AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LIFESTREAM TECHNOLOGIES, INC.
SECURED INTERACTIVE TECHNOLOGIES, INC.
AND
THE STOCKHOLDERS OF SECURED INTERACTIVE TECHNOLOGIES, INC.
JUNE 24, 1999
TABLE OF CONTENTS
Page
----
ARTICLE 1
THE BUSINESS COMBINATION.................................................................................1
1.1 The Merger......................................................................................1
1.2 Closing.........................................................................................1
1.3 Effective Time of the Merger....................................................................1
1.4 Articles of Incorporation; Bylaws...............................................................2
1.5 Directors and Officers of the Purchaser.........................................................2
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION.....................................................2
2.1 Conversion of Shares............................................................................2
(a) Seller Common Stock....................................................................2
(b) Treasury Shares........................................................................2
2.2 Consideration...................................................................................2
2.3 No Fractional Shares............................................................................2
2.4 Stock Transfer Books............................................................................2
2.5 Surrender and Exchange of Certificates Representing Seller Common Stock
...............................................................................................3
(a) Exchange Agent.........................................................................3
(b) Surrender of Certificates..............................................................3
(c) Lost Certificates......................................................................3
(d) No Interest............................................................................3
(e) Dividends on Purchaser Common Stock....................................................3
(f) No Liability...........................................................................4
2.6 Dissenting Stockholders.........................................................................4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES BY SELLER AND THE STOCKHOLDERS
4
3.1 Organization and Qualification..................................................................4
3.2 Capitalization..................................................................................5
3.3 Authority.......................................................................................5
3.4 Non-Contravention...............................................................................5
3.5 Consents........................................................................................6
3.6 No Subsidiaries.................................................................................6
3.7 Absence of Certain Changes or Events............................................................6
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3.8 Governmental Authorization and Compliance with Laws.............................................7
3.9 Absence of Undisclosed Liabilities..............................................................7
3.10 Tax Matters.....................................................................................7
3.11 Title to Properties; Adequacy...................................................................8
3.12 Bank Accounts...................................................................................8
3.13 Leases and Subleases............................................................................8
3.14 Material Contracts..............................................................................9
3.15 Legal Proceedings...............................................................................9
3.16 Labor Relations................................................................................10
3.17 Insider Interests..............................................................................10
3.18 Intellectual Property..........................................................................10
3.19 Insurance......................................................................................11
3.20 Employee and Fringe Benefit Plans..............................................................11
(a) Schedule of Plans.....................................................................11
(b) Qualification.........................................................................12
(c) Accruals; Funding.....................................................................13
(d) Reporting and Disclosure..............................................................13
(e) Prohibited Transactions; Terminations; Other Reportable Events........................13
(f) Claims for Benefits...................................................................14
(g) Other.................................................................................14
(h) Creation of Obligations By Reason of Merger...........................................14
(i) No Multi-Employer Plans...............................................................14
3.21 Environmental Matters..........................................................................14
3.22 Suppliers and Customers........................................................................15
3.23 Corporate Records..............................................................................15
3.24 Brokers, Finders and Investment Bankers........................................................15
3.25 Accuracy of Schedules, Certificates and Documents..............................................15
3.26 Combinations Involving Seller..................................................................16
3.27 Software Completion............................................................................16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..........................................................16
4.1 Ownership of Shares............................................................................16
4.2 Authorization..................................................................................16
4.3 Absence of Violations or Conflicts.............................................................16
4.4 No Consents Required...........................................................................17
4.5 No Claims Against Seller.......................................................................17
4.6 Litigation Related to this Agreement...........................................................17
4.7 Investment Intent..............................................................................17
4.8 Access to Information; Accredited Investor Status..............................................18
4.9 Economic Risk..................................................................................18
4.10 Tax Advice.....................................................................................18
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................................19
5.1 Organization...................................................................................19
5.2 Capitalization.................................................................................19
5.3 Authority......................................................................................19
5.4 Non-Contravention..............................................................................19
5.5 Consents.......................................................................................20
5.6 Periodic Reports...............................................................................20
5.7 Brokers, Finders and Investment Bankers........................................................20
5.8 Accuracy of Schedules, Certificates and Documents..............................................20
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS.....................................................................20
6.1 Conduct of Business Pending the Effective Time.................................................20
(a) Operation by Seller in the Ordinary Course of Business................................20
(b) Forbearances by Seller................................................................21
6.2 Best Efforts; Further Assurances; Cooperation..................................................22
6.3 Confidentiality................................................................................23
6.4 Expenses.......................................................................................23
6.5 No Solicitation of Transactions................................................................23
6.6 Share Transfer Restrictions....................................................................24
6.7 Public Announcements...........................................................................24
6.8 Employee Matters...............................................................................24
(a) Employee Benefits.....................................................................24
(b) Employment Agreements.................................................................24
6.9 Stockholder Agreements.........................................................................24
6.10 No Transfers...................................................................................24
6.11 Special Provisions with Respect to Seller......................................................24
6.12 Noncompetition; Nondisclosure..................................................................25
(a) Scope and Reasonableness of Restrictions..............................................25
(b) Use of Names..........................................................................25
(c) Noncompetition........................................................................25
(d) No Interference with Customers........................................................25
(e) No Interference with Employees........................................................26
(f) Trade Secrets; Confidential Information...............................................26
(g) Remedies..............................................................................27
(h) Modification..........................................................................27
(i) Covenants Independent.................................................................27
6.13 Tax Matters....................................................................................27
(a) Transfer Taxes........................................................................27
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(b) Preparation and Filing of Returns.....................................................27
(c) Cooperation and Exchange of Information...............................................28
(d) Tax-Free Transaction..................................................................28
6.14 Release of Seller by the Stockholders..........................................................28
6.15 Stockholders' Meeting..........................................................................28
6.16 Memorandum and Written Consent.................................................................28
6.17 SEC Reports....................................................................................28
6.18 Rule 144.......................................................................................28
ARTICLE 7
CONDITIONS TO THE MERGER................................................................................29
7.1 Conditions to Obligations of Purchaser.........................................................29
(a) Consents, Authorizations, etc.........................................................29
(b) Injunction, etc.......................................................................29
(c) Representations and Warranties; Covenants and Agreements..............................29
(d) Certificate...........................................................................29
(e) Board and Stockholder Approval........................................................30
(f) Legal Opinion.........................................................................30
(g) Additional Certificates, etc..........................................................30
7.2 Conditions to Obligations of Seller and the Stockholders.......................................30
(a) Consents, Authorizations, etc.........................................................30
(b) Injunction, etc.......................................................................30
(c) Representations and Warranties; Covenants and Agreements..............................30
(d) Purchaser Common Stock................................................................31
(e) Certificate...........................................................................31
(f) Additional Certificates, etc..........................................................31
(g) Board and Stockholder Approval........................................................31
ARTICLE 8
DOCUMENTS TO BE DELIVERED AT CLOSING....................................................................31
8.1 Documents to be Delivered by Seller and the Stockholders.......................................31
8.2 Documents to be Delivered by Purchaser to the Stockholders.....................................31
ARTICLE 9
INDEMNIFICATION.........................................................................................32
9.1 Indemnification by the Stockholders............................................................32
9.2 Indemnification by Purchaser...................................................................32
9.3 Certificates...................................................................................32
9.4 Claims for Indemnification.....................................................................32
9.5 Defense of Claim by Third Parties..............................................................33
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9.6 Third Party Claim Assistance...................................................................33
9.7 Settlement of Indemnification Claims...........................................................33
9.8 Manner of Indemnification......................................................................34
9.9 Indemnification Exclusive Remedy...............................................................34
9.10 Certain Limitations............................................................................34
ARTICLE 10
TERMINATION AND ABANDONMENT.............................................................................34
10.1 Termination and Abandonment....................................................................34
10.2 Specific Performance...........................................................................35
10.3 Rights and Obligations upon Termination........................................................35
10.4 Effect of Termination..........................................................................35
ARTICLE 11
STOCKHOLDERS' REPRESENTATIVE............................................................................36
11.1 Appointment; Acceptance........................................................................36
11.2 Authority......................................................................................36
11.3 Actions........................................................................................36
11.4 Successors.....................................................................................37
11.5 Effectiveness..................................................................................37
ARTICLE 12
GENERAL PROVISIONS......................................................................................37
12.1 Notices........................................................................................37
12.2 Table of Contents; Headings....................................................................38
12.3 Amendment......................................................................................39
12.4 Severability...................................................................................39
12.5 Waiver.........................................................................................39
12.6 No Third Party Beneficiaries; Assignment.......................................................39
12.7 Time of the Essence; Computation of Time.......................................................39
12.8 Counterparts...................................................................................39
12.9 Governing Law..................................................................................40
12.10 Entire Agreement...............................................................................40
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LIST OF EXHIBITS
Exhibit A Form of Legal Opinion of Xxxxxxxxx Xxxxxxxx Xxxxxxxx
Marks & Xxxxxxx, Chtd. (Section 7.1(f))
LIST OF SCHEDULES
Schedule 3.1 Organization and Qualification
3.2 Capitalization
3.4 Non-Contravention
3.5 Consents
3.7 Absence of Certain Changes or Events
3.8 Governmental Authorization and Compliance with Laws
3.9 Absence of Undisclosed Liabilities
3.12 Bank Accounts
3.13 Leases and Subleases
3.14 Material Contracts
3.15 Legal Proceedings
3.16 Labor Relations
3.18 Intellectual Property
3.19 Insurance
3.20 Employee and Fringe Benefit Plans
3.21 Environmental Matters
3.22 Suppliers and Customers
5.4 Non-Contravention
5.5 Consents
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DEFINED TERMS
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TERM PAGE
---- ----
10-KSB...........................................................................................................18
10-QSB...........................................................................................................18
Acquisition Proposal.............................................................................................23
Affiliate........................................................................................................10
Agreement ........................................................................................................1
Articles of Merger................................................................................................1
Authorizations....................................................................................................6
Certificates......................................................................................................3
Citations........................................................................................................15
Closing...........................................................................................................1
Closing Date......................................................................................................1
Code..............................................................................................................1
Confidential Information.........................................................................................26
Continuing Employees.............................................................................................24
Corporate Returns ...............................................................................................27
Costs............................................................................................................32
Customer.........................................................................................................25
Determination Date...............................................................................................34
EEOC.............................................................................................................10
Effective Time....................................................................................................2
Employee Plans...................................................................................................12
Environmental Laws...............................................................................................15
ERISA............................................................................................................12
ERISA Affiliate..................................................................................................12
Exchange Agent....................................................................................................3
GCLN..............................................................................................................1
Governmental Entity...............................................................................................6
Indemnified Party ...............................................................................................32
Indemnifying Party...............................................................................................32
Intellectual Property............................................................................................10
Intellectual Property Agreements.................................................................................11
IRS..............................................................................................................12
Large Customers..................................................................................................15
Large Suppliers..................................................................................................15
Laws..............................................................................................................6
Liens.............................................................................................................8
Material Contracts................................................................................................9
Memorandum ......................................................................................................28
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Merger............................................................................................................1
Merger Consideration..............................................................................................3
Multi-Employer Plan..............................................................................................12
NLRB.............................................................................................................10
Noncompete Period ...............................................................................................25
Notice of Claim..................................................................................................32
Notice of Possible Claim.........................................................................................33
PBGC.............................................................................................................12
Pension/Profit-Sharing Plan......................................................................................11
Purchaser.........................................................................................................1
Purchaser Common Stock............................................................................................1
Purchaser Delivered Agreements...................................................................................19
Purchaser Material Contract......................................................................................20
Purchaser Preferred Stock........................................................................................19
Restricted Business..............................................................................................25
SEC..............................................................................................................12
Securities ......................................................................................................17
Securities Act...................................................................................................10
Seller............................................................................................................1
Seller Common Stock...............................................................................................1
Seller Delivered Agreements.......................................................................................5
Seller Licenses ..................................................................................................7
Shares............................................................................................................1
State Acts.......................................................................................................17
Stockholder Delivered Agreements.................................................................................16
Stockholders' Representative.....................................................................................36
Subsidiary........................................................................................................6
Superfund Notice ................................................................................................15
Tax Returns ......................................................................................................7
Taxes ............................................................................................................7
Territory........................................................................................................25
Trade Secret.....................................................................................................26
Welfare Plan ....................................................................................................12
Written Consent..................................................................................................28
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of June
24, 1999, by and among LIFESTREAM TECHNOLOGIES, INC., a Nevada corporation
("Purchaser"), SECURED INTERACTIVE TECHNOLOGIES, INC., a Nevada corporation
("Seller"), and the undersigned stockholders of Seller (referred to herein
individually as a "Stockholder" and collectively as the "Stockholders"), who are
all of the Stockholders of Seller.
BACKGROUND STATEMENT
The Stockholders own an aggregate of 2,344,000 shares of the $.001 par
value common stock of Seller ("Seller Common Stock" or "Shares") constituting
all of the outstanding shares of Seller Common Stock. In order to enable
Purchaser to acquire the assets and business of Seller, the parties hereto
desire to effect a business combination of Seller and Purchaser pursuant to
which Seller will merge (the "Merger") with and into Purchaser, and the
Stockholders will receive Purchaser common stock, par value $.001 per share
("Purchaser Common Stock"), in exchange for their Shares, as provided in this
Agreement. The Merger is intended to be a "reorganization" under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE 1
THE BUSINESS COMBINATION
1.1 The Merger. At the Effective Time (as defined below), Seller shall
be merged with and into Purchaser in accordance with the provisions of this
Agreement and the General Corporate Law of Nevada ("GCLN"), and the separate
existence of Seller shall thereupon cease, and Purchaser shall be the surviving
corporation in the Merger. The Merger shall have the effect provided under the
applicable laws of the State of Nevada including, but not limited to, Chapter
92A of the GCLN.
