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EXHIBIT 10.18
AGREEMENT AND PLAN OF MERGER
by and among
INTERNATIONAL ALLIANCE SERVICES, INC.
and
IASI/SMR ACQUISITION CO.
and
SMR & CO. BUSINESS SERVICES
and
ITS SHAREHOLDERS
Dated: November 30, 1996
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This Agreement and Plan of Merger (the "Agreement") is entered into as
of this 30 day of November, 1996 by and among International Alliance Services,
Inc., ("I-Alliance"), IASI/SMR Acquisition Co., ("Merger Sub"), SMR & Co.
Business Services, an Ohio corporation ("SMR"), and Xxxxxxx X. Skoda ("Skoda"),
Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxx X. Xxxxxx ("Xxxxxx") and Xxxxxxx X. Xxxxxx
("Xxxxxx"), (the preceding individually a "Shareholder" and collectively
"Shareholders").
WHEREAS, the Shareholders own all of the common stock of SMR, in the
amounts set forth in Exhibit A hereto (collectively the "SMR Shares"); and
WHEREAS, I-Alliance has determined that it wishes to acquire SMR; and
WHEREAS, to consummate such acquisition I-Alliance has formed Merger
Sub into which SMR will be merged with SMR as the surviving corporation; and
WHEREAS, SMR has determined that it wishes to be acquired by
I-Alliance.
Therefore in consideration of the mutual promises contained herein and other
good and valuable consideration the parties agree as follows.
ARTICLE 1
DEFINITIONS
As used herein the following terms will have the meanings set forth:
1.1 "Accrued Shareholder Liability" will mean the obligation of SMR to
the Shareholders, which is shown on the September 30, 1996 Balance Sheet in the
approximate amount of $3,300,000, as such amount is subsequentlt adjusted
pursuant to section 9.2.
1.2 "Actions" will have the meaning set forth in section 4.2.26.
1.3 "Affiliate of the Shareholder" will have the meaning set
forth in section 4.1.4.
1.4 "Benefit Plans" will have the meaning set forth in section
4.2.22(a).
1.5 "Closing" will have the meaning set forth in section 9.1.
1.6 "Closing Date" will have the meaning set forth in section 9.1.
1.7 "Contracts" will have the meaning set forth in section 4.2.20.
1.8 "Current Assets" means the `Total Current Assets' as such
term is used on the September 30, 1996 Balance Sheet.
1.9 "Effective Time" will have the meaning set forth in Article 3.
1.10 "Fixed Assets" will mean the property and equipment, at
cost less accumulated depreciation, shown as `Total Prop. and Equip. Net, as
such term is used on the September 30, 1996 Balance Sheet.
1.11 "Holder" will have the meaning set forth in section 7.3.1.
1.12 "I-Alliance Indemnified Parties" will mean I-Alliance.
1.13 "I-Alliance Shares" will have the meaning set forth in
sections 2.6.1 and Article 7.
1.14 "Issuer" will have the meaning set forth in section 7.3.1.
1.15 "Law" will mean any federal, state or local law, statute,
ordinance, regulation of directive.
1.16 "Leasehold Interests" will have the meaning set forth in
section 4.2.13.
1.17 "Liabilities" will have the meaning set forth in section
4.2.25.
1.18 "Liens" will mean any lien, mortgage, claim, charge, security
interest, encumbrance, restriction or limitation.
1.19 "Losses" will mean any and all expenses, losses, costs,
deficiencies, liabilities and damages including, but not limited to legal and
professional fees and expenses suffered or incurred in any manner including
investigation and defense of claims.
1.20 "Merger" will have the meaning set forth in section 2.1.
1.21 "OGCL" will mean the Ohio General Corporation Law.
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1.22 "Permits" will have the meaning set forth in section 4.2.19.
1.23 "Person" will mean any natural person, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision thereof) or other
entity of any kind.
1.24 "Receipts" will have the meaning set forth in section 8.7.
1.25 "Receivable" will mean all of SMR's receivables of any kind as of
the Effective Time, as well as (i) all receivables arising out of work in
process as of the close of business on November 30, 1996, (ii) all receivables
previously written off as uncollectible by SMR to the extent actually collected
after the Effective Time, and (iii) all receivables to the extent they comprise
the allowance for doubtful accounts as stated on the September 30, 1996 Balance
Sheet.
1.26 "Registrable Securities" will have the meaning set forth in
section 7.3.7.
1.27 "Registration Expenses" will have the meaning set forth in
section 7.3.5.
1.28 "Returns" will have the meaning set forth in section 4.2.17.
1.29 "SEC Documents" will have the meaning set forth in section
5.5.
1.30 "September 30, 1996 Balance Sheet" will have the meaning set
forth in section 4.2.4.
1.31 "Registration Statement" will have the meaning set forth in
section 7.3.2.
1.32 "Surviving Corporation" will have the meaning set forth in
section 2.1.
1.33 "Taxes" will have the meaning set forth in section 4.2.17.
1.34 "To the best of knowledge" (i) when used with an individual
will mean the actual knowledge of such individual and (ii) when used with an
entity will mean the personal knowledge of any officer, director, shareholder
or most senior manager below officer level of the organization responsible for
the types of matter referenced by that phrase.
1.35 "Total Liabilities" will mean `Total Liabilities' as such term is
used on the September 30, 1996 Balance Sheet, consisting of total current
liabilities and total long term liabilities.
1.36 "Uncollectible" will mean that with respect to any Receivable (i)
the debtor has had a bankruptcy or insolvency proceeding commenced, (ii) the
debtor has discontinued operations and declared it cannot pay its obligations;
or (iii) the receivable is not paid within six months after first billed.
ARTICLE 2
MERGER
2.1 The Merger Subject to the terms and conditions of this Agreement
and in accordance with the Ohio General Corporation Law (the "OGCL") at the
Effective Time the Merger Sub will be merged with and into SMR (the "Merger")
and the separate existence of Merger Sub will cease and SMR will continue as the
surviving corporation (the "Surviving Corporation").
2.2 Effect of the Merger. The Merger will have the effect set
forth in Section 1701.82 of the OGCL.
2.3 Certificate of Incorporation and Code of Regulations. At the
Effective Time, the Articles of Incorporation and the Code of Regulations of SMR
prior to the Effective Time, including all amendments thereto made prior to the
Effective Time, will be and continue to be the Articles of Incorporation and
Code of Regulations of the Surviving Corporation.
2.4 Directors. Each person serving as a director of SMR prior to the
Effective Time will tender a letter of resignation effective as of the Effective
Time. Those persons set forth in Schedule 2.4 will become the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation until his or her respective successor is duly elected
or appointed and qualified or until their earlier death, resignation or removal.
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2.5 Officers. Each person serving as an officer of SMR prior to the
Effective Time will become the initial officers of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation until his
or her respective successor is duly elected or appointed and qualified or until
their earlier death, resignation or removal.
2.6 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of the parties or the holders
of any of the respective securities:
2.6.1 All shares of SMR common stock, no par value per share,
issued and outstanding immediately prior to the Effective Time (the
"SMR Shares") will be converted into the right to receive (i) in the
aggregate Six Hundred Thousand (600,000) shares of I-Alliance common
stock (the " I-Alliance Shares") as described in Article 7, which will
be delivered to each Shareholder in the number of shares set forth
opposite such Shareholder's name on Schedule 2.6, and (ii) warrants to
purchase in the aggregate Nine Hundred Thousand (900,000) shares of
I-Alliance common stock at a purchase price of $10.375 per share,
exercisable in whole or in part at time and from time to time from the
Closing Date until 6:00 p.m. EST on the date three years from the
Closing Date, (the "Warrants"), in such form and with such terms as are
set forth in Exhibit B, which Warrants will be delivered to each
Shareholder in the number of warrants set forth opposite such
Shareholder's name on Schedule 2.6.
2.6.2 Each share of SMR common stock held in the treasury of
SMR will automatically be canceled and retired without any conversion
thereof.
2.6.3 Each share of Merger Sub common stock, no par value per
share, issued and outstanding immediately prior to the Effective Time
will be automatically converted into one share of common stock of the
Surviving Corporation.
2.7 Assumption of Liabilities.Surviving Corporation will execute an
assumption of liabilities of SMR substantially in the form set forth in Exhibit
C.
