger or business combination
with the Company (an "Acquisition Proposal"), (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal with any person or
entity other than Parent and BOL and their representatives, or (iii) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do any of the foregoing.
4.6 NO SALES OF CAPITAL STOCK. Between the date of this Agreement
and the Effective Time, the Stockholders shall neither sell, exchange, deliver,
assign, pledge, encumber nor otherwise transfer or dispose of any Company Stock
owned beneficially or of record by the Stockholders, nor grant any right of any
kind to acquire, dispose of, vote or otherwise control in any manner such shares
of Company Stock; provided, however, that notwithstanding anything to the
contrary stated herein, any transferee, executor, heir, legal representative,
successor or assign of the Stockholders shall be bound by this Agreement.
4.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the
Company shall give prompt notice to the Parent of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of the Company or the
Stockholders contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of the Stockholders or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. The delivery of any notice
pursuant to this SECTION 4.7 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
(ii) modify the conditions set forth in SECTION 7 or elsewhere or (iii) affect
the Parent's right to terminate this Agreement.
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4.8 AMENDMENT OF SCHEDULES. The Company and the Stockholders agree
that, with respect to the representations and warranties contained in this
Agreement, the Company and the Stockholders shall have the continuing obligation
until the Closing Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described on the Schedules.
4.9 FURTHER ASSURANCES. The Company and the Stockholders agree to
execute and deliver, or cause to be executed and delivered, such further
instruments or documents or take such other action as may be reasonably
necessary or convenient to carry out the transactions contemplated hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND BOL;
COVENANTS OF BOL AND THE PARENT.
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As of the date
hereof, BOL and the Parent hereby jointly and severally represents and warrants
to the Stockholders and the Company as set forth in this SECTION 5.
(a) ORGANIZATION OF BOL, THE PARENT. Each of BOL and the
Parent is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation with full corporate power and
authority to conduct is businesses in the manner as now conducted and in the
places where such properties are owned or leased and where such business are
currently being conducted. BOL and Parent are duly qualified to do business as
foreign corporations in each other jurisdiction where they own, operate or lease
real property and in each other jurisdiction in which the failure to be so
qualified or registered would have a material adverse effect on the properties,
assets, business, financial condition and prospects of either.
(b) AUTHORITY. All necessary corporate action has been
taken by each of BOL and the Parent to authorize the execution, delivery and
performance of this Agreement and each agreement, document and instrument to be
executed and delivered by BOL and the Parent pursuant to this Agreement and to
carry out the transaction contemplated hereby and thereby. This Agreement and
each agreement, document and instrument to be executed and delivered by each of
BOL and the Parent pursuant to or contemplated by this Agreement (to the extent
it contains obligations to be performed by BOL or the Parent) constitutes, or
when executed and delivered by BOL or the Parent will constitute, valid and
binding obligations of BOL or Parent as the case may be, enforceable in
accordance with their respective terms.
(c) NO CONFLICTS. The execution, delivery and performance
by BOL and the Parent of this Agreement and each such other agreement, document
and instrument: (i) does not and will not violate any provision of the
Certificate of Incorporation or bylaws of BOL or the Parent; (ii) will not
result in a breach of, constitute a default under, accelerate any obligation
under, or give rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ,
25
judgment, injunction, decree, determination or arbitration award, whether
written or oral, to which BOL or the Parent is a party or by which the property
of BOL or the Parent is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets of BOL or the Parent, except where such breach,
default, acceleration or right of termination would not have a material adverse
effect on the properties, assets, business, financial condition or prospects of
BOL or the Parent and would not result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets of BOL or the Parent, (iii) does not or will not, to BOL or the
Parent's knowledge, violate any laws of the United states, or any state or other
jurisdiction, or any state or other jurisdiction applicable to BOL or the Parent
or require BOL or the Parent to obtain any court, regulatory body,
administrative agency or other approval, consent or waiver, or make any filing
with, any federal, state, local or foreign governmental body, agency or official
("Governmental Entity") that has not been obtained or made, other than the
filing of the Certificate of Merger in accordance with the laws of the State of
Connecticut and except for any other approvals, consents, waivers and filings
that, if not obtained or made, individually or in the aggregate, would not have
a material adverse effect on the properties, assets, business, financial
condition or prospects of the BOL or the Parent.
(d) PARENT STOCK. The Parent Stock to be delivered to the
Stockholders at the Closing, when delivered in accordance with the terms of this
Agreement, will constitute valid and legally issued shares of the Common Stock
of the Parent, fully paid and non-assessable. Such Parent Stock will constitute
restricted securities and will be subject to the lock-up provisions and other
transfer restrictions imposed under this Agreement and under applicable federal
and state securities laws.
