Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THINK NEW IDEAS, INC.,
UBICUBE ACQUISITION CORP.,
UBICUBE GROUP, INC.,
AND
THE STOCKHOLDERS OF UBICUBE GROUP, INC.
JUNE 27, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement") is entered into as of this 27th day of
June, 1998, by and among THINK New Ideas, Inc., a Delaware corporation
("THINK"), UbiCube Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of THINK ("UAC"), UbiCube Group, Inc., a Delaware corporation (the
"Company"), the stockholders of the Company listed on Schedule A hereto (each
individually referred to hereinafter as a "Management Stockholder" and
collectively referred to hereinafter as the "Management Stockholders") and the
stockholders of the Company listed on Schedule B hereto (each individually
referred to hereinafter as a "Non-Management Stockholder" and collectively
referred to hereinafter as the "Non-Management Stockholders"; each of the
Management Stockholders and the Non-Management Stockholders is referred to
herein individually as a "Stockholder" and collectively are referred to herein
as the "Stockholders").
WITNESSETH:
WHEREAS, the authorized capital stock of the Company consists of
10,000,000 shares of common stock, par value $.001 per share (the "Company
Stock"), of which 9,991,735 shares of Company Stock are issued and outstanding
as of the date hereof;
WHEREAS, the authorized capital stock of UbiComs, Inc., a Delaware
corporation, consists of 10,000,000 shares of common stock, par value $.001 per
share, of which one (1) share is issued and outstanding as of the date hereof
and which share is owned by the Company;
WHEREAS, the authorized capital stock of NetComs USA, Inc., a Maine
corporation, consists of 3,000 shares of common stock, no par value per share,
of which 2,000 shares are issued and outstanding as of the date hereof and all
of which are owned by the Company;
WHEREAS, the authorized capital stock of NetComs Entertainment, Inc., a
Maine corporation, consists of 3,000 shares of common stock, no par value per
share, of which a certain amount of shares are issued and outstanding as of the
date hereof and all of which are owned by the Company;
WHEREAS, the authorized capital stock of NetComs Europe Limited., a United
Kingdom corporation ("NetComs Europe"), consists of 5,000 shares of common
stock, par value (POUND)1.00 per share, of which a certain amount of shares are
issued and outstanding as of the date hereof and all of which are owned by the
Company;
WHEREAS, the authorized capital stock of NetComs Entertainment, Ltd., a
United Kingdom corporation, consists of 1,000 shares of common stock, par value
(POUND)1.00 per share, of which two shares are issued and outstanding as of the
date hereof and both of which are owned by RDI UbiComs Limited;
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WHEREAS, the authorized capital stock of RDI UbiComs Limited, a United
Kingdom corporation, consists of 1,000 shares of common stock, par value
(POUND)1.00 per share, of which a certain amount of shares are issued and
outstanding as of the date hereof and all of which are owned by the Company;
WHEREAS, the authorized capital stock of UbiComs EOOD, a Bulgarian
corporation (each of UbiComs EOOD, UbiComs, Inc., NetComs USA, Inc., NetComs
Entertainment, Inc. NetComs Europe, NetComs Entertainment, Ltd. and RDI UbiComs
Limited is individually referred to hereinafter as a "Subsidiary," and
collectively referred to hereinafter as the "Subsidiaries"), consists of a
certain amount of shares of common stock, with a certain par value per share, of
which a certain amount of shares are issued and outstanding as of the date
hereof and all of which are owned by RDI UbiComs Limited;
WHEREAS, each of the Management Stockholders owns the number of shares of
Company Stock set forth opposite such Management Stockholder's name shown on
Schedule A hereto, representing in the aggregate 62.49 percent of the issued and
outstanding shares of capital stock of the Company;
WHEREAS, each of the Non-Management Stockholders owns the number of shares
of Company Stock set forth opposite such Non-Management Stockholder's name shown
on Schedule B hereto, representing in the aggregate 37.51 percent of the issued
and outstanding shares of capital stock of the Company;
WHEREAS, the Stockholders are the sole stockholders of the Company, and as
such, each Stockholder desires to sell, assign, transfer and convey to THINK all
of each Stockholder's right, title and interest in and to the issued and
outstanding shares of Company Stock pursuant to the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, it is the desire of UAC to purchase, obtain and acquire from the
Stockholders all of each such individual's or entity's right, title and interest
in and to all of the issued and outstanding shares Company Stock pursuant to the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the authorized capital stock of THINK consists of 50,000,000
shares of common stock, par value $.0001 per share (the "THINK Stock"), and
5,000,000 shares of preferred stock, par value $.0001 per share (the "Preferred
Stock"), of which 7,528,668 shares of THINK Stock were issued and outstanding as
of May 15, 1998 and no shares of Preferred Stock are issued and outstanding as
of the date hereof;
WHEREAS, the authorized capital stock of UAC consists of 1,000 shares of
common stock, par value $.0001 per share ("UAC Stock"), of which 100 shares are
issued and outstanding as of the date hereof;
WHEREAS, the respective Boards of Directors of THINK, UAC and the Company
deem it advisable and in the best interests of UAC and the Company and their
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respective stockholders that the Company merge with and into UAC (the "Merger")
pursuant to the terms of the Agreement and the applicable provisions of the laws
of the State of Delaware;
WHEREAS, the Stockholders are currently the only stockholders of the
Company entitled to vote on the Merger and have unanimously voted in favor of
the Merger; and
WHEREAS, the Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
TERMS OF MERGER
1.1 MERGER. Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall be merged with and into UAC and the Stockholders
shall transfer and convey to UAC all of the Stockholders' right, title and
interest in and to all of the issued and outstanding shares of Company Stock.
The Stockholders hereby agree, upon the terms and subject to the conditions set
forth herein, to transfer and deliver to UAC certificates representing all of
the issued and outstanding shares of Company Stock, and such delivery shall
effect the cancellation of all of such Stockholders' shares of Company Stock, in
exchange for the consideration described herein.
1.2 MERGER CONSIDERATION. In consideration of and in exchange for all of
the issued and outstanding shares of Company Stock as set forth in Section 1.1
above, THINK shall issue to the Stockholders shares of THINK Stock as follows
(the "Purchase Price"):
(a) INITIAL PAYMENT. At the Closing (as hereinafter defined), THINK
shall issue to the Stockholders in the respective amounts set forth on Schedule
1.2(a) hereto, shares of THINK Stock having an aggregate value of $4,250,000
(less 10,000 shares of THINK Stock). The number of shares of THINK Stock
issuable at the Closing shall be determined by subtracting (x) 10,000 from (y)
the quotient obtained by dividing (a) $4,250,000 by (b) the average closing sale
price per share of THINK Stock for the three (3) trading days immediately prior
to the Closing Date (as hereinafter defined) as quoted by the Nasdaq National
Market Systemsm ("Nasdaq") or such other exchange or quotation bureau on which
THINK's securities are then traded or listed for quotation.
(b) ESCROW SHARES. Also at the Closing, THINK shall issue to the
Stockholders additional shares of THINK Stock having an aggregate value of
$4,250,000 (less 10,000 shares of THINK Stock) (the "Escrow Shares"), which
shall be placed and held in Escrow (as hereinafter defined) pursuant to the
terms set forth herein. The number of shares of THINK Stock issuable at the
Closing to be placed and held in escrow shall be determined by subtracting (x)
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10,000 from (y) the quotient obtained by dividing (a) $4,250,000 by (b) the
average closing sale price per share of THINK Stock for the three (3) trading
days immediately prior to the Closing Date as quoted by Nasdaq or such other
exchange or quotation bureau on which THINK's securities are then traded or
listed for quotation.
While held in Escrow, the Escrow Shares shall continue to be
registered in the names of the Stockholders and, except for the rights of
possession and sale and transfer, the Stockholders shall possess and may
exercise all incidents of ownership and other rights pertaining to the Escrow
Shares, including but not limited to the right to exercise any voting rights
with respect to the Escrow Shares or to receive dividends or distributions
thereon or with respect thereto.
(c) SUBSEQUENT PAYMENTS OF PURCHASE PRICE. The balance of the
Purchase Price, subject to the provisions herein relating to the Escrow Shares,
shall be payable as follows:
(i) On January 15, 1999, THINK shall (A) cause to be released
from Escrow and delivered to the Stockholders Escrow Shares having an aggregate
value of $375,000 determined as of the Closing Date, and (B) issue to the
Stockholders additional shares of THINK Stock having an aggregate value of
$375,000 determined by dividing $375,000 by the average closing sale price per
share of THINK Stock for the three (3) trading days immediately prior to January
15, 1999 as quoted by Nasdaq or such other exchange or quotation bureau on which
THINK's securities are then traded or listed for quotation;
(ii) On January 15, 2000, THINK shall (A) cause to be released
from Escrow and delivered to the Stockholders Escrow Shares having an aggregate
value of $750,000 determined as of the Closing Date, and (B) issue to the
Stockholders additional shares of THINK Stock having an aggregate value of
$750,000 determined by dividing $750,000 by the average closing sale price per
share of THINK Stock for the three (3) trading days immediately prior to January
15, 2000 as quoted by Nasdaq or such other exchange or quotation bureau on which
THINK's securities are then traded or listed for quotation; and
(iii) On March 1, 2001, THINK shall (A) cause to be released
from Escrow the Escrow Shares in accordance with Section 1.3, and (B) issue to
the Stockholders additional shares of THINK Stock having an aggregate value of
$4,875,000. The number of shares of THINK Stock issuable on such date pursuant
to Section 1.3(c)(iii)(B) shall be determined by dividing $4,875,000 by the
average closing sale price per share of THINK Stock for the three (3) trading
days immediately prior to March 1, 2001 as quoted by Nasdaq or such other
exchange or quotation bureau on which THINK's securities are then traded or
listed for quotation; PROVIDED, HOWEVER, that in the event that revenues for the
Surviving Corporation for the year ended December 31, 1998 are less than
$4,500,000, the payments of the Purchase Price referred to in Sections 1.2(c)(i)
and 1.2(c)(ii) above shall be reduced in an amount to be agreed to in good faith
by the parties hereto, PROVIDED that such amount shall be added to the payment
of the Purchase Price referred to in Section 1.2(c)(iii).
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1.3 ESCROW SHARES.
(a) At the Closing, the Escrow Shares shall be placed and held in
escrow (the "Escrow") in accordance with the terms of an Escrow Agreement
("Escrow Agreement") by and among the parties hereto and Xxxxxxxxxxx & Xxxxxxxx
LLP, as escrow agent (the "Escrow Agent"), a copy of which Escrow Agreement is
attached hereto as Exhibit 1.3 and is incorporated herein by reference. The
parties hereto acknowledge and agree that the execution of this Agreement by
each of such parties constitutes their acceptance of the terms of the Escrow
Agreement, and such Escrow Agreement shall become effective upon execution of
this Agreement by the parties hereto and execution of the Escrow Agreement by
the Escrow Agent. The parties hereto further acknowledge and agree that,
subsequent to the Closing Date, the Escrow Shares shall be transferred from
Xxxxxxxxxxx & Xxxxxxxx LLP, as Escrow Agent, to Continental Stock Transfer &
Trust Company ("Continental"), which shall, upon such transfer and upon
acceptance by Continental of such shares, replace Xxxxxxxxxxx & Xxxxxxxx LLP as
the Escrow Agent and shall be substituted in all respects as the Escrow Agent
under the terms of the Escrow Agreement.
(b) The Escrow Shares that have not otherwise been released from
Escrow pursuant to Section 1.2 shall be released from Escrow no later than March
1, 2001 as follows:
(i) The aggregate number of Escrow Shares to be released from
Escrow in accordance with this Section 1.3(b) shall be equal to the number
obtained by multiplying (A) the product of (x) the number of Escrow Shares that
remain in Escrow as of the date of the calculations referred to in this Section
1.3(b) times (y) the percentage of Escrow Shares to be released to the
Stockholders and additional shares of THINK Stock to be issued to the
Stockholders, if any, as determined in accordance with Section 1.3(b)(ii), times
(B) the percentage of Escrow Shares to be released to the Stockholders and
additional shares of THINK Stock to be issued to the Stockholders, if any, as
determined in accordance with Section 1.3(b)(iii), which product shall equal the
number of Escrow Shares to be released from Escrow to the Stockholders, with any
remaining Escrow Shares being released to THINK; PROVIDED, HOWEVER, that in the
event the number of Escrow Shares to be released from Escrow as determined
pursuant to this Section 1.3(b) is greater than the number of shares that remain
in Escrow as of such date, THINK shall issue to the Stockholders additional
shares of THINK Stock in an amount equal to the difference between the number of
shares of THINK Stock required to be delivered to the Stockholders pursuant to
this Section 1.3 and the total number of Escrow Shares that remains in Escrow as
of the date of such delivery.
