AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is made March
__, 2000, by XxxxXxx.xxx, Inc., a Nevada corporation with its principal place of
business in Florida ("Buyer"), Xxxxx X. Xxxxxx, an individual resident in Texas
("Xxxxxx"), K. Xxxxxxxx Xxxxxx, an individual resident in Texas ("Xxxxxx") and
HCT Capital Corp., a Texas corporation ("HCT"). Xxxxxx, Xxxxxx and HCT are
referred to collectively as "Sellers."
RECITALS
Xxxxxx and Xxxxxx each own 5,000 shares of common stock, no par value
("Common Shares") of Desktop Corporation, a Texas corporation (the "Company"),
and HCT owns 15,000 shares of Series A 8%-10% Cumulative Convertible Preferred
Stock, par value $10.00 per share ("Preferred Stock"), of the Company. The
Common Shares and the Preferred Shares (the "Shares") constitute all of the
issued and outstanding capital stock of the Company. The Buyer desires to
acquire all of the Shares and the Sellers desire to exchange all of the Shares
for voting common shares, par value $0.001 per share, of the Buyer, in an
exchange that qualifies under Sections 354 and 368 of the Internal Revenue Code
of 1986, as amended.
The Buyer's purchase of the Shares constitutes one of the Contemplated
Transactions (as defined in Section 1). Upon completion of all Contemplated
Transactions, the Buyer will be, directly and through Desktop Ventures, Inc., a
Texas corporation, the majority shareholder of VetMall, Inc., a Florida
corporation, and successor to the business of VetMall, LLC, a Nevada limited
liability company.
This Agreement is being entered into for the purpose of implementing
the foregoing desires, and sets forth the terms and conditions pursuant to which
the Sellers are selling to the Buyer and the Buyer is purchasing from the
Sellers solely in exchange for voting common shares of the Buyer, all of the
issued and outstanding shares of capital stock of the Company.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES" -- the Company, its Subsidiaries and
VetMall, Inc., collectively.
"APPLICABLE CONTRACT" -- any Contract (a) under which any
Acquired Company has or may acquire any rights, (b) under which any Acquired
Company has or may become subject to
any obligation or liability, or (c) by which any Acquired Company or any of the
assets owned or used by it is or may become bound.
"BALANCE SHEET" -- as defined in Section 3.4.
"BEST EFFORTS" -- the efforts that a prudent Person desirous
of achieving a result and cognizant of the relative benefits, costs and expenses
would use in similar circumstances to ensure that such result is achieved as
expeditiously as is reasonably possible.
"BREACH" -- a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement or in connection with the Contemplated
Transactions will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUYER" -- as defined in the first paragraph of this
Agreement.
"BUYER'S SHARES" - as defined in Section 2.2.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing
actually takes place.
"COMPANY" -- as defined in the Recitals of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions
contemplated by this Agreement, including:
(a) the conversion of VetMall, LLC, a Nevada limited
liability company, into VetMall, Inc., a Florida corporation;
(b) the sale of the Shares by the Sellers to the
Buyer;
(c) the purchase by Buyer of the 40 shares of
VetMall, Inc. common stock from W. A. Xxxxxx Company;
(d) the execution, delivery, and performance of the
Employment Agreements and the Sellers' Releases;
(e) the performance by the Buyer and the Sellers of
their respective covenants and obligations under this Agreement; and
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(f) the Buyer's acquisition and ownership of the
Shares and exercise of control over the Acquired Companies.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CONVERSION" -- means the conversion of VetMall, LLC, a Nevada
limited liability company, into VetMall, a Florida corporation.
"DAMAGES" -- as defined in Section 6.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the
Sellers to the Buyer concurrently with the execution and delivery of this
Agreement.
"EMPLOYMENT AGREEMENTS" -- as defined in Section 2.4(a)(iii).
"ENCUMBRANCE" -- any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ERISA" -- the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES" -- any real property, leaseholds, or other
interests currently or formerly owned or operated by any Acquired Company or
VetMall, LLC and any buildings, plants, structures, or equipment (including
motor vehicles) currently or formerly owned or operated by any Acquired Company
or VetMall, LLC.
"GAAP" -- generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
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(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.21.
"IRC" -- the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
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(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERSON" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PLAN" -- as defined in Section 3.13.
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
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(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree and resides with such person, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 5% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 5%
of the outstanding equity securities or equity interests in a Person.
"REPRESENTATIVE" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS" -- as defined in the first paragraph of this
Agreement.
"SELLERS' RELEASES" -- as defined in Section 2.4.
"SHARES" -- as defined in the Recitals of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"TAX RETURN" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
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2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES BEING EXCHANGED. Subject to the terms and
conditions of this Agreement, at the Closing provided for in Section 2.3, being
held simultaneously with the execution of this Agreement, each Seller is
selling, assigning and delivering to Buyer the number of shares of the Company
set forth below opposite the name of such Seller, and the Buyer is purchasing
such shares from each such Seller, free and clear of all liens, claims, options,
charges, and encumbrances whatsoever:
SELLER: NUMBER AND TYPE OF SHARES:
Xxxxx Xxxxxx 5,000 common shares
K. Xxxxxxxx Xxxxxx 5,000 common shares
HCT Capital Corp. 15,000 shares of Preferred Stock
2.2 CONSIDERATION. Subject to the terms and conditions of this
Agreement, and reliance on the representations, warranties, and agreements of
the Sellers contained herein and in consideration of the aforesaid sale,
assignment, and delivery of the Shares, the Buyer is delivering at the Closing
in full payment for the aforesaid sale, assignment, and delivery of these
Shares, an aggregate of 50,000 shares of common stock, par value $0.001 per
share, of Buyer (the "Buyer's Shares"), each Seller receiving the number of
Buyer's Shares set forth below opposite the name of such Seller:
SELLER: NUMBER OF THE BUYER'S SHARES:
Xxxxx Xxxxxx 20,000
K. Xxxxxxxx Xxxxxx 20,000
HCT Capital Corp. 10,000
------
Total: 50,000
======
In addition, upon (i) the closing of any initial public
offering ("IPO") of VetMall, Inc., a Florida corporation ("VetMall"), (ii) the
sale by the Buyer of all or substantially all of the Shares, regardless of the
form of such transaction, or (iii) the sale by VetMall of all or substantially
all of its assets, the Buyer shall either (A) issue to Sellers (in the same
proportion as the Buyer's Shares received by them hereunder) that number of
shares of Buyer common stock which, when multiplied by the closing price of the
Buyer common stock on the date the IPO or the sale closes, equals $4,800,000, or
(B) transfer to sellers (in the same proportion as the Buyer's Shares received
by them hereunder) 16% of the Shares (as adjusted by stock splits), whichever of
(A) or (B) has a lower value based on the IPO or sales price of the VetMall
common stock and the closing price of the Buyer common stock on the date that
the IPO or the sale is declared effective by the Securities and Exchange
Commission. For example, if VetMall sells one million shares in the IPO at a
price of $10 per share, the split adjusted Shares purchased from Sellers is
700,000 Shares, the value of 16% of the Shares would be $1,120,000 (700,000 x
$10 x 16%). Since $1,120,000 is less than $4,800,000, Buyer would transfer to
Sellers 112,000 shares of VetMall common stock.