1.2 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxxx, Xxxxxx
& Xxxxxxx, LLP 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000-0000 at 10:00
a.m. on the third business day after all conditions set forth in Article 7 have
been satisfied or waived in writing or at such other place and time as Purchaser
and Seller may agree (the "Closing Date"). At the Closing, the parties shall
execute and deliver the agreements and other documents referred to in Article 8.
1
1.3 Effective Time of the Merger. If all the conditions set forth in
Article 7 shall have been fulfilled or waived in accordance with this Agreement
and provided that this Agreement has not been terminated pursuant to Article 10,
the parties shall cause articles of merger (the "Articles of Merger") to be
executed, delivered and filed with the Secretary of State of Nevada in
accordance with the provisions of the GCLN. The Merger shall become effective at
the time of such filing unless a different effective time is specified in the
Articles of Merger pursuant to the GCLN (the "Effective Time").
1.4 Articles of Incorporation; Bylaws. The Articles of Incorporation
and Bylaws of Purchaser after the Effective Time shall be the Articles of
Incorporation and Bylaws of Purchaser as in effect immediately prior to the
Effective Time.
1.5 Directors and Officers of the Purchaser. The directors and officers
of Purchaser after the Effective Time shall be the directors and officers of
Purchaser who held such respective positions immediately prior to the Effective
Time.
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION
2.1 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) Seller Common Stock. The Shares shall be converted into the
right to receive the "Merger Consideration" (as defined below).
(b) Treasury Shares. Any shares of the capital stock of Seller
held in the treasury of Seller or held by Purchaser or any of its
Subsidiaries (as defined below) shall be automatically canceled and
extinguished, and no payment shall be made in respect thereof.
2.2 Consideration. At the Effective Time, by virtue of the Merger, each
Stockholder shall be entitled to receive one share of Purchaser Common Stock for
each of the Shares owned by the Stockholder (the "Merger Consideration").
2.3 No Fractional Shares. No scrip or fractional shares of Purchaser
Common Stock shall be issued in the Merger upon conversion of Seller Common
Stock as provided in Section 2.1. Each registered holder of Seller Common Stock
who would otherwise have been entitled to receive a fractional share of
Purchaser Common Stock upon conversion of his Shares shall be entitled to
receive a cash payment with respect to such fractional share in an amount equal
to the closing market price of a share of Purchaser Common Stock on the business
day immediately prior to the Closing
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Date as reported on the Nasdaq Electronic Bulletin Board multiplied by a
fraction equivalent to such fractional share.
2.4 Stock Transfer Books. From and after the Effective Time, no
transfer of Seller Common Stock outstanding prior to the Effective Time shall be
registered on the stock transfer books of the Purchaser. If, after the Effective
Time, certificates for Seller Common Stock are presented to the Purchaser for
transfer, such certificates shall be canceled and exchanged for the Merger
Consideration.
2.5 Surrender and Exchange of Certificates Representing Seller Common
Stock.
(a) Exchange Agent. Purchaser shall appoint Nevada Agency &
Trust Company, or such other financial institution as may be selected
by Purchaser, or Purchaser shall appoint itself, to act as exchange
agent for the Merger (the "Exchange Agent"). At the Effective Time,
Purchaser shall, pursuant to irrevocable instructions, direct the
Exchange Agent to deliver the number of shares of Purchaser Common
Stock provided for in Section 2.2.
(b) Surrender of Certificates. Prior to the Effective Time,
Purchaser shall cause the Exchange Agent to make available to each
record holder as of the Effective Time of an outstanding certificate or
certificates which immediately prior to the Effective Time represented
Seller Common Stock (the "Certificates"), a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates for conversion thereof,
which letter of transmittal shall comply with all applicable rules of
Nasdaq. Upon surrender to the Exchange Agent of the Certificates at the
Closing or thereafter, together with such letter of transmittal duly
executed, the holder of such Certificates shall be entitled to receive
at the Closing or promptly after such surrender if after the Closing in
exchange therefor one or more certificates as requested by the holder
(properly issued, executed and counter-signed, as appropriate)
representing that number of whole shares of Purchaser Common Stock to
which such holder of Seller Common Stock shall have become entitled
pursuant to the provisions of Section 2.2 and the Certificates so
surrendered shall forthwith be canceled. From the Effective Time until
surrender in accordance with the provisions of this Section 2.5, each
Certificate (other than Certificates representing treasury shares)
shall represent for all purposes only the right to receive the Merger
Consideration. All payments in respect of Seller Common Stock that are
made in accordance with the terms hereof shall be deemed to have been
made in full satisfaction of all rights pertaining to such securities.
(c) Lost Certificates. In the case of any lost, misplaced,
stolen or destroyed Certificate, the holder thereof may be required, as
a condition precedent to delivery to such holder of the Merger
Consideration, to deliver to Purchaser an indemnity agreement and a
bond in such reasonable sum as Purchaser may direct as indemnity
against any claim that
3
may be made against the Exchange Agent or Purchaser with respect to the
Certificate alleged to have been lost, misplaced, stolen or destroyed.
(d) No Interest. No interest shall be paid or accrued on any
portion of the Merger Consideration regardless of the cause for delay
in payment of the Merger Consideration.
(e) Dividends on Purchaser Common Stock. No holder of a
Certificate shall be entitled to delivery of any dividend or other
distribution from Purchaser having a record date after the Effective
Time until surrender of such holder's Certificate pursuant to this
Section 2.5. Upon such surrender, there shall be paid to the holder the
amount of any dividends or other distributions (without interest) that
theretofore became payable by Purchaser, but were not paid by reason of
the foregoing with respect to the number of whole shares of Purchaser
Common Stock represented by the Certificate or Certificates issued upon
such surrender. From and after the Effective Time, Purchaser shall,
however, be entitled to treat any such Certificate that has not yet
been surrendered for exchange as evidencing the ownership of the
aggregate Merger Consideration into which Seller Common Stock
represented by such Certificate shall have been converted,
notwithstanding any failure to surrender such Certificate.
(f) No Liability. Neither Purchaser nor Seller shall be liable
to any holder of shares of Seller Common Stock for any Purchaser Common
Stock (or dividends or distributions with respect thereto) delivered to
a public official pursuant to any abandoned property, escheat or
similar law.
2.6 Dissenting Stockholders. Any holder of Seller Common Stock who
dissents from the Merger and exercises dissenters' rights in accordance with the
provisions of the GCLN and who perfects such rights pursuant to the GCLN shall
be entitled to receive, in lieu of the Merger Consideration, the value of such
shares in cash as determined pursuant to the applicable provisions of the GCLN.
Notwithstanding the other provisions of this Article 2, Seller Common Stock with
respect to which a proper demand has been made in accordance with Chapter 92A of
the GCLN shall not be converted into the right to receive Merger Consideration
applicable to such shares as set forth in Section 2.1, unless the holder thereof
shall have lost his status as a dissenting stockholder pursuant to Chapter 92A
of the GCLN.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES BY SELLER AND THE STOCKHOLDERS
Seller and each of the Stockholders hereby jointly and severally
represent and warrant to Purchaser as follows:
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3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada has the corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in the jurisdictions shown on
Schedule 3.1, which include all jurisdictions in which it is required to be
qualified or in which it is subject to any cost, restriction or penalty
(including assessment of taxes, penalties or fees for prior periods) for failing
to qualify. Seller has provided to Purchaser copies of (i) Seller's original
Articles of Incorporation and all amendments, restatements, articles of merger
or other filings with respect thereto (certified by the Secretary of State or
other appropriate official of the State of Nevada and any other appropriate
state), and (ii) Seller's currently effective Bylaws (certified by Seller's
Secretary). All amendments to, and articles of merger and other filings with
respect to, Seller's Articles of Incorporation and every other reorganization
involving Seller were made in accordance with its Articles of Incorporation, its
Bylaws and applicable "Law" (as defined below).
3.2 Capitalization. The authorized capital stock of Seller consists of
20,000,000 shares of $.001 par value Seller Common Stock and 5,000,000 shares of
$.001 par value preferred stock. All of the issued and outstanding shares of
Seller Common Stock are duly authorized, validly issued, fully paid and
nonassessable, were not issued in violation of any preemptive rights, and were
issued under available exemptions from federal and state securities laws. The
Shares are the only shares of Seller's capital stock issued and outstanding, and
no shares of Seller's capital stock are held by Seller as treasury shares as of
the date hereof. Except as set forth on Schedule 3.2 and in this Section 3.2,
there are no shares of capital stock of Seller outstanding, and there are no
subscriptions, options, convertible securities, calls, rights, warrants or other
agreements, claims or commitments of any nature whatsoever obligating Seller to
issue, transfer, register with any securities commission or other authority,
deliver or sell or cause to be issued, transferred, so registered, delivered or
sold, additional shares of the capital stock or other securities of Seller or
obligating Seller to grant, extend or enter into any such agreement or
commitment. Schedule 3.2 sets forth a list of each of the Stockholders, their
names (as such names appear in the share records of Seller), their addresses and
states of residence, and the number and percentage of Shares held by each of
them.
3.3 Authority. Seller has the corporate power and authority to execute
and deliver this Agreement and any other agreements, instruments and documents
executed and delivered by Seller pursuant to this Agreement (this Agreement and
such other agreements, instruments and documents are collectively referred to as
the "Seller Delivered Agreements") and, subject to approval of the Stockholders
of Seller in accordance with the GLCN, to consummate the transactions
contemplated on the part of Seller hereby and thereby. The execution and
delivery by Seller of the Seller Delivered Agreements and the consummation by
Seller of the transactions contemplated on its part thereby have been duly
authorized by all necessary action on the part of Seller, other than the
approval of the Stockholders of Seller in accordance with the GLCN. The Seller
Delivered Agreements have been duly executed and delivered by Seller and each is
a valid and binding obligation of Seller enforceable in accordance with its
terms, except (i) as such enforcement may be limited by bankruptcy,
reorganization, insolvency or other laws and court decisions relating to or
affecting the enforcement of rights generally (including but not limited to
statutory or other law
5
regarding fraudulent transfers), and (ii) as to the availability of specific
performance or other equitable remedies.
3.4 Non-Contravention. The execution and delivery of the Seller
Delivered Agreements by Seller do not and the consummation by Seller of the
transactions contemplated thereby does not and will not (i) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Seller, or (ii)
except as set forth on Schedule 3.4, violate or conflict with, or result (with
the giving of notice or the lapse of time or both) in a violation of or
constitute a default under any provision of, or result in the acceleration or
termination of or entitle any party to accelerate or terminate (whether after
the giving of notice or lapse of time or both), any obligation or benefit under,
or result in the creation or imposition of any "Lien" (as defined below) upon
any of the assets or properties of Seller or require consent, authorization or
approval of any person or entity pursuant to any provision of any "Material
Contract" (as defined below), "Intellectual Property Agreement" (as defined
below), or other license granted or issued by any "Governmental Entity" (as
defined below) to Seller, law, ordinance, regulation, policy, order or rule
(collectively "Laws"), arbitration award, judgment or decree to which Seller is
a party or by which it or its assets or properties are bound and do not and will
not violate or conflict with any other restriction of any kind or character to
which Seller is subject or by which any of its assets or properties may be
bound, and the same does not and will not constitute a breach of, default under,
or an event permitting termination of any Material Contract or Intellectual
Property Agreement to which Seller is a party. Except as set forth on Schedule
3.4, no such violation, conflict, default, acceleration, termination,
entitlement, creation or imposition of a Lien, regardless of whether it is
described on Schedule 3.4, shall cause any damage, additional cost or expense
(including any payments or expenses incurred to obtain consents or waivers) to
Seller or Purchaser. Except as set forth on Schedule 3.4, Seller believes that
it will be able to obtain (without material additional payment or expense) all
consents and waivers necessary to avoid any such violation, acceleration,
entitlement to accelerate, creation or imposition of a lien, charge, pledge,
security interest or other encumbrance, conflict or event.
3.5 Consents. Except as set forth on Schedule 3.5, no consent,
authorization, clearance, order or approval of, or filing or registration with
(collectively, "Authorizations") any executive, judicial or other public
authority, agency, department, bureau, division, unit or court or other public
person or entity (collectively, a "Governmental Entity") or any other party is
required for, or in connection with, the execution and delivery of the Seller
Delivered Agreements by Seller and the consummation by Seller of the
transactions contemplated thereby.
3.6 No Subsidiaries. As used in this Agreement, the term "Subsidiary"
means, with respect to any person, corporation or other entity, any corporation
or other organization, whether incorporated or unincorporated, of which at least
a majority of the securities or interests having by the terms thereof voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is at that time
directly or indirectly owned or controlled by such person, corporation or other
entity. There are no Subsidiaries of Seller.
6
3.7 Absence of Certain Changes or Events. Except as disclosed on
Schedule 3.7 or permitted by Section 6.1(b), since December 31, 1998, there has
not been: (i) any material adverse change in the assets, liabilities, business,
financial position, results of operations or prospects of Seller; (ii) any
damage, destruction, loss or casualty to property or assets of Seller, whether
or not covered by insurance; (iii) any strike, work stoppage or slowdown or
other labor trouble involving Seller; (iv) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, capital stock or
property) with respect to the capital stock of Seller; (v) any redemption or
other acquisition by Seller of any of the capital stock of Seller; (vi) any
split, combination, reclassification or other similar change in the outstanding
capital stock of Seller; (vii) any transaction entered into by Seller other than
in the ordinary course of business; or (viii) any agreement to do any of the
foregoing. Except as disclosed on Schedule 3.7, since December 31, 1998 there
has not been any issuance by Seller of any shares, or options, calls or
commitments relating to shares of its capital stock, or any securities or
obligations convertible into or exchangeable for, or giving any person any right
to acquire from it, any shares of its capital stock.
