Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 17th
day of May, 2000, by and among XXXXXXXXXX.XXX, INC., a Delaware corporation
("Tek"), having its principal offices at 0 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000,
BIG TECH ACQUISITION CORP., a Delaware corporation ("Mergerco"), having its
principal offices c/o XxxXxxxxxx.Xxx, Inc., 0 Xxxxxxx Xxxxxx, Xxx Xxxx, XX
00000; BIG TECHNOLOGIES, INC., a Delaware corporation with its principal office
at 000 Xxxxxxxxxx Xxxxxx, #000, Xxxxxx, XX 00000 (the "Company"); and Xxxx X.
Xxxxx, having an address at 000 Xxxxxx Xxxxxx, #000, Xxxxxx, XX 00000 ("Tager")
and Xxxxxx X. Xxx, having an address at 000 X. 00xx Xxxxxx, Xxx. 0X, Xxx Xxxx,
XX 00000 ("Xxx", with each of Tager and Xxx being referred to as a "Stockholder"
and collectively as the "Stockholders").
W I T N E S S E T H:
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WHEREAS, the Stockholders are the record and beneficial owners of 100%
of the issued and outstanding shares of the common stock of the Company, $1.00
par value ("the Big Common Stock") and there are (a) no outstanding options and
warrants to purchase Common Stock, (b) no convertible notes, convertible
debentures, shares of convertible preferred stock or other securities
convertible into shares of Big Common Stock, and (c) no other rights and
privileges to receive or acquire shares of Big Common Stock (collectively, the
"Fully Diluted Equity");
WHEREAS, Mergerco is a direct wholly-owned subsidiary of Tek, which has
been formed for the purpose of effecting the Merger (as defined below) of the
Company with and into Mergerco, with Mergerco being the Surviving Corporation
(as defined below) of the Merger, and thereby enabling Tek to acquire all of the
shares of capital stock of the Company as shall represent the Fully Diluted
Equity of the Company at the effective date of the Merger (hereinafter referred
to as the "Stock") pursuant to this Agreement as hereinafter provided for; and
WHEREAS, the Stockholders, the Board of Directors of each of (i) the
Company, (ii) Mergerco and (iii) Tek, with Tek being the sole stockholder of
Mergerco, have all authorized and approved the Merger and the consummation of
the other transactions contemplated by this Agreement, all on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and agree
as follows:
1. THE MERGER.
1.1. The Merger. At the time of the Closing on the Closing Date (as
such terms are hereinafter defined) and in accordance with the provisions of
this Agreement and the applicable provisions of the Delaware General Corporation
Law ("DGCL"), the Company shall be merged with and into Mergerco (the "Merger")
in accordance with the terms and conditions of this Agreement and a certificate
of merger to be filed with the Secretary of State of the State of Delaware in
substantially the form of Exhibit A annexed hereto (the "Certificate of
Merger"), with Mergerco as the surviving corporation of such Merger (Mergerco
hereinafter being
sometimes referred to as the "Surviving Corporation"). Thereupon, the separate
existence of the Company shall cease, and Mergerco, as the Surviving
Corporation, shall continue its corporate existence under the DGCL under the
name "Big Technologies, Inc.".
1.2. Effectiveness of the Merger. As soon as practicable upon or after
the satisfaction or waiver of the conditions precedent set forth in Sections 6
and 7 below, Mergerco and the Company will execute the Certificate of Merger
(subject to such revisions as to form (but not substance) as may be required by
the relevant provisions of the DGCL), and shall file or cause to be filed such
Certificate of Merger with the Secretary of State of the State of Delaware; and
the Merger shall become effective as of the date of the filing of such
Certificate of Merger, which shall occur on the "Closing Date" (as hereinafter
defined), and the Closing shall be deemed to occur as of such Closing Date in
accordance with Section 8 hereof.
1.3. Effect of the Merger. Upon the effectiveness of the Merger: (a)
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of each of Mergerco and the Company (the
"Constituent Corporations"), and all obligations owed to, belonging to or due to
each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to the DGCL, without further act or deed, and (b)
the Surviving Corporation shall be liable for all claims, liabilities and
obligations of each of the Constituent Corporations, all of which shall become
and remain the obligations of the Surviving Corporation pursuant to the DGCL,
without further act or deed.
1.4. Surviving Corporation. Upon the effectiveness of the Merger, the
Certificate of Incorporation, By-Laws, directors and officers of the Surviving
Corporation shall be those of Mergerco as in effect immediately prior to the
effectiveness of the Merger, except that the Certificate of Incorporation shall
be amended to change the name of the Surviving Corporation to "Big Technologies,
Inc."
1.5. Status and Conversion of Securities. At the Closing Date and upon
the effectiveness of the Merger:
(a) Mergerco Stock. Each share of capital stock of the Company
outstanding immediately prior to the effectiveness of the Merger, representing
the Fully Diluted Equity of the Company, shall be canceled and extinguished and
automatically converted into the right to receive that number of shares of
common stock of Tek, par value $.0001 per share ("Tek Common Stock"), found by
(i) dividing (A) $1,050,000 by (B) the Market Average Price of a share of Tek
Common Stock (such number of shares of Tek Common Stock being the "Share Merger
Closing Consideration") and (ii) dividing that number by the number of shares of
the Company's Stock outstanding as of the Closing Date of the Merger. The
"Market Average Price" of each share of Tek Common Stock shall be equal to the
average closing price for one share of Tek Common Stock, as reported by The
Nasdaq SmallCap Market, for the five (5) consecutive trading days ending on the
trading day that immediately precedes the Closing Date of the Merger. Each
Stockholder shall receive his pro rata portion of the Share Closing Merger
Consideration, which shall equal that number of shares of Tek Common Stock set
forth opposite his name on Schedule 1.5 attached hereto. In the event that the
above calculation would produce
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a fraction of a share of Tek Common Stock as part of the Merger Closing
Consideration, such number of shares of Tek Common Stock shall be rounded up to
the nearest whole number of shares of Tek Common Stock.
(b) Cash Merger Consideration. Each Stockholder shall receive his pro
rata share of $150,000 in cash, which amount shall be set forth opposite his
name on Schedule 1.5 to be paid by certified check (the "Cash Merger Closing
Consideration", and, together with the Share Merger Closing Consideration, the
"Merger Closing Consideration").
(c) The Merger Closing Consideration shall be paid and delivered to the
holders of the outstanding Stock upon:
(A) surrender to the Surviving Corporation of the certificates
representing such shares of outstanding Stock (all of which
shall be delivered free and clear of any and all pledges,
liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever, except any
restrictions which may be created by operation of state or
federal securities laws) at the time and place of the Closing
as provided in Section 8 below; and
(B) delivery to the Surviving Corporation and Tek by the
subject holder of Stock of an appropriate letter confirming
(w) such holder's ownership of his or her Stock free and clear
as aforesaid (which representation and warranty shall survive
the Closing), (x) such information regarding such Stockholder
and his background and financial status as may reasonably be
requested by Tek, (y) such Stockholder's investment intent
with respect to the Tek Common Stock being received by such
Stockholder pursuant to Section 1.5 hereof and (z) such other
representations with respect to the Stockholder's status and
the transfer restrictions applicable to such Tek Common Stock
under Rule 144 and 145 as promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act").
1.6. Earn-Out. In the event that Mergerco achieves those earnings
targets set forth on Schedule 1.6 attached hereto (the "Milestones"), each
Stockholder shall receive his pro rata share of the Earn-Out Merger
Consideration. The Earn-Out Merger Consideration shall equal the number of
shares of Tek Common Stock equal to (A) $650,000 divided by (B) the Market
Average Price of a share of Tek Common Stock. The Earn-Out Merger Consideration
shall be distributed to the Stockholders in three equal installments, each
distribution to be made within 15 days after the close of each full fiscal
quarter of Mergerco following the Closing Date commencing with the fiscal
quarter ending on September 30, 2000, upon the achievement of each Milestone,
with achievement of the Milestones being determined on a cumulative basis. For
example, if a Milestone is not met for one fiscal quarter or for two fiscal
quarters successively, and as a result no Earn-Out Merger Consideration is paid
for such fiscal quarter or quarters, but the Milestones, on a cumulative basis,
are subsequently met in a succeeding fiscal quarter, then the Stockholders shall
be entitled to the Earn-Out Consideration payable for the fiscal quarters for
which the cumulative Milestones have been met.
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1.7. Liquidation of Shares. During the period from the Closing Date of
the Merger through November 30, 2000, Tek has the right (the "Liquidation
Right"), on written notice to the Shareholders, to repurchase, pro rata from
each Shareholder, up to that aggregate number of the shares of Tek Common Stock
delivered to the Shareholders as the Share Merger Closing Consideration equal to
$100,000 divided by the Market Average Price. However, if Tek has not exercised
its Liquidation Right in full by close of business on November 30, 2000, then
that portion of the Liquidation Right remaining unexercised shall immediately
vest in the Shareholders, and each Shareholder may, on written notice to Tek no
later than December 31, 2000, require Tek to repurchase from him that number of
shares which were not purchased by Tek upon its prior exercise of its
Liquidation Right equal to his pro rata share of $100,000 divided by the Market
Average Price which were not purchased by Tek in its prior exercise of the
Liquidation Right. Any fractional share amounts to be purchased shall be rounded
up to the nearest whole number of shares.
1.8. Books and Records. On the Closing Date, the Company shall deliver
to Tek all of the stock books, records and minute books of the Company, all
financial and accounting books and records of the Company, and all referral,
client, customer and sales records of the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
The Company and each Stockholder severally (and not on behalf of the
other Stockholder) hereby represents and warrants to Mergerco and Tek as
follows:
2.1. Ownership of the Stock.
(a) The number of shares of outstanding Stock, the record owners
thereof, and the record addresses and social security number or tax
identification number of each of the Stockholders, are as set forth on Schedule
2.4 annexed hereto. Each Stockholder is the legal and beneficial owner of his
shares of the Stock, free and clear of all pledges, liens, claims, charges,
options, calls, encumbrances, restrictions and assessments whatsoever, except
any restrictions which may be created by operation of state or federal
securities laws.