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2.3 CLOSING. The purchase and sale (the "Closing") provided
for in this Agreement will take place at the offices of Johnson, Blakely, Pope,
Bokor, Xxxxxx & Xxxxx, P.A., 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx,
simultaneously with the execution of this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) the Sellers will deliver to the Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for transfer to the
Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii)
executed by the Sellers and VetMall (collectively, "Sellers' Releases");
(iii) employment and noncompetition agreements in the
form of Exhibit 2.4(a)(iii), executed by the Sellers (collectively, "Employment
Agreements"); and
(iv) opinions of counsel in the form of Exhibit
2.4(a)(iv).
(b) the Buyer will deliver to the Sellers:
(i) certificates representing the Buyer's Shares; and
(ii) the Employment Agreements executed by the
Company.
2.5 Adjustment in Amount of Buyer's Shares
The number of Buyer's Shares that are delivered to the Sellers on the
Closing Date is subject to post-Closing reduction according to the procedure
described below.
The Buyer will cause Xxxxx Xxxxxxxx, LLP to prepare audited
consolidated financial statements (the "Closing Financial Statements") of the
Acquired Companies as of the Closing Date and for the period from January 1,
2000 through the Closing Date, including a computation of consolidated
stockholders' equity as of the Closing Date. The consolidated stockholders'
equity reflected in the Closing Financial statements will be used in computing
the Adjustment Amount.
The Adjustment Amount will be determined by:
(i) subtracting (a) $150,000 times the number of months and
fraction thereof, between December 31, 1999 and the Closing
Date, from (b) $______[X]_________ (which amount is the
stockholders' equity of Desktop Corporation at December 31,
1999 as reflected in the audited consolidated financial
statements prepared by Xxxxx Xxxxxxxx, LLP). The result will
be the "Base Amount"; then
(ii) if the stockholders' equity of Desktop Corporation as shown on
the Closing Financial Statements is less than the Base Amount,
subtracting the stockholders' equity of Desktop Corporation as
shown on the Closing Financial Statements from the Base
Amount; then
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(iii) dividing such result by the Base Amount to determine the
Adjustment Percentage; then
(iv) multiplying 50,000 by the Adjustment Percentage to determine
the Adjustment Amount. If the stockholders' equity of Desktop
Corporation as shown on the Closing Financial Statements is
greater than the Base Amount, there will be no adjustment in
the number of Buyer's Shares delivered to the Sellers.
Otherwise, the number of Shares to which the Sellers are
entitled will be determined by subtracting the Adjustment
Amount from 50,000.
Upon receipt of notice from the Buyer that an adjustment is required in
the number of Buyer's Shares to which they are otherwise entitled under this
Agreement, each Seller agrees to promptly (but in no event more than ten days
after receipt of such notice), deliver to the Buyer the stock certificate
delivered to him or it pursuant to Section 2.4(a)(i) of this Agreement. The
Buyer will then issue a new certificate to the Seller for the number of Buyer's
Shares to which the Seller is entitled after taking into account the Adjustment
Amount.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers represent and warrant to the Buyer, as of the date hereof,
as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a
complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired Company is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. Each Acquired Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the absence of such qualification
would not have a material adverse effect on it. Immediately prior to the
Conversion, VetMall, LLC was a limited liability company organized, validly
existing, and in good standing under the laws of Nevada, with full power and
authority as a limited liability company to conduct its business as it was then
being conducted, to own or use the properties and assets that it purported to
own or use, and to perform all its obligations under contracts to which it was a
party.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect and
the Organizational Documents of VetMall, LLC as in effect immediately prior to
the Conversion.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and
binding obligation of the Sellers, enforceable against Sellers in accordance
with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyances and other similar laws of
general application affecting the rights of creditors and (ii) applicable laws
and regulations and principles of equity which may restrict the enforcement of
certain remedies or the availability of certain equitable remedies. Upon the
execution and delivery of the Employment Agreements, and the Sellers' Releases
(collectively, the "Sellers' Closing Documents"), the Sellers' Closing Documents
will constitute the legal, valid, and binding obligations of the Sellers which
are parties thereto, enforceable against Sellers in accordance with their
respective terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyances and other similar laws of
general application affecting the rights of creditors and (ii) applicable laws
and regulations and principles of equity which may restrict the enforcement of
certain remedies or the availability of certain equitable remedies. The Sellers
have the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing Documents and to
perform their obligations under this Agreement and the Sellers' Closing
Documents to which they are parties.
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(b) neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Acquired
Companies or VetMall, LLC, or (B) any resolution adopted by the board of
directors or the stockholders of any Acquired Company or the managing members of
VetMall, LLC;
(ii) contravene in any material respect, conflict in
any material respect with, or result in a material violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any Acquired Company, VetMall, LLC, or any
Seller, or any of the assets owned or used by any Acquired Company or by
VetMall, LLC at the Conversion, may be subject;
(iii) contravene in any material respect, conflict in
any material respect with, or result in a material violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by any Acquired Company or was held by VetMall, LLC at the Conversion, or
that otherwise relates to the business of, or any of the assets owned or used
by, any Acquired Company, which revocation, withdrawal, suspension,
cancellation, termination or modification would have a material adverse effect
on such entity;
(iv) cause Buyer or any Acquired Company to become
subject to, or to become liable for the payment of, any Tax (other than an
excise tax on the Contemplated Transactions);
(v) cause any of the assets owned by any Acquired
Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract or
any agreement to which VetMall, LLC was a party immediately prior to the
Conversion, which declaration, exercise, cancellation, termination or
modification would have a material adverse effect on it; or
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(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by any
Acquired Company or owned or used by VetMall, LLC at the Conversion.