ARTICLE 3
CONSUMMATION OF MERGER
The Closing will take place on the Closing Date at the offices of
I-Alliance, 00000 Xxxxx Xxxxxx Xxxxx, Xxxxxx Xxxx, XX 00000 or such other place
as the parties may agree. At the time of the Closing, the parties will cause the
Merger to be consummated by filing the Certificate of Merger with the Secretary
of State of Ohio, in such form as required by and executed in accordance with
the OGCL. The date and time of such filing will be the Effective Time.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SMR AND SHAREHOLDERS
4.1 Warranties and Representations of Shareholders. Each Shareholder,
severally, represents and warrants to I-Alliance and Merger Sub that:
4.1.1 Authority. The Shareholder has the right, power,
authority and legal capacity to enter into and perform such
Shareholder's obligations under this Agreement and to consummate the
transactions contemplated hereby to be performed by such Shareholder.
This Agreement has been, and each other document ancillary to this
Agreement to which a Shareholder is a party will be at the Closing,
duly executed and delivered by such Shareholder and constitute, or will
when delivered, constitute, the legal, valid and binding obligations of
such Shareholder, enforceable against such Shareholder, in accordance
with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws and
equitable principles relating to or limiting creditors' rights
generally.
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4.1.2 Title to the SMR Shares. The Shareholder owns, of record
and beneficially, all of the SMR Shares set forth opposite such
Shareholder's name on Exhibit A hereto, free and clear of all Liens,
taxes, security interests, options, warrants and restrictions on
transfer.
4.1.3 No Brokers. The Shareholder has not employed any broker
or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated
hereby for which SMR or I-Alliance may be responsible.
4.1.4 Affiliated Transactions. Except as specifically set
forth (including dollar amounts) on Schedule 4.1.4 as of the date
hereof, neither the Shareholder nor any Affiliate of the Shareholder
(as defined below) is indebted to, or is a creditor of, or a guarantor
of any obligation of, or a party to any contract, agreement, license,
option, commitment or other arrangement, written or oral, express or
implied, with SMR. For purposes of this Section, an "Affiliate of the
Shareholder" means any employee, officer or director of the
Shareholder, any spouse or family member (including in-laws) of the
Shareholder, or any corporation or other entity in which such
Shareholder (or spouse or family member) has an equity or ownership
interest exceeding twenty percent (in the aggregate) or for all
Shareholders (and Affiliate) exceeding in the aggregate fifty percent.
4.2 Warranties and Representations of SMR and Shareholders.
Shareholders, severally, and Shareholders jointly with SMR hereby represent
and warrant to I-Alliance and Merger Sub that:
4.2.1 Organization. SMR is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Ohio with full power and authority to own, lease and operate its
properties and to carry on its business as now being and as heretofore
conducted.
4.2.2 Authority. The execution, delivery and performance by
SMR of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action by SMR. This Agreement has been, and each
other document ancillary to this Agreement to which SMR is a party will
be at the Closing, duly executed and delivered by SMR and constitute,
or will when delivered, constitute, the legal, valid and binding
obligations of SMR, enforceable against SMR, in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar laws and equitable
principles relating to or limiting creditors' rights generally. This
Agreement, the Merger and other transactions contemplated hereby have
been approved and adopted by the board of directors and the holders of
a majority of the voting power of the shares of the capital stock of
SMR entitled to vote thereon in accordance with the Articles of
Incorporation and Code of Regulations and the applicable Law.
4.2.3 Capitalization. The authorized capital stock of SMR
consists of 750 shares of common stock, without par value, of which the
SMR Shares constitute all of the shares outstanding. The SMR Shares
have been duly authorized and are validly issued, fully paid and
nonassessable, and there are no outstanding rights, subscriptions,
warrants, calls, options or other agreements or commitments of any kind
or character to purchase or otherwise to acquire from SMR any of its
unissued shares of capital stock or any other security of SMR in favor
of any Person.
4.2.4 Financial Statements. Attached hereto as Schedule 4.2.4
are true and correct copies of the (a) internally prepared balance
sheet of SMR as at September 30, 1996 (the "September 30, 1996 Balance
Sheet") and the related statement of income of SMR for the eight months
then ended and (b) the internally prepared balance sheet of SMR as of
January 31, 1996 together with the internally prepared statement of
income of SMR for the twelve months then ended. I-Alliance has been
furnished with the internally prepared balance sheets of SMR as of
January 31, 1995 and the internally prepared related statement of
income for the fiscal year then ended. All of such financial statements
(the "Financial Statements"), are true and correct, are in accordance
with the internal books and records of SMR, and consistent with past
practices, fairly present the financial condition and results of
operations of SMR as at the respective dates and for the respective
periods covered thereby and were prepared in conformity with generally
accepted accounting principles (other than the requirements with
respect to `notes to financial statements') consistently applied over
the periods referenced and from period to period.
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4.2.5 Absence of Changes. Since September 30, 1996, SMR has
carried on its business in the ordinary course, and there has not been
any material adverse change in its business condition (financial or
otherwise), results of operations or liabilities.
4.2.6 Net Worth. At November 30, 1996 the Total Liabilities of
SMR, other than Accrued Shareholder Liability, do not exceed the sum of
(i) the stated value (computed on the same basis as the September 30,
1996 Balance Sheet) of the Fixed Assets plus (ii) the difference
between the stated value of Current Assets and the Accrued Shareholder
Liability.
4.2.7 No Subsidiaries. Except as set forth in Schedule 4.2.7,
SMR has no subsidiaries.
4.2.8 Articles of Incorporation, Code of Regulations,
Corporate Records and Committees. The copies of the
Articles of Incorporation and Code of Regulations of SMR
heretofore delivered to I-Alliance are correct and complete, to the
extent of their existence. The stock transfer, minute books and
corporate records of SMR which have been made available to I-Alliance
are correct and complete, to the extent of their existence, and
constitute the only written records and minutes of the meetings,
proceedings, and other actions of the shareholders and the Board of
Directors of SMR from the date of its organization to the date hereof,
there being no committees of its Board of Directors.
4.2.9 No Consent. Except as set forth on Schedule 4.2.9, no
material consent, order, license, approval or authorization of, or
exemption by, or registration or declaration or filing with, any
governmental authority, bureau or agency, and no consent or approval of
any other Person, is required to be obtained or made in connection with
the sale of the SMR Shares.
4.2.10 No Breach. Except as set forth on Schedule 4.2.10, the
performance of this Agreement will not (i) violate any material
provision of the Articles of Incorporation or Code of Regulations of
SMR; (ii) violate, conflict with or result in the breach or termination
of, or constitute an amendment to, or otherwise give any Person the
right to terminate, or constitute (or with notice or lapse of time or
both would constitute) a default (by way of substitution, novation or
otherwise) under the terms of, any material contract, mortgage, lease,
bond, indenture, agreement, franchise or other instrument or obligation
to which SMR is a party or by which SMR or any of its respective assets
or properties are bound or affected; (iii) result in the creation of
any material Liens upon the properties or assets of SMR pursuant to the
terms of any contract, mortgage, lease, bond, indenture, agreement,
franchise or other instrument or obligation; (iv) materially violate
any judgment, order, injunction, decree or award of any court,
arbitrator, administrative agency or governmental or regulatory body
against, or binding upon, SMR or any of its securities, properties,
assets or business; (v) constitute a material violation by SMR of any
statute, law, rule or regulation of any jurisdiction as such statute,
law, rule or regulation relates to SMR or to any of its securities,
properties, assets or business; or (vi) materially violate any Permit.
4.2.11 Accounts Receivable. The accounts receivable and
unbilled work in process of SMR reflected on the September 30, 1996
Balance Sheet are actual and bona fide accounts receivable and unbilled
work in process which arose in the ordinary and usual course of SMR's
business, represent valid obligations due to SMR, are collectible in
the aggregate recorded amounts thereof on the books of SMR and will be
fully collected in the ordinary course, except to the extent reflected
in the allowance for doubtful accounts.
4.2.12 Other Tangible Property. SMR has good and marketable
title to all of the assets reflected on its books and records and on
the September 30, 1996 Balance Sheet, free and clear of all Liens,
other than those set forth on Schedule 4.2.12. To the best knowledge of
SMR and Shareholders the owned tangible personal property material to
the business of SMR are in good operating condition and repair,
ordinary wear and tear excepted.