(b) Schedule 2.4 accurately sets forth the number of shares of Stock
owned of record and beneficially by each Stockholder, and all of the Stock of
each Stockholder has been duly authorized and validly issued, and is fully paid
and non-assessable.
2.2. Valid and Binding Agreement.
(a) The execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby by the
Company have been duly and validly authorized by the Board of Directors of the
Company and the unanimous vote of the stockholders of the Company. The Company
has the full legal right, power and authority to execute and deliver this
Agreement and, upon obtaining necessary approval of the stockholders of the
Company, will have the full power and authority to perform its obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
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against the Company and the Stockholders in accordance with its terms, except to
the extent limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of specific
performance or similar equitable relief is available only at the discretion of
the court before which enforcement is sought.
(b) Each Stockholder has the full legal right, power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and, when executed and delivered by each
Stockholder who is to become a party thereto, the Employment Agreement, the
Non-Competition Agreement (if applicable to a Stockholder), the Subscription
Agreement, and the Stockholder Agreement (as such terms are hereinafter
defined), constitutes and will constitute the legal, valid and binding
obligations of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms, except to the extent limited by
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally, and except that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court before which
enforcement is sought.
2.3. Organization, Good Standing and Qualification.
(a) The Company: (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware; (ii) has all
necessary corporate power and authority to carry on its business and to own,
lease and operate its properties; and (iii) is not required, by the nature of
its properties or business, to be qualified to do business as a foreign
corporation in any other foreign jurisdiction in which the failure to be so
qualified would have a material adverse effect on the Company or its business or
financial condition.
(b) The Company has no subsidiary corporations.
(c) True and complete copies of the Articles of Incorporation and
By-Laws of the Company (including all amendments thereto), and a correct and
complete list of the officers and directors of the Company, are annexed hereto
as Schedule 2.3.
2.4. Capital Structure; Stock Ownership.
(a) The authorized and outstanding shares of capital stock of the
Company, and the record owners of such shares of capital stock, and all
outstanding options, warrants and other securities convertible, exchangeable or
exercisable for shares of capital stock of the Company are as set forth on
Schedule 2.4 annexed hereto. Other than as set forth on Schedule 2.4, no other
shares of capital
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stock of the Company are issued or outstanding.
(b) Except as set forth in Schedule 2.4 annexed hereto (all of which
agreements and commitments will be terminated and canceled as of the Closing
Date, without any payment by the Company), there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or calls, demands or commitments: (i) obligating the Company to
issue, transfer or purchase any shares of its capital stock, or (ii) obligating
the Stockholders to transfer any shares of the Stock owned by such Stockholder.
Other than in respect of the stock purchase rights described in Schedule 2.4
(all of which shall be terminated and canceled as of the Closing Date, without
any payment by the Company), no shares of capital stock of the Company are
reserved for issuance pursuant to stock options, warrants, agreements or other
rights to purchase capital stock.
2.5. Investments. Except as set forth on Schedule 2.5, the Company does
not own, directly or indirectly, any stock or other equity securities of any
corporation or entity, or have any direct or indirect equity or ownership
interest in any person, firm, partnership, corporation, venture or business
other than the business conducted by the Company.
2.6. Financial Information.
(a) The Company has furnished to Tek the unaudited financial
information of the Company as kept by it on its accounting systems (i) for the
fiscal year ended December 31, 1999, (the "1999 Financial Information"); and
(ii) as at March 31, 2000 (the "March 2000 Financial Information"). Such 1999
Financial Information and March 2000 Financial Information are herein
collectively referred to as the "Financial Information".
(b) Except as provided in Schedule 2.6(b), the Financial Information is
complete and correct in all material respects and present fairly the financial
position of the Company as of the dates thereof and for the periods reflected
therein.
(c) Except as expressly set forth in the Financial Information and/or
in the Schedules to this Agreement, to the best knowledge of the Company and the
Stockholders, there are, as at the date hereof, no liabilities or obligations
(including, without limitation, any tax liabilities or accruals) of the Company,
including any contingent liabilities, that are, in the aggregate, material.
(d) The Company has furnished to Tek: (i) a list of any leasehold or
other contractual obligations of the Company to the Stockholders and/or any of
their respective Affiliates on the date hereof; (ii) a list of all obligations
of the Company guaranteed by the Stockholders and/or any of their respective
Affiliates on the date hereof, and the terms of such guarantees; (iii) a list
reflecting the nature and amount of all obligations owed to the Company on the
date hereof by the Stockholders and/or any of their respective Affiliates; and
(iv) a list reflecting the nature and amount of all obligations owed by the
Company on the date hereof to the Stockholders and/or any of their respective
Affiliates. Wherever used in this Agreement, the term "Affiliate" means, as
respects any person or entity, any other person or entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the first person or entity.
2.7. Certain Adverse Changes. The Company and the Stockholders
acknowledge that, since December 31, 1999, there have not been any material or
adverse changes in the financial condition, operations or business of the
Company from that shown in the Financial Information. Except as and to the
extent described in Schedule 2.7 annexed hereto (which Schedule may make
reference to any other Schedule hereto or to any other document(s) referred to
in this Agreement which has heretofore been delivered to Mergerco), since
December 31, 1999, the business of the Company has continued to be operated only
in the ordinary course, and there has not been:
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(a) Any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting the business, operations, assets,
properties, financial condition or prospects of the Company; or
(b) Any declaration, setting aside or payment of any dividend or other
distribution with respect to the Stock, any other payment of any kind by the
Company to any of its stockholders or any of their respective Affiliates, any
forgiveness of any debt or obligation owed to the Company by any of its
stockholders or any of their respective Affiliates, or any direct or indirect
redemption, purchase or other acquisition by the Company of any capital stock of
the Company.
2.8. Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule 2.8 annexed
hereto: (i) on the date hereof and on the Closing Date, all federal, state and
local tax returns and tax reports required to be filed by the Company on or
before the date of this Agreement or the Closing Date, as the case may be, have
been and will have been timely filed with the appropriate governmental agencies
in all jurisdictions in which such returns and reports are required to be filed;
(ii) all federal, state and local income, franchise, sales, use, property,
excise and other taxes (including interest and penalties and including estimated
tax installments where required to be filed and paid) due from or with respect
to the Company as of the date hereof and as of the Closing Date have been and
will have been fully paid, and appropriate accruals shall have been made on the
Company's books for taxes not yet due and payable; (iii) as of the Closing Date,
all taxes and other assessments and levies which the Company is required by law
to withhold or to collect on or before the Closing Date will have been duly
withheld and collected, and will have been paid over to the proper governmental
authorities to the extent due and payable on or before the Closing Date; and
(iv) there are no outstanding or pending claims, deficiencies or assessments for
taxes, interest or penalties with respect to any taxable period of the Company.
At and after the Closing Date, the Company will have no liability for any
federal, state or local income tax with respect to any taxable period ending on
or before the Closing Date, except as and to the extent disclosed in Schedule
2.8.
(b) There are no audits pending with respect to any federal, state or
local tax returns of the Company, and no waivers of statutes of limitations have
been given or requested with respect to any tax years or tax filings of the
Company.
2.9. Personal Property; Liens. Except as provided in Schedule 2.9
annexed hereto, the Company has and owns good and marketable title to all of its
tangible and intangible personal property, including therein all software,
software developments and related technology, free and clear of all liens,
pledges, claims, security interests and encumbrances whatsoever. All material
items of machinery, equipment, vehicles and other personal property owned or
leased by the Company are listed in Schedule 2.9 annexed hereto, and, except as
and to the extent disclosed in Schedule 2.9, all of such personal property are
in good operating condition and repair (reasonable wear and tear excepted) and
are adequate for their use in the Company's business as presently conducted.
2.10. Real Property.
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(a) The Company neither owns nor has any interest of any kind (whether
ownership, lease or otherwise) in any real property except to the extent of the
Company's leasehold interests under the leases for its business premises, true
and complete copies of which leases (including all amendments thereto) are
annexed hereto as Schedule 2.10 (the "Leases").
(b) The Company is presently in compliance with all of its obligations
under the Leases, and the premises leased thereunder are in good condition
(reasonable wear and tear excepted) and are adequate for the operation of the
Company's business as presently conducted.
2.11. Insurance Policies; Bank Accounts. Schedule 2.11 annexed hereto
contains (i) a true and correct schedule of all insurance policies held by the
Company concerning its business and properties (including but not limited to
professional liability insurance), and (ii) a complete list of all bank accounts
and safe deposit boxes maintained by or on behalf of the Company, with
indication of all persons having signatory, access or other authority with
respect thereto.
2.12. Permits and Licenses. The Company possesses all permits, licenses
and/or franchises, from whatever governmental authorities or agencies (domestic
and/or foreign) requiring the same and having jurisdiction over the Company,
which are necessary in order to operate its business in the manner presently
conducted, all of which permits, licenses and/or franchises are valid, current
and in full force and effect; and none of such permits, licenses or franchises
will be voided, revoked or terminated, or voidable, revocable or terminable,
upon and by reason of the Merger and the change of ownership of the Company
pursuant to this Agreement.
