Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among:
XXXXXXXXXX.XXX, INC.,
a Delaware corporation;
XXXXXXXXXX.XXX MERGER SEVEN CORP.,
a Delaware corporation;
XXXXXX, INC.,
a Virginia corporation;
U.S. CONGRESS HANDBOOK, INC.,
a Virginia corporation;
and
THE STOCKHOLDERS OF XXXXXX, INC. AND U.S. CONGRESS HANDBOOK, INC.
LISTED ON EXHIBIT A HERETO
Dated as of January ___, 2000
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TABLE OF CONTENTS
PAGE
SECTION 1 - DESCRIPTION OF TRANSACTION...........................................................................20
1.1 Merger of USCH into Merger Sub.....................................................................20
1.2 Effect of the Merger...............................................................................20
1.3 Closing; Effective Time............................................................................20
1.4 Certificate of Incorporation, Bylaws and Directors and Officers....................................21
1.5 Conversion of USCH Stock...........................................................................21
1.6 Additional Consideration...........................................................................21
1.7 Closing of USCH Transfer Books.....................................................................21
1.8 Exchange of Certificates...........................................................................22
1.9 Dissenting Shares..................................................................................22
1.10 Tax Consequences...................................................................................23
1.11 Accounting Treatment...............................................................................23
1.12 Further Action.....................................................................................23
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF XXXXXX, USCH, AND THE STOCKHOLDERS................................23
2.1 Organization, Good Standing and Qualification......................................................23
2.2 Subsidiaries.......................................................................................23
2.3 Capitalization; Voting Rights......................................................................24
2.4 Authorization; Binding Obligations.................................................................24
2.5 Financial Statements...............................................................................24
2.6 Liabilities........................................................................................24
2.7 Agreements; Action.................................................................................24
2.8 Obligations to Related Parties.....................................................................25
2.9 Absence of Changes.................................................................................25
2.10 Title to Properties and Assets; Liens, Etc.........................................................25
2.11 Patents and Trademarks.............................................................................26
2.12 Compliance with Other Instruments..................................................................26
2.13 Litigation.........................................................................................26
2.14 Tax Returns and Payments...........................................................................27
2.15 Employees..........................................................................................27
2.16 Registration Rights................................................................................27
2.17 Compliance with Legal Requirements; Consents.......................................................28
2.18 Stockholders.......................................................................................28
2.19 Full Disclosure....................................................................................28
2.20 Reliance on Representations and Warranties.........................................................28
2.21 Securities Laws Matters............................................................................29
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION.........................................................29
3.1 Organization, Good Standing and Qualification......................................................29
3.2 Subsidiaries.......................................................................................29
3.3 Capitalization; Voting Rights......................................................................30
3.4 Authorization; Binding Obligations.................................................................30
3.5 Full Disclosure....................................................................................30
3.6 Litigation.........................................................................................30
3.7 Compliance with other Instruments..................................................................30
3.8 Consents...........................................................................................31
3.9 Current Ownership of Netivation Stock by the Stockholders..........................................31
3.10 Reliance on Representations and Warranties.........................................................31
SECTION 4 - CERTAIN COVENANTS OF XXXXXX, USCH AND THE STOCKHOLDERS..............................................31
4.1 Access and Investigation...........................................................................31
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4.2 Operation of Business..............................................................................32
4.3 USCH Stockholders' Meeting.........................................................................33
4.4 No Negotiation.....................................................................................33
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES..................................................................33
5.1 Notification; Opportunity to Cure..................................................................33
5.2 Filings and Consents...............................................................................34
5.3 Public Announcements...............................................................................34
5.4 Best Efforts.......................................................................................34
5.5 Tax Matters........................................................................................35
5.6 Resale.............................................................................................35
5.7 Confidentiality....................................................................................35
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF NETIVATION AND MERGER SUB....................................35
6.1 Accuracy of Representations........................................................................35
6.2 Performance of Covenants...........................................................................35
6.3 Stockholder Approval...............................................................................35
6.4 Consents...........................................................................................35
6.5 No Material Adverse Change.........................................................................35
6.6 Agreements and Documents...........................................................................36
6.7 No Restraints......................................................................................36
6.8 No Proceedings.....................................................................................36