(e) LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or threatened against BOL or
the Parent which may have an adverse effect on the properties, assets, business,
financial condition or prospects of BOL or the Parent or which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
(f) COMPLIANCE WITH LAWS. Neither BOL nor the Parent has
not received notice of a violation or alleged violation of applicable statutes,
ordinances, orders, rules and regulations promulgated by any federal, state,
municipal or other governmental authority, which violation or alleged violation
would have a material adverse effect on the business of BOL or the Parent.
(g) BOL. BOL is a wholly-owned first tier subsidiary of
the Parent.
(h) DISCLOSURE. This Agreement, including the Exhibits
attached hereto and the Information Statement of the Parent dated November 30,
1999, neither contains an untrue statement of material fact nor omits to state a
material fact necessary to make the statements herein, in light of the
circumstances under which they were made, not misleading.
5.2 MAKING OF COVENANTS. BOL and the Parent covenant and agree as
set forth in this Section 5.2:
26
(a) The Parent and BOL shall, if necessary, obtain any
governmental approvals of an anti-trust nature, necessary for the Parent and BOL
to fulfill their obligations hereunder to consummate the transactions
contemplated hereby.
(b) BOL and the Parent shall give prompt notice to the
Stockholders of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of BOL and the Parent contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (ii) any material failure of
BOL and the Parent to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. The
delivery of any notice pursuant to this SECTION 5.2 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions set forth in this Agreement or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
(c) BOL and the Parent agree to execute and deliver, or
cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BOL AND THE PARENT.
6.1 INTRODUCTION. The obligations of BOL and the Parent to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the conditions set forth in
this SECTION 6.
6.2 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing
Date, BOL shall have had sufficient time to review the trial balance sheet of
the Company prepared by the Stockholders as of the last day of the month ended
immediately prior to the Closing Date disclosing no material change in the
financial condition of the Company since the Company Balance Sheet Date.
6.3 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial position or business of the Company shall have
occurred and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, since the
Company Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and the Parent shall
have received on the Closing Date a certificate signed by the President of the
Company and the Stockholders to such effect.
6.4 DUE DILIGENCE AND REGULATORY REVIEW. BOL shall have completed
to its satisfaction a due diligence investigation of the Company and its
prospects, business, assets, contracts, rights, liabilities and obligations,
including a review of the practices and procedures of the Company with respect
to compliance with contracts and federal, state and local laws and regulations
governing the operations of the Company. Such review shall be satisfactory in
all respects to the Parent, in its sole discretion.
27
6.5 OPINION OF COUNSEL. BOL shall have received an opinion from
Xxxxxxxxxx & Xxxxxxx, counsel to the Company and the Stockholders, dated the
Closing Date, in form and substance satisfactory to BOL, to the effect that:
(a) each of NECAnet and NECA have been duly organized and
is validly subsisting in good standing under the laws of the State of
Connecticut.
(b) the authorized and outstanding capital stock of
NECAnet and NECA is as represented by the Stockholders in this Agreement and
each share of such stock has been duly and validly authorized and issued, is
fully paid and nonassessable and was not issued in violation of the preemptive
rights of any stockholder;
(c) to the knowledge of such counsel, neither NECAnet nor
NECA has any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(d) this Agreement has been duly authorized, executed and
delivered by NECA, NECAnet and the Stockholders and constitutes a valid and
binding agreement of such parties enforceable against them in accordance with
its terms except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(e) except to the extent set forth on SCHEDULE 3.16, to
the knowledge of such counsel, there are no claims, actions, suits or
proceedings pending, or threatened against or affecting the Company or the
Stockholders, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality wherever located;
(f) no notice to, consent, authorization, approval or
order of any court or governmental agency or body of the State of Connecticut or
to the knowledge of such counsel of any other third party is required in
connection with the execution, delivery or consummation of this Agreement by the
Stockholders or for the merger of the Company with and into BOL;
(g) the execution of this Agreement and the performance
of the obligations hereunder will not violate or result in a breach or
constitute a default under any of the terms or provisions of NECA or NECAnet's
Certificate of Incorporation or bylaws or of any lease, instrument, license,
permit or any other agreement to which NECA or NECAnet is a party or by which
NECA or NECAnet is/are bound; and
(h) any other matters incident to the matters set forth
herein as reasonably required by BOL.