(ii) CONSOLIDATED REVENUES. For purposes of determining the
appropriate percentage to be utilized in determining pursuant to Section
1.3(b)(i) the number of Escrow Shares to be released to the Stockholders and the
additional shares of THINK Stock to be issued to the Stockholders, if any, the
following table sets forth the percentage of the Escrow Shares remaining as of
the date of the calculation described in Section 1.3(b)(i) that, subject to
adjustment based on the Surviving Corporation's Pretax Profit Margin (as
defined), THINK shall cause to be released to the Stockholders and shall, if
applicable, issue the Stockholders not later than March 1, 2001. The percentage
of Escrow Shares to be received by the Stockholders shall be based on, among the
other factors set forth in this Section 1.3, the Consolidated Revenues (as
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hereinafter defined) of the Surviving Corporation for the three-year period
ended December 31, 2000, and shall be determined as follows:
The percentage of the Escrow Shares
If the Surviving Corporation's remaining in Escrow at the time of
Consolidated Revenues for the such calculation to be released to the
three-year period ended DECEMBER 31, Stockholders and, if applicable,
2000 ARE: ISSUED TO THE STOCKHOLDERS SHALL BE:
($) (%)
Less than 15,000,000 0
15,000,000-15,999,999 50
16,000,000-16,999,999 55
17,000,000-17,999,999 60
18,000,000-18,999,999 65
19,000,000-19,999,999 70
20,000,000-20,999,999 75
21,000,000-21,999,999 80
22,000,000-22,999,999 85
23,000,000-23,999,999 90
24,000,000-24,999,999 95
25,000,000-25,999,999 100
26,000,000-26,999,999 105
27,000,000-27,999,999 110
28,000,000-28,999,999 115
29,000,000-29,999,999 120
30,000,000-30,999,999 125
31,000,000-31,999,999 130
32,000,000-32,999,999 135
33,000,000-33,999,999 140
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34,000,000-34,999,999 145
35,000,000 or higher 150
For purposes of this Section 1.3, "Consolidated Revenues" shall mean
all fees, commissions and compensation earned by the Surviving Corporation
excluding commissionable media and production costs.
(iii) PRETAX PROFIT MARGIN. For purposes of determining the
appropriate percentage to be utilized in determining pursuant to Section
1.3(b)(i) the number of Escrow Shares to be released to the Stockholders and the
additional shares of THINK Stock to be issued to the Stockholders, if any, the
following table sets forth the percentage of the Escrow Shares remaining as of
the date of the calculation described in Section 1.3(b)(i) that THINK shall
cause to be released to the Shareholders and shall, if applicable, issue to the
Stockholders not later than March 1, 2001. The percentage of Escrow Shares to be
received by the Stockholders shall be based on, among the other factors set
forth in this Section 1.3, the Pretax Profit margin of the Surviving Corporation
for the year ended December 31, 2000, and shall be determined as follows:
The percentage of the Escrow Shares
If the Surviving Corporation's remaining in Escrow at the time of
Pretax Profit Margin such calculation to be released to the
FOR THE YEAR ENDED DECEMBER 31, 2000 Stockholders and, if applicable, TO BE
is: ISSUED TO THE STOCKHOLDERS SHALL BE:
($) (%)
Less than 3.000 0
3.000-3.999 75
4.000-4.999 77.5
5.000-5.999 80
6.000-6.999 82.5
7.000-7.999 85
8.000-8.999 87.5
9.000-9.999 90
10.000-10.999 92.5
11.000-11.999 95
12.000-12.999 97.5
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13.000-13.999 100
14.000-14.999 102.5
15.000-15.999 105
16.000-16.999 107.5
17.000-17.999 110
18.000-18.999 112.5
19.000-19.999 115
20.000-20.999 117.5
21.000-21.999 120
22.000-22.999 122.5
23.000 or above 125
For purposes of this Section 1.3, "Pretax Profit Margin" shall mean the
Surviving Corporation's pretax profit margin after interest, depreciation,
amortization, and other non-cash charges, and including the Surviving
Corporation's pro rata portion of THINK's general overhead expense, which shall
not exceed three percent (3%) of the Surviving Corporation's Consolidated
Revenues.
1.4 EFFECTIVE TIME OF MERGER. Subject to the terms and conditions of this
Agreement, the certificate of merger, in substantially the form of Exhibit 1.4
(the "Certificate of Merger"), required by Section 251 of the Delaware General
Corporation Law ( the "DGCL") shall be duly executed and acknowledged by the
Constituent Corporations (as hereinafter defined) and thereafter delivered to
the Secretary of the State of Delaware for filing pursuant to the DGCL, on the
Closing Date (as hereinafter defined). The Merger shall become effective (the
"Effective Time") upon the filing of the Certificate of Merger with the
Secretary of the State of Delaware (the "Merger Documents").
1.5 EFFECTS OF THE MERGER.
(a) At the Effective Time: (i) the separate existence of the Company
shall cease and the Company shall be merged with and into UAC (UAC and the
Company are sometimes referred to herein as the "Constituent Corporations" and
UAC is sometimes referred to herein as the "Surviving Corporation"); (ii) the
Certificate of Incorporation of UAC as in effect immediately prior to the
Effective Time shall continue to be the Certificate of Incorporation of the
Surviving Corporation; and (iii) the Bylaws of UAC as in effect immediately
prior to the Effective Time shall continue to be the Bylaws of the Surviving
Corporation.
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(b) At and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL. Without limiting the foregoing, at
the Effective Time, UAC as the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations, and all singular rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well as for stock subscriptions and all other things in
action or belonging to each of the Constituent Corporations, shall be vested in
UAC as the Surviving Corporation and all property, rights, privileges, powers
and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not revert or be in
any way impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations shall thenceforth attach to UAC as the
Surviving Corporation, and may be enforced against it to the same extent as if
said debts and liabilities had been incurred by it.
1.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors and
officers of UAC immediately prior to the Effective Time shall continue be the
directors and officers of UAC as the Surviving Corporation until their
successors shall have been duly elected, appointed and/or qualified or until
their earlier death, resignation or removal in accordance with the Certificate
of Incorporation and Bylaws of UAC.
1.7 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of Company
Stock, shares of THINK Stock or shares of UAC Stock:
(a) THINK STOCK. Each issued and outstanding share of THINK Stock
shall continue to be issued and outstanding and shall not be affected by the
Merger.
(b) UAC STOCK. Each issued and outstanding share of capital stock of
UAC shall continue to be issued and outstanding and shall not be affected by the
Merger.
(c) CONVERSION OF COMPANY STOCK. Each share of Company Stock issued
and outstanding as of the Effective Time shall be converted into shares of THINK
Stock as set forth on Schedule 1.2(a) hereto. All such shares of Company Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of THINK Stock to be issued or
paid in consideration therefor upon the surrender of such certificate for
exchange to THINK at the Closing.
1.8 RESTRICTIONS ON RESALE OF THINK STOCK. The shares of THINK Stock
received by the Stockholders pursuant to this Agreement may not be sold,
assigned, pledged, hypothecated or transferred, or any interest therein conveyed
to any other person, except in accordance with the registration provisions of
the federal and state securities laws or applicable exemption therefrom, and the
certificates representing such shares shall contain an appropriate legend to
that effect.
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1.9 TAX-FREE REORGANIZATION. The parties intend that the Merger qualify as
a tax-free reorganization under Section 368(a)(2)(D) of the Code. Unless
required by a final determination of the Internal Revenue Service (or other
governing body having jurisdiction over these matters) or a court of competent
jurisdiction, the parties shall not take any position on any subsequently filed
tax return inconsistent with this section. The parties hereby agree to comply
with the reporting requirements of Treasury Regulation ss.1.368-3.
(a) In furtherance of the foregoing, THINK hereby represents, warrants and
covenants as follows:
(i) Prior to the transaction, THINK will be in control of UAC within
the meaning of section 368(c)(1) of the Code.
(ii) THINK has no plan or intention to reacquire any of its stock
issued in the transaction.
(iii) THINK has no plan or intention to liquidate UAC; to merge UAC
with or into another corporation; or to sell or otherwise dispose of the assets
of UAC except for dispositions made in the ordinary course of business or
transfers described in ss.368(a)(2)(D) of the Code.
(iv) THINK has no plan or intention to issue shares of UAC Stock in
the transaction.
(b) In addition, the Company hereby represents, warrants and covenants as
follows:
(i) There is no plan or intention by the Stockholders who own one
percent or more of the Company Stock, and to the best of the knowledge of the
management of the Company, there is no plan or intention on the part of the
remaining Stockholders to sell, exchange, or otherwise dispose of a number of
shares of THINK Stock received in the transaction to THINK or to persons related
(as defined in Treasury Regulation ss.1.368-1(e)(3)) to THINK that would reduce
the Stockholders' ownership of THINK Stock to a number of shares having a value,
as of the date of the transaction, of less than 50 percent of the value of all
of the formerly outstanding shares of Company Stock as of the same date. For
purposes of this representation, shares of the Company Stock exchanged for cash
or other property, surrendered by dissenters or exchanged for cash in lieu of
fractional shares of THINK Stock will be treated as outstanding Company stock on
the date of the transaction. Moreover, shares of the Company stock and shares of
THINK stock held by the Stockholders and otherwise sold, redeemed, or disposed
of prior or subsequent to the transaction will be considered in making this
representation.
(ii) At the time of the transaction, the Company will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire Company Stock that, if
exercised or converted, would affect THINK's acquisition or retention of control
of the Company, as defined in section 368(c)(1) of the Code.
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(iii) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(a) of the Code.
(iv) On the date of the transaction, the fair market value of the
assets of the Company transferred to UAC will exceed the sum of its liabilities,
plus the amount of liabilities, if any, to which the assets are subject.
(v) The liabilities of the Company assumed by UAC and the
liabilities to which the transferred assets of the Company are subject were
incurred by the Company in the ordinary course of its business.
(c) In addition, UAC hereby represents, warrants and covenants as follows:
(i) Following the transaction, UAC will hold at least 90 percent of
the fair market value of the Company's net assets and at least 70 percent of the
fair market value of the Company's gross assets held immediately prior to the
transaction. For purposes of this representation, amounts paid by UAC to
dissenters, amounts paid by UAC to Company shareholders who receive cash or
other property, amounts used by UAC to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company will be included as assets of the Company immediately prior to the
transaction.
(ii) Following the transaction, UAC will continue the Company's
historic business or use a significant portion of the Company's historic
business assets in its business.
(d) Each of THINK, UAC, and the Company hereby represents, warrants and
covenants as follows:
(i) The fair market value of the THINK Stock and other consideration
received by each Stockholder will be approximately equal to the fair market
value of the Company Stock surrendered in the exchange.
(ii) THINK, UAC, the Company, and the Stockholders will pay their
respective expenses, if any, incurred in connection with the transaction.
(iii) There is no intercorporate indebtedness existing between THINK
and the Company or between UAC and the Company that was issued, acquired, or
will be settled at a discount.
(iv) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(f)(iii) and (iv) of the Code.
1.10 REGISTRATION RIGHTS OF STOCKHOLDERS. For a period of one (1) year
following each initial issuance by THINK of shares of THINK Stock pursuant to
Section 1.2, in the event that THINK proposes to register any of its securities
under the Securities Act of 1933, as amended (the "Securities Act"), for sale
(including sales by persons other than THINK) within such one-year period (other
than registration on Form X-0, Xxxx X-0 or any form which does not include
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substantially the same information as would be required to be included in a
registration statement covering the sale of the shares of THINK Stock owned by
the Stockholders), THINK shall notify the Stockholders of such registration in
writing at least ten (10) days prior to the filing of such registration
statement (the "Piggyback Notice"). Upon the written request of Stockholders
owning at least fifty percent (50%) of the THINK Stock to be received by the
Stockholders under this Agreement, which request shall be given within twenty
(20) days after receipt of such Piggyback Notice from THINK, THINK shall cause
to be included in the registration statement (the "Registration Statement")
filed under the Securities Act up to that number of shares of THINK Stock owned
by the Stockholders resulting from: (a) dividing the number of shares of THINK
Stock owned by the Stockholders by (b) the aggregate number of shares of THINK
Stock owned by the persons or entities whose shares of THINK Stock are being
included in the Registration Statement multiplied by (c) the number of shares of
THINK Stock being registered for resale by such persons or entities (the
"Registrable Stock"); PROVIDED, HOWEVER, that in no event shall THINK be
required to include in the Registration Statement more than twenty percent (20%)
of the shares of THINK Stock owned by the Stockholders and THINK shall have no
registration obligation hereunder or otherwise if the proposed Registration
Statement relates to an underwritten offering by THINK and the managing
underwriter of the subject offering has expressed its objection to the same to
THINK; PROVIDED, HOWEVER, that there shall be included in such underwritten
offering that amount of shares of Registrable Stock the Stockholders or such
other person or persons entitled to participate therein that in the opinion of
such underwriter can be sold in such offering, with such shares of Registrable
Stock being allocated pro rata among the holders of shares of Registrable Stock
to be sold on the basis of the number of shares of Registrable Stock to be
registered; PROVIDED, HOWEVER, that such pro rata allocation shall not affect
the number of shares being offered by THINK in any such offering. Inclusion of
any of a Stockholder's shares of THINK Stock in a Registration Statement
pursuant hereto shall be deemed to fulfill THINK's obligations hereunder with
respect to such Stockholder. Notwithstanding the foregoing, the Escrow Shares
shall not be subject to the registration rights described in this Section 1.11
unless and until such Escrow Shares are released to the Stockholders pursuant to
Section 1.3 herein.
