AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is entered into as of the 28th day of December, 1999 by and among BOL
Acquisition Co. X, Inc., a New York corporation ("BOL") and wholly owned
subsidiary of XxxxxxxXxxxxx.xxx, Inc., a Delaware corporation (the "Parent");
the Parent; Prime Communications Systems Incorporated, a New York corporation,
(the "Company"); and Xxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxxxx Xxxxxx, the owners of
all the issued and outstanding stock of the Company (collectively the
"Stockholders").
INTRODUCTION
BOL and the Company intend to effect a merger of the Company with and
into BOL in accordance with this Agreement and the New York Business Corporation
Law (the "Merger"). Upon consummation of the Merger, the Company will cease to
exist, and BOL will continue to exist as the surviving corporation of the
Merger. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and that this Agreement constitute a plan of reorganization
for such purposes.
This Agreement has been adopted and approved by the respective boards of
directors of BOL and the Company, and the shareholder of BOL and the
Stockholders have each unanimously approved this Agreement by written consent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual and dependent promises
and the representations and warranties hereinafter contained, the parties hereto
agree as follows:
SECTION 1. DESCRIPTION OF THE MERGER TRANSACTION.
1.1 MERGER OF THE COMPANY INTO BOL. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
SECTION 1.2), the Company shall be merged with and into BOL, and the separate
existence of the Company shall cease.
1.2 EFFECTIVE TIME. The effective time of the Merger (the "Effective
Time") shall occur at the time a properly executed Certificate of Merger for the
merger of the Company into BOL, conforming to the requirements of the New York
Business Corporation Law (the "Merger Certificate") has been delivered and
accepted for filing by the Secretary of State New York. At the Effective Time,
the Company shall be merged with and into BOL in accordance with the Merger
Certificate and the separate existence of the Company shall cease and BOL shall
continue as the surviving corporation (the "Surviving Corporation").
1.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF THE
SURVIVING CORPORATION. At the Effective Time:
(a) The Articles of Incorporation of BOL shall become the
Articles of Incorporation of the Surviving Corporation; and, subsequent to the
Effective Time, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law.
(b) The bylaws of BOL shall become the bylaws of the Surviving
Corporation; and, subsequent to the Effective Time, such bylaws shall be the
bylaws of the Surviving Corporation until they shall thereafter be duly amended.
(c) The Board of Directors of the Surviving Corporation shall
be set forth on EXHIBIT 1.3 hereto and shall hold office subject to the
provisions of the laws of the Surviving Corporation's state of incorporation and
of the Articles of Incorporation and bylaws of the Surviving Corporation.
(d) The officers of the Surviving Corporation shall be set
forth on EXHIBIT 1.3 hereto, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and bylaws of the Surviving
Corporation, until his or her successor is elected and qualified.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the New York Business
Corporation Law. Except as herein specifically set forth and as otherwise
required by law, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of BOL shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
the Company shall be merged with and into BOL, and BOL, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time, the
separate existence of the Company shall cease and, in accordance with the terms
of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and BOL shall
be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and BOL; and the title to any real estate, or interest therein,
whether by deed or otherwise, vested in the Company and BOL, shall not revert or
be in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the Company and BOL and any claim
existing, or action or proceeding pending, by or against the Company or BOL may
be prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Company or BOL shall be impaired by the Merger, and all
debts, liabilities and duties of the Company and BOL shall attach to the
Surviving Corporation, and may be enforced against the Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
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1.5 MERGER CONSIDERATION; CONVERSION OF SHARES.
(a) As of the Effective Time, all of the shares of capital stock of
the Company ("Company Stock"), issued and outstanding immediately prior to the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, shall be automatically converted to, in the aggregate,
shares of common stock of the Parent, par value $.01 per share ("Parent Stock")
and cash, as follows (collectively, the "Merger Consideration"):
(i) $1,240,000 in U.S. currency delivered by check, wire
transfer or other immediately available funds, and
(ii) $5,760,000 in unregistered shares of the Parent Stock
valued at $8.00 per share. The shares of Parent Stock delivered hereunder shall
constitute "restricted securities" under the Securities Act of 1933, as amended
and be subject to the restrictions on transfer set forth in this Agreement.
(b) The "average NASDAQ National Market price" shall mean the
average of the closing sales prices or, in case no such reported sale takes
place on any given day, the average of the reported closing bid and asked prices
for such day. In either case, the prices would be as reported by The Nasdaq
Stock Market, Inc.
1.6 DELIVERY OF MERGER CONSIDERATION; ESCROW OF SHARES; SET-OFF.
(a) At the Closing, the Stockholders shall deliver certificates
representing all outstanding shares of Company Stock to counsel for BOL to hold
in escrow until the Effective Time. At the Effective Time, the Stockholders
shall receive the aggregate Merger Consideration set forth in SECTION 1.5 above
provided, however, that a number of shares of Parent Stock included in the
aggregate Merger Consideration with a value of $1,500,000 (the "Escrow Shares")
shall be delivered into escrow with the Parent's counsel (the "Escrow Agent")
pursuant to the escrow agreement (the "Escrow Agreement") attached hereto as
EXHIBIT 1.6. In addition to all other rights and remedies of BOL and the
Surviving Corporation for breach by the Company or the Stockholders of the
representations, warranties, covenants and agreements of the Company and the
Stockholders herein, both at law and in equity, the Surviving Corporation shall
have the right to set-off against the Escrow Shares for any claims of the
Surviving Corporation arising under the post-Closing adjustment provisions of
SECTION 2 below and/or the indemnity provisions of Section 12 below.
(b) The Stockholders shall deliver to counsel for BOL at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders or accompanied by duly executed stock powers, to hold in escrow
until the Effective Time. The Stockholders shall cure any deficiencies with
respect to the endorsement of the certificates or
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other documents of conveyance with respect to Company Stock or with respect to
the stock powers accompanying any Company Stock.
(c) At the Effective Time, counsel for BOL shall release the
certificates representing shares of Company Stock to BOL and such certificates
shall be canceled. As of the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
of shares of the Company thereafter.
1.7 CLOSING. The closing of the Merger (the "Closing") shall occur on
the third business day after satisfaction or waiver of all of the conditions set
forth in Section 6 hereof at the offices of Xxxxx & Xxxxxxx, LLP, 000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000 at 10:00 a.m. on December 28, 1999, or
at such other place and time or date as may be mutually agreed upon by the
parties hereto. The actual date of the Closing is referred to herein as the
"Closing Date". At the Closing, BOL and the Company shall take all actions
necessary to effect the Merger (including filing the Merger Certificate which
shall become effective at the Effective Time) and to effect the conversion and
delivery of shares referred to in SECTION 1.6 hereof.
SECTION 2. POST CLOSING ADJUSTMENTS
2.1 POST-CLOSING ADJUSTMENT BASED ON CASH ON HAND AND ACCOUNTS
PAYABLE. The Company shall maintain a minimum of twenty thousand dollars
($20,000.00) of cash on hand at the Closing Date in excess of the Company's
outstanding payables and liabilities (the "Minimum Cash Requirement") at the
Closing. For purposes hereof, outstanding payables and liabilities shall (a)
include accrued but unpaid employee vacation and sick time, current accrued
accounts payable , accrued lease payments, etc. and (b) exclude deferred revenue
liability. Within thirty (30) days of the Closing Date, or as soon as
practicable thereafter, BOL and/or its accountants shall review the records and
accounts of the Company and to the extent that there was a deficiency in the
Minimum Cash Requirement as of the Closing Date, the Stockholders shall pay the
amount of such shortfall, in cash or other readily available funds to the
Surviving Corporation within three (3) business days of the date of
determination of the Minimum Cash Requirements.
2.2 POST-CLOSING ADJUSTMENT FOR FIRST SIX MONTHS OF 2000 REVENUES AND
EBITDA. Any adjustment described in this SECTION 2.2 shall be based on an income
statement prepared by BOL's accountants (the "Income Statement") on or about
August 30, 2000, showing the Company and the Surviving Corporation's audited
revenues and earnings before interest and taxes less depreciation and
amortization ("EBITDA") on an accrual basis in accordance with
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generally accepted accounting principals ("GAAP") for the first six (6) months
of calendar year 2000.
(a) REVENUES. To the extent that the Company's and the Surviving
Corporation's aggregate audited revenues for the first six (6) months of
calendar year 2000 are (i) less than one million four hundred thousand dollars
($1,400,000) on an accrual basis in accordance with GAAP, the Merger
Consideration shall be reduced by an amount equal to five dollars ($5.00) for
each one dollar ($1.00) in revenue less than one million four hundred thousand
($1,400,000), and (ii) greater than one million four hundred thousand dollars
($1,400,000) on an accrual basis in accordance with GAAP, the Merger
Consideration shall be increased by an amount equal to five dollars ($5.00) for
each one dollar ($1.00) in revenue greater than one million four hundred
thousand dollars ($1,400,000). For example, in the event the revenues for such
period, are one million three hundred thousand dollars ($1,300,000), the Merger
Consideration would be decreased by five hundred thousand dollars ($500,000)
(i.e. the $100,000 shortfall multiplied by 5.00). For purposes of this
paragraph, the revenue calculations shall be made in the same manner in which
BOL's accountants audit the Company's revenues for calendar year 1999 (i.e. on
an accrual basis in accordance with GAAP). In no event shall the adjustments
under this Section reduce the Merger Consideration below $1,500,000.
(b) To the extent that the Company's and the Surviving Corporation's
EBITDA for the first six (6) months of calendar year 2000 is less than
thirty-five percent (35%) of the audited revenues for such period, the Merger
Consideration shall be reduced by fourteen dollars and twenty-eight cents
($14.28) for each one dollar of revenue less than such minimum EBITDA amount.