6.6 ADDITIONAL LIABILITIES AND OBLIGATIONS. The Stockholders shall
have delivered to BOL a certificate dated the Closing Date, setting forth (i)
all liabilities and obligations of the
28
Company arising since the Company Balance Sheet Date and (ii) showing all
material contracts and agreements, together with copies thereof, entered into by
the Company since the Company Balance Sheet Date .
6.7 GOOD STANDING CERTIFICATES; CERTIFIED COPY OF THE CERTIFICATE
OF INCORPORATION. The Company shall have delivered to the Parent certificates,
dated as of a date no earlier than twenty (20) days prior to the Closing Date,
duly issued by the Secretary of State and the Department of Revenue of the State
of Connecticut and of any other state in which the Company is authorized to do
business, showing that the Company is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
the Company for all periods prior to the dates of such certificates have been
filed and paid. The Company shall also have delivered to the Parent prior to the
Closing a recent copy of its Certificate of Incorporation and all amendments
thereto duly certified by the Secretary of the State of Connecticut.
6.8 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of the Company and the Stockholders contained in
SECTION 3 and elsewhere in this Agreement shall be true and correct on and as of
the Closing Date, with the same effect as though made on and as of the Closing
Date; the Company and the Stockholders shall, on or before the Closing Date,
have performed and satisfied all agreements and conditions hereunder which by
the terms hereof are to be performed and satisfied by the Company or the
Stockholders on or before the Closing Date; and the Company and the Stockholders
shall have delivered to the Parent a certificate dated the Closing Date signed
by the Company's President and by the Stockholders to the foregoing effect.
6.9 APPROVALS AND CONSENTS. Excluding any approvals or consents
required to be obtained by the Parent or BOL pursuant to SECTION 5.2(a), the
Company and the Stockholders shall have made all filings with and notifications
of governmental authorities, regulatory agencies and other entities required to
be made by them in connection with the execution and delivery of this Agreement,
the performance of the transactions contemplated hereby and the continued
operation of the businesses of the Company subsequent to the Effective Time. The
Company and the Parent shall have received all required authorizations, waivers,
consents and permits to permit the consummation of the transactions contemplated
by this Agreement, in form and substance reasonably satisfactory to the Parent,
from all third parties, including, without limitation, approvals required under
federal and state securities laws and/or the Securities and Exchange Commission,
state "Blue Sky" laws, other applicable governmental authorities and regulatory
agencies, lessors, lenders and contract parties, required in connection with the
Merger or the Company's permits, leases, licenses and franchises, to avoid a
breach, default, termination, acceleration or modification of any material
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award as
a result of the execution or performance of this Agreement, or otherwise in
connection with the execution and performance of this Agreement.
6.10 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any
court, administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions contemplated by this Agreement, and which
29
would in the reasonable judgment of the Parent or BOL make it inadvisable to
consummate such transactions, and no law or regulation shall be in effect and no
court order shall have been entered in any action or proceeding instituted by
any party which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
6.11 PROCEEDINGS SATISFACTORY TO BOL AND THE PARENT. All
proceedings to be taken by the Company and the Stockholders in connection with
the consummation of the Closing on the Closing Date and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transaction contemplated hereby reasonably
requested by BOL and the Parent shall be reasonably satisfactory in form and
substance to BOL and the Parent and their counsel.
6.12 EMPLOYMENT AGREEMENT. Xxxxxxx Xxxxxxx shall have executed and
delivered an individual employment agreement with BOL in the form attached
hereto as EXHIBIT 6.12 (the "Employment Agreement"). -
6.13 ESCROW AGREEMENT. The Stockholders shall have executed and
delivered the Escrow Agreement.
6.14 LEASE. BOL shall have executed a lease with the landlord of
the office space currently leased by the Company in the form attached hereto as
EXHIBIT 6.14 (THE "LEASE").
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS.
7.1 INTRODUCTION. The obligations of the Company and the
Stockholders to consummate this Agreement and the transactions contemplated
hereby are subject to the fulfillment, prior to or at the Closing Date, of the
following conditions (any one or more of which may be waived in whole or in part
by the Company and the Stockholders):
7.2 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of BOL and the Parent contained in SECTION 5 and
elsewhere in this Agreement shall be true and correct in all material respects
on and as of the Closing Date, with the same effect as though made on and as of
the Closing Date; BOL and the Parent shall, on or before the Closing Date, have
performed and satisfied all agreements and conditions hereunder which by the
terms hereof are to be performed and satisfied by BOL and the Parent on or
before the Closing Date; and BOL shall have delivered to the Company a
certificate signed by the President of BOL and dated as of the Closing Date
certifying to the foregoing effect.