6.9 Securities Law Compliance..........................................................................36
6.10 Dissenters Rights..................................................................................36
6.11 Unaccredited Investors.............................................................................36
6.12 Proceedings and Documents..........................................................................37
6.13 Corporate Approvals................................................................................37
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXX, USCH AND THE STOCKHOLDERS............................37
7.1 Accuracy of Representations........................................................................37
7.2 Performance of Covenants...........................................................................37
7.3 Consents...........................................................................................37
7.4 Agreements and Documents...........................................................................37
7.5 No Restraints......................................................................................37
7.6 No Proceedings.....................................................................................38
7.7 Corporate Approvals................................................................................38
7.8 Stock Price........................................................................................38
SECTION 8 - TERMINATION..........................................................................................38
8.1 Termination Events.................................................................................38
8.2 Termination Procedures.............................................................................38
8.3 Effect of Termination..............................................................................38
SECTION 9 - INDEMNIFICATION, ETC.................................................................................39
9.1 Survival of Representations, Warranties and Covenants..............................................39
9.2 Indemnification by the Stockholders................................................................39
9.3 Indemnification by Netivation......................................................................40
9.4 Interest...........................................................................................40
9.5 Defense of Third Party Claims......................................................................40
9.6 Indemnity Reserve..................................................................................41
9.7 Exercise of Remedies by Netivation Indemnitees Other Than Netivation...............................41
SECTION 10 - MISCELLANEOUS PROVISIONS............................................................................41
10.1 Stockholders' Agent................................................................................41
10.2 Further Assurances.................................................................................42
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10.3 Fees and Expenses..................................................................................42
10.4 Attorneys' Fees....................................................................................42
10.5 Notices............................................................................................42
10.6 Headings...........................................................................................43
10.7 Counterparts.......................................................................................43
10.8 Governing Law......................................................................................43
10.9 Successors and Assigns.............................................................................43
10.10 Remedies Cumulative; Specific Performance..........................................................43
10.11 Waiver.............................................................................................43
10.12 Amendments.........................................................................................43
10.13 Time of the Essence................................................................................43
10.14 Severability.......................................................................................44
10.15 Parties in Interest................................................................................44
10.16 Mediation and Arbitration..........................................................................44
10.17 Entire Agreement...................................................................................44
10.18 Cross-Guarantee....................................................................................44
10.19 Construction.......................................................................................44
EXHIBITS
Exhibit A - Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D - Allocation of Merger Consideration
Exhibit E - Forms of Legal Opinions
Exhibit F - Forms of Consulting Agreements
Exhibit G - Form of Escrow Agreement
Exhibit H - Form of Prospective Offeree Questionnaire
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and
entered into as of January 13, 2000, by and among: XXXXXXXXXX.XXX, INC., a
Delaware corporation ("Netivation"), XXXXXXXXXX.XXX MERGER SEVEN CORP., a
Delaware corporation and a wholly-owned subsidiary of Netivation ("Merger Sub"),
XXXXXX, INC., a Virginia corporation ("Xxxxxx"), U.S. CONGRESS HANDBOOK, INC., a
Virginia corporation and a sister corporation of Xxxxxx, ("USCH"), and the
stockholders of Xxxxxx and USCH set forth on EXHIBIT A hereto (the
"Stockholders"). Certain capitalized terms used in this Agreement are defined in
EXHIBIT B.
RECITALS
A. The parties intend to effect a merger of USCH into Merger
Sub in accordance with this Agreement and the Delaware General Corporation Law
("Delaware Law") and the Virginia Stock Corporation Act ("Virginia Law") (the
"Merger"). Upon consummation of the Merger, USCH will cease to exist, and Merger
Sub will remain a wholly-owned subsidiary of Netivation.
B. The Stockholders own an aggregate of 1000 shares of capital
stock of USCH (the "USCH Stock"), constituting 100% of the USCH capital stock on
a fully-diluted basis.
X. Xxxxxx and USCH are sister corporations with the same
shareholders and a history of common transactional relationships.
D. Although Xxxxxx is remaining independent and is not merging
with any other entity as contemplated in this Agreement or otherwise, Xxxxxx has
nevertheless been made a party to this Agreement at the request of Netivation
for the purpose of providing Netivation a sufficient level of comfort in regards
to representations, warranties, indemnities and other assurances that Netivation
requires in light of the relationship between Xxxxxx and USCH, and,
reciprocally, Netivation and Merger Sub are agreeing that the representations,
warranties, indemnities and other assurances provided to USCH are also provided
for the benefit of Xxxxxx.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1 - DESCRIPTION OF TRANSACTION
1.1 MERGER OF USCH INTO MERGER SUB . Upon the terms and
subject to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), USCH shall be merged with and into Merger Sub, and the
separate existence of USCH shall cease. Merger Sub will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER . The Merger shall have the effects
set forth in this Agreement and in the applicable provisions of Delaware Law and
Virginia Law.
1.3 CLOSING; EFFECTIVE TIME . The consummation of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields, Chartered, 000 X.
Xxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx, Xxxxx 00000 on or before January 31, 2000,
or at such other time as the parties may agree (the "Scheduled Closing Time").
(The date on which the Closing actually takes place is referred to in this
Agreement as the "Closing Date.") Contemporaneously with or as promptly as
practicable after the Closing, a properly executed certificate of merger (the
"Certificate of Merger"), conforming to the requirements of Delaware Law and
Virginia Law, shall be filed with the Secretary of State of the State of
Delaware and the Clerk of the Virginia State Corporation Commission. The Merger
shall become effective at the time such Certificate of Merger is filed with and
accepted by the Secretary of State of the State of Delaware and the Clerk of the
Virginia State Corporation Commission (the "Effective Time").
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1.4 CERTIFICATE OF INCORPORATION, BYLAWS AND DIRECTORS AND
OFFICERS .
(a) The certificate of incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by law; PROVIDED, HOWEVER, that Article I of the Certificate of
Incorporation shall be amended to read as follows: "The name of this corporation
is "U.S. Congress Handbook, Inc."
(b) The bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended.
(c) The directors and officers of the Surviving
Corporation immediately after the Effective Time shall be the individuals
identified on EXHIBIT C.
1.5 CONVERSION OF USCH STOCK .
(a) Subject to Sections 1.8(c) and 1.9, at the
Effective Time, by virtue of the Merger and without any further action on the
part of Netivation, Merger Sub, Xxxxxx, USCH or the Stockholders, each share of
Common Stock of USCH issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive Seventy-Five (75) shares of
Common Stock of Netivation (the "Netivation Stock"). All outstanding shares of
USCH capital stock shall be exchanged for no more than Seventy-Five Thousand
(75,000) shares of Netivation Stock. The Netivation Stock, together with the
payments described in Section 1.6, shall be the consideration for this
Transaction (the "Merger Consideration"). The Merger Consideration to be
received by the Stockholders is set forth on EXHIBIT D.
If, between the date of this Agreement and the Closing Date, the shares
of capital stock of USCH or the Netivation Stock are changed into a different
number or class of shares by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination or similar
transaction, the Merger Consideration shall be appropriately adjusted.
(b) If any shares of capital stock of USCH
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with USCH,
then the shares of Netivation Stock issued in exchange for such shares of
capital stock of USCH will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Netivation Stock may be accordingly marked with appropriate
legends.
1.6 ADDITIONAL CONSIDERATION . At Closing, Netivation shall
pay Two Hundred Thousand Dollars ($200,000) cash to the Stockholders. At
Closing, Netivation shall also deliver to the Stockholders a promissory note for
an additional Two Hundred Thousand Dollars ($200,000) to be paid in $25,000
increments on a quarterly basis beginning February 1, 2000 and ending November
1, 2001. Said promissory note shall bear interest at the short term Applicable
Federal Rate compounded quarterly in existence at the time of Closing and shall
be secured by an interest in the assets transferred from USCH to Merger Sub
through this Merger. All cash payments to the Stockholders shall be made in
proportion to each Stockholder's interest in USCH immediately prior to Closing.
1.7 CLOSING OF USCH TRANSFER BOOKS . At the Effective Time,
holders of certificates representing USCH capital stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of USCH, and the stock transfer books of USCH shall be closed with
respect to all shares of such capital stock outstanding immediately prior to the
Effective Time. No further transfer of any such capital stock of USCH shall be
made on such stock transfer books after the Effective Time. If, after the
Effective Time, a valid certificate previously representing any of such capital
stock of USCH (an "USCH Stock Certificate") is presented to the Surviving
Corporation or Netivation, such USCH Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.8.
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1.8 EXCHANGE OF CERTIFICATES .
(a) At or as soon as practicable after the Effective
Time, Netivation will send to each holder of an USCH Stock Certificate a letter
of transmittal and instructions for use in customary form and containing such
provisions as may reasonably be required for use in effecting the surrender of
such USCH Stock Certificate for payment therefor and conversion thereof. Upon
surrender of an USCH Stock Certificate to Netivation for exchange, together with
a duly executed letter of transmittal and such other documents as may be
reasonably required by Netivation, the holder of such USCH Stock Certificate
shall be entitled to receive in exchange therefor cash plus certificates
representing the number of whole shares of Netivation Stock that such holder has
the right to receive pursuant to the provisions of this Section 1 and the USCH
Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.8, each USCH Stock Certificate shall be deemed,
from and after the Effective Time, to represent only the right to receive upon
such surrender cash plus a certificate representing shares of Netivation Stock
(and cash in lieu of any fractional share of Netivation Stock) as contemplated
by this Section 1. If any USCH Stock Certificate shall have been lost, stolen or
destroyed, Netivation may, in its discretion and as a condition precedent to the
issuance of any certificates representing Netivation Stock, require the owner of
such lost, stolen or destroyed USCH Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Netivation may reasonably
direct) as indemnity.