3.8 Governmental Authorization and Compliance with Laws. Except as
disclosed on Schedule 3.8, Seller has been and is in compliance with all Laws of
all Governmental Entities applicable to Seller or its business, properties or
assets. Seller holds all licenses, permits, certificates, franchises,
registrations, consents, approvals, Authorizations or other rights filed with,
granted, issued by, or entered by any Governmental Entity, that are required for
the conduct of its business as now being conducted (collectively, "Seller
Licenses"). The Seller Licenses are set forth on Schedule 3.8 and are valid and
in full force and effect, and the terms of the Seller Licenses are not subject
to any restrictions or conditions that limit or would limit the operations of
the business of Seller as presently conducted, other than restrictions or
conditions generally applicable to licenses of that type. Except as set forth on
Schedule 3.8, there are no proceedings pending or, to the best knowledge of
Seller, complaints or petitions by others, or threatened proceedings, before any
Governmental Entity relating to the business or operations of Seller or the
Seller Licenses, and to the best knowledge of Seller there are no facts or
conditions that reasonably could be expected to constitute grounds for any
Governmental Entity to revoke, terminate, suspend, deny, annul, or impose
conditions on any renewal of the Seller Licenses, or impair the ability of
Seller to consummate the transactions contemplated hereby or to impose any
fines, forfeitures or other penalties on Seller.
3.9 Absence of Undisclosed Liabilities. Except as set forth in the
balance sheet as of December 31, 1998, or on Schedule 3.9, Seller (i) did not
have, as of December 31, 1998, debts, liabilities or obligations, whether
accrued, absolute, contingent or otherwise and whether due or to become due
(including without limitation any uninsured liabilities or liabilities resulting
from failure to comply with any Laws); (ii) has not incurred since December 31,
1998, any such debts, liabilities or obligations (other than debts, liabilities
or obligations incurred in the ordinary and usual course of business after
December 31, 1998 which, in the aggregate, are not material), and (iii) since
December 31, 1998, has not conducted its business otherwise than in the ordinary
and usual course.
7
3.10 Tax Matters. All taxes arising under the Code or any Law
promulgated thereunder, or arising under any federal, state, local or foreign
Law, including, without limitation, any income, profits, employment, sales, use,
occupation, excise, real property, personal property or ad valorem taxes or any
license or franchise fee or tax and all penalties and interest related thereto
(collectively, "Taxes"), due and payable by Seller have been paid or provided
for in Seller's financial statements and are not delinquent. All Taxes not yet
due have been fully accrued on the books of Seller and adequate reserves have
been established therefor. The charges, accruals and reserves which have been
provided in Seller's financial statements in respect of Taxes are sufficient for
the payment of all unpaid Taxes, whether or not disputed, that are accrued or
applicable for all years and periods ended prior thereto. There are no pending
claims asserted for Taxes against Seller or outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax return of
Seller for any period. Seller has duly and timely filed all federal, state,
local and foreign tax returns and all other returns heretofore required to be
filed ("Tax Returns") with respect to all Taxes. Seller has delivered to
Purchaser true and correct copies of all Tax Returns for its last five (5)
taxable years. Seller has not filed a consent to the application of Section
341(f) of the Code. Seller has made all estimated income tax deposits and all
other required Tax payments or deposits and has complied for all prior periods
with the Tax withholding provisions of all applicable federal, state, local and
other Laws.
3.11 Title to Properties; Adequacy. Seller has good and marketable
title to all properties and assets reflected in the balance sheet dated December
31, 1998 (or acquired after that date), or valid leasehold or license interests
in all properties and assets not reflected on such balance sheet but used by
Seller, free and clear of any title defects, except (i) for mortgages and liens
securing debt reflected as liabilities on such balance sheet, (ii) liens for
current Taxes and assessments not in default, (iii) mechanics', carriers',
workers', repair persons', landlords', statutory or common law liens either not
delinquent or being contested in good faith and (iv) liens, security interests,
pledges, hypothecations, encumbrances, restrictions, reservations,
encroachments, infringements, easements, covenants, rights-of-way, building or
use restrictions, exceptions, variances, title retention or other security
arrangement, defect of title, adverse right or interest charge or claim of any
nature whatsoever of, on or with respect to any property or property interest,
options, rights of refusal or similar rights or other transfer restrictions of
any nature whatsoever (including any arising from any pending or threatened
litigation), federal and state estate or inheritance taxes, and other matters or
limitations of any kind, if any, all of which do not have an adverse effect on
Seller's use of the property affected (collectively "Liens"). No person other
than Seller is currently entitled to possession of any of the properties of
Seller, whether owned or leased by Seller. To the best knowledge of Seller, the
real property, buildings, structures and improvements owned or leased by Seller
conform to all applicable Laws, including zoning regulations, none of which
would upon consummation of the transactions contemplated hereby adversely
interfere with the use of such properties, buildings, structures or improvements
for the purposes for which they are now utilized. Seller has not received notice
nor has actual knowledge of (A) any pending or contemplated condemnation or
eminent domain proceeding affecting the properties owned or leased by Seller,
(B) any proposal for increasing the assessed value of any such properties for
state, county, local or other ad valorem Taxes or (C) any pending or
contemplated proceedings or public improvements that
8
would result in the levy of any special Tax or assessment against any such
properties; and there are no outstanding requirements or recommendations by
Seller's insurance providers requiring or recommending any repairs or work to be
done with reference to any such properties or any basis for such. The properties
and assets owned or leased by Seller are adequate for the conduct of its
business as presently conducted and are in good repair and operating condition,
normal wear and tear excepted. The properties and assets owned by Seller
constitute all of the property and assets which Seller uses or may reasonably
need in connection with the operation of its business as presently conducted,
and the consummation of the transactions contemplated by this Agreement will not
impair the ability of Purchaser to use such properties and assets.
3.12 Bank Accounts. Schedule 3.12 lists all bank, money market, savings
and similar accounts and safe deposit boxes of Seller, specifying the account
numbers and the authorized signatories or persons having access to them.
3.13 Leases and Subleases. Schedule 3.13 sets forth each lease or
sublease pursuant to which Seller leases or subleases any real or personal
property, either as lessor or lessee, except any lease or sublease of personal
property that (i) can be canceled by Seller upon 30 or fewer days' notice
without cost or penalty, acceleration of rentals or exercise of an option to
purchase the leased property or (ii) involves an annual rental of $5,000 or
less, and the leases and subleases not required to be disclosed on Schedule 3.13
do not involve annual payments by or to Seller of more than $25,000 in the
aggregate. Seller has delivered to Purchaser true and correct copies of all
leases and subleases required to be set forth on Schedule 3.13, and: (A) Seller
is not in default in connection with any lease or sublease to which it is a
party or by which it is bound nor, so far as Seller knows, is there any basis
for any claim or default in any respect under any of the foregoing; and so far
as Seller knows, no other party is in default under any such lease or sublease;
(B) no act or event has occurred which with notice or lapse of time, or both,
would constitute a default under any such lease or sublease and, so far as
Seller knows, there is no basis for such; (C) there is no outstanding notice of
cancellation or termination in connection therewith; and (D) each such lease or
sublease is a valid and binding agreement of the parties thereto which is in
full force and effect in accordance with its terms.
3.14 Material Contracts. Schedule 3.14 contains a correct and complete
list of the following (collectively, the "Material Contracts"):
(a) all bonds, debentures, loan agreements, notes, mortgages,
deeds to secure debt, deeds of trust, reinsurance and other risk
sharing agreements, indentures or guaranties to which Seller is a party
or by which Seller or its properties or assets are bound;
(b) all leases (whether capital or operating) under which
Seller is the lessee of real or personal property;
(c) all employment agreements of Seller; and
9
(d) all existing contracts and commitments (other than those
described in subparagraphs (a), (b) or (c) and any "Employee Plans" (as
defined below)) to which Seller is a party or by which Seller or its
properties or assets may be bound involving an annual commitment or
annual payment by any party thereto of more than $5,000 individually or
$25,000 in the aggregate, or which have a fixed term extending more
than 12 months from the date hereof.
True and complete copies of all Material Contracts, including all amendments
thereto, have been delivered to Purchaser. Except as set forth on Schedule 3.14:
(A) all Material Contracts are in full force and effect and constitute the valid
and binding obligations of the respective parties thereto; (B) there has not
been and there currently is no default under any Material Contract by Seller or,
to the knowledge of Seller, any other party thereto; (C) no event has occurred
which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default thereunder entitling
any party to terminate a Material Contract; and (D) the continuation, validity
and effectiveness of all such Material Contracts under the current terms thereof
and the current rights and obligations of Seller thereunder will in no way be
affected, altered or impaired by the consummation of the transactions
contemplated hereby. Except as disclosed on Schedule 3.14, there are no
contracts or options to sell or lease any properties or assets of Seller.
3.15 Legal Proceedings. Except as set forth on Schedule 3.15, (i) there
is no claim, action, suit, proceeding or investigation pending or, to the
knowledge of Seller, contemplated or threatened against Seller or any of its
properties or assets (or any of its officers or directors in connection with the
business of Seller), before any arbitrator or Governmental Entity, domestic or
foreign, which in the event of a final adverse determination, considered
individually or in the aggregate with all such other claims, actions, suits or
proceedings, would adversely affect the assets, liabilities, financial position,
results of operations, business or prospects of Seller, or which seeks treble
damages, seeks damages in connection with any of the transactions contemplated
by this Agreement or seeks to prohibit, restrict or delay consummation of the
transactions contemplated hereby or any of the conditions to consummation of the
transactions contemplated hereby or to limit the right of Purchaser to control
Seller or any aspect of the business of Seller after the Closing, nor is there
any judgment, decree, injunction, ruling or order of any Governmental Entity,
arbitrator or any other person outstanding against Seller having any such
effect; and (ii) Seller is not a party to or bound by any judgment, decree,
injunction, ruling or order of any Governmental Entity, arbitrator or any other
person against Seller that, when considered individually or in the aggregate
with all such other judgments, decrees, injunctions, rulings or orders,
adversely affects the assets, liabilities, financial position, results of
operations, business or prospects of Seller.
3.16 Labor Relations. Except as disclosed on Schedule 3.16, Seller is
in compliance with all federal and state Laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
is not engaged in any unfair labor or unlawful employment practice. There is no
unlawful employment practice or discrimination charge pending before the Equal
Employment Opportunity Commission ("EEOC") or any EEOC recognized state
"referral agency." There is no unfair labor practice charge or complaint against
Seller pending before the
10
National Labor Relations Board ("NLRB"). There is no labor strike, dispute,
slowdown or stoppage actually pending or, to the best knowledge of Seller,
threatened against or involving or affecting Seller and no NLRB representation
question exists respecting any of its employees. No grievance or arbitration
proceeding is pending and no written claim therefor exists. There is no
collective bargaining agreement that is binding on Seller. Except for any
Material Contract disclosed pursuant to Section 3.14, Seller is not a party to
or bound by any agreement, arrangement or understanding with any employee or
consultant that cannot be terminated on notice of ninety (90) or fewer days
without liability to Seller or that entitles the employee or consultant to
receive any salary continuation or severance payment or retain any specified
position with Seller.
3.17 Insider Interests. No affiliate (an "Affiliate"), as that term is
defined in Rule 405 of Regulation C promulgated under the Securities Act of
1933, as amended (the "Securities Act"), officer, director or Stockholder of
Seller, other than Xxx Xxxxx, (i) has any agreement with Seller or any interest
in any property, real or personal, tangible or intangible, including without
limitation trade names or trademarks used in or pertaining to the business of
Seller, except for the normal rights as a stockholder or (ii) has any claim or
cause of action against Seller, except for accrued compensation and benefits,
expenses and similar obligations incurred in the ordinary course of business
(including reimbursement of medical expenses pursuant to Employee Plans) with
respect to employees of Seller.
3.18 Intellectual Property. Except as set forth on Schedule 3.18, and
except for licenses of generally available computer programs for personal
computers, Seller owns and has owned all patents, trademarks, service marks,
trade names, copyrights or applications for the foregoing, and all computer
programs, firmware and documentation relating thereto, and trade secrets and
other intellectual properties (collectively, the "Intellectual Property") that
are or were used in the conduct of the business of and the development of
products and services by Seller. Except as disclosed on Schedule 3.18, Seller
has and has had the unrestricted right to produce, market, license and sell all
of the products and services produced, marketed and licensed by it in the
jurisdictions in which Seller produces, markets, licenses and sells its products
and services, and the consummation of the transactions contemplated by this
Agreement will not alter or impair any such rights. Schedule 3.18 lists all of
the Intellectual Property other than trade secrets, which have been separately
disclosed to Purchaser, and lists all licenses or other agreements (other than
licenses of generally available computer programs for personal computers)
pursuant to which Seller has any right to use or enjoy any Intellectual Property
that is owned by others or pursuant to which Seller is under a duty of
confidentiality with respect to any Intellectual Property owned by others (the
"Intellectual Property Agreements"). Except as disclosed on Schedule 3.18, all
of the Intellectual Property is owned free and clear of all assignments,
licenses, sublicenses, and Liens, including claims of employees, former
employees or independent contractors of Seller, and Seller has not received
notice that the use of any of the Intellectual Property in the business of
Seller, any of the products or services of Seller or any products or services
held for future sale or license by Seller violates or infringes upon the claimed
rights of others and there is no valid basis for such a claim. As to the
Intellectual Property Agreements, except as set forth on Schedule 3.18, (i) all
are in full force and effect; (ii) Seller is not, nor to the best of the
knowledge of Seller, is any other party thereto, in default under any
Intellectual
11
Property Agreement; (iii) Seller is not obligated to make any royalty, transfer
or similar payments under any Intellectual Property Agreement, (iv) the rights
of Seller under the Intellectual Property Agreements will not be affected by the
consummation of the transactions provided for herein, and (v) the exercise by
Seller of its respective rights under any Intellectual Property Agreement, in
the manner and in the jurisdictions currently used by Seller, will not infringe
upon the claimed rights of others.