7.3 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any
court, administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions as contemplated by this Agreement, and which would in the
reasonable judgment of the Company make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and no court order
shall have been
30
entered in any action or proceeding instituted by any party which enjoins,
restrains or prohibits this Agreement or the complete consummation of the
transactions as contemplated by this Agreement.
7.4 EMPLOYMENT AGREEMENT. BOL shall have executed and delivered
the Employment Agreement.
7.5 ESCROW AGREEMENT. BOL shall have executed and delivered the
Escrow Agreement.
7.6 OPINION OF COUNSEL. The Company shall have received an opinion
from Xxxxx & Xxxxxxx, LLP, counsel to the Parent and BOL, in form and substance
reasonably satisfactory to the Company, to the effect that:
(a) Each of the Parent and BOL is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation with full corporate power and authority to
conduct its respective businesses in the manner as now conducted.
(b) The Parent Stock to be delivered to the Stockholder
at the Closing, when delivered in accordance with the terms of this Agreement,
will constitute valid and legally issued shares of the Common Stock of the
Parent, fully paid and non-assessable.
(c) This Agreement has been duly authorized, executed and
delivered by the Parent and BOL and constitutes a valid and binding agreement of
the Parent and BOL enforceable against them in accordance with its terms except
as such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors and except (i) as the same may be subject to the effect of
general principles of equity and (ii) that no opinion need be expressed as to
the enforceability of indemnification provisions included herein;
(d) The execution of this Agreement and the performance
of the obligations hereunder will not violate or result in a breach or
constitute a default under any of the terms of BOL's or the Parent's Certificate
of Incorporation or their respective bylaws, or, to the knowledge of such
counsel after reasonable investigation and supported by a certificate from BOL
and the Parent, of any lease, instrument, license, permit or any other agreement
by which the Company or BOL is bound.
7.7 LEASE. BOL shall have executed the Lease.
7.8 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial position or business of the Parent or BOL shall
have occurred and the Parent and BOL shall not have suffered any material loss
or damage to a material portion of its properties or business, since the date of
this Agreement which change, loss or damage materially affects or impairs the
ability of the Parent or BOL to conduct its business.
31
7.9 PROCEEDINGS SATISFACTORY TO COMPANY. All proceedings to be
taken by the Parent or BOL in connection with the consummation of the Closing on
the Closing Date and the other transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transaction contemplated hereby reasonably requested by the Company shall be
reasonably satisfactory in form and substance to the Company and its counsel.
SECTION 8. PARENT STOCK - TRANSFER RESTRICTIONS.
8.1 LOCK-UP. In addition to applicable federal and state
securities laws restricting the public sale of the Parent Stock to be issued to
the Stockholders hereunder, the Stockholders hereby irrevocably agrees that for
a period of (i) one (1) year after the Closing Date with respect to 100% of such
stock, and (ii) two (2) years after the Closing Date with respect to 50% of such
stock, the Stockholders will not offer, pledge, sell, assign or otherwise
transfer directly or indirectly, any of the Parent Stock or enter into any
agreement that transfers or assigns, in whole or in part, any of the economic
consequences of ownership of the shares of Parent Stock received hereunder (such
restrictions adjusted for any stock splits, recapitalizations, mergers or other
similar events). The Stockholders agree that the foregoing shall be binding upon
the Stockholder and their respective successors, assigns, heirs, and personal
representatives.
8.2 UNREGISTERED STOCK; INVESTMENT INTENT. The Stockholders
acknowledge and agree that the shares of Parent Stock to be delivered to the
Stockholders pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933, as amended (the "Act") and therefore may not
be resold without compliance with the Act. The Stockholders represent and
warrant that the Parent Stock to be acquired by Stockholders pursuant to this
Agreement is being acquired solely for their own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. The Stockholders
covenant, warrant and represent that none of the shares of Parent Stock issued
to such Stockholders will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Act and the rules and regulations of the
Securities and Exchange Commission and applicable state securities laws.
