AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of August 13, 1998 by and among Rare Medium, Inc., a New York
corporation (the "Rare Medium" or the "Purchaser"), ICC Technologies, Inc., a
Delaware corporation ("ICC"), I/O 360, Inc., a New York corporation ("I/O 360"),
and Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxx Xxxxx and Xxxxxxxxx Banasic, the Stockholders
of I/O 360 (the "Stockholders").
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 The Merger
Upon the terms and subject to the conditions hereof, (a) on the
Effective Date (as defined in Section 1.2 hereof), the separate existence of I/O
360 shall cease and I/O 360 shall merge (the "Merger") with and into Rare Medium
(Rare Medium being sometimes referred to herein as the "Surviving Corporation")
and (b) from and after the Effective Time (as defined in Section 1.2 hereto, the
Merger shall have all the effects of a merger provided by the laws of the State
of New York and other applicable law.
1.2 The Closing; Effective Date and Time of the Merger
The closing of this Agreement (the "Closing") shall occur on August 13,
1998 (the "Closing Date") at the offices of Elias, Goodman, Xxxxxx & Zizmor,
L.L.P., or such other time or location as the parties hereto shall agree. At the
Closing, each of the parties hereto shall deliver all such funds, documents,
instruments, certificates and other items as may be required under this
Agreement or the Operative Documents (as defined in Section 2.3 hereof) or
otherwise.
On the Closing Date and subject to the terms and conditions hereof,
such officers' certificates and certificates of merger (together, the
"Certificates of Merger") as are necessary or advisable to accomplish the Merger
in compliance with the applicable provisions of the Business Corporation Law of
the State of New York (the "New York Law"), substantially in the form or forms
attached hereto as Exhibit 1.2, and in such form as required by, and executed in
duplicate in accordance with, the
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New York Law, shall be delivered for filing to the Secretary of State of the
State of New York (the "Secretary of State"). The Merger shall become effective
on the date (the "Effective Date") and at the time (the "Effective Time") that
the Certificates of Merger are so filed and a certificate to that effect is
issued by the Secretary of State. If the Secretary of State requires any changes
in the Certificates of Merger as a condition to filing the Certificates of
Merger or issuing its certificate, ICC, Rare Medium, I/O 360 and the
Stockholders will execute necessary revisions incorporating such changes,
provided such changes are not inconsistent with and do not result in any
substantial change in the terms of this Agreement.
1.3 Purchase Price
Subject to the terms and conditions of this Agreement, the purchase
price for I/O 360 (the "Purchase Price") will be paid as follows:
(a) $3,000,000 shall be paid at Closing by delivery of restricted
shares (the "Shares") of the common stock, par value $.01 per share, of ICC
("ICC Common Stock"), which the parties agree shall be valued at the average
last reported sale price per share of ICC Common Stock for the 15 trading days
during the period from August 3, 1998 through August 21, 1998, inclusive (as
reported in the Wall Street Journal) (the "Closing Date Value"); provided,
however, that shares of ICC Common Stock with an aggregate value of $400,000
shall be held in escrow subject to an Escrow Agreement by and among Rare Medium,
the Stockholders and, an escrow agent, as to be mutually agreed to by the
parties, as Escrow Agent, in the form set forth as Exhibit 1.3(a) (the "Escrow
Agreement").
(b) In the event that on the first anniversary of the Closing Date, the
shares received in payment of the Purchase Price, in the aggregate, shall have a
value of less than $3,000,000.00 (based on the average last reported sale price
per share of ICC Common Stock for the 15 trading days immediately prior to the
first anniversary of the Closing Date), the Stockholders shall be issued
additional shares (the "Additional Shares") in an amount calculated as the
difference between $3,000,000.00 and the actual value of the shares as of such
first anniversary (the "Difference"). Rare Medium and ICC shall use their best
efforts to enable the Stockholders to sell Additional Shares pursuant to Rule
144 under the 1933 Act as if they were part of the ICC Common Stock delivered to
the Stockholders pursuant to section 1.3(a) above.
In the event that the Shares are not eligible to be sold pursuant to
Rule 144 (as the result of some act, failure to act or omission on the part of
Rare Medium or ICC) or the Additional Shares do not qualify to be sold pursuant
to Rule 144 as if they were part of the ICC Common Stock delivered to the
Stockholders pursuant to section 1.3(a) above, then in the event that ICC shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in
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connection with the proposed offer and sale of any of either of their securities
by it or any of its security holders (other than a registration statement on
Form X-0, X-0 or other successor or comparable form), ICC will give written
notice of its determination (the "Piggyback Notice") to the Stockholders at
least thirty (30) days prior to filing such registration statement. Upon the
written request from the holder of any of the Stockholders within twenty (20)
days after the giving of the Piggyback Notice, ICC will, except as herein
provided, cause such Shares and Additional Shares to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Shares and Additional
Shares to be so registered; provided, however, that nothing herein shall prevent
ICC from, at any time, abandoning or delaying any such registration. If any such
registration shall be underwritten in whole or in part, ICC may require that the
Additional Shares requested for inclusion pursuant to this Section be included
in the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriter(s). In the event that in the good faith
judgment of a managing underwriter of such public offering the inclusion of all
of the Additional Shares originally covered by a request for registration would
materially adversely affect the successful marketing of the shares of stock
offered by ICC, the number of shares of Additional Shares otherwise to be
included in the underwritten public offering may be reduced pro rata among all
selling security holders requesting such registration (including any selling
security holder not a party to this Agreement) as required by the managing
underwriter. To the extent only a portion of the Additional Shares are included
in the underwritten public offering, those Additional Shares that are excluded
from the underwritten public offering shall be withheld from the market by the
holders thereof for a period, not to exceed 120 days, which the managing
underwriter reasonably determines is necessary to effect the underwritten public
offering.
In the event that the Shares and/or the Additional Shares are not
eligible to be sold pursuant to Rule 144 on the first anniversary of the Closing
Date (as the result of some act, failure to act or omission on the part of Rare
Medium or ICC), then the number of Shares and Additional Shares issued to the
Stockholders shall be increased, but not decreased, to equal the number of
shares as would be necessary to make the aggregate value of the Shares and
Additional Shares (based on the average last reported sale price per share of
ICC Common Stock for the 15 trading days immediately prior to the determination
date) equal to $3,000,000 on the earlier of (i) the date on which a registration
statement registering all of the Shares and the Additional Shares requested to
be included therein is declared effective or (ii) the second anniversary of the
Closing Date.
(c) In the event that a post-Closing audit conducted by an independent
certified public accounting firm shall show that the net worth for I/O 360, as
indicated on a Balance Sheet as of the Closing Date (the "Closing Date Balance
Sheet"), was less than $250,000.00, the Purchase Price shall be deemed to be
reduced
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in an amount equal to the difference between $250,000.00 and the actual net
worth, as shown on the Closing Date Balance Sheet, with such reduction in the
Purchase Price offset against the ICC Common Stock held in escrow pursuant to
the Escrow Agreement.
1.4 Conversion of Shares
1.4.1 Exchange Ratio
As of the Effective Date, by virtue of the Merger and without any
action of the holders thereof:
(a) All shares of any class of the common stock, no par value,
of I/O 360 (the "Common Stock") held by I/O 360, whether as treasury shares or
otherwise, shall be canceled;
(b) All of the other issued and outstanding shares of Common
Stock not held by I/O 360 shall be canceled and converted into the right to
receive from ICC a pro rata portion of the Purchase Price in accordance with
Section 1.3 above;
(c) Any granted and outstanding options, warrants or other
rights to purchase or subscribe for shares of Common Stock; and
(d) Each issued and outstanding share of Rare Medium's capital
stock shall be converted into one share of the Surviving Corporation's common
stock.
1.4.2 ICC to Make Certificates Available
Upon surrender to Rare Medium of one or more certificates representing
Common Stock for cancellation, ICC shall make available, and each holder of
Common Stock shall be entitled to certificates representing the number of shares
of ICC Common Stock that such holder is entitled to receive pursuant to Section
1.4.1 (b) hereof, provided, however, that the parties acknowledge that the
Escrow Agent shall retain physical possession of the certificates representing
shares of ICC Common Stock in the aggregate value of $400,000.00 pursuant to the
terms of the Escrow Agreement.
1.4.3 No Fractional Securities
No certificates or scrip representing fractional shares of ICC Common
Stock shall be issued upon the surrender for exchange of certificates
representing Common Stock pursuant to this Article I and no ICC dividend, stock
split or interest
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shall relate to any fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional securities, each holder of Common Stock who would
otherwise have been entitled to a fraction of a share of ICC Common Stock upon
surrender of certificates representing Common Stock for cancellation pursuant to
this Article I will be paid cash upon such surrender or an amount equal to such
fraction times the Closing Date Value.
1.4.4 Closing Company Transfer Books
Upon the Effective Date, the stock transfer books of I/O 360 shall be
closed and no transfer of Common Stock shall thereafter be made. If, after the
Effective Date, certificates representing shares of Common Stock are presented
to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing ICC Common Stock.
1.5 Assistance in Consummation of the Merger
The Stockholders, Rare Medium, ICC and I/O 360 shall provide all
reasonable assistance to, and shall cooperate with, each other to bring about
the consummation of the Merger as soon as possible in accordance with the terms
and conditions of this Agreement. ICC shall cause Rare Medium to perform all of
Rare Medium's obligations in connection with this Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF I/O 360 AND THE STOCKHOLDERS
Except as set forth in the documents provided to Rare Medium and ICC
and listed in the I/O 360 Disclosure Schedule attached hereto as Schedule II
(the "Disclosure Schedule") I/O 360 and the Stockholders jointly and severally
represent and warrant to Rare Medium and ICC, as of the date of this Agreement
and as of the Closing (which representations and warranties shall survive the
Closing to the extent provided in Section 9.3 hereof), all as follows in this
Article II:
2.1 Good Title
The Stockholders own all of the issued and outstanding shares of Common
Stock free and clear of any lien, encumbrance, adverse claim, restriction on
sale or transfer (other than restrictions imposed by applicable securities
laws), preemptive right or option.