For example, in the event that the Company's audited revenues as determined in
SECTION 2.2(a) above were $1,400,000 and the Company's EBITDA is actually
$470,000, then the Merger Consideration would be reduced by $285,600 (i.e. the
$20,000 EBITDA shortfall (35% of $1,400,000 less $470,000) times 14.28). For
purposes of calculations made pursuant to this SECTION 2.2(b), the Company's and
the Surviving Corporation's expenses shall include the Parent's allocation of
overhead charges for: (i) insurance, payroll services and other regular
operating expenses attributable to the Surviving Corporation's business and (ii)
the Surviving Corporation's pro rata share for use of the Parent's Albany data
center (if any). There shall be no allocation of overhead charge for the
Parent's Wall, New Jersey office or Executive Officers' salaries.
(c) To the extent any decrease in the Merger Consideration is required
under this SECTION 2.2, the Stockholder shall make such payment within five (5)
business days of the delivery of the Income Statement To the extent any increase
or decrease in the Merger Consideration is required under this SECTION 2.2, the
Surviving Corporation or Stockholders, as the case may be, shall pay such amount
in Parent Stock and such shares of stock would be valued at the "average Nasdaq
National Market price" for the twenty (20) business day period immediately
preceding the date of delivery of the Income Statement or the date of resolution
of any dispute regarding any Merger Consideration adjustment.
2.3 DISPUTE RESOLUTION PROCEDURE FOR ADJUSTMENTS BASED ON MERGER
CONSIDERATION ADJUSTMENTS. Notwithstanding anything in this Section 2 to the
contrary, if the Stockholders dispute the determination of the Minimum Cash
Requirement or any item contained on the
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Income Statement, the Stockholders shall notify the Surviving Corporation in
writing of each disputed item (collectively, the "Disputed Amounts"), and
specify the amount thereof in dispute within thirty (30) business days after
determination of the Minimum Cash Requirement or the delivery of the Income
Statement, as the case may be. If the Surviving Corporation and the Stockholders
cannot resolve any such dispute, then such dispute shall be resolved by an
independent nationally recognized accounting firm which is reasonably acceptable
to the Surviving Corporation and the Stockholders (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as practical and shall be final and binding on the parties, absent
manifest error which error may only be corrected by such Independent Accounting
Firm. Any expenses relating to the engagement of the Independent Accounting Firm
shall be allocated between the Surviving Corporation and the Stockholders so
that the Stockholders' aggregate share of such costs shall bear the same
proportion to the total costs that the Disputed Amounts unsuccessfully contested
by the Stockholders (as finally determined by the Independent Accounting Firm)
bear to the total of the Disputed Amounts so submitted to the Independent
Accounting Firm.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to BOL to enter into this Agreement and consummate the transactions contemplated
hereby, the Company and the Stockholders hereby jointly and severally make to
BOL the representations and warranties contained in this Section 3.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York with full corporate power and authority to own or lease
the Company's properties and to conduct the Company's business in the manner and
in the places where such properties are owned or leased and where such business
is currently conducted or proposed to be conducted. The copies of the
Certificate of Incorporation of the Company as amended to date, certified by the
Secretary of State for the State of New York and the bylaws certified by the
Secretary of the Company and heretofore delivered to BOL's counsel, are complete
and correct, and no amendments thereto are pending. The stock records and minute
books of the Company which have heretofore been delivered to BOL's counsel are
correct and complete. The Company is duly qualified to do business as a foreign
corporation in each other jurisdiction in which it owns, operates or leases real
property and in each other jurisdiction in which the failure to be so qualified
or registered would have a material adverse effect on the properties, assets,
business, financial condition and prospects of the Company.
3.3 SUBSIDIARIES; INVESTMENTS. Except as set forth in SCHEDULE 3.3, the
Company has no direct or indirect subsidiaries and owns no securities issued by
any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Except as set forth in SCHEDULE 3.3, neither the Company nor the Stockholders
own nor have any direct or indirect interest in or control over any corporation,
partnership, joint venture or entity of any kind (other than as an owner of less
than 2% of the outstanding common stock of a publicly held company which stock
trades on a national exchange.).
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3.4 CAPITAL STOCK. The total authorized capital stock of the Company
consists solely of the shares listed on SCHEDULE 3.4. All of the issued and
outstanding shares of the Company Common Stock are duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholders as set forth in SCHEDULE 3.4 free and clear of any liens,
claims, encumbrances, restrictions, security interests, mortgages, pledges or
other demands, and all such shares were offered, issued, sold and delivered by
the Company in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholders. No
shares of the Company Stock are held in the treasury of the Company. SCHEDULE
3.4 contains a complete and correct listing of the stockholders of the Company
at the date hereof, together with the number and class of the capital stock of
the Company owned by each such stockholders. There are no outstanding
subscriptions, options, warrants, commitments, preemptive rights, agreements,
arrangements or commitments of any kind for or relating to the issuance, sale,
registration or voting of, or outstanding securities convertible into or
exchangeable for, any shares of capital stock of any class or other equity
interests of the Company. The Company has never acquired any treasury stock.
3.5 AUTHORITY OF THE COMPANY AND THE STOCKHOLDERS
(a) The Company has full right, power and authority to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by it pursuant to or as contemplated by this Agreement and to carry
out the transactions contemplated hereby and thereby. The execution, delivery
and performance by the Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by the Company's Board of
Directors, and have been approved by the Stockholders by a unanimous written
consent vote. This Agreement and each agreement, document and instrument to be
executed and delivered by the Company pursuant to or as contemplated by this
Agreement (to the extent it contains obligations to be performed by the Company)
constitutes, or when executed, delivered and approved by the Stockholders will
constitute, valid and binding obligations of the Company, enforceable in
accordance with their respective terms. The execution, delivery and performance
by the Company of this Agreement and each such other agreement, document and
instrument:
(i) does not and will not violate any provision of the Articles
of Incorporation or bylaws of the Company;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the Company or
require the Company to obtain any court, regulatory body, administrative
agency or other approval, consent or waiver, or make any filing with,
any federal, state, local or foreign governmental body, agency or
official ("Governmental Entity") that has not been obtained or made,
other than the filing of the Certificate of Merger in accordance with
the laws of the State of New York and except for any other approvals,
consents, waivers and filings that, if not obtained or made,
individually or in the aggregate, would not have a material adverse
effect on the properties, assets, business, financial condition or
prospects of the Company; and
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(iii) except as otherwise indicated on Schedule 3.5 hereto, do
not and will not result in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration
award, whether written or oral, to which the Company is a party or by
which the property of the Company is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the assets of the Company,
except where such breach, default, acceleration or right of termination
would not have a material adverse effect on the properties, assets,
business, financial condition or prospects of the Company, and would not
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets of
the Company.
(b) The Stockholders have full right, authority and power to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by or on behalf of it pursuant to or as contemplated by this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument to be executed and
delivered by the Stockholders pursuant to or as contemplated by this Agreement
(to the extent it contains obligations to be performed by such Stockholders)
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Stockholders enforceable in accordance with their respective
terms, subject to the terms hereof. The execution, delivery and performance by
the Stockholders of this Agreement and each such agreement, document and
instrument:
(i) do not and will not violate any provision of the Articles
of Incorporation or bylaws of the Company;
(ii) do not and will not violate any laws of the United States,
or any state or other jurisdiction applicable to the Stockholders or require the
Stockholders to obtain any approval, consent or waiver of, or make any filing
with, any Governmental Entity that has not been obtained or made; and
(iii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which the
Stockholders are a party or by which the property of such Stockholders is bound
or to which the property of the Stockholders is subject or result in the
creation or imposition of any mortgage, pledge, lien, security interest or other
charge or encumbrance on any of the assets or properties of the Company. Except
as disclosed on SCHEDULE 3.5, there are no stockholder agreements with respect
to the ownership or operation of the Company, and any such agreements shall be
terminated prior to the Closing.
3.6 STATUS OF PROPERTY OWNED OR LEASED.
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(a) REAL PROPERTY. The real property identified as being owned or
leased by the Company on Schedule 3.6(a) is collectively referred to herein as
the "Real Property". The Real Property constitutes all the real property owned
and leased by the Company.
(i) TITLE. Except as set forth on Schedule 3.6(a), there are no
unrecorded mortgages, deeds of trust, ground leases, security interests or
similar encumbrances, liens, assessments, licenses, claims, rights of first
offer or refusal, options, or options to purchase, or any covenants, conditions,
restrictions, rights of way, easements, judgments or other encumbrances or
matters affecting title to the Real Property. There are no leases, tenancies or
occupancy rights of any kind affecting any of the Real Property.
(ii) SECURITY INTERESTS. There is not now, nor, as a result of
the consummation of the transactions contemplated hereby, will there be, any
mortgages, deeds of trust, ground leases, security interests or similar
encumbrances on the Real Property, except as set forth on SCHEDULE 3.6(a)
(collectively, the "Encumbrances"). There is no outstanding principal balance or
accrued unpaid interest or other amount due as of the date hereof under any
instrument secured by any of the Encumbrances and all payments required under
each Encumbrance to the date hereof have been made in full. No condition or fact
does or will exist, as a result of the consummation of the transactions
contemplated hereby, which, with the lapse of time or the giving of notice or
both, would constitute a material default thereunder or result in any
acceleration of the indebtedness secured thereby or any increase in the amount
of interest, premiums or penalties payable on such indebtedness.
(iii) COMMISSIONS. There are no brokerage or leasing fees or
commissions or other compensation due or payable on an absolute or contingent
basis to any person, firm, corporation, or other entity with respect to or on
account of any of the Encumbrances or the Real Property, and no such fees,
commissions or other compensation shall, by reason on any existing agreement,
become due after the date hereof.
(iv) PHYSICAL CONDITION. Except as set forth on SCHEDULE
3.6(a), there is no material defect in the physical condition of any of the Real
Property. Except as set forth on SCHEDULE 3.6(a), there is no material defect in
any material improvements located on or constituting a part of any of the Real
Property, including, without limitation, the structural elements thereof, the
mechanical systems (including without limitation all heating, ventilating, air
conditioning, plumbing, electrical, elevator, security, telecommunication,
utility, and sprinkler systems) therein, the roofs or the parking and loading
areas (collectively, the "Improvements"). All of the Improvements located on or
constituting a part of any of the Real Property, including, without limitation,
the structural elements thereof, the mechanical systems therein, the roofs and
the parking and loading areas are in generally good operating condition and
repair.