8.3 ABLE TO BEAR RISK; SOPHISTICATED AND ACCREDITED INVESTORS;
INFORMATION. Each of the Stockholders represent and warrant that he/she are able
to bear the economic risk of an investment in Parent Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment. Each
of the Stockholders represents that he/she is an "accredited investor" within
the meaning of Regulation D of Rule 504 of the Act. Each of the Stockholders
further represent and warrant that he/she (i) fully understands the nature,
scope and duration of the limitations on transfer contained in this Agreement,
(ii) have received a copy of the Company's information statement dated November
30, 1999 and supplement dated December 8, 1999 (collectively, the "Information
Statement"); and (iii) have such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the proposed investment and therefore has the capacity to protect his or her own
interests in connection with the acquisition of the Parent Stock. The
Stockholders represent and warrant that they have had an adequate opportunity to
ask questions and receive answers from the officers of the Parent concerning any
and all matters relating to the acquisition of Parent Stock as
32
contemplated by this Agreement including, without limitation, the background and
experience of the officers and directors of the Parent, the plans for the
operations of the business of the Parent and its affiliates and information
disclosed in the Information Statement. The Stockholders have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his satisfaction.
8.4 RESTRICTIVE LEGENDS. The certificates evidencing the Parent
Stock to be received by the Stockholders hereunder will bear legends
substantially in the form set forth below and containing such other information
as the Parent may deem appropriate. References in such legend to "THE COMPANY"
shall refer to the Parent.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE SECURITIES OR
BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE 1933 ACT AND ANY STATE
SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY,
SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE FURTHERMORE SUBJECT TO A LOCK-UP
AGREEMENT CONTAINED IN SECTION 8 OF THAT CERTAIN AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION WITH THE COMPANY DATED AS OF _____________, PURSUANT TO WHICH
THE HOLDER OF THIS CERTIFICATE HAS AGREED NOT TO OFFER, PLEDGE, SELL OR
OTHERWISE TRANSFER DIRECTLY OR INDIRECTLY THE SECURITIES REPRESENTED BY THIS
CERTIFICATE UNTIL [_____________]. A COPY OF THE LOCK-UP AGREEMENT MAY BE
OBTAINED BY CONTACTING THE SECRETARY OF THE COMPANY
In addition, such certificates shall also bear such other legends as
counsel for the Parent reasonably determines are required under the applicable
laws of any state.
SECTION 9. TERMINATION OF AGREEMENT; EFFECT OF TERMINATION.
9.1 TERMINATION. This Agreement may be terminated any time prior
to the Closing Date solely by:
(a) mutual consent of the boards of directors of BOL and
the Company;
(b) either the Stockholders and the Company, on the one
hand, or by BOL, on the other hand, if
33
(i) the transactions contemplated by this Agreement
to take place at the Closing shall not have been consummated by
December 31, 1999, unless the failure of such transactions to be
consummated is due to the willful failure of the party seeking to
terminate this Agreement to perform any of its obligations under this
Agreement to the extent required to be performed by it prior to or on
the Closing Date; or
(ii) if a material breach or default shall be made by
the other party in the observance of or in the due and timely
performance of any of the covenants or agreements contained herein, and
the curing of such default shall not have been made on or before the
Closing Date.
9.2 LIABILITIES IN THE EVENT OF TERMINATION. Upon the termination
of this Agreement none of the parties hereto shall have any obligation or
liability to any other party (except for obligations arising under SECTION 11
hereof) unless such termination results from the willful or intentional failure
of any party to perform any of its obligations hereunder which performance was
within such party's reasonable control at a reasonable cost. In such case,
without limiting the non-breaching party's otherwise available legal or
equitable remedies, the non-performing party shall be liable for any and all
damages arising from a breach or default by such party with respect to any of
its representations, warranties, covenants or agreements contained in this
Agreement including, but not limited to, legal and audit costs and out of pocket
expenses.
