1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 7, 2001 (the
"Agreement"), by and among RMS NETWORKS, INC., a Delaware corporation ("RMS"),
VISUAL DATA CORPORATION, a Florida corporation ("VDAT"), and VISUAL DATA
NETWORKS, INC., a Florida corporation ("SUB"), which is a direct wholly-owned
subsidiary of VDAT. RMS and SUB are hereinafter sometimes collectively referred
to as the "Constituent Corporations."
RECITALS
A. The Boards of Directors of RMS, VDAT and SUB deem it advisable
and in the best interests of each corporation and its respective shareholders
that RMS and VDAT combine in order to advance their long-term business
interests, all upon the terms and subject to the conditions of this Agreement.
B. It is intended that the combination be effected by a merger of
RMS with and into SUB with SUB surviving, which for Federal income tax purposes
shall be a tax-free reorganization as described in the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) In accordance with the provisions of
this Agreement, the Florida Business Corporation Act ("FBCA") and the Delaware
General Corporation Law ("DGCL"), at the Effective Time, RMS shall be merged
(the "Merger") with and into SUB, and SUB shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Florida. The name of the
Surviving Corporation shall be Visual Data Networks, Inc. At the Effective Time,
the separate existence of RMS shall cease.
1
2
(b) The Merger shall have the effects on RMS and SUB, as
Constituent Corporations of the Merger, provided for under the DGCL and FBCA.
Section 1.2 Effective Time. The Merger shall become effective at
the time of filing of, or at such later time as specified in, an agreement of
merger, in the form required by and executed in accordance with the DGCL and the
FBCA, with the Secretary of State of the State of Florida in accordance with the
provisions of Sections 607.1101 and 607.1103 of the FBCA and with the Secretary
of State of the State of Delaware in accordance with the provisions of Section
252 of the DGCL (the "Certificate of Merger"). The date and time when the Merger
shall become effective is herein referred to as the "Effective Time."
Section 1.3 Articles of Incorporation and Bylaws of Surviving
Corporation. The Articles of Incorporation and Bylaws of SUB as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation until thereafter amended as provided by
law.
Section 1.4 Directors and Officers of Surviving Corporation.
(a) The directors of the Surviving Corporation shall be the same as VDAT at the
Effective Time, consistent with this Agreement and will hold office from and
after the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation or as otherwise provided by law or until
their earlier resignation or removal.
(b) The officers of RMS immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and each will
hold office from and after the Effective Time until their respective successors
are duly appointed and qualified in the manner provided in the Bylaws of the
Surviving Corporation or as otherwise provided by law or until their earlier
resignation or removal.
(c) At the Effective Time, the Articles of Incorporation
and/or Bylaws of VDAT shall have been amended to provide for a staggered Board
of Directors, consisting of three (3) classes. As of the Effective Time, the
Board of Directors
2
3
shall be nine (9) members classified as set forth on Schedule 1.4(c). At the
Effective Time, the Class I directors shall deliver resignations to Atlas
Xxxxxxxx, P.A., that are released by Atlas Xxxxxxxx and become effective when
Threshold II, as that is term defined in Section 2.6, is achieved. Xxxxx Xxxxxx
shall become a Class II director of VDAT upon the achievement of Threshold I, as
that term is defined in Section 2.6, and one (1) person shall be designated a
Class I director by Messrs. Kates and Xxxxxx upon the achievement of Threshold
II. The remaining two (2) vacancies on the board at the time Threshold II is
achieved, shall be filled with independent directors by the nomination of Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxx Xxxxxx. Such directors shall be
Class I directors.
Section 1.5 Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Effect on RMS Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Every share of RMS' common stock, par value $.01 per
share (the "RMS Shares"), issued and outstanding immediately
3
4
prior to the Effective Time shall be converted into the right to receive the
number of shares of VDAT Common Stock, $.0001 par value per share (the "VDAT
Common Stock") equal to (X) 10,000,000 divided by (Y) the number of shares of
RMS common stock and RMS options and warrants issued and outstanding immediately
prior to the Effective Time (the "Exchange Ratio"). Sixty-One and Six-Tenths
percent (61.6%) of the number of shares of VDAT Common Stock each RMS
shareholder is entitled to receive based upon the Exchange Ratio shall be
distributed to each RMS shareholder pursuant to the provisions of Section 2.4 of
this Agreement ("Closing Shares"). The remaining Thirty-Eight and Four-Tenths
percent (38.4%) of the number of shares of VDAT Common Stock each RMS
shareholder is entitled to receive based upon the Exchange Ratio, shall be
distributed to each RMS shareholder pursuant to the provisions of Section 2.4 of
this Agreement, but only after the requirements of Section 2.6 are met
("Threshold Shares").
(b) All RMS Shares shall be canceled and retired, and
each certificate representing any such RMS Shares shall thereafter (i) represent
only the right to receive the VDAT Common Stock issuable in exchange for such
RMS Shares upon the surrender of such certificates in accordance with Sections
2.1 and 2.4 and (ii) entitle the holder thereof to vote with respect to, and
receive dividends on, such number of shares of VDAT Common Stock which such
holder is entitled to receive in exchange for such certificates, provided that
dividends shall be paid to such holder, without interest, only upon surrender of
certificates in accordance with Section 2.4; provided that with respect to the
Threshold Shares, no rights, including the right to vote or receive dividends
shall belong to the RMS shareholders until the requirements of Section 2.6 have
been met.
(c) Notwithstanding anything to the contrary in this
Agreement, any holder of RMS Shares who shall exercise the rights of a
dissenting shareholder pursuant to and strictly in accordance with the
provisions of Section 262 of the DGCL shall be entitled to receive only the
payment therein provided for and shall not be entitled to receive VDAT Common
Stock. Such payment shall be made directly by the Surviving Corporation.
(d) In the event of any change in VDAT Common Stock by
reason of any stock split, readjustment, stock dividend, reclassification, or
similar event including, with respect to the Threshold Shares any such change
after the Effective Time, the
4
5
amounts set forth in Sections 2.1 and 2.2 shall be appropriately adjusted.
Section 2.2 Effect on RMS Options and Warrants. Every RMS option
or warrant issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive an option or warrant of VDAT based upon
the Exchange Ratio. Each option and warrant will be exercisable for that number
of shares of VDAT Common Stock as determined by Sections 2.1(a) and 2.6. The
purchase price of each option will be adjusted to reflect the Exchange Ratio.
Section 2.3 SUB Common Stock. Each share of common stock, $.0001
par value, of SUB issued and outstanding immediately prior to the Effective Time
shall remain outstanding.
Section 2.4 Exchange Procedures. (a) VDAT shall authorize its
transfer agent to act as exchange agent hereunder (the "Exchange Agent") for the
purposes of exchanging certificates representing RMS Shares or RMS options or
warrants and shares of VDAT Common Stock. As promptly as practicable after the
Effective Time, VDAT shall deposit with the Exchange Agent, in trust for the
holders of Certificates (as defined in Section 2.4(b) below), certificates
representing the shares of VDAT Common Stock issuable pursuant to Section 2.1(a)
in exchange for Closing Shares (the "RMS Closing Certificates"). As promptly as
practicable after each Threshold specified in Section 2.6 is achieved, VDAT
shall deposit with the Exchange Agent, in trust for the Threshold Shares (as
defined in Section 2.1(a), above), certificates representing the shares of VDAT
Common Stock issuable pursuant to Section 2.1(a), based upon the Threshold that
has been achieved, in exchange for the applicable Threshold Shares (the "RMS
Threshold Certificates").
(b) Promptly after the Effective Time, the Exchange Agent
shall mail or cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented RMS Shares or RMS options or warrants (the
"Certificates"), a letter of transmittal and instructions for use in effecting
the surrender of the Certificates for exchange therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor that number of Closing Shares of VDAT Common Stock which such
holder has the right to receive under Section 2.1(a) and such Certificate shall
forthwith be canceled. If any such shares are to be issued to a person other
than the person in
5
6
whose name the Certificate surrendered in exchange therefor is registered, it
shall be a condition of exchange that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such exchange shall pay any transfer or other taxes required by
reason of the exchange to a person other than the registered holder of the
Certificate surrendered or such person shall establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Promptly after a Threshold specified in Section 2.6 has been achieved, the
Exchange Agent shall issue to each person who has submitted a Certificate, that
person's number of Threshold Shares, based upon the Threshold achieved, as
calculated pursuant to Section 2.1(a).
(c) No dividends or other distributions with respect to
the VDAT Common Stock constituting all or a portion of the consideration payable
to the holders of RMS Shares shall be paid to the holder of any unsurrendered
Certificate representing RMS Shares until such Certificate is surrendered as
provided for in this Section 2.4. Subject to the effect of applicable laws,
following such surrender, there shall be paid, without interest, to the record
holder of the certificates representing VDAT Common Stock (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time payable prior to or on the date of such surrender
with respect to such whole shares of VDAT Common Stock, less the amount of any
withholding taxes which may be required thereon under any provision of federal,
state, local or foreign tax law; provided that, such payment shall be limited to
those amounts owed on the Closing Shares only until Threshold Shares are issued
based upon the achievement of each Threshold as set forth in Section 2.6, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time, but prior to the date
of surrender and a payment date subsequent to the date of surrender payable with
respect to such shares of VDAT Common Stock, less the amount of any withholding
taxes which may be required thereon under any provision of federal, state, local
or foreign tax law. VDAT shall make available to the Exchange Agent cash for
these purposes. Any fractional shares shall be rounded up to the next whole
share.
(d) Any portion of the VDAT Common Stock made available
to the Exchange Agent pursuant to Section 2.4(a) that remains unclaimed by the
holders of RMS Shares, options or warrants twelve (12) months after the date on
which Certificates representing such shares, options or warrants were deposited
with the Exchange Agent by VDAT shall be returned to VDAT, upon demand, and any
such holder who has not exchanged his, her or its RMS Shares, options or
warrants in accordance with this Section 2.4 prior to that time shall thereafter
look only to VDAT for his, her or its claim for VDAT Common Stock, any cash in
lieu of fractional shares and certain dividends or other distributions. Neither
VDAT nor SUB shall be liable to any holder of RMS Shares, options or warrants
with respect to any VDAT Common Stock delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
6
7
(e) If any Certificate representing RMS Shares, options
or warrants shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by VDAT, the posting by such person of a
bond in such reasonable amount as VDAT may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
consideration payable under Section 2.1(a) and, if applicable, any unpaid
dividends and distributions on shares of VDAT Stock deliverable in respect
thereof including taking account for any stock dividend, stock split or other
such action relating to the VDAT shares, in each case pursuant to this
Agreement.
Section 2.5 Transfers. From and after the Effective Time, there
shall be no transfers on the stock transfer books of RMS or the Surviving
Corporation of RMS Shares, options or warrants. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged as provided in this Article II.
Section 2.6 Requirements for Threshold Shares. The Threshold
Shares shall be distributed by the Exchange Agent based upon the attainment of
the Thresholds set forth herein. For purposes of this Section 2.6, except as
otherwise indicated, "RMS" shall mean either SUB or if SUB is merged into VDAT
then the division of VDAT operating the RMS business; "Revenue" shall mean
revenue from any source for RMS as determined in accordance with generally
accepted accounting principles ("GAAP") as consistently applied, but excluding
revenue associated with the sale of any assets of RMS (other than equipment and
inventory held for resale), and other non-recurring revenue not in the ordinary
course of business. For purposes of any Revenue calculation, pilot and license
fees shall not constitute non-recurring revenue. "Baseline Revenue" shall mean
programming fees, licensing fees or royalties which are contractually committed
to for a period of at least 12 months and are not subject to termination or
other cancellation, other than "for cause" on less than 60 days prior written
notice, or in the case of those agreements set forth on Schedule 2.6(a), which
are not subject to termination or other cancellation, other than "for cause" on
less than 45 days prior written notice. "Net Income" shall mean the net income
of the Surviving Corporation as determined according to GAAP consistently
applied. For purposes of any Net Income calculation, VDAT shall not allocate any
general administrative expenses to RMS, except for a monthly
7
8
charge of $30,000 per month. To the extent that salaried employees of RMS who
receive annual compensation of $125,000 or more (the "Significant Threshold
Employees") receive any salary increase, bonus or additional fringe benefits
(the "Increased Compensation") not presently received by the Significant
Threshold Employees, such Increased Compensation will not be an expense of RMS
for the purpose of any Net Income calculation. VDAT shall assume all accounting,
human relations and general legal expenses of RMS from the Effective Time of the
Merger. VDAT shall not allocate any financing costs to RMS for any amounts
advanced to RMS prior to the Effective Time. VDAT shall not allocate any
financing costs to RMS for amounts advanced to RMS after the Effective Time,
unless any such amount was not set forth in the Budget approved by the RMS
Executive Committee (as discussed below), in which case such advances shall be
an expense of RMS, and RMS shall be charged interest at the prime rate (set
forth by Bank of America) plus four percent. No charges in connection with the
Merger, this Agreement or the transactions contemplated hereby (the
"Transactions") (including, without limitation, charges in connection with the
negotiation, preparation and execution and performance of this Agreement, the
structuring of the Transactions, any agreement relating thereto and any filings
to be made in connection therewith) shall be charged to RMS for purposes of any
calculation under this Section 2.6. Any amounts in excess of $50,000 incurred by
RMS, the RMS shareholders, or the Shareholder's Representative in performing
this agreement following the Effective Time shall be offset against the
Threshold II Shares as set forth in Section 9.6. Beginning with the first full
fiscal quarter following the Effective Time, and through the period to earn the
Threshold Shares, VDAT shall deliver to the Shareholders' Representative a
statement, signed by an executive officer of VDAT, setting forth the Revenue,
Baseline Revenue, and Net Income of RMS as determined pursuant to this Agreement
(the "Settlement Statement") in respect of each full quarter. The Settlement
Statement shall be delivered to the Shareholders' Representative on the date
that is (a) in the case of the first three (3) quarters of VDAT's fiscal year,
the earlier of (i) ten (10) days after VDAT's filing of its quarterly report
with the Securities and Exchange Commission (the "SEC") in respect of a given
quarter and (ii) 55 days after the end of such quarter and (b) in the case of
the fourth quarter of VDAT's fiscal year, the earlier of (i) ten (10) days after
VDAT's filing of its annual report with
8
9
the SEC in respect of such fiscal year, and (ii) 100 days after the end of such
fourth quarter.
The Settlement Statement shall be final and binding on the RMS
shareholders unless, within 30 days following date of delivery to the
Shareholders' Representative of the Settlement Statement, the Shareholders'
Representative shall have notified VDAT in writing, including the basis of
contestation (the "Notice of Objection") that the RMS shareholders do not accept
as correct the amount of any calculation reflected in the Settlement Statement.