(v) Utilities. The Company has not received any written notice
of any termination or impairment of the furnishing of, or any material increase
in rates for, services to any of the Real Property of water, sewer, gas,
electric, telecommunication, drainage or other utility services, except ordinary
and usual rate increases applicable to all customers (or all customers of a
certain class) of a utility provider. The Company has not entered into any
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agreement requiring it to pay to any utility provider rates which are less
favorable than rates generally applicable to customers of the same class as the
Company.
(vi) COMPLIANCE. Except as set forth on SCHEDULE 3.6(a), the
Company has not received any written notice from any municipal, state, federal
or other governmental authority with respect to any violation of any zoning,
building, fire, water, use, health, environmental or other statute, ordinance,
code or regulation issued in respect of any of the Real Property that has not
been heretofore corrected, and except in either case as set forth in SCHEDULE
3.6(a) hereto.
(vii) GOVERNMENT APPROVALS. The Company has not received any
notice of any plan, study or effort by any Governmental Entity which would
adversely affect the present use, zoning or value to the Company of any of the
Real Property or which would modify or realign any adjacent street or highway in
a manner materially adverse to the Company.
(viii) ZONING. The Company has not received any notice of any
zoning violations. All buildings and improvements situated on the Real Property
were built pursuant to validly issued building permits. Certificates of
occupancy were issued for all such structures as built, and all such structures
have been maintained as built since such certificates were issued.
(ix) REAL PROPERTY TAXES. Except as set forth in said SCHEDULE
3.6(a), no special assessments of any kind (special, bond or otherwise) are or
have been levied against any Real Property, or any portion thereof, which are
outstanding or unpaid. Each property constituting part of the Real Property is
assessed as a separate and distinct tax lot.
(x) SERVICE CONTRACTS. A complete list of all material existing
service, management, supply or maintenance or equipment lease contracts and
other contractual agreements affecting the Real Property or any portion thereof
(the "Service Contracts") is set forth on SCHEDULE 3.6(a). All such Service
Contracts are terminable upon no more than thirty (30) days written notice, at
no cost, except as specified in SCHEDULE 3.6(a).
(b) PERSONAL PROPERTY. A list of each item of the machinery,
equipment and other fixed assets owned or leased by the Company having a fair
market value of $5,000 or more (the "Equipment"), is contained in SCHEDULE
3.6(b) hereto. All of the Equipment and other machinery, equipment and personal
property of the Company is located on the Real Property or used in the operation
of the Company. Except as specifically disclosed in Schedule 3.6(b) or in the
Company Financial Statements (as hereinafter defined), the Company has good and
marketable title to all of the personal property owned by it. None of such
personal property or assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security title, encumbrance or other charge except
as specifically disclosed in any Schedule hereto or in the Financial Statements.
The Financial Statements reflect all personal property of the Company, subject
to dispositions and additions in the ordinary course of business consistent with
this Agreement. Except as otherwise specified in SCHEDULE 3.6(b) hereto, all
leasehold improvements, furnishings, machinery and equipment of the Company are
in generally good repair, normal wear and tear excepted, have been well
maintained, and conform in all material respects with all applicable ordinances,
regulations and other laws.
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3.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has delivered to the Parent the following financial
statements, copies of which are attached hereto as SCHEDULE 3.7:
(i) Compiled, reviewed or management-prepared balance sheets of
the Company dated December 31, 1997 and December 31, 1998 and compiled, reviewed
or management-prepared statements of income, stockholders' equity and cash flows
for each of the two (2) years ended December 31, 1997 and December 31, 1998,
certified by the Chief Financial Officer of the Company (the "Year-End Company
Financial Statements");
(ii) Management prepared balance sheets of the Company as of
December 16, 1999 (herein the "Company Balance Sheet Date") and statements of
income, stockholders' equity and cash flows for the period then ended, certified
by the Chief Financial Officer of the Company (the "Interim Company Financial
Statements", together with the Year-End Company Financial Statements, the
"Company Financial Statements");
The Company Financial Statements have been prepared in accordance with GAAP
applied consistently during the periods covered thereby (except that the Interim
Company Financial Statements are subject to normal year-end audit adjustments
and do not include footnotes), and present fairly in all respects the financial
condition of the Company at the dates of said statements and the results of
their operations for the periods covered thereby.
(b) As of the Company Balance Sheet Date, the Company had no
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others or contingent liabilities arising prior to the Company
Balance Sheet Date) except liabilities stated or adequately reserved for on the
Company Financial Statements or reflected in Schedules furnished to Parent
hereunder as of the date hereof.
(c) As of the date hereof, the Company has no liabilities of any
nature, whether accrued, absolute, contingent or otherwise, (including without
limitation liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent liabilities arising prior to the date hereof or the Closing, as the
case may be) except liabilities (i) stated or adequately reserved against on the
appropriate Company Financial Statement or the notes thereto, (ii) reflected in
Schedules furnished to Parent hereunder on the date hereof or (iii) incurred in
the ordinary course of business of the Company consistent with prior practices.
3.8 TAXES.
(a) The Company has paid or caused to be paid all federal, state,
local, foreign and other taxes, including without limitation income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp taxes,
11
transfer taxes and property taxes, whether or not measured in whole or in part
by net income, and all deficiencies, or other additions to tax, interest, fines
and penalties owed by it (collectively, "Taxes"), in the amounts indicated on
tax returns filed by the Company through the date hereof or in correspondence
received from any federal, state, local or foreign government taxing authority,
whether disputed or not (other than current taxes the liability for which is
adequately reserved for on the financial statements provided to the Parent
pursuant to SECTION 3.7 hereof).
(b) The Company has in accordance with applicable law filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof and all such returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. For every taxable period
of the Company, the Company has delivered or made available to Parent complete
and correct copies of all federal, state, local and foreign income tax returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company. Schedule 3.8 attached hereto sets forth all federal tax
elections under the Internal Revenue Code of 1986, as amended (the "Code"), that
are in effect with respect to the Company or for which an application by the
Company is pending.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting in writing or threatening to assert
against the Company any deficiency or claim for additional Taxes or a claim that
the Company is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax. The Company has not
entered into a closing agreement pursuant to SECTION 7121 of the Code.
(d) Except as set forth in SCHEDULE 3.8 attached hereto, there has
not been any audit of any tax return filed by the Company, no audit of any tax
return of the Company is in progress, and the Company has not been notified by
any tax authority that any such audit is contemplated or pending. Except as set
forth in SCHEDULE 3.8, no extension of time with respect to any date on which a
tax return was or is to be filed by the Company is in force, and no waiver or
agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes.
(e) (i) The Company has not consented to have the provisions
of Section 341(f)(2) of the Code applied to it, (ii) the Company has not agreed
to, and has not been requested by any governmental authority to, make any
adjustments under Section 481(a) of the Code by reason of a change in accounting
method or otherwise and (iii) the Company has never made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances would obligate it to make any payments, that will not be
deductible under SECTION 280G of the Code. The Company has disclosed on its
federal income tax returns all positions taken therein that could give rise to a
penalty for underpayment of federal Tax under SECTION 6662 of the Code. The
Company has never had any liability for unpaid Taxes because it is a member of
an "affiliated group" (as defined in SECTION 1504(a) of the Code). The Company
has never filed, nor has it ever been required to file, a consolidated, combined
or unitary tax return with any entity. The Company is not a party to any tax
sharing agreement.
12
(f) The Company computes its federal taxable income under the
accrual basis method of accounting.
(g) For purposes of this SECTION 3.8, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company as of
the respective balance sheet dates in the Company Financial Statements and all
accounts receivable arising thereafter or hereafter to the Closing Date, arose
or will arise from valid sales in the ordinary course of business. Except as set
forth in SCHEDULE 3.9, the Company has no accounts or loans receivable from any
person, firm or corporation which is affiliated with the Company. For purposes
hereof, "affiliate" means any Stockholder, or any business entity which
controls, or is controlled by, or is under common control with the Company.
3.10 INVENTORIES. The Company maintains less than $10,000 of inventory,
all saleable in the ordinary course and stated in accordance with GAAP.
3.11 ABSENCE OF CERTAIN CHANGES.
Since December 31, 1998, the Company has conducted its business only in
the ordinary course and consistent with past practices and except as disclosed
in SCHEDULE 3.11 there has not been:
(a) Any change in the properties, assets, liabilities, business,
operations, financial condition or prospects of the Company which change by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has been materially adverse with respect to the
Company;
(b) Except for the endorsement of checks in the ordinary course of
business any material contingent liability incurred by the Company as guarantor
or otherwise with respect to the obligations of others or any cancellation of
any material debt or claim owing to, or waiver of any material right of, the
Company;
(c) Any mortgage, encumbrance or lien placed on any of the
properties of the Company which remains in existence on the date hereof or will
remain on the Closing Date except for liens permitted by any current agreement
of the Company with respect to borrowed money;
(d) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any capital
assets of the Company costing more than $10,000;
(e) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting any of the properties, assets or
business of the Company;
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(f) Any declaration, setting aside or payment of any dividend by
the Company, or the making of any other distribution in respect of the capital
stock of the Company, any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock, any issuance or sale of any
securities convertible into or exchangeable for debt or equity securities of the
Company or any grant, issuance or exercise of options, warrants, subscriptions,
preemptive rights, agreements, arrangements or commitments of any kind for or
relating to the issuance, sale, registration or voting of any shares of capital
stock of any class or other equity interests of the Company;
(g) Any claim of unfair labor practices asserted against the
Company; any change in the compensation (in the form of salaries, wages,
incentive arrangements or otherwise) payable or to become payable by the Company
to any of its officers, employees, agents or independent contractors other than
customary merit or cost of living increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors; any entering into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any officer, director or employee of the
Company except for employment arrangements providing for salary or wages of less
than $20,000 per annum and any oral agreement terminable at will by the Company;
(h) Any change with respect to the officers or senior management
of the Company, any grant of any severance or termination pay to any officer or
employee of the Company;
(i) Any payment or discharge of a material lien or liability of
the Company which was not shown on the Company Financial Statements or incurred
in the ordinary course of business thereafter;
(j) Any obligation or liability incurred by the Company to any of
its officers, directors or stockholders, or any loans or advances made by the
Company to any of its officers, directors, stockholders, except normal
compensation and expense allowances payable to officers or employees;
(k) Any change in accounting methods or practices other than to
comply with new accounting pronouncements, credit practices or collection
policies used by the Company;
(l) Any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(m) Any agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or require the
Company to take any of the actions specified in paragraphs (i) through (xii)
above.