SECTION 10. NON-COMPETITION. For a period of three (3) years from and
after the Closing Date, each of the Stockholders shall not directly or
indirectly, (i) seek, obtain or accept a "Competitive Position" in the
"Restricted Territory" with a "Competitor" of the Company (as such terms are
hereafter defined), or (ii) solicit, directly or indirectly, any customers,
clients, accounts, officers, employees, agents or representatives of the
Company, BOL, the Parent, or its affiliates. For purposes of this Agreement, a
"Competitor" of the Company means any business, individual, partnership, joint
venture, association, firm, corporation or other entity engaged, wholly or
partly, in the business of selling internet access service, web site design or
web hosting services, or in any related business which the Company and/or its
affiliates may engage in or actively plan to engage in from time to time during
the term of this covenant; the "Restricted Territory" means the New England
states, Delaware, Pennsylvania, Maryland, New York and New Jersey; a
"Competitive Position" means any employment with any Competitor of the Company
or self-employment whereby Stockholders will use or are likely to use any
Confidential Information (as defined below), or whereby the Stockholders have
duties for such Competitor that are the same or substantially similar to those
actually performed by Stockholders for the Company under the terms of employment
with the Surviving Corporation. Nothing contained in this SECTION 10 is intended
to prevent either Stockholder from investing in stock or other securities listed
on a national securities exchange or actively traded on the over the counter
market or any corporation engaged, wholly or partly, in the sale of
telecommunications products or services; provided, however, that either
Stockholder and members of his immediate family shall not, directly or
indirectly, hold more than a total of two percent (2%) of all issued and
outstanding stock or other securities of any such corporation. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section is invalid or unenforceable, the parties hereto agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or
34
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
SECTION 11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
11.1 THE STOCKHOLDERS. The Stockholders recognize and acknowledge
that they have had in the past, currently have in the future may have access to
certain confidential information relating to the Company, the Parent and BOL,
including, but not limited to, operational policies, customer lists, and pricing
and cost policies, that are valuable, special and unique assets of the Company,
the Parent and BOL (collectively, "Confidential Information"). The Stockholders
agree that they will not use or disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of BOL who need to know
such information in connection with the transactions contemplated hereby, who
have been informed of the confidential nature of such information and who have
agreed to keep such information confidential as provided hereby, and (b)
following the Closing, such information may be disclosed by the Stockholders as
is required in the course of performing its duties for the Surviving Corporation
unless (i) such information becomes known to the public generally through no
breach by the Stockholders of this covenant, (ii) disclosure is required by law
or the order of any governmental authority under color of law or is necessary in
order to secure a consent or approval to consummate the transactions
contemplated hereby, provided, that prior to disclosing any information pursuant
to this clause (ii), the Stockholders shall give prior written notice thereof to
BOL and provide BOL with the opportunity to contest such disclosure, or (iii)
the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party and the
same prior disclosure set forth immediately above is given. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
section, BOL shall be entitled to an injunction restraining the Stockholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting BOL from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event that the transactions contemplated herein are not consummated, the
Stockholders shall return to BOL as soon as possible all documents containing
confidential information about the Parent.
11.2 BOL AND PARENT. BOL and Parent recognize and acknowledge that
it has in the past and currently has access to certain confidential information
relating to the Company, such as operational policies, customer lists, and
pricing and cost policies, that are valuable, special and unique assets of the
Company. BOL and Parent agree that, on behalf of themselves and their
affiliates, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use or disclose such confidential
information for their own benefit except in furtherance of the transactions
contemplated by this Agreement or disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to the Stockholders and to authorized representatives of
the Company, BOL or Parent who need to know such information in connection with
the transactions contemplated hereby, who have been informed of the confidential
nature of such
35
information and who have agreed to keep such information confidential as
provided hereby, unless (i) such information becomes known to the public
generally through no breach by BOL, the Parent or its affiliates of this
covenant, (ii) disclosure is required by law or the order of any governmental
authority under color of law or is necessary in order to secure a consent or
approval to consummate the transactions contemplated hereby, provided, that
prior to disclosing any information pursuant to this clause (iii), BOL shall, if
possible, give prior written notice thereof to the Company and the Stockholders
and provide the Company and the Stockholders with the opportunity to contest
such disclosure, or (iv) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party and the same prior disclosure set forth immediately above is
given. In the event of a breach or threatened breach by BOL of the provisions of
this Section, the Company and the Stockholders shall be entitled to an
injunction restraining BOL from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
Company and the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event
that the transactions contemplated herein are not consummated, the Parent and
BOL shall return to the Company within a reasonable time all documents
containing confidential information about the Company.
11.3 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants in SECTIONS 11.1 and
11.2, and because of the immediate and irreparable damage that would be caused
for which they would have no other adequate remedy, the parties hereto agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
11.4 SURVIVAL. The obligations of the parties under this ARTICLE 11
shall survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated herein on the Closing Date.
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders, on
behalf of themselves and their respective successors, executors, administrators,
estates, heirs and permitted assigns, agree subsequent to the Effective Time to
indemnify and hold harmless the Surviving Corporation and its respective
officers, directors, employees and agents (individually, a "Parent Indemnified
Party" and collectively, the "Parent Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Parent Indemnified Party
(a "Loss" or "Losses"), arising out of, based upon or in connection with:
(a) any breach of any representation, warranty, covenant
or agreement made by the Company or the Stockholders in this Agreement or in any
schedule, exhibit, certificate,
36
agreement or other instrument required to be delivered by the by the
Stockholders under this Agreement, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations or warranties.