If the Shareholders' Representative timely delivers the Notice of Objection to
VDAT, then the Shareholders' Representative and VDAT shall attempt to reach a
mutual agreement as to each disputed calculation made in the Settlement
Statement. If such parties fail to reach agreement to all disputed calculations
within ten days after the Notice of Objection has been received, then VDAT's
accounting firm shall be instructed by VDAT and the Shareholders' Representative
to make, as soon as practicable after the matter is referred to such firm, all
calculations that were in dispute and the determination of such accounting firm
shall be final and binding on the parties. The cost of the accounting firm to be
paid one-half by VDAT and one-half by RMS. The costs of RMS or the Shareholders'
Representative in connection with this Section 2.6 shall be borne by VDAT up to
$50,000 in the aggregate in accordance with the second paragraph of Section
5.10. Any amounts incurred above $50,000 shall be offset against the Threshold
II Shares. For purposes of this Section 2.6, the Threshold II Shares shall be
valued at the average of the closing price of VDAT's common stock for five
trading days prior to the end of the period to which the disputed Settlement
Statement relates.
In the event that within four full quarters after the Effective Time,
operations of RMS produce Revenue for two consecutive quarters that constitute
Revenue of at least $6,500,000 on an annualized basis, at least 60% of which
Revenue is Baseline Revenue, and Net Income of at least $1.00 for such period on
an annualized basis, the RMS shareholders shall be entitled to receive 50% of
the Threshold Shares ("Threshold I"). In the event that within six full quarters
after the Effective Time, the operations of RMS produce Revenue for two
consecutive quarters that constitute Revenue of at least $8,000,000 on an
annualized basis, at least 60% of which Revenue is Baseline Revenue, and Net
Income for such period on an annualized basis of
9
10
at least $400,000, the RMS shareholders shall be entitled to receive 50% of the
Threshold Shares ("Threshold II").
In the event the RMS shareholders are not eligible to receive Threshold
I Shares because of the failure to meet the Revenue, Baseline Revenue and Net
Income targets, the shares that would have been allocated for distribution in
connection with the achievement of such targets will be available for issuance
and will be issued in the event that the RMS shareholders receive Threshold II
shares as a result of meeting of the Threshold II performance requirements. The
Threshold II performance period shall be extended for an additional two quarters
if Threshold I has been met during the stated time frame period.
VDAT agrees that through the period to earn the Threshold Shares, RMS
shall (a) operate within VDAT as either SUB or a separate division and (b) the
business of RMS shall be conducted as conducted by RMS prior to the Merger. The
President of SUB or the division shall be Xxxxx Xxxxx, who shall be empowered to
enter into network agreements and other contractual agreements so long as the
net incremental costs to produce the network or other net incremental costs are
less than $100,000 during the term of the applicable agreement. Any agreement
which requires an expenditure above such committed amount shall require the
approval of RMS' Executive Committee. RMS' Executive Committee shall consist of
Xxxxx Xxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxxxxx (the "RMS Executive Committee").
RMS, whether operated as SUB or a separate division of VDAT, shall operate its
business according to a budget agreed to by the RMS Executive Committee (the
"Budget"). The President of RMS has submitted to the RMS Executive Committee, a
budget which has been approved and is set forth on Schedule 2.6(b) attached
hereto. Following the Effective Time, the President of RMS will submit to the
RMS Executive Committee for its comment, revision and approval, at least 30 days
before the beginning of each fiscal year, an annual operating and capital budget
for RMS. The preparation of any Budget by Kates and the approval by the RMS
Executive Committee thereof shall be prepared and approved with consideration to
the cost cutting initiative undertaken by RMS and VDAT (e.g. coach airfare,
modest hotels). From the date hereof until the Effective Time, RMS shall provide
a Budget to VDAT on a quarterly basis at least five (5) days prior to the
commencement of the quarter covered by such Budget and at the Effective Time,
RMS shall provide a Budget to VDAT in respect of the duration of the
10
11
then fiscal year. The Budget shall specify, among other things, RMS' targets for
Revenue, Baseline Revenue and Net Income (the "Targets") and the amount of
capital expenditures proposed for such fiscal year. The President shall, as an
officer of RMS (whether RMS is a subsidiary or a division of VDAT) and subject
to the supervision and control of the RMS Executive Committee, operate RMS'
business in the ordinary course and within the limits provided in the applicable
Budget and as provided in this Agreement.
In the event of a claim for indemnification pursuant to Article 9
herein, 500,000 Threshold II Shares may be withheld pending satisfaction of such
claim or claims.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VDAT AND SUB
VDAT and SUB jointly and severally represent and warrant to RMS as
follows:
Section 3.1 Organization. Each of VDAT and SUB is a corporation
duly organized, validly existing and in good standing under the laws of its
respective State of Incorporation. VDAT owns directly all of the outstanding
capital stock of SUB. Each of VDAT and SUB has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Except as set forth in Schedule 3.1, each of VDAT and
SUB is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualifications or licenses necessary,
as indicated on Schedule 3.1, except in such jurisdictions where the failure to
be so duly qualified or licensed and in good standing would not individually or
in the aggregate have a material adverse effect on the business, operations,
assets, prospects, financial condition or results of operations of VDAT and
would not delay or prevent the consummation of the transactions contemplated
hereby (a "VDAT Material Adverse Effect"). VDAT previously has delivered to RMS
accurate and complete copies of its Articles of Incorporation and Bylaws, and
SUB's Articles of Incorporation and Bylaws, each as currently in effect. Neither
of VDAT or SUB is in violation of any terms of its Articles of Incorporation or
Bylaws.
11
12
Section 3.2 Capitalization.
(a) The authorized capital stock of VDAT consists of
50,000,000 shares of VDAT Common Stock and 5,000,000 shares of VDAT preferred
stock. As of the date hereof, there are 14,788,947 shares of VDAT Common Stock
issued and outstanding and no shares held in treasury; and no shares of VDAT
preferred stock outstanding. As of the date hereof, there were outstanding under
the VDAT Stock Option Plans, or otherwise, VDAT Stock Options and outstanding
VDAT warrants entitling the holders thereof to purchase, in the aggregate, up to
the amount set forth on Schedule 3.2 of VDAT Common Stock. The capitalization of
VDAT as of the date hereof is as set forth on Schedule 3.2. All shares of VDAT
Common Stock to be issued at the Effective Time shall be, when issued, duly
authorized and validly issued, fully paid, and nonassessable and subject to the
terms of this Agreement, free from liens, charges, claims and encumbrances.
(b) The authorized capital stock of SUB consists of one
hundred (100) shares of common stock, $.0001 par value, of which one hundred
(100) are issued and outstanding and are validly issued, fully paid and
nonassessable. All such shares are issued to VDAT. As of the date hereof, there
are no outstanding SUB stock options or warrants or any other rights entitling
any person to purchase capital stock of SUB.
(c) All issued and outstanding shares of VDAT and SUB
have been issued in compliance with all applicable federal and state securities
and blue sky laws.
Section 3.3 Authority. Each of VDAT and SUB has full corporate
power and authority to execute and deliver this Agreement and, subject to the
requisite approval of the shareholders of VDAT, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Boards of Directors of VDAT and SUB and by VDAT
as the sole shareholder of SUB, and, except for the requisite approval by the
shareholders of VDAT, no other corporate proceedings on the part of VDAT or SUB
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. VDAT's Board of Directors has determined that the
transactions contemplated by this Agreement, including the Merger, are in the
best interests of VDAT and its shareholders and have determined to recommend to
12
13
such shareholders that they vote in favor of this Agreement and the consummation
of the transactions contemplated hereby, including the Merger. This Agreement
has been duly and validly executed and delivered by each of VDAT and SUB and,
assuming this Agreement constitutes a legal, valid and binding agreement of RMS
and the RMS shareholders, constitutes a legal, valid and binding agreement of
VDAT and SUB, as the case may be, enforceable against each of them in accordance
with its terms, except as the enforceability may be affected by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and the possible
unavailability of certain equitable remedies, including the remedy of specific
performance.
Section 3.4 No Violations: Consents and Approvals. Except as set
forth on Schedule 3.4:
(a) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby nor compliance by
VDAT and SUB with any of the provisions hereof conflicts with, violates or
results in any breach of (i) subject to obtaining the requisite approval of
VDAT's shareholders and the NASDAQ stock market, any provision of the Articles
of Incorporation or Bylaws of either of VDAT or SUB, (ii) any contract,
agreement, instrument or understanding to which VDAT or SUB is a party or by
which VDAT, SUB or any of their respective assets or properties is bound, or
(iii) subject to the requisite approval of VDAT's shareholders and the NASDAQ
Stock Market, any law, judgment, decree, order, statute, rule or regulation of
any jurisdiction or governmental authority (a "Law") applicable to VDAT or SUB
or any of their respective assets or properties, excluding from the foregoing
clauses (ii) and (iii) conflicts, violations or breaches which, either
individually or in the aggregate, would not have an VDAT Material Adverse Effect
or materially impair VDAT's or SUB's ability to consummate the transactions
contemplated hereby or for which VDAT or SUB has received or, prior to the
Merger, shall have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any governmental entity is required by
VDAT or SUB in connection with the execution and delivery of the Agreement or
the consummation by VDAT or SUB of the transactions contemplated hereby, except
(i) in connection,
13
14
or in compliance, with the provisions of the Securities Act of 1933, as amended
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) the filing of the Certificate of Merger with the Secretary
of State of the States of Florida and Delaware, (iii) filings with, and approval
of, the NASDAQ in connection with obligations of VDAT hereunder, and (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not, individually or
in the aggregate, have an VDAT Material Adverse Effect, or materially impair the
ability of VDAT or SUB to perform its obligations hereunder.
Section 3.5 SEC Documents: VDAT Financial Statements.
(a) VDAT has filed with the Securities and Exchange
Commission ("SEC") all documents required to be filed under the Securities Act
and the Exchange Act since the effective date of its initial public offering
(the "VDAT SEC Documents"). As of their respective dates, the VDAT SEC Documents
complied in all respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and none of the VDAT SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) As of their respective dates, the financial
statements of VDAT included in the VDAT SEC Documents were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and present fairly
the consolidated financial position of VDAT as at the dates thereof and the
consolidated results of its operations and statements of cash-flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
VDAT's balance sheet included in its Form 10-QSB for the quarter ended June 30,
2001, shall be referred to as the "VDAT Interim Balance Sheet."
(c) VDAT has no liability or obligation of any kind
(whether contingent or otherwise and whether due or to become due) except (i) as
set forth on Schedule 3.5, (ii) as set forth on the VDAT Interim Balance Sheet,
or (iii) as incurred in the
14
15
ordinary course of business, consistent with past practice since the date of the
VDAT Interim Balance Sheet.
Section 3.6 Absence of Certain Changes. Since the date of the
VDAT Interim Balance Sheet, VDAT has been operated only in the ordinary course,
consistent with past practice, and there has not been any adverse change, or any
event, fact or circumstance which might reasonably be expected to result in an
adverse change, in either event that would have a VDAT Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 3.6 or in the VDAT SEC Documents, since June 30, 2001, there has not
been with respect to VDAT or SUB any:
(a) sale or disposition of any material asset other than
inventory in the ordinary course;
(b) payment of any dividend, distribution or other
payment to any shareholder of VDAT or to any relative of any such shareholder
other than payments of salary and expense reimbursements made in the ordinary
course of business, consistent with past practice, for employment services
actually rendered or expenses actually incurred;
(c) incurrence or commitment to incur any liability
individually or in the aggregate material to VDAT, except such liabilities under
VDAT's existing credit facilities and liabilities incurred in connection with
the Merger;
(d) waiver, release, cancellation or compromise of any
indebtedness owed to VDAT or claims or rights against others, exceeding $50,000
in the aggregate;
(e) any change in any accounting method, principle or
practice except as required or permitted by generally accepted accounting
principles; or
(f) unusual or novel method of transacting business
engaged in by VDAT or any change in VDAT's accounting procedures or practices or
its financial or equity structure.
Section 3.7 Proxy Statement/Prospectus Registration Statement.
None of the information regarding VDAT and SUB to be supplied by VDAT and SUB
for inclusion or incorporation by reference in (i) the registration statement on
Form S-4 (as it may be amended or supplemented from time to time, the
"Registration Statement") relating to VDAT Common Stock to be issued in
connection with the Merger or (ii) the proxy statement
15
16
to be distributed in connection with the shareholders' meeting of VDAT
contemplated by Section 5.5 (as it may be amended or supplemented from time to
time, the "Proxy Statement" and together with the prospectus to be included in
the Registration Statement, the "Proxy Statement/Prospectus") will, in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Time, and, in the case of the Proxy Statement, at the time of its
mailing to shareholders of VDAT and at the time of its shareholders' meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances when made. If at any time
prior to the Effective Time any event with respect to VDAT or SUB shall occur
which is required to be described in the Proxy Statement or Registration
Statement, such event shall be so described, and an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the shareholders of VDAT. The Proxy Statement and the Registration Statement
will (with respect to VDAT) comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
Section 3.8 State Antitakeover Statutes. The VDAT Board of
Directors has approved this Agreement and the transactions contemplated hereby
and such approval constitutes approval of the Merger and the other transactions
contemplated hereby by the VDAT Board of Directors as required by the FBCA. No
"business combination," "moratorium," "control share," "fair price," "interested
shareholder," affiliated transactions" or other state antitakeover statute or
regulation (i) prohibits or restricts VDAT's ability to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated hereby or thereby, (ii) would have the effect of invalidating or
voiding this Agreement or the Voting Agreement attached hereto as Exhibit 3.8
(the "Voting Agreement") or any provision hereof, or (iii) would subject RMS to
any material impediment or condition in connection with the exercise of any of
its respective rights under this Agreement.
Section 3.9 Broker's Fees. Except as set forth on Schedule 3.9,
neither VDAT nor SUB nor any of VDAT's affiliates or their respective officers,
directors or agents has employed any broker, finder or financial advisor or
incurred any liability for any broker's fees, commissions, or financial advisory
or
16
17
finder's fees in connection with any of the transactions contemplated by this
Agreement.
Section 3.10 Compliance With Laws. Except as set forth on Schedule
3.10, neither VDAT nor SUB is conducting or has conducted its business in
violation of any Law, including without limitation, any law pertaining to
environmental protection, occupational health or safety, or employment
practices, except any law the violation of which would not have an VDAT Material
Adverse Effect.
Section 3.11 No Litigation. Except as set forth in the VDAT SEC
Documents or on Schedule 3.11, there is no claim, litigation, investigation or
proceeding by any person or governmental authority pending or, to VDAT's
knowledge threatened, against VDAT or SUB which would have a VDAT Material
Adverse Effect. There are no pending or, to VDAT's knowledge, threatened
controversies or disputes with, or grievances or claims by, any employees or
former employees of VDAT or SUB or any of their respective predecessors of any
nature whatsoever, including, without limitation, any controversies, disputes,
grievances or claims with respect to their employment, compensation, benefits or
working conditions, except for such litigation which would not have a VDAT
Material Adverse Effect.