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2.2 Organization, Good Standing
I/O 360 is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York, and has all requisite
corporate power and authority to own, operate and lease its properties and
assets and to carry on its business as now conducted. I/O 360 is duly qualified
and licensed as a foreign corporation to do business and is in good standing in
each jurisdiction listed on the Disclosure Schedule, which jurisdictions
constitute all the jurisdictions where the character of I/O 360's properties
occupied, owned or held under lease or the nature of the business conducted by
I/O 360 makes such qualification necessary and where the failure to be so
qualified would have a material adverse effect on the business, business
prospects, assets or financial condition (a "Material Adverse Effect") of I/O
360.
2.3 Authorization
I/O 360 has all requisite corporate power and authority and the
Stockholders have all requisite power, right and authority to enter into this
Agreement and each of the documents to which it or he is a party, including,
without limitation and as applicable, the Employment Agreements (as defined in
Section 6.3 hereof), and the Escrow Agreement (collectively, the "Operative
Documents"), and to carry out the transactions contemplated hereby and thereby.
This Agreement has been, and each Operative Document to which I/O 360 or the
Stockholders are a party will be, on the Closing Date, duly executed and
delivered by each of I/O 360 and the Stockholders, as applicable, and this
Agreement is, and each Operative Document to which I/O 360 or the Stockholders
are a party will be, on the Closing Date, a legal, valid and binding obligation
of each of I/O 360 and the Stockholders, as applicable, enforceable against each
of them in accordance with their respective terms of this Agreement and each
such Operative Document, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditor's
rights generally, or by general equitable principles, and to the extent any
indemnification or contribution provisions thereof may be limited by applicable
federal or state securities laws.
2.4 Authorized Capitalization
I/O 360's authorized capital stock consists solely of shares of Common
Stock of which 200 shares are issued and outstanding on the date of this
Agreement and entirely held by the Stockholders. All issued and outstanding
shares of Common Stock are validly issued, fully paid and nonassessable. There
are no outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments or other agreements of any character which obligate or may
obligate I/O 360 to issue any additional shares of any of its capital stock or
any securities convertible into or evidencing the right to subscribe for any
shares of any such capital stock. There are
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no voting trusts or other agreements or understandings with respect to the
capital stock of I/O 360 to which I/O 360 or the Stockholders are a party or by
which I/O 360 or the Stockholders are bound, nor, in the case of the
Stockholders, is there any such agreement or understanding to which the
Stockholders are a party or by which he is bound, nor are there any such
agreements or understandings to which the Stockholders are a party or by which
the Stockholders are bound. The Stockholders are not indebted to I/O 360, and
I/O 360 is not indebted to the Stockholders.
2.5 Subsidiaries and Affiliates
I/O 360 has no Subsidiaries. As used in this Agreement, "Subsidiaries,"
when used in reference to any Person (as defined in Section 2.6 of this
Agreement), shall mean corporations of which outstanding securities having
ordinary voting power to elect a majority of the Board of Directors of such
corporations are owned directly or indirectly by such Person. I/O 360 does not
own, directly or indirectly, any ownership, equity, profits or voting interest
in, or otherwise control, any corporation, partnership, joint venture or other
entity, and has no agreement or commitment to purchase any such interest.
2.6 No Approvals or Notices Required; No Conflicts With
Instruments
The execution, delivery and performance of this Agreement and the
Operative Documents by I/O 360 and the Stockholders and the consummation of the
transactions contemplated hereby and thereby will not (a) constitute a violation
(with or without the giving of notice or lapse of time, or both) of any
provision of law or any judgment, decree, order, regulation or rule of any court
or other governmental authority applicable to I/O 360 or the Stockholders which
violation would have a Material Adverse Effect on I/O 360, (b) require any
consent, approval or authorization of, or declaration, filing or registration
with, any person, corporation, partnership, joint venture, association,
organization, other entity or governmental or regulatory authority (a "Person"),
except for compliance with applicable securities laws and the filing of all
documents necessary to consummate the Merger with the Secretaries of State (the
consent of all such Persons to be duly obtained by I/O 360 and the Stockholders
at or prior to the Closing), (c) result in a default (with or without the giving
of notice or lapse of time, or both) under, acceleration or termination of, or
the creation in any party of the right to accelerate, terminate, modify or
cancel, any agreement, lease, note or other restriction, encumbrance, obligation
or liability to which I/O 360 or the Stockholders are a party or by which either
of them is bound or to which any of their assets are subject, (d) result in the
creation of any lien or encumbrance upon any material assets of I/O 360 or upon
the Common Stock which default, acceleration or termination would have a
Material Adverse Effect on I/O 360, (e) violate any provision of the Certificate
of Incorporation or By-Laws of I/O 360, or (f) invalidate or adversely affect
any permit,
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license, authorization or status used in the conduct of the business of I/O 360
which would have a Material Adverse Effect on I/O 360.
2.7 Financial Statements
I/O 360 has delivered to Rare Medium (a) an audited balance sheet and
statement of income of I/O 360 as of or for each of the two fiscal years ending
December 31, 1996 and 1997 prepared by Xxxxxxx Xxxxxx & Sons, Inc., independent
certified public accountants, (b) a trial balance of I/O 360's accounts as of
and for the one-month period ended June 30, 1998 (the balance sheet as of June
30, 1998 being herein referred to as the "Company Balance Sheet") and (c)
balance sheet and income statement which accurately reflect, as of June 30,
1998, the business of I/O 360 without including any of the assets, liabilities
or operations of Horizon Distance Learning, Inc. All of the foregoing financial
statements are herein referred to as the "Financial Statements." The Financial
Statements have been prepared in conformity with generally accepted accounting
principles, other than the June 30, 1998 trial balance, which has been so
prepared, and on a basis consistent with prior accounting periods, and present
fairly the financial position, results of operations and changes in financial
position of I/O 360 as of the dates and for the periods indicated. I/O 360 has
no liability or obligation of any nature (absolute, contingent or otherwise)
which is not fully reflected or reserved against in the Company Balance Sheet,
except for liability reserves or obligations incurred since the date of the
Company Balance Sheet in the ordinary course of business and consistent with
past practice and not in excess of $25,000 in the aggregate or $5,000
individually.
2.8 Absence of Certain Changes or Events
Except as specifically contemplated by this Agreement, since December
31, 1997, neither I/O 360 nor any of its officers or directors in their
representative capacity on behalf of I/O 360 has:
(a) taken any action or entered into or agreed to enter into
any transaction, agreement or commitment other than in the ordinary course of
business;
(b) forgiven or canceled any indebtedness or waived any claims
or rights of material value (including, without limitation, any indebtedness
owing by the Stockholders or any officer, director or employee of I/O 360);
(c) granted any material increase in the compensation of
directors, officers or employees (including any such increase pursuant to any
bonus, pension, profit-sharing, lease payment or other plan or commitment) or
any material increase in the compensation payable or to become payable to any
director, officer or employee;
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(d) suffered any material adverse change in its working
capital, assets, liabilities (absolute, accrued, contingent or otherwise),
earnings or reserves or in its financial condition, business, business prospects
or operations;
(e) borrowed or agreed to borrow any funds, assumed or become
subject to, whether directly or by way of guarantee or otherwise, any obligation
or liability (absolute or contingent), or incurred any liabilities or
obligations (absolute, accrued, contingent or otherwise) which exceed in the
aggregate $7,500 (counting obligations or liabilities arising from one
transaction or a series of similar transactions, and all periodic installments
or payments under any lease or other agreement providing for periodic
installments or payments, as a single obligation or liability), except
liabilities and obligations reflected in the Company Balance Sheet or incurred
since the date of the Company Balance Sheet in the ordinary course of business
and consistent with past practice which do not exceed $5,000 in the aggregate,
or increased, or experienced any change in any assumptions underlying or methods
of calculating, any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of claims, liabilities and obligations reflected or reserved
against in the Company Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since the date of the Company Balance
Sheet, or prepaid any obligation having a fixed maturity of more than 90 days
from the date such obligation was issued or incurred;
(g) permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge, except for
(i) assessments for current taxes not yet due and payable, (ii) landlord's liens
for rental payments and other lease-related performance incurred in the ordinary
course of business and not yet due and payable, and (iii) mechanics',
materialmen's, carriers' and other similar liens securing indebtedness that was
incurred in the ordinary course of business and is not yet due and payable;
(h) written down the value of any inventory (including
write-downs by reason of shrinkage or markdown) or written off as uncollectible
any notes or accounts receivable in excess of $5,000.00;
(i) sold, transferred or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
in the ordinary course of business and consistent with past practice;
(j) disposed of or permitted to lapse any rights to the use of
any trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person other than representatives of Rare Medium any trade secret, formula,
process or know-how not theretofore a matter of public knowledge, other than
pursuant to confidentiality agreements that are adequate to protect the
business, business prospects, assets, operations and condition (financial and
other) of I/O 360;
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(k) made any capital expenditure or commitment to make a
capital expenditure for additions to property, plant, equipment or intangible
capital assets in excess of $5,000.00;
(l) made any material change in any method of accounting or
accounting practice;
(m) declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of capital stock or other
securities of I/O 360, or otherwise permitted the withdrawal by any of the
holders of capital stock of I/O 360 of any cash or other assets (real, personal
or mixed, tangible or intangible), in compensation, indebtedness or otherwise,
other than payments of compensation in the ordinary course of business and
consistent with past practice;
(n) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of the holders of capital stock of I/O 360, or any affiliate of such holder
or any of its officers or directors, except for compensation paid to officers at
rates not exceeding the rate of compensation as of December 31, 1997;
(o) entered into or agreed to enter into, or otherwise
suffered to be outstanding, any power of attorney of I/O 360 or any obligations
or liabilities (whether absolute, accrued, contingent or otherwise) of I/O 360,
as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any other Person;
(p) received notice of, or otherwise obtained knowledge of:
(i) any claim, action, suit, arbitration, proceeding or investigation involving,
pending against or threatened against I/O 360 before or by any court or
governmental or non-governmental department, commission, board, bureau, agency
or instrumentality, or any other Person; (ii) any valid basis for any claim,
action, suit, arbitration, proceeding, investigation or the application of any
fine or penalty adverse to I/O 360 before or by any Person; or (iii) any
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
I/O 360 is a party which relate directly to the transactions contemplated herein
or which would otherwise have an adverse effect upon the business, business
prospects, assets or financial condition of I/O 360, or
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(q) agreed, whether in writing or otherwise, to take any
action described in this Section 2.8 not otherwise specifically disclosed
pursuant to this Section 2.8.