4.2.13 Leasehold Interests. SMR has a good and valid leasehold
interest in all personal property which is leased to be used in the
business of SMR (the "Leasehold Interests"). All Leasehold Interests
are used and operated in compliance and conformity with all lease
agreements creating such Leasehold Interest, except to the extent that
the failure so to conform would not materially affect the lease. SMR
has not been notified in writing of any claim that there is under any
Leasehold Interest, any existing material default (including, but not
limited to any payment default or event of material default or event
that would with the passage of time or the giving of notice constitute
such material default) and to the best knowledge of Shareholders and
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SMR, SMR is not in material default. All personal property under lease
agreements are not subject to any charges for excessive usage or wear
and tear (or would not be subject to such charges if the current rate
of usage continued for the remainder of the term).
4.2.14 Real Property. SMR does not own any real property.
Schedule 4.2.14 sets forth a true and correct list of all leases,
subleases or other agreements under which SMR is lessee or lessor of
any real property or has any interest in real property and, except as
set forth in Schedule 4.2.14, there are no rights or options held by
SMR, or any contractual obligations on its part, to purchase or
otherwise acquire (including by way of lease or sublease) any interest
in or use of any real property, nor any rights or options granted by
SMR, or any contractual obligations entered into by it, to sell or
otherwise dispose of (including by way of lease or sublease) any
interest in or use of any real property. All such leases, subleases and
other agreements grant the leasehold estates or other interests they
purport to grant with the right to quiet possession, are in full force
and effect and constitute legal, valid and binding obligations of the
respective parties hereto, with no existing or claimed default or event
of default or event which with notice or lapse of time or both would
constitute a default or event of default by SMR by any other party
thereto, which would materially and adversely affect SMR. To the best
knowledge of SMR and Shareholders, SMR is not in violation of any
material building, zoning, health, safety, environmental or other law,
rule or regulation and no notice from any Person has been served upon
SMR claiming any such violation.
4.2.15 Assets. The assets described in section 4.2.12 and the
leaseholds described in sections 4.2.13 and 4.2.14 constitute all of
the material assets and properties used by and necessary for the
operation of SMR, as of the date of the Effective Time (except for
items disposed of in the ordinary course of business).
4.2.16 Intellectual Property. Except as listed on Schedule
4.2.16, no person has made or to the knowledge of SMR overtly
threatened in writing to make any claim that the operation of SMR is in
violation or infringement of any patent, patent licenses, trade name,
trade xxxx, service xxxx, copyright, software license, know-how or
other proprietary or trade rights of any third party. Except as listed
on Schedule 4.2.16, SMR owns or has the right to use any trademarks,
trade names, trade secrets, computer software, patents, inventions,
processes, copyrights, or other intellectual property (or applications
therefor) which are materially used in the conduct of its business.
4.2.17 Tax Matters. SMR has timely filed all federal, state,
county and local tax returns, estimates and reports (collectively,
"Returns") required to be filed by it through the date hereof, copies
of which have been made available to I-Alliance for their inspection
and review, which Returns accurately reflect the taxes due for the
periods indicated; and SMR has paid in full all income, gross receipts,
value added, excise, property, franchise, sales, use, employment,
payroll and other taxes of any kind whatsoever (collectively, "Taxes")
shown to be due by such Returns. The liabilities, if any, for Taxes
accrued for operations of SMR from the date of the end of the period
for which the last return for such Tax was filed through September 30,
1996 are reflected on the September 30, 1996 Balance Sheet. There is no
unassessed deficiency for Taxes proposed or (to the best knowledge of
SMR and Shareholders ) threatened against SMR, and no taxing authority
has raised any issue with respect to SMR which, if adversely
determined, would result in a material liability for any Tax. There are
not in force any extensions with respect to the dates on which any
Return was or is due to be filed by SMR or any waivers or agreements by
SMR for the extension of time for the assessment or payment of any
Taxes. SMR has not been, and currently is not being, audited by any
federal, state or local tax authority.
4.2.18 Compliance with Laws. To the best knowledge of SMR and
Shareholders, SMR is not in violation of any applicable law, rule or
regulation, the violation of which could materially and adversely
affect the assets, properties, liabilities, business, results of
operations, or condition (financial or otherwise) of SMR.
4.2.19 Permits. Except as set forth on Schedule 4.2.19, SMR
(including, without limitation, its employees) has duly obtained and
holds in full force and effect all consents, authorizations, permits,
licenses, orders or approvals of, and has made all declarations and
filings with, all federal, state or local governmental or regulatory
bodies that are material or necessary in or to the conduct of its
business (collectively, the "Permits"); all of the Permits were duly
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obtained and are in full force and effect; no violations are or have
been recorded in respect of any such Permit and no proceeding is
pending or, to the best knowledge of SMR and Shareholders, threatened
to revoke, deny or limit any such Permit.
4.2.20 Contracts and Agreements. Schedule 4.2.20 lists and
briefly describes all written or oral contracts, agreements, leases,
mortgages and commitments, which exceed $10,000 in annual payments or
receipts, and to which SMR is a party or by which it may be bound,
including, without limitation, all management agreements, joint venture
agreements, leases, guarantees and indemnifications, employment and
consulting agreements and instruments of indebtedness (collectively,
"Contracts"), true and correct copies of which have been made available
to I-Alliance for its inspection and review. All Contracts constitute
legal, valid and binding obligations of SMR and are in full force and
effect on the date hereof, and SMR has paid in full amounts due
thereunder which are due and payable and is not in default under any of
them nor, to the best knowledge of SMR or Shareholders, is any other
party to any such contract or other agreement in default thereunder,
nor, to the best knowledge of SMR or Shareholders, does any condition
exist that with notice or lapse of time or both would constitute a
default or event of default thereunder by SMR or by any other Person.
Except as set forth in Schedule 4.2.9, no Contract requires the consent
or approval of a third party in connection with the Merger.
4.2.21 Employee Relations. SMR is not a party to any
collective bargaining agreement or any negotiations for such an
agreement. SMR has not experienced in the last five years any strike,
grievance or unfair labor practice claim, suit or administrative
proceeding. Except as set forth in Schedule 4.2.21, SMR is not party to
any material obligation with respect to any employment contract with a
term of one year or more. To the best knowledge of SMR and
Shareholders, SMR has complied in all material respects with any Law
relating to employment, civil rights and equal employment
opportunities.
4.2.22 Employee Benefits. (a) Schedule 4.2.22 contains a list
of all pension, retirement, savings, disability, medical, dental or
other health plans, life insurance (including any individual life
insurance policy as to which SMR makes premium payments whether or not
SMR is the owner, beneficiary or both of such policy) or other death
benefit plans, profit sharing, deferred compensation, stock option,
bonus or other incentive plans, vacation benefit plans, severance
plans, or other employee benefit plans or arrangements (whether written
or arising from custom), ("Benefit Plans) in which the employees of SMR
participate, and SMR has no other employee pension benefit plan as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or any employee welfare benefit plan as
defined in Section 3(1) of ERISA.
(b) To the best knowledge of SMR and Shareholders, SMR has in
all material respects complied with the requirements of the Benefit
Plans and with all Law applicable thereto. There are no actions, suits
claims or disputes related to the Benefit Plans. To the best knowledge
of SMR and Shareholders, no prohibited transactions in connection with
any Benefit Plan have occurred.
4.2.23 Employee Compensation. SMR has made available to
I-Alliance for its inspection and review the permanent files of all
the employees of SMR, together with payroll information pertinent to
such employees.
4.2.24 Insurance. Schedule 4.2.24 lists all policies of
property, theft, fire, liability, workers' compensation, title,
professional liability or life insurance or reinsurance or any other
insurance owned or maintained by SMR or in which SMR is a named insured
or on which SMR is paying any premiums. All such policies, are in full
force and effect at the date hereof, and each of the insured parties
thereunder is not in default with respect to any provision contained in
any such insurance policy nor failed to give any notice or present any
claim thereunder in due and timely fashion. Schedule 4.2.24 sets forth
a summary of the claims history for SMR under such policies since
January 1, 1993 and, except as set forth on Schedule 4.2.24, there are
no claims outstanding under any such policies.