Section 3.12 Employee Benefits. All employee welfare benefit plans
as defined in Section 3(1) of the Employee Retirement Income Security Act of
1974 ("ERISA"), employee pension benefit plans as defined in Section 3(2) of
ERISA, and all other employee benefit programs or arrangements of any type,
written or unwritten (collectively, the "Plans") maintained by VDAT or to which
VDAT contributes are listed on Schedule 3.12. In addition, Schedule 3.12
separately sets forth any Plans which VDAT, or any affiliate or predecessor of
VDAT, maintained or contributed to within the six years preceding the date
hereof.
(a) The Plans comply, with all applicable provisions of
all Laws, including, without limitation, the Code and ERISA, and have so
complied during all prior periods during which any such provisions were
applicable. Without limiting the foregoing, all of the Plans, and any related
trust, intended to meet the requirements for tax-favored treatment under the
Code (including, without limitation, Sections 401 and 501 and Subchapter B of
the Chapter 1 of the Code) meets and for all prior periods has met, such
requirements in all material respects.
17
18
(b) VDAT and, to its knowledge, any other party involved
in the administration of any of the Plans (i) has complied in all material
respects with the provisions of ERISA, the Code or other Laws, applicable to
such party, whether as an employer, plan sponsor, plan administrator, or
fiduciary of any of the Plans or otherwise, (including without limitation the
provisions of ERISA and the Code concerning prohibited transactions), and (ii)
has administered the Plans in accordance with their respective terms. VDAT has
made all contributions required of it by any Law (including, without limitation,
ERISA) or contract under any of the Plans and no unfunded liability exists with
respect to any of the Plans.
(c) VDAT has no responsibility or liability, contingent
or otherwise, with respect to any Plans or any employee benefits other than
under the Plans listed on Schedule 3.12. VDAT has the right to amend or
terminate, without the consent of any other person, any of the Plans, except as
prohibited by law and any applicable collective bargaining agreement. Neither
VDAT, nor any affiliate or predecessor of VDAT, maintains or has ever maintained
or been obligated to contribute to (i) any defined benefit pension plan (as such
term is defined in Section 3(35) of ERISA), (ii) any multiemployer plan (as such
term is defined in Section 3(37) of ERISA), (iii) any severance plan or policy,
or (iv) any arrangement providing medical or other welfare benefits to retirees
or other former employees or their beneficiaries, except as required under part
6 of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (hereinafter
collectively referred to as "COBRA").
(d) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to VDAT's knowledge, any actions, suits,
or claims (other than routine claims for benefits) which could reasonably be
expected to be asserted, against any of the Plans, or the assets thereof, or
against VDAT or any other party with respect to any of the Plans.
Section 3.13 Taxes. (a) VDAT has duly filed with the appropriate
federal, state, local and foreign taxing authorities all Tax Returns (as defined
below) required to be filed by or with respect to VDAT on or before the date of
this Agreement. All such Tax Returns are true, correct and complete in all
material respects as of the time of filing. VDAT, with respect to the federal
income Tax Returns, and any other Tax Returns, has paid in full on a timely
basis all Taxes (as defined below) due on such Tax Returns or such Taxes that
are otherwise due, except to the extent such Tax is being contested in good
faith through appropriate proceedings and, for contested Taxes only, for which
adequate reserves have been established on the VDAT Interim Balance Sheet.
Except as set forth on Schedule 3.13, the balance for accrued Taxes on the VDAT
Balance Sheet for the payment of
18
19
accrued but unpaid Taxes through the date thereof is correct and the amount of
VDAT's liability for unpaid Taxes shall not exceed such balance for accrued but
unpaid Taxes of VDAT. The balance of accrued Taxes has been determined in
accordance with GAAP, applied on a consistent basis. All monies which VDAT was
required by Law to withhold from employees have been withheld and either timely
paid to the proper governmental authority or set aside in accounts for such
purposes and accrued on the books of VDAT.
(b) VDAT has never been a member of an affiliated group
filing consolidated returns.
(c) (i) VDAT has not received any notice of a deficiency or
assessment with respect to Taxes of VDAT from any taxing authority which has not
been fully paid or finally settled, except to the extent any such deficiency or
assessment is being contested in good faith through appropriate proceedings and
for which adequate reserves have been established on the VDAT Interim Balance
Sheet; (ii) there are no ongoing audits or examinations of any Tax Return
relating to VDAT and no notice (oral or written) of audit or examination of any
such Tax Return has been received by VDAT; (iii) In the last three years, the
federal income Tax Returns of VDAT have not been audited by the Internal Revenue
Service; and (iv) To VDAT's knowledge, no issue has been raised (either in
writing or verbally, formally or informally) on audit or in any other proceeding
(and is currently pending) with respect to Taxes of VDAT by any taxing authority
which, if resolved against VDAT, would have a VDAT Material Adverse Effect. VDAT
has disclosed on its federal income tax returns all positions taken therein
that, VDAT believes could give rise to a substantial understatement penalty
within the meaning of Code Section 6662.
(d) VDAT is not (nor has it ever been) a party to any tax
sharing agreement and has not assumed the liability for taxes of any other
person under law or contract.
(e) VDAT (i) has not filed a consent pursuant to Code
Section 341(f) nor agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in Code Section
341(f)) owned by VDAT; (ii) has not agreed, or is not required, to make any
adjustment under Code Section 481(a) by reason of a change in accounting method
or otherwise initiated by VDAT that will affect the liability of VDAT for Taxes;
(iii) has not made an election, or is required, to treat any asset of VDAT as
owned by another person pursuant to the provisions of former Code Section
168(f)(8); (iv) is not now nor has ever been a party to any agreement, contract,
arrangement, or plan that would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Code Section
280G; (v) has not participated in an international boycott as defined in Code
Section 999; (vi) is not
19
20
now nor has ever been a "foreign person" within the meaning of Code Section
1445(b)(2); (vii) is not now nor has ever been a United States real property
holding corporation within the meaning of Code Section 897(c)(1)(A)(ii); and
(viii) has not made any of the foregoing elections or is required to apply any
of the foregoing rules under any comparable state or local tax provision.
(f) VDAT is not required to report or pay any additional
Taxes from any joint venture, partnership or other arrangement or contract
limited liability company that could be treated as a partnership for federal
income tax purposes.
(g) For purposes of this Section 3.13, the following
terms shall have the meaning given to them below:
(i) "Tax" means any of the Taxes, and "Taxes"
means, with respect to VDAT, (i) all income taxes (including any tax on or based
upon net income, or gross income, or income as specially defined, or earnings,
or profits, or selected items of income, earnings or profits) and all gross
receipts, estimated, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, environmental (including taxes under Code Section
59A), alternative, add-on minimum, custom duties, capital stock, social security
(or similar), unemployment, disability, or other taxes, fees assessments, or
similar charges of any kind whatsoever, together with any interest, penalty, or
addition thereto, whether disputed or not, imposed by any taxing authority, and
(ii) any liability for payment of any amount of the Tax described in the
immediately preceding clause (i) as a result of being a "transferee" (within the
meaning of Code Section 6901 or any other applicable law) of another person or
successor, by contract, or otherwise, or a member of an affiliated,
consolidated, or combined group.
(ii) "Tax Return" means any return, declaration,
report, claim or refund, or information return or statement or other document
(including any related or supporting information) filed or required to be filed
with any appropriate federal, state, local and foreign governmental entity or
authority (individually or collectively, "taxing authority") or other authority
in connection with the determination, assessment or collection of any Tax paid
or the administration of any Laws, regulations, or administrative requirements
relating to any such Tax.
20
21
Section 3.14 Absence of Certain Business Practices. Neither VDAT
nor any director, officer, employee or agent of the foregoing, nor any other
person acting on its behalf, directly or indirectly, has to VDAT's knowledge
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person which (i) might subject VDAT to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a VDAT Material Adverse Effect, or
(iii) if not continued in the future, might have a VDAT Material Adverse Effect
or which might subject VDAT to suit or penalty in any private or governmental
litigation or proceeding.
Section 3.15 Intellectual Property. (a) Schedule 3.15(a) and the
VDAT SEC documents sets forth a correct and complete list of (i) all U.S. and
foreign trademarks, patents, service marks, trade names, copyrights, mask works
and designs which are pending, applied for, granted, or registered in any
country or jurisdiction of the world and are owned by VDAT and used in
connection with its business; and (ii) all unregistered trademarks, patents,
service marks, and trade names which are owned by VDAT and used in connection
with its business. Except as set forth on Schedule 3.15(a), title to all
registered intellectual property is recorded on records in the name of VDAT and,
to the extent applicable, all affidavits of continued use and incontestability
in respect of such registered intellectual property have been timely filed.
(b) Except as disclosed and set forth on Schedule
3.15(b), (i) VDAT owns or possesses licenses or other valid rights to use, and
upon consummation of the transactions contemplated by this Agreement, the
Surviving Corporation shall own or possess licenses or other valid rights to use
(without the making of any payment to others or the obligation to grant rights
to others in exchange), all intellectual property reasonably necessary to the
conduct of the business of VDAT as currently conducted, including, without
limitation, all releases required in connection with quotes, testimonials or
likenesses utilized in editorial or promotional material; (ii) VDAT's right
title and interest in such intellectual property, to its knowledge, is not being
opposed by any claim or demand or in any proceeding, action, litigation or order
to which VDAT or any person or entity who has granted a license or other right
21
22
to use intellectual property to VDAT or who has been granted a license or other
right to use intellectual property by VDAT, is a party or subject, nor to the
knowledge of VDAT is any such claim, demand, proceeding, action, litigation, or
court order threatened; and (iii) the conduct of the business of VDAT as
currently conducted does not materially infringe or conflict with any
intellectual property of others.
Section 3.16 Knowledge. The term "to VDAT's knowledge" shall mean
the actual knowledge of each director and executive officer of VDAT.
Section 3.17 No Undisclosed Information. No provision of this
Article III or any Schedule or any document or agreement furnished by VDAT
contains any untrue statement of a material fact, or omits to state a material
fact necessary in order to make the statement contained herein, in light of the
circumstances under which such statements are made, not misleading. No
preclosing investigation by RMS of VDAT, its subsidiaries, their respective
assets or their business shall relieve VDAT of its indemnification or other
obligations under this Agreement.
Section 3.18 Certain Business Practice. Neither VDAT nor any
directors, officers, agents or employees of VDAT (in their capacities as such)
has (i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
Section 3.19 Required Vote of VDAT Shareholders. The affirmative
vote of the holders of a majority of the outstanding shares of VDAT Common Stock
is required to approve the Merger. The vote of the holders of a plurality of
shares of VDAT Common Stock present and voting is required to approve the
amendment to VDAT's Articles of Incorporation and/or Bylaws for a staggered
Board of Directors and to change its corporate name to Visual Data Networks,
Inc. No other vote of the shareholders of VDAT is required by Law, the Articles
of Incorporation or Bylaws of VDAT or otherwise in order for VDAT to consummate
the Merger and the transactions contemplated hereby.
22
23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RMS
RMS represents and warrants to VDAT and SUB as follows:
Section 4.1 Organization. (a) RMS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. RMS
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualifications or licenses necessary,
as indicated on Schedule 4.1, except in such jurisdictions where the failure to
be so duly qualified or licensed and in good standing would not individually or
in the aggregate have a material adverse effect on the business, operations,
assets, prospects, financial condition or results of operations of RMS and would
not delay or prevent the consummation of the transactions contemplated hereby (a
"RMS Material Adverse Effect").
(b) RMS previously has delivered to VDAT accurate and
complete copies of RMS' Certificate of Incorporation and Bylaws, each as
currently in effect. RMS is not in violation of any terms of its Certificate of
Incorporation or Bylaws.
Section 4.2 Capitalization. (a) The authorized capital stock of
RMS consists of 25,000,000 shares of RMS common stock. The directors of RMS are
authorized to issue one or more series of preferred shares, but have not issued
any preferred shares up to the date of this Agreement. As of the date hereof,
there are 8,281,077.1 shares of RMS common stock issued and outstanding and no
shares held in treasury; and no shares of RMS preferred stock outstanding. As of
the date hereof, there are outstanding under the RMS Stock Option Plans, all of
which are listed on Schedule 4.2(a), RMS Stock Options and warrants entitling
the holders thereof to purchase, in the aggregate, up to 3,064,986 RMS Shares.
Except as set forth on Schedule 4.2(a), at the Effective Time, there will not be
any existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating RMS to issue, transfer or sell any shares
of capital stock of RMS or any other securities convertible into or evidencing
the right to subscribe for any such shares. Neither
23
24
RMS nor any subsidiary is subject to any obligation to repurchase or otherwise
acquire any shares of its capital stock or other similar interest. All issued
and outstanding RMS Shares are, and all RMS Shares issued and outstanding at the
Effective Time shall be, duly authorized and validly issued, fully paid and
non-assessable and subject to the terms of this Agreement free from all liens,
charges, claims, preemptive or similar rights and encumbrances. All issued and
outstanding shares of RMS have not been issued in violation of any applicable
federal or state securities or blue sky laws.
(b) RMS has five (5) subsidiaries (the "Subsidiary" or
"Subsidiaries").
(i) RMS has a wholly-owned Subsidiary organized
under the law of the State of Delaware, PharmaSee, LLC ("PharmaSee"). PharmaSee
is in good standing in the State of Delaware.
(ii) RMS has a second wholly-owned Subsidiary,
also organized under the law of the State of Delaware, Bevision, LLC
("Bevision"). Bevision is in good standing in the State of Delaware.
(iii) RMS has a third wholly-owned Subsidiary,
also organized under the laws of the State of Delaware, Digital Leasing, LLC
("Digital"). Digital is in good standing in the State of Delaware.
(iv) RMS has a fourth wholly-owned Subsidiary,
also organized under the law of the State of Delaware, RMUSIC, Inc. ("RMUSIC").
RMUSIC is in good standing in the State of Delaware, although it is currently
not an actively operating entity.
(v) RMS has a fifth wholly-owned Subsidiary,
also organized under the law of the State of Delaware, RMS Labs, Inc. ("RMS
Labs"). RMS Labs is in good standing in the State of Delaware, although it is
currently not an actively operating entity.
(c) All outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of RMS, is owned by RMS or
a Subsidiary of RMS, directly or indirectly, free and clear of any lien,
encumbrance or charge, and free of any other
24
25
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interest). Each Subsidiary is validly existing and has full requisite
power to operate its business as it is now being conducted and proposed to be
conducted. Schedule 4.2(c) sets forth the name of each Subsidiary, the number of
shares or interests authorized and the ownership interest of each such
Subsidiary.