2.9 Taxes
I/O 360 has (a) duly and timely filed, including valid extensions, with
the appropriate governmental agencies (domestic and foreign) all tax returns,
information returns and reports for all Taxes (as defined below) required to
have been filed with respect to I/O 360 prior to the Effective Date and (b) paid
in full or provided for all Taxes, interest and other governmental charges which
are shown to be due on such returns or reports. "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, but not limited to,
income, excise, gross receipts, property, sales, use, ad valorem, transfer,
franchise, profit, license, withholding, payroll, employment, severance, stamp,
occupation, windfall profit, social security and unemployment or other taxes
imposed by the United States or any agency or instrumentality thereof, any
state, county, local or foreign government, or any agency or instrumentality
thereof, and any interest or fines, and any and all penalties or additions
relating to such taxes, charges, fees, levies or other assessments. Furthermore,
(i) the reserves and provisions for Taxes reflected in the Company Balance Sheet
are adequate, as determined in accordance with generally accepted accounting
principles consistently applied; (ii) no unresolved claim for assessment or
collection of Taxes has been asserted or threatened against I/O 360, and no
audit or investigation by governmental authorities is under way with respect to
Taxes, interest or other governmental charges; (iii) no state of facts exists or
has existed which would constitute a reasonable basis for the assessment against
I/O 360 of any additional tax liability with respect to any period for which tax
returns have been filed; (iv) I/O 360 has not filed or entered into any
election, consent or extension agreement or any waiver that extends any
applicable statute of limitations; (v) any Taxes incurred by I/O 360 or accrued
by it since the date of the Company Balance Sheet have arisen in the ordinary
course of business; and (vi) I/O 360 has not filed any consent to the
application of Section 341(f)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), to any assets held, acquired or to be acquired by it. I/O
360 has furnished Rare Medium with complete and correct copies of all returns of
Taxes, except for returns of Taxes for periods as to which the applicable
statutory period of limitations has expired. I/O 360 has not been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the Code during the applicable period specified in section 897(c)(1)(A)(ii)
of the Code. I/O 360 is a "small business corporation" within the meaning of
Section 280G(b)(5) of the Code.
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2.10 Property
(a) I/O 360 owns no real property other than the leasehold interests
described in the Disclosure Schedule. Schedule 2.10 is a complete and accurate
list of all real property of I/O 360 which is leased, rented or used by I/O 360
(the "Real Property"). I/O 360 has delivered to Rare Medium true and complete
copies of all leases, subleases, rental agreements, contracts of sale, tenancies
or licenses of any portion of the Real Property.
The Disclosure Schedule sets forth the basis, for tax purposes, of I/O
360 in its assets.
(b) I/O 360 has provided to Rare Medium a complete and accurate list of
each item of personal property having a fair market value in excess of $500
which is owned, leased, rented or used by I/O 360 (the "Personal Property");
provided, however, that such list need not describe the Listed Intellectual
Property or the Intellectual Property Licenses (both terms as defined in Section
2.17 hereof). I/O 360 has delivered to Rare Medium true and complete copies of
all leases, subleases, rental agreements, contracts of sale, tenancies or
licenses of any portion of the Personal Property. The Real Property and the
Personal Property include all properties and assets (whether real, personal or
mixed, tangible or intangible) (other than, in the case of the Personal
Property, property rights with an individual value of less than $500, the Listed
Intellectual Property and the Intellectual Property Licenses) (i) reflected in
I/O 360 Balance Sheet purchased by I/O 360 since the date of I/O 360 Balance
Sheet (except for such properties or assets sold since the date of I/O 360
Balance Sheet in the ordinary course of business and consistent with past
practice) or (ii) used in the business of I/O 360 as presently conducted.
(c) I/O 360's leasehold interest in each parcel of the Real Property is
free and clear of all liens, mortgages, pledges, deeds of trust, security
interests, conditional sales agreements, charges, encumbrances and other adverse
claims or interests of any kind, except as set forth on Schedule 2.10(c), each
lease of any portion of the Real Property is valid, binding and enforceable in
accordance with its terms against the parties thereto and against any other
Person with an interest in such Real Property. I/O 360 has performed all
obligations imposed upon it thereunder; and neither I/O 360 nor any other party
thereto is in default thereunder nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder. No consent is
required from any Person under any lease of the Real Property in connection with
the consummation of the transactions described in this Agreement and the
Operative Documents, and I/O 360 has not received notice that any party to any
such lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. I/O 360
has not granted any lease, sublease, tenancy or license of, or entered into any
rental agreement or Contract of sale with respect to, any portion of the Real
Property.
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(d) I/O 360's plant, structures and Personal Property are in good
operating condition and repair, normal wear and tear excepted, are adequate for
the uses to which they are being put and comply in all material respects with
applicable safety and other laws and regulations.
(e) Except for (i) assessments for current taxes not yet due and
payable, (ii) landlord's liens for rental payments and other lease-related
performance in respect of the Real Property incurred in the ordinary course of
business and not yet due and payable, and (iii) mechanics', materialmen's,
carrier's' and other similar liens securing indebtedness that was incurred in
the ordinary course of business and is not yet due and payable, the Personal
Property is free and clear of all liens, and, other than leased Personal
Property which is so noted on the list supplied pursuant to paragraph (b) of
this Section 2.10, I/O 360 owns such Personal Property.
(f) Each lease, license, rental agreement, contract of sale or other
agreement to which the Personal Property is subject is valid, binding and
enforceable in accordance with its terms against I/O 360 (except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditor's rights generally, or by general
equitable principles), I/O 360 has performed all obligations imposed upon it
thereunder, and neither I/O 360 nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. No consent is required from the owner or
lessor under any lease of Personal Property in connection with the consummation
of the transactions described in this Agreement and the Operative Documents, and
I/O 360 has not received notice that any party to any such lease, license,
rental agreement, contract of sale or other agreement intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other fight thereunder. I/O 360 has not granted any leases, subleases,
tenancies or licenses of any portion of the Personal Property, except as
described in the Disclosure Schedule.
(g) Neither the whole nor any portion of the leaseholds or any other
assets or property of I/O 360 is subject to any currently outstanding
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the knowledge of the Stockholders, has any such condemnation,
expropriation or taking been proposed.
2.11 Contracts
The Disclosure Schedule contains a complete and accurate list of all
material contracts, oral or written, to which I/O 360 is a party or by which I/O
360 is bound, including, without limitation, security agreements, conditional
sales agreements, instruments relating to the borrowing of money, and broker or
distributorship
13
agreements; provided, however, that the Disclosure Schedule need not include:
(a) purchase orders received by I/O 360 in the ordinary course of its business
from its customers; (b) purchase orders issued by I/O 360 in the ordinary course
of its business to its suppliers and subcontractors involving less than $ 1,000
individually and $5,000 in the aggregate; or (c) other contracts cancelable
within 30 days without penalty or involving less than $1,000 individually and
$5,000 in the aggregate. All contracts set forth in such Schedule are valid,
binding and enforceable in accordance with their terms against I/O 360, are in
full force and effect (except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditor's
rights generally, or by general equitable principles), I/O 360 has performed all
material obligations imposed upon it thereunder, and neither I/O 360 nor any
other party thereto is in default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default thereunder. True
and complete copies of each such contract have been heretofore delivered to Rare
Medium.
Except as set forth in the Disclosure Schedule, I/O 360 has no:
(i) restriction by agreement from carrying on its business
anywhere in the world, or restriction by agreement from providing services to
any customer or potential customer;
(ii) notice of or any knowledge that any party to a contract
to which it is a party intends to cancel, terminate or refuse to renew such
contract or to exercise or decline to exercise any option or right thereunder;
and
(iii) material disagreement with any of its suppliers or
customers.
2.12 Customers and Suppliers
The Disclosure Schedule sets forth: (a) a list of the customers of I/O
360 accounting for 5% or more of I/O 360's sales during the fiscal year last
ended showing the approximate total sales by I/O 360 to each such customer
during the fiscal year last ended and (b) a current list of the suppliers of I/O
360 from whom I/O 360 has purchased more than 5% of the goods purchased by I/O
360 in the fiscal year last ended. I/O 360 has no reasonable basis to expect any
material modification to its relationship with any customer or supplier named on
the Disclosure Schedule. I/O 360 has not had any customer who accounted,
directly or indirectly, for more than 5% of its sales during the last two fiscal
years, and I/O 360 has no supplier from whom it has purchased more than 5% of
the goods or services which it purchased during the last two fiscal years. I/O
360 is not a party to or bound by, any contract which prohibits the use or
publication by I/O 360, Rare Medium or ICC of the name of any party to such
contract and I/O 360 is not a party to or bound by, any contract which prohibits
or in any way restricts I/O 360 from freely providing services to any
14
other customer of I/O 360 or any potential customer of I/O 360, Rare Medium or
ICC. None of I/O 360's customers has canceled or substantially reduced or, to
the knowledge of I/O 360, is currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by I/O
360. The Disclosure Schedule sets forth all of I/O 360's vendor authorizations
and vendor relationships.