3.19 Insurance. Seller maintains the amount and scope of all insurance
policies or contracts providing coverage as summarized on Schedule 3.19. All
such policies or contracts of insurance are of a scope and, in the opinion of
management, in an amount usual and customary for businesses engaged in the
business of Seller and are sufficient for compliance with all Laws and of all
agreements to which Seller is a party. All insurance policies pursuant to which
any such insurance is provided are in full force and effect and no effective
notice of cancellation or termination of any such insurance policies has been
given to Seller by the carrier of any such policy. All premiums required to be
paid in connection therewith have been paid in full.
3.20 Employee and Fringe Benefit Plans.
(a) Schedule of Plans. Schedule 3.20 lists each of the
following that Seller or any "ERISA Affiliate" (as defined below)
either maintains, is required to contribute to or otherwise
participates in (or at any time maintained, contributed to or otherwise
participated in) or as to which Seller or any ERISA Affiliate has any
unsatisfied liability or obligation, whether accrued, contingent or
otherwise:
(i) any employee pension benefit plan
("Pension/Profit-Sharing Plan") (as such term is defined in the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including any pension, profit-sharing, retirement,
thrift or stock bonus plan;
(ii) any "multi-employer plan" ("Multi-Employer Plan")
(as such term is defined in ERISA);
(iii) any employee welfare benefit plan ("Welfare Plan")
(as such term is defined in ERISA); or
(iv) any other compensation, stock option, restricted
stock, fringe benefit or retirement plan, program, policy,
understanding or arrangement of any kind whatsoever, whether
formal or informal, not included in the foregoing and providing
for benefits for, or the welfare of, any or all of the current
or former employees or agents of Seller or any ERISA Affiliate
or their beneficiaries or dependents, including any group
health, life insurance, retiree medical, bonus, incentive or
severance arrangement, and all outstanding stock options,
restricted shares, phantom stock
12
awards, stock appreciation rights, performance share unit
awards or cash or other similar incentive awards thereunder;
(all of the foregoing in items (i), (ii), (iii) and (iv) being referred
to as "Employee Plans"). "ERISA Affiliate" means each trade or business
(whether or not incorporated) which together with Seller is treated as
a single employer pursuant to Code Section 414(b), (c), (m) or (o).
Seller has delivered to Purchaser (and Schedule 3.20 lists each item
delivered) copies of the following: (1) each written Employee Plan, as
amended (including either the original plan or the most recent
restatement and all subsequent amendments); (2) the most recent
Internal Revenue Service ("IRS") determination letter issued with
respect to each Pension/Profit- Sharing Plan; (3) the latest actuarial
valuation (if any) for each Pension/Profit-Sharing Plan; (4) all annual
reports on the Form 5500 series; (5) each trust agreement, insurance
contract or document setting forth any other funding arrangement, if
any, with respect to each Employee Plan; (6) the most recent ERISA
summary plan description or other summary of plan provisions
distributed to participants or beneficiaries for each Employee Plan;
(7) each opinion or ruling from the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation ("PBGC") concerning any Employee
Plan; and (8) each Registration Statement, amendment thereto and
prospectus relating thereto filed with the Securities and Exchange
Commission (the "SEC") or furnished to participants in connection with
any Employee Plan.
(b) Qualification. Except as set forth on Schedule 3.20 each
Pension/Profit-Sharing Plan of Seller: (i) has received a favorable
determination letter from the IRS to the effect that it is qualified
under Code Sections 401(a) and 501, both as to the original plan and
all restatements or material amendments; (ii) has never been subject to
any assertion by any Governmental Entity that it is not so qualified;
and (iii) has been operated so that it has always been so qualified.
(c) Accruals; Funding.
(i) Pension/Profit-Sharing Plans. None of the Employee
Plans is a Pension/Profit-Sharing Plan subject to ERISA Title
IV (including those for retired, terminated or other former
employees and agents).
(ii) Other Plans. Schedule 3.20 fully and accurately
sets forth any funding liability under each Employee Plan not
subject to ERISA Title IV, whether insured or otherwise,
specifically setting forth any liabilities under any retiree
medical arrangement and specifically designating any insured
plan which provides for retroactive premium or other
adjustments. The levels of insurance reserves and accrued
liabilities with regard to each such Employee Plan are
reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
13
(iii) Contributions. Except as set forth on Schedule
3.20: (1) Seller and each ERISA Affiliate have made full and
timely payment of all amounts required to be contributed under
the terms of each Employee Plan and applicable Law, or required
to be paid as expenses under such Employee Plan, including PBGC
premiums and amounts required to be contributed under Code
Section 412; (2) all contributions have been made in accordance
with the actuarial recommendations; and (3) no excise taxes are
assessable as a result of any nondeductible or other
contributions made or not made to an Employee Plan.
(d) Reporting and Disclosure. Summary plan descriptions and all
other returns, reports, registration statements, prospectuses,
documents, statements and communications which are required to have
been filed, published or disseminated under ERISA or other Law and the
rules and regulations promulgated by the Department of Labor under
ERISA and the Treasury Department or by the SEC with respect to the
Employee Plans have been so filed, published or disseminated.
(e) Prohibited Transactions; Terminations; Other Reportable
Events. Except as set forth on Schedule 3.20:
(i) neither Seller, any ERISA Affiliate, any Employee
Plan, any trust or arrangement created under any of them, nor
any trustee, fiduciary, custodian, administrator or any person
or entity holding or controlling assets of any of the Employee
Plans has engaged in any "prohibited transaction" (as such term
is defined in ERISA or the Code) which could subject any of the
foregoing persons or entities, or any person or entity dealing
with them, to any tax, penalty or other cost or liability of
any kind; and
(ii) no termination, whether partial or complete, has
occurred with respect to any Employee Plan.
(f) Claims for Benefits. Other than claims for benefits arising
in the ordinary course of the administration and operation of the
Employee Plans, no claims, investigations or arbitrations are pending
or threatened against any Employee Plan or against Seller, any ERISA
Affiliate, any trust or arrangement created under or as part of any
Employee Plan, any trustee, fiduciary, custodian (to Seller's actual
knowledge), administrator (to Seller's actual knowledge), or to
Seller's actual knowledge, other person or entity holding or
controlling assets of any Employee Plan, and no basis to anticipate any
such claim or claims exists.
(g) Other. Each of Seller and all ERISA Affiliates have fully
complied with all of their obligations under each of the Employee Plans
and with all provisions of ERISA and any and all other Laws applicable
to the Employee Plans. No written notice has been received by Seller of
any claim by any participant in the Employee Plans of any violations of
such
14
Laws, and to the best knowledge of Seller or the Stockholders, no such
claims are pending or threatened.
(h) Creation of Obligations By Reason of Merger. Except as set
forth on Schedule 3.20, the execution and delivery of the Seller
Delivered Agreements and the consummation of the transactions
contemplated by the Seller Delivered Agreements will not constitute an
event under any Employee Plan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any employee, including any obligation
to make a payment that would be nondeductible under Code Section 280G
or any other Code provision.
(i) No Multi-Employer Plans. Except as set forth on Schedule
3.20, none of the Employee Plans is a Multi-Employer Plan, and neither
Seller nor any ERISA Affiliate has any liability, joint or otherwise,
for any withdrawal liability (potential, contingent or otherwise) under
ERISA Title IV for a complete or partial withdrawal from any Multi-
Employer Plan.
3.21 Environmental Matters. Except as set forth on Schedule 3.21:
(a) Seller has obtained all Authorizations, kept all records
and made all filings required by applicable "Environmental Laws" (as
defined below) with respect to emissions or discharges into the
environment and the proper disposal of any hazardous wastes, hazardous
substances, or other hazardous or toxic materials as defined in the
Environmental Laws. None of the properties occupied or used by Seller
has been contaminated by Seller or, to Seller's actual knowledge, any
other party, with any such hazardous wastes, hazardous substances, or
other hazardous or toxic materials. Seller has conducted its operations
and will consummate the transactions contemplated by this Agreement in
compliance with all Environmental Laws and all Authorizations obtained
pursuant thereto.
(b) Seller has not received any notice from the United States
Environmental Protection Agency that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation and
Liability Act ("Superfund Notice"), any citation from any Governmental
Entity for noncompliance with its requirements with respect to air,
water or environmental pollution, or the improper storage, use or
discharge of any hazardous waste, other waste or other substance or
material pertaining to its business ("Citations") or any written notice
from any private party alleging any such noncompliance or impropriety;
and there are no pending or unresolved Superfund Notices, Citations or
written notices from private parties alleging any such noncompliance or
impropriety.
(c) The term "Environmental Laws" shall mean all Laws relating
to pollution or protection of the environment.
15
3.22 Suppliers and Customers. Copies of (i) a list(s) setting forth
each supplier to whom payments were made which equaled or exceeded five percent
of Seller's cost of services or cost of goods sold for Seller's most recent
fiscal year ended or to whom payments are projected to equal or exceed such
percentage for the current fiscal year (the "Large Suppliers") and the
percentage of Seller's cost of services or goods sold allocable to each Large
Supplier for such fiscal year, and (ii) a list(s) setting forth the 20 largest
customers (determined by gross sales revenue) from whom payments were received
for Seller's most recent fiscal year ended or from whom payments are projected
that will place them within such category for the current fiscal year (the
"Large Customers") and the percentage of Seller's gross sales allocable to each
of such Large Customers for such fiscal year have been provided by Seller to
Purchaser and each such list reflects accurately and in reasonable detail such
information. Except as reflected in Schedule 3.22, no supplier is a sole source
of supply of any good or service to Seller. Seller has no Knowledge that any of
the Large Suppliers or any of the Large Customers intends to terminate or
otherwise modify adversely to Seller its relationship with Seller or to decrease
or materially limit its services, supplies or materials to Seller or its usage
or purchase of the goods or services of Seller, as the case may be.
3.23 Corporate Records. The corporate record books (including the share
records) of Seller are complete, accurate and up to date with all necessary
signatures and set forth all meetings and actions taken by the stockholders and
directors of Seller and all transactions involving the shares of Seller (and
contain all canceled share certificates).
3.24 Brokers, Finders and Investment Bankers. Neither the Stockholders,
nor Seller nor any of its officers, directors or employees have employed any
broker, finder or investment banker or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees or finders' or similar
fees in connection with the transactions contemplated by this Agreement.
3.25 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in this Agreement, in any certificate furnished to
Purchaser pursuant hereto and in each schedule hereto is both complete (in that
it does not omit to state any material fact necessary to make the statements
contained therein not misleading) and accurate; and all documents furnished to
Purchaser pursuant to this Agreement as being documents described in this
Agreement or in any schedule attached hereto are true and correct copies of the
documents which they purport to represent.
3.26 Combinations Involving Seller. All mergers, consolidations or
other business combinations involving Seller and all liquidations, purchases or
other transactions by which Seller acquired any of its business and property
were conducted in accordance with applicable certificates of incorporation,
bylaws, any other applicable agreements, instruments and documents and
applicable Law.
3.27 Software Completion. Each Stockholder represents and warrants to
Purchaser that the Privalink software and all other related software, including
appropriate Internet interface and capability, has been completed, is ready for
the beta test phase and shall be ready for production for
16
sale to end-use consumers no later than December 31, 1999, and that the total
amount of expenses the Purchaser shall incur in order to expand said software by
December 31, 1999 to include medical records, drug interactions, drug or
pharmaceutical inserts such as those utilized within the Physician's Desk
Reference and content-based recommendation programs by December 31, 1999 shall
not exceed $250,000.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder represents and warrants to Purchaser, severally and
not jointly, with respect to himself and his ownership of Shares, as follows:
4.1 Ownership of Shares. The Stockholder owns of record and
beneficially all of the Shares set forth opposite his name on Schedule 3.2. Such
Stockholder owns all right, title and interest in and to such Shares, free and
clear of all Liens (including those for federal or state estate or inheritance
taxes), options, rights of refusal or similar rights or other transfer
restrictions of any nature whatsoever (including any arising from any pending or
threatened litigation) other than restrictions on transfers arising out of
applicable federal and state securities Laws and the agreements identified on
Schedule 3.2 (which shall be terminated at or prior to the Closing). The
Stockholder owns no other security of Seller.
4.2 Authorization. With respect to this Agreement and any other
agreements, instruments and documents executed and delivered by the Stockholder
pursuant to this Agreement (this Agreement and such other agreements,
instruments and documents, are collectively referred to as the "Stockholder
Delivered Agreements"): (i) such Stockholder has the right, power and authority
to enter into the Stockholder Delivered Agreements executed and delivered by him
and to consummate the transactions contemplated by, and otherwise to comply with
and perform his obligations under, them; and (ii) the Stockholder Delivered
Agreements will, when delivered, constitute valid and binding obligations of
such Stockholder enforceable against such Stockholder in accordance with their
terms.
4.3 Absence of Violations or Conflicts. The execution and delivery of
the Stockholder Delivered Agreements and the consummation by such Stockholder of
the transactions contemplated by, or other compliance with the performance
under, them do not and will not with the passing of time or giving of notice or
both: (i) constitute a violation of, be in conflict with, constitute a default
or require any payment under, permit a termination of, or result in the creation
or imposition of any Lien upon any assets of Seller or any of the Shares under
(A) any contract, agreement, commitment, undertaking or understanding (including
rights of refusal or similar rights or other transfer restrictions) to which
such Stockholder is a party or to which he or his properties or Seller or its
properties are subject or bound, (B) any judgment, decree or order of any
Governmental Entity to which such Stockholder or his properties are subject or
bound, or (C) any applicable Laws; or (ii)
17
create, or cause the acceleration of the maturity of, any debt, obligation or
liability of such Stockholder that would result in any Lien or other claim upon
the assets of Seller.