(d) RMS has delivered to VDAT true and complete copies of
the organizational documents or comparable governing instruments (including all
amendments to each of the foregoing) of each Subsidiary of RMS as listed in this
Agreement.
Section 4.3 Authority. RMS has full corporate power and authority
to execute and deliver this Agreement and, subject to the requisite approval of
the Merger and the adoption of this Agreement by RMS' shareholders, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by RMS' Board of Directors and the
Shareholder-Directors (as defined in Section 4.16) and, except for the requisite
approval of the Merger and the adoption of this Agreement by RMS' shareholders,
no other corporate proceedings on the part of RMS are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. RMS' Board
of Directors has determined that the transactions contemplated by this
Agreement, including the Merger, are in the best interests of RMS and its
shareholders and, except as provided in Section 5.3 below, have determined to
recommend to such shareholders that they vote in favor of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger. This
Agreement has been duly and validly executed and delivered by RMS and, assuming
this Agreement constitutes a legal, valid and binding agreement of VDAT,
constitutes a legal, valid and binding agreement of RMS, enforceable against it
in accordance with its terms, except as the enforceability may be affected by
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and the possible
unavailability of certain equitable remedies, including the remedy of specific
performance.
25
26
Section 4.4 No Violations; Consents and Approvals.
(a) Except as set forth on Schedule 4.4 (a), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by RMS with any of the
provisions hereof conflicts with, violates or results in any breach of (i)
subject to obtaining the requisite approval of RMS' shareholders, any provision
of the Certificate of Incorporation or Bylaws of RMS, (ii) any contract,
agreement, instrument or understanding to which RMS is a party, or by which RMS
or any of its assets or properties is bound, or (iii) subject to the requisite
approval of RMS' shareholders, any Law applicable to RMS or any of its
respective assets or properties, excluding from the foregoing clauses (ii) and
(iii) conflicts, violations or breaches which, either individually or in the
aggregate, would not have a RMS Material Adverse Effect or materially impair
RMS' ability to consummate the transactions contemplated hereby. RMS shall only
be required to obtain those contractual consents specifically set forth on
Schedule 7.7, but shall use its reasonable best efforts to obtain all consents
set forth on Schedule 4.4(a).
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any governmental entity is required by
RMS in connection with the execution and delivery of the Agreement or the
consummation by RMS of the transactions contemplated hereby, except (i) the
filing of the appropriate merger documents with the Secretary of State of the
States of Florida and Delaware and (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings, the failure of which to
be obtained or made would not, individually or in the aggregate, have a RMS
Material Adverse Effect, or materially impair the ability of RMS to perform its
obligations hereunder.
Section 4.5 SEC Documents: RMS Financial Statements. (a) RMS has
withdrawn its Registration Statement that had been filed with the SEC and
currently has no active filings with the SEC.
(b) As of their respective dates, the financial
statements of RMS set forth on Schedule 4.5(b) were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and present fairly the consolidated
financial position of RMS as at the dates thereof and the consolidated
26
27
results of its operations and statements of cash-flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). RMS has a December
31 year end. Audited financial statements for RMS have been issued through
December 31, 1999. Unaudited financial statements for the year ended December
31, 2000 and interim, unaudited statements for the six month period ended June
30, 2001 have been prepared. (Collectively, the financial statements set forth
on Schedule 4.5(b) shall be referred to as "RMS Financial Statements")
(c) RMS has no liability or obligation of any kind
(whether contingent or otherwise and whether due or to become due) except (i) as
set forth on Schedule 4.5(c), (ii) as set forth on the RMS Financial Statements,
or (iii) as incurred in the ordinary course of business, consistent with past
practice since the date of the RMS financial statements for the period ended
June 30, 2001.
Section 4.6 Absence of Certain Changes. Since June 30, 2001,
except as set forth on Schedule 4.6, RMS has been operated only in the ordinary
course, consistent with past practice, and there has not been any adverse
change, or any event, fact or circumstance which might reasonably be expected to
result in an adverse change, in either event that would have an RMS Material
Adverse Effect. Without limiting the generality of the foregoing, except as set
forth on Schedule 4.6 and except as permitted by Section 5.1, since June 30,
2001, there has not been with respect to RMS any:
(a) sale or disposition of any material asset other than
inventory in the ordinary course;
(b) payment of any dividend, distribution or other
payment to any shareholder of RMS or to any relative of any such shareholder
other than payments of salary and expense reimbursements made in the ordinary
course of business, consistent with past practice, for employment services
actually rendered or expenses actually incurred;
(c) incurrence or commitment to incur any liability
individually or in the aggregate material to RMS, except such liabilities under
RMS' existing credit facilities and liabilities incurred in connection with the
Merger;
27
28
(d) waiver, release, cancellation or compromise of any
indebtedness owed to RMS or claims or rights against others, exceeding $50,000
in the aggregate;
(e) any change in any accounting method, principle or
practice except as required or permitted by generally accepted accounting
principles;
(f) unusual or novel method of transacting business
engaged in by RMS or any change in RMS' accounting procedures or practices or
its financial or equity structure;
(g) any issuance or sale of any stock, notes, bonds or
other securities or pursuant to the exercise of outstanding securities, or
entering into any agreement with respect thereto;
(h) any amendment to RMS' Certificate of Incorporation or
Bylaws;
(i) other than in the ordinary course of business
consistent with past practice, any (x) purchase, sale, assignment or transfer of
any material assets, (y) mortgage, pledge or existence of any lien, encumbrance
or charge on any material assets or properties, tangible or intangible, except
for liens for taxes not yet delinquent and such other liens which do not,
individually or in the aggregate, have a RMS Material Adverse Effect;
(j) any incurrence of any material liability (absolute or
contingent), except for current liabilities and obligations incurred in the
ordinary course of business consistent with past practice;
(k) any incurrence of any damage, destruction or similar
loss, whether or not covered by insurance, materially affecting the business or
properties of RMS; or
(l) any entering into any transaction of a material
nature other than in the ordinary course of business, consistent with past
practice.
Section 4.7 Proxy Statement Prospectus; Registration Statement.
None of the information regarding RMS to be supplied by RMS for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will, in the case of the Registration Statement at the time it becomes effective
28
29
and at the Effective Time, and in the case of the Proxy Statement, at the time
it is first mailed to shareholders of VDAT and at the time of respective
shareholders meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading in light of the circumstances when
made. If at any time prior to the Effective Time any event with respect to RMS
shall occur which is required to be described in the Proxy Statement or
Registration Statement, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law. The
Proxy Statement and the Registration Statement will (with respect to RMS) comply
as to form in all material respects with the provisions of the Securities Act
and the Exchange Act.
Section 4.8 State Antitakeover Statutes. The RMS Board of
Directors has approved this Agreement and the transactions contemplated hereby
and such approval constitutes approval of the Merger and the other transactions
contemplated hereby by the RMS Board of Directors as required by the DGCL. No
"business combination," "moratorium," "control share," "fair price," "interested
shareholder," affiliated transactions" or other state antitakeover statute or
regulation (i) prohibits or restricts RMS' ability to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated hereby or thereby, (ii) would have the effect of invalidating or
voiding this Agreement or the Voting Agreement or any provision hereof, or (iii)
would subject VDAT or SUB to any material impediment or condition in connection
with the exercise of any of their respective rights under this Agreement.
Section 4.9 Broker's Fees. Except as set forth on Schedule 4.9,
neither RMS nor any of its affiliates or their respective officers, directors or
agents has employed any broker, finder or financial advisor or incurred any
liability for any broker's fees, commissions, financial advisory or finder's
fees in connection with any of the transactions contemplated by this Agreement.
Section 4.10 Compliance With Laws. RMS and its Subsidiaries are in
possession of all franchises, grants, authorizations, licenses, establishment
registrations, product listings, permits, easements, variances, exceptions,
consents, certificates, identification and registration numbers, approvals
29
30
and orders of any governmental entity necessary for RMS and its Subsidiaries to
own, lease and operate their properties or otherwise to carry on their business
as it is now being conducted (collectively the "RMS Permits"), except where the
failure to be in possession of any such RMS Permit would not have a RMS Material
Adverse Effect. As of the date of this Agreement, none of the RMS Permits have
been suspended or cancelled nor is any such suspension or cancellation pending
or, to the knowledge of RMS, threatened, nor has RMS or any of its Subsidiaries
received from any governmental entity any written notification with respect to
possible conflicts, defaults or violations of laws in respect of such RMS
Permits, except in each case, where it would not have a RMS Material Adverse
Effect. Neither RMS nor any of its Subsidiaries is in conflict with, or in
default or violation of (i) any law applicable to RMS or its Subsidiaries or by
which any property or asset of RMS or its Subsidiaries is bound or affected
except where any such conflict, default or violation would not have a RMS
Material Adverse Effect, or (ii) any RMS Permits except where any such conflict,
default or violation would not have an RMS Material Adverse Effect. Schedule
4.10 sets forth, as of the date of this Agreement, all actions, proceedings or
investigations pending, or, to the knowledge of RMS, threatened against RMS or
any of its Subsidiaries that could reasonably be expected to result in the
suspension or cancellation of any RMS Permit.
Section 4.11 No Litigation. Except as set forth on Schedule 4.11,
there is no claim, litigation, investigation or proceeding by any person or
governmental authority pending or, to RMS' knowledge threatened, against RMS
which would have a RMS Material Adverse Effect. Except as set forth on Schedule
4.11, there are no pending or, to RMS' knowledge, threatened controversies or
disputes with, or grievances or claims by, any employees or former employees of
RMS or any of its respective predecessors of any nature whatsoever, including,
without limitation, any controversies, disputes, grievances or claims with
respect to their employment, compensation, benefits or working conditions,
except for such controversies, disputes, grievances or claims which would not
have a RMS Material Adverse Effect.
Section 4.12 Employee Benefits. (a) All employee welfare benefit
plans as defined in Section 3(1) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), employee
30
31
pension benefit plans as defined in Section 3(2) of ERISA, and all other
employee benefit programs or arrangements of any type, written or unwritten
(collectively, the "Plans") maintained by RMS or to which RMS contributes are
listed on Schedule 4.12(a). In addition, Schedule 4.12(a) separately sets forth
any Plans which RMS, or any affiliate or predecessor of RMS, maintained or
contributed to within the six years preceding the date hereof.
(b) The Plans comply, with all applicable provisions of
all Laws, including, without limitation, the Code and ERISA, and have so
complied during all prior periods during which any such provisions were
applicable. Without limiting the foregoing, all of the Plans, and any related
trust, intended to meet the requirements for tax-favored treatment under the
Code (including, without limitation, Sections 401 and 501 and Subchapter B of
the Chapter 1 of the Code) meets and for all prior periods has met, such
requirements in all material respects.
(c) RMS and, to its knowledge, any other party involved
in the administration of any of the Plans (i) has complied in all material
respects with the provisions of ERISA, the Code or other Laws, applicable to
such party, whether as an employer, plan sponsor, plan administrator, or
fiduciary of any of the Plans or otherwise, (including without limitation the
provisions of ERISA and the Code concerning prohibited transactions), and (ii)
has administered the Plans in accordance with their respective terms. RMS has
made all contributions required of it by any Law (including, without limitation,
ERISA) or contract under any of the Plans and no unfunded liability exists with
respect to any of the Plans.
(d) RMS has no responsibility or liability, contingent or
otherwise, with respect to any Plans or any employee benefits other than under
the Plans listed on Schedule 4.12(a). RMS has the right to amend or terminate,
without the consent of any other person, any of the Plans, except as prohibited
by law and any applicable collective bargaining agreement. Neither RMS, nor any
affiliate or predecessor of RMS, maintains or has ever maintained or been
obligated to contribute to (i) any defined benefit pension plan (as such term is
defined in Section 3(35) of ERISA), (ii) any multiemployer plan (as such term is
defined in Section 3(37) of ERISA), (iii) other than as set forth on Schedule
4.12(a), any severance plan or policy, or (iv) any arrangement providing medical
or other welfare benefits to retirees or other former employees or their
beneficiaries, except as required under part 6 of Subtitle B of Title I of ERISA
or Section 4980B(f) of the Code (hereinafter collectively referred to as
"COBRA").
(e) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to RMS' knowledge, any actions, suits, or
claims (other than routine claims for benefits) which could reasonably be
expected to be asserted, against any of the Plans, or the assets thereof, or
against RMS or any other party with respect to any of the Plans.
31
32
(f) Schedule 4.12(f) contains a list setting forth the
name and current annual salary and other compensation payable to each
Significant RMS Employee (as defined below), and the profit sharing, bonus or
other form of additional compensation paid or payable by RMS or any Subsidiary
to or for the benefit of each such person for the current fiscal year. Schedule
4.12(f) sets forth summaries of all oral employment or consulting or similar
arrangements regarding any Significant RMS Employee which are not terminable
without liability on thirty (30) days' or less prior notice and lists all
written employment and consulting agreements with respect to any Significant RMS
Employee. There is not due or owing and there will not be due and owing at the
Effective Time to any RMS employees, any sick pay, severance pay (whether
arising out of the termination of any RMS employee prior to, on, or subsequent
to the Effective Time), compensable time or pay, including salary, commission
and bonuses, personal time or pay or vacation time or vacation pay attributable
to service rendered on or prior to the Effective Time, except as disclosed in
Schedule 4.12(f) and other than claims made in the ordinary course of business
consistent with past practice. Except as disclosed on Schedule 4.11 or Schedule
4.12(f), neither RMS nor any of its Subsidiaries have, any liability arising out
of claims made or suits brought (including workers' compensation claims and
claims or suits for contribution to, or indemnification of, third parties,
occupational health and safety, environmental, consumer protection or equal
employment matters) for injury, sickness, disease, discrimination, death or
termination of employment of any Significant RMS Employee, or other employment
matter to the extent attributable to an event occurring or a state of facts
existing on or prior to the date hereof. For purposes hereof "Significant RMS
Employee" means any employee of RMS or any of its Subsidiaries who (i) is an
officer, (ii) owns over 50,000 options to purchase capital stock of RMS, (iii)
has an employment contract with RMS or any of its Subsidiaries which calls for
annual compensation in excess of $50,000 or (iv) is compensated at an annual
rate greater than $50,000.