2.13 Orders, Commitments and Returns
I/O 360 has no backlog. There were no outstanding claims against I/O
360 as of the date hereof to return merchandise with an aggregate retail value
in excess of $5,000 by reason of alleged overshipments, defective merchandise,
missed delivery dates, incorrect quantities or otherwise, or of merchandise in
the hands of customers under an understanding that such merchandise would be
returnable.
2.14 Claims and Legal Proceedings
There are no claims, actions, suits, arbitrations or proceedings
pending or involving or threatened against, or investigations involving, I/O 360
before or by any court or governmental or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other Person. There
is no valid basis for any claim, action, suit, arbitration, proceeding or
investigation (other than as noted on the Disclosure Schedule) adverse to the
business, business prospects, assets, operations or condition (financial or
other) of I/O 360 before or by any Person. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which I/O 360 is a
party which, if determined adversely to I/O 360, would have a Material Adverse
Effect.
2.15 Labor Matters
There are no disputes, employee grievances or disciplinary actions
pending or to the knowledge of I/O 360 or the Stockholders threatened or
involving I/O 360 or any of its present or former employees. I/O 360 has
complied with all provisions of law relating to employment and employment
practices, terms and conditions of employment, wages and hours, the failure to
comply with which would have a material adverse effect upon the business,
business prospects, assets, operations or condition (financial or other) of I/O
360. I/O 360 is not engaged in any unfair labor practice and has no liability
for any arrears of wages or Taxes or penalties for failure to comply with any
such provisions of law. There is no labor strike, dispute, slowdown or stoppage
pending or threatened against or affecting I/O 360, and I/O 360 has not
experienced any work stoppage or other labor difficulty. No collective
bargaining agreement is binding on I/O 360. I/O 360 has no knowledge of any
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to employees of I/O 360, and I/O 360 has not been
requested by any group of employees or others to enter into any collective
bargaining
15
agreement or other agreement with any labor union or other employee
organization.
2.16 Employee Benefit Plans
(a) Except as set forth on the Disclosure Schedule, I/O 360 has no
bonus, deferred compensation, incentive, severance pay, pension, profit-sharing,
retirement, stock purchase, stock option or any other employee benefit plan,
employee fringe benefit plan, arrangement or practice with regard to present or
former employees as to which I/O 360 has any liability ("Employee Benefit
Plan"), whether formal or informal. The aggregate amount paid by I/O 360 during
the fiscal year last ended pursuant to all Employee Benefit Plans, whether
formal or informal, did not exceed $50,000.00. I/O 360 has no agreement,
arrangement or commitment, whether formal or informal and whether legally
binding or not, to create any additional plan or arrangement or to modify or
amend any existing Employee Benefit Plan.
(b) I/O 360 has delivered to Rare Medium true, correct and complete
copies of all written Employee Benefit Plans of I/O 360, all contracts related
thereto and the most recently available annual reports, summary plan
descriptions, Internal Revenue Service Form 5500s (or 5500-C or 5500-R) and
favorable determination letters for such plans to the extent applicable. I/O 360
is in compliance in all material respects with the terms of its Employee Benefit
Plans and with all applicable laws and regulations, including, but not limited
to, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code. I/O 360 has extinguished any liabilities to participants,
beneficiaries and the Pension Benefit Guaranty Corporation which may have arisen
under any such plans previously maintained by them and expects to incur no
future liabilities with regard to such plans. Neither I/O 360 nor any
"affiliate" of I/O 360 is a party to, has ever made any contributions to, or is
subject to any liability with respect to any multi-employer plan within the
meaning of Section 4001(a)(3) of ERISA or any defined benefit plan within the
meaning of Section 3(35)of ERISA. The term "affiliate" means any company,trade
or business which is a member of the same control group, as defined in Section
414(b) or 414(c) of the Code, with the Company, or any company, trade or
business which is a member of an affiliated service group, as defined in Section
414(m) or 414(o) of the Code, with I/O 360.
(c) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or failure to meet the requirements of
Section 4980B(f) of the Code has occurred with respect to any Employee Benefit
Plan which would have a Material Adverse Effect on I/O 360.
(d) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of I/O 360 and the Stockholders
threatened,
16
against any Employee Benefit Plan or the assets of any such plan which would
have a Material Adverse Effect.
2.17 Patents, Trademarks
(a) I/O 360 has a valid license to use each copy of mass-market
third-party software used by it. Set forth on the Disclosure Schedule is a true
and complete list of all inventions, patents, trademarks, trade names, brand
names, copyrights, Software Products (as defined in paragraph (b) of this
Section 2.17), trade secrets and formulae (collectively, the "Listed
Intellectual Property") of any kind now used or reasonably anticipated to be
used in the business of I/O 360 except the mass-market third-party software
described in the first sentence of this Section 2.17. The Disclosure Schedule
contains a complete list of all licenses or agreements which in any way affect
the rights of I/O 360 to any of the Listed Intellectual Property (the
"Intellectual Property Licenses"); such list indicates the specific Listed
Intellectual Property affected by each such Intellectual Property License.
Neither I/O 360's operations nor any Listed Intellectual Property or
Intellectual Property License infringes or provides any basis to believe that
I/O 360's operations or any Listed Intellectual Property or Intellectual
Property License would infringe upon any validly issued or to the knowledge of
I/O 360 or the Stockholders any pending trademark, trade name, service xxxx,
copyright or, any validly issued or pending patent or other right of any other
Person, nor is there any infringement by any other Person of any of the Listed
Intellectual Property or of the intellectual property to which the Intellectual
Property Licenses relate. Except as specifically set forth on the Disclosure
Schedule, consummation of the transactions contemplated hereby and by the
Operative Documents will not alter or impair I/O 360's rights to any of the
Listed Intellectual Property or under any Intellectual Property License. The
manner in which I/O 360 has manufactured, packaged, shipped, advertised, labeled
and sold its products complies with all applicable laws and regulations
pertaining thereto, the failure to comply with which would have a material
adverse effect upon the business, business prospects, assets, operations or
condition (financial or other) of I/O 360.
(b) I/O 360 is the sole and exclusive owner or licensee of:
(i) the Listed Intellectual Property, the Intellectual
Property Licenses and the technology, know-how and processes now used by I/O
360, or used in connection with any product now being manufactured and sold by
I/O 360, in the manner that such product is now being manufactured and sold; and
(ii) all right, title and interest of whatever kind or nature
throughout the world in and to the fully or partially developed computer
software products listed on the Disclosure Schedule, with all modifications,
enhancements and additions thereto, including, without limitation, all rights in
and to all versions
17
thereof and all source code, object code, manuals and other documentation and
related materials thereof (collectively, the "Software Products"). Without
limiting the generality of the above, the Software Products shall also include
all of I/O 360's related programs, trade secrets, algorithms and processes
relating to the Software Products or such programs, I/O 360's copyright in and
to each of the Software Products and all works derivative therefrom (including
the registrations of copyright listed on the Disclosure Schedule), all current,
previous, enhanced and developmental versions of the source and object code and
any variations thereof, all user and programmer documentation, all design
specifications, all maintenance and installation job control language, all
system documentation (including all flow charts, systems procedures and program
component descriptions), all procedures for modification and preparation for the
release of enhanced versions and all test data available (excluding all
proprietary information of third parties) with respect to the Software Products.
(c) Each of the Intellectual Property Licenses is valid, binding and
enforceable in accordance with its terms against I/O 360 (except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditor's rights generally, or by general
equitable principles), I/O 360 has performed all obligations imposed upon it
thereunder, and neither I/O 360 nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. I/O 360 has not received notice that any
party to any of the Intellectual Property Licenses intends to cancel, terminate
or refuse to renew the same or to exercise or decline to exercise any option or
other right thereunder. No licenses, sublicenses, covenants or agreements have
been granted or entered into by I/O 360 in respect of any of the Listed
Intellectual Property except the Intellectual Property Licenses. No director,
officer, Stockholders or employee of I/O 360 owns, directly or indirectly, in
whole or in part, any of the Listed Intellectual Property. Neither I/O 360 nor
the Stockholders know or have any reason to believe that there exists any new
developments in the creation, publication or marketing of the products of I/O
360 or any new or improved products or processes useful in connection with the
business of I/O 360 as now conducted or as presently anticipated to be
conducted, except such developments, products and processes as would not have a
material adverse effect upon the business, business prospects, assets,
operations or condition (financial or other) of I/O 360. None of the officers of
I/O 360 and none of I/O 360's employees, consultants, distributors, agents,
representatives or advisers has entered into any agreement regarding know-how,
trade secrets, assignment of rights in inventions, or prohibition or restriction
of competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than I/O
360.
(d) To I/O 360's knowledge, since January 1, 1991 no Person has
asserted any claim of infringement or other interference with third-party rights
with respect
18
to the Listed Intellectual Property. I/O 360 has not disclosed any source code
regarding the Software Products to any Person other than to an employee of I/O
360, to ICC or to Rare Medium. I/O 360 has at all times maintained reasonable
procedures to protect and has enforced all trade secrets of I/O 360. Neither I/O
360 nor any escrow agent is under any contractual or other obligation to
disclose the source code or any other proprietary information included in or
relating to the Software Products, nor is any other party to the Intellectual
Property Licenses or any escrow agent under any such obligation to disclose any
source code or other proprietary information included in or relating to Software
Products, if any, that are licensed to I/O 360, or to any Person, and no event
has taken place, including the execution of this Agreement or any related change
in I/O 360's business activities, which would give rise to such obligation, and
(iv) I/O 360 has not deposited any source code regarding the Software Products
into any source code escrows or similar arrangements. I/O 360 has not deposited
any source code to Software Products into source code escrows or similar
arrangements.
(e) The Software Products currently being marketed by I/O 360 are free
from known significant defects and substantially conform to the specifications,
documentation and sample demonstration furnished to Rare Medium.