ARTICLE II
CLOSING
2.1 DATE AND TIME OF CLOSING. Subject to satisfaction of the conditions
set forth in this Agreement and compliance with the other provisions hereof, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place on June 27, 1998 at 10:00 a.m. (eastern daylight savings time) at the
law offices of Xxxxxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxxxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000, or at such other place and time thereafter as shall be
mutually agreeable to the parties hereto (the "Closing Date").
2.2 CLOSING DOCUMENTS. Upon fulfillment of the conditions set forth
herein, on the Closing Date, the parties hereto shall cause the Merger Documents
to be filed as contemplated in Section 1.4 hereof and each party hereto will
execute and deliver to the other parties here to such other documents and
instruments as are contemplated herein.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MANAGEMENT
STOCKHOLDERS. As of the date hereof and as of the Closing Date, the Company and
the Management Stockholders, jointly and severally, except as specifically
provided herein, represent and warrant to THINK and UAC as follows:
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of the Company
and by each of the Management Stockholders. The Company has taken all necessary
corporate action and has all of the necessary corporate power to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by an officer of the Company on
its behalf and, assuming that this Agreement is the valid and binding obligation
of THINK, is the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. Each Management
Stockholder severally represents and warrants that he or she has the ability to
consummate the transactions contemplated hereby, that this Agreement has been
duly executed and validly delivered by him or her and that this Agreement is the
valid and binding obligation of such Management Stockholder, enforceable against
each such Management Stockholder in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(b) ORGANIZATION; SUBSIDIARIES. Each of the Company and the
Subsidiaries set forth on Schedule 3.1(b) hereto is a corporation duly
organized, validly existing and in good standing (other than NetComs USA, Inc.
and NetComs Entertainment, Inc.) under the laws of the jurisdiction of its
incorporation. Each of the Company and the Subsidiaries has the corporate power
and authority to own and lease its respective properties and assets and to carry
on its respective business as it is now being conducted and is duly qualified to
do business as a foreign corporation in each jurisdiction where it owns or
leases real property or conducts business, except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
earnings, prospects, assets or condition (financial or otherwise) of the Company
or any of the Subsidiaries ("Material Adverse Effect"). Each of the transactions
pursuant to which the Company acquired all of the outstanding capital stock of a
Subsidiary, and each transaction pursuant to which a Subsidiary changed its name
or domicile, was duly authorized by each party's respective boards of directors
and shareholders, and was consummated in accordance with the laws of the
applicable jurisdictions of incorporation of the entities involved in such
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transaction. Set forth on Schedule 3.1(b) hereto is a true and correct list of
each jurisdiction in which each of the Company and the Subsidiaries is qualified
to do business. The Company has no other business, organizational, corporate or
other activities, assets, liabilities, obligations, or involvement with any
other business, organizational or corporate activities of other entities other
than owning, directly or indirectly, 100% of the stock of each of the
Subsidiaries.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
shares of capital stock of the Company and each Subsidiary as of the date hereof
is as set forth above in the recitals to this Agreement. The outstanding shares
of Company Stock and outstanding shares of capital stock of each Subsidiary
("Subsidiary Stock") have been duly authorized, validly issued and are fully
paid and non-assessable. Each Management Stockholder hereby severally represents
and warrants that he or she is the sole legal and beneficial owner of the number
of shares of Company Stock as set forth in Schedule A to this Agreement. Each
Management Stockholder hereby severally represents and warrants that the issued
and outstanding shares of Company Stock owned by such Management Stockholder, as
well as the shares of Subsidiary Stock, are owned by the Company free of
preemptive rights and free and clear of any and all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or
limitations of any kind whatsoever. All of the issued and outstanding shares of
capital stock of the Subsidiaries are owned by the Company or a direct
subsidiary of the Company. Neither the Company nor any Subsidiary has issued any
shares of capital stock which could give rise to claims for violation of any
federal or state securities laws (including any rules or regulations promulgated
thereunder) or the securities laws of any other jurisdiction (including any
rules or regulations promulgated thereunder). There are no options, warrants,
calls, convertible securities or commitments of any kind whatsoever relating to
the shares of the Company Stock subject hereto or the Subsidiary Stock, or any
of the unissued shares of capital stock of the Company or any Subsidiary, and
there are no voting trusts, voting agreements, stockholder agreements or other
agreements or understandings of any kind whatsoever which relate to the voting
of the capital stock of the Company or any Subsidiary which shall not terminate
as of the Closing. On or prior to the date hereof, all outstanding stock option
awards issued pursuant to the Red Dot Interactive Incorporated 1997 Equity
Incentive Plan ("Red Dot Plan"), which was assumed by the Company in connection
with the Company's acquisition of Red Dot Interactive Incorporated have been
terminated in accordance with the provisions of the Red Dot Plan. Also set forth
on Schedule 3.1(c) is a complete and accurate description of the organizational
structure of the Company and the Subsidiaries, including a complete and accurate
description of the ownership of the Company and the Subsidiaries.
(d) FINANCIAL STATEMENTS. The Company has delivered to THINK certain
financial statements of the Company and each Subsidiary (all of the foregoing,
including the notes thereto, may collectively be referred to hereinafter as the
"Financial Statements"), as set forth on Schedule 3.1(d) hereto, accompanied by
the corresponding relevant opinions and reports, if any, of the Company's and
each Subsidiary's independent auditors as of the same dates and for the same
periods. The Financial Statements present fairly, in all material respects, the
financial position of the Company and each Subsidiary as of the respective dates
indicated and the results of operations and cash flows of the Company for the
respective periods indicated.
15
(e) OWNED REAL PROPERTY. Neither the Company nor any Subsidiary
owns, nor does it have any interest in, any real property other than the leased
real property described below.
(f) LEASED REAL PROPERTY; TENANCIES. Set forth on Schedule 3.1(f)
hereto is a true, correct and complete list of all of the leases and subleases
(the "Real Property Leases") with respect to real property leased by the Company
or any Subsidiary as lessee and used in the conduct of its business or otherwise
(the "Leased Real Property"). Also set forth on Schedule 3.1(f) is a true,
correct and complete list of the monthly or annual rental payments due
thereunder as of the date hereof and the expiration dates thereof. The Company
has delivered to THINK true, correct and complete copies of each of the Real
Property Leases. Except as set forth on Schedule 3.1(f), neither the Company nor
any Subsidiary is required pursuant to the provisions of any of the Real
Property Leases (or otherwise) to obtain the consent of any lessor with respect
to the Leased Real Property prior to or in connection with consummation of the
transactions contemplated hereby. Neither the Company, any Subsidiary nor, to
the Company's or the Management Stockholders' knowledge, any third party is in
default under any of the Real Property Leases. There are no subleases or
subtenancies for any part of the Leased Real Property that shall remain in
effect after the Closing Date and there is no third party which has any right to
purchase, use or otherwise possess all or any part of the Leased Real Property.
(g) TITLE. Each of the Company and the Subsidiaries: (i) holds a
valid and enforceable leasehold interest in the Leased Real Property; and (ii)
owns good and marketable title to all of the assets and properties reflected on
the balance sheet of the respective Financial Statements or purchased by the
Company or the Subsidiaries after the date thereof, except supplies consumed or
assets or properties sold in the ordinary course of business subsequent to the
date thereof. The Leased Real Property is leased free of all adverse claims,
liens, mortgages, charges, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever, except: (A) as stated in the
Financial Statements; (B) for liens for taxes or assessments not yet due and
payable or which are being contested by the Company or a Subsidiary in good
faith which, if and when imposed and/or determined adversely to the Company or
the Subsidiaries, would not have a Material Adverse Effect on the Company or the
Subsidiaries; (C) for liens imposed by law for sums not yet due or which are
being contested by the Company or a Subsidiary in good faith which, if and when
imposed and/or determined adversely to the Company or the Subsidiaries, would
not have a Material Adverse Effect on the Company or the Subsidiaries; and (D)
for imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not
detract from the value of the Leased Real Property subject thereto or which do
not impair the operations of the Company or the Subsidiary or affect the present
use of the Leased Real Property or otherwise constitute a Material Adverse
Effect. There is no condemnation or eminent domain proceeding pending or, to the
Company's or the Management Stockholders' knowledge, threatened against the
Leased Real Property (or any part thereof). Neither the Company nor any
Subsidiary has made any commitments or received any notice, oral or written,
from any public authority or other entity with respect to the taking or use of
the Leased Real Property (or any part thereof), whether temporarily or
permanently, for easements, rights-of-way or other public or quasi-public
purposes or for any other purpose whatsoever nor is there any proceeding pending
or, to the Company's or the Management Stockholders' knowledge, threatened which
could adversely affect the zoning classification relating to such property or
16
its use by the Company and/or any of the Subsidiaries as of the date hereof. The
assets reflected on the balance sheet of the Financial Statements and those
purchased by the Company and/or any of the Subsidiaries after the date of the
most recent Financial Statement, are owned free and clear of all adverse claims,
liens, mortgages, charges, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever, except: (A) as stated in the
Financial Statements; (B) for liens for taxes or assessments not yet due and
payable or which are being contested by the Company or a Subsidiary in good
faith which, if and when imposed and/or determined adversely to the Company or
the Subsidiaries, would not have a Material Adverse Effect on the Company or the
Subsidiaries; (C) for liens imposed by law for sums not yet due or which are
being contested by the Company or a Subsidiary in good faith which, if and when
imposed and/or determined adversely to the Company or the Subsidiaries, would
not have a Material Adverse Effect on the Company or the Subsidiaries; and (D)
for imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not
detract in any material respect from the value of any of the assets subject
thereto or which do not impair the operations of the Company or the Subsidiary
in any material respect or affect the present use of the assets in any material
respect. Neither the Company nor any Subsidiary has made any commitments or
received any notice, oral or written, from any public authority or other entity
with respect to the taking or use of any of the Company's or any Subsidiary's
assets, whether temporarily or permanently, for any purpose whatsoever, nor is
there any proceeding pending or, to the Company's or the Management
Stockholders' knowledge, threatened which could adversely affect any asset owned
or used by the Company or the Subsidiary as of the date hereof.
(h) CONDITION OF ASSETS. The Real Property Leases and all other
documents and agreements pursuant to which the Company and/or any of the
Subsidiaries have obtained the right to use or occupy any real property,
personal property or assets, are valid and enforceable in all respects in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. All licenses, permits
and authorizations related to the location or operation of the business of the
Company and/or any of the Subsidiaries are in good standing and are valid and
enforceable in all respects in accordance with their respective terms. There is
not, under any of the foregoing instruments, documents or agreements, any
existing default, nor is there any event which, with notice or lapse of time or
both, would constitute a default arising through the Company, any Subsidiary or,
to the knowledge of the Company and the Management Stockholders, any third
party, which could: (i) have a Material Adverse Effect on the Company or any
Subsidiary; or (ii) materially adversely affect any of their respective uses of
the Leased Real Property or the title to their respective assets. To the
Company's and each Stockholders' knowledge, neither the Company nor any
Subsidiary is in violation of and the Company and the Subsidiaries have each
complied with all applicable zoning, building or other codes, statutes,
regulations, ordinances, notices and orders of any governmental authority with
respect to the occupancy, use, maintenance, condition, operation and improvement
of the Leased Real Property or any other assets, except where the failure to
17
comply would not have a Material Adverse Effect. The Company's and each
Subsidiary's use of any improvements for the purposes for which any of the
Leased Real Property or assets are being used as of the date hereof does not
violate any such code, statute, regulation, ordinance, notice or order, except
where such violation would not have a Material Adverse Effect. The Company and
each of the Subsidiaries possess all licenses, certificates of occupancy,
permits and authorizations required to be obtained by the Company and the
Subsidiaries with respect to the Company's and each Subsidiary's operation and
maintenance of the Leased Real Property or assets for all uses for which such
property is or assets are operated or used by the Company and/or any of the
Subsidiaries as of the date hereof, except where the failure to do so would not
have a Material Adverse Effect on the Company or any of the Subsidiaries. All of
the Leased Real Property and assets (whether owned or leased by the Company or
the Subsidiaries) are in good operating condition and repair, subject to normal
wear and use and each such item is usable in a manner consistent with current
use by the Company or the Subsidiaries.
(i) INTELLECTUAL PROPERTY.
(i) Schedule 3.1(i) hereto sets forth a true, correct and
complete list (including where applicable, the date of registration and the
serial or registration number) of all registered and unregistered trademarks,
service marks and trade names (including any applications for the same), trade
secrets, registered and unregistered copyrights, and computer programs and
software (whether or not protected by patent, copyright or otherwise) which are
owned by, licensed by, used in or are material to the business of the Company or
any of the Subsidiaries (collectively, the "Intellectual Property"). With
respect to each of the foregoing items, there is listed on Schedule 3.1 (i)
hereto the following: (A) the extent of the Company's and each Subsidiary's
interest therein; (B) each agreement and all other documents evidencing the
Company's and/or the Subsidiaries' interest therein; (C) the extent of the
interest of any third party therein; and (D) each agreement and all other
documents evidencing the interest of any third party therein.