2.13. Contracts and Commitments.
(a) Schedule 2.13 annexed hereto lists all material contracts, leases,
commitments, technology agreements, software development agreements, web design
agreements, hosting agreements, software or technology licenses, consulting
agreements, employment agreements and employment offer letters, indentures and
other agreements to which the Company is a party (collectively, "Material
Contracts"), except that Schedule 2.13 need not list any such agreement that is
listed on any other Schedule hereto, or was entered into in the ordinary course
of the business of the Company and that, in any case: (i) is for the purchase of
supplies or other inventory items in the ordinary course of business; (ii) is
related to the purchase or lease of any capital asset involving aggregate
payments of less than $5,000 per annum; or (iii) may be terminated without
penalty, premium or liability by the Company on not more than thirty (30) days'
prior written notice; provided, however, that Schedule 2.13 shall list all
technology agreements, software or development agreements, web design
agreements, hosting agreements, and software or technology licenses involving
the Company or any Affiliate, regardless of the duration thereof or the amount
of payments called for or required thereunder.
(b) Except as set forth in Schedule 2.13: (i) all Material Contracts
are in full force and effect; (ii) the Company is in compliance with all of its
obligations under the Material Contracts, and has not received any written
notice that any Material Contract is in
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breach or default or is now subject to any condition or event which has occurred
and which, after notice or lapse of time or both, would constitute a default by
any party under any such contract, lease, agreement or commitment; and (iii)
none of the Material Contracts will be voided, revoked or terminated, or become
voidable, revocable or terminable, upon and by reason of the Merger and the
change of ownership of the Company pursuant to this Agreement;
(c) There is no outstanding power of attorney granted by the Company to
any person, firm or corporation for any purpose whatsoever.
2.14. Customers and Suppliers. None of the Company or any Stockholder
has any knowledge of, nor has received any written notice of, any existing,
announced or anticipated changes in the policies of any material clients,
customers or suppliers of the Company which will materially adversely affect the
business presently being conducted by the Company.
2.15. Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 2.15. annexed hereto, the Company
is not a party to (i) any collective bargaining agreement or other labor
agreement, or (ii) any agreement with respect to the employment or compensation
of employee(s). No union is now certified or, to the best of the knowledge of
the Company and the Stockholders, claims to be certified as a collective
bargaining agent to represent any employees of the Company, and there are no
labor disputes existing or, to the best of the knowledge of the Company and the
Stockholders, threatened, involving strikes, slowdowns, work stoppages, job
actions or lockouts of any employees of the Company.
(b) Except as set forth on Schedule 2.15, there are no unfair labor
practice charges or petitions for election pending or being litigated before the
National Labor Relations Board or any other federal or state labor commission
relating to any employees of the Company. The Company has not received any
written notice of any actual or alleged violation of any law, regulation, order
or contract term affecting the collective bargaining rights of employees, equal
opportunities in employment, or employee health, safety, welfare, or wages and
hours.
(c) The Company has never at any time been required to make
contributions to any "multiemployer plan" (as defined in Section 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")).
(d) Except as disclosed on Schedule 2.15, the Company does not maintain
or have any liabilities or obligations of any kind with respect to, any bonus,
deferred compensation, pension, profit sharing, retirement or other such benefit
plan, and does not have any potential or contingent liability in respect of any
actions or transactions relating to any such plan other than to make
contributions thereto if, as and when due in respect of periods subsequent to
the date hereof.
(e) Except for the group insurance programs listed in Schedule 2.15,
the Company does not maintain any medical, health, life or other employee
benefit insurance programs or any welfare plans (within the meaning of Section
3(1) of ERISA) for the benefit of
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any current or former employees, and, except as required by law, the Company has
no liability, fixed or contingent, for health or medical benefits to any former
employee.
2.16. No Breach of Statute, Decree or Other Instrument.
(a) Except as set forth in Schedule 2.16 annexed hereto: (i) neither
the execution and delivery of this Agreement by the Company and/or the
Stockholders, nor the performance of or compliance with the terms and provisions
of this Agreement on the part of the Company and/or the Stockholders, will
violate or conflict with any term of the Articles of Incorporation or By-Laws of
the Company or any statute, law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) of any
governmental authority which is in effect and affects the existing business of
the Company, or will at the Closing Date conflict with, result in a breach of,
or constitute a default under, any of the terms, conditions or provisions of any
judgment, order, award, injunction, decree, contract, lease, agreement,
indenture or other instrument to which the Company or the Stockholders is a
party or by which the Company or the Stockholders is bound; (ii) no consent,
authorization, order or approval of or filing with any governmental authority or
agency, or any third party, will be required on the part of the Company or the
Stockholders in connection with the consummation of the Merger and the other
transactions contemplated hereby; and (iii) the Company will not be required,
whether by law, regulation or administrative practice, to reapply for or refile
to obtain any of the licenses, permits or other authorizations presently held by
the Company and required for the operation of its business as conducted on the
date hereof.
(b) In connection with and as respects the Merger, the Company and each
Stockholder has waived any and all rights which he may have (by way of right of
first refusal, right of first offer, or otherwise) to purchase any of the Stock
by reason of the proposed disposition thereof by any Stockholder pursuant to the
Merger.
2.17. Compliance with Laws.
(a) Except as set forth on Schedule 2.17, to the best knowledge of the
Company and the Stockholders, the Company has not, at any time since the
inception of the Company, (i) handled, stored, generated, processed or disposed
of any hazardous substances in violation of any federal, state or local
environmental laws or regulations, (ii) otherwise committed any material
violation of any federal, state or local environmental laws or regulations
(including, without limitation, the provisions of the Environmental Protection
Act and other applicable environmental statutes and regulations) or any material
violation of the Occupational Safety and Health Act, or (iii) been in material
violation of any requirements of its insurance carriers from time to time.
(b) Except as set forth on Schedule 2.17 annexed hereto, neither the
Company nor any of its current officers has received any written notice of
default or violation, nor, to the best knowledge of the Company and the
Stockholders, is the Company in default or violation, with respect to any
judgment, order, writ, injunction, decree, demand or assessment issued by any
court or any federal, state, local, municipal or other governmental agency,
board, commission, bureau, instrumentality or department, domestic or foreign,
relating to any aspect of the Company's business, affairs, properties or assets.
Neither the Company nor any of its current
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officers has received written notice of, been charged with, or is under
investigation with respect to, any violation of any provision of any federal,
state, local, municipal or other law or administrative rule or regulation,
domestic or foreign, relating to any aspect of the Company's business, affairs,
properties or assets, which violation would have a material adverse effect on
the Company, its business or any material portion of its assets.
(c) Schedule 2.17 sets forth the date(s) of the last known audits or
inspections (if any) of the Company conducted by or on behalf of the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other governmental and/or quasi-governmental agency
(federal, state and/or local).
2.18. Litigation. Except as disclosed in Schedule 2.18 annexed hereto,
there is no suit, action, arbitration, or legal, administrative or other
proceeding, or governmental investigation (including, without limitation, any
claim alleging the invalidity, infringement or interference of any patent,
patent application, or rights thereunder owned or licensed by the Company)
pending, or to the best knowledge of the Company and the Stockholders,
threatened, by or against the Company or any of its assets or properties.
2.19. Patents, Licenses and Trademarks. Schedule 2.19 annexed hereto
correctly sets forth a list and brief description of the nature and ownership
of: (a) all patents, patent applications, copyright registrations and
applications, registered trade names, and trademark registrations and
applications, both domestic and foreign, which are presently owned, filed or
held by the Company and/or any of its directors, officers, stockholders,
employees, or independent contractors and which in any way relate to or are used
in the business of the Company; (b) all licenses, both domestic and foreign,
which are owned or controlled by the Company and/or any of its directors,
officers, stockholders, employees, or independent contractors and which in any
way relate to or are used in the business of the Company; and (c) all
franchises, licenses and/or similar arrangements granted to the Company by
others and/or to others by the Company. None of the patents, patent
applications, copyright registrations or applications, registered trade names,
trademark registrations or applications, franchises, licenses or other
arrangements set forth or required to be set forth in Schedule 2.19 is subject
to any pending challenge, or threatened challenge known to the Company or the
Stockholders.
2.20. Transactions with Affiliates. Except as disclosed on Schedule
2.20, no material asset employed in the business of the Company is owned by,
leased from or leased to any of the Stockholders of the Company, any of their
respective Affiliates, members of their families or any partnership, corporation
or trust for their benefit, or any other officer, director, employee, or
independent contractors of the Company or any Affiliate of the Company.
2.21. Schedules Incorporated by Reference. The making of any recitation
in any Schedule hereto shall be deemed to constitute a representation and
warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement, as, to
the extent, and subject to the qualifications and limitations, set forth in such
corresponding Section(s).
2.22. Disclosure and Duty of Inquiry. Neither Tek nor Mergerco is or
will be required to undertake any independent investigation to determine the
truth, accuracy and
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completeness of the representations and warranties made by the Company and the
Stockholders in this Agreement.
2.23. Ownership of Tek Common Stock or Other Securities. None of (i)
the Company, (ii) any Stockholder, (iii) the Stockholders taken together, or
(iv) the Company and the Stockholders, taken together, either individually or in
the aggregate own of record or beneficially (as determined in accordance with
the definitions provided under Regulation 13d-3 promulgated under the Exchange
Act) five (5%) percent or more of the outstanding Tek Common Stock (the
"Percentage") on the date hereof, and such ownership by any of such persons and
groups will not equal or exceed the Percentage on the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND TEK.
Mergerco and Tek hereby jointly and severally represent and warrant to
the Company and the Stockholders, as follows:
3.1. Organization, Good Standing and Qualification. (a) Each of
Mergerco and Tek is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, with all necessary power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
(b) True and complete copies of the Articles of Incorporation and
By-Laws of Mergerco (including all amendments thereto), and a correct and
complete list of the officers and directors of Mergerco to hold office
immediately following completion of the transactions contemplated hereby, are
annexed hereto as Schedule 3.1.