Section 4.13 Taxes. (a) RMS has duly filed with the appropriate
federal, state, local and foreign taxing authorities all Tax Returns (as defined
below) required to be filed by or with respect to RMS on or before the date
hereof. All such Tax Returns are true, correct and complete in all material
respects as of the time of filing. RMS, with respect to the federal
32
33
income Tax Returns, and any other Tax Returns, has paid in full on a timely
basis all Taxes (as defined below) due on such Tax Returns or such Taxes that
are otherwise due, except to the extent such Tax is being contested in good
faith through appropriate proceedings and, for contested Taxes only, for which
adequate reserves have been established on the RMS Interim Balance Sheet. Except
as set forth on Schedule 4.13, the balance for accrued Taxes on the RMS Interim
Balance Sheet for the payment of accrued but unpaid Taxes through the date
thereof is correct and the amount of RMS' liability for unpaid Taxes shall not
exceed such balance for accrued but unpaid Taxes of RMS. The balance of accrued
Taxes has been determined in accordance with GAAP, applied on a consistent
basis. All monies which RMS was required by Law to withhold from employees have
been withheld and either timely paid to the proper governmental authority or set
aside in accounts for such purposes and accrued on the books of RMS.
(b) RMS has never been a member of an affiliated group
filing consolidated returns.
(c) (i) RMS has not received any notice of a deficiency or
assessment with respect to Taxes of RMS from any taxing authority which has not
been fully paid or finally settled, except to the extent any such deficiency or
assessment is being contested in good faith through appropriate proceedings and
for which adequate reserves have been established on the RMS Financial
Statements; (ii) there are no ongoing audits or examinations of any Tax Return
relating to RMS and no notice (oral or written) of audit or examination of any
such Tax Return has been received by RMS; (iii) In the last three years, the
federal income Tax Returns of RMS have not been audited by the Internal Revenue
Service; and (iv) To RMS' knowledge, no issue has been raised (either in writing
or verbally, formally or informally) on audit or in any other proceeding (and is
currently pending) with respect to Taxes of RMS by any taxing authority which,
if resolved against RMS, would have a RMS Material Adverse Effect. RMS has
disclosed on its federal income tax returns all positions taken therein that,
RMS believes could give rise to a substantial understatement penalty within the
meaning of Code Section 6662.
(d) RMS is not (nor has it ever been) a party to any tax
sharing agreement and has not assumed the liability for taxes of any other
person under law or contract.
(e) RMS (i) has not filed a consent pursuant to Code
Section 341(f) nor agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in Code Section
341(f)) owned by RMS; (ii) has not agreed, or
33
34
is not required, to make any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise initiated by RMS that will affect the
liability of RMS for Taxes; (iii) has not made an election, or is required, to
treat any asset of RMS as owned by another person pursuant to the provisions of
former Code Section 168(f)(8); (iv) is not now nor has ever been a party to any
agreement, contract, arrangement, or plan that would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Code Section 280G; (v) has not participated in an international
boycott as defined in Code Section 999; (vi) is not now nor has ever been a
"foreign person" within the meaning of Code Section 1445(b)(2); (vii) is not now
nor has ever been a United States real property holding corporation within the
meaning of Code Section 897(c)(1)(A)(ii); and (viii) has not made any of the
foregoing elections or is required to apply any of the foregoing rules under any
comparable state or local tax provision.
(f) RMS is not required to report or pay any additional
Taxes from any joint venture, partnership or other arrangement or contract
limited liability company that could be treated as a partnership for federal
income tax purposes.
(g) For purposes of this Section 4.13, the following
terms shall have the meaning given to them below:
(i) "Tax" means any of the Taxes, and
"Taxes" means, with respect to RMS, (i) all income taxes
(including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings or profits) and
all gross receipts, estimated, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, windfall profits, environmental (including taxes
under Code Section 59A), alternative, add-on minimum, custom
duties, capital stock, social security (or similar),
unemployment, disability, or other taxes, fees assessments, or
charges of any kind whatsoever, together with any interest,
penalty, or addition thereto, whether disputed or not, imposed
by any taxing authority, and (ii) any liability for payment of
any amount of the Tax described in the immediately preceding
clause (i) as a result of being a "transferee" (within the
meaning of Code Section 6901 or any other applicable law) of
another person or successor, by contract, or otherwise, or a
member of an affiliated, consolidated, or combined group.
34
35
(ii) "Tax Return" means any return,
declaration, report, claim or refund, or information return or
statement or other document (including any related or
supporting information) filed or required to be filed with any
appropriate federal, state, local and foreign governmental
entity or authority (individually or collectively, "taxing
authority") or other authority in connection with the
determination, assessment or collection of any Tax paid or
payable by the Group or the administration of any Laws,
regulations, or administrative requirements relating to any
such Tax.
Section 4.14 Absence of Certain Business Practices. Neither RMS
nor any director, officer, employee or agent of the foregoing, nor any other
person acting on its behalf, directly or indirectly, has to RMS' knowledge given
or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person which (i) might subject RMS to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a RMS Material Adverse Effect, or (iii)
if not continued in the future, might have a RMS Material Adverse Effect or
which might subject RMS to suit or penalty in any private or governmental
litigation or proceeding.
Section 4.15 Intellectual Property. (a) Schedule 4.15(a) sets
forth a correct and complete list of (i) all U.S. and foreign trademarks,
patents, service marks, trade names, internet domain names, copyrights, mask
works and designs which are pending, applied for, granted, or registered in any
country or jurisdiction of the world and are owned by RMS and used in connection
with its business; (ii) all unregistered trademarks, patents, service marks, and
trade names which are owned by RMS and used in connection with its business; and
(iii) all licenses, contracts, permissions and other agreements relating to the
business to which RMS is a party relating in any way to rights in any of the
foregoing. Except as set forth on Schedule 4.15(a), title to all registered
intellectual property is recorded on records in the name of RMS and, to the
extent applicable, all affidavits of continued use and incontestability in
respect of such registered intellectual property have been timely filed.
(b) Except as disclosed and set forth on Schedule
4.15(b), (i) RMS owns or possesses licenses or other valid rights to use, and
upon consummation of the transactions contemplated by this Agreement, the
Surviving Corporation shall own or possess licenses or other valid rights to use
(without the making of any payment to others (other than applicable license or
other fees) or the obligation to grant rights to
35
36
others in exchange), all intellectual property necessary to the conduct of the
business of RMS as currently conducted, including, without limitation, all
releases required in connection with quotes, testimonials or likenesses utilized
in editorial or promotional material; in each case, other than to the extent
that the failure to own or possess licenses or valid rights would not result in
a RMS Material Adverse Effect, (ii) RMS' right title and interest in such
intellectual property is not being opposed by any claim or demand or in any
proceeding, action, litigation or order to which RMS or any person or entity who
has granted a license or other right to use intellectual property to RMS or who
has been granted a license or other right to use intellectual property by RMS,
is a party or subject, nor to the knowledge of RMS, is any such claim, demand,
proceeding, action, litigation, or court order threatened; and (iii) the conduct
of the business of RMS as currently conducted does not materially infringe or
conflict with any intellectual property of others.
(c) All employees who have contributed to or participated
in the conception and development of RMS intellectual property on behalf of RMS
and its Subsidiaries, have executed agreements in substantially the form set
forth in Schedule 4.15(c). All such personnel have either (i) been a party to a
"work-for-hire" arrangement or agreement with RMS in accordance with applicable
laws that has accorded RMS full, effective, exclusive and original ownership of
all tangible and intangible property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of RMS or its Subsidiaries as
assignee that have conveyed to RMS or its Subsidiaries effective and exclusive
ownership of all tangible and intangible property thereby arising.
(d) RMS is not, nor as a result of the execution or
delivery of this Agreement, or performance of RMS' obligations hereunder, will
RMS or any of its Subsidiaries be, in violation of any license, sublicense,
agreement or instrument relating to RMS intellectual property to which RMS or
any of its Subsidiaries is a party or otherwise bound except any violation that
would not result in a RMS Material Adverse Effect, nor will execution or
delivery of this Agreement, or performance of RMS' obligations hereunder, cause
the diminution, termination or forfeiture of any material RMS intellectual
property.
Section 4.16 Required Vote of RMS Shareholders. The affirmative
vote of the holders of a majority of the outstanding RMS Shares, as well as a
majority vote of the "Shareholder-Directors" (which Shareholder-Directors
approval has been obtained) as they are described in the RMS Shareholders
Agreement (as defined below), is required to approve the Merger. No other
36
37
vote of the shareholders of RMS is required by Law, the Certificate of
Incorporation or Bylaws of RMS or otherwise in order for RMS to consummate the
Merger and the transactions contemplated hereby, except that a vote of the
holders of 75% of the outstanding common stock of RMS is required to terminate
the Shareholders Agreement among RMS and its shareholders dated January 1, 1997
(as the same may have been amended from time to time, the "RMS Shareholders
Agreement").
Section 4.17 Knowledge. The term "to RMS' knowledge" shall mean
the actual knowledge of each director and officer of RMS.
Section 4.18 No Undisclosed Information. No provision of this
Article IV or any Schedule or any document or agreement furnished by RMS or the
RMS shareholders contains any untrue statement of a material fact, or omits to
state a material fact necessary in order to make the statement contained herein,
in light of the circumstances under which such statements are made, not
misleading. No preclosing investigation by VDAT of RMS, its subsidiaries, their
respective assets or their business shall relieve RMS' shareholders of their
indemnification or other obligations under this Agreement.
Section 4.19 Contracts. Except for the contracts and agreements
described in Schedule 4.19 (the "Listed Contracts"), neither RMS nor any
Subsidiary is a party to any of the following:
(a) any agreement or contract for the purchase of
materials, supplies, equipment or services involving in the case of any such
contract more than $50,000 per annum;
(b) any contract that expires more than one year after
the date of this Agreement or any contract that may be renewed at the option of
any person other than RMS or any of its Subsidiaries so as to expire more than
one year after the date of this Agreement;
(c) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with GAAP in excess of $50,000;
37
38
(d) any contract for capital expenditures in excess of
$50,000 in the aggregate;
(e) any contract limiting the freedom of RMS or any of
its Subsidiaries to engage in any line of business or to compete with any other
corporation, partnership, limited liability company, trust, individual or other
entity, or any confidentiality, secrecy or nondisclosure contract or any
contract that may be terminable as a result of VDAT's status as a competitor of
any party to such contract;
(f) any contract pursuant to which RMS is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property, pursuant to which payments in excess of $10,000 remain
outstanding;
(g) any contract with an Affiliate as defined in Section
5.11;
(h) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other person other than customary customer agreements made
in the ordinary course of business; or
(i) any employment contract, arrangement or policy
(including without limitation any collective bargaining contract or union
agreement) which may not be immediately terminated without penalty (or any
augmentation or acceleration of benefits).
RMS and its Subsidiaries have performed all of the obligations
required to be performed by them and are entitled to all benefits under, and are
not in default, or to RMS' knowledge, alleged to be in default in respect of any
Listed Contract, except as may be provided on Schedule 4.19 and except for any
defaults which, individually or in the aggregate, would not have a RMS Material
Adverse Effect. Each of the Listed Contracts is valid and binding and in full
force and effect, and there exists no default or event of default or event,
occurrence, condition or act, with respect to RMS or any of its Subsidiaries, or
to the knowledge of RMS, with respect to the other contracting party, which with
the giving of notice, the lapse of the time or the
38
39
happening of any other event or conditions, would become a default or event of
default under any Listed Contract, except as may be provided on Schedule 4.19
and except for any defaults which, individually or in the aggregate, would not
have a RMS Material Adverse Effect.
Section 4.20 Affiliate. Schedule 4.20 sets forth the name and
address of each person who is, in RMS' reasonable judgement, an Affiliate of RMS
(as such term is used in Rule 145 under the Securities Act).
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of RMS. Except as contemplated by
this Agreement or as expressly agreed to in writing by the other party, during
the period from the date of this Agreement to the Effective Time, RMS will
conduct its operations substantially as presently operated and only in the
ordinary course of business, in a normal manner consistent with past practices
and will use commercially reasonable efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with suppliers, distributors, customers
and others having business relationships with it and will take no action which
would adversely affect its ability to consummate the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement, prior to the Effective Time, RMS
will not, without the prior written consent of VDAT:
(a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, deliver, grant
any options for, or otherwise agree or commit to issue, sell or deliver any
shares of its capital stock or any securities convertible into shares of its
capital stock, other than pursuant to and in accordance with the terms of its
stock option plans;
(c) recapitalize, split, combine or reclassify any shares
of its capital stock; declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock; or purchase, redeem or otherwise acquire any
shares of its own capital stock;
39
40
(d) (i) create, incur, assume, maintain or permit to exist
any long-term debt or any short-term debt for borrowed money other than under
existing lines of credit, relating to purchase money security interests or
obligations as a lessee under leases recorded as capital leases, each as
incurred in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practices; or (iii) make any loans,
advances or capital contributions to, or investments in, any other person;
(e) (i) increase in any manner the rate of compensation of
any of its directors, officers or other employees, except in the ordinary course
of business and in accordance with its customary past practices or as otherwise
may be contractually required; or (ii) pay or agree to pay any bonus, pension,
retirement allowance, severance or other employee benefit except as required
under currently existing employee benefit plans;
(f) except as set forth on Schedule 5.1(f), sell or
otherwise dispose of, or encumber, or agree to sell or otherwise dispose of or
encumber, any assets other than inventory in the ordinary course of business;
(g) enter into any other agreement, commitment or
contract, except agreements, commitments or contracts for the purchase, sale or
lease of goods or services in the ordinary course of business consistent with
past practice;
(h) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into any agreement in
principle or an agreement with respect to, any (i) plan of liquidation or
dissolution, (ii) acquisition of a material amount of assets or securities,
(iii) disposition of a material amount of assets or securities or (iv) material
change in its capitalization, or enter into a material contract or any amendment
or modification of any material contract or release or relinquish any material
contract right;
(i) engage in any unusual or novel method of transacting
business or change any accounting procedure or practice or its financial
structure; or
(j) authorize or enter into any formal or informal
agreement or otherwise make any commitment to do any of the foregoing or to take
any action which would make any of the representations or warranties of RMS
contained in this Agreement untrue or incorrect or prevent RMS from performing
or cause RMS not to perform its covenants hereunder in any material respect or
result in any of the conditions to the Merger set forth herein not being
satisfied.
(k) Notwithstanding the foregoing, RMS may act, without
the consent of VDAT on the following items: issue shares
40
41
of RMS stock to resolve outstanding issues with Spacenet, its Landlord, and
others with whom it now has or, prior to the Effective Time has a dispute;
pursue and contract for new or restructure existing networks, so long as the
direct costs of such network will not exceed the expected revenue from the
network; pursue and contract for advertising to be shown on a network;
separately or collectively modify, waive, terminate or eliminate any warrants or
stock options or the plans to which they relate, including the issuance of
capital stock of RMS pursuant to an exchange program created by RMS; and enter
into a joint venture, or similar arrangement, including, without limitation, any
agreement as generally described on Schedule 5.1(k) to (i) license the RMS
concept or (ii) license the RMS technology for use by satellite providers for
residential use, so long as the direct cost associated with the arrangement does
not exceed the expected revenue from the arrangement. RMS shall use its best
efforts to notify VDAT in advance in the event it undertakes any of the actions
set forth in this Section 5.1(k).