3.12 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are described in SCHEDULE 3.12 attached hereto,
indicating with respect to each of such arrangements the type of arrangement
maintained (such as checking account,
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borrowing arrangements, safe deposit box, etc.), the names in which the accounts
are held, the account number, and the name of each person, corporation, firm or
other entity authorized in respect thereof.
3.13 PATENTS, TRADE NAMES, TRADEMARKS, COPYRIGHTS AND PROPRIETARY
RIGHTS. All patents, patent applications, trademark registrations, trademark
registration applications, copyright registrations, copyright registration
applications and all material trade names, trademarks, copyrights and other
material proprietary rights owned by or licensed to the Company or used in its
respective business as presently conducted (the "Proprietary Rights") are listed
in SCHEDULE 3.13 attached hereto. All of the material patents, registered
trademarks and copyrights of the Company and all of the material patent
applications, trademark registration applications and copyright registration
applications of the Company have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified on said
schedule. Except as set forth in SCHEDULE 3.13: (a) use of said patents, trade
names, trademarks, copyrights or other proprietary rights in the ordinary course
of business as presently conducted does not require the consent of any other
person and (b) the Company has sufficient title or adequate rights or licenses
to use all material patents, trade names, trademarks, copyrights, or other
proprietary rights used by it in its business as presently conducted free and
clear of any attachments, liens, encumbrances or adverse claims. The Company has
not received written notice that its present or contemplated activities or
products infringe any such patents, trade names, trademarks or other proprietary
rights of others. Except as set forth in SCHEDULE 3.13: (i) no other person has
an interest in or right or license to use, or the right to license others to
use, any of said patents, patent applications, trade names, trademarks,
copyrights or other proprietary rights; (ii) there are no written claims or
demands of any other person pertaining thereto and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of the
Company in respect thereof; (iii) none of the patents, trade names, trademarks,
copyrights or other proprietary rights listed in said schedule is subject to any
outstanding order, decree, judgment or stipulation, or is being infringed by
others; and (iv) no proceeding charging the Company with infringement of any
adversely held patent, trade name, trademark or copyright has been filed or is
threatened to be filed.
3.14 TRADE SECRETS AND CUSTOMER LISTS. The Company has the right to use
in the ordinary course of its business as presently conducted, free and clear of
any claims or rights of others, all trade secrets, inventions, customer lists
and secret processes required for or incident to the manufacture or marketing of
all products presently sold, manufactured, licensed, under development or
produced by it, including products licensed from others. Any payments required
to be made by the Company for the use of such trade secrets, inventions,
customer lists and secret processes are described in SCHEDULE 3.14. The Company
is not using or in any way making use of any confidential information or trade
secrets of any third party, including without limitation, a former employer of
any present or past employee of the Company or any of the predecessors of the
Company.
3.15 CONTRACTS.
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(a) Except for contracts, commitments, plans, agreements and
licenses described in SCHEDULE 3.15 (complete and accurate copies of which have
been delivered to the Parent), the Company is neither a party to nor subject to:
(i) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, severance or termination pay, collective bargaining or the like, or any
contract or agreement with any labor union;
(ii) any employment contract or contract for services which
requires the payment of $20,000 or more annually or which is not terminable
within thirty (30) days by the Company without liability for any penalty or
severance payment other than pursuant to the Company's severance policies
existing on the date hereof;
(iii) any contract or agreement for the purchase of any
commodity, material or equipment except purchase orders in the ordinary course
for less than $10,000 each;
(iv) any other contracts or agreements creating any obligation
of the Company of $10,000 or more with respect to any such contract;
(v) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(vi) any contract or agreement which by its terms does not
terminate or is not terminable by the Company or any successor or assign within
six months after the date hereof without payment of a penalty;
(vii) any contract or agreement for the sale or lease of its
products or services not made in the ordinary course of business;
(viii) any contract with any sales agent or distributor of
products of the Company or any subsidiary;
(ix) any contract containing covenants limiting the freedom of
the Company to compete in any line of business or with any person or entity;
(x) any contract or agreement for the purchase of any fixed
asset for a price in excess of $10,000 whether or not such purchase is in the
ordinary course of business;
(xi) any license agreement (as licensor or licensee);
16
(xii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing of money
and any related security agreement;
(xiii) any contract or agreement with any officer, employee,
director or stockholder of the Company or with any persons or organizations
controlled by or affiliated with any of them;
(xiv) any partnership, joint venture, or other similar
contract, arrangement or agreement; or
(xv) any registration rights agreements, warrants, warrant
agreements or other rights to subscribe for securities, any voting agreements,
voting trusts, shareholder agreements or other similar arrangements or any stock
purchase or repurchase agreements or stock restriction agreements.
(b) All material contracts, agreements, leases and instruments to
which the Company is a party or by which the Company is obligated are valid and
are in full force and effect and constitute legal, valid and binding obligations
of the Company and the other parties thereto, enforceable in accordance with
their respective terms. Neither the Company nor any other party to any contract,
agreement, lease or instrument of the Company is in default in complying with
any provisions thereof, and no condition or event or facts exists which, with
notice, lapse of time or both would constitute a default thereof on the part of
either of the Company or on the part of any other party thereto in any such case
that could have a material adverse effect on the properties, assets, financial
condition or prospects of either of the Company. SCHEDULE 3.15 indicates whether
any of the agreements, contracts, commitments or other instruments and documents
described therein requires consent or approval to be transferred to the
Surviving Corporation as a result of the transactions contemplated herein.
3.16 LITIGATION. SCHEDULE 3.16 hereto lists all currently pending and
threatened litigation and governmental or administrative proceedings or
investigations to which the Company is a party. Except for matters described in
SCHEDULE 3.16, there is no litigation or governmental or administrative
proceeding or investigation pending or threatened against the Company which may
have an adverse effect on the properties, assets, business, financial condition
or prospects of the Company or which would prevent or hinder the consummation of
the transactions contemplated by this Agreement.
3.17 COMPLIANCE WITH LAWS. The Company has not received notice of a
violation or alleged violation of applicable statutes, ordinances, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Company, and except as set forth
in SCHEDULE 3.17 hereto, the Company is currently in compliance in all material
respects with all such statutes, ordinances, orders, rules or regulations, and
there is no valid basis for any claim that the Company is not in compliance with
any such statute, ordinance, order, rule or regulation.
17
3.18 INSURANCE. The Company has delivered to counsel to BOL true and
correct copies of each insurance policy (including policies providing property,
casualty, Liability, and workers' compensation coverage and bond and surety
arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years. With respect to each such insurance policy: (i) the policy is legal,
valid, binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby, (iii) neither the Seller nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (iv) no party to the policy has
repudiated any provision thereof. The Seller has been covered during the past
five (5) years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. SCHEDULE
3.18 describes any self-insurance arrangements affecting the Seller.
3.19 WARRANTY AND RELATED MATTERS. There are no existing or threatened
in writing, product liability, warranty or other similar claims against the
Company alleging that any of its products or services are defective or fail to
meet any product or service warranties except as disclosed in SCHEDULE 3.19
hereto. The Company has not received notice of any statements, citations,
correspondence or decisions by any Governmental Entity stating that any product
manufactured, marketed or distributed at any time by the Company (the "Company
Products") is defective or unsafe or fails to meet any product warranty or any
standards promulgated by any such Governmental Entity. There have been no
recalls ordered by any such Governmental Entity with respect to any Company
Product. There is no (i) fact relating to any Company Product that may impose
upon the Company a duty to recall any Company Product or a duty to warn
customers of a defect in any Company Product, (ii) latent or overt design,
manufacturing or other defect in any Company Product, or (iii) liability for
warranty or other claim or return with respect to any Company Product except in
the ordinary course of business consistent with the past experience of the
Company for such kind of claims and liabilities.
3.20 FINDER'S FEES. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company or the Stockholders.
3.21 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 3.21 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from Governmental Entities in order for
the Company to conduct its business. The Company has obtained all the Approvals,
which are valid and in full force and effect. Except as disclosed on SCHEDULE
3.21, none of the Approvals is subject to termination by their express terms as
a result of the execution of this Agreement by the Company or the consummation
of the Merger, and no further Approvals will be required in order to continue to
conduct the business currently conducted by the Company subsequent to the
Closing. Except as disclosed in SCHEDULE 3.21 or in any other schedule hereto,
the Company is neither subject to nor bound by any agreement, judgment, decree
or order which may materially and adversely affect its properties, assets,
business, financial condition or prospects.
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3.22 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 3.22 hereto, no Stockholder, officer, employee or director of the
Company and none of their respective parents, grandparents, spouses, children,
siblings or grandchildren owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor, supplier or customer of the Company
or any organization, person or entity with whom the Company is doing business.
3.23 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 3.23 sets forth a list of every Employee Program (as
defined below) that has been maintained (as such term is further defined below)
by the Company at any time during the three-year period ending on the date
hereof.