2.18 Accounts Receivable
All accounts receivable of I/O 360 reflected in the Company Balance
Sheet, or existing at the Effective Time, represent sales actually made in the
ordinary course of business. I/O 360 has no reason to believe that any such
account receivable is not or shall not, be collected in the amounts shown. I/O
360's bad debt reserves and sales return allowances as reflected in the Company
Balance Sheet are adequate based on I/O 360's bad debts and sales returns
experience to date. Set forth on the Disclosure Schedule is a full and complete
list of all accounts receivable of I/O 360 existing as of May 31, 1998 and as of
the Closing Date.
2.19 Inventory
Subject to such reserves and write-downs as may be reflected in the
Financial Statements, all items in the inventory reflected in the Company
Balance Sheet or as currently owned by I/O 360 are of a quality and quantity
usable and saleable in the ordinary course of business. Such inventory consists
of materials and supplies used or sold in the business of I/O 360.
2.20 Corporate Books and Records
I/O 360 has furnished to Rare Medium or its representatives for their
examination true and complete copies of (a) the Certificate of Incorporation and
By-
19
Laws of I/O 360, including all amendments thereto, (b) the minute books of I/O
360, and (c) the stock transfer books of I/O 360.
2.21 Licenses, Permits, Authorizations, Etc.
I/O 360 has received all currently required governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign, the failure to obtain which
would, in the aggregate, have a Material Adverse Effect on I/O 360's. I/O 360
has not received any notification of any failure by it to have obtained any of
such governmental approvals, authorizations, consents, licenses, orders,
registrations or permits.
2.22 Applicable Laws
(a) I/O 360 has complied, and is in compliance with, all federal,
state, local and foreign laws, rules, regulations, ordinances, decrees and
orders applicable to the operation of its business, to its employees, or to the
Real Property and the Personal Property, the failure to comply with which would,
in the aggregate, have a Material Adverse Effect on I/O 360, including, without
limitation, all such laws, rules, regulations, ordinances, decrees and orders
relating to antitrust, consumer protection, currency exchange, environmental
protection, equal opportunity, health, occupational safety, pension, securities
and trading-with-the-enemy matters. I/O 360 has not received any notification of
any asserted present or past unremedied failure by I/O 360 to comply with any of
such laws, rules, regulations, ordinances, decrees or orders.
(b) I/O 360 is not currently in violation of any applicable building,
zoning, environmental or other law, ordinance or regulation in respect of the
Real Property or its plant, structures or operations. No such law, ordinance or
regulation would reasonably be expected to prevent the use of substantially all
the Real Property for the conduct thereon of the business of I/O 360 as
currently conducted.
(c) I/O 360 is not in violation of, and has not violated, in connection
with the ownership, use, maintenance or operation of the Real Property or the
Personal Property or the conduct of its business, any applicable federal, state,
county or local statutes, laws, regulations, guidances, rules, ordinances,
codes, licenses, permits, judgments, writs, decrees, injunctions or orders of
any governmental entity relating to environmental (air, water, groundwater,
soil, noise and odor) matters, including, by way of illustration and not of
limitation, the Clean Air Act, the Water Pollution Control Act, the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss.ss.6901 et. seq.) and the
regulations issued thereunder, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. ss.ss.9601 et. seq.), the
Clean Water Act, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Hazardous Waste Control Act, comparable State of New
York laws,
20
and the regulations issued thereunder, and all other applicable federal, state,
county, local and foreign environmental requirements.
2.23 Insurance
(a) I/O 360 maintains insurance as set forth on the Disclosure
Schedule.
(b) All insurance policies and binders of I/O 360 are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date this representation is made have been paid, and no notice of
cancellation or termination has been received with respect to any such policy or
binder. Such policies and binders are sufficient for compliance with all
requirements of law currently applicable to I/O 360. Except as set forth in the
Disclosure Schedule, all agreements to which I/O 360 is a party, will remain in
full force and effect through the respective expiration dates of such policies
or binders without the payment of additional premiums, and will not in any way
be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. I/O 360 has not been refused any insurance with
respect to its assets or operations, nor has its coverage been limited, by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance.
(c) I/O 360 has no pending insurance claims.
2.24 Brokers and Finders
Neither the Stockholders nor any director, officer, agent or employee
acting on behalf of I/O 360 or the Stockholders has retained any broker or
finder in connection with the transactions contemplated by this Agreement and
the Operative Documents.
2.25 Government Contracts
I/O 360 has never been, nor as a result of the consummation of the
transactions contemplated by this Agreement is it reasonable to expect that it
will be, suspended or debarred from bidding on contracts or subcontracts for any
agency of the United States government, nor has such suspension or debarment
been threatened or action for such suspension or debarment been commenced. I/O
360 has not been nor is it now being audited or investigated by the United
States Government Accounting Office, the United States Department of Justice,
the United States Department of Defense or any of its agencies, the Defense
Contract Audit Agency or the inspector general of any agency of the United
States government, nor has such audit or investigation been threatened. There is
no valid basis for I/O 360's suspension or debarment from bidding on contracts
or subcontracts for any agency of the United States government and there is no
valid basis for a claim pursuant to
21
an audit or investigation by the United States Government Accounting Office, the
United States Department of Justice, the United States Department of Defense or
any of its agencies, the Defense Contract Audit Agency or the inspector general
of any agency of the United States government, or any prime contractor.
2.26 Absence of Questionable Payments
Neither I/O 360 nor any director, officer, agent, employee or other
Person acting on behalf of I/O 360 has used any I/O 360 funds for improper or
unlawful contributions, payments, gifts or entertainment, or made any improper
or unlawful expenditures relating to political activity to government officials
or others. Neither I/O 360 nor any current director, officer, agent, employee or
other Person acting on behalf of I/O 360 has accepted or received any improper
or unlawful contributions, payments, gifts or expenditures.
2.27 Personnel
The Disclosure Schedule sets forth a true and complete list of:
(a) the names and current rates of pay of all directors and elected and
appointed officers of I/O 360 and the family relationships, if any, among such
persons;
(b) the current rates of pay for all nonexecutive employees of I/O 360
by classification, and all labor union contracts (if any); and
(c) all group insurance programs in effect for employees of I/O 360.
I/O 360 is not in material default with respect to any of its
obligations referred to in clause (a) or (b) above.
2.28 Bank Accounts
The Disclosure Schedule sets forth the names and locations of all
banks, trust companies, savings and loan associations and other financial
institutions at which I/O 360 maintains safe deposit boxes or accounts of any
nature and the names of all Persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.
2.29 Insider Interests
Neither the Stockholders nor any officer of I/O 360 has any interest
(other than as Stockholders of I/O 360) (a) in any property, real or personal,
tangible or intangible, used in or directly pertaining to the business of I/O
360, including, without limitation, inventions, patents, trademarks or trade
names, or (b) in any
22
agreement, contract, arrangement or obligation relating to I/O 360, its present
or prospective business or its operations, except for the Employment Agreements,
to be entered into between Stockholders and Rare Medium at the Closing.
2.30 Full Disclosure
No information furnished by I/O 360 or the Stockholders to ICC or Rare
Medium in this Agreement (including, but not limited to, the Financial
Statements and all information in the Schedules and the other Exhibits hereto)
and the Operative Documents is false or misleading in any material respect in
light of the circumstances pursuant to which such information was provided.
Neither the Stockholders nor I/O 360 has made any untrue statement of a material
fact nor omitted to state a material fact necessary in order to make the
statements made or information delivered in or pursuant to this Agreement,
including, but not limited to, all Schedules and Exhibits hereto, or in or
pursuant to the Operative Documents, or in or pursuant to closing certificates
executed or delivered by the Stockholders or I/O 360, in light of the
circumstances in which they were made, not misleading.
2.31 No Commission Registration
(a) Investment. The Stockholders shall receive the ICC Common Stock
with no intention of distributing or reselling the ICC Common Stock or any part
thereof, or interest therein, in any transaction which would be in violation of
the securities laws of the United States or any state thereof, without
prejudice, however, to the Stockholders' right at all times to sell or otherwise
dispose of all or any part of the ICC Common Stock under an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or under an exemption from such registration requirements
available under the Securities Act and applicable state securities laws.
(b) No Public Market. The Stockholders understand that the ICC Common
Stock received or to be received by the Stockholders pursuant to this Agreement
has not been registered under the Securities Act by reason of its sale in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, and that Stockholders will
have to hold the ICC Common Stock and bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration.
(c) Experience. The Stockholders acknowledge that the Stockholders and
the Stockholders' representatives are experienced in, and capable of, evaluating
the financial condition and prospects of corporations like ICC. The Stockholders
has had access to the records of ICC and has had the opportunity to ask
questions concerning ICC and an investment in the ICC Common Stock. The
Stockholders are residents of the State of New York.
23
2.32 Misrepresentation
To the knowledge of the Stockholders and I/O 360, none of the
representations and warranties set forth in this Agreement and in any of the
certificates, schedules, exhibits, lists, documents, or other instruments
delivered, or to be delivered, by I/O 360 or the Stockholders as contemplated by
any provision hereof, contains any untrue statement of material fact or omits to
state any material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, misleading.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF RARE MEDIUM AND ICC
Except as is otherwise described in the applicable Schedules, Rare
Medium and ICC jointly and severally represent and warrant to I/O 360 and the
Stockholders, as of the date of this Agreement and as of the Closing (which
representations and warranties shall survive the Closing to the extent provided
in Section 9.3 hereto, all as follows in this Article III:
3.1 Organization, Good Standing
Rare Medium and ICC are corporations duly organized, validly existing
and in good standing under the laws of the States of New York and Delaware,
respectively, and have all requisite corporate power and authority to own,
operate and lease their properties and assets and to carry on their businesses
as now conducted. Rare Medium is a wholly-owned subsidiary of ICC. Rare Medium
and ICC are duly qualified and licensed as a foreign corporation to do business
and are in good standing in each jurisdiction listed on Schedule 3.1, which
jurisdictions constitute all the jurisdictions where the character of Rare
Medium's and ICC's properties occupied, owned or held under lease or the nature
of the business conducted by Rare Medium and ICC the failure to be so qualified
would have a Material Adverse Effect on Rare Medium and ICC.