Section 5.2 No Shelf Registration. VDAT shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of VDAT Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of RMS
within the meaning of Rule 145 promulgated under the Securities Act.
Section 5.3 No Solicitation. RMS agrees that, prior to the
Effective Time, except as provided below it shall not, and shall not authorize
or permit any of its directors, officers, employees, agents or representatives
to, directly or indirectly, solicit, initiate, facilitate or encourage
(including by way of furnishing or disclosing information), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to any Transaction Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Transaction Proposal or agree to or endorse any Transaction Proposal or
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to take any such action; provided, however, that
nothing contained in this Agreement shall prohibit the RMS Board of Directors
from (i) furnishing information to or entering into discussions or
41
42
negotiations with any person or entity that makes an unsolicited written, bona
fide Transaction Proposal or has already made a Transaction Proposal (to the
extent permitted herein) and the RMS Board of Directors determines in good faith
that such action is necessary for the RMS Board of Directors to comply with its
fiduciary duties to shareholders under applicable Delaware law, (ii) failing to
recommend or withdrawing, modifying or changing its recommendation referred to
in Section 4.3 or (iii) issuing a neutral recommendation in respect of any
Transaction Proposal, in each case if there exists a Transaction Proposal and
the RMS Board of Directors, based upon the advice of independent legal counsel,
determines in good faith that such action is necessary for the RMS Board of
Directors to comply with its fiduciary duties to shareholders under applicable
Delaware law or in connection with such Transaction Proposal. RMS shall
immediately advise the other parties to this Agreement, orally and in writing,
of any inquiries or proposals relating to a Transaction Proposal known to it,
the material terms and conditions of such inquiry or proposal, and the identity
of the person or entity making such inquiry or proposal. RMS shall give VDAT and
SUB at least two (2) business days advance notice of any information to be
supplied to, and at least three (3) days' advance notice of any agreement to be
entered into with any person or entity making such a proposal for a Transaction
Proposal with respect to RMS. For purposes of this Agreement, "Transaction
Proposal" shall mean any of the following (other than the transactions between
RMS, VDAT and SUB contemplated by this Agreement) involving RMS: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of twenty percent (20%) or more of the assets of RMS, in a
single transaction or series of transactions; (iii) any offer for, or the
acquisition (or right to acquire) of "beneficial ownership" by any person,
"group" or entity (as such terms are defined under Section 13(d) of the
Securities Exchange Act of 1934), of twenty percent (20%) or more of the
outstanding shares of capital stock of RMS or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement by RMS of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing. Upon the receipt by RMS of
proceeds from VDAT of at least $1.5 million from any funding between the date
hereof and the Effective Time, RMS shall cease immediately discussions or
negotiations with any party with whom they are presently having
42
43
discussions or negotiations with respect to a Transaction Proposal; provided,
however, that this sentence shall in no way limit the rights of the RMS Board of
Directors as otherwise set forth in this Section 5.3. Schedule 5.3 sets forth a
list of such parties.
Section 5.4 Access to Information. (a) From the date of this
Agreement until the Effective Time, RMS will provide VDAT and VDAT will provide
RMS, and their respective lenders and authorized representatives (including
counsel, environmental and other consultants, accountants and auditors) full
reasonable access during normal business hours to all facilities, personnel and
operations and to all books and records of RMS, VDAT and SUB, will permit the
other party to make such inspections as it may reasonably require (including
without limitation any air, water or soil testing or sampling deemed necessary)
and will cause its officers to furnish the other party with such financial and
operating data and other information with respect to its business and properties
as the other party may from time to time reasonably request.
(b) VDAT and RMS will hold and will cause their
representatives to hold in confidence, all documents and information furnished
in connection with this Agreement, other than documents or information which (i)
are available to the public, (ii) are or become known by VDAT or RMS from a
source other than RMS or VDAT, as the case may be, other than by a breach of a
confidentiality obligation owed to RMS or VDAT, respectively, or (iii) are
required by law to be disclosed.
Section 5.5 Registration Statement and Proxy Statement. VDAT
shall file with the SEC as soon as is reasonably practicable after the execution
of this Agreement a Proxy Statement/Prospectus and VDAT shall file the
Registration Statement in which the Proxy Statement/Prospectus shall be
included. RMS shall cooperate with VDAT with regard to such filings. VDAT and
RMS shall use all commercially reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable. VDAT shall
use its reasonable best efforts to obtain, prior to the effective date of the
Registration Statement, any and all necessary state securities law or "Blue Sky"
permits or approvals in connection with the issuance of VDAT Common Stock in the
Merger. VDAT shall advise RMS, promptly after it receives notice thereof, of any
request from the SEC with respect to amending the Registration Statement or for
additional information, of notice and the time
43
44
that the Registration Statement has been declared effective, of any supplement
or amendment being filed to the Registration Statement, of the issuance of any
stop order by the SEC with respect to the Registration Statement, of the
suspension of the qualification of the shares of VDAT Common Stock for offering
or sale in any jurisdiction, and of any notification from NASDAQ of suspension
or halting in trading of VDAT Common Stock or delisting of VDAT Common Stock for
any reason from the NASDAQ National Market System. VDAT shall use commercially
reasonable efforts to maintain the effectiveness of the Registration Statement
(and maintain the current status of the Prospectus contained therein) for so
long as the options and warrants of VDAT issued pursuant to Section 2.2
(collectively, the "Options and Warrants") remain outstanding, and the VDAT
Common Stock made available to the Exchange Agent pursuant to Section 2.4(a) has
not been returned to VDAT in accordance with Section 2.4(d).
Section 5.6 Shareholders' Meetings. Unless the RMS Board of
Directors shall have taken an action permitted by clause (ii) of Section 5.3
above, RMS and VDAT shall each, as soon as reasonably practicable following the
date hereof and in any event within 45 days after the Registration Statement is
declared effective, establish a record date for, duly call, give notice of,
convene and hold (and reconvene and hold if adjourned for any reason) a special
meeting of its stockholders for the purpose of voting to approve this Agreement
and the Merger and the other transactions contemplated hereby, including in the
case of VDAT, the amendment of VDAT's Articles of Incorporation and/or Bylaws to
provide for a staggered Board of Directors and a change in VDAT's corporate
name, and including, in the case of RMS, the termination of the RMS Shareholders
Agreement. RMS and VDAT shall, through their respective Boards of Directors,
recommend to their shareholders approval of such matters and will coordinate and
cooperate with respect to the timing of such meetings and shall use all
commercially reasonable efforts to hold such meetings on the same day and as
soon as practicable after the date hereof. Unless the RMS Board of Directors
shall have taken an action permitted by clause (ii) of Section 5.3 above, VDAT
shall use all commercially reasonable efforts to solicit from shareholders of
such party proxies in favor of such matters.
Section 5.7 Reasonable Efforts; Other Actions. RMS, VDAT and SUB
each shall use all commercially reasonable efforts promptly to take, or cause to
be taken, all other actions and do,
44
45
or cause to be done, all other things necessary, proper or appropriate under
applicable Law to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) the taking of any actions
required to qualify the Merger treatment as a tax-free reorganization within the
meaning of Code Section 368(a)(2)(D), and (ii) the obtaining of all necessary
consents, approvals or waivers under their respective material contracts.
Section 5.8 Public Announcements. Before issuing any press
release or otherwise making any public statement with respect to the Merger,
VDAT, SUB and RMS will consult with each other as to its form and substance and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by Law (it being agreed that the
parties hereto are entitled to disclose all requisite information concerning the
transaction in any filings required with the SEC).
Section 5.9 Notification of Certain Matters. Each of RMS and VDAT
shall give prompt notice to the other party of (i) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by it subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results of operations of RMS
or VDAT, as the case may be, to which it is a party or is subject, (ii) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement, (iii) any material adverse change in their
respective financial condition, properties, businesses or results of operations
or the occurrence of any event which is reasonably likely to result in any such
change, or (iv) the occurrence or existence of any event which would, or could
with the passage of time or otherwise, make any representation or warranty
contained herein untrue; provided, however, that the delivery of notice pursuant
to this Section 5.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. Each party shall use its best
efforts to prevent or promptly remedy the same.
Section 5.10 Expenses. Except as otherwise provided herein, VDAT
and SUB, on the one hand, and RMS, on the other
45
46
hand, shall bear their respective expenses incurred in connection with the
Merger, including, without limitation, the preparation, execution and
performance of this Agreement, the Proxy Statement/Prospectus and the
transactions contemplated hereby, including all fees and expenses of its
representatives, counsel and accountants.
VDAT shall pay up to an aggregate of $50,000 of the costs and expenses
of RMS and the RMS shareholders after the Effective Time in connection with (i)
complying with Section 2.6 and (ii) performing the Shareholder Representative's
responsibilities as set forth herein. Any amounts in excess of $50,000 shall be
offset against the Threshold II Shares.
Section 5.11 Affiliates. Schedule 4.20 lists all persons who, as
of the date hereof, may be deemed to be "affiliates" of RMS for purposes of Rule
145 under the Securities Act (the "Affiliates"). RMS shall advise VDAT in
writing of any other persons who become Affiliates prior to the Effective Time.
RMS shall cause each person who is so identified as an Affiliate to deliver to
VDAT, prior to the Effective Time, a written agreement substantially in the form
of Exhibit 5.11 hereto.
Section 5.12 Stock Exchange Listing. VDAT shall prepare and submit
to the NASDAQ Stock Market a listing application covering the shares of VDAT
Common Stock issuable in the Merger (including the Threshold Shares and shares
issuable upon exercise of the Options and Warrants), and shall use its
commercially reasonable efforts to obtain, prior to the Effective Time, approval
for the listing of such shares, subject to official notice of issuance.
Section 5.13 State Antitakeover Laws. If any "fair price" or
"control share acquisition" statute or other similar antitakeover regulation
shall become applicable to the transactions contemplated hereby, VDAT and RMS
and their respective Board of Directors shall use their reasonable best efforts
to grant such approvals and to take such other actions as are necessary so that
the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and shall otherwise use their
reasonable best efforts to eliminate the effects of any such statute or
regulation on the transactions contemplated hereby.
46
47
Section 5.14 Satisfaction of Conditions. RMS agrees to use its
best efforts to cause each of the conditions set forth in Article VII to VDAT
and SUB proceeding with the Closing to be satisfied on or before the Closing
Date. VDAT and SUB agree to use their respective best efforts to cause each of
the conditions set forth in Article VIII to RMS proceeding with the Closing to
be satisfied on or before the Closing Date.
Section 5.15 No Additional Transactions. Except as generally set
forth on Schedule 5.15, VDAT agrees that until the Registration Statement is
declared effective, it shall not solicit, negotiate, enter into or commit
unconditionally to enter into any significant transaction, including any
acquisition or disposition, merger, recapitalization or other significant
transaction, which would have to be disclosed in the text (excluding such
disclosure which would not materially change the Registration Statement) or pro
forma financial statements contained in the Registration Statement or which
would otherwise delay or affect the ability of the Registration Statement to be
declared effective as soon as possible.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF VDAT, SUB AND RMS
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions, any one or more of which may be waived in a writing signed by each
of VDAT, SUB and RMS:
Section 6.1 Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and remain in effect. All necessary state
securities or Blue Sky authorizations shall have been received.
Section 6.2 Shareholder Approval. The requisite vote of the
shareholders of RMS and VDAT necessary to consummate the transactions
contemplated by this Agreement shall have been obtained.
47
48
Section 6.3 Consents and Approvals. All necessary consents and
approvals of any United States or any other governmental authority required for
the consummation of the transactions contemplated by this Agreement shall have
been obtained.
Section 6.4 Listing. The VDAT Common Stock issuable in the Merger
(including the Threshold Shares and shares issuable upon exercise of the Options
and Warrants) shall have been authorized for listing on the NASDAQ National
Market System.
Section 6.5 Capital. In addition to funds raised between the date
hereof and the Effective Time, additional funding of at least $5,000,000 must be
committed to VDAT prior to the Merger, the proceeds of which will be used to
fund the combined entities following the Effective Time. The form of funding can
be all debt, all equity or any combination of debt and equity that is reasonably
satisfactory to both RMS and VDAT. The funding does not have to occur prior to
the Merger, but must be committed and scheduled to close within a reasonable
time after the Merger.
Section 6.6 Staggered Board of Directors. The Articles of
Incorporation and/or Bylaws of VDAT shall have been amended to provide for a
staggered Board of Directors as of the Effective Time as set forth in Section
1.4(c).
Section 6.7 Lock-up Agreements. The persons set forth on Schedule
6.7(a), 6.7(b) and 6.7(c) shall have executed Lock-up Agreements in the form of
Exhibit 6.7(a), Exhibit 6.7(b) and Exhibit 6.7(c), respectively.
Section 6.8 Name Change. The Articles of Incorporation of VDAT
shall have been amended to change the name of VDAT to "Visual Data Networks,
Inc."
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF VDAT AND SUB
The obligation of VDAT and SUB to effect the Merger and to perform
under this Agreement is subject to the fulfillment on or before to the Closing
Date of the following additional conditions, any one or more of which may be
waived, in writing, by VDAT and SUB:
48
49
Section 7.1 Representations Accurate. The representations and
warranties of RMS contained herein shall be true and correct on the date of this
Agreement and at and on the Closing Date in all material respects as though such
representations and warranties were made at and on such date, except those
representations and warranties that speak as of a specific date.
Section 7.2 Performance. RMS shall have complied, in all material
respects, with all agreements, obligations and conditions required by this
Agreement to be complied with by it on or prior to the Closing Date.
Section 7.3 Officer's Certificate. VDAT and SUB shall have
received a duly executed certificate signed by the President or Chairman of RMS
certifying as to (i) compliance with the conditions set forth in Sections 7.1
and 7.2; (ii) the accuracy and completeness of the Bylaws of RMS and the
director and shareholder resolutions of RMS approving this Agreement, the Merger
and the transactions contemplated hereby; and (iii) the identity and authority
of the officers and other persons executing documents on behalf of RMS.
Section 7.4 Certified Certificate of Incorporation. VDAT and SUB
shall have received a certificate of the Secretary of State of the State of
Delaware certifying the Certificate of Incorporation of RMS and all amendments
thereof, dated not more than ten (10) days prior to the Closing Date.
Section 7.5 Good Standing. VDAT shall have received a certificate
of good standing, or its equivalent, dated no more than ten (10) days prior to
the Closing Date, from the State of incorporation of RMS and each other State in
which RMS is qualified to do business as set forth on Schedule 4.1.