4.4 No Consents Required. No Authorization of or with any Governmental
Entity or any other Authorization of or with any other third party, on the part
of such Stockholder is required in connection with his execution or delivery of
the Stockholder Delivered Agreements or the consummation of the transactions
contemplated by, or other compliance with the performance under, such
Stockholder Delivered Agreements by such Stockholder.
4.5 No Claims Against Seller. The Stockholder has no claim against
Seller, except for accrued compensation and benefits and expenses or similar
obligations incurred in the ordinary course of business (including reimbursement
of medical expenses pursuant to the Employee Plans disclosed pursuant to this
Agreement), and except as otherwise specifically provided in this Agreement.
4.6 Litigation Related to this Agreement. Such Stockholder is not a
party to, or subject to any judgment, decree or order entered in, any lawsuit or
proceeding brought by any Governmental Entity or other third party seeking to
prevent the execution of this Agreement or the consummation of the transactions
contemplated hereby.
4.7 Investment Intent. Such Stockholder will acquire the securities
issued pursuant to this Agreement (the "Securities") for his own account, to
hold for investment and with no present intention of dividing his participation
with others or reselling or otherwise participating, directly or indirectly, in
a distribution thereof, and he will not make any sale, transfer or other
disposition of the Securities in violation of the Securities Act or any
applicable state securities laws (the "State Acts"). Without limiting the
foregoing, such Stockholder has no plan or intention to sell or otherwise
dispose of any of the Purchaser Common Stock issued to him pursuant to this
Agreement or to effect any other transaction which would adversely affect the
status of the Merger as a tax-free reorganization under the Code. Such
Stockholder agrees that there will be placed on the certificate or other
evidence of the Securities, or any substitutions therefor, a legend stating in
substance:
THE SECURITIES EVIDENCED HEREBY MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN AN
AGREEMENT AND PLAN OF MERGER (THE "AGREEMENT") DATED
__________, 1999 AMONG THE CORPORATION AND THE HOLDER OF
THESE SECURITIES AND OTHERS. ANY ATTEMPTED TRANSFER IN
VIOLATION OF THE AGREEMENT SHALL BE NULL AND
18
VOID. A COPY OF THE AGREEMENT OR A SUMMARY OF
SUCH RESTRICTIONS IS AVAILABLE FROM THE
CORPORATION UPON REQUEST.
4.8 Access to Information; Accredited Investor Status. Such Stockholder
has been given access to all material and relevant information concerning
Purchaser, thereby enabling such Stockholder to make an informed investment
decision concerning his investment in the Securities. Such Stockholder has
relied solely upon an independent investigation made by him and his
representatives, if any, and has, prior to the date hereof, been given access to
and the opportunity to examine data and information relating to Purchaser. In
making his investment decision to acquire the Securities pursuant to this
Agreement, such Stockholder is not relying on any oral or written
representations or assurances from Purchaser or any other person or any
representative of Purchaser or any other person other than as set forth in this
Agreement. Without limiting the foregoing, such Stockholder has reviewed
Purchaser's Quarterly Reports on Form 10-QSB for the quarter ended March 31,
1999 (the "10-QSB") and Purchaser's Annual Report on Form 10-KSB for the year
ended December 31, 1998 (the "10-KSB"). Such Stockholder has reviewed the
definition of "accredited investor" as defined in Rule 501 of Regulation D under
the Securities Act and unless otherwise provided in writing to Purchaser, such
Stockholder is an accredited investor.
4.9 Economic Risk. Such Stockholder represents that he is able to bear
the economic risk of an investment in the Securities, which such Stockholder
acknowledges is currently illiquid, including a possible total loss of his
investment. In making this statement, such Stockholder hereby represents and
warrants to Purchaser that he has adequate means of providing for his current
needs and contingencies; he is able to afford to hold the Securities for an
indefinite period and he further represents that he has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the investment in the Purchaser Common Stock. Further,
such Stockholder represents that he has no present need for liquidity in the
Purchaser Common Stock and is willing to accept such investment risks.
4.10 Tax Advice. Such Stockholder has reviewed with his tax advisor the
U.S. federal, state, local and foreign tax consequences of an investment in the
Purchaser Common Stock and the transactions contemplated by this Agreement. Such
Stockholder is relying solely on such advisors and not on any statements or
representations of Purchaser or any of its agents, except as provided herein,
understands that he (and not Purchaser) shall be responsible for his own tax
liability that will arise as a result of this investment or the transactions
contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and the Stockholders as
follows:
19
5.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
corporate power and authority to own all its properties and assets and to carry
on its business as it is now being conducted.
5.2 Capitalization. The authorized capital stock of Purchaser consists
of 50,000,000 shares of $.001 Purchaser Common Stock and 5,000,000 shares of
$.001 par value preferred stock (the "Purchaser Preferred Stock"). As of June
24, 1999, 11,738,826 shares of Purchaser Common Stock were validly issued and
outstanding, fully paid and non-assessable, no shares of Purchaser Common Stock
were held in the treasury of Purchaser, and no Purchaser Preferred Stock was
issued or outstanding or held in the treasury of Purchaser.
5.3 Authority. Purchaser has the corporate power and authority to
execute and deliver this Agreement and any other agreements, instruments and
documents executed and delivered by Purchaser pursuant to this Agreement (this
Agreement and such other agreements, instruments and documents are collectively
referred to as the "Purchaser Delivered Agreements") and to consummate the
transactions contemplated on the part of Purchaser thereby. The execution and
delivery by Purchaser of the Purchaser Delivered Agreements and the consummation
by Purchaser of the transactions contemplated on its part thereby have been duly
authorized by its Board of Directors. No other corporate action on the part of
Purchaser is necessary to authorize the execution and delivery of the Purchaser
Delivered Agreements by Purchaser or the consummation by Purchaser of the
transactions contemplated thereby. The Purchaser Delivered Agreements have been
duly executed and delivered by Purchaser, and each is a valid and binding
obligation of Purchaser enforceable in accordance with its terms, except (i) as
such enforcement may be limited by bankruptcy, reorganization, insolvency or
other laws and court decisions relating to or affecting the enforcement of
rights generally (including but not limited to statutory or other law regarding
fraudulent transfers), and (ii) as to the availability of specific performance
or other equitable remedies.
5.4 Non-Contravention. Except as set forth on Schedule 5.4, the
execution and delivery of the Purchaser Delivered Agreements by Purchaser do not
and the consummation by Purchaser of the transactions contemplated thereby does
not and will not (i) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of Purchaser or (ii) violate or conflict with, or result
(with the giving of notice or the lapse of time or both) in a violation of or
constitute a default under, any provision of, or result in the acceleration or
termination of or entitle any party to accelerate or terminate (whether after
the giving of notice or lapse of time or both) any obligation or benefit under,
or result in the creation or imposition of any Lien upon any of the assets or
property of Purchaser pursuant to any provision of, any contract, agreement,
commitment, undertaking, arrangement or understanding to which Purchaser is a
party or bound or to which any of their assets or properties are subject that is
required to be disclosed in response to Items 601(b)(4) and 601(b)(10) of
Regulation S-K promulgated under the Securities Act (a "Purchaser Material
Contract"), Law, order, arbitration award, judgment or decree to which Purchaser
is a party or by which Purchaser or its assets or properties is bound, and the
same does not and will not constitute an event permitting termination of any
Purchaser Material Contract.
20
5.5 Consents. Except for any required filings with the SEC under
Regulation D or any state securities commissions, and as reflected on Schedule
5.5, no Authorization of any Governmental Entity is required for, or in
connection with, the execution and delivery of the Purchaser Delivered
Agreements by Purchaser and the consummation by Purchaser of the transactions
contemplated thereby, where the failure to make such filing or registration or
to obtain such consent, authorization, order or approval would have a material
and adverse effect on the ability of Purchaser to consummate the transactions
contemplated by the Purchaser Delivered Agreements.
5.6 Periodic Reports. The 10-KSB, the 10-QSB and the 8-K did not, as of
their respective dates, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
5.7 Brokers, Finders and Investment Bankers. Neither Purchaser nor any
of its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees or finders' or similar fees in
connection with the transactions contemplated by this Agreement.
5.8 Accuracy of Schedules, Certificates and Documents. All information
concerning Purchaser contained in this Agreement, in any certificate furnished
to Seller pursuant hereto and in each schedule hereto is both complete (in that
it does not omit to state any material fact necessary to make the statements
contained therein not misleading) and accurate; and all documents furnished to
Seller pursuant to this Agreement as being documents described in this Agreement
or in any schedule attached hereto are true and correct copies of the documents
which they purport to represent.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Conduct of Business Pending the Effective Time. During the period
from the date hereof to the Effective Time (except as required by Law and for
the transactions contemplated by this Agreement):
(a) Operation by Seller in the Ordinary Course of Business.
Seller shall conduct its operations according to its ordinary and usual
course of business in substantially the same manner as heretofore
conducted and use its reasonable best efforts to preserve intact its
business organization, to maintain all Authorizations, to keep
available the services of its officers and employees, and to maintain
satisfactory relationships with the relevant Governmental Entities,
licensors, suppliers, distributors, customers and others having
business relationships with it. Seller shall prepare and file all
federal, state, local and foreign returns for Taxes and other Tax
reports, filings and amendments thereto required to be filed
21
by it, and allow Purchaser, at its request, to review all such returns,
reports, filings and amendments at Seller's offices prior to the filing
thereof, which review shall not interfere with the timely filing of
such returns.
(b) Forbearances by Seller. Seller shall not without the prior
written consent of Purchaser, which consent shall not be unreasonably
withheld:
(i) except as otherwise permitted pursuant to clause
(vi) below, incur any debt, liability or obligation, direct or
indirect, whether accrued, absolute, contingent or otherwise,
other than current liabilities incurred in the ordinary and
usual course of business, or pay any debt, liability or
obligation of any kind other than such current liabilities and
current maturities of existing long-term debt (including
interest when due) in each case only in accordance with the
terms of the document creating and evidencing such debt, or
fail to pay any debt when due or take or fail to take any
action, the taking of which, or the failure to take of which,
would permit any debt to be accelerated;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm
or corporation or make any loans or advances to any individual,
firm or corporation (other than through endorsement of checks
in the ordinary course of business);
(iii) declare, set aside or pay any dividend (whether in
cash, capital stock or property) with respect to its capital
stock or declare or make any distribution on, redeem, or
purchase or otherwise acquire any Seller Common Stock, or
split, combine or otherwise similarly change the outstanding
Seller Common Stock, or authorize the creation or issuance of
or issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for,
or giving any person any right to acquire from it, any shares
of its capital stock;
(iv) mortgage, pledge or otherwise encumber any property
or asset, except in the ordinary and usual course of business;
(v) sell, lease, transfer or dispose of any of its
properties or assets, waive or release any rights or cancel,
compromise, release or assign any indebtedness owed to it or
any claims held by it, except in the ordinary and usual course
of business but in no event shall any such sale, lease,
transfer, disposition, waiver, release, cancellation,
compromise or assignment exceed $5,000;
(vi) make any investment of a capital nature either by
purchase of stock or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any
property or assets of any other individual, firm or
corporation, except in the ordinary and usual course of
business but in no event greater than $5,000;
22
(vii) fail to perform its obligations under Material
Contracts (except those being contested in good faith) or enter
into, assume or amend any contract or commitment that would be
a Material Contract other than contracts to provide services
entered into in the ordinary and usual course of business;
(viii)except for regularly scheduled increases in
accordance, both as to timing and amount, with normal prior
practice, increase in any manner the compensation or fringe
benefits of any of its officers or employees or pay or agree to
pay any pension or retirement allowance not required by any
existing plan or agreement to any such officers or employees,
or commit itself to or enter into any employment agreement or
any incentive compensation, deferred compensation, profit
sharing, stock option, stock purchase, savings, consulting,
retirement, pension or other "fringe benefit" plan, award or
arrangement with or for the benefit of any officer, employee or
other person;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless
Seller makes reasonable efforts to obtain simultaneously with
such termination or cancellation replacement policies providing
substantially the same coverage on commercially reasonable
terms and, if so available, such policies are in full force and
effect;
(x) amend its Articles of Incorporation or Bylaws;
(xi) enter into any union, collective bargaining or
similar agreement; or
(xii) enter into an agreement to take any of the actions
described in clauses (i) through (xi).
In connection with the continued operation of the business of Seller between the
date of this Agreement and the Effective Time, Seller shall confer in good faith
on a regular basis with representatives of Purchaser on operational matters of
materiality and the general status of ongoing operations. Seller acknowledges
that Purchaser does not thereby waive any rights it may have under this
Agreement as a result of this covenant to engage in consultations nor shall
Purchaser be responsible for any decisions made by Seller's officers and
directors with respect to matters which are the subject of such consultation.
6.2 Best Efforts; Further Assurances; Cooperation. Subject to the other
provisions in this Agreement, the parties hereto shall in good faith perform
their obligations under this Agreement before, at and after the Effective Time,
and shall each use their reasonable best efforts to do, or cause to be done, all
things necessary, proper or advisable under applicable Law to obtain all
Authorizations and satisfy all conditions to the obligations of the parties
under this Agreement and to cause the transactions contemplated by this
Agreement to be carried out promptly in accordance with the terms hereof and
shall cooperate fully with each other and their respective officers,
23
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as part of their respective
obligations under this Agreement. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and deliver such
documents as may be reasonably requested by the other parties hereto in order to
consummate more effectively the transactions contemplated by this Agreement.