No Seller, Acquired Company or VetMall, LLC is or
will be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consist of 100,000 shares of common stock, no par value, of which 10,000
shares are issued and outstanding and 15,000 shares of Series A 8%-10%
Cumulative Convertible Preferred Stock, par value $10 per share, all of which
are issued and outstanding. All of the foregoing constitute the "Shares". The
Sellers are the record and beneficial owners and holders of the Shares, free and
clear of all Encumbrances (other than the security interests in favor of the
Buyer). Xxxxxx owns 5,000 shares of the common stock comprising the Shares,
Xxxxxx owns 5,000 shares of common stock comprising the Shares, and HCT owns
15,000 shares of the Series A 8%-10% Cumulative Convertible Preferred Stock
comprising part of the Shares. All of the outstanding equity securities and
other securities of each Acquired Company are owned of record and beneficially
by one or more of the Sellers, free and clear of all Encumbrances (other than
the security interests in favor of the Buyer). No legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. All of the outstanding equity securities of
each Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable. Except as related to the Contemplated Transactions,
there are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. No Acquired
Company owns, or has any Contract to acquire, any equity securities or other
securities of any Person (other than Acquired Companies) or any direct or
indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. The Sellers have delivered to the
Buyer: (a) consolidated balance sheets of the Acquired Companies (except for
VetMall) and VetMall, LLC as at December 31, 1999 (the "Balance Sheet"), and the
related statements of profit and loss for the fiscal year then ended. Such
financial statements fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Acquired
Companies (except for VetMall) and VetMall, LLC as at the date thereof of and
for the twelve months ended on December 31, 1999, all in accordance with GAAP.
The financial statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods involved. No
financial statements of any Person other than the Acquired Companies are
required by GAAP to be included in the consolidated financial statements of the
Acquired Companies.
3.5 BOOKS AND RECORDS. The books of account, minute books,
stock record books, and other records of the Acquired Companies and VetMall,
LLC, all of which have been made available to Buyer, are complete and correct,
in all material respects, and have been maintained, in all material respects, in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Acquired Companies or VetMall LLC are subject to that
Section), including the maintenance of an adequate system of internal controls.
The minute books of the Acquired Companies and VetMall, LLC contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Acquired Companies and the managing members of VetMall, LLC, and no
meeting of any such stockholders, Board of Directors, managing members, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Acquired Companies.
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3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by any Acquired Company. The
Acquired Companies own (with good and marketable title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that they purport to own located in the facilities owned or
operated by the Acquired Companies or reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.6 of the Disclosure Letter
and personal property sold since the date of the Balance Sheet in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by the Acquired Companies since the date of the Balance Sheet (except
for personal property acquired and sold since the date of the Balance Sheet in
the Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.6 of the Disclosure Letter. All
material properties and assets reflected in the Balance Sheet, and all such
properties and assets owned by VetMall, are free and clear of all Encumbrances
other than (a) minor imperfections in title and Encumbrances which do not
materially affect such property or assets or the use thereof by the Acquired
Company.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The equipment of the
Acquired Companies are in good operating condition and repair, ordinary wear and
tear excepted, and are adequate for the uses to which they are being put, and
none of such equipment is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost. The
equipment of the Acquired Companies is sufficient for the continued conduct of
the Acquired Companies' businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the
Acquired Companies on their respective accounting records (collectively, the
"Accounts Receivable") represent valid obligations arising from sales actually
made or services actually performed in the Ordinary Course of Business. The
Accounts Receivable are current and collectible net of the respective reserves
shown on the accounting records of the Acquired Companies as of the Closing Date
(which reserves are adequate). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable (except as reflected by Part 3.8 of the Disclosure Letter).
Part 3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date Closing Date.
12
3.9 [Intentionally omitted]
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part
3.10 of the Disclosure Letter, the Acquired Companies have no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the dates thereof.
3.11 TAXES.
(a) The Acquired Companies and VetMall, LLC have
filed or caused to be filed (on a timely basis since their inception) all Tax
Returns that are or were required to be filed by or with respect to any of them,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. The Sellers have delivered to Buyer copies of,
and Part 3.11 of the Disclosure Letter contains a complete and accurate list of,
all such Tax Returns. The Acquired Companies and VetMall, LLC have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Sellers or any Acquired Company, except such Taxes, if any, as
are listed in Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and as of the Closing Date.
(b) The United States federal and state income Tax
Returns of each Acquired Company and VetMall, LLC subject to such Taxes have not
been audited by the IRS or relevant state tax authorities and no Acquired
Company has received notice of audit from the IRS or relevant state tax
authorities. Except as described in Part 3.11 of the Disclosure Letter, no
Seller, Acquired Company or VetMall, LLC has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of VetMall, LLC or any Acquired Company or for which any Acquired Company
may be liable.
(c) The charges, accruals, and reserves with respect
to Taxes on the respective books of each Acquired Company (and on the books of
VetMall, LLC as of the Conversion) are adequate (determined in accordance with
GAAP) and are at least equal to that entity's liability for Taxes. There exists
no proposed tax assessment against VetMall, LLC or any Acquired Company except
as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by any
Acquired Company. All Taxes that VetMall, LLC or any Acquired Company is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) VetMall, LLC or any Acquired Company are true, correct, and
complete in all material respects. There is no tax sharing agreement that will
require any payment by VetMall, LLC or any Acquired Company after the date of
this Agreement. No Acquired Company is, or within the five-year period preceding
the Closing Date has been, an "S" corporation. During the consistency period (as
defined in Section 338(h)(4) of the IRC with respect to the sale of the Shares
to Buyer), no Acquired Company or target affiliate (as defined in Section
338(h)(6) of the IRC with respect to the sale of the Shares to Buyer) has sold
or will sell any property or assets to Buyer or to any member of the affiliated
group (as defined in Section 338(h)(5) of the IRC) that includes Buyer. Part
3.11 of the Disclosure Letter lists all such target affiliates.
13
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of any Acquired Company,
and no event has occurred or circumstance exists that would reasonably be
expected to result in such a material adverse change.
3.13 EMPLOYEE BENEFITS.
(a) As used in this Section 3.13, the following terms
have the meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other
Benefit Obligation, if any, owed, adopted, or followed by an Acquired Company or
an ERISA Affiliate of an Acquired Company.
"COMPANY PLAN" means all Plans, if any, of which an
Acquired Company or an ERISA Affiliate of an Acquired Company is or was a Plan
Sponsor, or to which an Acquired Company or an ERISA Affiliate of an Acquired
Company otherwise contributes or has contributed, or in which an Acquired
Company or an ERISA Affiliate of an Acquired Company otherwise participates or
has participated. All references to "Plans" are to "Company Plans" unless the
context requires otherwise.
"COMPANY VEBA" means a VEBA, if any, whose members
include employees of any Acquired Company or any ERISA Affiliate, if any, of an
Acquired Company.
"ERISA AFFILIATE" means, with respect to an Acquired
Company, any other person, if any, that, together with the Company, would be
treated as a single employer under IRC ss. 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA
ss. 3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements, if any, under which the compensation paid does not depend
upon the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty
Corporation, or any successor thereto.