(b) Each Employee Program which has been maintained by a Company
and which has at any time been intended to qualify under SECTION 401(a) or
501(c)(9) of the Code, has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing (or, if earlier, the
date that all of such Employee Program's assets were distributed). No event or
omission has occurred which would cause any such Employee Program to lose such
qualification under the applicable Code section.
(c) Except as otherwise disclosed on SCHEDULE 3.23, there has not
been any failure of any party to comply with any laws applicable to or the terms
of any Employee Programs that have been maintained by the Company, except for
any failures to comply that, individually or in the aggregate, would not have a
material adverse effect on the properties, assets, business, financial condition
or prospects of the Company. With respect to any Employee Program now or
heretofore maintained by the Company, there has occurred no "prohibited
transaction," as defined in SECTION 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or SECTION 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including without limitation
through any obligation of indemnification or contribution) in any taxes,
penalties or other liability to the Company or any Affiliate (as defined below).
No litigation, arbitration, or governmental administrative proceeding or
investigation or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee
Program.
(d) Neither the Company nor any Affiliate has ever maintained any
Employee Program subject to Title IV of ERISA.
(e) Except as otherwise disclosed on SCHEDULE 3.23, with respect
to each Employee Program maintained by the Company within the three years
preceding the date hereof, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Parent: (i) all documents embodying or
19
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the date hereof; (ii) the most recent IRS determination or approval letter
with respect to such Employee Program under Code SECTION 401 or 501(c)(9), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; and (vi) any documents evidencing any loan to an Employee
Program that is a leveraged employee stock ownership plan.
(f) Each Employee Program maintained by the Company as of the date
hereof is subject to amendment or termination by the Board of Directors of the
Company without any further liability or obligation on the part of the Company
to make further contributions to any trust maintained under any such Employee
Program following such termination and the Company has not made any written or
oral representations to the contrary to its employees.
(g) For purposes of this SECTION 3.23:
(i) "Employee Program" means (a) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; and (b) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in subsection (a) above. In
the case of an Employee Program funded through an organization described in Code
Section 501(c)(9), each reference to such Employee Program shall include a
reference to such organization;
(ii) an entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries);
(iii) an entity is an "Affiliate" of a Company for purposes of
this SECTION 3.23 if it would have ever been considered a single employer with
the Company under ERISA SECTION 4001(b) or part of the same "controlled group"
as the Company for purposes of ERISA Section 302(d)(8)(c) and
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
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3.24 ENVIRONMENTAL MATTERS.
(a) Except as used in connection with routine maintenance and as
set forth in SCHEDULE 3.24 hereto, (i) the Company has never generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below); (ii) no Hazardous Material (as defined below) has ever been
or is threatened to be spilled, released, or disposed of at any site presently
or formerly owned, operated, leased, or used by the Company, or has ever come to
be located in the soil or groundwater at any such site; (iii) no Hazardous
Material has ever been transported from any site presently or formerly owned,
operated, leased, or used by the Company for treatment, storage, or disposal at
any other place; (iv) the Company does not presently own, operate, lease, or
use, nor has it previously owned, operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any Governmental Entity on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company in connection with the
presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 3.24 hereto, (i) the Company
has no liability under, nor has the Company ever violated in any material
respect, any Environmental Law (as defined below); (ii) any property owned,
operated, leased, or used by the Company and any facilities and operations
thereon are presently in compliance in all material respects with all applicable
Environmental Laws; (iii) the Company has never entered into or been subject to
any judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any request
for information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law (as defined below);
and (iv) the Company nor any Company Stockholder has any reason to believe that
any of the items enumerated in clause (iii) of this paragraph will be
forthcoming.
(c) Except as set forth in SCHEDULE 3.24 hereto, no site owned,
operated, leased, or used by the Company contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls ("pcb's") or
equipment containing pcb's, or any urea formaldehyde foam insulation.
(d) For purposes of this Section 3.24, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, or contaminant,
as defined or regulated under any Environmental Law or any other substance which
may pose a threat to the environment or to human health or safety; (ii)
"Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental laws, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, existing as of the date hereof; and (iv) the
Company shall mean and include the Company, its predecessors and all other
entities for whose conduct the Company is or may be held responsible under any
Environmental Law.
3.25 LISTS OF CERTAIN EMPLOYEES AND SUPPLIERS.
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(a) SCHEDULE 3.25 hereto contains a list of all current directors
and officers of the Company and a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive base salary from the Company during the current fiscal year of $20,000
or more. In each case such schedule includes the current job title and current
base salary of each such individual.
(b) SCHEDULE 3.25 sets forth a true and complete list of all
suppliers of the Company to whom the Company made payments aggregating $25,000
or more during the most recent complete fiscal year, showing, with respect to
each, the name, address and dollar volume involved.
3.26 EMPLOYEES; LABOR MATTERS. As of the date hereof, the Company
employed the number of full-time employees and part-time employees described on
SCHEDULE 3.26. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth in SCHEDULE 3.26, upon
termination of the employment of any of said employees, the Company will not by
reason of the Merger be liable to any of said employees for so-called "severance
pay" or any other payments. Except as set forth in SCHEDULE 3.26 attached
hereto, the Company has no policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment. The Company is in compliance with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. No charges of employment
discrimination or unfair labor practices have been brought against the Company,
nor are there any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations existing, pending or threatened against or
involving the Company. There are no grievances, complaints or charges that have
been filed against the Company under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement). No collective bargaining
agreements are in effect or are currently being or are about to be negotiated by
the Company. The Company has not received written notice of pending or
threatened changes with respect to the senior management or key supervisory
personnel of the Company.
3.27 CUSTOMERS. SCHEDULE 3.27 sets forth any customer who accounted for
more than 5% of the sales of the Company for the most recent complete fiscal
year of the Company (collectively, the "Customers"). No Customer has given
notice to the Company of its intention to terminate, to cancel or otherwise
materially and adversely modify its relationship with the Company or to decrease
materially or limit its usage or purchase of the services or products of the
Company.
3.28 Y2K. The Company has taken all necessary action to assess,
evaluate and correct all of the hardware, software, embedded microchips and
other processing capabilities of computer and telecommunication systems it uses,
either directly or indirectly, including but not limited to computerized
services provided by third parties such as billing and payroll services, to
ensure that such systems will be able to function accurately and without
interruption or ambiguity using date information before, during and after
January 1, 2000.
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3.29 DISCLOSURE. This Agreement, including the Schedules hereto
prepared by the Company, together with the other information furnished to BOL by
the Company and the Stockholders in connection herewith, does not contain an
untrue statement of material fact or omit to state a material fact necessary to
make the statements herein and therein, in light of the circumstances under
which they were made, not misleading.
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the
Stockholders covenant and agree as set forth in this Section 4.
4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Merger Effective Date, the Stockholders will cause the Company to do and the
Company will do the following, unless Parent shall otherwise consent in writing:
(a) conduct its business only in the ordinary course consistent
with past practices, refrain from changing or introducing any method of
management or operations except in the ordinary course of business and in a
manner consistent with past practices and maintain levels of working capital
consistent with past practices;
(b) refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from purchasing
or selling any capital asset costing more than $5,000 and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of its properties or
assets;
(c) refrain from incurring or modifying any contingent liability as
a guarantor or otherwise with respect to the obligations of others, and from
incurring or modifying any other contingent or fixed obligations or liabilities
except in the ordinary course of business and in a manner consistent with past
practices;
(d) refrain from making any change in its incorporation documents,
by-laws or authorized or issued capital stock or from acquiring any securities
issued by any other business organization other than short-term investments in
the ordinary course of business;
(e) refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock, making any direct
or indirect redemption, purchase or other acquisition of its capital stock,
issuing, granting, awarding, selling, pledging, disposing of or encumbering or
authorizing the issuance, grant, award, sale, pledge, disposition or encumbrance
of any shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class of the Company or entering into any agreement or
commitment with respect to any of the foregoing;
(f) refrain from making any change in the compensation payable or
to become payable to any of its officers, employees or agents, except for
scheduled increases in
23
salary or wages in the ordinary course of business that are consistent with past
practices, or granting any severance or termination pay to, or establishing,
adopting or entering into any agreement or arrangement providing for severance
or termination pay to, or entering into or amending any employment, or other
agreement or arrangement with, any director, officer or other employee of the
Company or any Stockholder or establishing, adopting or entering into or
amending any collective bargaining, bonus, incentive, deferred compensation,
profit sharing, stock option or purchase, insurance, pension, retirement or
other employee benefit plan;
(g) refrain from making any change in its borrowing arrangements or
modifying, amending or terminating any of its contracts except in the ordinary
course of business, or waiving, releasing or assigning any material rights or
claims;
(h) use reasonable efforts to prevent any change with respect to
its management and supervisory personnel or banking arrangements;
(i) use reasonable efforts to keep intact its business organization
and to preserve the goodwill of and business relationships with all suppliers,
customers and others having business relations with it, and to maintain its
properties and facilities, including those held under leases, in as good a
working order and condition as on the date hereof, ordinary wear and tear
excepted;
(j) use reasonable efforts to have in effect and maintain at all
times all insurance of the kind, in the amount and with the insurers set forth
in SCHEDULE 3.18 or equivalent insurance with any substitute insurers approved
by Parent;
(k) refrain from changing accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable) or from making any tax
election or settling or compromising any federal, state, local or foreign income
tax liability;
(l) refrain from entering into any executory agreement, commitment
or undertaking to do any of the activities prohibited by the foregoing
provisions; and
(m) permit Parent and its authorized representatives (including
without limitation Parent's attorneys, accountants, and pension and
environmental consultants) to have full access to all of its properties, assets,
books, records, business files, executive personnel, tax returns, contracts and
documents and furnish to Parent and its authorized representatives such
financial and other information with respect to its business or properties as
Parent may from time to time reasonably request.