4.2.25 Liabilities. To the best knowledge of SMR and
Shareholders, there are no material liabilities or obligations of SMR
except (i) those accrued, reflected or otherwise provided for on the
September 30, 1996 Balance Sheet, (ii) those listed on Schedule 4.2.25,
or (iii) those arising in the ordinary course of business after
September 30, 1996.
4.2.26 Actions and Proceedings. Except as provided on Schedule
4.2.26, there are no claims, actions, suits, arbitrations, proceedings,
investigations or inquiries, whether at law or in equity and whether or
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not before any court, private body or group, governmental department,
commission, board, agency or instrumentally (collectively "Actions"),
pending or to the best knowledge of SMR or Shareholders, threatened
against SMR or any of its assets, whether or not fully or partially
covered by insurance, or which would give rise to any right of
indemnification by any Person from SMR, and there are no outstanding
orders, writs, injunctions, awards, sentences or decrees of any court,
private body or group, governmental department, commission, board,
agency or instrumentality against involving or affecting SMR.
4.2.27 Bank Accounts, Guarantees and Powers. Schedule 4.2.27
sets forth (i) a list of all accounts and deposit boxes maintained by
SMR at any bank or other financial institution and the names of the
person authorized to effect transactions in such accounts, to borrow
pursuant to such resolutions and with access to such boxes; (ii) all
agreements or commitments of SMR guaranteeing the payment of money or
the performance of other contracts by any third persons; and (iii) the
names of all persons, firms, associations, corporations, or business
organizations holding general or special powers of attorney from SMR
together with a summary of the terms thereof.
4.2.28 Absence of Changes. Except as set forth in Schedule
4.2.28, since September 30, 1996, SMR has carried on its business in
the ordinary course, and there has not been:
4.2.28.1 any material adverse change in its business condition
(financial or otherwise), results of operations or
liabilities;
4.2.28.2 any pending or, to the best knowledge of SMR and
Shareholders, threatened amendment, modification, or
termination of any agreement, license or permit which is
material to its business;
4.2.28.3 any disposition or acquisition of any of its assets
or properties other than in the ordinary course;
4.2.28.4 any damage, destruction or other casualty loss
(whether or not covered by insurance) adversely
affecting or that could reasonably be expected to adversely
affect its business or assets; or
4.2.28.5 except in the ordinary course, any material
obligation or liability incurred.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF I-ALLIANCE
I-Alliance represents and warrants to the Shareholders and SMR that:
5.1 Organization. I-Alliance is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has full
power and authority to own, lease and operate its properties and to carry on its
business as now being and as heretofore conducted by it, and is duly qualified
or otherwise authorized as a foreign corporation to transact business and is in
good standing in each jurisdiction in which it is required to be so qualified or
authorized.
5.2 Authority. This Agreement has been duly authorized, executed and
delivered by I-Alliance and is the valid and binding agreement of I-Alliance
enforceable against I-Alliance in accordance with its terms. This Agreement has
been, and each other document ancillary to this Agreement to which I-Alliance is
a party will be at the Closing, duly executed and delivered by I-Alliance and
constitute, or will when delivered, constitute, the legal, valid and binding
obligations of I-Alliance, enforceable against I-Alliance, in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar laws and equitable principles
relating to or limiting creditors' rights generally. This Agreement, the Merger
and other transactions contemplated hereby have been approved and adopted by the
board of directors and the holders of a majority voting power of the shares of
the capital stock of I-Alliance entitled to vote thereon in accordance with the
Articles of Incorporation and Code of Regulations and the applicable Law.
5.3 The I-Alliance Shares. The I-Alliance Shares being delivered
pursuant to this Agreement are validly issued, fully paid and non-assessable.
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5.4 No Breach. The authorization, execution, delivery and performance
of this Agreement by I-Alliance will not violate any provision of its
certificate of incorporation or by-laws or violate, conflict with or result in
the breach or termination of, or otherwise give any Person the right to
terminate, any agreement to which it is a party.
5.5 Documents Delivered. I-Alliance has delivered to Shareholders
I-Alliance's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996, its Information Statement to Stockholders
dated September 23, 1996 and its 8-K dated October 4, 1996, (collectively
the"SEC Documents"). The SEC Documents were true and complete in all material
respects as at their respective dates, did not contain any untrue statement of a
material fact nor omit to state any material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, and since September
23, 1996, there has not been any material adverse change in I-Alliance's
business condition (financial or otherwise), results of operations or
liabilities, not reflected in the SEC Documents.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
6.1 I-Alliance Conditions Precedent. The obligation of I-Alliance to
close the transactions herein contemplated is subject to the following express
conditions precedent:
6.1.1 Representations and Warranties. The representations and
warranties set forth in Article 4 of this Agreement shall be true and
correct in all material respects at and as of the Closing Date.
6.1.2 Covenants. SMR and Shareholders shall have
performed and complied with all of their covenants under this
Agreement in all material respects through the Closing Date.
6.1.3 Satisfactory Performance. All actions to be taken by SMR
and Shareholders in connection with consummation of the transaction
contemplated hereby and all certificates, instruments, and other
documents required to effect the transactions contemplated hereby have
been completed in a manner which is reasonably satisfactory in form and
substance to I-Alliance.
6.1.4 Continuation of Business. Between September 30 and the
Closing Date, except as otherwise provided herein, SMR will have been
operated in the normal course, consistent with prior practice, and will
not have suffered any damage, destruction, loss or occurrence, whether
covered by insurance or not, which may materially adversely affect the
value of SMR.
6.1.5 Legal Actions. No suit, action, or other proceeding
shall be pending or threatened before any court or governmental agency
seeking to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated herein and there shall have been no investigation or
inquiry made or commenced by any governmental agency in connection with
this Agreement or the transactions contemplated herein.
6.1.6 Employment Agreement. Each Shareholder will have signed
and delivered to I-Alliance his commitment, substantially in the form
of Exhibit D attached hereto, to enter into, within ninety days after
the Closing Date, an employment agreement and non competition agreement
on similar terms to those of other officers of I-Alliance.
6.1.7 Legal Limitations on Closing. There shall not be in
effect any statute, rule or regulation which makes it illegal for
I-Alliance to consummate the transactions contemplated herein or any
order, decree of judgment which enjoins I-Alliance from consummating
the transactions contemplated hereby.
6.1.8 Deliveries by the Shareholders. The Shareholders will
have delivered the stock certificates representing the SMR Shares, duly
endorsed for transfer, the written resignations of the directors of SMR
requested by I-Alliance and the Lock-up Agreement contemplated by
Section 7.6.
6.1.9 Deliveries by SMR. SMR will have delivered the minute
book, stock book and stock ledger of SMR, and a good standing
certificate, dated as of a date not more than sixty days prior to the
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date hereof as to the corporate existence and good standing of SMR
certified by the Secretary of State of the State of Ohio.
6.1.10 Waivers. I-Alliance may waive one or more of said
conditions but such waiver shall be effective only if in writing and
signed on behalf of I-Alliance by one of its duly authorized officers
and may be conditioned in any manner I-Alliance sees fit.
6.2 Conditions Precedent to Closing by SMR and Shareholders. The
obligation of SMR and Shareholders to close the transactions herein contemplated
is subject to the following express conditions precedent:
6.2.1 Representations and Warranties. Representations and
warranties set forth in Article 5 of this Agreement shall be true and
correct in all material respects at and as of the Closing Date.
6.2.2 Covenants. I-Alliance will have performed and complied
with all of its covenants under this Agreement in all material respects
through the Closing Date.
6.2.3 Employment Agreement. I-Alliance will have signed and
delivered to each Shareholder its commitment, substantially in the form
of Exhibit D attached hereto, to enter into, within ninety days after
the Closing Date, an employment agreement and non competition agreement
on similar terms to those of other officers of I-Alliance.
6.2.4 Legal Limitations on Closing. There shall not be in
effect any statute, rule or regulation which makes it illegal for
I-Alliance, SMR or the Shareholders to consummate the transactions
contemplated herein or any order, decree or judgment which enjoins SMR
or the Shareholders from consummating the transactions contemplated
hereby.
6.2.5 Legal Actions. No suit, action, or other proceeding
shall be pending or threatened before any court or governmental agency
seeking to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated herein and there shall have been no investigation or
inquiry made or commenced by any governmental agency in connection with
this Agreement or the transactions contemplated herein.