3.2 Authority
Each of Rare Medium and ICC has full corporate power and authority to
execute, deliver and perform this Agreement and the Operative Documents to which
either is a party and to carry out the transactions contemplated hereby and
thereby. This Agreement has been, and each Operative Document to which Rare
Medium is a party will be, on the Closing Date, duly executed and delivered by
Rare Medium, and this Agreement is, and each Operative Document to which Rare
Medium is a party will be, on the Closing Date, a legal, valid and binding
obligation of Rare Medium, enforceable against Rare Medium in accordance with
its terms. This Agreement has been, and each Operative Document to which ICC is
a party will be, on the Closing Date, duly executed and delivered by ICC, and
24
this Agreement is, and each Operative Document to which ICC is a party will be,
on the Closing Date, a legal, valid and binding obligation of ICC, enforceable
against ICC in accordance with its terms.
3.3 No Approvals or Notices Required; No Conflicts With
Instruments
The execution, delivery and performance of this Agreement and the
Operative Documents by Rare Medium and by ICC, the issuance of the ICC Common
Stock to the Stockholders and the consummation of the transactions contemplated
hereby and by the Operative Documents will not (a) constitute a violation (with
or without the giving of notice or lapse of time, or both) of any provision of
law or any judgment, decree, order, regulation or rule of any court or other
governmental authority applicable to Rare Medium or to ICC, (b) require any
consent, approval or authorization of, or declaration, filing or registration
with, any Person, except for compliance with applicable securities laws and the
filing of all documents necessary to consummate the Merger with the Secretary of
State, (c) result in a default (with or without the giving of notice or lapse of
time, or both) under, acceleration or termination of, or the creation in any
party of the right to accelerate, terminate, modify or cancel, any agreement,
lease, note or other restriction, encumbrance, obligation or liability to which
Rare Medium or ICC is a party or by which either is bound or to which any of
their assets are subject, (d) result in the creation of any material lien or
encumbrance upon the assets of Rare Medium or ICC, the ICC Common Stock or the
funds being delivered in connection herewith, (e) conflict with or result in a
breach of or constitute a default under any provision of the charter documents
of Rare Medium or ICC, or (f) invalidate or adversely affect any permit,
license, authorization or status used in the conduct of the business of ICC.
3.4 Authorized Shares
All of the shares of ICC Common Stock issuable in exchange for Common
Stock in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and will be issued in
compliance with applicable federal and state securities laws and will be free
and clear of any lien, pledge, security interest, encumbrance, claim or
equitable interest and not preemptive right, right of first refusal or other
rights of shareholders exists with respect to such shares or the issuance
thereof.
3.5 Reports
ICC has delivered to I/O 360 a complete and accurate copy of each
report, schedule, document, statement and proxy statement filed with the SEC on
or after December 31, 1997 (the "ICC SEC Documents"). Each of the ICC SEC
Documents complied in all material respects with the applicable requirements of
the 1933 Act and the 1934 Act and none of the ICC SEC Documents contained any
25
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.6 Legal Proceedings
There are no claims, actions, suits, arbitrations, proceedings or
investigations involving, pending or, to the knowledge of Rare Medium or ICC,
threatened against Rare Medium or ICC before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person, which questions the validity of this
Agreement or any action taken or to be taken by Rare Medium or ICC pursuant to
this Agreement or in connection with the transactions contemplated hereby, and,
to the knowledge of Rare Medium or ICC, there is no valid basis for any such
claim, action, suit, arbitration, proceeding or investigation.
3.7 Brokers and Finders
Neither Rare Medium nor ICC, nor any director, officer, agent or
employee acting on behalf of Rare Medium or ICC, has retained any broker or
finder in connection with the transactions contemplated by this Agreement and
the Operative Documents.
3.8 No Commission Registration
(a) Investment. Rare Medium shall receive the Common Stock of I/O 360
with no intention of distributing or reselling such Common Stock or any part
thereof, or interest therein, in any transaction which would be in violation of
the securities laws of the United States or any state thereof, without
prejudice, however, to Rare Medium's right at all times to sell or otherwise
dispose of all or any part of such Common Stock under an effective registration
statement under the Securities Act or under an exemption from such registration
requirements available under the Securities Act and applicable state securities
laws.
(b) No Public Market. Rare Medium understands that such Common Stock
has not been registered under the Securities Act by reason of its sale in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, and that Rare Medium will
have to hold such Common Stock and bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration.
(c) Experience. Rare Medium acknowledges that Rare Medium and its
representatives are experienced in, and capable of, evaluating the financial
condition and prospects of corporations like I/O 360. Rare Medium has had access
26
to the records of I/O 360 and has had the opportunity to ask questions
concerning I/O 360 and an investment in I/O 360's Common Stock.
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE PURCHASER AND ICC
The obligations of Rare Medium and ICC to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or prior to the Closing Date shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date, which conditions may be
expressly waived in writing by Rare Medium or ICC.
4.1 Accuracy of Representations and Warranties
The representations and warranties of I/O 360 and the Stockholders
contained herein (including applicable Exhibits or Schedules) and in the
Operative Documents shall have been true in all material respects when made and
shall be true in all material respects as of the Closing Date as though made on
that date, except as affected by transactions contemplated hereby and except to
the extent that such representations and warranties are made as of a specified
date, in which case such representations and warranties shall be true in all
material respects as of the specified date.
4.2 Performance of Agreement
I/O 360 and the Stockholders shall have performed all obligations and
agreements and complied in all material respects with all covenants and
conditions contained in this Agreement or any Operative Document to be performed
and complied with by them at or prior to the Closing Date.
4.3 Opinion of Counsel for I/O 360
I/O 360 and the Stockholders shall have delivered or caused to be
delivered to ICC and Rare Medium an opinion letter of counsel for I/O 360 and
the Stockholders, dated the Closing Date, substantially in the form attached
hereto as Exhibit 4.3.
4.4 Stockholders' Approval
The Stockholders shall have executed a valid consent approving this
Agreement and the transactions contemplated hereby in accordance with the
applicable provisions of the New York Law concerning Stockholders consents in
lieu of Stockholders meetings.
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4.5 Resignations
Rare Medium shall have received resignations effective as of the
Effective Date of all the officers and directors of I/O 360.
4.6 Consents to Merger
I/O 360 shall have received written consents to the Merger from each of
the parties (other than I/O 360) to those agreements, leases, notes or other
documents identified on the Disclosure Schedule to require such consents, which
consents shall in all respects be reasonably satisfactory to ICC in its sole and
absolute discretion.
4.7 Officers' Certificate
ICC and Rare Medium shall have received a certificate of the President
and the Secretary or Assistant Secretary of I/O 360, dated the Closing Date,
substantially in the form attached hereto as Exhibit 4.7, certifying that all of
the conditions to the obligations of ICC and Rare Medium (other than the
condition of Section 4.9 hereof) have been fulfilled.
4.8 Stockholders' Certificates
ICC and Rare Medium shall have received a certificate from the
Stockholders, dated the Closing Date, substantially in the form attached hereto
as Exhibit 4.8, certifying that all of the conditions to the obligations of ICC
and Rare Medium (other than the condition of Section 4.9 hereof) have been
fulfilled.
4.9 Intentionally Deleted
4.10 Material Change
From March 31, 1998 to the Closing Date, I/O 360 shall not have
suffered any material adverse change in its business, business prospects,
assets, operations or condition (financial or other).
4.11 Intentionally Deleted.
4.12 Firpta Certification
Rare Medium shall receive from the Stockholders a properly completed
and executed Foreign Investment and Real Property Tax Act of 1980 Certification
in substantially the form attached hereto as Exhibit 4.12, stating under penalty
of perjury, the Stockholders' taxpayer identification number and that the
Stockholders are not a foreign person.
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4.13 Good Standing Certificate
I/O 360 shall have delivered to Rare Medium a certificate dated as of
no earlier than five (5) days preceding the Closing Date, duly issued by the
Secretary of State of the State of New York, and unless waived by Rare Medium,
from the appropriate governmental authority in each state in which I/O 360 is
authorized to do business, showing I/O 360 in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
I/O 360 for all periods prior to the Closing have been filed and paid.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE STOCKHOLDER AND I/O 360
The obligations of the Stockholders and I/O 360 to perform and observe
the covenants, agreements and conditions hereof to be performed and observed by
them at or prior to the Closing Date shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date, which conditions may be
expressly waived in writing by Stockholders and, on behalf of I/O 360, by the
President of I/O 360.
5.1 Accuracy of Representations and Warranties
The representations and warranties of Rare Medium and ICC contained
herein and in the Operative Documents shall have been true when made and shall
be true as of the Closing Date as though made on that date, except as affected
by transactions contemplated hereby and except and to the extent that such
representations and warranties are made as of a specified date, in which case
such representations and warranties shall be true as of the specified date.
5.2 Performance of Agreement
Rare Medium shall have performed all obligations and agreements and
complied with all covenants and conditions contained in this Agreement or any
Operative Document to be performed and complied with by them at or prior to the
Closing Date.
5.3 Opinion of Counsel for Rare Medium
Rare Medium shall have delivered or caused to be delivered to I/O 360
and the Stockholders an opinion letter of Rare Medium's general counsel, Elias,
Goodman, Xxxxxx & Xxxxxx, L.L.P., dated the Closing Date, substantially in the
form attached hereto as Exhibit 5.3.
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5.4 Stockholders' Approval
ICC, as sole stockholder of Rare Medium, shall have executed a valid
consent approving the Merger in accordance with the applicable provisions of the
Delaware Law concerning shareholder consents in lieu of stockholder meetings.
5.5 Officers' Certificate
I/O 360 shall have received a certificate of a President and the
Secretary or an Assistant Secretary of Rare Medium, dated the Closing Date,
substantially in the form attached hereto as Exhibit 5.5, certifying that the
conditions to the obligations of I/O 360 and the Stockholders has been
fulfilled.