14
"PENSION PLAN" has the meaning given in ERISA ss.
3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss.
3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or
purports to meet the requirements of IRCss.401(a).
"TITLE IV PLANS" means all Pension Plans that are
subject to Title IV of ERISA, 29 U.S.C.ss.1301 et seq., other than
Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary
association under IRCss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss.
3(1).
(b) (i) Part 3.13(i) of the Disclosure Letter
contains a complete and accurate list of all Company Plans, Company Other
Benefit Obligations, and Company VEBAs, and identifies as such all Company
Plans, if any, that are (A) defined benefit Pension Plans, (B) Qualified Plans,
(C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains
a complete and accurate list of (A) all ERISA Affiliates of each Acquired
Company, if any, and (B) all Plans, if any, of which any such ERISA Affiliate is
or was a Plan Sponsor, in which any such ERISA Affiliate participates or has
participated, or to which any such ERISA Affiliate contributes or has
contributed.
(iii) Part 3.13(iii) of the Disclosure Letter sets
forth, for each Multi-Employer Plan, if any, as of its last valuation date, the
amount of potential withdrawal liability, if any, of the Acquired Companies and
the Acquired Companies' other ERISA Affiliates, calculated according to
information made available pursuant to ERISA ss. 4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets
forth a calculation of the liability of the Acquired Companies for
post-retirement benefits other than pensions, made in accordance with Financial
Accounting Statement 106 of the Financial Accounting Standards Board, regardless
of whether any Acquired Company is required by this Statement to disclose such
information.
(v) Part 3.13(v) of the Disclosure Letter sets forth
the financial cost of all obligations owed under any Company Plan or Company
Other Benefit Obligation, if any, that is not subject to the disclosure and
reporting requirements of ERISA.
(c) The Sellers have delivered to Buyer, or will
deliver to Buyer within ten days of the date of this Agreement:
(i) all documents that set forth the terms of each
Company Plan, Company Other Benefit Obligation, or Company VEBA, if any, and of
any related trust, including (A) all plan descriptions and summary plan
descriptions of Company Plans for which Sellers or the Acquired Companies are
required to prepare, file, and distribute plan descriptions and summary plan
descriptions, and (B) all summaries and descriptions furnished to participants
and beneficiaries regarding Company Plans, Company Other Benefit Obligations,
and Company VEBAs, if any, for which a plan description or summary plan
description is not required;
15
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all collective bargaining agreements pursuant
to which contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Acquired Companies and the ERISA
Affiliates, if any, of the Acquired Companies, and all collective bargaining
agreements, if any, pursuant to which contributions are being made or
obligations are owed by such entities;
(iv) a written description of any Company Plan or
Company Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements, if any, filed with
respect to any Company Plan;
(vi) all insurance policies, if any, purchased by or
to provide benefits under any Company Plan;
(vii) all contracts, if any, with third party
administrators, actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan, Company Other Benefit
Obligation, or Company VEBA;
(viii) all reports, if any, submitted within the four
years preceding the date of this Agreement by third party administrators,
actuaries, investment managers, consultants, or other independent contractors
with respect to any Company Plan, Company Other Benefit Obligation, or Company
VEBA;
(ix) all notifications, if any, to employees of their
rights under ERISAss. 601 et seq. and IRCss.4980B;
(x) the Form 5500 filed in each of the most recent
three plan years with respect to each Company Plan, including all schedules
thereto and the opinions of independent accountants;
(xi) all notices, if any, that were given by any
Acquired Company or any ERISA Affiliate of an Acquired Company or any Company
Plan to the IRS, the PBGC, or any participant or beneficiary, pursuant to
statute, within the four years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section 3.13;
(xii) all notices, if any, that were given by the
IRS, the PBGC, or the Department of Labor to any Acquired Company, any ERISA
Affiliate of an Acquired Company, or any Company Plan within the four years
preceding the date of this Agreement;
16
(xiii) with respect to Qualified Plans and VEBAs, if
any, the most recent determination letter for each Plan of the Acquired
Companies that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, if any, the
Form PBGC-1 filed for each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the
Disclosure Letter:
(i) The Acquired Companies have performed, in all
material respects, all of their respective obligations under all Company Plans,
Company Other Benefit Obligations, and Company VEBAs. The Acquired Companies
have made appropriate entries in their financial records and statements for all
obligations and liabilities under such Plans, VEBAs, and Obligations that have
accrued but are not due.
(ii) No statement, either written or oral, has been
made by any Acquired Company to any Person with regard to any Plan or Other
Benefit Obligation that was not in accordance with, in all material respects,
the Plan or Other Benefit Obligation and that could have a material adverse
economic consequence to any Acquired Company or to Buyer.
(iii) The Acquired Companies, with respect to all
Company Plans, Company Other Benefits Obligations, and Company VEBAs, if any,
are, and each Company Plan, Company Other Benefit Obligation, and Company VEBA,
if any, is, in full compliance with ERISA, the IRC, and other applicable Laws
including the provisions of such Laws expressly mentioned in this Section 3.13,
and with any applicable collective bargaining agreement.
(A) No transaction prohibited by ERISAss.406 and no
"prohibited transaction" under IRC ss. 4975(c) have occurred with respect to any
Company Plan, if any.
(B) No Seller or Acquired Company has any liability
to the IRS with respect to any Plan, including any liability imposed by Chapter
43 of the IRC.
(C) No Seller or Acquired Company has any liability
to the PBGC with respect to any Plan or has any liability under ERISA ss. 502 or
ss. 4071.
(D) All filings required by ERISA and the IRC as to
each Plan, if any, have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or accrued
with respect to all Company Plans, Company Other Benefit Obligations, and
Company VEBAs, if any, are deductible under IRC ss. 162 or ss. 404. No amount,
or any asset of any Company Plan or Company VEBA, is subject to tax as unrelated
business taxable income.
(iv) Each Company Plan, if any, can be terminated
within thirty days, without payment of any additional contribution or amount and
without the vesting or acceleration of any benefits promised by such Plan.
17
(v) Since December 31, 1999, there has been no
establishment or amendment of any Company Plan, Company VEBA, or Company Other
Benefit Obligation that has not been approved in writing by the Buyer.
(vi) To the Knowledge of the Sellers, no event has
occurred or circumstance exists that could result in a material increase in
premium costs of Company Plans and Company Other Benefit Obligations that are
insured, or a material increase in benefit costs of such Plans and Obligations
that are self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving,
any Company Plan, Company Other Benefit Obligation, or Company VEBA, if any, is
pending or, to Sellers' Knowledge, is Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRCss.401(a).