6.2.6 Satisfactory Performance. All actions to be taken by
I-Alliance in connection with consummation of the transactions
contemplated hereby and all certificates, instruments, and other
documents required to effect the transactions contemplated hereby have
been completed in a manner which is reasonably satisfactory in form and
substance to SMR and Shareholders.
6.2.7 Waiver. SMR and Shareholders may waive one or more of
the foregoing conditions but such waiver shall only be effective if in
writing and signed by SMR and Shareholders and may be conditioned in
any manner SMR and Shareholders see fit.
6.2.8 Deliveries. The Assumption Agreement of the Surviving
Corporation will have been delivered to SMR and the Shareholders.
ARTICLE 7
I-ALLIANCE SHARES, REGISTRATION AND LOCK-UP
7.1 Legend. Any certificate or certificates representing I-Alliance
Shares will bear the following legend unless and until removal thereof is
permitted pursuant to the terms of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT FOR THESE
SHARES OR AN OPINION OF I-ALLIANCE'S COUNSEL THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER OR UNDER APPLICABLE STATE SECURITIES
LAWS.
7.2 Examination and Investment Representation. Shareholders, severally,
represent and warrant to I-Alliance that each of them has examined I-Alliance's
Annual Report of Form 10-K for the year ended December 31, 1995, its Quarterly
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Report on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996, and
September 30, 1996, its September 23, 1996 Information Statement to
Stockholders, and its Form 8-K dated October 4, 1996, including the financial
statements contained therein, has had the opportunity to discuss I-Alliance's
operations with its officers and employees, and is acquiring the I-Alliance
Shares for his/her own account for investment within the contemplation of the
Securities Act of 1933, as amended (the "Securities Act") and not with a view to
the transfer or resale thereof, except to the extent otherwise expressly
provided in this Agreement, that he has been advised by his counsel of the legal
implications and effect of the foregoing under the Securities Act and of the
circumstances under which he may dispose of his I-Alliance Shares under the
Securities Act, including the possible limited sale thereof pursuant to Rule 144
under the Securities Act and of the affect of the legending of the certificate
for his I-Alliance Shares with the legend described in Section 7.1.
7.3 Registration Rights. Each Shareholder shall have the following
registration rights with respect to the I-Alliance Shares:
7.3.1 Transfer of Registration Rights. Shareholder may assign
the registration rights with respect to the I-Alliance Shares to any
party or parties to which he may from time to time transfer the
I-Alliance Shares. Upon assignment of any registration rights pursuant
to this Section 7.3, Shareholder shall deliver to the entity issuing
such shares (the "Issuer") a notice of such assignment which includes
the identity and address of any assignee (collectively, Shareholder and
each such subsequent holder is referred to as a "Holder").
7.3.2 Required Registration. Issuer agrees to register
Registrable Securities pursuant to a registration statement on Form
S-3 (the " Registration Statement") as follows:
7.3.2.1 Within four months after the Closing Date,
Issuer will register 90,000 of the Shares;
7.3.2.2 upon demand, the balance of the Registrable
Securities associated with the Shares issued in the
transactions contemplated by this Agreement provided that such
demand may not be made with respect to any such Registrable
Securities until the expiration of twenty months after the
Closing Date; and
7.3.2.3 upon demand, any Registrable Securities
issued in connection with the exercise of the warrants issued
in the transactions contemplated by this Agreement provided
that such demand may not be made with respect to any such
Registrable Securities earlier than four months prior to the
date such Registrable Securities are free from the restriction
on sale described in section 7.6 below.
7.3.3 Timing of Registration. Issuer shall use its best
efforts to cause the Registration Statement to be declared
effective as quickly as practicable after the period of time or
demand described in section 7.3.2 above, and to maintain the
effectiveness of the Registration Statement until such time as Issuer
reasonably determines based on an opinion of counsel that the Holders
will be eligible to sell all of the Registrable Securities then owned
by the Holders without the need for continued registration of the
Shares in the three-month period immediately following the termination
of the effectiveness of the Registration Statement. Issuer's
obligations contained in Section 7.3 shall terminate on the third
anniversary of the Effective Time, provided that if Issuer has not
fulfilled its obligations with respect to any demand made before such
date, its obligations will continue with respect to such demand until
satisfied or registration is no longer required to sell Registrable
Securities covered by such demand.
7.3.4 Registration Procedures. In case of each registration,
qualification or compliance effected by Issuer subject to this Section
7.3, Issuer shall keep Holder advised in writing as to the initiation
of each such registration, qualification and compliance and as to the
completion thereof. In addition, Issuer shall at its own expense:
7.3.4.1 subject to this Section 7.3.4, before filing
a registration or prospectus or any amendment or supplements
thereto, furnish to counsel selected by Holder copies of all
such documents proposed to be filed and the portions of such
documents provided in writing by Holder for use therein,
subject to such Holder's approval, and for which Holder shall
indemnify Issuer;
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7.3.4.2 prepare and file with the SEC such amendments
and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective and
comply with provisions of the Securities Act with respect to
the disposition of all securities covered thereby during such
period;
7.3.4.3 update, correct, amend and supplement the
Registration Statement as necessary;
7.3.4.4 if such offering is to be underwritten, in
whole or in part, enter into a written agreement in form and
substance reasonably satisfactory to the managing
underwriter and the registering Holder;
7.3.4.5 furnish to Holder such number of
prospectuses, including preliminary prospectuses, and other
documents that are included in the Registration Statement as
Holder may reasonably request from time to time;
7.3.4.6 use its best efforts to register to qualify
such Registrable Securities under such other securities or
blue sky laws of such jurisdictions of the United States as
Holder may request to enable it to consummate the disposition
in such jurisdiction of the Registrable Securities (provided
that Issuer will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this section 7.3);
7.3.4.7 notify Holder, at any time when the
prospectus included the Registration Statement relating to the
Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event which would
cause such prospectus to contain an untrue statement of a
material fact or omit any fact necessary to make the statement
therein in light of the circumstances under which they are
made not misleading and, at the request of Holder, prepare a
supplement or amendment to such prospectus, so that, as
thereafter delivered to purchasers of such shares, such
prospectus will not contain any untrue statements of a
material fact or omit to state any fact necessary to make the
statements therein in light of the circumstances under which
they are made not misleading;
7.3.4.8 use its best efforts to cause all such
Registrable Securities to be listed on each securities
exchange on which similar securities issued by Issuer are then
listed and obtain all necessary approvals from the exchange or
the National Association of Securities Dealers for trading
thereon; and
7.3.4.9 upon the sale of any Registrable Securities
pursuant to the Registration, remove all restrictive legends
from all certificates or other instruments evidencing such
Registrable Securities (to the extent permitted by the
Securities Act).
7.3.5 Delay and Suspension. If Issuer is aware of any event
which has occurred or which it reasonably expects might occur within
the next ninety days, and such event would cause (or Issuer believes
might cause) the Registration Statement (or any prospectus) to contain
any untrue statements of a material fact or omit to state any fact
necessary to make the statements therein in light of the circumstances
under which they are made not misleading, then notwithstanding any
other provision of this Section 7.3, Issuer upon notice to Holder, may
delay filing any Registration Statement otherwise required hereunder
or may withdraw or suspend for up to ninety days any then pending
Registration Statement. Upon any such delay or suspension no further
demand need be made with respect to those Registrable Securities
subject to such delay or suspension, and the three year period set
forth in section 7.3.3 will be extended with respect to such
Registrable Securities for the period of such delay or suspension.
7.3.6 Expenses. Except as required by law, all expenses
incurred by in complying with this Section 7.3, including but not
limited to, all registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel and accountants for Issuer,
blue sky fees and expenses (including fees and disbursements of counsel
related to all blue sky matters) ("Registration Expenses") incurred in
connection with any registration, qualification or compliance pursuant
this Section 7.3 will be borne by Issuer. All underwriting discounts
and selling commissions and any fees of Holder's own attorneys or other
advisors applicable to a sale incurred in connection with any
registration of Registrable Shares shall be borne by Holder.
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7.3.7 Further Information. If Registrable Securities owned by
Holder are included in any registration, such Holder shall use
reasonable efforts to cooperate with Issuer and shall furnish Issuer
such information regarding itself as Issuer may reasonably request and
as shall be required in connection with any registration, qualification
or compliance referred to in this Agreement.