(ii) Except as otherwise set forth on Schedule 3.1(i) hereto,
the Company's and each Subsidiary's right, title or interest in the Intellectual
Property is free and clear of adverse claims, liens, mortgages, charges,
security interests and encumbrances or other restrictions or limitations of any
kind whatsoever.
(iii) To the Company's and each Management Stockholder's
knowledge, neither the Company nor any Subsidiary has committed any acts of
unfair competition or directly, indirectly, contributorily or by inducement,
infringed upon any patent, trademark, service xxxx, trade name, copyright,
computer program or software, or any other intellectual property, nor has the
Company or any Subsidiary misappropriated any of the foregoing from any other
person or entity or received from any other person or entity any notice, charge,
claim or other assertion with respect thereto.
(iv) Neither the Company nor any Subsidiary has sent or
otherwise communicated to any other person or entity any notice, charge, claim
or other assertion of, nor has the Company or any Subsidiary any knowledge of,
any present, impending or threatened infringement upon any of the Intellectual
Property by any other person or entity, or misappropriation of any of the
18
foregoing by any other person or entity, or any commission of acts of unfair
competition by any other person or entity.
(j) ACCOUNTS RECEIVABLE. Schedule 3.1(j) hereto sets forth a true,
correct and complete list of the Company's and each Subsidiary's accounts
receivable (the "Accounts Receivable") as of April 30, 1998. Such schedule
accurately, correctly and completely reflects the Accounts Receivable as of such
date. The Accounts Receivable are valid, arose out of bona fide transactions in
the ordinary course of business, and are the valid and binding obligations of
and are enforceable against the respective account debtors thereunder, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect.
There is no contest, claim or right of set-off contained in any written
agreement with any account debtor relating to the amount or validity of any
Account Receivable. The reserves (if any) for doubtful accounts reflected in the
Financial Statements are consistent with past practices of the Company or its
relevant Subsidiary.
(k) ACCOUNTS PAYABLE. Schedule 3.1(k) hereto sets forth a true,
correct and complete list of the Company's and each Subsidiary's accounts
payable (the "Accounts Payable") as of April 30, 1998. Such schedule accurately,
correctly and completely reflects the aggregate amount of Accounts Payable as of
such date. Prior to the Closing Date, all outstanding Accounts Payable will have
been paid by the Company or the Subsidiaries as the case may be in a manner
consistent with past practice.
(l) ABSENCE OF UNDISCLOSED LIABILITIES. Other than as set forth on
the Financial Statements, neither the Company nor any of the Subsidiaries has
had nor do they have any indebtedness, loss or liability of any nature
whatsoever (other than as incurred in the ordinary course of business), whether
accrued, absolute, contingent or otherwise and whether due or become due, which
is material to the Company's or such Subsidiary's business or the assets, or the
operations, prospects, earnings or condition (financial or otherwise) of the
Company or of any Subsidiary.
(m) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.1(m) and except as expressly set forth in this Agreement, neither the
Company nor any Subsidiary has, after April 1, 1998:
(i) issued, sold, granted or contracted to issue, sell or
grant any of its stock, notes, bonds, other securities or any option to purchase
any of the same other than to the Stockholders;
(ii) except as may be set forth on Schedule 3.1(m)(ii),
amended its articles or certificate of incorporation or bylaws;
(iii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment other than in
the ordinary course of business of the Company and the Subsidiaries;
19
(iv) entered into any material transaction in any way
inconsistent with the past practices of its business or conducted its business
in any manner inconsistent with its past practices;
(v) incurred any damage, destruction or any other loss to any
of its property or assets in an aggregate amount exceeding Fifty Thousand
Dollars ($50,000) whether or not covered by insurance;
(vi) suffered any loss in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000) and, neither the Company, any Subsidiary nor the
Management Stockholders has become aware of any intention on the part of any
client, dealer or supplier to discontinue its current relationship with the
Company or any Subsidiary, the loss or discontinuance of which, alone or in the
aggregate, could have a Material Adverse Effect on the Company or any
Subsidiary;
(vii) modified, amended or altered any contractual arrangement
with any client, dealer or supplier, the modification, amendment or alteration
of which, alone or in the aggregate, could have a Material Adverse Effect on the
Company or any Subsidiary;
(viii) incurred any material liability or obligation (absolute
or contingent) or made any material expenditure other than in the ordinary
course of business of the Company or any Subsidiary;
(ix) experienced any material adverse change in the Company's
or any Subsidiary's business or the Assets, or the operations, earnings,
prospects or condition (financial or otherwise) of the Company or any Subsidiary
or experienced or have knowledge of any event which could have a Material
Adverse Effect on the Company or any of the Subsidiaries;
(x) declared, set aside (other than Subchapter S distributions
to the Stockholders that have been set aside in accordance with this Agreement)
or paid any dividend or other distribution in respect of the capital stock of
the Company or any Subsidiaries;
(xi) redeemed, repurchased, or otherwise acquired any of its
capital stock or securities convertible into or exchangeable for its capital
stock or entered into any agreement with respect to any of the foregoing;
(xii) granted, conveyed, transferred, assigned or made any
sale of Accounts Receivable or any accrual of liabilities outside of the
ordinary course of its business;
(xiii) granted, conveyed, transferred, assigned or made any
sale of any material interest in any of the Intellectual Property;
(xiv) purchased, disposed of or contracted to purchase or
dispose of, or granted or received an option or any other right to purchase or
sell, any of its property or assets, except in the ordinary course of business;
20
(xv) increased the rate of compensation payable or to become
payable to the officers or employees of the Company or any of the Subsidiaries,
or increased the amounts paid or payable to such officers or employees under any
bonus, insurance, pension or other benefit plan, or made any arrangements
therefor with or for any of said officers or employees except for increases
consistent with the Company's or Subsidiary's ordinary course of business or
increases resulting from the application of existing formulas under existing
plans, agreements or policies relating to employee compensation:
(xvi) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement for the
benefit of its employees, except as otherwise required or permitted herein; or
(xvii) changed any material accounting principle, procedure or
practice followed by the Company or any of the Subsidiaries or changed the
method of applying such principle, procedure or practice.
(n) AGREEMENTS. Set forth on Schedule 3.1(n) hereto is a true,
correct and complete list of all contracts, agreements and other instruments
material to the business or operation of the Company and/or any of the
Subsidiaries, including without limitation, those to which the Company or any
Subsidiary is a party and those by which any of its property or assets are bound
(collectively, the "Material Agreements"). Copies of all such Material
Agreements have heretofore been delivered or made available by the Company to
THINK. Other than as set forth on Schedule 3.1(n) and 3.1(f), there is no
contract, agreement or other instrument to which the Company, any Subsidiary or
any Management Stockholder is a party or which affects the assets, liabilities
or outstanding securities of the Company or any of the Subsidiaries, which is
material to the business, assets or operations of the Company or any of the
Subsidiaries. None of the foregoing agreements limits the freedom of the Company
or any of the Subsidiaries to compete in any line of business or with any person
or other entity in any geographic region within or outside of the United States
of America.
Neither the Company, the Subsidiaries, the Management Stockholders
(each severally and not jointly), nor any third party is in material default and
no event has occurred which, with notice or lapse of time or both, could cause
or become a material default by the Company, any of the Subsidiaries, the
Management Stockholders or any third party, under any Material Agreement. To the
best of the Company's and the Management Stockholders' knowledge, each Material
Agreement is enforceable in accordance with its terms, against all other parties
thereto, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting creditors'
rights generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(o) NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery
of this Agreement by the Company and each of the Management Stockholders, nor
consummation of the transactions contemplated hereby, does or will: (i) violate
21
or conflict with any provision of the articles or certificate of incorporation
or bylaws of the Company or any of the Subsidiaries; (ii) violate or, with the
passage of time, result in the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate any obligation under, or
result in the creation an imposition of any lien, charge, pledge, security
interest or other encumbrance upon any of the property or assets, which are
material to the business or operation of the Company or any of the Subsidiaries,
pursuant to any provision of any mortgage, lien, lease, agreement, permit,
indenture, license, instrument, law, order, arbitration award, judgment or
decree to which the Company or any Subsidiary is a party or by which it or any
of such property or assets are bound, the effect of which violation,
acceleration, creation or imposition could have a Material Adverse Effect on the
Company or any Subsidiary; (iii) violate or conflict with any other restriction
of any kind whatsoever to which the Company or any Subsidiary or any Management
Stockholder is subject or by which any of their respective properties or assets
may be bound, the effect of any of which violation or conflict could have a
Material Adverse Effect on the Company or the Subsidiaries, or violate or
conflict with any agreement or contract to which any Management Stockholder is a
party; or (iv) constitute an event permitting termination by a third party of
any agreement to which the Company, any Subsidiary or any Management Stockholder
is a party or is subject, which termination could have a Material Adverse Effect
on the Company or the Subsidiaries. No consent, authorization, order or approval
of, or filing or registration with, any governmental commission, board or other
regulatory body either inside or outside the United States of America is
required in connection with the execution, delivery and performance of the terms
of this Agreement and consummation of the transactions contemplated hereby.
(p) EMPLOYEE BENEFIT PLANS. Schedule 3.1(p) hereto sets forth a
true, correct and complete list of all "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (the "Benefit Plans") covering the employees of the Company
or any Subsidiary (the "Employees"). Each Benefit Plan is in compliance in all
material respects with all applicable provisions of law, including ERISA and the
Code. There are no pending or, to the Company's or the Management Stockholders'
knowledge, threatened claims against any Benefit Plan (except for claims for
benefits payable in the normal operation of the Benefit Plans) that could give
rise to any material liability to the Company or any Subsidiary. All reports,
notices and returns required to be filed with any governmental agency or
provided to any person or entity with respect to the Benefit Plans have been
timely filed. Neither the Company nor any Subsidiary has had and does not now
have any Benefit Plan that is an employee pension plan (as defined in Section
3(2) of ERISA) nor does the Company or any Subsidiary contribute to any
multiemployer pension or multiemployer welfare benefit plan (within the meaning
of Section 3(37) of ERISA).
(q) LABOR RELATIONS. There are no agreements with, or, to the
Company's and Management Stockholders' knowledge, pending petitions for
recognition of, any labor union or association as the exclusive bargaining agent
for any or all of the employees of the Company or the Subsidiaries and no such
petition has been pending at any time during the two years prior to the date
hereof. To the Company's or the Management Stockholders' knowledge, there has
not been any organizing effort by any union or other group seeking to represent
any employees of the Company or of any of the Subsidiaries as its exclusive
bargaining agent at any time during the two years prior to the date hereof.
There are no labor strikes, work stoppages or other labor disputes now pending
22
or, to the Company's and Management Stockholders' knowledge, threatened against
the Company or any of the Subsidiaries, nor has there been any such labor
strike, work stoppage or other labor dispute or grievance at any time during the
two years prior to the date hereof. Neither the Company nor any of the
Management Stockholders has any knowledge that any executive, key employee or
any group of employees of the Company or of any of the Subsidiaries has any
plans to terminate his/her employment with the Company or the applicable
Subsidiary.
(r) INSURANCE. Schedule 3.1(r) hereto sets forth a true, correct and
complete list of all insurance policies or binders of insurance or programs of
self-insurance which relate to the respective businesses of the Company and the
Subsidiaries as of the date hereof. The coverage under each such policy and
binder is in full force and effect. Neither the Company nor any of the
Management Stockholders has knowledge of, nor has the Company or any of the
Management Stockholders received any notice of cancellation, termination,
nonrenewal or disallowance of, any claim thereunder or with respect thereto.
Neither the Company nor any of the Management Stockholders has knowledge of any
claim against the Company or any of the Subsidiaries relating to the applicable
business, assets, properties or operations which could increase the insurance
premiums payable by the Company or any of the Subsidiaries under such policy or
binder in excess of normal increases consistent with industry practices.