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES
The obligations of all parties to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by them at or
prior to the Closing Date shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date, which conditions may be expressly
waived in writing by Rare Medium, ICC, I/O 360 and the Stockholders.
6.1 Legal Proceedings
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened which would enjoin, restrain,
condition or prevent consummation of this Agreement or any Operative Document.
6.2 Approvals and Consents
All transfers of permits or licenses, all approvals, applications or
notices to public agencies, federal, state, local or foreign, the granting or
delivery of which is necessary for the consummation of the transactions
contemplated hereby or for the continued operation of I/O 360, shall have been
obtained, and all waiting periods specified by law shall have passed. All other
consents, approvals and notices referred to in this Agreement shall have been
obtained or delivered.
6.3 Employment Agreements
Xxxx Xxxxx and Xxx Xxxxx shall have each entered into an employment
agreements with Rare Medium in the form attached hereto as Exhibit 6.3(a) (the
"Employment Agreements") and Xxxxxx Xxxxxx shall have executed a consulting
agreement in the form attached hereto as Exhibit 6.3(b) (the "Consulting
30
Agreement"). At the Closing, Xxxx Xxxxx and Xxx Xxxxx shall each receive a
signing bonus in the amount of $50,000.00.
6.4 Escrow Agreement
The Stockholders and Rare Medium shall have entered into the Escrow
Agreement.
6.5 Loans to Xxxxxx Xxxxxx
At the Closing, Rare Medium shall satisfy the loan to I/O 360 made by
Xxxxxx Xxxxxx in the amount shown on the Company Balance Sheet, in an amount not
to exceed $100,000.00.
ARTICLE VII - COVENANTS
7.1 Intentionally Deleted.
7.2 Intentionally Deleted.
7.3 Intentionally Deleted.
7.4 Cooperation
Each party hereto will fully cooperate with the other parties, their
counsel and accountants in connection with any steps required to be taken as
part of its obligations under this Agreement. Each party will use its best
efforts to cause all conditions to this Agreement to be satisfied as promptly as
possible and to obtain all consents and approvals necessary for the due and
punctual performance of this Agreement and for the satisfaction of the
conditions hereof. No party will undertake any course of action inconsistent
with this Agreement or which would make any representations, warranties or
agreements made by such party in this Agreement or any of the Operative
Documents untrue or any conditions precedent to this Agreement unable to be
satisfied at or prior to the Closing.
7.5 Information in Disclosure Documents
I/O 360 covenants that, other than with respect to information
furnished by Rare Medium and ICC to I/O 360 for use therein, none of the
information to be included in the materials to be furnished to the Stockholders
by or on behalf of the Board of Directors or management of I/O 360 in connection
with the approval of this Agreement and the Merger by the Stockholders will
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to
31
make the statements therein, in light of the circumstances under which such
statements were made, not misleading.
7.6 Intentionally Deleted.
7.7 Confidentiality
(a) In connection with the Merger, ICC, Rare Medium and I/O
360 are furnishing each other and the Stockholders with certain information
which is either nonpublic, confidential or proprietary in nature. The
Stockholders recognize and acknowledge that they will have access to certain
confidential information of Rare Medium and ICC, and that such information
constitutes valuable, special and unique property of Rare Medium and ICC. The
Stockholders agree that they will not, for any reason or purpose whatsoever, use
any of such confidential information or disclose any of such confidential
information to any party without express authorization of the Rare Medium and
ICC.
(b) Without the prior written consent of the other parties to
this Agreement, no party or any of its representatives will disclose to any
other Person the fact that the Confidential Information has been made available,
or any of the terms, conditions or other facts with respect to the Merger,
including the status thereof, except as required by law or permitted under the
terms of this Agreement.
(c) This Section 7.7 shall be inoperative as to such portions
of the Confidential Information which (i) are or become generally available to
the public other than as a result of a disclosure by the receiving party or its
representatives which is not required by law; (ii) become available to the
receiving party from a source with no obligation of confidentiality to the other
party; (iii) describe technology independently developed by the receiving party;
or (iv) were known to the receiving party on a nonconfidential basis prior to
its disclosure to the receiving party by the supplying party or one of its
representatives.
(d) In the event that a receiving party or any of its
representatives is requested or becomes legally compelled (by written or oral
interrogatories, subpoena, civil investigative demand or similar process) to
disclose any of the Confidential Information for purposes not permitted by this
Agreement, the receiving party will provide the supplying party with prompt
written notice so that the supplying party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the supplying party waives compliance with the provisions of
this Agreement, the receiving party will furnish only that portion of the
Confidential Information which is legally required, and will exercise good-faith
efforts to obtain reliable assurance that confidential treatment will be
accorded the Confidential Information.
32
(e) Each party agrees that the other parties shall be entitled
to equitable relief, including injunction and specific performance, in the event
of any breach of the provisions of clause (a), (b), (c) or (d) of this Section
7.7. Such remedies shall not be deemed to be the exclusive remedies for a breach
of this Section 7.7 by any party or its representatives but shall be in addition
to all other remedies available at law or equity.
(f) It is further understood and agreed that no failure or
delay by any party in exercising any fight, power or privilege under this
Section 7.7 shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege hereunder.
7.8 Payment of Brokerage Fees
Any brokerage, finder's or other fee or expense due in violation of
Section 2.24 hereof shall be paid by the Stockholders.
7.9 Further Acts
After the Closing Date, each party hereto, at the request of and
without any further cost or expense to the other parties, will take any further
actions necessary or desirable to carry out the purposes of this Agreement or
any Operative Document, to vest in the Surviving Corporation full title to all
properties, assets and rights of I/O 360 and/or to effect the issuance of the
ICC Common Stock to the Stockholders.
7.10 Intentionally Deleted
7.11 Intentionally Deleted
7.12 Restrictions on Transfer
For a period of one year from the Closing Date, none of the
Stockholders shall (i) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (a) any shares of ICC Common Stock
received by the Stockholders at the Closing or (b) any interest (including,
without limitation, an option to buy or sell) in any such shares of ICC Common
Stock, in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose; or (ii) engage in any transaction, whether or not
with respect to any shares of ICC Common Stock or any interest herein, the
intent or effect of which is to reduce the risk of owning the shares of ICC
Common Stock acquired hereunder (including, by way of example and not
limitation, engaging in put, call, short-sale, straddle or similar market
transactions). Notwithstanding the foregoing, the Stockholders may (x) transfer
shares of ICC Common Stock to immediate family members (or trusts for the
benefit of the Stockholders or family members, the trustees of which so agree)
or (y) encumber or
33
pledge any of such shares of ICC Common Stock; provided, that, the family
member, trust, trustee, pledgee or other beneficiary of such transfer,
encumbrance or pledge, as the case may be, agrees in writing prior to such
transaction to be bound by (1) the provisions of this Section as if a
Stockholders and party hereto and (2) the indemnification provisions set forth
in this Agreement as if a Stockholders and party hereto. The provisions of this
Section shall apply to the shares paid to the Stockholders at the Closing and to
any Additional Shares paid to the Stockholders; provided that the restrictions
contained herein shall only apply to the Additional Shares for the balance of
the one (1) year period commencing upon the Closing Date.
The certificates evidencing the ICC Common Stock delivered to the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as Rare Medium may deem necessary or
appropriate:
EXCEPT AS PROVIDED BY THAT CERTAIN MERGER AGREEMENT AND PLAN
OF REORGANIZATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY FOR PUBLIC INSPECTION, THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NO BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE
FIRST ANNIVERSARY OF THE CLOSING DATE. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
7.13 Intentionally Deleted
7.14 "Woo Art" Litigation
I/O 360 and the Stockholders hereby agree that Rare Medium's aggregate
liability with regard to the litigation in which I/O 360 is contributing
one-half of the costs of litigation, settlement and damages relating to I/O
360's dispute with Woo Art shall not exceed $40,000.00 which shall include, but
not be limited to, attorneys fees, costs, expenses, settlement payments and
damage awards (the "Woo Art Expenses"). In the event that the Woo Art Expenses
shall exceed such $40,000.00 amount, the Stockholders shall pay all such
additional Woo Art Expenses directly and shall indemnify Rare Medium against all
such additional Woo Art Expenses. In the event that the Woo Art shall not be
finally determined or settled by the date on
34
which the shares placed in escrow are to be released to the Stockholders
pursuant to the Escrow Agreement, shares in an amount reasonably sufficient to
indemnify Rare Medium against any additional pending Woo Art Expenses shall be
maintained in escrow until the final determination or settlement of the Woo Art
litigation.
7.15 Reports Under the 1934 Act.
With a view to making available to the Stockholders the benefits of
Rule 144 promulgated under the, Act and any other rule or regulation of the SEC
that may at any time permit a holder to sell securities of ICC to the public
without registration, ICC and Rare Medium agree to use their best efforts to:
(a) make and keep public information regarding ICC available, within
the-meaning of Rule 144, so long as the Stockholders own restricted securities
of ICC;
(b) file with the SEC in a timely manner all reports and other
documents required of ICC under the Act and the 1934 Act; and
(c) furnish to any Stockholder upon request (a) a written statement by
ICC that it has complied with the reporting requirements of Rule 144, and of the
Act and the 1934 Act, and (b) a copy of the most recent annual or quarterly
report of, and such other reports and documents filed by ICC with the SEC as may
be reasonably requested in availing any such Stockholder to take advantage of
any rule or regulation of the SEC permitting the selling of any such securities
without registration.
7.16 Nasdaq Listing
ICC agrees to authorize for listing on Nasdaq the shares of ICC Common
Stock issuable, and those required to be reserved for issuance, in connection
with this Agreement, upon official notice of issuance.
7.17 Blue Sky Laws
ICC and Rare Medium shall take, such steps as may be reasonably
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of ICC Common Stock pursuant hereto
provided, however, that this shall not require ICC to file a consent to service
of process in any jurisdiction. The Stockholder shall use their best efforts to
assist ICC and Rare Medium as may be necessary to comply with the securities and
blue, sky laws of all jurisdictions which are applicable in connection with the
issuance of ICC Common Stock ICC and Rare Medium pursuant hereto.