7.3.8 Definition For purposes of this Section 7.3,
"Registrable Securities" will mean the I-Alliance Shares (and all
I-Alliance shares issued in connection with the Warrants) and all
common stock or other securities issued in respect of such Shares by
way of a stock dividend or stock split or in connection with a
combination or subdivision of shares, recapitalization, merger or
consolidation or reorganization, and any securities issued in respect
of the I-Alliance Shares or Warrants by way of stock dividend or stock
split or in connection with any combination or subdivision of shares,
recapitalization, merger or consolidation or reorganization; provided,
however, as to any particular Registrable Securities, such Registrable
Securities will cease to be subject to this Article when they have been
sold pursuant to an effective registration statement or in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that
all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale and the purchaser and
seller receive an opinion of counsel from the seller or the purchaser,
which opinion shall be in form and substance reasonably satisfactory to
the other party and Issuer and their respective counsel, to the effect
that such stock in the hands of the purchaser is freely transferable
without restriction or registration under the Securities Act in any
public or private transaction.
7.4 Indemnity. I-Alliance shall indemnify Shareholders from and against
any and all liabilities to which they may become subject as a result of any
untrue statement or alleged untrue statement of a material fact contained in the
related registration statement, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, other than a statement or omission made in
reliance on and consistent with information furnished in writing by the
Shareholders for use in such registration statement, provided, however, that
each Shareholder shall indemnify I-Alliance and the underwriters of any
offering, if any, from and against any and all liabilities to which I-Alliance
may become subject as a result of any untrue statement or alleged untrue
statement of a material fact contained in the related registration statement, or
the omission or alleged omissions to state therein a material fact required to
be stated therein or necessary to make the statement not misleading, but only
insofar as such statement or omission was made in reliance by I-Alliance on and
consistent with information furnished in writing by such Shareholder.
7.5 Documents. I-Alliance shall furnish to Shareholder one copy of the
registration statement and any amendments thereto and such number of copies of
the final prospectus as they may reasonably request, and shall deliver to the
NASDAQ such number of copies of the final prospectus required to comply with the
prospectus delivery requirements and permit the sale of the registered
I-Alliance Shares on such Exchange.
7.6 Lock-Up. Each of the Shareholders agrees (other than to spouses
and children who agree to the terms of this section) that he:
7.6.1 will not sell, transfer, pledge, or otherwise dispose of
the I-Alliance Shares prior to the expiration of a twenty-four month
period following the Closing Date; provided that after the expiration
of six months from the Closing Date, each of the Shareholders may
thereafter sell, transfer or otherwise dispose of, in the aggregate, up
to fifteen (15%) per cent of the I-Alliance Shares such Shareholder
receives.
7.6.2 will not sell, transfer, pledge or otherwise dispose of
Warrants or any shares of I-Alliance common stock acquired as a result
of the exercise of the Warrants prior to the expiration of the thirty
(30) month period following the Closing Date; provided that each of the
Shareholders may sell, transfer or otherwise dispose of Warrants or any
shares of I-Alliance common stock acquired as a result of the exercise
of the Warrants, in the aggregate up to the following percentage of
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the total of such shares that could be acquired upon exercise of the
Warrants, after the end of each period specified (such period
commencing on the Closing Date):
Six months 33%
Eighteen months 66%
7.6.3 will enter into a Lock-Up Agreement in the form set
forth in Exhibit E hereto.
ARTICLE 8
OTHER COVENANTS
8.1 Announcements. Prior to the Closing, none of the parties will make
any public release of information regarding this Agreement or the transactions
contemplated hereto, except that the parties may issue a press release to be
mutually agreed upon, after the execution of this Agreement and the Closing and
as otherwise required by law.
8.2 Conduct of Business. During the period from the date hereof to the
Effective Time, unless I-Alliance consents otherwise in writing (which consent
will not be unreasonably withheld), and except as otherwise provided in this
Agreement or disclosed in the Schedules, SMR will:
8.2.1 conduct the business of SMR only in the ordinary course of
business consistent with past practice except as contemplated
by this Agreement;
8.2.2 use its best efforts preserve the goodwill of those suppliers,
customers and distributors having business relations with SMR;
8.2.3 maintain any insurance coverages as of the date of this
Agreement against loss or damage to the Assets;
8.2.4 not transfer or encumber any of the Assets except for the
transfer in the ordinary course of business;
8.2.5 maintain the Assets in conditions comparable to their current
condition, reasonable wear and tear excepted, except for
Assets sold or consumed during the ordinary course of
business;
8.2.6 not create, incur, assume, or guarantee any indebtedness,
including capitalized lease obligations, either involving more
than ten thousand dollars ($10,000) singly or twenty thousand
($20,000) in the aggregate or for any amount whatsoever
outside the ordinary course of business;
8.2.7 not make capital expenditures or series of related capital
expenditures either involving more than Ten Thousand dollars
($10,000) singly or in the aggregate, or make any capital
investment in, any loan to, or any acquisition of the
securities or assets of any other person or entity or persons
or entities;
8.2.8 not make or pledge to make any charitable contribution
(including for capital or building purposes) in amounts or to
types of organizations not consistent with past practice;
8.2.9 not make any recapitalization, reorganization, merger,
consolidation, reclassification (voting or nonvoting),
dissolution or liquidation of SMR, or sale of a substantial
portion of the assets of SMR outside the ordinary course of
its business;
8.2.10 not pay any bonuses or any other extraordinary compensation
unless the amount thereof has actually been paid or accrued as
a liability of SMR.
8.3 Cooperation. Each party hereto agrees that before and after the
Closing to execute any and all further documents and writings and to perform
such other reasonable actions which may be or become necessary or expedient to
effectuate and carry out this Agreement.
8.4 Tax Matters. It is the intent of the parties that the exchange of
the SMR shares for the I-Alliance Shares be a tax free reorganization under
section 368(a) of the Internal Revenue Code. I-Alliance and Merger Sub will use
all reasonable efforts to consummate the merger in such fashion, but neither
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I-Alliance nor Merger Sub makes any representation as to the tax treatment of
Shareholders or any agreement with respect to refraining from taking any future
action which could adversely affect the tax treatment of this transaction.
Notwithstanding anything in this Agreement to the contrary, the Shareholders
will remain solely liable for any tax consequences to them as a result of the
transactions contemplated by this Agreement.
8.5 Tax Cooperation. After Closing the Surviving Corporation will
coordinate the preparation of all necessary tax returns. Each party agrees
to timely furnish to Surviving Corporation any records and other
information reasonably requested by it in connection therewith.
8.6 Access To Information. SMR will, during ordinary business hours and
upon reasonable notice from I-Alliance, permit I-Alliance and its authorized
representatives to have access to all Assets, to all books, records, accounts,
documents and other materials relating in any way to the business of SMR. SMR
will, as soon as is practicable, furnish to I-Alliance such other information in
possession of SMR, its officers, employees and shareholders with respect to SMR
as I-Alliance may from time to time reasonably request. SMR will otherwise
cooperate in the examination of SMR by I-Alliance.
8.7 Confidentiality.
8.7.1 Any non-public information received by any party hereto
as a result of discussions and investigations pursuant to or in
furtherance of this Agreement or otherwise received prior to the
Closing Date, will be kept confidential by the recipient and will be
used only for the purposes of evaluating the transactions contemplated
herein. The parties may make disclosure information to attorneys,
accountants and advisors provided such parties agree to be bound by the
terms of this section.
8.7.2 SMR will not disclose any confidential information of
its clients to I-Alliance unless such information is directly relevant
to and absolutely necessary for the evaluation of the transactions
contemplated herein. If any such information is disclosed, I-Alliance
or its employees and agents agree that such information will not be
given to any employee or agent who does not have a need to know, will
not be disclosed to any third party whatsoever (unless required by law)
and will not be used for any purpose other than the evaluation of the
transactions contemplated by this Agreement, and will be returned to
SMR upon completion of the Merger.
8.7.3 If this Agreement is terminated for any reason the
parties will promptly return any copies of confidential information to
the person who supplied it.
8.8 Collection of Receivables.Surviving Corporation will use all
reasonable efforts to collect the Receivables and pay down the Accrued
Shareholder Liability, subject to the conditions in this Section 8.8, (the
proceeds of such Receivables collectively the "Receipts").