3.2. Authorization of Agreement. The execution, delivery and
performance of this Agreement, the Employment Agreement, the Non-Competition
Agreement (with any Stockholder signatory thereto), and the Stockholder
Agreement, and the consummation of the Merger and the other transactions
contemplated hereby by Mergerco and Tek, have been duly and validly authorized
by the Board of Directors and (as legally required under the DGCL) the sole
stockholder of Mergerco, and by the Boards of Directors of Mergerco and Tek; and
Mergerco and Tek have the full legal right, power and authority to execute and
deliver this Agreement, the Employment Agreement, the Non-Competition Agreement
and the Stockholder Agreement, and to perform their respective obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. No further corporate authorization is necessary on the part of
Mergerco or Tek to consummate the transactions contemplated hereby and thereby.
3.3. Valid and Binding Agreement. This Agreement, the Employment
Agreement, the Non-Competition Agreement, the Xxx Non-Competition Agreement and
the Stockholder Agreement constitutes the legal, valid and binding obligation of
Mergerco and/or Tek (if a signatory), enforceable against Mergerco and Tek in
accordance with its terms, and each of this Agreement, the Employment Agreement,
the Non-Competition Agreement (with any Stockholder signatory thereto) and the
Stockholder Agreement, constitutes and will constitute the legal, valid and
binding obligations of the Surviving Corporation and Tek (as the case may be),
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enforceable against the Surviving Corporation and Tek in accordance with their
respective terms, except, in each case, to the extent limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and except that the remedy of specific performance or similar equitable relief
is available only at the discretion of the court before which enforcement is
sought.
3.4. No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by Mergerco or Tek, nor compliance with the terms and
provisions of this Agreement on the part of Mergerco or Tek, will: (a) violate
any statute, law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) of any governmental
authority which is in effect and which affects Mergerco or Tek; (b) require the
issuance of any authorization, order, consent or approval of or filing with any
governmental authority or agency, or any third party; or (c) conflict with or
result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which Mergerco or Tek is a party, or by which
Mergerco or Tek is bound, or constitute a default thereunder.
3.5. Capitalization of Tek.
Tek is (i) authorized to issue 100,000,000 shares of Tek Common Stock,
$.0001 par value per share and 10,000,000 shares of Preferred Stock (the
"Preferred Stock"); (ii) 15,913,529 shares of Tek Common Stock were issued and
outstanding at March 31, 2000.
3.6. Tek Common Stock. When issued and delivered pursuant to Section
1.5 above as Merger Closing Consideration, all of the Tek Common Stock so issued
shall have been duly authorized and validly issued, and shall be fully paid and
non-assessable, and shall be free of any pre-emptive rights or other
limitations.
3.7. Investment. Tek will be acquiring ownership of the outstanding
capital stock of the Company for its own account, for investment purposes only,
and not with a view to the resale or distribution thereof.
3.8. Business of Mergerco. Mergerco has been formed solely for the
purposes of consummating the transactions contemplated by this Merger Agreement,
has not conducted and will not conduct any independent business operations until
the Closing Date of the Merger, and at the Closing Date will have no liabilities
(or obligations to assume any liabilities), except those acquired from the
Company.
3.9. Disclosure and Duty of Inquiry. The Company and the Stockholders
are not and will not be required to undertake any independent investigation to
determine the truth, accuracy and completeness of the representations and
warranties made by Mergerco and Tek in this Agreement.
3.10. Due Diligence by Tek and/or Mergerco. Tek and Mergerco (i) have
had reasonable access to the Company's Financial Information, the books and
records available at the Company's offices or as provided by the Company in
response to specific requests of the Stockholders; (ii) the Company permitted
Tek and Mergerco to make such reasonable inspections thereof as they requested;
and (iii) the Stockholders furnished Tek and Mergerco
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with such financial, operating data and other information with respect to the
Company as requested by Tek and/or Mergerco.
3.11. Disclosure Documents. Tek has delivered to the Company and the
Stockholders its Annual Report on Form 10-K for the year ended June 30, 1999,
and all other reports filed by Tek with the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), since June 30, 1999
(including the Tek Reports on Form 10-Q and Form 8-K), all of which reports are
in proper form and are in compliance with Commission rules and regulations, and
none of which contain material misstatements of material facts or omit such
information as would be necessary to make the information contained therein not
materially misleading (except as otherwise corrected by a subsequent filing
delivered to the Company and the Stockholders). As of their respective dates,
the financial statements of Tek included in such reports (the "Tek Financial
Statements") complied when filed as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Securities and Exchange Commission and NASDAQ with respect thereto, and
were, when filed, in accordance with the books and records of Tek, complete and
accurate in all material respects, and presented fairly the consolidated
financial position and the consolidated results of operations, changes in
stockholders' equity and cash flows of Tek and its subsidiaries as of the dates
and for the periods indicated, in accordance with GAAP, subject in the case of
interim financial statements to normal year-end adjustments and the absence of
certain footnote information.
3.12. Certain Adverse Changes. Tek acknowledges that, since March 31,
2000, there have not been any material or adverse changes in the financial
condition, operations or business of Tek from that shown in the Tek Financial
Statements. Except as and to the extent described in Schedule 3.12 annexed
hereto, since March 31, 2000, the business of Tek has continued to be operated
only in the ordinary course, and there has not been any damage, destruction or
loss, whether covered by insurance or not, materially and adversely affecting
the business, operations, assets, properties, financial condition or prospects
of Tek.
3.13. Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule 3.13 annexed
hereto: (i) on the date hereof and on the Closing Date, all federal, state and
local tax returns and tax reports required to be filed by Tek on or before the
date of this Agreement or the Closing Date, as the case may be, have been and
will have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed; (ii)
all federal, state and local income, franchise, sales, use, property, excise and
other taxes (including interest and penalties and including estimated tax
installments where required to be filed and paid) due from or with respect to
Tek as of the date hereof and as of the Closing Date have been and will have
been fully paid, and appropriate accruals shall have been made on the Tek's
books for taxes not yet due and payable; (iii) as of the Closing Date, all taxes
and other assessments and levies which Tek is required by law to withhold or to
collect on or before the Closing Date will have been duly withheld and
collected, and will have been paid over to the proper governmental authorities
to the extent due and payable on or before the Closing Date; and (iv) there are
no outstanding or pending material claims, deficiencies or assessments for
taxes, interest or penalties with respect to any taxable period of Tek. At and
after the Closing Date,
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Tek will have no material liability for any federal, state or local income tax
with respect to any taxable period ending on or before the Closing Date, except
as and to the extent disclosed in Schedule 3.13.
(b) There are no audits pending with respect to any federal, state or
local tax returns of Tek, and no waivers of statutes of limitations have been
given or requested with respect to any tax years or tax filings of Tek.
3.14. Permits and Licenses. Tek possesses all permits, licenses and/or
franchises, from whatever governmental authorities or agencies (domestic and/or
foreign) requiring the same and having jurisdiction over Tek, which are
necessary in order to operate its business in the manner presently conducted,
all of which permits, licenses and/or franchises are valid, current and in full
force and effect; and none of such permits, licenses or franchises will be
voided, revoked or terminated, or voidable, revocable or terminable, upon and by
reason of the Merger.
3.15. Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 3.15 annexed hereto, Tek is not a
party to (i) any collective bargaining agreement or other labor agreement, or
(ii) any agreement with respect to the employment or compensation of
employee(s). No union is now certified or, to the best of the knowledge of Tek,
claims to be certified as a collective bargaining agent to represent any
employees of Tek or the Company, and there are no labor disputes existing or, to
the best of the knowledge of Tek, threatened, involving strikes, slowdowns, work
stoppages, job actions or lockouts of any employees of Tek.
(b) Except as set forth on Schedule 3.15, there are no unfair labor
practice charges or petitions for election pending or being litigated before the
National Labor Relations Board or any other federal or state labor commission
relating to any employees of Tek. Tek has not received any written notice of any
actual or alleged violation of any law, regulation, order or contract term
affecting the collective bargaining rights of employees, equal opportunities in
employment, or employee health, safety, welfare, or wages and hours.
(c) Tek has never at any time been required to make contributions to
any "multiemployer plan" (as defined in Section 3(37) of ERISA.
(d) Except as disclosed on Schedule 3.15, Tek does not maintain or have
any liabilities or obligations of any kind with respect to, any bonus, deferred
compensation, pension, profit sharing, retirement or other such benefit plan,
and does not have any potential or contingent liability in respect of any
actions or transactions relating to any such plan other than to make
contributions thereto if, as and when due in respect of periods subsequent to
the date hereof.
(e) Except for the group insurance programs listed in Schedule 3.15,
Tek does not maintain any medical, health, life or other employee benefit
insurance programs or any welfare plans (within the meaning of Section 3(1) of
ERISA) for the benefit of any current or former employees, and, except as
required by law, Tek has no liability, fixed or contingent, for health or
medical benefits to any former employee.
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3.16. No Breach of Statute, Decree or Other Instrument. Except as set
forth in Schedule 3.16 annexed hereto: (i) neither the execution and delivery of
this Agreement by Tek, nor the performance of or compliance with the terms and
provisions of this Agreement on the part of Tek, will violate or conflict with
any term of the Articles of Incorporation or By-Laws of Tek or any statute, law,
rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) of any governmental authority which is in
effect and affects the existing business of Tek, or will at the Closing Date
conflict with, result in a breach of, or constitute a default under, any of the
terms, conditions or provisions of any judgment, order, award, injunction,
decree, contract, lease, agreement, indenture or other instrument to which Tek
is a party or by which Tek is bound; (ii) no consent, authorization, order or
approval of or filing with any governmental authority or agency (other than
filings under federal and state securities laws), or any third party, will be
required on the part Tek in connection with the consummation of the Merger and
the other transactions contemplated hereby; and (iii) Tek will not be required,
whether by law, regulation or administrative practice, to reapply for or refile
to obtain any of the licenses, permits or other authorizations presently held by
Tek and required for the operation of its business as conducted on the date
hereof in connection with the consummation of the Merger and the other
transactions contemplated hereby.