6.3 Confidentiality. Except as contemplated by this Agreement or as
necessary to carry out the transactions contemplated hereby, all information or
documents furnished to Purchaser shall be kept confidential by Purchaser (and
Purchaser shall cause its agents and representatives to maintain the
confidentiality of such documents) and in the event such transactions are not
consummated, Purchaser shall return to Seller all information furnished
hereunder and shall not thereafter use the same for any purpose until such time
as such information becomes publicly available from sources other than parties
to this Agreement, except to the extent (i) it was known by Purchaser prior to
being received, (ii) it is or thereafter becomes lawfully obtainable from other
sources, (iii) Purchaser is legally required to disclose the same to any
Governmental Entity having jurisdiction over Purchaser or as otherwise may be
required by applicable law, or (iv) such duty of confidentiality is waived in
writing by Seller. Purchaser will give Seller as much advance notice as is
reasonably possible of any disclosure to be made pursuant to (iii) above and
will provide a copy of the intended disclosure to Seller.
6.4 Expenses. Except as otherwise provided in this Agreement, whether
or not the transactions contemplated hereby are consummated, all costs and
expenses (including any brokerage commissions or any finder's or investment
banker's fees and including attorney's and accountant's fees) incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided that each Stockholder
acknowledges and agrees that all fees and expenses of his and Seller's advisors
in connection with this Agreement and the transactions contemplated hereby are
the expenses of the Stockholders, and not of Seller, and Purchaser acknowledges
and agrees that the time and expenses of Seller personnel and their costs are
expenses of Seller, and not of the Stockholders.
6.5 No Solicitation of Transactions. Prior to the termination and
abandonment of this Agreement, neither Seller nor the Stockholders will, or will
direct their Affiliates, officers, directors, or representatives to: (i)
solicit, initiate or encourage submission of proposals or offers from any person
other than Purchaser relating to any acquisition or purchase of all or a
material part of the stock or assets of, or any merger, consolidation, share
exchange or business combination with, or any recapitalization, restructuring or
issuance or offering of debt or equity securities of, Seller (an "Acquisition
Proposal"); or (ii) participate in any discussions or negotiations regarding, or
furnish to any person other than Purchaser and its representatives, any
information with respect to, or otherwise cooperate in any way or assist,
facilitate or encourage, any Acquisition Proposal by any person other than
Purchaser. If, notwithstanding the foregoing, Seller, the Stockholders or any of
their Affiliates or representatives should receive any Acquisition Proposal or
any inquiry regarding any such proposal from a third party, the person or entity
making such inquiry shall be notified that no negotiations or discussions will
take place.
24
6.6 Share Transfer Restrictions. No Stockholder shall transfer any
Purchaser Common Stock received by him pursuant to this Agreement other than
pursuant to Rule 144.
6.7 Public Announcements. Neither Seller nor any of the Stockholders
shall make any public announcement regarding any aspect of this Agreement to the
financial community, Governmental Entities, employees or the general public
without Purchaser's prior written consent.
6.8 Employee Matters.
(a) Employee Benefits. Purchaser shall take all action
necessary or appropriate to permit the employees of Seller at the
Effective Time who shall continue to be employed by Purchaser
thereafter ("Continuing Employees") to participate after the Effective
Time in Purchaser's employee benefit programs and to cause Seller to
take all actions necessary or appropriate to adopt Purchaser's employee
benefit programs effective as of the Effective Time. Purchaser will
cause Seller to give each Continuing Employee full credit for service
with Seller for purposes of eligibility to participate in, vesting and
payment of benefits under, and eligibility for any subsidized benefit
provided under (but not, except as provided in the preceding sentence,
for purposes of determining the amount of any benefit under) any
Purchaser employee benefit plan; provided, however, that nothing in
this Agreement shall be deemed to require Purchaser to cause to be
continued any employee's employment, responsibilities or officer title
for any definite period, or to change the terms or conditions of any
existing employee benefit program.
(b) Employment Agreements. On or prior to the Closing Date, all
agreements between Seller and any of its employees (other than
agreements relating to confidentiality, ownership of inventions and
materials and similar agreements benefitting Seller) shall have been
canceled at no cost to Seller.
6.9 Stockholder Agreements. On or prior to the Closing Date, all
agreements among the Stockholders and Seller relating to Seller or any stock or
securities of Seller shall have been canceled at no cost to Seller, except for
costs incurred by Seller in connection with the termination of outstanding
options to acquire Seller Common Stock.
6.10 No Transfers. Except pursuant to this Agreement or with the prior
written consent of Purchaser, the Stockholders shall not transfer any or all of
the Shares after the date of this Agreement.
6.11 Special Provisions with Respect to Seller. If the Closing occurs
as provided herein, then at that time all representations, warranties, covenants
and agreements to the extent made or adopted by Seller (and only to such extent)
shall expire and be of no further force and effect, and Seller's having made
representations, warranties, covenants and agreements shall in no way limit the
liability of the Stockholders for those representations, warranties, covenants
and agreements pursuant to this Agreement.
25
6.12 Noncompetition; Nondisclosure.
(a) Scope and Reasonableness of Restrictions. The Stockholders
acknowledge that Purchaser and Seller will sell services and/or
products throughout the United States (the "Territory") and that
Purchaser would not purchase the Shares without the assurance that the
Stockholders will not engage in the activities prohibited by this
Section for the periods set forth herein, and to induce Purchaser to
consummate the Merger, the Stockholders agree to restrict their actions
and those of the respective Affiliates which they control throughout
the Territory and otherwise as provided in this Section 6.12. The
Stockholders acknowledge that such restrictions are reasonable in light
of the business of Purchaser and the benefits of the transactions
contemplated by this Agreement to the Stockholders; provided, however,
that such restrictions shall not apply to any activities undertaken by
such individuals after the Closing solely in their capacities as
employees of Seller or Purchaser, if such individuals are in fact
employed by Seller or Purchaser after the Closing.
(b) Use of Names. Except for any relationship or involvement
with Purchaser or its Affiliates, the Stockholders agree that from and
after the Closing neither the Stockholders nor any of the Affiliates
controlled by them will, either individually or jointly, manage,
operate, join, control or participate in the ownership, management or
control of any business under the name or style of Seller, or any name
or style incorporating any such name or style or any name or style
confusingly similar to such name or style.
(c) Noncompetition. During the period commencing on the Closing
Date and terminating on the fifth anniversary thereof (the "Noncompete
Period"), neither the Stockholders nor any of their respective
Affiliates which they control will (i) engage directly in the business
of designing software and related systems for health monitoring devices
(the "Restricted Business") within the Territory, (ii) act as a
consultant, advisor, independent contractor, officer, manager,
employee, principal, agent, trustee of any corporation (other than
Purchaser or an Affiliate thereof), partnership, association or agent
or agency, (iii) directly or indirectly own more than one (1%) percent
of the outstanding capital stock of any corporation (other than
Purchaser or an Affiliate thereof), or be a member or employee of any
partnership or any owner or employee of any other business, any of
which is engaged in the Restricted Business in the Territory during the
Noncompete Period.
(d) No Interference with Customers. The Stockholders agree
that, during the Noncompete Period, neither the Stockholders nor any of
their respective Affiliates which they control will induce a "Customer"
(as defined below): (i) to patronize any business entity engaged in the
Restricted Business in the Territory (other than Purchaser or an
Affiliate thereof); or (ii) to withdraw, curtail or cancel such
Customer's business with Seller or Purchaser. As used in this Section
6.12, "Customer" means any actual customer of Seller, Purchaser or its
Affiliates, or any potential customer of Seller or Purchaser or its
Affiliates
26
served or solicited by Purchaser or Seller within the 12-month period
prior to the Closing Date.
(e) No Interference with Employees. The Stockholders agree
that, during the Noncompete Period, neither the Stockholders nor any of
their Affiliates which they control will directly or indirectly request
or induce any employee to terminate his employment with Purchaser or
its Affiliates and accept employment with another business entity
engaged in the Restricted Business in the Territory or hire during the
Noncompete Period, any employee within twelve (12) months after
termination of such person's employment with Purchaser or any of its
Affiliates.
(f) Trade Secrets; Confidential Information.
(i) The Stockholders recognize and acknowledge that they
have had access to certain highly sensitive, special and unique
information of Seller that is confidential or proprietary. The
Stockholders hereby covenant and agree that they and their
Affiliates which they control will not (A) as to Trade Secrets
(as defined in this Section 6.12(f)), as long as they remain
Trade Secrets, and (B) as to Confidential Information (as
defined in this Section 6.12(f)), during the Noncompete Period,
use or disclose any Trade Secrets or Confidential Information,
except for disclosures to authorized representatives of Seller
or Purchaser; provided, however, that the foregoing
restrictions shall not apply to items that have entered the
public domain other than by an unauthorized disclosure by the
Stockholders or their Affiliates, or any items required to be
disclosed by a Governmental Authority or under applicable Laws.
(ii) For purposes of this Agreement, (A) "Trade Secret"
means any information, including, but not limited to, technical
or non-technical data, a formula, a pattern, a compilation, a
program, a device, a method, a technique, a set of guidelines,
a procedure, a drawing, a process, financial data, financial
plans, product plans or a list of actual or potential customers
or suppliers of Seller, whether currently existing or hereafter
developed or acquired by Seller, that derives economic value,
actual or potential, from not being generally known to and not
being readily ascertainable by proper means by other persons
who can obtain economic value from its disclosure or use and is
the subject of efforts that are reasonable under the
circumstances to maintain its secrecy; and (B) "Confidential
Information" is any data or information of Seller other than
Trade Secrets which is competitively sensitive and not
generally known to the public.
(iii) The Stockholders acknowledge that all Trade
Secrets and Confidential Information are and shall remain the
sole, exclusive and valuable property of Seller or Purchaser,
and that the Stockholders and their Affiliates do not have and
shall acquire no right, title or interest therein. Any and all
printed, typed, written or other material that the Stockholders
or their Affiliates may have or obtain with respect to
27
Trade Secrets or Confidential Information (including all
copyrights therein) shall be and remain the exclusive property
of Seller or Purchaser, and any and all such material
(including any copies) shall, upon request of Purchaser, be
promptly delivered by the Stockholders or their Affiliates
controlled by them to Seller or Purchaser.
(g) Remedies. The Stockholders acknowledge that any violation
of the provisions of this Section 6.12 may cause irreparable harm to
Seller or Purchaser and that damages are not an adequate remedy. The
Stockholders therefore agree that Seller and Purchaser shall be
entitled to an injunction by an appropriate court in the appropriate
jurisdiction, enjoining, prohibiting and restraining the Stockholders
or their Affiliates from the continuance of any such violation, in
addition to any monetary damages that might occur by reason of the
violation of this Section 6.12. The remedies provided in this Section
6.12 are cumulative and shall not exclude any other remedies to which
either party to this Agreement may be entitled under this Agreement or
applicable Law, and the exercise of a remedy shall not be deemed an
election excluding any other remedy (any such claim by any other party
to this Agreement being hereby waived).
(h) Modification. The parties agree that should any portion,
provision or clause of this Section 6.12 be deemed too broad to permit
enforcement to its full extent, then it shall be enforced to the
maximum extent permitted by Law, and the Stockholders hereby consent
and agree that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
(i) Covenants Independent. The covenants and agreements set
forth in this Section 6.12 shall be deemed and shall be construed as
separate and independent covenants and agreements, and, should any
portion of such covenants and agreements be held invalid, void or
unenforceable by any court of competent jurisdiction, such invalidity,
voidness, or unenforceability shall in no way render invalid, void or
unenforceable any other portion thereof or any separate covenant not
declared invalid, void or unenforceable; and this Section 6.12 shall in
that case be construed as if the void, invalid or unenforceable
portions were omitted.
6.13 Tax Matters.
(a) Transfer Taxes. The Stockholders shall pay all stock
transfer and other similar Taxes and fees in respect of the exchange of
the Shares and shall be responsible for paying all the costs of filing
all returns relating to such Taxes and fees.
(b) Preparation and Filing of Returns. The Stockholders shall
be responsible for the good faith preparation of all federal corporate
income Tax Returns and state corporate income Tax Returns for Seller
(collectively, the "Corporation Returns"), including extensions, for
taxable periods ending on or prior to the Effective Time. At least
thirty (30) days prior to the due date (including extensions) of any
Corporation Return, the Stockholders
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shall cause such Corporation Return to be delivered to Purchaser, and
the Purchaser will thereafter cause such Return to be filed as
prepared, unless Purchaser believes that there is not a reasonable
basis for any position taken on such return. Purchaser shall timely
file all Corporation Returns delivered to it by the Stockholders and
shall furnish the Stockholders with evidence regarding the filing of
such Corporation Returns. No modification to the Corporation Returns
shall be made without prior consultation with the Stockholders'
Representative.
(c) Cooperation and Exchange of Information. The Stockholders
and Purchaser agree to furnish, or to cause to be furnished in good
faith to each other, such cooperation and assistance as is reasonably
necessary to respond to audits, to negotiate settlements with Tax
authorities, and to prosecute and defend against Tax claims.
(d) Tax-Free Transaction. The parties hereto intend that the
Merger shall be treated as a tax-free reorganization under the Code,
shall report the Merger as such for federal and state income tax
purposes, and shall take no action after the Effective Time to
adversely effect the status of the Merger as a tax-free reorganization
under the Code.
6.14 Release of Seller by the Stockholders. If the Closing occurs as
contemplated by this Agreement, then the Stockholders hereby release Seller from
any and all claims, rights and causes of action that the Stockholders may have
or may have had against Seller arising out of any transactions between the
Stockholders and Seller or its predecessors in interest prior to, or arising
with respect to any act or omissions occurring prior to the Effective Time;
provided, however, that the foregoing release does not apply to accrued
compensation and benefits and expenses or similar obligations incurred in the
ordinary course of business (including reimbursement of medical expenses
pursuant to the Employee Plans disclosed pursuant to this Agreement).