(s) TAX MATTERS. The Company and each Subsidiary has filed when due
and will file if and when due prior to the Closing Date (after giving effect to
any extensions granted by the requisite legal or regulatory authority) all
returns, reports, elections, estimates, declarations, schedules, forms and other
documents (collectively, the "Tax Returns") relating to taxes required to be
filed by the Code or by any applicable federal, state, county, municipal, local,
foreign or other laws, including, without limitation, consolidated, combined or
unitary returns, for any taxable period ending prior to or on the Closing Date
(the "Pre-Closing Tax Period"). The taxable year of the Company and each
Subsidiary for foreign, federal and state income and business tax purposes
currently ends on a certain date of each year. All taxes shown on any Tax Return
required to be filed with respect to the Company and any of the Subsidiaries for
any Pre-Closing Tax Period have been, or will have been, paid or accrued prior
to the Closing. The Company and the Subsidiaries have heretofore delivered to
THINK all Tax Returns filed on their respective behalves for the fiscal years
ended on such date in 1993, 1994, 1995, 1996 and 1997. The Company and the
Subsidiaries have fully accrued on their respective books all taxes for any
periods which are not yet due. No tax liens have been filed, and no material
claims have been or are being asserted or, to the Company's or the Management
Stockholders' knowledge, threatened against the Company or any Subsidiary with
respect to any taxes. No Tax Returns of the Company or any of the Subsidiaries
have been audited in the past five (5) years by any taxing authority, no
deficiencies or claims have been proposed, assessed or claimed (including
interest and penalties) against the Company or any Subsidiary which have not
been paid or accrued, and neither the Company nor any Subsidiary has waived or
extended any statute of limitations with respect to the assessment of any taxes,
which waiver or extension has not yet expired by its terms. There are no suits,
actions, proceedings, claims or investigations now pending against the Company
or any of the Subsidiaries with respect to any taxes. The Company and the
Subsidiaries have withheld or collected from each payment made to each of their
respective employees, consultants, contractors and other payees the amount of
23
all taxes (including, but not limited to, federal income taxes, state and local
income and wage taxes, payroll taxes, workers' compensation and unemployment
taxes) required to be withheld or collected therefrom for all Pre-Closing Tax
Periods and the Company and the Subsidiaries have timely paid or accrued and
reported the same in respect of their respective employees, consultants,
contractors and other payees to the proper tax receiving offices. Neither the
Company nor any Subsidiary has any liability for any taxes of any nature
whatsoever other than as shown on the Financial Statements (except for
liabilities for taxes accruing after the date of such Financial Statement in the
ordinary course of business) and neither the Company nor any of the Management
Stockholders is aware of any basis for any additional liabilities for taxes for
any Pre-Closing Tax Period. The reserve for accrued but unpaid taxes for the
period ending December 31, 1997, includes adequate provision for all taxes which
have been assessed or which will be due and payable by the Company and any of
the Subsidiaries for all Pre-Closing Tax Periods. The Company has not filed any
state or local tax returns on a unitary or combined basis with any other member
of an affiliated group, as such term is defined in Section 1504 of the Code.
The term "taxes" or "tax" as used in this section or referred to
elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, and other assessments, including, without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties. or additions attributable thereto.
(t) COMPLIANCE WITH APPLICABLE LAW. The Company and each Subsidiary
has been and is in compliance with all foreign, federal, state and local laws,
statutes, ordinances, rules and regulations applicable to the business, except
where the failure to comply with which would not have a Material Adverse Effect
on the Company or any of the Subsidiaries or which would subject any officer or
director of the Company or of any of the Subsidiaries to civil or criminal
penalties or imprisonment. The Company and each Subsidiary has complied with the
rules and regulations of all governmental agencies having authority over its
business or its operations, including without limitation, agencies concerned
with intra-state and interstate commerce, occupational safety and employment
practices, except where the failure to comply would not have a Material Adverse
Effect on the Company or any of the Subsidiaries. Neither the Company nor any of
the Management Stockholders has any knowledge of or received any notice of
violation of any such rule or regulation during the five (5) years prior to the
date hereof which could result in any liability of the Company or of any of the
Subsidiaries for penalties or damages or which could subject the Company or any
Subsidiary to any injunction or government writ, order or decree. To the
Company's and the Management Stockholders' knowledge, there are no facts, events
or conditions that could interfere with, prevent continued compliance with or
give rise to any liability under any foreign, federal, state or local
governmental laws, statutes, ordinances or regulations applicable to the
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company or any Subsidiary, except where the failure to do so
would not have a Material Adverse Effect on the Company or any Subsidiary.
24
(u) LITIGATION. Except as set forth on Schedule 3.1(u) hereto, there
is no action, suit, proceeding or investigation pending or, to the Company's or
the Management Stockholders' knowledge, threatened, which could restrict the
Company's or the Management Stockholders' ability to perform its or their
respective obligations hereunder or could have a Material Adverse Effect on the
Company or any of the Subsidiaries. Neither the Company, any of the Management
Stockholders, nor any Subsidiary is in default in respect of any judgment,
order, writ, injunction or decree of any court or any federal, state, local or
other governmental agency, authority, body, board, bureau, commission,
department or instrumentality which could have a Material Adverse Effect on the
Company or any Subsidiary.
(v) PERMITS. The Company and the Subsidiaries hold all permits,
licenses, orders and approvals of all foreign, federal, state or local
governmental or regulatory authorities, agencies or bodies required for the
conduct and operation of the Company's and each Subsidiary's respective
businesses as currently conducted, except where the failure to do so would not
have a Material Adverse Effect on the Company or any of the Subsidiaries. All
such permits, licenses, orders, and approvals are in full force and effect and
no suspension, termination or revocation of any of the foregoing is threatened.
None of such permits, licenses, orders or approvals will be materially adversely
affected by consummation of the transactions contemplated by this Agreement.
Neither the Company nor any of the Management Stockholders has knowledge of or
received any notice of violation of any of such rules or regulations during the
five (5) years prior to the date hereof which would result in any liability of
the Company or any Subsidiary for penalties or damages or which would subject
the Company or any Subsidiary to any injunction or governmental writ, order or
decree.
(w) UNLAWFUL PAYMENTS. Neither the Company, any Subsidiary, the
Management Stockholders, nor any officer, director, employee, agent or
representative of the Company or any Subsidiary has made, directly or
indirectly, any bribe or kickback, illegal political contribution, payment from
corporate funds which was incorrectly recorded on the books and records of the
Company or any Subsidiary, unlawful payment from corporate funds to governmental
or municipal officials in their individual capacities for the purpose of
affecting their action or the actions of the jurisdiction which they represent
to obtain favorable treatment in securing business or licenses or to obtain
special concessions of any kind whatsoever, or illegal payment from corporate
funds to obtain or retain any business.
(x) WARRANTIES. Except as required or implied by federal or state
law or as otherwise disclosed on Schedule 3.1(x) hereto, neither the Company nor
any Subsidiary has made, extended or otherwise represented that it would provide
any express warranty with respect to the products or services sold, distributed
or leased to its clients or customers.
(y) OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 3.1(y) hereto sets
forth a true, correct and complete list of all of the officers, directors and
employees of the Company and the Subsidiaries as of the date hereof, including
their respective names, titles and salaries. The Company and the Subsidiaries
have also provided true, correct and complete copies of any employment
agreements between the Company or any of the Subsidiaries (as applicable) and
any of the foregoing officers, directors and employees of the Company or any of
the Subsidiaries (as applicable) in effect as of the date hereof.
25
(z) LOANS TO OR FROM AFFILIATES. Except as set forth on Schedule
3.1(z) hereto, there exist no outstanding loans by the Company or any of the
Subsidiaries to any current or former officer, director, employee, consultant or
stockholder of the Company or any of the Subsidiaries or any affiliate of any of
the foregoing. There are no outstanding loans to the Company or any Subsidiary
by any current or former officer, director, employee, consultant or stockholder
of the Company or any of the Subsidiaries.
(aa) BOOKS AND RECORDS.
(i) The books of account and other financial records of the
Company and the Subsidiaries are complete and correct and have been maintained
in accordance with good business practices.
(ii) All material corporate action of the Company's and each
Subsidiary's board of directors (including any committees) and stockholders of
the Company and each Subsidiary since the Company's and each Subsidiary's
respective dates of incorporation has been authorized, approved and/or ratified
in the minute books of the Company or the applicable Subsidiary.
(bb) BANK ACCOUNTS. Set forth on Schedule 3.1(bb) is a true, correct
and complete list of the names of each bank, savings and loan, or other
financial institution, at which the Company or any of the Subsidiaries (as
applicable) maintain any account (including any cash contribution or similar
accounts) and the names of all persons authorized to draw thereon or who have
access thereto. Schedule 3.1 (bb) includes a true, correct and complete list of
each credit or loan facility or guaranty established and/or maintained by or on
behalf of the Company and any of the Subsidiaries, including the amounts
available to the Company and the applicable Subsidiaries under each such
facility, the outstanding principal balance thereunder as of the date hereof,
the interest rate applicable thereto and the maturity date thereof.
(cc) SOLVENCY OF THE COMPANY AND THE SUBSIDIARIES. Since its
formation and through the Closing Date, the Company and each Subsidiary has been
and will be solvent. "Solvent" shall mean, for purposes of application of this
provision, that: (i) the fair saleable value of the Company's and each
Subsidiary's property is in excess of the total amount of its respective debts;
and (ii) the Company and the Subsidiaries are able to pay their respective debts
as they mature.
(dd) INVESTMENT PURPOSE. Each Management Stockholder represents that
such Management Stockholder is acquiring and will acquire, as the case may be,
the shares of THINK Stock issuable to him or her pursuant hereto solely for his
or her own account for investment purposes only and not with a view toward
resale or distribution thereof other than pursuant to an effective registration
statement or applicable exemption from the registration requirements of the
Securities Act of 1933, as amended. Each Management Stockholder understands that
such shares of THINK Stock will be issued in reliance upon an exemption from the
registration requirements of the Securities Act and that subsequent sale or
transfer of such securities is prohibited absent registration or exemption from
the provisions of the Securities Act. Each Management Stockholder hereby agrees,
severally and not jointly, that he or she will not sell, assign, transfer,
26
pledge or otherwise convey any of the shares of the THINK Stock issuable to him
or her pursuant hereto, except in compliance with the provisions of the
Securities Act and in accordance with any transfer restrictions or similar terms
set forth on the certificates representing such securities or otherwise set
forth herein.
(ee) AGREEMENTS WITH AFFILIATES. Except as set forth on Schedule
3.1(ee) hereto, neither the Company nor any Subsidiary is a party to any
instrument, license, lease or other agreement, written or oral, with any
officer, director or stockholder of the Company or any of the Subsidiaries.
(ff) ACCURACY OF INFORMATION FURNISHED. The Company and the
Management Stockholders (severally and not jointly with respect to those
statements, representations and warranties made severally and not jointly by
such Management Stockholders) represent, warrant and covenant that no statement
by the Company and/or the Management Stockholders set forth herein or in the
exhibits or the schedules hereto, and no statement set forth in any certificate
or other instrument or document required to be delivered by or on behalf of the
Company or the Management Stockholders pursuant hereto or in connection with the
consummation of the transactions contemplated hereby, contained, contains or
will contain any untrue statement of a material fact, or omits, omitted or will
omit to state any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(gg) XXXX-XXXXX-XXXXXX FILING. The Stockholders, are the beneficial
owners of 100% of the outstanding securities of the Company. No persons other
than the Stockholders have the contractual right to designate the directors of
the Company. Other than his or her interest in the Company, no Stockholder,
directly or indirectly, (a) owns beneficially or of record 50% or more of the
outstanding voting securities of any other entity; (b) has the right to 50% or
more of (i) the profits or (ii) the assets upon dissolution, of any other
entity; and (c) has the contractual right to designate 50% or more of the
directors of any other entity. Neither the Company nor any of the Stockholders
is "engaged in manufacturing" for purposes f the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the regulations
promulgated thereunder. The "total assets" of each Stockholder individually, as
the ultimate parents of the Company, calculated in accordance with the HSR Act
and the regulations promulgated thereunder, are less than $10 million as of the
Closing Date.
(hh) INVESTOR STATUS. Set forth on Schedule 3.1(hh) hereto is a list
of all of the Management Stockholders receiving shares of THINK Stock in
connection with the transactions contemplated herein. Also set forth on such
Schedule 3.1(hh) is a listing of each such Management Stockholder's country of
residence and whether each such Management Stockholder is an Accredited
Investor, as that term is defined in Regulation D under the Securities Act, or a
non-Accredited Investor.
3.2 REPRESENTATIONS AND WARRANTIES OF NON-MANAGEMENT STOCKHOLDERS. As of
the date hereof and as of the Closing Date, each Non-Management Stockholder
represents and warrants to THINK and UAC, severally and not jointly, as follows:
27
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the Non-Management Stockholders. Each
Non-Management Stockholder represents and warrants that he or she has the
ability to consummate the transactions contemplated hereby, that this Agreement
has been duly executed and validly delivered by him or her and that this
Agreement is the valid and binding obligation of such Non-Management
Stockholder, enforceable against such Non-Management Stockholder in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights generally and except that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) TITLE TO SHARES. Each Non-Management Stockholder hereby
represents and warrants that he, she or it is either the sole legal or the sole
beneficial owner of the shares of the Company Stock as set forth in Schedule B
to this Agreement. Each Non-Management Stockholder hereby represents and
warrants that the issued and outstanding shares of Company Stock owned by such
Non-Management Stockholder are owned free of preemptive rights and free and
clear of any and all adverse claims, liens, mortgages, charges, security
interest, encumbrances and other restrictions or limitations of any kind
whatsoever.
(c) NON-CONTRAVENTIONS; CONSENTS. Neither the execution and delivery
of this Agreement by the Non-Management Stockholder nor consummation of the
transactions contemplated hereby, does or will: (i) violate or conflict with any
restriction of any kind whatsoever to which the Non-Management Stockholder is
subject or by which any of his or her properties or assets may be bound, the
effect of any of which violation or conflict could have a Material Adverse
Effect on the Company or any of the Subsidiaries, or (iii) constitute an event
permitting termination by a third party of any agreement to which the
Non-Management Stockholder is a party or is subject, which termination could
have a Material Adverse Effect on the Company or any of the Subsidiaries, or
violate or conflict with any agreement or contract to which any Non-Management
Stockholder is a party. No consent, authorization, order, or approval of, or
filing or registration with, any governmental commission, board, or other
regulatory body is required in connection with the execution, delivery, and
performance by the Non-Management Stockholder of the terms of this Agreement and
the consummation by the Non-Management Stockholder of the transactions
contemplated hereby.