3.17. Compliance with Laws.
(a) Except as set forth on Schedule 3.17, to the best knowledge of Tek,
it has not, at any time since its inception, (i) handled, stored, generated,
processed or disposed of any hazardous substances in violation of any federal,
state or local environmental laws or regulations, (ii) otherwise committed any
material violation of any federal, state or local environmental laws or
regulations (including, without limitation, the provisions of the Environmental
Protection Act and other applicable environmental statutes and regulations) or
any material violation of the Occupational Safety and Health Act, or (iii) been
in material violation of any requirements of its insurance carriers from time to
time.
(b) Except as set forth on Schedule 3.17 annexed hereto, neither Tek
nor any of its current officers has received any written notice of default or
violation, nor, to the best knowledge of Tek, is it in default or violation,
with respect to any judgment, order, writ, injunction, decree, demand or
assessment issued by any court or any federal, state, local, municipal or other
governmental agency, board, commission, bureau, instrumentality or department,
domestic or foreign, relating to any aspect of Tek's business, affairs,
properties or assets. Neither Tek nor any of its current officers has received
written notice of, been charged with, or is under investigation with respect to,
any violation of any provision of any federal, state, local, municipal or other
law or administrative rule or regulation, domestic or foreign, relating to any
aspect of Tek's business, affairs, properties or assets, which violation would
have a material adverse effect on Tek, its business or any material portion of
its assets.
Schedule 3.17 sets forth the date(s) of the last known audits or inspections (if
any) of Tek conducted by or on behalf of the Environmental Protection Agency,
the Occupational Safety and Health Administration, and any other governmental
and/or quasi-governmental agency (federal, state and/or local).
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3.18. Litigation. Except as disclosed in Schedule 3.18 annexed hereto,
there is no suit, action, arbitration, or legal, administrative or other
proceeding, or governmental investigation (including, without limitation, any
claim alleging the invalidity, infringement or interference of any patent,
patent application, or rights thereunder owned or licensed by Tek) pending, or
to the best knowledge of Tek, threatened, by or against it or any of its assets
or properties.
3.19. Schedules Incorporated by Reference. The making of any recitation
in any Schedule hereto shall be deemed to constitute a representation and
warranty that such recitation is an accurate statement and disclosure of the
information required by the corresponding Section(s) of this Agreement, as, to
the extent, and subject to the qualifications and limitations, set forth in such
corresponding Section(s).
4. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Company covenants and agrees that, from the date hereof until the
Closing Date:
4.1. Access to Information. The Company shall permit Tek and its
counsel, accountants and other representatives, upon reasonable advance notice
to the Company, during normal business hours and without undue disruption of the
business of the Company, to have reasonable access to all properties, books,
accounts, records, contracts, documents and information relating to the Company.
Tek and its representatives shall also be permitted to consult freely with the
Company's counsel concerning the business of the Company.
4.2. Maintenance of Insurance. The Company shall continue to carry its
existing insurance, to the extent obtainable upon reasonable terms.
4.3. Corporate Matters. The Company shall not, without the prior
written consent of Tek:
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of the Company's capital stock;
(c) issue or create any warrants, obligations, subscriptions, options,
convertible securities or other commitments under which any additional shares of
the Company's capital stock might be directly or indirectly issued;
(d) amend, cancel or modify any existing Material Contract or enter
into any new agreement, commitment or transaction, whether or not such revision
is material;
(e) pay, grant or authorize any salary increases or bonuses or enter
into any employment, consulting or management agreements;
(f) modify any agreement other than a Material Contract to which the
Company is a party or by which it may be bound, or modify any payment terms with
any
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creditor, other than in the ordinary course of business; provided, that no
modifications, whether or not in the ordinary course of business, shall be made
to any Material Contract;
(g) make any change in the Company's management personnel;
(h) except pursuant to commitments in effect on the date hereof (to the
extent disclosed in this Agreement or in any Schedule hereto), make any capital
expenditure(s) or commitment(s), whether by means of purchase, lease or
otherwise, or any operating lease commitment(s), in excess of $5,000 in the
aggregate;
(i) sell, assign or dispose of any capital asset(s) with a net book
value in excess of $5,000 as to any one item;
(j) change its method of collection of accounts or notes receivable,
accelerate or slow its payment of accounts payable, or prepay any of its
obligations or liabilities, other than prepayments to take advantage of trade
discounts not otherwise inconsistent with or in excess of historical prepayment
practices;
(k) declare, pay, set aside or make any dividend(s) or other
distribution(s) of cash or other property, or redeem any outstanding shares of
the Company's capital stock;
(l) incur any liability or indebtedness in excess of $5,000 as to any
one item or $25,000 in the aggregate;
(m) voluntarily subject any of the assets or properties of the Company
to any further liens or encumbrances;
(n) forgive any liability or indebtedness owed to the Company by any of
its stockholders or any of their respective Affiliates; or
(o) agree to do, or take any action in furtherance of, any of the
foregoing.
5. ADDITIONAL AGREEMENTS OF THE PARTIES.
5.1. Confidentiality. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon Mergerco or Tek under applicable state or federal
securities or antitrust laws, as to which the Company shall be given reasonable
advance notice, it is expressly understood and agreed by Mergerco and Tek that
(i) this Agreement, the Schedules hereto, and the conversations, negotiations
and transactions relating hereto and/or contemplated hereby, and (ii) all
financial information, business records and other non-public information
concerning the Company which Mergerco, Tek or their representatives have
received or may hereafter receive, shall be maintained in the strictest
confidence by Mergerco, Tek and their representatives, and shall not be
disclosed to any person that is not associated or affiliated with Mergerco or
Tek and involved in the transactions contemplated hereby or used for any purpose
other than the transaction contemplated hereby, without the prior written
approval of the Company. The parties hereto shall use their best efforts to
avoid disclosure of any of the foregoing or undue disruption of any of the
business operations or personnel of the Company. In the event that the
transactions
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contemplated hereby shall not be consummated for any reason, Mergerco and Tek
covenant and agree that neither they nor their representatives shall retain any
computer files and other electronic media, documents, lists or other writings of
the Company which they may have received or obtained in connection herewith or
any documents incorporating any of the information contained in any of the same
(all of which, and all copies thereof in the possession or control of Mergerco,
Tek or their representatives, shall be returned to the Company).
5.2. No Solicitation. (a) From and after the date of this Agreement
until the earlier of the effective time of the Merger or termination of this
Agreement pursuant to Section 9 hereof, the Company and the Stockholders shall
not, and the Company will instruct its directors, officers, employees,
representatives, investment bankers, agents and affiliates (including any
subsidiaries) not to, directly or indirectly, (i) initiate, solicit, encourage,
negotiate or accept the making, submission or announcement of, any Acquisition
Proposal (as defined below) by any person, entity or group (other than Tek and
its Affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any non-public information
concerning the Company to, or afford any access to the properties, books or
records of the Company to, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any person, entity or group (other than Tek and
its Affiliates, agents and representatives), in connection with any Acquisition
Proposal with respect to the Company. Without limiting the generality of the
foregoing, the Company acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by any director or officer of
the Company, or by any employee, representative, investment banker, agent or
affiliate of the Company having direct or indirect authority from the Company or
any director or officer of the Company, shall be deemed to constitute a breach
of this Section 5.2(a) by the Company. For the purposes of this Agreement, an
"Acquisition Proposal" with respect to an entity means any proposal, inquiry or
offer relating to or which the entity has reason to believe relates to (i) any
merger, consolidation, combination, sale, dividend or other disposition of
substantial assets or properties or similar transactions or series of
transactions involving the entity or any subsidiaries of the entity, or (ii) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing. As of the date hereof, the
Company will immediately cease and cause to be terminated any and all existing
activities, discussions or negotiations with any parties with respect to any
Acquisition Proposal. The Company will (i) notify Tek as promptly as practicable
if it receives any proposal or inquiry or request for the Company in connection
with an Acquisition Proposal or potential Acquisition Proposal and (ii) as
promptly as practicable deliver to Tek a copy of such proposal, inquiry or
request if it is in written form, as well as the identity of the third party
submitting such Acquisition Proposal. In addition, subject to the other
provisions of this Section 5.2, from and after the date of this Agreement, until
the Termination Date, the Company and the Stockholders will not, and the Company
will instruct its directors, officers, employees, representatives, investment
bankers, agents and affiliates (including any subsidiaries) not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Tek).
(b) Notwithstanding the foregoing provisions of paragraph (a), the
Company's Board of Directors, prior to the Closing Date, after consultation with
outside legal counsel, shall be free to take any action or authorize the taking
of any action with respect to unsolicited inquiries, proposals or offers
received by the Company after the date hereof with respect to an
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unsolicited bona fide Acquisition Proposal, which the Board of Directors of the
Company in its good faith reasonable judgment determines, after consultation
with its independent financial advisors, would be reasonably likely to result in
a transaction financially more favorable than the Merger to the Stockholders
including, without limitation, responding thereto and providing information to
third parties in connection therewith, as may be required in the exercise of
their fiduciary duties under applicable law to the Company or the Stockholders.