6.15 Stockholders' Meeting. As soon as practicable after the date of
this Agreement, Seller shall duly and properly call a special meeting of its
Stockholders for the purpose of approving this Agreement, the Merger, and all
other matters necessary to consummate the transactions contemplated hereby,
shall submit all of the foregoing to its Stockholders for such approval as soon
as reasonably practicable, shall recommend such approval and shall use its best
efforts to obtain such approval. The Stockholders may effect such approval by
unanimous written consent in lieu of a stockholders' meeting at any time after
they have had a reasonable time within which to review the Memorandum (as
defined below) and Written Consent (as defined below) prepared in connection
therewith.
6.16 Memorandum and Written Consent. Seller shall deliver to the
Stockholders copies of a Memorandum providing certain information concerning
Purchaser and Seller and the shares of Purchaser Common Stock to be issued in
the Merger (the "Memorandum"), which shall be prepared by Seller, and Seller
shall deliver to the Stockholders a Written Consent with respect to the approval
of this Agreement and the Merger (the "Written Consent"), together with certain
information concerning Seller, both of which shall be prepared by Seller, each
of which shall be in compliance
29
with applicable Law and subject to review and approval by Purchaser and Seller.
The Stockholders shall be responsible for the accuracy of the information
supplied by Seller or the Stockholders for inclusion therein, and Purchaser
shall be responsible for the accuracy of the information supplied by Purchaser
for inclusion therein.
6.17 SEC Reports. Between the date hereof and the Closing, Purchaser
shall deliver a copy of each document it files with the SEC to the Stockholders.
6.18 Rule 144. At all times after one year from the Closing, Purchaser
shall take all actions to permit Rule 144 to be available for sales of such
Purchaser Common Stock by the holders thereof; provided, however, that Purchaser
shall not be in violation of this requirement if Rule 144 is so available for at
least ten (10) days in any thirty (30) day period. Prior to making any sales of
Purchaser Common Stock under Rule 144, the Stockholders shall consult with
Purchaser so as to endeavor to sell such shares in a manner intended to maintain
an orderly market for Purchaser Common Stock.
ARTICLE 7
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Purchaser. Purchaser's obligation to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment to the reasonable satisfaction of Purchaser, prior to or at the
Effective Time, of each of the following conditions (any or all of which may be
waived by Purchaser):
(a) Consents, Authorizations, etc. All Authorizations of or
with any Governmental Entity or any nongovernmental third party that
are required for or in connection with the execution and delivery by
Seller and the Stockholders of this Agreement and the consummation by
Seller and the Stockholders of the transactions contemplated hereby
shall have been obtained or made.
(b) Injunction, etc. The consummation of the transactions
contemplated hereby will not violate the provisions of any injunction,
order, judgment, decree or Law applicable or effective with respect to
Purchaser or its officers and directors. No suit or proceeding shall
have been instituted by any person, or, to the knowledge of Purchaser,
shall have been threatened by any Governmental Entity, and not
subsequently withdrawn, dismissed or otherwise eliminated, which seeks
(i) to prohibit, restrict or delay consummation of the transactions
contemplated hereby or to limit in any material respect the right of
Purchaser to control any material aspect of the business of Purchaser
and its Subsidiaries or Seller after the Effective Time, or (ii) to
subject Purchaser or Seller or their respective directors or officers
to material liability on the ground that it or they have breached any
law or regulation or otherwise acted improperly in relation to the
transactions contemplated by this Agreement.
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(c) Representations and Warranties; Covenants and Agreements.
The representations and warranties of Seller and the Stockholders
contained in this Agreement shall have been true and correct in all
respects at the date hereof and shall also be true and correct in all
material respects at and as of the Effective Time, with the same effect
as if made at and as of the Effective Time, except that representations
and warranties that are confined to a specified date shall speak only
as of such date, and Seller and the Stockholders shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at
or prior to the Effective Time.
(d) Certificate. Seller shall have delivered to Purchaser a
certificate, dated as of the Effective Time, executed on behalf of
Seller by the President of Seller and by the Stockholders to the effect
that the conditions specified in paragraph (c) of this Section 7.1 have
been satisfied.
(e) Board and Stockholder Approval. The Board of Directors of
Purchaser shall have approved this Agreement and the Merger in
accordance with the GCLN, and all of the outstanding shares of Seller
Common Stock shall have been voted to approve this Agreement and the
Merger in accordance with the GCLN. Each of the Stockholders shall have
executed this Agreement.
(f) Legal Opinion. The opinion of Xxxxxxxxx Xxxxxxxx Xxxxxxxx
Marks & Xxxxxxx, Chtd., legal counsel to Seller, in substantially the
form of Exhibit A.
(g) Additional Certificates, etc. Seller and the Stockholders
shall have furnished to Purchaser such additional certificates,
opinions and other documents as Purchaser may have reasonably requested
as to any of the conditions set forth in this Section 7.1.
7.2 Conditions to Obligations of Seller and the Stockholders. The
obligation of Seller and the Stockholders to consummate the transactions
contemplated hereby is subject to the fulfillment to the reasonable satisfaction
of Seller and Stockholders' Representative, prior to or at the Effective Time,
of each of the following conditions (any or all of which may be waived by mutual
agreement of Seller and the Stockholders' Representative):
(a) Consents, Authorizations, etc. All Authorizations of or
with any Governmental Entity or any non-governmental third party which
are required for or in connection with the execution and delivery of
this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby shall have been obtained or made
except where the failure to obtain such consent, authorization, or
approval would not have a material adverse effect on the financial
position and results of operations of Purchaser and its Subsidiaries,
taken as a whole.
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(b) Injunction, etc. The consummation of the transactions
contemplated hereby will not violate the provisions of any injunction,
order, judgment, decree or Law applicable or effective with respect to
Seller or its officers or directors.
(c) Representations and Warranties; Covenants and Agreements.
The representations and warranties of Purchaser contained in this
Agreement shall have been true and correct in all respects at the date
hereof and shall also be true and correct in all material respects at
and as of the Effective Time, with the same effect as if made at and as
of the Effective Time, except that representations and warranties that
are confined to a specified date shall speak only as of such date; and
Purchaser shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time.
(d) Purchaser Common Stock. The shares of Purchaser Common
Stock issued to the Stockholders pursuant to the Merger shall, upon
consummation of the Merger, be validly authorized and issued, fully
paid and nonassessable.
(e) Certificate. Purchaser shall have delivered to the
Stockholders a certificate, dated as of the Closing Date, executed on
behalf of Purchaser by the Chairman of the Board, President or other
executive officer of Purchaser to the effect that the conditions
specified in paragraph (c) of this Section 7.2 have been satisfied.
(f) Additional Certificates, etc. Purchaser shall have
furnished to the Stockholders such additional certificates and other
documents as Seller may have reasonably requested as to any of the
conditions set forth in this Section 7.2.
(g) Board and Stockholder Approval. The Board of Directors of
Purchaser shall have approved this Agreement and the Merger in
accordance with the GCLN, and at least a majority of the outstanding
shares of Seller Common Stock shall have been voted to approve this
Agreement and the Merger in accordance with the GCLN. Each of the
Stockholders shall have executed this Agreement.
ARTICLE 8
DOCUMENTS TO BE DELIVERED AT CLOSING
8.1 Documents to be Delivered by Seller and the Stockholders. In
addition to the other documents specified in Section 2.2, at the Closing, Seller
and the Stockholders shall deliver, or cause to be delivered, to Purchaser the
following:
(i) The certificate referred to in Section 7.1(d).
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(ii) Any additional documents requested by Purchaser pursuant
to Section 7.1(f).
(iii) The books and records of Seller.
(iv) Such other documents as Purchaser may reasonably request.
8.2 Documents to be Delivered by Purchaser to the Stockholders. At the
Closing, Purchaser shall deliver to Seller and the Stockholders' Representative
the following:
(i) The certificate referred to in Section 7.2(e).
(ii) Any additional documents requested by the Stockholders
pursuant to Section 7.2(e).
(iii) The transmittal letters referred to in Section 2.5(b)
above if not previously delivered to the Stockholders' Representative
or the Stockholders.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Stockholders. The Stockholders shall jointly
and severally indemnify and hold harmless Purchaser and Seller in respect of any
and all claims, losses, damages, liabilities, demands, assessments, judgments,
costs and expenses (including, without limitation, settlement costs and any
legal or other expenses for investigating, bringing or defending any actions or
threatened actions) reasonably incurred by Purchaser or Seller (collectively,
the "Costs") resulting from any breach of any representation, warranty, covenant
or agreement made by the Stockholders or Seller under the Seller Delivered
Agreements or the Stockholder Delivered Agreements. The Stockholders shall also
pay to Purchaser interest at the prime rate specified in the "Money Rates"
section of The Wall Street Journal on the disbursement date referred to in the
immediately following clause (a) on any such indemnification payments the
receipt of which is deferred from (a) the later to occur of (i) the date of
notice of request for indemnification to Seller as set forth in Section 9.4, or
(ii) the date on which Purchaser or an Affiliate thereof disburses funds to a
third party in connection with the claim or other matter giving rise to the
claim for indemnification hereunder, through (b) the date such indemnification
payment is actually received by Purchaser.
9.2 Indemnification by Purchaser. Purchaser agrees to indemnify and
hold harmless the Stockholders in respect of any and all Costs reasonably
incurred by the Stockholders in connection with any breach of any
representation, warranty, covenant or agreement made by Purchaser under the
Purchaser Delivered Agreements. Purchaser shall also pay to the Stockholders
interest in the manner as set forth in Section 9.1.
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9.3 Certificates. Any claim based, in whole or in part, upon any untrue
or incorrect statement set forth in the certificate delivered pursuant to
Section 7.1(d) or Section 7.2(e) shall be deemed to be a claim for breach of
representation, warranty, covenant or agreement under this Agreement.
9.4 Claims for Indemnification. The representations, warranties,
covenants and agreements in this Agreement shall survive the Closing subject to
the limitations set forth herein and shall not be affected by any investigation
made by the parties hereto prior to the date hereof or the Effective Time. The
party seeking indemnification (the "Indemnified Party") shall give the party
from whom indemnification is sought (the "Indemnifying Party") a written notice
("Notice of Claim") within sixty (60) days of the discovery of any loss,
liability, claim or expense in respect of which the right to indemnification
contained in this Article 9 may be claimed; provided, however, that the failure
to give such notice within such sixty (60) day period shall not result in the
waiver or loss of any right to bring such claim hereunder after such period
unless, and only to the extent that, the other party is actually prejudiced by
such failure. In the event a claim is pending or threatened or the Indemnified
Party has a reasonable belief as to the validity of the basis for such claim,
the Indemnified Party may give written notice (a "Notice of Possible Claim") of
such claim to the Indemnifying Party, regardless of whether a loss has arisen
from such claim. A party shall have no liability under this Article 9 for breach
of a representation or warranty, unless a Notice of Claim or Notice of Possible
Claim therefor is delivered by the Indemnified Party prior to the second
anniversary of the Effective Time; provided, however, that as to any liability
arising pursuant to Sections 3.1, 3.2, 3.3, 3.6, 3.8, 3.10, 3.17, 3.18, 3.20 or
3.21, Article 4 or Sections 5.1, 5.2 or 5.3, any Notice of Claim or Notice of
Possible Claim must be delivered by the Indemnified Party not later than ninety
(90) days after the expiration of the applicable statute of limitations
(including any extensions) therefor; and provided, further, that the limitations
set forth in this Section 9.4 shall not apply to liability under this Article 9
for any intentional breach of a representation or warranty in this Agreement.
Any Notice of Claim or Notice of Possible Claim shall set forth the
representations, warranties, covenants and agreements with respect to which the
claim is made, the specific facts giving rise to an alleged basis for the claim
and the amount of liability asserted or anticipated to be asserted by reason of
the claim.
9.5 Defense of Claim by Third Parties. If any claim is made by a third
party against a party to this Agreement that, if sustained, would give rise to a
liability of another party under this Agreement, the party against whom the
claim is made shall promptly cause notice of the claim to be delivered to the
other party and shall afford the other party and its counsel, at the other
party's sole expense, the opportunity to join in the defense and settlement of
the claim. The failure to provide such notice will not relieve the Indemnifying
Party of liability under this Agreement unless, and only to the extent that, the
Indemnifying Party is actually prejudiced by such failure.
9.6 Third Party Claim Assistance. From time to time after the Closing,
Purchaser and the Stockholders shall provide or cause their appropriate
employees or representatives to provide the other party with information or data
in connection with the handling and defense of any third party claim or
litigation (including counterclaims filed by the parties) in respect to which a
party may be
34
required to indemnify another party under this Agreement. The party receiving
such information or data shall reimburse the other party for all of its
reasonable costs and expenses in providing these services, including, without
limitation, (i) all out of pocket, travel and similar expenses incurred by its
personnel in rendering these services; and (ii) all fees and expenses for
services performed by third parties engaged by or at the request of such other
party.
9.7 Settlement of Indemnification Claims. If a recipient of a Notice of
Claim desires to dispute such claim, it shall, within thirty (30) days after
receipt of the Notice of Claim, give counternotice, setting forth the basis for
disputing such claim, to Purchaser or the Stockholders' Representative, as the
case may be. If no such counternotice is given within such thirty (30) day
period, or if Purchaser, or the Stockholders' Representative, as the case may
be, acknowledges liability for indemnification, then the amount claimed shall be
promptly satisfied as provided in Section 9.8. If, within thirty (30) days after
the receipt of counternotice by Purchaser or the Stockholders' Representative,
as the case may be, the Stockholders' Representative and Purchaser have not
reached agreement as to the claim in question, then the party disputing the
claim shall satisfy any undisputed amount as specified in Section 9.8 and the
disputed amount of the claim of indemnification shall be submitted to and
settled by arbitration in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall be held in the Post Falls, Idaho area before a panel of three (3)
arbitrators, one selected by each of the parties and the third selected by
mutual agreement of the first two, and all of whom shall be independent and
impartial under the rules of the American Arbitration Association. The decision
of the arbitrators shall be final and binding as to any matter submitted under
this Agreement. To the extent the decision of the arbitrators is that a party
shall be indemnified hereunder, the amount shall be satisfied as provided in
Section 9.8. Judgment upon any award rendered by the arbitrators may be entered
in any court of competent jurisdiction. The date of the arbitrator's decision or
the date a claim otherwise becomes payable pursuant to this Section 9.7 is
referred to as the "Determination Date."