8.8.1 Surviving Corporation will be entitled to retain 100% of
any Receipts until such Receipts equals the amount, if any, by which
Current Assets less cash exceeds Accrued Shareholder Liability on
November 30, 1996 after any adjustments described in Section 9.2.
8.8.2 Thereafter, Surviving Corporation will remit at the end
of each month, 100% of Receipts to Shareholders until the Accrued
Shareholder Liability is satisfied. Shareholders, within thirty days of
the Closing Date will furnish Surviving Corporation with a schedule of
the proportion of Receipts payable to each Shareholder.
8.8.3 Payments from accounts having both Receivables and post
November 30, 1996 receivables will be applied as designated on the
payment. If no designation is made they will be applied on a first in,
first out basis. If an account disputes the amount of any Receivable,
the disputed amount may be withheld from amounts that would otherwise
be due (on a FIFO basis) as a Receipt until such disputed amount is
paid.
8.8.4 Uncollectibles. At the end of each month after the
Closing Date, the Surviving Corporation will furnish to the
Shareholders a statement of all amounts of Receivables becoming
Uncollectible in the previous month. The amount of such account will be
offset against the amounts owing the Shareholders under the Accrued
Shareholder Liability in the same proportion as is set forth in 8.8.2
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above. The Uncollectible Receivable will be assigned over to the
Shareholders together with all right, title, interest and power to
collect. This section 8.8.4 sets forth the exclusive remedy with
respect to breaches of the warranty on collectibility of Receivables in
section 4.2.11.
8.9 Insurance. The Shareholders will cause to be maintained claims made
errors and omission insurance of the type maintained by SMR prior to Closing
with insurers and in amounts substantially equivalent to those of SMR prior to
Closing covering the financial statement business (and any other business which
will not be conducted by Surviving Corporation) previously conducted by SMR for
at least five years after the Closing Date. If Surviving Corporation is able to
purchase such insurance at an incremental cost less than that which the
Shareholders can cause such insurance to be purchased, Surviving Corporation
will purchase such insurance on the request of Shareholders and be reimbursed
therefor by Shareholders.
ARTICLE 9
CLOSING, CLOSING ADJUSTMENTS AND TERMINATION
9.1 Closing. The closing ("Closing"), i.e. the execution and delivery
of the documents contemplated by this Agreement, will take place at the offices
of I-Alliance, as soon as practical after the date of this agreement, or at such
time as mutually agreed, to take effect as of the close of business on November
30, 1996 (the "Closing Date"). The parties agree that time is of the essence.
I-Alliance will deliver the I-Alliance Shares and the Warrants to the respective
Shareholders within thirty (30) days of the Closing Date.
9.2 Adjustments. As soon as the results are reasonably available, but
in no event longer than sixty days after the Closing Date, a balance sheet will
be prepared for SMR as of November 30,1996. If, on the balance sheet of SMR,
computed as of November 30, 1996 (including current liabilities pro rated to
such date), the Total Liabilities of SMR exceed the sum of (i) Fixed Assets plus
(ii) the Current Assets, then the Accrued Shareholder Liability will be
decreased by the amount of such excess. If the Total Liabilities of SMR are less
than the sum of (i) Fixed Assets plus (ii) the Current Assets, then the Accrued
Shareholder Liability will be increased by the amount of such difference. This
Section sets forth the exclusive remedy with respect to breaches of the Net
Worth warranty set forth in section 4.2.6.
9.3 Termination. This Agreement may be terminated at any time on or
prior to the Effective Time:
9.3.1 by I-Alliance or SMR if any court of competent
jurisdiction issues any order (other than temporary
restraining order) restraining, enjoining or
prohibiting the transactions;
9.3.2 by mutual written agreement of I-Alliance and SMR;
9.3.3 by either I-Alliance or SMR if the Effective Time
will not have occurred on or before December 31,
1996, time being of the essence, provided that the
right to terminate this Agreement pursuant to this
section will not be available to any party whose
failure to fulfill any obligation of this Agreement
has been the cause or resulted in the failure of the
Effective Time to occur on or before such date;
9.3.4 Breach by SMR. By I-Alliance if there has been a
material breach on the part of SMR in its
representations, warranties or covenants set forth
herein, provided however that if such breach is
susceptible to cure, then SMR will have 30 days after
receipt of written notice from I-Alliance, of its
intent to terminate this Agreement, in which to cure
such breach; and
9.3.5 Breach by I-Alliance. By SMR if there has been a
material breach on the part of I-Alliance in its
representations, warranties or covenants set forth
herein, provided however that if such breach is
susceptible to cure, then I-Alliance will have 30
days after receipt of written notice from SMR, of its
intent to terminate this Agreement, in which to cure
such breach.
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9.4 Effect of Termination. If this Agreement is terminated pursuant to
this Article, all obligations of the parties under this Agreement will terminate
(except for this Article and section 8.7), and no party hereto will have any
further liability to the other parties hereto, except that such termination will
be without prejudice to any claim which a party may have against another for
breach of this Agreement that occurred prior to the date of termination.
ARTICLE 10
SURVIVAL, INDEMNIFICATION AND LIMIT OF LIABILITY
10.1 Survival. All of the representations or warranties contained
herein will survive for a period of one year from the Closing Date and will then
expire. Upon the expiration of representations and warranties pursuant to this
section, unless written notice of a claim based on such representations and
warranty specifying in reasonable detail the facts on which the claim is based
will have been delivered to the indemnifying party prior to expiration of such
representation and warranty, such representation and warranty will be of no
further force or effect, as if never made and no action may be brought based on
the same, whether for breach of contract or any other legal theory, except,
however, that claims based on fraud, willful misrepresentation or with respect
to the representations and warranties set forth in Section 4.1.1 may be asserted
at any time within one year after I-Alliance learns of such fraud, willful
misrepresentation or breach.
10.2 Shareholders Indemnity. Except for the representations in sections
4.2.6 and 4.2.11, each Shareholder agrees to indemnify, defend and hold
I-Alliance Indemnified Parties harmless from and against all Losses incurred by
I-Alliance Indemnified Parties resulting from or on account of a breach of any
material representation, warranty or covenant of such Shareholder made in this
Agreement.
10.3 Limit of Liability. No Shareholder will be liable to I-Alliance
under this Agreement for an amount in excess of the sum of the consideration
received by such Shareholder pursuant to this Agreement (exclusive of the
Shareholder Accrued Liability).
10.4 Conditions of Indemnification. The respective obligations and
liabilities of the Indemnifying Parties to the Indemnified Party under this
Article will be subject to the following terms and conditions:
10.4.1 Notice. Within 15 days after receipt of notice of
commencement of any action or the assertion of any claim by a third
party (but in any event at least 10 days preceding the date on which an
answer or other pleading must be served in order to prevent a judgment
by default in favor of the parties asserting the claim), the
Indemnified Parties will give the Indemnifying Party written notice
thereof, together with a copy of such claim, process or other legal
pleading and the Indemnifying Party will have the right to undertake
defense thereof, by representatives of its own choosing, that are
reasonably satisfactory to the Indemnified Party. Notwithstanding the
Indemnifying Parties undertaking of such defense, the Indemnified Party
will have the right to engage its own counsel, at its own expense and
participate in the defense of claims; provided, however that the
Indemnifying Party will retain the right in its sole and absolute
discretion to make all decisions with respect to the defense,
settlement or compromise of such claim, provided that the Indemnifying
Party remains liable for any payments due under any such settlement or
compromise.
10.4.2 Failure to Assume Defense. If the Indemnifying Party by
the 15th day after receipt of notice of such claim (or if earlier by
the 5th day preceding the day on which the answer or other pleading
must be filed in order to prevent judgment by default in favor of the
person asserting such claim), does not elect to defend against such
claim, the Indemnified Party will (upon further notice to Indemnifying
Party) have the right to undertake defense, compromise or settlement of
such claim on behalf of and for the account and risk of the
Indemnifying Party; provided however, that the Indemnified Party will
not settle or compromise such claim without the Indemnifying Parties
consent, which consent will not be unreasonably withheld; and provided
further, that the Indemnifying Party will have the right to assume the
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defense of such claim with counsel of its own choosing at any time
prior to settlement, compromise or final termination thereof.
10.4.3 Cooperation. In connection with any indemnification,
the Indemnified Party will cooperate with all reasonable requests of
the Indemnifying Party, and will be reimbursed all its out of pocket
expenses.