(c) From and after the date of this Agreement until the earlier of the
effective time of the Merger or termination of this Agreement pursuant to
Section 9 hereof, Tek shall not, and will instruct its directors, officers,
employees, representatives, investment bankers, agents and affiliates (including
any subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage, negotiate or accept the making, submission or announcement of, any
Acquisition Proposal by any person, entity or group (other than the Company, the
Stockholders and their Affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning Tek to, or afford any access to the properties, books or
records of Tek to, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any person, entity or group (other than the
Company and the Stockholders and their Affiliates, agents and representatives),
in connection with any Acquisition Proposal with respect to Tek's acquisition of
an entity that conducts a business that is similar, in every material way, to
the business conducted by the Company on the date of this Agreement (a "Tek
Acquisition Proposal"). Without limiting the generality of the foregoing, Tek
acknowledges and agrees that any violation of any of the restrictions set forth
in the preceding sentence by any director or officer of TEK, or by any employee,
representative, investment banker, agent or affiliate of TEK having direct or
indirect authority from the Company or any director or officer of TEK, shall be
deemed to constitute a breach of this Section 5.2(c) by Tek. As of the date
hereof, Tek will immediately cease and cause to be terminated any and all
existing activities, discussions or negotiations with any parties with respect
to any Tek Acquisition Proposal. TEK will (i) notify the Company as promptly as
practicable if it receives any proposal or inquiry or request for the Company in
connection with a Tek Acquisition Proposal or potential Tek Acquisition Proposal
and (ii) as promptly as practicable deliver to the Company a copy of such
proposal, inquiry or request if it is in written form, as well as the identity
of the third party submitting such Tek Acquisition Proposal. In addition,
subject to the other provisions of this Section 5.2(c), from and after the date
of this Agreement, until the Termination Date, Tek will not, and will instruct
its directors, officers, employees, representatives, investment bankers, agents
and affiliates (including any subsidiaries) not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any such Tek Acquisition Proposal made by any person, entity or group (other
than the Company).
5.3. Non-Competition, Confidentiality and Assignment of Inventions
Agreement;; and Employment Agreement. (a) On the Closing Date, each key employee
or independent contractor to the Company who is to be employed or engaged by
Mergerco and/or Tek upon completion of the Merger who are listed on Schedule 5.3
shall execute and deliver to Tek and the Surviving Corporation a
non-competition, confidentiality and assignment of inventions agreement,
containing non-competition provisions, in substantially the form of Exhibit B
annexed hereto (the "Non-Competition Agreement").
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(b) On the Closing Date, the Surviving Corporation and Tager shall
execute and deliver to Tek an employment agreement in substantially the form of
Exhibit C annexed hereto (the "Employment Agreement").
5.4. Public Disclosure. (a) Prior to the Closing Date, the Company and
Tek will consult and mutually agree with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
this Agreement and will not issue any such press release or make any such public
statement prior to such consultation and agreement, except as may be required by
law or any listing agreement with a national securities exchange or the Nasdaq
Stock Market.
(b) The Company will notify Tek, and Tek will notify the Company,
before issuing any press release or otherwise making any public statement with
respect to an Acquisition Proposal or Tek Acquisition Proposal, respectively.
5.5. Additional Agreements and Instruments. On or before the Closing
Date, the Company, the Stockholders, Mergerco and Tek shall execute, deliver and
file the Certificate of Merger and all exhibits, agreements, certificates,
instruments and other documents, not inconsistent with the provisions of this
Agreement, which, in the opinion of counsel to the parties hereto, shall
reasonably be required to be executed, delivered and filed in order to
consummate the Merger and the other transactions contemplated by this Agreement
and in order that Tek and Mergerco comply with all federal and state securities
laws.
5.6. Non-Interference. Neither Mergerco, Tek, the Company nor the
Stockholders shall cause to occur any act, event or condition which would cause
any of their respective representations and warranties made in this Agreement to
be or become untrue or incorrect in any material respect as of the Closing Date,
or would interfere with, frustrate or render unreasonably expensive the
satisfaction by the other party or parties of any of the conditions precedent
set forth in Sections 6 and 7 below.
5.7. Corporate Structure of the Surviving Corporation.
(a) The Surviving Corporation. Under the terms of the Employment
Agreement, Tager shall initially be President and Chief Executive Officer of the
Surviving Corporation. The full Board of Directors of the Surviving Corporation
on the Closing Date shall consist of Xxxxxxxxx Xxxxxxxx, Xxxxx Xxxxxxxx and
Xxxxx. The Company and Tager shall use all reasonable efforts to ensure that the
employees of the Company listed below, which Tek desires the Surviving
Corporation to hire or retain upon completion of the Merger (including the
filling of those positions specified below for which candidates have not yet
been identified), shall become employed or retained by Mergerco on the Closing
Date, and in the case of W. Xxxx Xxxx, no later than July 30, 2000:
1. W. Xxxx Xxxx, Chief Operating Officer
2. Xxxxxxx Xxxxxx, Senior Vice President - Application Development
3. Xxxx Xxxxxxx, Senior Application Developer
4. Xxxxxx Xxxxxxxx, Application Developer
5. RFP Respondent, To Be Filled
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6. Sales Manager, To Be Filled
7. Project Manager, To Be Filled
5.8. Nasdaq Listing. Within the first year after the Closing Date, Tek
agrees to authorize for listing on The Nasdaq SmallCap Market, the shares of Tek
Common Stock to be issued as Merger Closing Consideration, upon official notice
of issuance.
5.9. Holdings in Mergerco. On the Closing Date, the Stockholders (or
their respective designees) shall be issued an aggregate of 3.5% of the common
stock of Mergerco to be issued and outstanding as of such date or, if the
Stockholders so choose, they shall be granted options exercisable for 3.5% of
shares of the common stock of Mergerco issued and outstanding on the Closing
Date at an exercise price and on such other terms as shall be mutually agreed to
by Tek, Mergerco and the Stockholders. On the Closing Date, the Stockholders
shall enter into a stockholders agreement (the "Shareholders Agreement"), with
respect to rights and restrictions on transfers of shares of Mergerco common
stock following the Closing, in substantially the form of Exhibit D annexed
hereto.
6. CONDITIONS PRECEDENT TO MERGERCO AND TEK'S PERFORMANCES.
In addition to the fulfillment of the parties' agreements in Section 5
above, the obligations of Mergerco to consummate the Merger and of Mergerco and
Tek to consummate the transactions contemplated by this Agreement are further
subject to the satisfaction, at or before the Closing Date, of all the following
conditions, any one or more of which may be waived in writing by Mergerco and
Tek:
6.1. Accuracy of Representations and Warranties. All representations
and warranties made by the Company and/or the Stockholders in this Agreement, in
any Schedule(s) hereto, and/or in any written statement delivered to Mergerco or
Tek under this Agreement, shall be true and correct in all material respects on
and as of the Closing Date as though such representations and warranties were
made on and as of that date.
6.2. Performance. The Company and the Stockholders shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by them
on or before the Closing Date. -
6.3. Certification. Mergerco and Tek shall have received a certificate,
dated the Closing Date, signed by the Stockholders, certifying, in such detail
as Mergerco and Tek and their counsel may reasonably request, that the
conditions specified in Sections 6.1, 6.2, 6.8, 6.12, and 6.16 above and below
have been fulfilled.
6.4. Resolutions. Mergerco and Tek shall have received certified
resolutions of the Board of Directors and the stockholders of the Company in
form reasonably satisfactory to counsel for Mergerco and Tek authorizing the
Company's execution, delivery and performance of this Agreement and the Merger
and all actions to be taken by the Company hereunder, and shall have received
certified copies of the Certificate of Incorporation and By-laws of the Company.
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6.5. Termination of Employment Agreements. The Company shall have
delivered to Tek and Mergerco evidence, reasonably satisfactory to Tek and
Mergerco, of the termination and cancellation of any existing employment
agreements between the Company and Tager, and between the Company and any other
employees of the Company, as specified by Tek and Mergerco, on or prior to the
Closing Date.
6.6. Absence of Litigation. No action, suit or proceeding by or before
any court or any governmental body or authority, against the Company or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the Company, its business or any material portion of its
assets, or impair the ability of any of the Stockholders to deliver in the
Merger all of his Stock free and clear of all pledges, liens, claims, charges,
options, calls, encumbrances, restrictions and assessments whatsoever (except
any restrictions which may be created by operation of state or federal
securities laws).
6.7. Consents. All necessary disclosures to and agreements and consents
of any parties to (a) any parties to any Material Contracts and/or any licensing
authorities which Tek is a party, and (b) any governmental authorities or
agencies to the extent required in connection with the transactions contemplated
by this Agreement, shall have been obtained in such form as is reasonably
satisfactory to counsel to Tek, and true and complete copies thereof delivered
to Tek and Mergerco.
6.8. Settlement of Accounts. All debts, liabilities and other monetary
obligations (if any) owed to the Company by any of the Stockholders or other
stockholders of the Company and/or any of their respective Affiliates shall have
been fully paid to the Company, such that no such debts, liabilities or
obligations shall be outstanding on the Closing Date.
6.9. Condition of Property. Between the date of this Agreement and the
Closing Date, assets of the Company having an aggregate fair market value of
$10,000 or more shall not have been lost, destroyed or irreparably damaged by
fire, flood, explosion, theft or any other cause, if not fully covered by
insurance.
6.10. No Material Adverse Change. On the Closing Date, there shall not
have occurred any event or condition (including, without limitation, third party
claims) not disclosed on Schedules to this Agreement which, in the reasonable
opinion of Tek and its counsel, would materially and adversely affect the value
of the technologies, intellectual property, software, rights under Material
Contracts, and other assets owned, held or used by the Company.