Section 7.6 Legal Action. There shall be no pending or threatened
legal action or inquiry which challenges the validity or the legality of or
seeks or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the Merger or would otherwise restrict VDAT's or the
Surviving Corporation's exercise of full rights to own and operate the business
of RMS subsequent to the Effective Time.
49
50
Section 7.7 Consents. VDAT and SUB shall have received copies of
consents set forth on Schedule 7.7 necessary for RMS to execute, deliver and
perform this Agreement and consummate the Merger.
Section 7.8 RMS Documents. VDAT and SUB shall have received an
executed copy of the legal opinion of RMS' legal counsel, which legal opinion
will be in a form and substance reasonably acceptable to VDAT and its counsel.
Section 7.9 Dissenting Shares. On the Closing Date, the aggregate
number of RMS Shares with respect to which the holders shall be dissenting
shareholders entitled to relief under Section 262 of the DGCL shall not exceed
five percent (5%) of all outstanding RMS Shares.
Section 7.10 Material Adverse Change. There shall have been no
material adverse change in the business, operations, assets, prospects,
financial condition or results of operations of RMS.
Section 7.11 Agreements with Affiliates. VDAT and SUB shall have
received from each person who is an Affiliate under Section 5.11 an executed
copy of the written agreement referred to in Section 5.11 and such agreements
shall be in full force and effect and there shall be no breach, or in existence
any facts which with passage of time or otherwise could constitute a breach,
thereof.
Section 7.12 Certificate of Merger. RMS shall have delivered to
VDAT the Certificate of Merger as executed by duly authorized officers of RMS.
Section 7.13 Networks. RMS, in the reasonable judgement of VDAT,
shall be making reasonable progress to finalize agreements, including roll-out
schedules, for at least two (2) new networks, which networks may include
networks for the pilots set forth on Schedule 7.13.
Section 7.14 Spacenet. The reasonable resolution, satisfactory to
VDAT of all the existing obligations between RMS and Spacenet.
50
51
Section 7.15 Injunction Illegality. No preliminary or permanent
injunction, or other order decreed by any federal or state court which prevents
the consummation of this Agreement shall have been issued and remain in effect
(each party agrees to use its reasonable efforts to have any such injunction,
order or decree lifted). No governmental authority shall have enacted any
statute, rule or regulation that would prevent consummation of this Agreement or
make the merger illegal.
Section 7.16 Payables. At the Effective Time (provided that VDAT
shall have funded RMS pursuant to the Budget prior to the Effective Time), all
RMS' payables and accrued liabilities for past due obligations, excluding (i)
any monthly accruals made in the ordinary course of business, including, but not
limited to, accruals for items such as payroll, bonuses, vacation pay and other
employee benefits, professional fees, property taxes, rent escalation, retailer
fees, agency commissions and equipment purchased for resale, (ii) any payables
to Spacenet, and (iii) any payables less than 30 days old, will not exceed
$750,000.
Section 7.17 Lease. RMS shall have modified the terms and
conditions of its real estate lease for its principal offices, on terms and
conditions reasonably satisfactory to VDAT.
Section 7.18 Employment Contracts. VDAT or the Surviving
Corporation shall have entered into employment agreements with the persons set
forth on Schedule 7.18 (on the general terms and conditions of such agreements
as set forth thereon) in form and substance reasonably satisfactory to VDAT.
Section 7.19 Shareholders' Agreement. The RMS Shareholders
Agreement shall have been terminated.
Section 7.20 General. All required action hereunder shall have
been taken by RMS in connection with the consummation of the transactions
contemplated hereby, and all certificates, opinions and other documents required
to affect the Merger and the transactions contemplated herein shall be
reasonably satisfactory in form and substance to VDAT.
51
52
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF RMS
The obligations of RMS to effect the Merger and to perform under this
Agreement is subject to the fulfillment on or before the Closing Date of the
following additional conditions, any one or more of which may be waived, in
writing, by RMS:
Section 8.1 Representations Accurate. The representations and
warranties of VDAT and SUB contained herein shall be true and correct on the
date of this Agreement and at and on the Closing Date in all material respects
as though such representations and warranties were made at and on such date,
except those representations and warranties that speak as of a specific date.
Section 8.2 Performance. VDAT and SUB shall have complied, in all
material respects, with all agreements, obligations and conditions required by
this Agreement to be complied with by them on or prior to the Closing Date.
Section 8.3 Compliance Certificate. RMS shall have received a
certificate signed by the President or Chairman of each of VDAT and SUB
certifying as to (i) compliance with the conditions set forth in Sections 8.1
and 8.2; (ii) the accuracy and completeness of the Bylaws of SUB and, as
applicable, the director and shareholder resolutions of VDAT and SUB approving
this Agreement, the Merger and the transactions contemplated hereby; and (iii)
the identity and authority of the officers and other persons executing documents
on behalf of VDAT and SUB.
Section 8.4 Certified Articles of Incorporation. RMS shall have
received certificates of the Secretary of State of the State of Florida
certifying the Articles of Incorporation of VDAT and the Articles of
Incorporation of SUB and all amendments thereof, dated not more than ten (10)
days prior to the Closing Date.
Section 8.5 Good Standing. RMS shall have received a certificate
of good standing, or its equivalent, dated no more than ten (10) days prior to
the Closing Date, from the state of incorporation of VDAT and SUB and each other
state in which VDAT and SUB are qualified to do business, which states are set
forth on Schedule 8.5.
Section 8.6 Legal Action. There shall be no pending or threatened
legal action or inquiry which challenges the validity
52
53
or legality of or seeks or could reasonably be expected to prevent, delay or
impose conditions on the consummation of the Merger.
Section 8.7 Consents. RMS shall have received copies of consents
of all third parties necessary for VDAT to execute, deliver and perform this
Agreement and consummate the Merger.
Section 8.8 Certificate of Merger. SUB shall have delivered to
RMS the Certificate of Merger, executed by duly authorized officers of SUB.
Section 8.9 Material Adverse Change. There shall have been no
material adverse change in the business, operations, assets, prospects,
financial condition or results of operations of VDAT.
Section 8.10 Injunction Illegality. No preliminary or permanent
injunction, or other order decreed by any federal or state court which prevents
the consummation of this Agreement shall have been issued and remain in effect
(each party agrees to use its reasonable efforts to have any such injunction,
order or decree lifted). No governmental authority shall have enacted any
statute, rule or regulation that would prevent consummation of this Agreement or
make the merger illegal.
Section 8.11 General. All required action hereunder shall have
been taken by VDAT in connection with the consummation of the transactions
contemplated hereby, and all certificates, opinions and other documents required
to affect the Merger and the transactions contemplated herein shall be
reasonably satisfactory in form and substance to RMS.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties and
Covenants. All of the representations, warranties and covenants in this
Agreement and the obligations of the parties with respect thereto shall survive
the Closing as set forth in Section 12.1.
Section 9.2 Indemnification by the Shareholders of RMS. After the
Effective Time, the shareholders of RMS shall,
53
54
indemnify, defend, protect and hold harmless VDAT and its officers, directors,
divisions, subdivisions, affiliates (including, the Surviving Corporation),
shareholders, agents, employees, successors and assigns (collectively, the
"Purchaser Indemnified Parties") from and against all Losses (as defined below)
that arise as a result of or incident to: (a) any breach of, misrepresentation
in, untruth in or inaccuracy in the representations and warranties by RMS set
forth in this Agreement or in any exhibit or in any other document delivered
pursuant to this Agreement; (b) nonfulfillment or nonperformance of any
agreement, covenant or condition on the part of RMS made in this Agreement or in
any other document delivered pursuant to this Agreement; or (c) any claim by any
third party that, if true, would mean that a condition for indemnification set
forth in subsection (a) through (b) of this Section 9.2 had been satisfied.
Notwithstanding the foregoing, however, such indemnification obligations shall
in all events be limited solely to the extent of 500,000 Threshold II Shares as
set forth in Section 9.7 below. For purposes of this Article IX, "Losses" means
liabilities, claims, damages, actions, demands, assessments, adjustments,
penalties, losses, costs and expenses whatsoever (including court costs,
reasonable attorneys' fees and expenses of investigation), whether equitable or
legal, matured or continued, known or unknown, foreseen or unforeseen, ordinary
or extraordinary, patent or latent.
Section 9.3 Indemnification by VDAT. VDAT shall indemnify,
defend, protect and hold harmless the shareholders of RMS (collectively, the
"RMS Indemnified Parties") at all times after the Effective Time, from and
against all Losses that arise as a result of or incident to: (a) any breach of,
misrepresentation, untruth in or inaccuracy, the representations and warranties
of VDAT and SUB set forth in this Agreement; (b) nonfulfillment and
nonperformance of the Agreement, covenant or condition on the part of VDAT and
SUB made in this Agreement, and (c) any claim by a third party that is true,
would mean that a condition for indemnification set forth in Subsection (a) and
(b) of this Section 9.3 had been satisfied. Notwithstanding the foregoing,
however, such indemnification obligations shall in all events be limited to
$500,000 as set forth in Section 9.7 below.
Section 9.4 Indemnification Procedure. Upon the occurrence of any
claim for which indemnification is believed to be due under this Agreement,
other than any claim discussed in
54
55
Section 9.5 below, the party seeking indemnification (the "Indemnified Party")
shall provide notice of such claim (a "Claim Notice") to the party from whom
indemnification is sought (the "Indemnifying Party"). The Claim Notice shall
state in general terms the circumstances giving rise to the claim, specify the
amount of the claim (or an estimate thereof), and make a request for any payment
then believed due. A Claim Notice shall be conclusive against the Indemnifying
Party in all respects 20 days after receipt by the Indemnifying Party unless,
within such period, the Indemnifying Party sends the Indemnified Party a notice
disputing the propriety or amount of the claim (a "Dispute Notice"). Any Dispute
Notice shall describe the basis for such objection and the amount of the claim
that the Indemnifying Party does not believe should be subject to
indemnification. Upon receipt of any Dispute Notice, the Indemnified Party and
the Indemnifying Party shall use reasonable efforts to cooperate and arrive at a
mutually acceptable resolution of the dispute within the next 30 days. If a
resolution is not reached within the 30 day period, either party may submit the
dispute to a panel of three arbitrators selected from the panels of arbitrators
of the American Arbitration Association in a city mutually selected by the
Indemnifying Party and the Indemnified Party (or, if no city can be mutually
agreed upon within 15 days, then in Fort Lauderdale, Florida). The Indemnified
Party shall select one arbitrator, the Indemnifying Party shall select the
second arbitrator, and the two previously selected arbitrators shall select the
third arbitrator. In all respects, the American Arbitration Association's then
existing Commercial Arbitration Rules shall govern such panel. The arbitrators'
decision shall be binding and conclusive on the parties. It if is finally
determined (through either agreement of the parties, arbitration or a Claim
Notice becoming conclusive) that all or a portion of the claim amount is owed to
the Indemnified Party, the Indemnifying Party shall, within 10 days of such
determination, pay the Indemnified Party such amount owed. The non-prevailing
party in any arbitration shall pay all costs of the arbitration and all of the
prevailing party's reasonable attorneys' fees and expenses of investigation. The
arbitrators shall specify in their decision which party is the prevailing party
and the amount of the costs, fees and expenses to be paid by the non-prevailing
party.
Section 9.5 Indemnification Procedure with Respect to Third Party
Claims.
55
56
(a) If any third party shall notify an Indemnified Party
pursuant to this Agreement with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any Indemnifying
Party, then the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation under this Agreement unless, and then
solely to the extent that, the Indemnifying Party is thereby prejudiced.
(b) The Indemnifying Party will have the right to defend
the Indemnified Party against a Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party
notifies the Indemnified Party in writing within a reasonable time after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Losses the Indemnified Party may suffer that arise as a result
of or incident to the Third Party Claim; (ii) the Indemnifying Party provides
the Indemnified Party with evidence acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations under this Agreement;
(iii) the Third Party Claim involves only monetary damages and does not seek an
injunction or equitable relief or involve the possibility of criminal penalties;
(iv) settlement of or adverse judgment with respect to the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 9.5(b), (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (which will not be unreasonably withheld), and (iii) the
Indemnifying Party will not consent to
56
57
the entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (which
will not be unreasonably withheld).
(d) If or to the extent that any of the conditions set
forth in Section9.5(b) is or becomes unsatisfied: (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim and any matter it may deem
appropriate in its sole discretion and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection therewith
(but will keep the Indemnifying Party reasonably informed regarding the progress
and anticipated cost thereof); (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the cost of defending against
the Third Party Claim (including attorneys' fees and expenses); (iii) the
Indemnifying Party will remain responsible for any Losses the Indemnified Party
may suffer that arise as a result of or incident to the Third Party Claim to the
fullest extent provided in this Section 9; and (iv) the Indemnifying Party shall
be deemed to have waived any claim that its indemnification obligations should
be reduced because of the manner in which counsel for the Indemnified Party
handled the Third Party Claim.
Section 9.6 Threshold Funds. A maximum of 500,000 Threshold II
Shares shall be the only source available to satisfy indemnification claims of
the Purchaser Indemnified Parties pursuant to this Article 9. A maximum of
$500,000 shall be the only source available to satisfy indemnification claims of
the RMS Indemnified Parties pursuant to this Article 9. The costs of the
Shareholders' Representative in complying with the provisions of this Section 9
may be satisfied from such Threshold II Shares; provided, however, that the
amount of such costs which may be satisfied from such Threshold Shares shall not
exceed $50,000 in the aggregate in accordance with the second paragraph of
Section 5.10.
Section 9.7 Basket and Limitation. Notwithstanding anything to
the contrary in the foregoing provisions of this Article 9, no party shall be
required to indemnify another party until the aggregate of the Losses of the
party seeking indemnification reaches $500,000, at which point (i) VDAT shall be
liable for all such Losses of the RMS Indemnified Parties in
57
58
excess of $500,000 up to a maximum liability of $500,000, and (ii) the RMS
shareholders shall be liable for all such Losses of the Purchaser Indemnified
Parties in excess of $500,000 up to a maximum liability of 500,000 Threshold II
shares. For purposes of this Article 9, the Threshold Shares II shall be valued
at the average of closing price of VDAT's common stock for the five trading days
prior to the final determination of the Loss.
Section 9.8 Other Indemnification Provisions. Except as provided
in Article XI, the indemnification provisions in this Article 9 are the
exclusive remedies of the parties for breach of any representation, warranty or
covenant in this Agreement or any exhibit or other document delivered pursuant
hereto absent a claim for fraud.
Section 9.9 RMS Litigation Indemnity. Notwithstanding anything to
the contrary contained herein, in the event the Losses associated with
litigation described in items (1) and (2) on Schedule 4.11 exceed $100,000, VDAT
may offset any such excess Losses against the Threshold II shares. The Threshold
II shares shall be valued as determined in Section 9.7.