Claims under clause (a) of this SECTION 12.1 are hereinafter collectively
referred to as "Parent Indemnifiable Claims". The payment of any Parent
Indemnifiable Claim by the Stockholders hereunder shall be made (i) 55% in
shares of Parent Stock from the Escrow Shares to the extent available and then
from the stockholders directly, and (ii) 45% in cash or other readily available
funds. The Stockholders, indemnification obligations hereunder shall be limited
to the Merger Consideration of $3,500,000, as adjusted pursuant to SECTION 2 of
this Agreement. After payment of such amount, the Stockholders' indemnification
obligations hereunder shall terminate.
12.2 INDEMNIFICATION BY THE PARENT. Subsequent to the Effective
Time, the Parent and its successors and assigns agrees to indemnify and hold
harmless the Stockholders and their successors, heirs and assigns (individually
and collectively, the "Stockholder Indemnified Party") from and against and in
respect of all losses, liabilities, obligations, damages, deficiencies, actions,
suits, proceedings, demands, assessments, orders, judgments, fines, penalties,
costs and expenses (including the reasonable fees, disbursements and expenses of
attorneys, accountants and consultants) of any kind or nature whatsoever
(including all amounts paid in investigation, defense or settlement of the
foregoing) sustained, suffered or incurred by or made against the Stockholders,
arising out of, based upon or in connection with a breach by the Parent or BOL
of any of their respective representations, warranties, covenants or agreements
made in this Agreement or in any schedule, exhibit, certificate, agreement or
other instrument delivered under or in connection with this Agreement. The
Parent's indemnification obligations hereunder shall be limited to the Merger
Consideration of $3,500,000 as adjusted pursuant to SECTION 2 of this Agreement.
After delivery of the same, the Parent's indemnification obligations hereunder
shall terminate.
12.3 NOTICE; DEFENSE OF CLAIMS.
Promptly after receipt by a Parent Indemnified Party or a Stockholder
Indemnified Party of notice of any claim, liability or expense to which the
indemnification obligations hereunder would apply, the Indemnified Party shall
give notice thereof in writing to the Indemnifying Party, but the omission to so
notify the Indemnified Party promptly will not relieve the Indemnifying Party
from any liability except to the extent that the Indemnifying Party shall have
been prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted. If within twenty (20) days after receiving such notice the
Indemnifying Party gives written notice to the Indemnified Party stating that
(i) it would be liable under the provisions hereof for indemnity in the amount
of such claim if such claim were successful and (ii) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense, then counsel for the defense shall be selected by the Indemnifying
Party (subject to the consent of the Indemnified Party which consent may not be
unreasonably withheld) and the Indemnifying Party shall not be required to make
any payment with respect to such claim,
37
liability or expense as long as the Indemnifying Party is conducting a good
faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the Indemnifying Party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The Indemnifying Party shall have the right, with the
consent of the Indemnified Party, which consent shall not be unreasonably
withheld, to settle any Indemnified Claims by third parties which are
susceptible to being settled provided its obligation to indemnify the
Indemnified Party therefor will be fully satisfied. The Indemnifying Party shall
keep the Indemnified Party apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
the Indemnified Party with all documents and information that the Indemnified
Party shall reasonably request and shall consult with the Indemnified Party
prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, the Indemnified Party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for the Indemnified Party shall be paid by the Indemnifying Party. If no such
notice of intent to dispute and defend is given by the Indemnifying Party, or if
such diligent good faith defense is not being or ceases to be conducted, the
Indemnified Party shall, at the expense of the Indemnifying Party, undertake the
defense of (with counsel selected by the Indemnified Party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the Indemnifying Party, then the
Indemnified Party shall make available all information and assistance that the
Indemnifying Party may reasonably request and shall cooperate with the
Indemnifying Party in such defense.
12.4 LIMITATIONS ON INDEMNIFICATION. Neither the Stockholders nor
the Parent shall be obligated to indemnify the other party except to the extent
the cumulative amount of losses to such party exceeds Twenty Thousand Dollars
($20,000) (the "Indemnity Threshold") whereupon the full amount of such losses
shall be recoverable in accordance with the terms hereof. Notwithstanding the
foregoing sentence, the Indemnity Threshold shall not apply to liability arising
from (i) any matter relating to the Purchase Price adjustments set forth in
Section 2, (ii) the Stockholders' Assumed Contract, (iii) fraud or (iv) the
litigation disclosed on SCHEDULE 3.16.