6.11. Execution and Delivery of Exhibits. On or before the Closing
Date: (a) the Company shall have executed and delivered to Mergerco the
Certificate of Merger, substantially in the form of Exhibit A; (b) all employees
of the Company other than Tager being retained after the Closing shall have
executed and delivered to all other parties thereto the Non-Competition
Agreement (to which it is a party), substantially in the form annexed hereto as
Exhibit B; (c) each of the Stockholders shall have executed and delivered to all
other parties thereto the Shareholders Agreement, substantially in the form
annexed hereto as Exhibit D; (d) each stockholder of the Company receiving any
Merger Closing Consideration shall have
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executed and delivered to all other parties thereto the Subscription Agreement,
substantially in the form annexed hereto as Exhibit E; and (e) Tager shall have
executed and delivered to Tek and Mergerco the Employment Agreement,
substantially in the form annexed hereto as Exhibit C.
6.12. Stockholder Approval. The stockholders of the Company shall have
unanimously approved or ratified this Agreement, the consummation of the Merger
and all other transactions contemplated by this Agreement, all in accordance
with the applicable provisions of the DGCL and on or prior to the Closing Date.
6.13. Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to Mergerco, Tek and their counsel. The
Company shall have submitted to Tek or its representatives for examination the
originals or true and correct copies of all records and documents relating to
the business and affairs of the Company which Tek may have requested in
connection with said transactions.
6.14. Due Diligence. Mergerco and Tek shall be satisfied, in their sole
discretion, with the results of their due diligence investigation of the Company
and its business including, but not limited to, investigation of its
technologies (both proprietary and those licensed from third parties), its
existing web design and other services currently marketed, its proposed services
and products, and the marketability and size of the markets for all such
services and products.
6.15. Opinion of Counsel. Mergerco and Tek shall receive an opinion of
counsel from counsel to the Company and counsel to the Stockholders, which
counsel shall be reasonably satisfactory to Mergerco and Tek, substantially in
such form as set forth on Exhibit F annexed hereto.
6.16. Evidence of Compliance with Section 2.23. Each of Mergerco and
Tek shall receive evidence satisfactory to it and its counsel that none of (i)
the Company, (ii) any individual Stockholder, (iii) the Stockholders taken
together, or (iv) the Company and the Stockholders, taken together, either
individually or in the aggregate, own of record or beneficially (as determined
in accordance with the definitions provided under Regulation 13d-3 promulgated
under the Exchange Act) an amount equal to or greater than the Percentage of the
outstanding Tek Common Stock on the date of this Agreement and on the Closing
Date.
7. CONDITIONS PRECEDENT TO THE COMPANY AND THE STOCKHOLDERS'
PERFORMANCES.
In addition to the fulfillment of the parties' agreements in Section 5
above, the obligations of the Company to consummate the Merger and of the
Stockholders to consummate the transactions contemplated by this Agreement are
further subject to the satisfaction, at or before the Closing Date, of all of
the following conditions, any one or more of which may be waived in writing by
the Company and the Stockholders:
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7.1. Accuracy of Representations and Warranties. All representations
and warranties made by Mergerco and Tek in this Agreement, in any Schedule(s)
hereto and/or in any written statement delivered to the Company and/or the
Stockholders under this Agreement shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of that date.
7.2. Performance. Mergerco and Tek shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Mergerco and/or TEK on
or before the Closing Date.
7.3. Certification. The Stockholders and the Company shall have
received a certificate, dated the Closing Date, signed by Mergerco and Tek,
certifying, in such detail as the Stockholders and their counsel may reasonably
request, that the conditions specified in Sections 7.1 and 7.2 above have been
fulfilled.
7.4. Resolutions. The Stockholders and the Company shall have received
certified resolutions of the Board of Directors and sole stockholder of Mergerco
and of the Board of Directors of Tek, in form reasonably satisfactory to counsel
for the Stockholders and the Company, authorizing the Merger and Mergerco and
Tek's execution, delivery and performance of this Agreement and all actions to
be taken by Mergerco and Tek hereunder, and shall have received certified copies
of the Certificate of Incorporation, as amended, and By-laws of each of Tek and
Mergerco.
7.5. Absence of Litigation. No action, suit or proceeding by or before
any court or any governmental body or authority, against Tek or Mergerco or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on Tek or Mergerco, its or their business or any material portion
of its or their assets, or impair the ability of Tek or Mergerco to deliver in
the Merger all of the Merger Closing Consideration and the Earn-out Merger
Consideration free and clear of all pledges, liens, claims, charges, options,
calls, encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or federal securities
laws).
7.6. Consents. All necessary disclosures to and agreements and consents
of any parties to any material agreements to which Tek is a party, and any
governmental authorities or agencies to the extent required in connection with
the transactions contemplated by this Agreement, shall have been obtained in
such form as is reasonably satisfactory to counsel to the Company and the
Stockholders, and true and complete copies thereof delivered to the Company and
the Stockholders.
7.7. No Material Adverse Change. On the Closing Date, there shall not
have occurred any event or condition (including, without limitation, third party
claims) not disclosed on Schedules to this Agreement which, in the reasonable
opinion of the Company, the Stockholders and their counsel, would materially and
adversely affect the business of Tek.
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7.8. Execution and Delivery of Exhibits. On or before the Closing Date:
(a) Mergerco shall have executed and delivered to the Company the Certificate of
Merger, substantially in the form of Exhibit A; and (b) Tek and/or Mergerco (as
applicable) shall have executed and delivered to all other parties thereto the
Non-Competition Agreement (to which it is a party), substantially in the form
annexed hereto as Exhibit B; the Shareholders Agreement, substantially in the
form annexed hereto as Exhibit D; the Subscription Agreement, substantially in
the form annexed hereto as Exhibit E; and the Tager Employment Agreement,
substantially in the form annexed hereto as Exhibit C.
7.9. Approvals. The Board of Directors of each of Tek and Mergerco, and
Tek as the sole shareholder of Mergerco, shall have unanimously approved or
ratified this Agreement, the consummation of the Merger and all other
transactions contemplated by this Agreement, all in accordance with the
applicable provisions of the DGCL and on or prior to the Closing Date.
7.10. Delivery of Merger Consideration. Tek and Mergerco shall have
delivered to the Stockholders stock certificates evidencing the Tek Common
Stock, in amounts representing their allocable shares of the Closing Merger
Consideration described in Section 2 of this Agreement.
7.11. Proceedings and Instruments Satisfactory. All proceedings to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incidental thereto, shall be reasonably satisfactory in form and
substance to the Company, the Stockholders and their counsel.
7.12. Opinion of Counsel. The Company and the Stockholders shall
receive an opinion of counsel from counsel to Mergerco and Tek substantially in
such form as set forth on Exhibit G annexed hereto.
8. CLOSING.
8.1. Place and Date of Closing. Unless this Agreement shall be
terminated pursuant to Section 9 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place in New York, New
York at the offices of Xxxxx Xxxxxxx, counsel to Mergerco and Tek, located at
000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other location
as is agreed to between the parties, at 10:00 a.m. local time on a date which
shall be not more than five business days following notice by Tek that it is
ready to close (the "Closing Date"); provided, that in no event shall such
Closing Date, the Closing and consummation of the Merger, occur later than May
17, 2000 (the "Outside Closing Date"), unless approved in writing by the
Company, Tek and Mergerco. The effectiveness of the Merger shall occur on the
Closing Date simultaneous with the Closing.
8.2. Actions at Closing. On the Closing Date, simultaneous with the
Closing, Mergerco and the Company shall file or cause to be filed the
Certificate of Merger with the Secretary of State of the State of Delaware. At
such Closing, there shall be made, by all necessary and appropriate persons, all
payments and deliveries stated in this Agreement to be made at the Closing
and/or on or prior to the Closing Date.
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9. TERMINATION OF AGREEMENT.
9.1. General. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing: (a) by
the mutual written consent of the Company, the Stockholders, Mergerco and Tek;
(b) by Mergerco and Tek, on one hand, or by the Company and the Stockholders, on
the other hand, if: (i) a material breach shall exist with respect to the
written representations and warranties made by the other party or parties, as
the case may be, (ii) the other party or parties, as the case may be, shall take
any action prohibited by this Agreement, if such actions shall or may have a
material adverse effect on the Company and/or the transactions contemplated
hereby, (iii) the other party or parties, as the case may be, shall not have
furnished, upon reasonable notice therefor, such certificates and documents
required in connection with the transactions contemplated hereby and matters
incidental thereto as it or they shall have agreed to furnish, and it is
reasonably unlikely that the other party or parties will be able to furnish such
item(s) prior to the Outside Closing Date, (iv) any consent of any third party
to the transactions contemplated hereby (whether or not the necessity of which
is disclosed herein or in any Schedule hereto) is reasonably necessary to
prevent a default under any outstanding material obligation of Mergerco or Tek,
on one hand, and the Stockholders or the Company, on the other hand, and such
consent is not obtainable without material cost or penalty (unless the party or
parties not seeking to terminate this Agreement agrees or agree to pay such cost
or penalty), or (v) if the Market Average Price is less than $3.00 per share on
the Closing Date; provided, however, that in the event a party to the Agreement
or any of its Affiliates has engaged in short selling of Tek Common Stock, or
has engaged in any means of market manipulation with respect to Tek Common
Stock, in either case (i) at any time following the date of execution of the
Merger Agreement and (ii) with the intent of causing a reduction in the market
price of Tek Common Stock, then such short selling or manipulating party
forfeits its ability to terminate this Agreement on the grounds that the Merger
Average Price is less than $3.00 per share; or (c) by Mergerco and Tek on the
one hand, or the Company and all Stockholders, on the other hand, at any time on
or after May 17, 2000 (the Outside Closing Date), if the transactions
contemplated hereby shall not have been consummated prior thereto, and the party
directing termination shall not then be in breach or default of any obligations
imposed upon such party by this Agreement.
9.2. Notice of Termination.
In the event of termination of this Agreement pursuant to this Section
9, prompt written notice shall be given by the terminating party or parties to
the other party or parties.