4.3 CONSENTS AND APPROVALS. The Company and the Stockholders shall use
their best efforts to obtain or cause to be obtained prior to the Closing Date
all necessary consents and approvals to the performance of the obligations of
the Company and the Stockholders under this Agreement, including, without
limitation, the consents and authorizations described in SCHEDULE 3.15 or
SCHEDULE 4.3 and such other authorizations, waivers, consents and permits as may
be necessary to transfer to Parent and/or to retain in full force and effect
without penalty subsequent
24
to the Effective Time all contracts, permits, licenses and franchises of or
applicable to the businesses of the Company.
4.4 ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. On the date hereof the
Stockholders will execute and deliver a unanimous written consent in lieu of a
meeting in accordance with applicable law for the purpose of authorizing the
transactions contemplated hereby. The recommendation of the Board of Directors
will remain in effect at all times prior to the Effective Time. The Stockholders
hereby agree to vote all shares of capital stock of the Company held of record
by him or over which the exercise voting control in favor of the Merger, this
Agreement and the consummation of the transactions contemplated hereby and shall
not demand appraisal or dissenter's rights in connection with the merger under
the business corporation laws of the State of New York.
4.5 EXCLUSIVE DEALING. Unless and until the earlier to occur of the
Closing Date or the termination of this Agreement pursuant to Section 9, neither
the Company nor the Stockholders shall, nor shall any of them permit any
director, officer, employee or agent of either of them to, directly or
indirectly, (i) take any action to solicit, initiate submission of or encourage,
proposals or offers from any person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) a portion of the assets
of, or any equity interest in, the Company or any merger or business combination
with the Company (an "Acquisition Proposal"), (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal with any person or
entity other than Parent and BOL and their representatives, or (iii) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do any of the foregoing.
4.6 NO SALES OF CAPITAL STOCK. Between the date of this Agreement and
the Effective Time, the Stockholders shall neither sell, exchange, deliver,
assign, pledge, encumber nor otherwise transfer or dispose of any Company Stock
owned beneficially or of record by the Stockholders, nor grant any right of any
kind to acquire, dispose of, vote or otherwise control in any manner such shares
of Company Stock; provided, however, that notwithstanding anything to the
contrary stated herein, any transferee, executor, heir, legal representative,
successor or assign of the Stockholders shall be bound by this Agreement.
4.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to the Parent of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the Company or the Stockholders contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of the Stockholders or the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. The delivery of any notice pursuant to
this SECTION 4.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, (ii) modify the
conditions set forth in SECTION 7 or elsewhere or (iii) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
4.8 AMENDMENT OF SCHEDULES. The Company and the Stockholders agree
that, with respect to the representations and warranties contained in this
Agreement, the Company and the
25
Stockholders shall have the continuing obligation until the Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described on the
Schedules. Notwithstanding the foregoing sentence, no amendment or supplement to
a SCHEDULE prepared by the Company or the Stockholders that constitutes or
reflects an event or occurrence that would be reasonably likely to have a
material adverse effect may be made unless the Parent consents to such amendment
or supplement.
4.9 FURTHER ASSURANCES. The Company and the Stockholders agree to
execute and deliver, or cause to be executed and delivered, such further
instruments or documents or take such other action as may be reasonably
necessary or convenient to carry out the transactions contemplated hereby.
Section 5. REPRESENTATIONS AND WARRANTIES OF BOL AND THE PARENT.
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As of the date hereof,
the Parent and BOL hereby represents and warrants to the Stockholders and the
Company as set forth in this Section 5.
5.2 ORGANIZATION OF BOL AND THE PARENT. Each of the Parent and BOL are
a corporations duly organized, validly existing and in good standing under the
laws of its respective state of incorporation with full corporate power and
authority to conduct is businesses in the manner as now conducted.
5.3 AUTHORITY. All necessary corporate action has been taken by BOL and
the Parent to authorize the execution, delivery and performance of this
Agreement and each agreement, document and instrument to be executed and
delivered by BOL and the Parent pursuant to this Agreement. This Agreement and
each agreement, document and instrument to be executed and delivered by BOL and
the Parent pursuant to this Agreement (to the extent it contains obligations to
be performed by BOL and the Parent) constitutes, or when executed and delivered
by BOL and the Parent will constitute, valid and binding obligations of BOL and
the Parent enforceable in accordance with their respective terms.
5.4 NO CONFLICTS. The execution, delivery and performance by BOL and
the Parent of this Agreement and each such other agreement, document and
instrument: (i) does not and will not violate any provision of its respective
the Certificate of Incorporation or bylaws of BOL and the Parent; and (ii) will
not result in a breach of, constitute a default under, accelerate any obligation
under, or give rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award, whether written or oral, to which BOL and/or Parent is a
party or by which the property of BOL and/or Parent is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets of BOL and/or
Parent, except where such breach, default, acceleration or right of termination
would not have a material adverse effect on the properties, assets, business,
financial condition or prospects of
26
BOL and/or Parent, and would not result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the assets of BOL and/or Parent.
5.5 PARENT STOCK. The Parent Stock to be delivered to the Stockholders
at the Closing, when delivered in accordance with the terms of this Agreement,
will constitute valid and legally issued shares of the Common Stock of the
Parent, fully paid and non-assessable. Such Parent Stock will constitute
restricted securities and will be subject to the lock-up provisions and other
transfer restrictions imposed under this Agreement and under applicable federal
and state securities laws.
5.6 LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or threatened against BOL or
the Parent which may have an adverse effect on the properties, assets, business,
financial condition or prospects of BOL and the Parent and would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
5.7 COMPLIANCE WITH LAWS. Neither BOL nor Parent has received notice of
a violation or alleged violation of applicable statutes, ordinances, orders,
rules and regulations promulgated by any federal, state, municipal or other
governmental authority, which violation or alleged violation would have a
material adverse effect on the business of BOL or the Parent.
Section 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BOL.
6.1 INTRODUCTION. The obligations of BOL to consummate this Agreement
and the transactions contemplated hereby are subject to the fulfillment, prior
to or at the Closing, of the conditions set forth in this Section 6.
6.2 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date, BOL
shall have had sufficient time to review the unaudited balance sheets of the
Company as of the last day of the month ended immediately prior to the Closing
Date, or such partial period as may be acceptable to Parent, and the unaudited
statements of income, cash flow and stockholders' equity for the period then
ended, disclosing no material change in the financial condition of the Company
or the results of its operations from the financial statements originally
furnished by the Company as set forth in SCHEDULE 3.7.
6.3 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial position or business of the Company shall have
occurred and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, since the
Company Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and BOL shall have
received on the Closing Date a certificate signed by the President of the
Company and the Stockholders to such effect.
6.4 DUE DILIGENCE AND REGULATORY REVIEW. BOL shall have completed to
its satisfaction a due diligence investigation of the Company and its prospects,
business, assets, contracts, rights, liabilities and obligations, including a
review of the practices and procedures of the Company with respect to compliance
with contracts and federal, state and local laws and
27
regulations governing the operations of the Company. Such review shall be
satisfactory in all respects to the Parent, in its sole discretion.
6.5 OPINION OF COUNSEL. BOL shall have received an opinion from
Xxxxxxxx, Xxxxxxx & Xxxxxx, counsel to the Company and the Stockholders, dated
the Closing Date, in form and substance satisfactory to BOL, to the effect that:
(a) the Company has been duly organized and is validly subsisting
in good standing under the laws of the State of New York.
(b) the authorized and outstanding capital stock of the Company is
as represented by the Stockholders in this Agreement and each share of such
stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(c) to the knowledge of such counsel, the Company has no
outstanding options, warrants, calls, conversion rights or other commitments of
any kind to issue or sell any of its capital stock;
(d) this Agreement has been duly authorized, executed and delivered
by the Company and the Stockholders and constitutes a valid and binding
agreement of such parties enforceable against them in accordance with its terms
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors;
(e) except to the extent set forth on SCHEDULE 3.16, to the
knowledge of such counsel, there are no claims, actions, suits or proceedings
pending, or threatened against or affecting the Company or the Stockholders, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located;
(f) no notice to, consent, authorization, approval or order of any
court or governmental agency or body or of any other third party is required in
connection with the execution, delivery or consummation of this Agreement by the
Stockholders or for the merger of the Company with and into BOL;
(g) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's Certificate of
Incorporation or bylaws or of any lease, instrument, license, permit or any
other agreement to which the Company is a party or by which the Company is
bound; and
(h) any other matters incident to the matters set forth herein as
reasonably required by BOL.
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6.6 ADDITIONAL LIABILITIES AND OBLIGATIONS. The Stockholders shall have
delivered to BOL a certificate dated the Closing Date, setting forth (i) all
material liabilities and obligations of the Company arising since the Company
Balance Sheet Date and (ii) showing all material contracts and agreements,
together with copies thereof, entered into by the Company since the Company
Balance Sheet Date.
6.7 GOOD STANDING CERTIFICATES; CERTIFIED COPY OF THE CERTIFICATE OF
INCORPORATION. The Company shall have delivered to BOL certificates, dated as of
a date no earlier than twenty (20) days prior to the Closing Date, duly issued
by the Secretary of State and the Department of Revenue and Finance of the State
of New York and of any other state in which the Company is authorized to do
business, showing that the Company is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
the Company for all periods prior to the dates of such certificates have been
filed and paid. The Company shall also have delivered to BOL prior to the
Closing a recent copy of its Certificate of Incorporation and all amendments
thereto duly certified by the Secretary of the State of New York.
6.8 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Company and the Stockholders contained in Section 3 and
elsewhere in this Agreement shall be true and correct on and as of the Closing
Date, with the same effect as though made on and as of the Closing Date; the
Company and the Stockholders shall, on or before the Closing Date, have
performed and satisfied all agreements and conditions hereunder which by the
terms hereof are to be performed and satisfied by the Company or the
Stockholders on or before the Closing Date; and the Company and the Stockholders
shall have delivered to the Parent a certificate dated the Closing Date signed
by the Company's President and by the Stockholders to the foregoing effect.