SECTION 13. MISCELLANEOUS.
13.1 LAW GOVERNING. This Agreement shall be construed under and
governed by the internal laws of the State of Connecticut without regard to its
conflict of laws provisions.
13.2 NOTICES. Any notice, request, demand other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given (i) if delivered or sent by facsimile transmission, upon receipt, or
(ii) if sent by registered or certified mail upon the sooner of receipt or the
expiration of three days after deposit in United States Post Office facilities
properly addressed with postage prepaid. All notices will be sent to the
addresses set forth below or to such other address as such party may designate
by notice to each other party hereunder:
38
TO BOL:
0000 Xxxxx 00
Xxxx, Xxx Xxxxxx, 00000
ATTN: Xxxx X. Xxxxx, President and Chief Executive Officer
Phone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
TO THE COMPANY AND THE STOCKHOLDERS:
Xxxxxxx Xxxxxxx and Xxxxxx Xxxxxxx
0 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
with a copy to:
Treiber, Xxxxxxxxxx & Xxxxxxx
00 Xxxxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxxxxx, Xx., Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representative.
13.3 ENTIRE AGREEMENT. This Agreement, including any schedules,
annexes and/or exhibits referred to herein and the other writings specifically
identified herein or contemplated hereby or delivered in connection with the
transactions contemplated hereby, is complete, reflects the entire agreement of
the parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings.
13.4 ASSIGNABILITY. This Agreement may not be assigned by the
Company or the Stockholders without the prior written consent of BOL. This
Agreement and the obligations of the parties hereunder shall be binding upon and
enforceable by, and shall inure to the benefit of,
39
the parties hereto and their respective successors, executors, administrators,
estates, heirs and permitted assigns, and no others.
13.5 ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S FEES. Each party
hereto agrees that any dispute regarding this Agreement shall be submitted to
arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
forty-five (45) mile radius of Hartford, Connecticut and the arbitrator(s) shall
apply Connecticut law. Judgment upon any award rendered by the arbitrator(s)
shall be final and may be entered in any court of competent jurisdiction.
Notwithstanding the foregoing, BOL shall have the absolute right to obtain
equitable remedies in any state court of competent jurisdiction in the State of
Connecticut or in a United States District Court for the Connecticut. Each party
irrevocably submits to and accepts the exclusive jurisdiction of each of such
courts and waives any objection (including any objection to venue or any
objection based upon the grounds of forum non conveniens) which might be
asserted against the bringing of any such action, suit or other legal proceeding
in such courts. The court and/or arbitrator(s) shall award costs and expenses
(including reasonable attorney's fees) to the prevailing party and/or parties in
any litigation or arbitration.
13.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
13.7 CERTAIN DEFINITIONS. for purposes of this Agreement, the
term:
(a) "Affiliate" of a person shall mean a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise; and
(c) "person" means an individual, corporation,
partnership, association, trust or any unincorporated organization.
(d) "knowledge" means the actual knowledge of such party
or receipt by such party of notice or information which would have been
sufficient to put a commercially reasonable person on notice to investigate such
matter.
13.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
40
13.9 AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by BOL, the Parent, the
Company and the Stockholders, or, in the case of a waiver, the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, or any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
13.10 SURVIVAL. All representations, warranties, agreements,
covenants and agreements of the parties contained in this Agreement, or in any
instrument, certificate, or opinion provided for in it, shall survive the
Closing (even if the damaged party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect forever thereafter (subject to any applicable statutes of
limitation or repose).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date set forth above by their duly authorized representatives.
WITNESS: XxxxxxxXxxxxx.xxx, Inc.
By: /s/ Xxxx X. Xxxxx
----------------------------- -----------------------------
Xxxx X. Xxxxx, President
WITNESS: BOL Acquisition Co. V, Inc.
By: /s/ Xxxx X. Xxxxx
----------------------------- -----------------------------
Xxxx X. Xxxxx, President
and Chief Executive Officer
WITNESS: New England Computer Associates, Inc.
By: /s/Xxxxxxx Xxxxxxx
----------------------------- -----------------------------
Xxxxxxx Xxxxxxx, President
WITNESS: NECAnet, Inc.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------- -----------------------------
Xxxxxxx Xxxxxxx, President
WITNESS: STOCKHOLDERS
/s/ Xxxxxxx Xxxxxxx
----------------------------- --------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
----------------------------- --------------------------------
Xxxxxx Xxxxxxx