9.3. Termination Fees.
(a) If this Agreement is terminated by Tek because of the taking of
action by the Company and the Stockholders prohibited by the terms of Section
5.2(a), with the result that the Company and the Stockholders do not complete
the Merger contemplated by this Agreement by the Outside Closing Date, then the
Company and the Stockholders shall be obligated to pay to Tek within fifteen
(15) days after the Outside Closing Date liquidated damages of $125,000.
(b) If this Agreement is terminated by the Company and the Stockholders
because of the taking of action by Tek prohibited by the terms of Section
5.2(c), with the result
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that Tek does not complete the Merger contemplated by this Agreement by the
Outside Closing Date, then Tek shall be obligated to pay to the Company within
fifteen (15) days after the Outside Closing Date liquidated damages of $125,000.
10. INDEMNIFICATION.
10.1. General.
(a) By the Company and the Stockholders. From and after the Closing
Date the Stockholders shall, jointly and severally, defend, indemnify and hold
harmless the Surviving Corporation and Tek from, against and in respect of any
and all claims, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and reasonable
attorneys' fees, that the Surviving Corporation or Tek (collectively, the "Tek
Group") may incur, sustain or suffer ("Tek Group Losses") as a result of any
breach of, or failure by the Company or such Stockholder(s) to perform, any of
the representations, warranties, covenants or agreements of the Company or
Stockholders contained in this Agreement or any Schedule(s) furnished by or on
behalf of the Company or Stockholders under this Agreement.
(b) By the Tek Group. From and after the Closing Date, each member of
the Tek Group shall jointly and severally indemnify, defend and hold harmless
the Stockholders from, against and in respect of any and all claims, losses,
costs, expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that such person
may incur, sustain or suffer ("Stockholder Losses") as a result of (i) any
breach of, or failure by Mergerco or Tek to perform, any of the representations,
warranties, covenants or agreements of Mergerco or Tek contained in this
Agreement or any Schedule(s) furnished by or on behalf of Mergerco or Tek under
this Agreement, (ii) a claim of a third-party with respect to the Company
regardless of when such Stockholder Loss arose or may arise (including before,
on or after the Closing Date) and regardless of by whom or when such Stockholder
Losses are asserted, except to the extent, and by the amount, that the
Stockholders would have at anytime been obligated to indemnify the Tek Group
pursuant to Section 10.1(a) hereof, as a result of the basis of such third-party
claim; and (iii) subject to the limitations provided by clause (ii) hereof and
of Delaware law, the fact that a Stockholder was a director, officer, agent or
employee of the Company, regardless of when such Stockholder Loss arose or arise
(including before, on or after the Closing Date) and regardless of by whom such
Stockholder Losses are asserted, except to the extent that such Stockholder is
found, by a final, non-appealable order of a court of competent jurisdiction ,
to have acted, or omitted to take action, which act or omission is determined to
have constituted actual fraud or gross negligence or other willful misconduct.
10.2. Limitation on Indemnity.
(a) Time Limitation on Indemnity for Breach of Representation and
Warranty. The Tek Group shall be entitled to indemnification by the Stockholders
for Tek Group Losses relating to: (i) breach of any representation or warranty
hereunder by the Company and the Stockholders only in respect of claims for
which notice of claim shall have been given to the Stockholder on or before the
second anniversary of the Closing Date, or (ii) with respect to
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Losses relating to a breach of any representations or warranties under Section
2.8 above, the expiration of the final statute of limitations for those tax
returns covered by the warranties under Section 2.8 above. The Stockholders
shall be entitled to indemnification by the Tek Group for Stockholder Losses
relating to breach of any representation or warranty hereunder by Mergerco and
Tek or in respect of any claim made under Section 10.1(b)(ii) or (iii), only in
respect of claims for which notice of claim shall have been given to the Tek
Group on or before the second anniversary of the Closing Date.
(b) Prejudice of Rights to Defend. No member of the Tek Group or any
Stockholder shall be entitled to indemnification in the event that the subject
claim for indemnification relates to a third-party claim and the Tek Group or
any Stockholder, respectively, delayed giving notice thereof to the indemnifying
party to such an extent as to cause material prejudice to the defense of such
third-party claim.
10.3. Claims for Indemnity. Whenever a claim shall arise for which any
party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party in writing within thirty (30) days of the
indemnified party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event within such shorter
period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If the indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
10.4. Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim; provided, however, that no obligation, restriction
or Tek Group Loss or Stockholder Loss (as applicable) not paid or satisfied
entirely by the indemnifying party shall be imposed on the indemnified party
without its prior written consent. If the remedy sought in any such action or
demand is solely money damages, the indemnifying party shall have fifteen (15)
days after receipt of such notice of settlement to object to the proposed
compromise or settlement, and if it does so object, the indemnifying party shall
be required to undertake, conduct and control, though counsel of its own
choosing and at its sole expense, the settlement or defense thereof, and the
indemnified party shall cooperate with the indemnifying party in connection
therewith; if the remedy sought is other than one for solely money damages, the
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indemnifying party shall not resolve such claim on behalf of itself and the
indemnified party over the reasonable objection of the indemnified party.
10.5. Non-Exclusive Remedy. The indemnifications provided in this
Agreement shall not be the sole and exclusive remedy of the parties hereto and
in no event shall these indemnification provisions limit any party's remedies
for specific performance, injunctive relief or any other equitable remedy
otherwise available to such party.
11. FINDER'S OR BROKER'S FEES.
Excepting any finder's fees owed to Xxxx X. Xxxxx, Xx. by Xxxx X. Xxxxx
in connection with the Merger under a Letter of Intent Regarding Finder's Fee,
dated as of July 15, 1999, each of Mergerco and Tek (on the one hand) and the
Company and the Stockholders (on the other hand) represent and warrant that
neither they nor any of their respective Affiliates have dealt with any broker
or finder in connection with any of the transactions contemplated by this
Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions.
12. FORM OF AGREEMENT.
12.1. Effect of Headings. The Section headings used in this Agreement
and the titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of the
provisions hereof or of the information set forth in such Schedules.
12.2. Entire Agreement; Waivers. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof, and
supersedes all prior agreements or understandings as to such subject matter. No
party hereto has made any representation or warranty or given any covenant to
the other except as set forth in this Agreement and the Schedules and Exhibits
hereto. No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
12.3. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.4. Confidentiality. Tek, the Company and each of the Stockholders
agree and acknowledge that in connection with Tek's due diligence investigation
of the Company, and the further negotiations to be conducted between the parties
regarding the terms of the proposed Merger, each of the parties will receive
confidential information of the other party. Tek, each of the Stockholders and
the Company do hereby agree to maintain, and to cause their representatives to
maintain, such information as confidential; and except as may be necessary to
protect the legal rights of a party in litigation if the proposed Merger is not
consummated, each party shall not divulge the confidential information of the
other party. In the event that the Merger is not consummated, each of the
parties agrees to return to the other party all confidential
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information of the other party then in the receiving party's possession. The
obligation of confidentiality created herein shall not apply to information
which was known to a party prior to its disclosure hereunder, or which is, or
falls into the public domain (provided such did not fall into the public domain
through the unauthorized acts of a receiving party), or which a party is
required to disclose by law.
13. PARTIES.
13.1. Parties in Interest. Nothing in this Agreement, whether expressed
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns, nor is anything in this Agreement intended to relieve or
discharge the obligations or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
13.2. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
(a) If to the Company or the Stockholders:
Big Technologies, Inc.
000 Xxxxxxxxxx Xxxxxx, #000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
email: xxxx@xxxxx.xxx
with a copy sent concurrently to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxx, Esq.
Fax: (000) 000-0000
email: xxxxxxxx@xxxxxxxxx.xxx
xxxx@xxxxxxxxx.xxx
(b) If to Mergerco, the Surviving Corporation
or Tek:
XxxXxxxxxx.Xxx, Inc.
0 Xxxxxxx Xxxxxx
-00-
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Fax: (000) 000-0000
email: xxxxxxxxxxxxx@xxxxxxxx.xxx
with a copy sent concurrently to:
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
email: xxxxxxxxx@xxxxxxxxxxxx.xxx
or to such other address as any party shall have specified by notice in writing
given to all other parties.
14. MISCELLANEOUS.
14.1. Amendments and Modifications. No amendment or modification of
this Agreement or any Exhibit or Schedule hereto shall be valid unless made in
writing and signed by the party to be charged therewith.
14.2. Non-Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto. Otherwise, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
14.3. Governing Law; Jurisdiction. This Agreement shall be construed
and interpreted and the rights granted herein governed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
wholly within such state.
14.4. Definition. Whenever in this Agreement the phrase "to the
knowledge of" or "to the best knowledge of" is used, such person shall be held
to have made such investigation of the facts and circumstances, including but
not limited to communications with relevant employees, consultants or other
representatives as a reasonable person, given his/her relationship as a
stockholder to, or position with, the Company, Mergerco, or Tek, as applicable,
would be expected to make in order to be able to make the representations,
warranties or other statements made by such persons in this Agreement.
-32-
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
XXXXXXXXXX.XXX, INC.
By:__________________________________________
Name:
Title:
BIG TECH ACQUISITION CORP.
By:__________________________________________
Name:
Title:
BIG TECHNOLOGIES, INC.
By:__________________________________________
Name:
Title:
THE PRINCIPAL STOCKHOLDERS:
_____________________________________________
Xxxx X. Xxxxx
_____________________________________________
Xxxxxx X. Xxx
-33-
EXHIBITS
A - Certificate of Merger
B - Form of Non-Competition Agreement
C - Form of Employment Agreement
D - Form of Stockholder Agreement
E - Form of Subscription Agreement
F - Opinion of Counsel to the Company and the Stockholders
G - Opinion of Counsel to Mergerco and Tek