6.9 APPROVALS AND CONSENTS. The Company and the Stockholders shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by them in connection with the
execution and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the businesses of the Company
subsequent to the Effective Time, and the Company and the Parent shall have
received all required authorizations, waivers, consents and permits to permit
the consummation of the transactions contemplated by this Agreement, in form and
substance reasonably satisfactory to the Parent, from all third parties,
including, without limitation, approvals required under federal and state
securities laws and/or the securities and Exchange Commission, state "Blue Sky"
laws, other applicable governmental authorities and regulatory agencies,
lessors, lenders and contract parties, required in connection with the Merger or
the Company's permits, leases, licenses and franchises, to avoid a breach,
default, termination, acceleration or modification of any material agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award as a result of
the execution or performance of this Agreement, or otherwise in connection with
the execution and performance of this Agreement.
6.10 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or
29
the complete consummation of the transactions contemplated by this Agreement,
and which would in the reasonable judgment of the Parent or BOL make it
inadvisable to consummate such transactions, and no law or regulation shall be
in effect and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
6.11 PROCEEDINGS SATISFACTORY TO BOL. All proceedings to be taken by
the Company and the Stockholders in connection with the consummation of the
Closing on the Closing Date and the other transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transaction contemplated hereby reasonably requested by BOL shall be
reasonably satisfactory in form and substance to BOL and its counsel.
6.12 EMPLOYMENT AGREEMENT. Each of the Stockholders shall have executed
and delivered individual employment agreements with BOL in the form attached
hereto as EXHIBIT 6.12(a), EXHIBIT 6.12(b) and EXHIBIT 6.12(c) (collectively,
the "Employment Agreements").
6.13 ESCROW AGREEMENT. The Stockholders shall have executed and
delivered the Escrow Agreement.
6.14 LEASE. BOL shall have executed a lease with the landlord of the
office space currently leased by the Company in the form attached hereto as
Exhibit 6.14 (the "Lease").
6.15 MATRIX. Matrix Systems Corporation, a New York Corporation which
is owned by the Stockholders, shall have terminated all of its employees and BOL
shall have hired certain of such former employees as it may, in its sole
discretion, need to operate the Surviving Corporation, provided, however, that
BOL shall have no obligation to hire any such employees nor shall it assume any
liability relating to such employee, including, without limitation liability for
vacation, sick time or other employee benefits. .
Section 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS.
7.1 INTRODUCTION. The obligations of the Company and the Stockholders
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing Date, of the following
conditions (any one or more of which may be waived in whole or in part by the
Company and the Stockholders):
7.2 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of BOL contained in Section 5 shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date; BOL shall, on or before the Closing Date,
have performed and satisfied all agreements and conditions hereunder which by
the terms hereof are to be performed and satisfied by BOL on or before the
Closing Date; and BOL shall have delivered to the Company a certificate signed
by the President of BOL and dated as of the Closing Date certifying to the
foregoing effect.
30
7.3 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions as contemplated by this Agreement, and which would in the
reasonable judgment of the Company make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and no court order
shall have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
7.4 EMPLOYMENT AGREEMENTS. BOL shall have executed and delivered the
Employment Agreements.
7.5 ESCROW AGREEMENT. BOL shall have executed and delivered the Escrow
Agreement.
7.6 LEASE. BOL shall have executed and delivered the Lease.
Section 8. PARENT STOCK - TRANSFER RESTRICTIONS.
8.1 LOCK-UP. In addition to applicable federal and state securities
laws restricting the public sale of the Parent Stock to be issued to the
Stockholders hereunder, the Stockholders hereby irrevocably agrees that for a
period of (i) one (1) year after the Closing Date with respect to 100% of such
stock, and (ii) two (2) years after the Closing Date with respect to 50% of such
stock, the Stockholders will not offer, pledge, sell, assign or otherwise
transfer directly or indirectly, any of the Parent Stock or enter into any
agreement that transfers or assigns, in whole or in part, any of the economic
consequences of ownership of the shares of Parent Stock received hereunder (such
restrictions adjusted for any stock splits, recapitalizations, mergers or other
similar events). The Stockholders agree that the foregoing shall be binding upon
the Stockholder and their respective successors, assigns, heirs, and personal
representatives.
8.2 UNREGISTERED STOCK; INVESTMENT INTENT. The Stockholders acknowledge
and agree that the shares of Parent Stock to be delivered to the Stockholders
pursuant to this Agreement have not been and will not be registered under the
Securities Act of 1933, as amended (the "Act") and therefore may not be resold
without compliance with the Act. The Stockholders represent and warrant that the
Parent Stock to be acquired by Stockholders pursuant to this Agreement is being
acquired solely for their own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. The Stockholders covenant, warrant and represent
that none of the shares of Parent Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the Securities and Exchange
Commission and applicable state securities laws.
8.3 ABLE TO BEAR RISK; SOPHISTICATED AND ACCREDITED INVESTORS;
INFORMATION. Each of the Stockholders represent and warrant that he/she are able
to bear the economic risk of an
31
investment in Parent Stock acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment. Each of the Stockholders further
represent and warrant that he/she (i) is an "accredited investor" within the
meaning of Regulation D under the Act; (ii) fully understands the nature, scope
and duration of the limitations on transfer contained in this Agreement, (iii)
have received a copy of the Company's information statement dated within five
(5) business days of the date of this Agreement (the "Information Statement");
and (iv) have such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect his or her own interests in
connection with the acquisition of the Parent Stock. The Stockholders represent
and warrant that they have had an adequate opportunity to ask questions and
receive answers from the officers of the Parent concerning any and all matters
relating to the acquisition of Parent Stock as contemplated by this Agreement
including, without limitation, the background and experience of the officers and
directors of the Parent, the plans for the operations of the business of the
Parent and its affiliates and information disclosed in the Information
Statement. The Stockholders have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to his
satisfaction.
8.4 RESTRICTIVE LEGENDS. The certificates evidencing the Parent Stock
to be received by the Stockholders hereunder will bear legends substantially in
the form set forth below and containing such other information as the Parent may
deem appropriate. References in such legend to "THE COMPANY" shall refer to the
Parent.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY
STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE 1933 ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO
THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH REGISTRATION
IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE FURTHERMORE SUBJECT TO
THE LOCK-UP PROVISIONS CONTAINED IN SECTION 8 OF THAT CERTAIN AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION WITH THE COMPANY DATED AS OF
_____________, A COPY OF WHICH MAY BE OBTAINED BY CONTACTING THE
SECRETARY OF THE COMPANY
In addition, such certificates shall also bear such other legends as
counsel for the Parent reasonably determines are required under the applicable
laws of any state.
Section 9. TERMINATION OF AGREEMENT; EFFECT OF TERMINATION.
32
9.1 TERMINATION. This Agreement may be terminated any time prior to the
Closing Date solely by:
(a) mutual consent of the boards of directors of BOL and the
Company;
(b) either the Stockholders and the Company, on the one hand, or by
BOL, on the other hand, if
(i) the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by January 15, 2000, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date; or
(ii) if a material breach or default shall be made by the other
party in the observance of or in the due and timely performance of any of the
covenants or agreements contained herein, and the curing of such default shall
not have been made on or before the Closing Date.
9.2 LIABILITIES IN THE EVENT OF TERMINATION. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
including, but not limited to, legal and audit costs and out of pocket expenses.
SECTION 10. NON-COMPETITION. For a period of three (3) years from and after the
Closing Date, each of the Stockholders shall not directly or indirectly, (i)
seek, obtain or accept a "Competitive Position" in the "Restricted Territory"
with a "Competitor" of the Company (as such terms are hereafter defined), or
(ii) solicit, directly or indirectly, any customers, clients, accounts,
officers, employees, agents or representatives of the Company, BOL, the Parent,
or its affiliates. For purposes of this Agreement, a "Competitor" of the Company
means any business, individual, partnership, joint venture, association, firm,
corporation or other entity engaged, wholly or partly, in the business of
selling internet access service, web site design, web hosting services, long
distance or local telephone service, or in any related Internet or
telecommunications business which the Company, the Parent or their affiliates
may engage in or actively plan to engage in from time to time during the term of
this covenant; the "Restricted Territory" means the New England States, New
York, Ohio, Pennsylvania, New Jersey, Delaware, Maryland or in any other state
in which the Surviving Corporation, the Parent or their affiliates are or
actively plan to do business; a "Competitive Position" means any employment with
any Competitor of the Company or self-employment whereby Stockholders will use
or are likely to use any Confidential Information (as defined below), or whereby
the Stockholders have duties for such Competitor that are the same or
substantially similar to those actually performed by Stockholders for the
Company under the terms of employment with the Surviving Corporation. Nothing
contained in this Section 10 is intended to prevent either Stockholder from
investing in stock or other securities listed on a national securities exchange
or actively traded on the over the counter market or any corporation engaged,
wholly or partly, in the sale of
33
telecommunications products or services; provided, however, that either
Stockholder and members of his immediate family shall not, directly or
indirectly, hold more than a total of two percent (2%) of all issued and
outstanding stock or other securities of any such corporation. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section is invalid or unenforceable, the parties hereto agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
11.1 THE STOCKHOLDERS. The Stockholders recognize and acknowledge that
they have had in the past, currently have in the future may have access to
certain confidential information relating to the Company, the Parent and BOL,
including, but not limited to, operational policies, customer lists, and pricing
and cost policies, that are valuable, special and unique assets of the Company,
the Parent and BOL (collectively, "Confidential Information"). The Stockholders
agree that they will not use or disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of BOL who need to know
such information in connection with the transactions contemplated hereby, who
have been informed of the confidential nature of such information and who have
agreed to keep such information confidential as provided hereby, and (b)
following the Closing, such information may be disclosed by the Stockholders as
is required in the course of performing its duties for the Surviving Corporation
unless (i) such information becomes known to the public generally through no
breach by the Stockholders of this covenant, (ii) disclosure is required by law
or the order of any governmental authority under color of law or is necessary in
order to secure a consent or approval to consummate the transactions
contemplated hereby, provided, that prior to disclosing any information pursuant
to this clause (ii), the Stockholders shall give prior written notice thereof to
BOL and provide BOL with the opportunity to contest such disclosure, or (iii)
the disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party and the
same prior disclosure set forth immediately above is given. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
section, BOL shall be entitled to an injunction restraining the Stockholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting BOL from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event that the transactions contemplated herein are not consummated, the
Stockholders shall return to BOL as soon as possible all documents containing
confidential information about the Parent.