(ix) Each Qualified Plan, if any, of each Acquired
Company is qualified in form and operation under IRC ss. 401(a); each trust for
each such Plan is exempt from federal income tax under IRC ss. 501(a). Each
Company VEBA is exempt from federal income tax. No event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust.
(x) Each Acquired Company and each ERISA Affiliate of
an Acquired Company has met the minimum funding standard, if any, and has made
all contributions required, under ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Acquired Companies have paid all amounts
due to the PBGC pursuant to ERISAss.4007.
(xiii) No Acquired Company or any ERISA Affiliate of
an Acquired Company has ceased operations at any facility or has withdrawn from
any Title IV Plan in a manner that would subject to any entity or Sellers to
liability under ERISA ss. 4062(e), ss. 4063, or ss. 4064.
(xiv) No Acquired Company or any ERISA Affiliate of
an Acquired Company has filed a notice of intent to terminate any Plan or has
adopted any amendment to treat a Plan as terminated. The PBGC has not instituted
proceedings to treat any Company Plan as terminated. No event has occurred or
circumstance exists that may constitute grounds under ERISA ss. 4042 for the
termination of, or the appointment of a trustee to administer, any Company Plan.
(xv) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could require the
provision of security under ERISA ss. 307 or IRC ss. 401(a)(29).
(xvi) No accumulated funding deficiency, whether or
not waived, exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding deficiency as of
the last day of the current plan year of any such Plan.
18
(xvii) The actuarial report for each Pension Plan of
each Acquired Company and each ERISA Affiliate of each Acquired Company fairly
presents the financial condition and the results of operations of each such Plan
in accordance with GAAP.
(xviii) Since the last valuation date for each
Pension Plan of each Acquired Company and each ERISA Affiliate of an Acquired
Company, no event has occurred or circumstance exists that would increase the
amount of benefits under any such Plan or that would cause the excess of Plan
assets over benefit liabilities (as defined in ERISA ss. 4001) to decrease, or
the amount by which benefit liabilities exceed assets to increase.
(xiv) No reportable event (as defined in ERISAss.4043
and in regulations issued thereunder) has occurred.
(xx) No Seller or Acquired Company has Knowledge of
any facts or circumstances that may give rise to any liability of any Seller,
any Acquired Company, or Buyer to the PBGC under Title IV of ERISA.
(xxi) No Acquired Company or any ERISA Affiliate of
an Acquired Company has ever established, maintained, or contributed to or
otherwise participated in, or had an obligation to maintain, contribute to, or
otherwise participate in, any Multi-Employer Plan.
(xxii) No Acquired Company or any ERISA Affiliate of
an Acquired Company has withdrawn from any Multi-Employer Plan with respect to
which there is any outstanding liability as of the date of this Agreement. No
event has occurred or circumstance exists that presents a risk of the occurrence
of any withdrawal from, or the participation, termination, reorganization, or
insolvency of, any Multi-Employer Plan that could result in any liability of
either any Acquired Company or Buyer to a Multi-Employer Plan.
(xxiii) No Acquired Company or any ERISA Affiliate of
an Acquired Company has received notice from any Multi-Employer Plan that it is
in reorganization or is insolvent, that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of any excise tax, or
that such Plan intends to terminate or has terminated.
(xxiv) No Multi-Employer Plan to which any Acquired
Company or any ERISA Affiliate of an Acquired Company contributes or has
contributed is a party to any pending merger or asset or liability transfer or
is subject to any proceeding brought by the PBGC.
(xxv) Except to the extent required under ERISAss.601
et seq. and IRCss. 4980B, no Acquired Company provides health or welfare
benefits for any retired or former employee or is obligated to provide health or
welfare benefits to any active employee following such employee's retirement or
other termination of service.
(xxvi) Each Acquired Company has the right to modify
and terminate benefits to retirees (other than pensions) with respect to both
retired and active employees.
19
(xxii) Sellers and all Acquired Companies have
complied with the provisions of ERISAss.601 et seq. and IRCss.4980B.
(xxviii)No payment that is owed or may become due to
any director, officer, employee, or agent of any Acquired Company will be
non-deductible to the Acquired Companies or subject to tax under IRC ss. 280G or
ss. 4999; nor will any Acquired Company be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person.
(xxiv) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration of any
benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) each Acquired Company is, and at all times since
its formation has been, in full compliance with each Legal Requirement that is
or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets. At all times during its existence
VetMall, LLC was, in full compliance with each Legal Requirement that was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may constitute or result in a
violation by VetMall, LLC or any Acquired Company of, or a failure on the part
of VetMall, LLC or any Acquired Company to comply with, any Legal Requirement
which violation would have a material adverse effect on it, or (B) may give rise
to any material obligation on the part of any Acquired Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature;
and
(iii) no Acquired Company or VetMall, LLC has
received, at any time since its formation, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, which would have a material
adverse effect on it, or (B) any actual, alleged, possible, or potential
obligation on the part of any Acquired Company or VetMall, LLC to undertake, or
to bear all or any material portion of the cost of, any remedial action of any
nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
any Acquired Company (or was previously held by VetMall, LLC) or that otherwise
relates to the business of, or to any of the assets owned or used by, any
Acquired Company. Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect, including those Governmental Authorizations, if any, transferred by
VetMall, LLC to VetMall. Except as set forth in Part 3.14 of the Disclosure
Letter:
20
(i) each Acquired Company is, and at all times since
its formation, has been, in material compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter and VetMall, LLC was, at all
times during its existence, in material compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, which would have a material adverse effect
on it, or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter, which would have a material adverse effect on it;
(iii) no Acquired Company or VetMall, LLC has
received, at any time since its formation, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, which would have a material adverse effect on it, or (B) any
actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization,
which would have a material adverse effect on it; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be listed
in Part 3.14 of the Disclosure Letter have been duly filed on a timely basis
with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14
of the Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Acquired Companies to lawfully conduct
and operate their businesses in the manner they currently conduct and operate
such businesses and to permit the Acquired Companies to own and use their assets
in the manner in which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against VetMall,
LLC or any Acquired Company or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of the Sellers and the Acquired
Companies, (1) no such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that might reasonably be expected to give rise
to or serve as a basis for the commencement of any such Proceeding. The Sellers
have delivered to the Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Disclosure
Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter will not
have a material adverse effect on the business, operations, assets, condition,
or prospects of any Acquired Company.