35
ARTICLE VIII - TERMINATION
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual consent of I/O 360 and Rare Medium;
(b) by either I/O 360 or Rare Medium if the other parties shall have
breached their agreements hereunder; provided, however, that I/O 360 may not
terminate this Agreement for a breach by the Stockholders, and Rare Medium may
not terminate this Agreement for a breach by ICC; or
(c) by either I/O 360 or Rare Medium if the Closing has not
occurred by September 30, 1998.
In the event of any termination pursuant to this Article VIII (other
than pursuant to clause (a) above), written notice setting forth the reasons
therefor shall forthwith be given by the terminating party to the other parties
hereto. Such termination shall not prejudice any party's right to seek remedies
for another party's breach of this Agreement.
ARTICLE IX - GENERAL
9.1 Expenses
Whether or not the transactions contemplated by this Agreement are
consummated, each party shall pay its own fees and expenses incident to the
negotiation, preparation and carrying out of this Agreement and the Operative
Documents (including legal and accounting fees and expenses), provided that,
should any action be brought hereunder, the attorneys' fees and expenses of the
prevailing party shall be paid by the other party to such action. The
Stockholders shall pay any transfer or similar taxes which may be payable in
connection with the transactions contemplated by this Agreement.
9.2 Amendment
Rare Medium, ICC, I/O 360 and the Stockholders may amend, modify or
supplement this Agreement at any time, but only in writing duly executed on
behalf of each of the parties to be bound thereby.
9.3 Indemnification and Survival of Warranties
9.3.1 (a) Except for as expressly provided herein, for a
period of one (1) year from the Closing Date, the Stockholders agree to
indemnify Rare Medium, ICC, the Surviving Corporation, their successors and
assigns, and the officers, directors, affiliates, employees, controlling Persons
and agents of the foregoing, and to hold each of them harmless against and in
36
respect of any and all losses, damages, Taxes, penalties or other additions to
Taxes, costs and expenses, including attorneys' and accountants' fees incurred
by any of them by reason of (i) a breach of any of the representations or
warranties made by I/O 360 or the Stockholders in this Agreement or the
Operative Documents or (ii) the nonperformance (whether partial or total) of any
covenants or agreements made by I/O 360 or the Stockholders in this Agreement or
the Operative Documents.
(b) Except for as expressly provided herein, for a period of
one (1) year from the Closing Date, ICC agrees to indemnify and to hold harmless
the Stockholders and his successors, assigns heirs, and legatees against and in
respect of all losses, damages, Taxes, penalties or other additions to Taxes,
costs and expenses, including attorneys' and accountants' fees incurred by any
of them by reason of (i) a breach of any of the representations or warranties
made by ICC or Rare Medium in this Agreement or the Operative Documents or (ii)
the nonperformance (whether partial or total) of any covenants or agreements
made by ICC or Rare Medium in this Agreement or the Operative Documents.
9.3.2 If any Person entitled to indemnification pursuant to
Section 9.3.1 hereof (an "Indemnitee") is threatened in writing with any claim,
or any claim is presented in writing to, or any action or proceeding is formally
commenced against, any of the Indemnitees which may give rise to the right of
indemnification hereunder, the Indemnitee will promptly give written notice
thereof to each indemnifying party; provided, however, that any delay by an
Indemnitee in so notifying the indemnifying party shall not relieve the
indemnifying party of any liability to any of the Indemnitees hereunder except
to the extent that the indemnifying party shall have been actually prejudiced as
a result of such failure.
9.3.3 The indemnifying party or parties, by delivery of
written notice to an Indemnitee within 30 days of notice of claim to indemnity
from an Indemnitee, may elect to assume the defense of such claim, action or
proceeding at the expense of the indemnifying party; provided, however, that (a)
unless such written notice shall be accompanied by a written agreement of each
indemnifying party acknowledging the liability of the indemnifying parties to
the Indemnitees as a result of this Agreement for any indemnified damage which
any Indemnitee might incur or suffer as a result of such claim, action or
proceeding or the contesting thereof, each indemnifying party shall be jointly
and severally liable for the attorneys' fees and expenses of the Indemnitee, if
any, incurred in connection with defending such claim; (b) counsel undertaking
such defense shall be reasonably acceptable to the Indemnitee; (c) the
indemnifying parties shall mutually elect to contest such claim, action or
proceeding and shall conduct and settle such contest in a joint manner, and if
the indemnifying parties shall fail at any time to agree, the Indemnitee shall
have no obligation to contest such claim, action or proceeding and (d) if the
Indemnitee requests in writing that such claim, action or proceeding
37
not to be contested, then it shall not be contested but shall not be covered by
the indemnities provided herein. The indemnifying parties may settle an
indemnifiable matter after delivering a written description of the proposed
settlement to and receiving consent from the Indemnitee. In the event the
Indemnitee unreasonably declines to consent to such settlement, then the
Indemnitee shall have no right to indemnification beyond the amount of the
proposed settlement. In the event the indemnifying parties jointly elect to
contest an indemnifiable matter, the Surviving Corporation, ICC and the
Stockholders shall permit each other reasonable access, subject to the
provisions of Section 7.7 hereof, to their respective books and records and
shall otherwise cooperate in connection with such claim. If the indemnifying
parties do not jointly elect to contest an indemnifiable matter, they shall
cooperate with the Indemnitee to the extent any of them has knowledge of facts
or circumstances relating to such matter, and the Indemnitee shall have the
exclusive right to prosecute, defend, compromise, settle or pay any claim, but
the Indemnitee shall not be obligated to do so; provided, however, that, should
the Indemnitee elect not to exercise its right exclusively to prosecute, defend,
compromise, settle or pay such claim, any indemnifying party may elect to do so
at its sole expense.
9.3.4 The representations and warranties contained in this
Agreement shall survive the Closing until the first anniversary of the Closing.
9.3.5 To secure their obligations pursuant to the provisions
of Section 9.3.l hereof, the Stockholders agree to escrow shares of ICC Common
Stock issued or issuable to them in the Merger with an aggregate value of
$400,000.00, pursuant to the terms and conditions of the Escrow Agreement.
Indemnity obligations hereunder shall be satisfied, in the case of
indemnification of Rare Medium and ICC through the release of ICC Common Stock
pursuant to the Escrow Agreement, such shares to be valued as of the last
reported sale on the last trading day prior to the release as reported in The
Wall Street Journal.
9.3.6 Notwithstanding anything to the contrary contained
herein, any limitations of indemnity set forth above shall not apply to any
breach of any of the representations or warranties made by I/O 360 or the
Stockholders in this Agreement or the Operative Documents as they may be related
to any claim made by any former shareholders of I/O 360.
9.4 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.
38
9.5 Headings
The headings preceding the text of Articles and Sections of this
Agreement are for convenience only and shall not be deemed parts thereof.
9.6 Applicable Law
This Agreement, including all matters of construction, validity and
performance, shall be governed by and construed and enforced in accordance with
the laws of the state of New York, as applied to contracts executed and to be
fully performed in such state by citizens of such state.
9.7 Parties in Interest
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, whether herein so expressed or not, but
neither this Agreement nor any of the rights, interests or obligations hereunder
of any party hereto shall be assigned without the prior written consent of the
other parties. This Agreement is not intended, nor shall it be construed, to
confer any enforceable rights on any Person not a party hereto.
9.8 Notices
Any notice or demand desired or required to be given hereunder shall be
in writing given by personal delivery or certified or registered mail, reputable
overnight courier service, telegram or confirmed facsimile transmission,
addressed as respectively set forth below or to such other address as any party
shall have previously designated by such a notice, The effective date of any
notice or request shall be three days from the date it is mailed by the
addressor, upon delivery of the courier package if it is sent by courier, upon
delivery to a telegraph company properly addressed with charges prepaid, upon
confirmation of a successful facsimile transmission, or in any event upon
personal delivery.
Notices to Rare Medium, ICC, the Stockholders and I/O 360 shall be sent
as follows:
Rare Medium, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx, President
39
ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx, President
with copies to:
Xxxxx, Xxxxxxx Xxxxxx & Zizmor, L.L.P.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
To I/O 360 and the Stockholders:
Horizon Live Distance Learning
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
with copies to:
Xxxxxxx, Phleger & Xxxxxxxx, LLP
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
9.9 Publicity
Neither I/O 360 nor the Stockholders shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior consent of Rare Medium except as required by
law.
9.10 Right of Rare Medium to Effect Merger with Newly Formed
Subsidiary
Rare Medium shall have the right and option, at its discretion, prior
to the Closing, to effect the Merger with a newly formed corporation ("NewCo"),
wholly-owned by Rare Medium in the stead of Rare Medium with I/O 360 being the
surviving entity), provided that such election by Rare Medium shall not affect
the representations and warranties or duties and obligations (other than
altering the parties to the Merger) made by Rare Medium and ICC to I/O 360 and
the
40
Stockholders. Rare Medium shall exercise such right by providing notice thereof
to I/O 360, prior to the Closing, in accordance with the notice provisions
herein.
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
RARE MEDIUM, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Its
ICC TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Its
I/O 360, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------
Its
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THE STOCKHOLDERS:
/s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx Xxxxx
------------------------------
Xxxx Xxxxx
/s/ Xxx Xxxxx
------------------------------
Xxx Xxxxx
/s/ Xxxxxxxxx Banasic
------------------------------
Xxxxxxxxx Banasic
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Exhibit 1.2
Certificate of Merger
43
Exhibit 1.3(a)
Form of Escrow Agreement
44
Exhibit 4.7
Form of I/O 360 Officer's Certificate
45
Exhibit 4.8
Form of I/O 360 Stockholder's Certificate
46
Exhibit 4.12
Form of FIRPTA Certificate
47
Exhibit 6.3(a)
Form of Employment Agreements
48
Exhibit 6.3(b)
Form of Consulting Agreement
49