9.8 Manner of Indemnification. Without limiting the obligations of the
Stockholders hereunder, all indemnification payments under this Article 9 shall
be made by payment of cash or delivery of a certified or cashier's check(s) in
the amount of the indemnification liability no later than five (5) days
following the Determination Date.
9.9 Indemnification Exclusive Remedy. In the absence of fraud, and
except for non-monetary equitable relief, if the Closing occurs, indemnification
pursuant to the provisions of this Article 9 shall be the sole and exclusive
remedy of the parties for any breach of any representation or warranty contained
in this Agreement.
9.10 Certain Limitations. The foregoing indemnification obligations are
subject to the limitation that no Indemnifying Party shall have any liability
for indemnification for breaches of representations and warranties pursuant to
this Article 9 unless the total Costs for which the Indemnifying Party would be
liable exceed Fifty Thousand Dollars ($50,000) in the aggregate, and then only
for the excess; provided, however, that the foregoing limitation shall not apply
to any
35
Costs with respect to, as a result of or involving any intentional breach of a
representation or warranty in this Agreement. In no event shall the liability of
the Stockholders and Purchaser under this Article 9 exceed the value as of the
Closing Date of the total consideration paid by Purchaser for the Shares.
ARTICLE 10
TERMINATION AND ABANDONMENT
10.1 Termination and Abandonment. This Agreement may be terminated and
abandoned at any time prior to the Effective Time:
(a) By mutual written consent of Seller and Purchaser.
(b) By Purchaser:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 7.1 is no longer
capable of being satisfied; or
(ii) if there has been a breach by Seller or the
Stockholders of any representation or warranty contained in
this Agreement or of any of the covenants or agreements set
forth in this Agreement, in each case which breach is not
curable, or, if curable, is not cured within five (5) days
after written notice of such breach is given by Purchaser to
the Stockholders' Representative.
(c) By Seller:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 7.2 is no longer
capable of being satisfied; or
(ii) if there has been a breach by Purchaser of any
representation or warranty contained in this Agreement or of
any of the covenants or agreements set forth in this Agreement,
in each case which breach is not curable or, if curable, is not
cured within five (5) days after written notice of such breach
is given by the Stockholders to Purchaser.
(d) By Purchaser or Seller if the Closing shall not have
occurred by July 15, 1999.
10.2 Specific Performance. The parties acknowledge that the rights of
each party to consummate the transactions contemplated hereby are special,
unique, and of extraordinary character, and that, in the event that either
violates or fails and refuses to perform any covenant made by it herein, the
other party or parties will be without adequate remedy at law. Each party
agrees,
36
therefore, that, in the event that it violates, fails or refuses to perform any
covenant or agreement made by it herein, the other party or parties so long as
it or they are not in breach hereof, may, in addition to any remedies at law,
institute and prosecute an action in a court of competent jurisdiction to
enforce specific performance of such covenant or agreement or seek any other
equitable relief.
10.3 Rights and Obligations upon Termination. If this Agreement is not
consummated for any reason, each party will redeliver all documents, work
papers, and other materials of any party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same, except to the extent previously properly
delivered to third parties in connection with the transactions contemplated
hereby, and all information received by any party hereto with respect to the
business of any other party shall not at any time be used for the advantage of,
or disclosed to third parties by, such party to the detriment of the party
furnishing such information; provided, however, that this Section 10.3 shall not
apply to any documents, work papers, material, or information which is a matter
of public knowledge or which heretofore has been or hereafter is published in
any publication for public distribution or filed as public information with any
governmental agency.
10.4 Effect of Termination. Except for the provisions of Sections 6.3,
6.4, 6.7, 10.3 and 10.4, which shall survive any termination of this Agreement,
in the event of the termination and abandonment of this Agreement pursuant to
Article 10, this Agreement shall forthwith become void and have no further
effect, without any liability on the part of any party hereto or its respective
officers, directors or stockholders; provided, however, that, unless this
Agreement is terminated pursuant to Section 10.1(a), nothing in this Section
10.4 shall prejudice any claim any party may have under this Agreement that
arises prior to the effectiveness of such termination.
ARTICLE 11
STOCKHOLDERS' REPRESENTATIVE
11.1 Appointment; Acceptance. By executing this Agreement, each of the
Stockholders (notwithstanding any Stockholder's current or future mental or
physical disability or incompetency) hereby irrevocably constitutes and appoints
Xxxxx Xxxxxx and his successors, acting as hereinafter provided, as his
attorney-in-fact and agent in his name, place and xxxxx in connection with the
transactions and agreements contemplated by this Agreement with respect to (i)
matters prior to the Closing Date, as specified herein, and (ii) matters
subsequent to the Closing Date (the "Stockholders' Representative"), and
acknowledges that such appointment is coupled with an interest. By executing
this Agreement under the heading "Stockholders' Representative," Xxxxx Xxxxxx
hereby (i) accepts his appointment and authorization to act as Stockholders'
Representative as attorney-in-fact and agent on behalf of the Stockholders in
accordance with the terms of this Agreement, and (ii) agrees to perform his
obligations under, and otherwise comply with, this Article 11.
37
11.2 Authority. Without limiting the generality of Section 11.1, each
Stockholder by this Agreement fully and completely, hereby: (a) authorizes the
Stockholders' Representative (i) to dispute or to refrain from disputing any
claim made by Purchaser under the Stockholder Delivered Agreements, (ii) to
negotiate and compromise any dispute which may arise under, and to exercise or
refrain from exercising remedies available under the Stockholder Delivered
Agreements and to sign any release or other document with respect to such
dispute or remedy, (iii) to give such instructions and to do such other things
and refrain from doing such other things as the Stockholders' Representative
shall deem necessary or appropriate to carry out the provisions of the
Stockholder Delivered Agreements, (iv) to waive any condition to the Closing,
and (v) to agree in his discretion with the Purchaser to amend this Agreement
from time to time; and (b) agrees to be bound by all agreements and
determinations made by and documents executed and delivered by the Stockholders'
Representative under the Stockholder Delivered Agreements.
11.3 Actions. Each of the Stockholders hereby expressly acknowledges
and agrees that the Stockholders' Representative is authorized to act on his
behalf, notwithstanding any dispute or disagreement between the Stockholders,
and that Purchaser and any other person or entity shall be entitled to rely on
any and all actions taken by the Stockholders' Representative under the
Stockholder Delivered Agreements without any liability to, or obligation to
inquire of, any of the Stockholders. Purchaser and any other person or entity is
hereby expressly authorized to rely on the genuineness of the signatures the
Stockholders' Representative, and upon receipt of any writing which reasonably
appears to have been signed by Stockholders' Representative, Purchaser and any
other person or entity may act upon the same without any further duty of inquiry
as to the genuineness of the writing.
11.4 Successors. If Xxxxx Xxxxxx ceases to function in his capacity as
the Stockholders' Representative for any reason whatsoever, then Xxx Xxxxxxxx
shall be appointed as his successor. If Xxx Xxxxxxxx ceases to function in his
capacity as the Stockholder's Representative for any reason whatsoever, then
Ford Xxxxxxxxx shall be appointed as his successor, and if Ford Xxxxxxxxx ceases
to function in such capacity for any reason whatsoever, then the Stockholders,
by action of the holders of Stockholders who formerly held a majority of the
Shares immediately prior to the Effective Time, shall have the right to appoint
his successor; provided, however, that if for any reason no successor has been
appointed pursuant to the foregoing within thirty (30) days, then Purchaser
shall have the right to appoint a successor.
11.5 Effectiveness. The authorizations of the Stockholders'
Representative shall be effective until its rights and obligations under this
Agreement terminate by virtue of the termination of any and all obligations of
the Stockholders to Purchaser and of Purchaser to the Stockholders under this
Agreement.
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ARTICLE 12
GENERAL PROVISIONS
12.1 Notices. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (i)
personal delivery; (ii) facsimile transmission; (iii) registered or certified
mail, postage prepaid, return receipt requested; or (iv) overnight delivery
service requiring acknowledgment of receipt. Any such notice or communication
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder):
If to Purchaser, to:
Lifestream Technologies, Inc.
000 Xxxxxxxxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
Fax No. 000-000-0000
Attention: President
with a copy to:
Xxxxxxxxxx, Xxxxxx & Xxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Fax No. (000) 000-0000
Attention: Xxxx X. Xxxxxxx
If to Seller to:
Secured Interactive Technologies, Inc.
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000-0000
Fax No. (000) 000-0000
Attention: Xxxxx Xxxxxx or Xxxxxxxxxxx Xxxx
with a copy to:
Xxxxxxxxx Xxxxxxxx Xxxxxxxx Marks & Xxxxxxx, Chtd.
Third and Xxxx Xxxxxxx, Xxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx 00000
Fax No. (000) 000-0000
Attention: Ford Xxxxxxxxx, Esq.
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If to the Stockholders, to the Stockholders' Representative:
Xxxxx Xxxxxx
000 Xxxx Xxxxxx, Xxxxx X
Xxxxxxxxx, Xxxxx 00000
Fax No. (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxxx Xxxxxxxx Marks & Xxxxxxx, Chtd.
Third and Xxxx Xxxxxxx, Xxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx 00000
Fax No. (000) 000-0000
Attention: Ford Xxxxxxxxx, Esq.
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail a copy of the
notice or communication to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice or communication is deemed received.
12.2 Table of Contents; Headings. The Table of Contents, cross
reference pages and headings contained herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit or affect any of the provisions hereof.
12.3 Amendment. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and executed (i)
if prior to the Effective Time, by Seller, Purchaser and the Stockholders'
Representative, and (ii) if after the Effective Time, by Purchaser and the
Stockholders' Representative.
12.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
40
12.5 Waiver. The failure of any party hereto at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition, or the breach of
any term, provision, warranty, representation, agreement or covenant contained
in this Agreement or the other agreements contemplated hereby, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein or therein contained.
12.6 No Third Party Beneficiaries; Assignment. This Agreement shall
inure to the benefit of the parties and their respective successors and
permitted assignees. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity. Except (after
the Effective Time) for (a) assignments to wholly-owned Subsidiaries of
Purchaser, in which event Purchaser shall remain liable for the performance of
this Agreement, or (b) any transfer or assignment after the Closing by Purchaser
in connection with the sale or transfer of all or substantially all of the
business or assets of Purchaser, whether by sale of stock or assets, merger or
otherwise, no transfer or assignment of this Agreement or of any rights or
obligations under this Agreement may be made by any party without the prior
written consent of the other parties (which consent shall not be withheld
unreasonably) and any attempted transfer or assignment without that required
consent shall be void. No transfer or assignment by a party of its rights under
this Agreement shall relieve it of any of its obligations to the other parties
under this Agreement.
12.7 Time of the Essence; Computation of Time. Time is of the essence
of each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a federal, public or legal holiday, the party
having such right or duty shall have until 5:00 p.m. Post Falls, Idaho time on
the next succeeding regular business day to exercise such right or to discharge
such duty.
12.8 Counterparts. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.
12.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Idaho, without giving effect to the
conflicts of law principles thereof.
12.10 Entire Agreement. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of all the terms of
the arrangements among the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters and cannot be changed or terminated orally.
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
LIFESTREAM TECHNOLOGIES, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
SECURED INTERACTIVE TECHNOLOGIES, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
[Signatures continued on next page]
42
STOCKHOLDERS:
-------------
LIFESTREAM TECHNOLOGIES, INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
CHRISTOM ENTERPRISES LIMITED
PARTNERSHIP
By: ____________________________________
Name: Xxxxxxxxxxx Xxxx
Title:__________________________________
LIFESTREAM DEVELOPMENT
PARTNERS/CMR
By: ____________________________________
Name: Xxx Xxxxxxx
Title:__________________________________
LIFESTREAM DEVELOPMENT
PARTNERS/CHRISTOM
By: ____________________________________
Name: Xxxxxxxxxxx Xxxx
Title:__________________________________
________________________________________
Xxxxx Xxxx
________________________________________
Xxxx Xxxx
________________________________________
Xxxxxxx Xxxx
43
________________________________________
Xxxxxxx X. Xxxxx
________________________________________
Xxxxx Xxx
________________________________________
Xxxx Xxxxxxxxx
KEY CORPORATE FINANCIAL
SERVICE, INC.
By: ____________________________________
Name: Xxx Xxxxxxxx
Title:__________________________________
________________________________________
Xxxxxxx Xxxxxxxx
________________________________________
Xxxxx X. Xxxxxx
________________________________________
Xxxxxx X. Xxxxx
________________________________________
Xxxxxxx Xxxxx
________________________________________
Xxxx Xxxxxxx
________________________________________
Xxx X. Xxxxxxxxxxx
44
WELLSOURCE INC.
By: ____________________________________
Name:___________________________________
Title:__________________________________
XXXXXXX SOFTWARE CORPORATION
By: ____________________________________
Name:___________________________________
Title:__________________________________
________________________________________
Xxxxx Xxxxx
________________________________________
Xxxx Xxxx
________________________________________
Xxxxx Xxxxx
________________________________________
Ford Xxxxxxxxx
SUNCRAFT, LTD.
By: ____________________________________
Name: Xxx Xxxxxxxx
Title:__________________________________
STOCKHOLDERS' REPRESENTATIVE:
-----------------------------
________________________________________
Xxxxx X. Xxxxxx
45