21
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) there is no Order to which VetMall, LLC or any of
the Acquired Companies, or any of the assets owned or used by any Acquired
Company, is subject;
(ii) no Seller is subject to any Order that relates
to the business of, or any of the assets owned or used by, any Acquired Company;
and
(iii) no officer, director, agent, or employee of any
Acquired Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) each Acquired Company is, and at all times since
its formation has been, in full compliance with all of the terms and
requirements of each Order, if any, to which it, or any of the assets owned or
used by it, is or has been subject and VetMall, LLC, at all times during its
existence, was in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which any Acquired Company, or any of the assets owned or used by any Acquired
Company, is subject, which violation or failure to comply would result in a
material adverse effect on any Acquired Company ; and
(iii) VetMall, LLC never received and no Acquired
Company has received, at any time since its formation, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which any
Acquired Company, or any of the assets owned or used by any Acquired Company, is
or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as
set forth in Part 3.16 of the Disclosure Letter, since the date of the Balance
Sheet, VetMall, LLC and the Acquired Companies have conducted their businesses
only in the Ordinary Course of Business and, except in connection with the
Conversion and the Contemplated Transactions, there has not been any:
(a) change in any Acquired Company's authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of any Acquired Company; issuance of any security convertible into
such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
22
(b) amendment to the Organizational Documents of any
Acquired Company;
(c) payment or increase by VetMall, LLC or any
Acquired Company of any bonuses, salaries, or other compensation to any
stockholder, director, officer, member or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or similar Contract
with any director, officer, member or employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of or any Acquired Company or former employees of VetMall, LLC;
(e) damage to or destruction or loss of any asset or
property of any Acquired Company, not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of VetMall, LLC or the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to any
Acquired Company of at least $5,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of VetMall, LLC or any Acquired Company or mortgage, pledge, or
imposition of any Encumbrance on any material asset or property of VetMall, LLC
or any Acquired Company, including the sale, lease, or other disposition of any
of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights
with a value to VetMall, LLC or any Acquired Company in excess of $5,000;
(i) material change in the accounting methods used by
VetMall, LLC or any Acquired Company; or
(j) agreement, whether oral or written, by VetMall,
LLC or any Acquired Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and the Sellers have delivered to the Buyer true and
complete copies, of:
23
(i) each Applicable Contract, if any, that involves
performance of services or delivery of goods or materials by VetMall, LLC or one
or more Acquired Companies of an amount or value in excess of $5,000;
(ii) each Applicable Contract, if any, that involves
performance of services or delivery of goods or materials to VetMall, LLC or one
or more Acquired Companies of an amount or value in excess of $5,000;
(iii) each Applicable Contract, if any, that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of VetMall, LLC or one or more Acquired Companies in excess of
$5,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract, if any, affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $5,000 and with terms of
less than one year);
(v) each licensing agreement or other Applicable
Contract, if any, with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure of
any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract, if any, to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named), if any, involving a sharing of profits,
losses, costs, or liabilities by VetMall, LLC or any Acquired Company with any
other Person;
(viii) each Applicable Contract, if any, containing
covenants that in any way purport to restrict the business activity of VetMall,
LLC or any Acquired Company or any Affiliate of an Acquired Company or limit the
freedom of any Acquired Company or any Affiliate of an Acquired Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract, if any, providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney, if any, that is currently
effective and outstanding;
(xi) each Applicable Contract, if any, entered into
other than in the Ordinary Course of Business that contains or provides for an
express undertaking by any Acquired Company to be responsible for consequential
damages;
(xii) each Applicable Contract, if any, for capital
expenditures in excess of $5,000;
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(xiii) each written warranty, guaranty, and or other
similar undertaking, if any, with respect to contractual performance extended by
VetMall, LLC or any Acquired Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth the
parties to the Contracts, the amount of the remaining commitment of the Acquired
Companies under the Contracts, and the Acquired Companies' office where details
relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter or as contemplated by the Contemplated Transactions:
(i) no Seller (and no Related Person of any Seller)
has or may acquire any rights under, and no Seller has or may become subject to
any obligation or liability under, any Contract that relates to the business of,
or any of the assets owned or used by, any Acquired Company; and
(ii) to the Knowledge of the Sellers and the Acquired
Companies, no officer, director, agent, employee, consultant, or contractor of
VetMall, LLC or any Acquired Company is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct, activity, or practice
relating to the business of any Acquired Company, or (B) assign to any Acquired
Company or to any other Person any rights to any invention, improvement, or
discovery.
(c) each Contract identified or required to be
identified in Part 3.17(a) of the Disclosure Letter is in full force and effect
and is valid and enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and similar laws of general application affecting the rights of
creditors and (ii) applicable laws and regulations and principles of equity
which may restrict the enforcement of certain remedies or the availability of
certain equitable remedies.
(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
(i) each Acquired Company is, and at all times since
its formation has been, in full compliance with all applicable terms and
requirements of each Contract under which such Acquired Company has or had any
obligation or liability or by which such Acquired Company or any of the assets
owned or used by such Acquired Company is or was bound, except where such
failure to comply would not have a material adverse effect on it;
(ii) to the Knowledge of the Sellers, each other
Person that has or had any obligation or liability under any Contract under
which an Acquired Company has or had any rights is, and at all times since its
formation has been, in full compliance with all applicable terms and
requirements of such Contract;
25
(iii) to the Knowledge of the Sellers, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with, or result in a violation or breach of, or give
any Acquired Company or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received
from any other Person, at any time since its formation, any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential material violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to VetMall, LLC or any Acquired Company under current or completed
Contracts with any Person and, to the Knowledge of the Sellers and the Acquired
Companies, no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design,
manufacture, or provision of products or services by VetMall, LLC or the
Acquired Companies have been entered into in the Ordinary Course of Business and
have been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
3.18 INSURANCE.
(a) The Sellers have delivered to the Buyer:
(i) true and complete copies of all policies of
insurance to which any Acquired Company is a party or under which any Acquired
Company or VetMall, LLC, or any director of any Acquired Company or former
member of VetMall, LLC, is or has been covered at any time since its formation;
(ii) true and complete copies of all pending
applications, if any, for policies of insurance; and
(iii) any statement by the auditor of any Acquired
Company's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting
any Acquired Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by any Acquired Company;
and
26
(iii) all obligations of the Acquired Companies to
third parties with respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which such coverage is
provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth,
by year, for the current policy year and each policy year since formation of
VetMall, LLC and each Acquired Company:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) All policies to which any Acquired Company is a
party or that provide coverage to either Seller, any Acquired Company, or any
director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the Acquired Companies for all
risks to which the Acquired Companies are normally exposed;
(D) are sufficient for compliance, in all material
respects, with all Legal Requirements and Contracts to which any Acquired
Company is a party or by which any of them is bound;
(E) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of any Acquired
Company.