(d) LITIGATION. There is no action, suit, proceeding, or
investigation pending, or, to the Non-Management Stockholders' knowledge,
threatened, which could restrict the Non-Management Stockholders' ability to
perform his or her respective obligations hereunder, or could have a Material
Adverse Effect on the Company or any of the Subsidiaries.
(e) INVESTMENT PURPOSE. Each Non-Management Stockholder represents
that each Non-Management Stockholder is acquiring and will acquire, as the case
may be, the shares of THINK Stock issuable to him or her pursuant hereto solely
for his or her own account for investment purposes only and not with a view
toward resale or distribution thereof other than pursuant to an effective
28
registration statement or applicable exemption from the registration
requirements of the Securities Act. Each Non-Management Stockholder understands
that such shares of THINK Stock will be issued in reliance upon an exemption
from the registration requirements of the Securities Act and that subsequent
sale or transfer of such securities is prohibited absent registration or
exemption from the provisions from the Securities Act. Each Non-Management
Stockholder hereby agrees that he or she will not sell, assign, transfer, pledge
or otherwise convey any of the shares of the THINK Stock issuable to him or her
pursuant hereto, except in compliance with the provisions of the Securities Act
and in accordance with any transfer restrictions or similar terms set forth on
the certificates representing such securities or otherwise set forth herein.
(f) INVESTOR STATUS. Set forth on Schedule 3.2(f) hereto is a list
of all of the Non-Management Stockholders receiving shares of THINK Stock in
connection with the transactions contemplated herein. Also set forth on such
Schedule 3.2(f) is a listing of each such Non-Management Stockholder's country
of residence and whether each such Non-Management Stockholder is an Accredited
Investor, as that term is defined in Regulation D under the Securities Act, or a
non-Accredited Investor.
3.3 REPRESENTATIONS AND WARRANTIES OF THINK AND UAC. As of the date hereof
and as of the Closing Date, THINK and UAC represent and warrant to the Company
and the Stockholders as follows:
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of THINK and
UAC. THINK and UAC have taken all necessary corporate action and have all of the
necessary corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the officers of THINK and UAC on behalf of THINK and
UAC, respectively, and, assuming that this Agreement is the valid and binding
obligation of the Company and the Stockholders, is the valid and binding
obligation of THINK and UAC, respectively, enforceable against each in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, or by legal or equitable principles, relating
to or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) ORGANIZATION. THINK is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and UAC
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and each has the corporate power and authority to
own and lease its respective properties and assets, and to carry on its
respective business as such business is now being conducted. Each of THINK and
UAC is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a Material Adverse Effect on
THINK or UAC.
29
(c) CAPITALIZATION. The number of authorized, issued and outstanding
shares of capital stock of THINK and UAC as of the date hereof is as set forth
above in the recitals to this Agreement. The outstanding shares of THINK Stock
and UAC Stock have been duly authorized and validly issued and are fully paid
and nonassessable. As of the date hereof, the number of shares of capital stock
that THINK is currently authorized to issue is adequate to permit THINK to
fulfill its obligations hereunder with respect to issuance of the shares of
THINK Stock to the Stockholders pursuant hereto. On the Closing Date, the shares
of THINK Stock issuable to the Stockholders pursuant to Section 1.2 will be duly
authorized, validly issued, fully paid and nonassessable. Neither THINK nor UAC
has issued any shares of capital stock which could give rise to claims for
violation of any federal or state securities laws (including any rules or
regulations promulgated thereunder) or the securities laws of any other
jurisdiction (including any rules or regulations promulgated thereunder). As of
the date hereof, there are no options, warrants, calls, convertible securities
or commitments of any kind whatsoever relating to the shares of THINK Stock or
UAC Stock subject hereto.
(d) NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery
of this Agreement, nor consummation of the transactions contemplated hereby,
does or will: (i) violate or conflict with any provision of the certificate of
incorporation or bylaws of THINK or UAC; (ii) violate or conflict with any
material provision of any mortgage, lien, lease, agreement, permit, indenture,
license, instrument, law, order, arbitration award, judgment or decree to which
THINK or UAC is a party or by which it or the property or assets which are
material to its business or operation are bound, the effect of any of which
violation would have a Material Adverse Effect on THINK or UAC; (iii) violate or
conflict with any other restriction to which THINK or UAC is subject or by which
any of the property or assets which are material to the business or operation of
THINK or UAC may be bound, the effect of any of which violation or conflict
would have a Material Adverse Effect on THINK or UAC; or (iv) constitute an
event permitting termination of any agreement to which THINK or UAC is subject
by any other party thereto, if in any such circumstance such termination could
have a Material Adverse Effect on THINK or UAC. Other than as provided herein,
no consent, authorization, order or approval of, or filing or registration with,
any governmental commission, board or other regulatory body is required in
connection with the execution, delivery and performance of the terms of this
Agreement by THINK and UAC and consummation by THINK and UAC of any of the
transactions contemplated hereby.
(e) LITIGATION. There is no action, suit, proceeding or
investigation pending against or related to THINK or UAC, nor, to the best
knowledge of THINK and UAC, has THINK or UAC been threatened with any such
action, suit, proceeding or investigation, which would restrict the ability of
either to perform its respective obligations hereunder or which would have a
Material Adverse Effect on THINK or UAC. Neither THINK nor UAC is in default in
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, local or other governmental agency, authority, body, board,
bureau, commission, department or instrumentality which could have a Material
Adverse Effect on THINK or UAC.
(f) ACCURACY OF INFORMATION FURNISHED. No statement by THINK or UAC
set forth herein or in the exhibits or the schedules hereto, and no statement
set forth in any certificate or other instrument or document required to be
delivered by or on behalf of THINK or UAC pursuant hereto or in connection with
30
consummation of the transactions contemplated hereby, contained, contains or
will contain any untrue statement of a material fact, or omitted, omits or will
omit to state any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(g) COMPLIANCE WITH APPLICABLE LAW. THINK and UAC have been and is
in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations (including without limitation the Securities
Act and the Securities Exchange Act of 1934, as amended) as of the date hereof,
the failure to comply with which could materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
THINK or UAC or which would subject any officer or director of THINK or UAC to
civil or criminal penalties or imprisonment. THINK and UAC have complied with
the rules and regulations of all governmental agencies having authority over its
business or its operations, including without limitation, agencies concerned
with intra-state and interstate commerce, occupational safety, environmental
protection and employment practices, except where the failure to comply would
not have a Material Adverse Effect on THINK or UAC. Neither THINK nor UAC has
any knowledge of, nor has THINK or UAC received any notice of, violation of any
such rule or regulation during the two years prior to the date hereof which
could result in any liability of THINK or UAC for penalties or damages or which
could subject it to any injunction or government writ, order or decree. To the
best knowledge of THINK and UAC, there are no facts, events or conditions that
could interfere with, prevent continued compliance with or give rise to any
liability under any foreign, federal, state or local governmental laws,
statutes, ordinances or regulations applicable to the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of THINK
or UAC, except where the failure to do so would not have a Material Adverse
Effect on THINK or UAC.
(h) NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of THINK has occurred since December 31, 1997. No material adverse
change in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of UAC has occurred since June 23, 1998, on which date UAC's
articles of incorporation were filed with the Secretary of State of the State of
Delaware.
(i) EMPLOYEE BENEFIT PLANS. Schedule 3.3(i) hereto sets forth a
true, correct and complete list of all of THINK's Benefit Plans (the "THINK
Benefit Plans") covering the employees of the THINK (the "THINK Employees").
Each THINK Benefit Plan is in compliance in all material respects with all
applicable provisions of law, including ERISA and the Code. There are no pending
or, to THINK's knowledge, threatened claims against any THINK Benefit Plan
(except for claims for benefits payable in the normal operation of the THINK
Benefit Plans) that could give rise to any material liability to the THINK. All
material reports, notices and returns required to be filed with any governmental
agency or provided to any person or entity with respect to the THINK Benefit
Plans have been timely filed. THINK has never had and does not now have any
THINK Benefit Plan that is an employee pension plan (as defined in Section 3(2)
of ERISA) nor does THINK contribute to any multiemployer pension or
31
multiemployer welfare benefit plan (within the meaning of Section 3(37) of
ERISA). There exist no benefit plans with respect to the employees of UAC.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Sections 3.1, 3.2 and 3.3 hereof shall survive until the
close of business on the date that is the second anniversary of the Closing Date
("Second Anniversary Date"), PROVIDED THAT, notice or demand with respect to any
alleged breach thereof is given as required pursuant to Article VI hereof; and
FURTHER PROVIDED THAT, with respect to claims for damages arising out of any
misrepresentation or breach of warranty made by the Company and the Stockholders
relating to taxes, notice shall have been given on or before the close of
business on the sixtieth (60th) day following the later to occur of: (i) the
expiration date of the statute of limitations applicable to any indemnified
foreign, federal, state or local tax liability; and (ii) the final determination
of any such tax liability, including the final administrative and/or judicial
determination thereof.
ARTICLE IV
COVENANTS
4.1 COVENANTS OF THINK.
(a) ISSUANCE OF SHARES. To the extent THINK is potentially obligated
hereunder to issue additional shares of THINK Stock, and at all times that such
obligations remain outstanding, THINK shall cause the approximate number of
shares of THINK Stock potentially subject to such obligations to be duly
authorized and reserved for issuance.
(b) OPERATING CAPITAL. THINK shall, until June 30, 1999, make
available to NetComs Europe Ltd. and UbiComs, Inc. funds as requested in good
faith by the presidents of NetComs Europe Ltd. and UbiComs, Inc., in an amount
not to exceed $750,000, which shall be used by such entities for general
corporate purposes and for the day-to-day operations of such entities.
(c) SEPARATE ACCOUNTING. THINK agrees that in the event, not in
connection with the Subsidiaries (or, if in connection with the Subsidiaries, by
mutual agreement of THINK, UAC and the Subsidiaries), UAC acquires or is merged
with or into another entity, or acquires any assets or incurs any expense, other
than UAC's pro rata allocation of THINK's general overhead expense and other
non-material expenses, THINK shall ensure that the Consolidated Revenues and
Pretax Profit Margin of the Subsidiaries are separately monitored and accounted
for so as to not impair THINK's or the Stockholders' ability to determine the
Consolidated Revenues and Pretax Profit Margin as set forth in Section 1.3.
4.2 COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
(a) GOOD STANDING. Promptly following execution of this Agreement,
but in any event not later than July 10, 1998, the Management Stockholders shall
take, or shall cause to be taken, all actions reasonably necessary to ensure
that NetComs USA, Inc. and NetComs Entertainment, Inc. are in good standing
under the laws of the state of each such corporation's jurisdiction of
32
incorporation, as evidenced by a certificate from the appropriate state official
of such state.
(b) RED DOT PLAN. Promptly following execution of this Agreement,
but in any event not later than July 10, 1998, the Stockholders shall take, or
shall cause to be taken, all actions necessary to terminate the Red Dot Plan in
accordance with the terms of the Red Dot Plan.
4.3 GOVERNMENTAL FILINGS AND CONSENTS. The Company, the Stockholders and
THINK shall cooperate with one another in filing any necessary applications,
reports and other documents with any foreign, federal and state agencies,
authorities and bodies having jurisdiction with respect to the respective
businesses of the Company and/or of any of the Subsidiaries and/or the
transactions contemplated by this Agreement, and in seeking any necessary
approval, consultation or prompt favorable action of, with or by any of such
agencies, authorities or bodies.
4.4 PUBLICITY. The Company, the Stockholders and THINK will consult with
each other party hereto prior to making, releasing or otherwise disseminating
any public announcements with respect to the transactions contemplated by this
Agreement. Any public announcements permitted hereunder shall be made only at
such time and in such manner as the Company and the Stockholders (collectively
acting as one) and THINK shall mutually agree, except that any party hereto
shall be free to make such public announcements as it shall reasonably deem
necessary to comply with foreign, federal or state laws, provided that such
announcement is simultaneously delivered to the other parties hereto.
4.5 RIGHT TO INVESTIGATE. The Company shall afford to the officers and
authorized representatives and agents of THINK, during what are currently the
regular business hours of the Company and upon prior notice, free and full
access to any office, warehouse, plant, property, inventory, accounts, books and
records of the Company such as to afford THINK the full opportunity to make such
investigations as it shall desire or deem appropriate with respect to the
affairs of the Company. The officers of the Company shall furnish THINK with
such additional financial and operating data and other information relating to
the assets, property, business and operation of the Company as THINK shall from
time to time request. Notwithstanding anything to the contrary set forth herein,
no due diligence or other investigation by THINK (or failure to conduct same)
shall operate as a waiver of, or otherwise affect any representation, warranty
or agreement given or made hereunder by the Company of any of the Stockholders.