10.5 Shareholders Additional Indemnity. Each Shareholder agrees to
indemnify, defend and hold I-Alliance Indemnified Parties harmless from and
against all Losses incurred by I-Alliance Indemnified Parties resulting from or
on account of any and all federal, state or local income tax or franchise tax
liability of SMR (or on account of SMR) whether in the current or future tax
years, on account of the distribution to the Shareholders of the Accrued
Shareholder Liability to the extent such tax liability is not reflected on the
Financial Statements.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by a writing signed by I-Alliance and the
Shareholders.
11.2 Waiver of Compliance. Any failure of I-Alliance or the
Shareholders to comply with any obligation, covenant, agreement or condition
herein contained may only be waived in writing by (i) I-Alliance in the case of
any failure of the Shareholders or (ii) the Shareholders in the case of any
failure of I-Alliance. Such waiver shall be effective only in the specific
instance and for the specific purpose for which made or given.
11.3 Expenses. Each party will pay its own expenses incurred in
connection with this Agreement or any transaction contemplated by this
Agreement. The foregoing shall not be construed as limiting any other rights
which any party may have as a result of misrepresentation of or breach by any
other party.
11.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, or when mailed by certified or
registered mail (return receipt requested), postage prepaid or when delivered by
fax (evidenced by confirmation of successful transmission), as follows:
A. If to I-Alliance:
International Alliance Services, Inc.
00000 Xxxxx Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxx 00000
Phone: (000) 000-0000; Fax: (000) 000-0000
Attn: Xxxxxx X. XxXxxxx
With a copy to:
Xxxx X. Xxxxxx & Associates Co., LPA
0 Xxxxxx Xxxx Xxxxx, Xxx. 000
Xxxxxxxxx, Xxxx 00000-0000
Phone: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx
or to such other person or place as I-Alliance or I-Alliance shall designate by
notice in the manner provided in this Section 11.4:
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B. If to the Shareholders:
To the Shareholders at their
respective addresses set forth on
Exhibit A
With a copy to:
Xxxxxx X. Xxxxxxx, Esq.
SMR & Co. Business Services
0000 Xxxx Xx.
Xxxxxxxx Xxxxxxx, XX
Phone: 000-0000; Fax 000-0000
or to such other person as the Shareholders shall designate by notice in the
manner provided in this Section 11.4.
11.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of I-Alliance and its successors and assigns, and to the Shareholders
and their respective successors and assigns or heirs, executors, administrators
and personal representatives, as the case may be, but neither this Agreement nor
any of the rights, interests and obligations hereunder shall be assigned by
I-Alliance or any of the Shareholders without the prior written consent of the
other parties.
11.6 Third Parties. This Agreement is not intended to and shall not be
construed to give any Person other than the parties hereto any interest or
rights (including, without limitation, any third party beneficiary rights) with
respect to or in connection with any agreement or provision contained herein or
contemplated hereby.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Ohio, without regard to principles of
conflicts of laws. I-Alliance and the Shareholders hereby irrevocably submit to
the jurisdiction of the courts of the State of Ohio, with venue in Cuyahoga
County, over any dispute arising out of this Agreement and agree that all claims
in respect of such dispute or proceeding shall be heard and determined in such
court. I-Alliance and the Shareholders hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may have to the
venue of any such dispute brought in such court or any defense of inconvenient
forum for the maintenance of such dispute. I-Alliance and the Shareholders
hereby consent to process being served by them in any suit, action or proceeding
by delivering it in the manner specified by the provisions of Section 11.4 of
this Agreement.
11.8 Severability The invalidity or unenforceability in whole or in
part of any covenant, promise or undertaking, or any section,
subsection, sentence, clause, phrase, word, or any of the
provisions of this Agreement will not affect the validity or
enforceability of the remaining portions of this Agreement. If
for any reason, any provision is determined to be invalid or
in conflict with any existing, or future law or regulation by
a court or agency having valid jurisdiction, such will not
impair the operation or have any other effect upon such other
provisions of this Agreement as may remain otherwise valid,
and the latter will continue to be given full force and effect
and bind the parties hereto.
11.9 Counterparts. This Agreement may be executed in two more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
11.10 Headings. The headings of the sections, schedules and articles of
this Agreement are inserted for the sake of convenience only and shall not
constitute a part hereof.
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11.11 Disclosures. Any disclosure in any Schedule to this Agreement
will be deemed a disclosure for all purposes under this Agreement and shall be
considered a disclosure under all other schedules of this Agreement; provided
information in documents referenced in but not included as part of a schedule
will not be disclosure for purposes of this section. Schedule 4.2.4 will be
updated upon completion of the November 30, 1996 balance sheet.
11.12 Waiver of Conflicts. Each of the parties acknowledge that Xxxxxxx
X. Skoda has represented or participated in the management of SMR and I-Alliance
in various capacities, and that SMR has provided financial advice to I-Alliance
and that Skoda has advised SMR and I-Alliance, and SMR has advised I-Alliance
that the economic and financial interests of the parties arising under or
relating to this Agreement are or may be in material conflict. Each party
further acknowledges that they have been advised to seek and consult independent
advice, and has done so to the extent such party deems prudent. Each party
agrees to forever waive any present or future claim of conflict of interest or
other claim or cause of action which they may have as result to the multiple
advice given to the parties by Xxxxxxx X. Skoda, or any advice given by SMR to
I-Alliance in the transactions contemplated by this Agreement.
11.13 Entire Agreement. This Agreement, including the schedules and
exhibits, contains the entire understanding of the parties in respect of the
subject matter contained herein and therein and there are no other terms or
conditions, representations or warranties, written or oral, express or implied,
except as set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
INTERNATIONAL ALLIANCE SERVICES, INC. IASI/SMR ACQUISITION, INC.
By: ________________________ By: __________________________
Xxxxxx X. Xxxxxxx, President Xxxxx Xxxxx, President
SMR & CO. BUSINESS SERVICES
By: _______________________
Xxxxx X. Xxxxxx, President
THE SHAREHOLDERS OF SMR
_______________________________ ________________________
Xxxxxxx X. Skoda Xxxxx X.Xxxxxx
_______________________________ ________________________
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
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EXHIBIT A
Shareholders of SMR
------------------------------ -------------------------------------------- -------------- --------------- ---------
Name Address Shares Warrants %
------------------------------ -------------------------------------------- -------------- --------------- ---------
------------------------------ -------------------------------------------- -------------- --------------- ---------
Xxxxxxx X. Skoda 195,600 293,400 32.6
------------------------------ -------------------------------------------- -------------- --------------- ---------
Xxxxxxx X. Xxxxxxx 189,000 283,500 31.5
------------------------------ -------------------------------------------- -------------- --------------- ---------
Xxxxx X. Xxxxxx 185,400 278,100 30.9
------------------------------ -------------------------------------------- -------------- --------------- ---------
Xxxxxxx X. Xxxxxx 30,000 45,000 5.0
------------------------------ -------------------------------------------- -------------- --------------- ---------
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EXHIBITS AND SCHEDULES REQUIRED
PLAN & AGREEMENT OF MERGER
IASI/SMR ACQUISITION COMPANY AND SMR
Exhibit A Shareholders of SMR
Exhibit B Terms of Warrants
Exhibit C Assumption Agreement
Exhibit D Employment Agreement Commitment
Exhibit E Lock-Up Agreement
Schedule 2.4 Initial Directors of Surviving Corporation
Schedule 2.6 Shareholders I-Alliance Shares and Warrants
Schedule 4.1.4 Affiliated Transactions
Schedule 4.2.4 Financial Statements of SMR
Schedule 4.2.7 Subsidiaries of SMR
Schedule 4.2.9 No Consent of Outside Parties
Schedule 4.2.10 No Breach
Schedule 4.2.12 Other Tangible Property
Schedule 4.2.14 Real Property
Schedule 4.2.16 Intellectual Property
Schedule 4.2.19 Permits
Schedule 4.2.20 Contracts and Agreements
Schedule 4.2.21 Employment and Consulting Contracts
Schedule 4.2.22 Employee Benefits
Schedule 4.2.24 Insurance
Schedule 4.2.25 Liabilities
Schedule 4.2.26 Actions and Proceedings
Schedule 4.2.27 Bank Accounts, Guarantees and Powers
Schedule 4.2.28 Absence of Changes
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