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(ii) None of Seller, VetMall, LLC or Acquired Company
has received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(iii) The Acquired Companies and VetMall, LLC have
paid all premiums due, and have otherwise performed all of their respective
obligations, under each policy to which any Acquired Company is, or VetMall, LLC
was, a party or that provides coverage to any Acquired Company or director
thereof.
(iv) The Acquired Companies and VetMall, LLC have
given notice to the insurer of all claims that may be insured thereby.
3.19 EMPLOYEES.
(a) Part 3.19 of the Disclosure Letter contains a
complete and accurate list of the following information for each employee or
director of the Acquired Companies, including each employee on leave of absence
or layoff status: employer; name; job title; current compensation paid or
payable and any change in compensation since December 31, 1998, vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any other
employee benefit plan or any Director Plan.
(b) Except as contemplated by the Contemplated
Transactions, no employee or director of any Acquired Company (or former
employee of VetMall, LLC) is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Sellers or the
Acquired Companies by any such employee or director. To the Sellers' Knowledge,
no director, officer, or other key employee of any Acquired Company intends to
terminate his employment with such Acquired Company.
(c) There are no retired employees or dependents
thereof who are receiving, entitled to receive, or scheduled to receive benefits
from the Acquired Companies.
3.20 LABOR RELATIONS; COMPLIANCE. Since December 31,
1998, no Acquired Company or VetMall, LLC has been or is a party to any
collective bargaining or other labor Contract. Since December 31, 1998, there
has not been, there is not presently pending or existing, and to the Sellers'
Knowledge there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To the Sellers'
Knowledge, no event has occurred or circumstance exists that could reasonably
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by any Acquired Company, and no such action is
contemplated by any Acquired Company. Each Acquired Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing, where such failure to comply would have a
material adverse effect on it. No Acquired Company is liable for the payment of
any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
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3.21 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS -- The term
"Intellectual Property Assets" includes:
(i) the name "Desktop Corporation", all fictional
business names, trade names, registered and unregistered trademarks, service
marks, and applications, if any, (collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable, if any, (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works, if any, (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by any Acquired Company as licensee or licensor, if
any.
(b) AGREEMENTS -- Part 3.21(b) of the Disclosure
Letter contains a complete and accurate list and summary description, including
any royalties paid or received by VetMall, LLC or the Acquired Companies, of all
Contracts relating to the Intellectual Property Assets to which any Acquired
Company is a party or by which any Acquired Company is bound. There are no
outstanding and, to the Sellers' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS.
(i) The Intellectual Property Assets are all those
necessary for the operation of the Acquired Companies' businesses as they are
currently conducted. One or more of the Acquired Companies is the owner of all
right, title, and interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use without payment to
a third party all of the Intellectual Property Assets.
29
(ii) Except as set forth in Part 3.21(c) of the
Disclosure Letter, all former and current employees of VetMall, LLC and each
Acquired Company have executed written Contracts with either VetMall, LLC or one
or more of the Acquired Companies that assign to one or more of the Acquired
Companies all rights to any inventions, improvements, discoveries, or
information relating to the business of any Acquired Company. No employee of any
Acquired Company has entered into any Contract that restricts or limits in any
way the scope or type of work in which the employee may be engaged or requires
the employee to transfer, assign, or disclose information concerning his work to
anyone other than one or more of the Acquired Companies (except as contemplated
by the Contemplated Transactions).
(d) PATENTS.
None of the Acquired Companies owns any
Patents.
(e) TRADEMARKS.
(i) Part 3.21(e) of Disclosure Letter contains a
complete and accurate list and summary description of all Marks. One or more of
the Acquired Companies is the owner of all right, title, and interest in and to
each of the Marks, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) No Marks have been registered with the United
States Patent and Trademark.
(iii) No Xxxx has been or is now involved in any
opposition, invalidation, or cancellation and, to the Sellers' Knowledge, no
such action is Threatened with the respect to any of the Marks.
(iv) To the Sellers' Knowledge, there is no
potentially interfering trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to the Sellers'
Knowledge, has been challenged or threatened in any way. None of the Marks used
by any Acquired Company, or previously used by VetMall, LLC, infringes or is
alleged to infringe any trade name, trademark, or service xxxx of any third
party.
(vi) All materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
(f) COPYRIGHTS.
(i) Part 3.21(f) of the Disclosure Letter contains a
complete and accurate list and summary description of all Copyrights. One or
more of the Acquired Companies is the owner of all right, title, and interest in
and to each of the Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.
30
(ii) None of the Copyrights have been.
(iii) No Copyright is infringed or, to the Sellers'
Knowledge, has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(g) TRADE SECRETS.
(i) With respect to each Trade Secret, if any, the
documentation relating to such Trade Secret is current and accurate in all
material respects, and is sufficient in detail and content to identify and
explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) The Sellers and the Acquired Companies have, and
VetMall, LLC has, taken all reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets, if any.
(iii) One or more of the Acquired Companies has good
title and an absolute (but not necessarily exclusive) right to use the Trade
Secrets, if any. The Trade Secrets, if any, are not part of the public knowledge
or literature, and, to Sellers' Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other than one or more of the
Acquired Companies) or to the detriment of the Acquired Companies. No Trade
Secret, if any, is subject to any adverse claim or has been challenged or, to
the Knowledge of the Sellers, threatened in any way.
3.22 CERTAIN PAYMENTS. Since its formation, no
Acquired Company, VetMall, LLC or director, officer, member, agent, or employee
of any Acquired Company (or former employee of VetMall, LLC), or to the Sellers'
Knowledge any other Person associated with or acting for or on behalf of any
Acquired Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of VetMall, LLC or
any Acquired Company or any Affiliate of an Acquired Company, or (iv) in
violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Acquired
Companies.
3.23 DISCLOSURE.
No representation or warranty of the Sellers in this
Agreement and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
31
3.24 RELATIONSHIPS WITH RELATED PERSONS. No Seller or
any Related Person of Sellers or of any Acquired Company has, or since the first
day of the next to last completed fiscal year of the Acquired Companies has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Acquired Companies'
businesses. No Seller or any Related Person of Sellers or of any Acquired
Company is, or since the first day of the next to last completed fiscal year of
the Acquired Companies has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with any
Acquired Company other than business dealings or transactions conducted in the
Ordinary Course of Business with the Acquired Companies at substantially
prevailing market prices and on substantially prevailing market terms, or (ii)
engaged in competition with any Acquired Company with respect to any line of the
products or services of such Acquired Company (a "Competing Business") in any
market presently served by such Acquired Company except for less than one
percent of the outstanding capital stock of any Competing Business that is
publicly traded on any recognized exchange or in the over-the-counter market.