11.2 BOL. BOL recognizes and acknowledges that it has in the past and
currently has access to certain confidential information relating to the
Company, such as operational policies, customer lists, and pricing and cost
policies, that are valuable, special and unique assets of the Company. BOL
agrees that, prior to the Closing, or if the transactions contemplated by this
34
Agreement are not consummated, it will not use or disclose such confidential
information to their own benefit except in furtherance of the transactions
contemplated by this Agreement or disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to the Stockholders and to authorized representatives of
the Company or BOL who need to know such information in connection with the
transactions contemplated hereby, who have been informed of the confidential
nature of such information and who have agreed to keep such information
confidential as provided hereby, unless (i) such information becomes known to
the public generally through no breach by BOL of this covenant, (ii) disclosure
is required by law or the order of any governmental authority under color of law
or is necessary in order to secure a consent or approval to consummate the
transactions contemplated hereby, provided, that prior to disclosing any
information pursuant to this clause (iii), BOL shall, if possible, give prior
written notice thereof to the Company and the Stockholders and provide the
Company and the Stockholders with the opportunity to contest such disclosure, or
(iv) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party and the
same prior disclosure set forth immediately above is given. In the event of a
breach or threatened breach by BOL of the provisions of this Section, the
Company and the Stockholders shall be entitled to an injunction restraining BOL
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event that the transactions
contemplated herein are not consummated, the Parent and BOL shall return to the
Company within a reasonable time all documents containing confidential
information about the Company.
11.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 11.1 and 11.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
11.4 SURVIVAL. The obligations of the parties under this Article 11
shall survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated herein on the Closing Date.
Section 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders, on behalf
of themselves and their respective successors, executors, administrators,
estates, heirs and permitted assigns, agree subsequent to the Effective Time to
indemnify and hold harmless the Surviving Corporation and their respective
officers, directors, employees and agents (individually, a "Parent Indemnified
Party" and collectively, the "Parent Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims
35
and including all amounts paid in investigation, defense or settlement of the
foregoing) sustained, suffered or incurred by or made against any Parent
Indemnified Party (a "Loss" or "Losses"), arising out of, based upon or in
connection with:
(a) any breach of any representation or warranty made by the
Company or the Stockholders in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such
representations or warranties (collectively, "Parent Representation and Warranty
Claims");
(b) any breach of any covenant or agreement made by the Company
or the Stockholders in this Agreement or in any schedule, exhibit, certificate,
agreement or other instrument delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement;
(c) with respect to taxes of the Company incurred with respect
to any Pre-Closing Tax Period (as defined below) to the extent such liability
exceeds the amounts accrued therefor and disclosed to BOL in SCHEDULE 3.7 hereto
(it being understood that such SCHEDULE shall be updated as of the Closing to
reflect tax accruals as of such date consistent with the Company's past
practices); the term "Pre-Closing Tax Period" shall mean all taxable periods
ending on or before the Closing Date and the portion (ending on the Closing
Date) of any taxable period that includes (but does not end on) the Closing
Date; or
(d) any claim, action, proceeding, liability or other matter
arising from or related to Matrix Systems Corporation.
Claims under clauses (a) through (d) of this SECTION 12.1 are hereinafter
collectively referred to as "Parent Indemnifiable Claims". The rights of Parent
Indemnified Parties to recover indemnification in respect of any occurrence
referred to in clauses (b) and (c) of this SECTION 12.1 shall not be limited by
the fact that such occurrence may not constitute an inaccuracy in or breach of
any representation or warranty referred to in clause (a) of this SECTION 12.1.
12.2 NOTICE; DEFENSE OF CLAIMS.
Promptly after receipt by a Parent Indemnified Party of notice of any
claim, liability or expense to which the indemnification obligations hereunder
would apply, the Parent Indemnified Party shall give notice thereof in writing
to the Stockholders, but the omission to so notify the Stockholders promptly
will not relieve the Stockholders from any liability except to the extent that
the Stockholders shall have been prejudiced as a result of the failure or delay
in giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted. If within twenty (20) days after receiving such
notice the Stockholders give written notice to the Parent Indemnified Party
stating that (i) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (ii) that it disputes
and intends to defend against such claim, liability
36
or expense at its own cost and expense, then counsel for the defense shall be
selected by the Stockholders (subject to the consent of the Parent Indemnified
Party which consent may not be unreasonably withheld) and the Parent Indemnified
Party shall not be required to make any payment with respect to such claim,
liability or expense as long as the Stockholders are conducting a good faith and
diligent defense at their own expense; provided, however, that the assumption of
defense of any such matters by the Stockholders shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The Stockholders shall have the right, with the consent of the
Parent Indemnified Party, which consent shall not be unreasonably withheld, to
settle any Parent Indemnified Claims by third parties which are susceptible to
being settled provided its obligation to indemnify the Parent Indemnified Party
therefor will be fully satisfied. The Stockholders shall keep the Parent
Indemnified Party apprised of the status of the claim, liability or expense and
any resulting suit, proceeding or enforcement action, shall furnish the Parent
Indemnified Party with all documents and information that the Parent Indemnified
Party shall reasonably request and shall consult with the Parent Indemnified
Party prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, the Parent Indemnified Party shall at
all times have the right to fully participate in such defense at its own expense
directly or through counsel; provided, however, if the named parties to the
action or proceeding include both the Stockholders and the Parent Indemnified
Party and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for the Parent Indemnified Party shall be paid by the
Stockholders. If no such notice of intent to dispute and defend is given by the
Stockholders, or if such diligent good faith defense is not being or ceases to
be conducted, the Parent Indemnified Party shall, at the expense of the
Stockholders, undertake the defense of (with counsel selected by the Parent
Indemnified Party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
Stockholders, then the Parent Indemnified Party shall make available all
information and assistance that the Stockholders may reasonably request and
shall cooperate with the Stockholders in such defense.
Section 13. MISCELLANEOUS.
13.1 LAW GOVERNING. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
13.2 NOTICES. Any notice, request, demand other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given (i) if delivered or sent by facsimile transmission, upon receipt, or (ii)
if sent by registered or certified mail upon the sooner of receipt or the
expiration of three days after deposit in United States Post Office facilities
properly addressed with postage prepaid. All notices will be sent to the
addresses set forth below or to such other address as such party may designate
by notice to each other party hereunder:
TO BOL:
0000 Xxxxx 00
Xxxx, Xxx Xxxxxx, 00000
37
ATTN: Xxxx X. Xxxxx, President and Chief Executive Officer
Phone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
TO THE COMPANY AND THE STOCKHOLDERS:
Xxxx Xxxxxx
000 Xxxxxxxxx
Xxxxxxx, XX 00000
Xxxxx Xxxxxxx
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxx
000 Xxxxxx Xxx.
Xxxxxx, XX 00000
with a copy to:
Pusatier, Sherman, Abbot & Xxxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representative.
13.3 ENTIRE AGREEMENT. This Agreement, including any schedules, annexes
and/or exhibits referred to herein and the other writings specifically
identified herein or contemplated hereby or delivered in connection with the
transactions contemplated hereby, is complete, reflects the entire agreement of
the parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings.
38
13.4 ASSIGNABILITY. This Agreement may not be assigned by the Company
or the Stockholders without the prior written consent of BOL. This Agreement and
the obligations of the parties hereunder shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors, executors, administrators, estates, heirs and permitted assigns, and
no others.
13.5 ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S FEES. Each party
hereto agrees that any dispute regarding this Agreement shall be submitted to
arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held in
Albany, New York and the arbitrator(s) shall apply New York law. Judgment upon
any award rendered by the arbitrator(s) shall be final and may be entered in any
court of competent jurisdiction. Notwithstanding the foregoing, BOL shall have
the absolute right to obtain equitable remedies in any state court of competent
jurisdiction in the State of New York or in a United States District Court for
the New York. Each party irrevocably submits to and accepts the exclusive
jurisdiction of each of such courts and waives any objection (including any
objection to venue or any objection based upon the grounds of forum non
conveniens) which might be asserted against the bringing of any such action,
suit or other legal proceeding in such courts. The court and/or arbitrator(s)
shall award costs and expenses (including reasonable attorney's fees) to the
prevailing party and/or parties in any litigation or arbitration.
13.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
13.7 CERTAIN DEFINITIONS. for purposes of this Agreement, the term:
(a) "Affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization.
13.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
39
13.9 AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by BOL, the Company and
the Stockholders, or, in the case of a waiver, the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any such right, power or privilege, or any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege.
13.10 SURVIVAL. All representations, warranties, agreements, covenants
and agreements of the parties contained in this Agreement, or in any instrument,
certificate, or opinion provided for in it, shall survive the Closing (even if
the damaged party knew or had reason to know of any misrepresentation or breach
of warranty at the time of Closing) and continue in full force and effect for a
period of twenty-four (24) months except for any representation, warranty,
indemnity, etc. relating to tax matters which shall survive for the applicable
statutes of limitation or repose.
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
WITNESS: XxxxxxxXxxxxx.xxx, Inc.
By: /s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx, President
WITNESS: BOL Acquisition Co. X, Inc.
________________________ By: /s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx, President
WITNESS: Prime Communication Systems,
Incorporated
________________________ By: /s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx, Chief Executive Officer
WITNESS: STOCKHOLDERS
/s/ Xxxx Xxxxxx
------------------------- -----------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxxxxx
------------------------- -----------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxx
------------------------- -----------------------------
Xxxxxx Xxxxxx
41