ARTICLE X
CLOSING
Section 10.1 Time and Place. Subject to the provisions of
Articles VI, VII, VIII, IX and XI, the closing of the Merger (the "Closing")
shall take place at the offices of Atlas Xxxxxxxx, P.A., as soon as practicable,
but in no event later than the second business day after the date on which each
of the conditions set forth in Articles VI, VII and VIII (other than those
conditions that by their nature are to be satisfied at the Closing but subject
to such conditions) have been satisfied or waived, in writing, by the party or
parties entitled to the benefit of such conditions; or at such other place, at
such other time, or on such other date as VDAT, SUB and RMS may, in writing,
mutually agree. The date on which the Closing actually occurs is herein referred
to as the "Closing Date."
Section 10.2 Filings at the Closing. Subject to the provisions of
Articles VI, VII, VIII and XI hereof, RMS, VDAT and SUB shall cause to be
executed and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to
58
59
be recorded in accordance with the applicable provisions of the FBCA and the
DGCL and shall take any and all other lawful actions and do any and all other
lawful things necessary to cause the Merger to become effective.
ARTICLE XI
TERMINATION AND ABANDONMENT
Section 11.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of RMS and VDAT:
(a) by mutual consent of VDAT and RMS;
(b) by either VDAT or RMS, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable;
(c) by either VDAT or RMS, if the requisite shareholder
approvals of the shareholders of either VDAT or RMS are not obtained at a
meeting of shareholders duly called and held therefor; or
(d) by either VDAT or RMS if a merger shall not have been
consummated by March 30, 2002, provided that a party in material breach of this
Agreement may not terminate this Agreement.
Section 11.2 Termination by VDAT. This Agreement may be terminated
and the Merger may be abandoned, at any time prior to the Effective Time, before
or after the approval of the shareholders of VDAT or RMS, by VDAT if (a) RMS
shall have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and V of this Agreement to be complied
with by RMS at or prior to such date of termination, (b) there exists a breach
of any representation or warranty of RMS contained in this Agreement such that
the closing conditions set forth in Article VII would not be satisfied,
provided, however, that with respect to either (a) or (b), if such failure or
breach is capable of being cured prior to the Effective Time, such failure or
breach shall not have been cured within fifteen (15) days of delivery to RMS of
written notice of such failure or breach, (c) the Board of Directors of RMS
shall have failed to
59
60
recommend, or shall have withdrawn, modified or changed its recommendation of
this Agreement or the Merger in a manner adverse to VDAT or shall have
recommended or issued a neutral recommendation with respect to any proposal in
respect of a Transaction Proposal (as defined in Section 5.3 above) with a
person or entity other than VDAT or any Affiliate of VDAT (or the RMS Board of
Directors resolves to do any of the foregoing), or (d) the Board of Directors of
RMS shall furnish or disclose nonpublic information or negotiate, explore or
communicate in any way with a third party with respect to any Transaction
Proposal in violation of this Agreement, or shall have resolved to do any of the
foregoing and publicly disclosed such resolution.
Section 11.3 Termination by RMS. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the shareholders of VDAT or RMS, by RMS, if (a) VDAT or
SUB shall have failed to comply in any material respect with any of the
covenants or agreements contained in Articles I, II and V of this Agreement to
be complied with by VDAT or SUB at or prior to such date of termination, (b)
there exists a breach of any representation or warranty of VDAT or SUB contained
in this Agreement such that the closing conditions set forth in Article VIII
would not be satisfied, provided, however, that, with respect to either (a) or
(b), if such failure or breach is capable of being cured prior to the Effective
Time, such failure or breach shall not have been cured within fifteen (15) days
of delivery to VDAT or SUB of written notice of such failure or breach, (c) the
Board of Directors of RMS shall have failed to recommend or shall have
withdrawn, modified or changed its recommendation of this Agreement in a manner
adverse to VDAT or shall have recommended or issued a neutral recommendation
with respect to any proposal in respect of a Transaction Proposal with a person
or entity other than VDAT or any Affiliate of VDAT (or the Board of Directors of
RMS, resolves to do any of the foregoing), in each case in accordance with and
solely to the extent permitted by Section 5.3 above, or (d) if VDAT shall not
have received a binding funding commitment within sixty (60) days from the date
hereof to provide RMS with capital in an amount of at least $1.5 million.
Section 11.4 Procedure for Termination. In the event of
termination and abandonment of the Merger by VDAT or RMS pursuant
60
61
to this Article XI, written notice thereof shall forthwith be given to the
other.
Section 11.5 Effect of Termination and Abandonment. In the event
of termination of this Agreement and abandonment of the Merger pursuant to this
Article XI, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 11.5 and in Sections 5.10 and 5.4(b) hereof.
All advances by VDAT to RMS shall be converted into a senior secured
convertible debenture (the "Debenture") bearing interest at 12% per annum
amortized over three (3) years from the date of termination. The Debenture shall
be a senior obligation of RMS, and VDAT shall have a security interest in all
the assets of RMS except that the Debenture shall be subordinate to the security
interests of Spacenet and the terms of any financing consummated by RMS during
the term of the Debenture. In the event of any termination hereunder by VDAT,
such conversion shall not take place for a period of sixty (60) days from the
date of termination during which time VDAT shall continue to have the obligation
to fund RMS in accordance with the terms of that certain agreement dated as of
the date hereof between VDAT and RMS in the form attached hereto as Exhibit
11.5. The obligation for such additional funding shall terminate in the event
RMS receives the Two Times Amount (as defined below).
During the term of the Debenture, VDAT shall be permitted to convert
any or all of outstanding principal amount of the Debenture into that number of
shares of RMS common stock which would result in a maximum aggregate equity
interest in RMS of 10% on a fully-diluted basis ("RMS Limit") at a conversion
price of $1.44. If, and to the extent that RMS consummates an equity financing
within six (6) months of termination of this Agreement, the conversion price
shall be reduced to the lower of (x) the price paid by an investor for RMS
common stock in such financing and (y) the lowest price at which RMS common
stock will be issued in any such financing upon the conversion of securities
issued in any such financing. VDAT shall receive at least 20 days' prior notice
before repayment of the Debenture. To the extent the conversion of the Debenture
would result in the issuance of shares of RMS common stock in excess of the RMS
Limit, such
61
62
excess amount will not be converted and will be repaid according to the terms of
the Debenture.
In the event that RMS, after the date of termination, receives one-time
funding in an amount equal or greater than two times the amount advanced by VDAT
(the "Two Times Amount"), any amount received by RMS greater than such Two Times
Amount shall be paid to VDAT up to an amount equal to the amount funded by VDAT
which has not been repaid or converted into shares of RMS common stock plus all
of the interest accrued thereon, RMS' obligations under the Debenture shall be
deemed satisfied in full and the Debenture shall be cancelled.
In the event this Agreement is terminated as a result of RMS violating
the provisions of Section 5.3 or the Board of Directors of RMS withdrawing their
approval of this transaction as a result of acceptance of a Transaction Proposal
pursuant to such section, VDAT shall receive within ten (10) business days of
the date of such termination, a payment in the amount of $750,000 and shall be
entitled to no other amount under this Agreement other than repayment of all
amounts under the Debenture.
ARTICLE XII
SURVIVABILITY; INVESTIGATIONS
Section 12.1 Survival of Representations and Warranties and
Covenants. The representations, warranties and covenants (other than any
covenants which by their terms continue for more than one (1) year after the
Effective Time which will continue in accordance with such terms) of RMS, VDAT
and SUB shall survive for one (1) year after the Effective Time. In furtherance
and not in limitation of the foregoing, the commitment contained in Section 2.6
to have RMS operate as a separate subsidiary or division of VDAT shall survive
the Effective Time for the period specified therein, and the rights of RMS
shareholders to receive more VDAT stock based upon the provisions of Article II
shall survive the Effective Time for the periods specified therein.
Section 12.2 Investigation. The respective representations and
warranties of VDAT, SUB and RMS contained herein or in any certificate or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto.
62
63
Section 12.3 Indemnification and Insurance for RMS
Directors/Officers. RMS shall, and from and after the Effective Time, the
Surviving Corporation shall (and VDAT shall cause the Surviving Corporation to),
indemnify, defend and hold harmless each person who is now, or who becomes prior
to the Effective Time, an officer or director of RMS (the "RMS D&O Indemnified
Parties") against (i) all losses, claims, damages, costs, expenses, liabilities
or judgements or amounts that are paid in settlement with the approval of RMS or
the Surviving Corporation, as applicable, (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director or officer of RMS,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated by this Agreement,
in each case to the full extent provided under the Certificate of Incorporation
and Bylaws of RMS in effect as of the date hereof or as permitted under DGCL, as
applicable, to indemnify directors and officers. The Certificate of
Incorporation and Bylaws of the Surviving Corporation shall contain provisions
with respect to indemnification set forth in the Certificate of Incorporation
and Bylaws of RMS on the date of this Agreement, and such provisions shall not
be amended, repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors
or officers of RMS, unless such modifications were required by law. RMS shall,
and from and after the Effective Time the Surviving Corporation shall, obtain
and maintain in effect an extended reporting period under the existing
directors' and officers' liability insurance policy of RMS for a period of at
least six (6)years from the Effective Time or shall cover such individuals under
a comparable policy, provided that the obligation required with such policy
would not require a payment of greater than $160,000. The provisions of this
Section are intended for the benefit of, and shall be enforceable by, each RMS
D&O Indemnified Party and his or her heirs and personal representatives after
the Effective Time.
63
64
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. All notices shall be in writing delivered as
follows:
If to VDAT or SUB, to:
Visual Data Corporation
0000 X.X. 00xx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
With a copy to:
Atlas Xxxxxxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
If to RMS, to:
RMS Networks, Inc.
000 X. X. 0xx Xxxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, President
With a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
SunTrust International Center, 00xx Xxxxx
Xxx Xxxxxxxxx Xxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
or to such other address as may have been designated in a prior notice pursuant
to this Section. Notices shall be deemed to be effectively served and delivered
(a) when delivered personally; (b) when given by telephone facsimile against
confirmation (with a copy mailed by first-class U.S. mail); (c) one (1) business
day following deposit with a recognized national air courier service; or (d)
three (3) business days after being deposited in the
64
65
United States mail in a sealed envelope, postage prepaid, return receipt
requested, to the appropriate party.
Section 13.2 Binding Effect. Except as may be otherwise provided
herein, this Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Except as otherwise specifically provided in this Agreement,
nothing in this Agreement is intended or will be construed to confer on any
person other than the parties hereto any rights or benefits hereunder.
Section 13.3 Headings. The headings in this Agreement are
intended solely for convenience of reference and will be given no effect in the
construction or interpretation of this Agreement.
Section 13.4 Exhibits and Schedules. The exhibits and schedules
referred to in this Agreement will be deemed to be a part of this Agreement.
Section 13.5 Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be deemed an original, and all of
which together will constitute one and the same document.
Section 13.6 Governing Law. This Agreement will be governed by
the laws of the State of Florida without regard to conflict of laws principles
thereof.
Section 13.7 Waivers. Compliance with the provisions of this
Agreement may be waived only by a written instrument specifically referring to
this Agreement and signed by the party waiving compliance. No course of dealing,
nor any failure or delay in exercising any right, will be construed as a waiver,
and no single or partial exercise of a right will preclude any other or further
exercise of that or any other right.
Section 13.8 Pronouns. The use of a particular pronoun herein
will not be restrictive as to gender or number but will be interpreted in all
cases as the context may require.
Section 13.9 Time Periods. Any action required hereunder
65
66
to be taken within a certain number of days will be taken within that number of
calendar days unless otherwise provided; provided, however, that if the last day
for taking such action falls on a weekend or a holiday, the period during which
such action may be taken will be automatically extended to the next business
day.
Section 13.10 Modification. No supplement, modification or
amendment of this Agreement will be binding unless made in a written instrument
that is signed by all of the parties hereto and that specifically refers to this
Agreement.
Section 13.11 Entire Agreement. This Agreement and the agreements
and documents referred to in this Agreement or delivered hereunder are the
exclusive statement of the agreement among the parties concerning the subject
matter hereof. All negotiations among the parties are merged into this
Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto among the
parties other than those incorporated herein and to be delivered hereunder.
Section 13.12 Severability. If any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby. To the extent permitted by applicable
law, each party waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
Section 13.13 Appointment and Duties of Shareholders'
Representative.
(a) RMS hereby irrevocably appoints Xxxxx Xxxxxx to act
as "Shareholders' Representative" on behalf of the shareholders of RMS under
this Agreement and all other agreements, certificates and documents contemplated
by this Agreement. RMS hereby irrevocably authorizes Shareholders'
Representative to take such actions on behalf of the shareholders and to
exercise such powers as are designated to Shareholders' Representative by the
terms and provisions of this Agreement, together with such actions as are
reasonably incidental thereto. Xxxxx Xxxxxx has accepted such appointment as
Shareholders' Representative.
66
67
(b) VDAT and RMS shall be entitled to rely upon
instructions from Shareholders' Representative, and shall be entitled to give
any notice required to be given to the shareholders of RMS under this Agreement
and all other agreements, certificates and documents contemplated by this
Agreement solely to Shareholders' Representative. Neither VDAT nor RMS shall be
liable for any acts or omissions of Shareholders' Representative in connection
with the performance by Shareholders' Representative of his obligations under
this Agreement. By approval of this Agreement, each shareholder of RMS hereby
irrevocably appoints Shareholders' Representative as his agent for purposes of
the first sentence of this Section 13.13, for purposes of acting on behalf of
the shareholders of RMS in connection with any indemnification matter pursuant
to Article 9, and for all other purposes contemplated by this Section 13.13
(c) If Shareholders' Representative resigns from such
position, the resulting vacancy shall be filled by Xxxxx Xxxxx and, in such
case, if he resigns or declines to accept such appointment to the resulting
vacancy, the position may be filled by approval of the beneficial holders of a
majority of the RMS Shares immediately before the Effective Time.
No bond shall be required of Shareholders' Representative.
Shareholders' Representative shall not be liable to the Shareholders for any act
taken or omitted under this Agreement as Shareholders' Representative while
acting in good faith and in accordance with this Agreement. Subject to the
$50,000 aggregate limitation set forth in this Section 13.13, and the second
paragraph of Section 5.10, any costs incurred by Shareholders' Representative in
carrying out its duties under this Agreement, including the costs of counsel,
accountants or other experts hired by Shareholders' Representative, shall be
paid or Shareholders' Representative shall be reimbursed from the value of the
Threshold II Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
67
68
VISUAL DATA CORPORATION
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx, President
RMS NETWORKS, INC.
By: /s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx, President
VISUAL DATA NETWORKS, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx, President
68