Except as set forth in Part 3.24 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of any Acquired Company is a party to any Contract
with, or has any claim or right against, any Acquired Company.
3.25 TAX MATTERS. The Buyer has made no
representations to any Seller regarding any federal, state, or local tax matters
that may affect a Seller as a result of his or its participation in this
Agreement (including the Contemplated Transactions) and each Seller has relied
solely upon his or its own legal and tax advisors for advice as to such matters.
3.26 BROKERS OR FINDERS. Except for certain
obligations to Powers & Associates, payment of which they are solely
responsible, the Sellers and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.27 SECURITIES LAW MATTERS. (a) Each Seller
represents to the Buyer that he or it: (A) understands that the Buyer's Shares
received by it in this transaction have not been registered under the Securities
Act of 1933, as amended, or under any state securities laws, and are delivered
by the Buyer in reliance upon federal and state exemptions for transactions not
involving any public offering; (B) is acquiring the Buyer's Shares solely for
his or its own account for investment purposes, and not with a view to the
distribution thereof; (C) is a sophisticated investor with knowledge and
experience in business and financial matters; (D) has received sufficient
information concerning the Buyer, and has had the opportunity to obtain
additional information as desired by it or its legal and financial advisors, in
order to evaluate the merits and risks inherent in holding the Buyer's Shares;
and (E) understands that the Buyer's Shares delivered to the Sellers is subject
to resale restrictions and may be sold by Sellers only in compliance with
applicable laws, rules and regulations of applicable federal and state
securities laws.
(b) Each Seller is acquiring the Buyer's Shares for
his or its own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act. Each individual Seller, and each
shareholder of HCT, is an "accredited investor" as such term is defined in Rule
501(a) under the Securities Act.
32
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Employment Agreements,
and the Promissory Notes (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the
execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of directors
or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and
will not be required to obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending
Proceeding that has been commenced against Buyer and that challenges, or may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions. To Buyer's Knowledge, no
such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
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5 INDEMNIFICATION; REMEDIES
5.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing for
two years. The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation.
5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. The
Sellers, jointly and severally, will indemnify and hold harmless the Buyer, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made
by the Sellers in this Agreement, the Disclosure Letter, or any other
certificate or document delivered by the Sellers pursuant to this Agreement;
(b) any Breach by any Seller of any covenant or
obligation of such Seller in this Agreement;
(c) any matter disclosed in the Disclosure Letter; or
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either Seller or
any Acquired Company (or any Person acting on their behalf) in connection with
any of the Contemplated Transactions.
The remedies provided in this Section 5.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
5.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER.
The Buyer will indemnify and hold harmless the Sellers, and will pay to the
Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
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5.4 RIGHT OF SET-OFF. Upon notice to Sellers
specifying in reasonable detail the basis for such set-off, Buyer may set off
any amount to which it may be entitled under this Section 6 against amounts
otherwise payable to the Sellers. The exercise of such right of set-off by the
Buyer in good faith, whether or not ultimately determined to be justified, will
not constitute an event of default under this Agreement. Neither the exercise of
nor the failure to exercise such right of set-off will constitute an election of
remedies or limit the Buyer in any manner in the enforcement of any other
remedies that may be available to it.
5.5 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party
under Section 5.2 or 5.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is materially prejudiced by the indemnifying
party's failure to give such notice.
(b) If any Proceeding referred to in Section 5.5(a)
is brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be impermissable, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 6 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
35
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
5.6 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A
claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
6. GENERAL PROVISIONS
6.1 EXPENSES. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants. The Sellers will
cause the Acquired Companies not to incur any out-of-pocket expenses in
connection with this Agreement (without the consent of the Buyer). In the event
of termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
6.2 PUBLIC ANNOUNCEMENTS. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as Buyer
determines. Unless consented to by the Buyer in advance or required by Legal
Requirements, prior to the Closing the Sellers shall, and shall cause the
Acquired Companies to, keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person. The Sellers and the Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions and the
Buyer will have the right to be present for any such communication.
6.3 NOTICES. All notices, consents, waivers, and
other communications under this Agreement must be in writing and will be deemed
to have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
36
Sellers: Xxxxx X. Xxxxxx
_____________________________
_____________________________
Facsimile No.:_______________
K. Xxxxxxxx Xxxxxx
_____________________________
_____________________________
Facsimile No.:_______________
HCT Capital Corp.
_____________________________
_____________________________
Attention:___________________
Facsimile No.:_______________
with a copy to: Xxxxx Xxxxx, Esq.
Xxxxx & Xxxxxxx, P.C.
1800 Mid-America Tower
00 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
And
Xxx Xxxxxx
Powers & Associates
____________________
____________________
Buyer XxxxXxx.xxx, Inc.
00000 Xxxxxxx Xxxx, Xxxxx X
Xxxxx, XX 00000
Attention: Xxxx XxXxxxx
Facsimile No.: (000) 000-0000
with a copy to Xxxxxx X. Xxxxxxxx, Esq.
Johnson, Blakely, Pope,
Bokor, Xxxxxx & Xxxxx, P.A.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
37
Facsimile No.: (000) 000-0000
6.4 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Florida, County of Pinellas, or, if it has or can acquire jurisdiction, in
the United States District Court for the Middle District of Florida, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
6.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
6.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
6.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter (including the Letter of Intent between Buyer and Sellers dated February
22, 2000) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
6.8 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter must
relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
38
6.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld,
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
6.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
6.11 SECTION HEADINGS. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
6.12 CONSTRUCTION. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
6.13 TIME OF ESSENCE. With regard to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.
6.14 GOVERNING LAW. This Agreement will be governed
by the laws of the State of Florida without regard to conflicts of laws
principles.
6.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
6.16 OTHER AGREEMENTS. The Sellers each hereby
release, waive and terminate any and all agreements among any two or more of
them which would impair, preclude or condition the consummation of the
transactions contemplated hreby, including without limitation, the Stockholders'
Agreement dated as of July 5, 1995 among the Sellers, and the Stock Redemption
and Buy-Sell Agreement among Xxxxxx, Xxxxxx and the Company dated as of June 28,
1995.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
XxxxXxx.xxx, Inc., /S/ Xxxxx Xxxxxx
a Nevada corporation --------------------------------
Xxxxx Xxxxxx
/S/ K. Xxxxxxxx Xxxxxx
By: --------------------------------
Title: K. Xxxxxxxx Xxxxxx
---------------------------
--------------------------- --------------------------------
HCT CAPITAL CORP.
By:_____________________________
Title:__________________________
EXHIBIT 2.4(A)(II)
EXHIBIT 2.4(A)(III)
EXHIBIT 2.4(A)(IV)