ARTICLE V
CONDITIONS
5.1 CONDITIONS TO OBLIGATIONS OF THINK AND UAC. The obligation of THINK
and UAC to consummate the transactions contemplated by this Agreement is subject
to the fulfillment of each of the following conditions, which may be waived in
whole or in part by THINK and UAC (in their sole and absolute discretion) to the
extent permitted by applicable law:
33
(a) NO MATERIAL ADVERSE CHANGE. Except as set forth on Schedule
3.1(m), since December 31, 1997, no material adverse change in the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
the Company or of any of the Subsidiaries, and no event which would materially
and adversely affect the business, assets, operations, earnings, prospects or
condition (financial or otherwise) of the Company or of any of the Subsidiaries
shall have occurred.
(b) COPIES OF RESOLUTIONS. The Company shall have furnished THINK
with certified copies of resolutions duly adopted by the board of directors of
the Company and the Stockholders authorizing the execution, delivery and
performance of the terms of this Agreement and all other necessary or proper
corporate action to enable the Company to comply with the terms of this
Agreement.
(c) CERTIFICATES OF GOOD STANDING. The Company shall have furnished
THINK with certified copies of certificates of good standing of the Company and
each U.S. Subsidiary other than NetComs USA, Inc. and NetComs Entertainment,
Inc. dated not more than ten (10) business days prior to the Closing Date from
the respective states or jurisdictions of incorporation or organization of the
Company and each Subsidiary and each other jurisdiction in which the Company or
any Subsidiary does business.
(d) OPINION OF THE COMPANY'S AND STOCKHOLDERS' COUNSEL. The Company
shall have furnished THINK with an opinion of Xxxxxx, Parachini, Steinberg,
Matzger & Xxxxxxx, LLP, counsel to the Company, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit 5.1(d).
(e) ACCURACY OF REPRESENTATIONS AND WARRANTIES: PERFORMANCE OF
COVENANTS. Each of the representations and warranties of the Company and each of
the Stockholders set forth in this Agreement was true, correct and complete in
all material respects when made and shall also be true, correct and complete in
all material respects at and as of the Closing Date, with the same force and
effect as if made at and as of the Closing Date. The Company and the
Stockholders shall have performed and complied in all material respects with all
agreements and covenants required by this Agreement to be performed by the
Company and each of the Stockholders at or prior to the Closing Date.
(f) DELIVERY OF OFFICERS' CERTIFICATES. The Company shall have
delivered a certificate signed by an Officer of the Company (i) with respect to
the authority and incumbency of the officers of the Company executing this
Agreement and any documents required to be executed or delivered in connection
therewith and (ii) certifying that the copies of the Company's and each
Subsidiary's articles of incorporation and bylaws, as attached to such
certificate and delivered to date as part of THINK's and UAC's due diligence
review, are true and correct copies as such documents are in effect on the
Closing Date.
(g) DELIVERY OF STOCK CERTIFICATES. The Stockholders shall have
delivered to THINK certificates representing all of the issued and outstanding
capital stock of the Company and the Subsidiaries.
34
(h) CONSENTS AND WAIVERS. On or prior to the Closing Date, any and
all necessary consents, authorizations, orders or approvals described in
Subsection 3.1(p) above shall have been obtained, except as the same shall have
been waived by THINK.
(i) LITIGATION. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company or the Stockholders issued by a court or
governmental agency (or other governmental or regulatory authority) of competent
jurisdiction restraining or prohibiting the consummation of the transactions
contemplated hereby or making consummation thereof unduly burdensome to the
Company or the Stockholders. On the Closing Date and immediately prior to
consummation of the transactions contemplated by this Agreement, no proceeding
or lawsuit shall have been commenced, be pending or have been threatened by any
governmental or regulatory agency or authority or any other person with respect
to the transactions contemplated by this Agreement.
(j) DELIVERY OF DOCUMENTS AND OTHER INFORMATION. Prior to the
Closing Date, the Company shall have delivered to THINK all of the agreements,
contracts, documents and other instruments required to be delivered pursuant to
the provisions of this Agreement.
(k) OPTIONS. Prior to the Closing, the Company shall have taken, or
shall cause to be taken, all actions necessary to terminate all options to
purchase Company Stock and Subsidiary Stock that have not vested prior to the
Closing Date and will not automatically vest in accordance with their terms at
the time of grant upon consummation of the transactions contemplated herein;
PROVIDED, HOWEVER, that a condition of such termination shall be the issuance,
in accordance with the terms set forth in Exhibit 5.1(k), which is incorporated
herein by reference, of options to purchase shares of THINK Stock to the holder
of such options as set forth in Schedule 1.2. Subsequent to such termination,
and except as may be specifically provided herein or in Exhibit 5.1(k), the
holders of such options shall have no further right, title or interest in such
options and shall have no right to receive shares of THINK Stock or options to
purchase shares of THINK Stock in exchange therefor.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS. The
obligations of the Company and the Stockholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment of each of the
following conditions, which may be waived in whole or in part by the Company
and/or the Stockholders to the extent permitted by law:
(a) COPIES OF RESOLUTIONS. At the Closing, THINK shall have
furnished the Company with certified copies of resolutions duly adopted by the
board of directors of THINK authorizing the execution, delivery and performance
of the terms of this Agreement (including the issuance and delivery of the THINK
Stock referred to in Section 5.2(f) below) and all other necessary or proper
corporate action to enable THINK to comply with the terms of this Agreement.
(b) CERTIFICATES OF GOOD STANDING. At the Closing, THINK shall have
furnished the Company with certified copies of certificates of good standing of
THINK dated not more than ten (10) business days prior to the Closing Date from
35
the State of Delaware and each other jurisdiction in which THINK is qualified to
do business.
(c) OPINION OF THINK'S COUNSEL. THINK shall have furnished to the
Company, at the Closing, with an opinion of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel
to THINK, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit 5.2(c).
(d) ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
COVENANTS. Each of the representations and warranties of THINK was true, correct
and complete in all material respects when made and shall also be true, correct
and complete in all material respects at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date. THINK shall have
performed and complied with in all material respects all agreements and
covenants required by this Agreement to be performed by THINK at or prior to the
Closing Date.
(e) DELIVERY OF OFFICERS' CERTIFICATES. THINK shall also have
delivered a certificate signed by the Secretary of THINK (i) with respect to the
authority and incumbency of the officers of THINK executing this Agreement and
any documents required to be executed or delivered in connection therewith and
(ii) certifying that the copies of THINK's articles of incorporation and bylaws,
as attached to such certificate and delivered to date as part of the Company's
due diligence review, are true and correct copies of such documents as in effect
on the Closing Date.
(f) STOCK CERTIFICATES. At the Closing, THINK shall have issued and
delivered to the Stockholders certificates representing the shares of THINK
Stock issuable pursuant hereto, which certificates shall be in the respective
names of the Stockholders.
(g) CONSENTS AND WAIVERS. On or prior to the Closing Date, any and
all necessary consents, authorizations, orders or approvals described in
Subsection 3.2(d) above shall have been obtained, except as the same shall have
been waived by the Company and the Stockholders.
(h) LITIGATION. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to THINK issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
herein or making the consummation thereof unduly burdensome to THINK. On the
Closing Date and immediately prior to consummation of the transactions
contemplated by this Agreement, no proceeding or lawsuit shall have been
commenced, be pending or have been threatened or by any governmental or
regulatory agency or authority or any other person with respect to the
transactions contemplated by this Agreement, but without restricting their
rights to seek contribution from one and then pursuant to applicable statutes or
common law.
ARTICLE VI
INDEMNIFICATION AND CLAIMS
6.1 INDEMNIFICATION BY THE MANAGEMENT STOCKHOLDERS.
36
(a) Subject to Sections 6.1(b), 6.1(c) and 6.6 hereof, the
Management Stockholders hereby agree, jointly and severally, but without
restricting their rights to seek contribution from one another pursuant to
applicable statutes or common law (provided that any such contribution shall in
no way prejudice or adversely affect THINK's or UAC's ability to proceed with
respect to the indemnification provided herein as THINK or UAC may deem
necessary or appropriate under the circumstances, nor prejudice or adversely
affect any other of THINK's or UAC's rights or remedies hereunder) to indemnify
and hold harmless THINK or UAC against and in respect of all damages, claims,
losses and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) reasonably incurred by THINK or UAC (all such amounts may
hereinafter be referred to as the "Damages") arising out of: (i) any
misrepresentation or breach of any representation or warranty made by the
Company or the Management Stockholders pursuant to the provisions of this
Agreement or in any statement, certificate or other document furnished by the
Company or the Management Stockholders pursuant to this Agreement; and (ii) the
nonperformance or breach of any covenant, agreement or obligation of the Company
or the Management Stockholders contained in this Agreement which has not been
waived by THINK in writing. The Management Stockholders shall have no right to
seek contribution from the Company in the event that they are required to make
any payments hereunder.
(b) Until the close of business on the Second Anniversary Date and
subject to Section 3.4 hereof, the Management Stockholders shall be obligated to
indemnify THINK and UAC pursuant to this Section 6.1 with respect to claims for
Damages as to which THINK and UAC shall have given written notice to the Company
and the Management Stockholders on or before the close of business on the
ninetieth (90th) day following discovery by THINK or UAC, as the case may be, of
the facts upon which a claim for indemnification is being made. The Management
Stockholders shall be obligated to indemnify THINK and UAC with respect to
claims for Damages arising out of any misrepresentation or breach of warranty
made by the Company or the Management Stockholders relating to Subsection 3.1(s)
as to which THINK or UAC shall have given notice on or before the close of
business on the sixtieth (60th) day following the later of: (i) the expiration
date of the statute of limitations applicable to any indemnified federal, state,
foreign or local tax liability; or (ii) the final determination of any such tax
liability, including the final administrative and/or judicial determination
thereof.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.1(a) and 6.1(b) above, no amount shall be payable by the Management
Stockholders in indemnification hereunder or under any other provision of this
Agreement unless the aggregate amount of such Damages in respect of which the
Company or the Management Stockholders would be liable, but for operation and
application of the provisions of this Section 6.1(c), exceeds on a cumulative
basis Fifty Thousand Dollars ($50,000) and then only to the extent of such
excess. The Management Stockholders may satisfy their indemnification
obligations hereunder by delivering to THINK or UAC, as the case may be, shares
of THINK Stock having an aggregate value equal to the amount of such
indemnification obligation, but only to the extent that such shares of THINK
Stock may not be transferred in reliance on Rule 144 under the Securities Act;
PROVIDED, HOWEVER, that if the value of such shares of THINK Stock is not
sufficient to satisfy the Management Stockholders' indemnification obligation,
THINK or UAC, as the case may be, shall have the option, to be exercised in
THINK's or UAC's sole discretion, as the case may be, to satisfy such deficiency
37
in either shares of THINK Stock then owned by the Non-Management Stockholders or
cash; PROVIDED FURTHER, that the value of such shares shall be determined in
accordance with Section 6.6 herein.
(d) In any case where the Management Stockholders have indemnified
THINK or UAC for any Damages and either THINK or UAC recovers from a third party
all or any part of the amount so indemnified by the Management Stockholders,
THINK or UAC, as the case may be, shall promptly reimburse to the Management
Stockholders the amount so recovered.
6.2 INDEMNIFICATION BY THE NON-MANAGEMENT STOCKHOLDERS.
(a) Subject to Sections 6.2(b), 6.2(c) and 6.6 hereof, the
Non-Management Stockholders hereby agree, severally and not jointly, to
indemnify and hold harmless THINK and UAC against and in respect of all Damages
arising out of: (i) any misrepresentation or breach of any representation or
warranty made by the Non-Management Stockholders pursuant to the provisions of
this Agreement or in any statement, certificate or other document furnished by
the Non-Management Stockholders pursuant to this Agreement; and (ii) the
non-performance or breach of any covenant, agreement or obligation of the
Non-Management Stockholders contained in this Agreement which has not been
waived by THINK in writing. The Non-Management Stockholders shall have no right
to seek contribution from the Company in the event they are required to make any
payments hereunder.
(b) Until the close of business on the Second Anniversary Date and
subject to Section 3.4 hereof, the Non-Management Stockholders shall be
obligated to indemnify THINK and UAC pursuant to this Section 6.1 with respect
to claims for Damages as to which THINK or UAC shall have given written notice
to the Non-Management Stockholders on or before the close of business on the
ninetieth (90th) day following discovery by THINK or UAC, as the case may be, of
the facts upon which a claim for indemnification is being made.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.2(a) and 6.2(b) above, no amount shall be payable by the
Non-Management Stockholders in indemnification hereunder or under any other
provision of this Agreement unless the aggregate amount of such Damages in
respect of which the Non-Management Stockholders would be liable, but for
operation and application of the provisions of this Section 6.2(c) exceeds on a
cumulative basis $50,000 and then only to the extent of such excess. The
Non-Management Stockholders may satisfy their indemnification obligations
hereunder by delivering to THINK or UAC, as the case may be, shares of THINK
Stock having an aggregate value equal to the amount of such indemnification
obligation, but only to the extent that such shares of THINK Stock may not be
transferred in reliance on Rule 144 under the Securities Act; PROVIDED, HOWEVER,
that if the value of such shares of THINK Stock is not sufficient to satisfy the
Non-Management Stockholders' indemnification obligation, THINK or UAC, as the
case may be, shall have the option, to be exercised in THINK's or UAC's sole
discretion, as the case may be, to satisfy such deficiency in either shares of
THINK Stock then owned by the Non-Management Stockholders or cash; PROVIDED
FURTHER, that the value of such shares shall be determined in accordance with
Section 6.6 herein.
38
(d) In any case where the Non-Management Stockholders have
indemnified THINK or UAC for any Damages and THINK or UAC recovers from a third
party all or any part of the amount so indemnified by the Non-Management
Stockholders, THINK or UAC, as the case may be, shall promptly reimburse to the
Non-Management Stockholders the amount so recovered.
6.3 CLAIMS AGAINST THINK. With respect to claims or demands by third
parties, whenever THINK shall have received notice that such a claim or demand
has been asserted or threatened which, if valid, would be subject to
indemnification under Section 6.1 or 6.2 hereof, THINK shall as soon as
reasonably possible and in any event within thirty (30) days of receipt of such
notice, notify the Management Stockholders or the Non-Management Stockholders,
as applicable, of such claim or demand and of all relevant facts within its
knowledge which relate thereto. The Management Stockholders or the
Non-Management Stockholders, as applicable, shall then have the right at their
own expense to undertake the defense of any such claims or demands utilizing
counsel selected by the Management Stockholders or the Non-Management
Stockholders, as applicable, and approved by THINK, which approval shall not be
unreasonably withheld. In the event that the Management Stockholders or the
Non-Management Stockholders, as applicable, should fail to give notice of the
intention to undertake the defense of any such claim or demand within sixty (60)
days after receiving notice that it has been asserted or threatened, THINK shall
have the right to defend, satisfy and discharge the same by payment, compromise
or otherwise and shall give written notice of any such payment, compromise or
settlement to the Management Stockholders or the Non-Management Stockholders, as
applicable.
6.4 INDEMNIFICATION BY THINK.
(a) Subject to Sections 6.4(b) and 6.6 hereof, THINK hereby agrees
to indemnify and hold harmless the Company and the Stockholders against and in
respect of all damages, claims, losses and expenses (including without
limitation, reasonable attorneys' fees and disbursements) reasonably incurred by
the Stockholders with respect thereto (all such amounts may hereinafter be
referred to as "Stockholder Damages") arising out of: (i) any misrepresentation
or breach of any representation or warranty made by THINK or UAC pursuant to the
provisions of this Agreement or in any statement, certificate or other document
furnished by THINK or UAC pursuant to this Agreement; and (ii) the
nonperformance or breach of any covenant, agreement or obligation of THINK or
UAC which has not been waived by the Stockholders collectively in writing.
(b) Until the close of business on the Second Anniversary Date and
subject to Section 3.4 hereof, THINK shall be obligated to indemnify the
Stockholders pursuant to this Section 6.4 only with respect to claims for
Stockholder Damages as to which the Stockholders shall have given written notice
to THINK on or before the close of business on the sixtieth (60th) day following
discovery by the Stockholders of the facts upon which a claim for
indemnification is being made.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.4(a) above, no amount shall be payable by THINK in indemnification
hereunder or under any other provision of this Agreement unless the aggregate
amount of Stockholder Damages in respect of which THINK would be liable, but for
39
operation and application of the provisions of this subsection, exceeds on a
cumulative basis Fifty Thousand Dollars ($50,000) and then only to the extent of
such excess.
(d) In any case where THINK has indemnified the Stockholders for any
Stockholder Damages and the Stockholders recover from a third party all or any
part of the amount so indemnified by THINK, the Stockholders shall promptly
reimburse to THINK the amount so recovered.
6.5 CLAIMS AGAINST THE STOCKHOLDERS. With respect to claims or demands by
third parties, whenever the Stockholders shall have received notice that such a
claim or demand has been asserted or threatened, which, if valid, would be
subject to indemnification under Section 6.5 hereof, the Stockholders shall as
soon as reasonably possible and in any event within thirty (30) days of receipt
of such notice, notify THINK of such claim or demand and of all relevant facts
within its knowledge which relate thereto. THINK shall have the right at its own
expense to undertake the defense of any such claim or demand utilizing counsel
selected by THINK and approved by the Stockholders. In the event that THINK
should fail to give notice of its intention to undertake the defense of any such
claim or demand within sixty (60) days after receiving notice that it has been
asserted or threatened, the Stockholders shall have the right to defend, satisfy
and discharge the same by payment, compromise or otherwise and shall give
written notice of any such payment, compromise or settlement to THINK.
6.6 LIMITATION OF LIABILITY. THINK, the Company and the Stockholders agree
that (a) the liability of the Stockholders in the aggregate under this Agreement
shall be limited to the Purchase Price actually received, and (b) the liability
of THINK under this Agreement shall be limited to the Purchase Price actually
paid. The indemnification obligation of the Stockholders shall be satisfied in
the following manner: (a) during the first twelve months after the Closing Date,
the Stockholders may tender to THINK shares of THINK Stock issued to them
hereunder, with the value of such shares being determined as of the date such
shares are issued by THINK to the Stockholders, and (b) during the remainder of
the period of indemnification by, at THINK's election, the tender by the
Stockholders of cash or THINK stock issued to the Stockholders hereunder, with
the value of such shares being determined as of the date such shares are issued
by THINK to the Stockholders.
6.7 INDEMNIFICATION BY JESPER CAPITAL LTD.
(a) Notwithstanding anything to the contrary contained herein,
Jesper Capital Ltd., a British Virgin Island ("Jesper"), hereby agrees to
indemnify and hold harmless THINK and UAC against and in respect of all Damages
arising out of (i) the issuance to Jesper by THINK of either THINK Stock or
options to purchase THINK Stock in connection with the transactions contemplated
herein; (ii) Jesper's ability as a corporate entity to approve, execute and
deliver this Agreement and all other documents related thereto, and consummate
the transactions contemplated herein or therein; and (iii) Jesper's ability to
properly own and vote Company Stock. Jesper shall have no right to seek
contribution from the Company in the event it is required to make any payments
hereunder.
40
ARTICLE VII
MISCELLANEOUS
7.1 FEES AND EXPENSES. Each party hereto shall pay its own expenses
incident to negotiation, execution, delivery and performance of the terms of
this Agreement and the consummation of the transactions contemplated hereby.
7.2 MODIFICATION, AMENDMENTS AND WAIVER. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by unanimous consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
7.3 ASSIGNMENT. None of the parties hereto shall have the authority to
assign its respective rights or obligations under this Agreement without the
prior written consent of the other parties hereto, except that THINK may assign
all or any portion of its respective rights hereunder without the prior written
consent of the Company or the Stockholders in the event of a change in control
and the Company and the Stockholders shall execute such documents as are
necessary in order to effectuate such assignments.
7.4 BURDEN AND BENEFIT. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and assigns. In the event of a default by the
Company or the Stockholders of any of their respective obligations hereunder,
the sole and exclusive recourse and remedy of THINK shall be against the Company
and the Stockholders, as the case may be, and any of the Company's or the
Stockholder's assets; under no circumstances shall any officer or director of
the Company be liable in law or equity for any obligations of the Company or the
Stockholders hereunder. In the event of a default by THINK of any of its
obligations hereunder, the sole and exclusive recourse and remedy of the
Stockholders and the Company shall be against THINK and its assets; under no
circumstances shall any officer, director, stockholder or affiliate of THINK be
liable in law or equity for any obligations of THINK hereunder.
7.5 BROKERS. The Company and the Stockholders represent and warrant to
THINK that there are no brokers or finders entitled to any brokerage or finder's
fee or other commission or fee based upon arrangements made by or on behalf of
the Company or the Stockholders or any other person in connection with this
Agreement or any of the transactions contemplated hereby. THINK represents and
warrants to the Company and the Stockholders that no other broker or finder is
entitled to any brokerage or finder's fee or other commission or fee based upon
arrangements made by or on behalf of THINK in connection with this Agreement or
any of the transactions contemplated hereby, other than fees or commissions for
which THINK shall be solely responsible.
7.6 ENTIRE AGREEMENT. This Agreement and the schedules, exhibits, lists
and other documents referred to herein contain the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements with respect thereto, whether written or oral.
41
7.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
7.8 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by commercial expedited
delivery service or registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
If to the Company
or the Stockholders:
UbiCube Group, Inc.
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Parachini, Steinberg, Matzger & Xxxxxxx
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
E-Mail: xxxxxxxx@xxxxxx.xxx
If to THINK or UAC:
THINK New Ideas, Inc.
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
E-Mail: xxx.xxxxx@xxxxxxxx.xxx
42
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
E-Mail: xxxxxxxx@xx.xxx
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If sent as aforesaid, the date any such notice
shall be deemed to have been delivered on the date of transmission of a
facsimile or telex, the day after delivery to a commercial overnight delivery
service, or five days after delivery into a United States Postal facility.
7.9 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
7.10 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
7.11 SEVERABILITY OF PROVISIONS. The provisions of this Agreement shall be
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
7.12 HEADINGS. The headings set forth in the articles and sections of this
Agreement and in the exhibits and the schedules to this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute a part
hereof.
7.13 KNOWLEDGE STANDARD. When used in this Agreement, the phrase "to the
best knowledge of, " "knowledge of, " "known to" or similar phrases shall mean
the actual knowledge of: (i) with respect to THINK, the officers and directors
of THINK; (ii) with respect to the Company, the officers and directors of the
Company; (iii) with respect to the Management Stockholders, the individuals
listed on Schedule A hereto; and (iv) with respect to the Non-Management
Stockholders, the individuals or entities listed on Schedule B hereto.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date and year first above written.
ATTEST: THINK NEW IDEAS, INC.
______________________________ By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Xxxxxx X. Xxxxx, President
and Chief Executive Officer
ATTEST: UBICUBE ACQUISITION CORP.
______________________________ By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx, President
ATTEST: UBICUBE GROUP, INC.
______________________________ By: /s/ Xxxxxxxxxx Xxxxxxx
Name: /s/ Xxxxxxxxxx Xxxxxxx
-------------------------------------
Title: CHIEF EXECUTIVE OFFICER
WITNESS: THE STOCKHOLDERS
______________________________ By: /s/ Xxxxx Xxxxx
---------------------------------------
Xxxxx Xxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
44
WITNESS:
______________________________ By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Xxxxxx Xxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxx
---------------------------------------
Xxxxx Xxxxx
WITNESS:
______________________________ By: _/S/ HANNAH KLEIN____________________
Xxxxxx Xxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxx Xxx
---------------------------------------
Xxxxxx Xxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx
45
WITNESS:
______________________________ By: /s/ Xxxxxx Xxxxxxxx
---------------------------------------
Xxxxxx Xxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxx
---------------------------------------
Xxxxx XxXxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
46
WITNESS:
______________________________ By: /s/ Xxxx Xxxxxxx
---------------------------------------
Xxxx Xxxxxxx
WITNESS:
______________________________ By: /s/ Xxxx Xxxxxxx
---------------------------------------
Xxxx Xxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxx
---------------------------------------
Xxxxx Xxxx
WITNESS:
______________________________ By: /s/ Xxx Xxxxxx
---------------------------------------
Xxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxx
---------------------------------------
Xxxxx Xxxxx
WITNESS:
______________________________ By: /s/ Xxxxxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxxxxx Xxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxxxx
47
WITNESS:
______________________________ By: /s/ Xxxx Xxxxx
---------------------------------------
Xxxx Xxxxx
WITNESS:
______________________________ By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Xxxxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Guisi De Luca
---------------------------------------
Guisi De Luca
WITNESS:
______________________________ By: /s/ Xxxxxx XxXxxxxxxx
---------------------------------------
Xxxxxx Xxxxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx XxXxxxxxx
---------------------------------------
Xxxxx XxXxxxxxx
WITNESS:
___________________________ By: /s/ Xxxxx Xxxx
---------------------------------------
Xxxxx Xxxx
WITNESS:
______________________________ By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx
48
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxx Xxxxxxxx
---------------------------------------
Xxxx Xxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxx Xxx
---------------------------------------
Xxxx Xxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxxxxxx
WITNESS:
______________________________ By: /s/ Xxxxx Xxxxxx
---------------------------------------
Xxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Xxxx Xxxxxxxx
---------------------------------------
Xxxx Xxxxxxxx
49
WITNESS:
______________________________ By: /s/ Xxxxx Xxxx
---------------------------------------
Xxxxx Xxxx
WITNESS:
______________________________ By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Xxxxxxx Xxxxxx
WITNESS:
______________________________ By: /s/ Karthigesu Gajendran
---------------------------------------
Karthigesu Gajendran
WITNESS: XXXXXXXX LTD.
______________________________ By: /s/ XXXXXXXX LTD.
--------------------------------------
Name: ____________________________________
Title:
-----------------------------------
WITNESS: JESPER CAPITAL LTD.
______________________________ By: /s/ Jesper Capital Ltd.
--------------------------------------
Name: ____________________________________
Title:
-------------------------------------
WITNESS: LANC UK LTD.
___________________________ By: /s/ Lanc Uk Ltd.
--------------------------------------
Name: ____________________________________
Title:
-------------------------------------
50