(b) No dividends or other distributions declared or
made with respect to Netivation Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered USCH Stock Certificate
with respect to the shares of Netivation Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such USCH Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(c) No fractional shares of Netivation Stock shall be
issued in connection with the Merger. In lieu of such fractional shares, any
holder of capital stock of USCH who would otherwise be entitled to receive a
fraction of a share of Netivation Stock shall, upon surrender of such holder's
USCH Stock Certificate(s), be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the closing price of one share of Netivation Stock as reported by the NASDAQ
consolidated reporting system on the Closing Date.
(d) Each certificate representing any of the shares
of Netivation Stock to be issued in the Merger shall bear a legend identical or
similar in effect to the following legend (together with any other legend or
legends required by applicable state securities laws or otherwise):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND ARE
RESTRICTED WITHIN THE MEANING OF RULE 144 OF THE ACT AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(e) Netivation and the Surviving Corporation shall be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable to any holder or former holder of capital stock of USCH pursuant to
this Agreement such amounts as Netivation or the Surviving Corporation may be
required to deduct or withhold therefrom under the Code or under any provision
of state, local or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid. Netivation shall use its reasonable best efforts to (i) provide the
Stockholders with notice of any such amounts to be deducted or withheld; and
(ii) review the reasons for such deductions or withholdings with the
Stockholders.
1.9 DISSENTING SHARES . Notwithstanding anything in this
Agreement to the contrary, shares of capital stock of USCH that are issued and
outstanding immediately prior to the Effective Time and that are held by
stockholders who have not voted such shares in favor of the Merger and who have
delivered a written demand for appraisal of such shares in the manner provided
under Virginia Law ("Dissenting Shares") shall not be canceled and
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converted in accordance with Section 1.5 unless and until such holder shall
have failed to perfect, or shall have effectively withdrawn or lost, such
holder's right to appraisal and payment under Virginia Law. If such holder
shall have so failed to perfect, or shall have effectively withdrawn or lost
such right, such holder's capital stock of USCH shall thereupon be deemed to
have been canceled and converted as described in Section 1.5 at the Effective
Time, and each such share shall represent solely the right to receive the
merger consideration described in Section 1.5. USCH shall give prompt notice
of any demands received by USCH for appraisal of its shares, and, prior to
the Effective Time, Netivation shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, USCH shall not, except with the prior written consent of
Netivation, make any payment with respect to, or settle or offer to settle,
any such demands. From and after the Effective Time, no stockholder of USCH
who has demanded appraisal rights as provided under Virginia Law shall be
entitled to vote such holder's shares of Netivation Stock or capital stock of
USCH for any purpose or to receive payment of dividends or other
distributions with respect to such holder's shares (except dividends and
other distributions payable to stockholders of record of USCH at a date which
is prior to the Effective Time).
1.10 TAX CONSEQUENCES . For federal income tax purposes, the
Merger is intended to constitute a reorganization within the meaning of Section
368(a) of the Code. The parties to this Agreement hereby adopt this Agreement as
a "plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.11 ACCOUNTING TREATMENT . For Netivation's accounting
purposes, the Merger is intended to be treated as a "purchase," but it is also
intended to be treated as a tax-free reorganization under Section 368 of the
Code for federal income tax purposes. Xxxxxx and Stockholders shall assume no
responsibility for Netivation's accounting or reporting of the Merger.
1.12 FURTHER ACTION . If, at any time after the Effective
Time, any further action is determined by Netivation to be necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation or Netivation with full right, title and possession of and to all
rights and property of USCH, the officers and directors of the Surviving
Corporation and Netivation shall be fully authorized (in the name of USCH and
otherwise) to take such action.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF
XXXXXX, USCH, AND THE STOCKHOLDERS
Except as set forth in Schedule 2 (the "Xxxxxx Schedule of
Exceptions"), Xxxxxx, USCH, and each of the Stockholders jointly and severally
represent and warrant, to and for the benefit of the Netivation Indemnitees, as
follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION . Xxxxxx and
USCH are corporations duly organized, validly existing and in good standing
under the laws of the State of Virginia. Xxxxxx and USCH have all requisite
corporate power and authority to own and operate their properties and assets, to
execute and deliver the Transactional Agreements, to carry out the provisions of
the Transactional Agreements and to carry on their business as presently
conducted and as presently proposed to be conducted. Xxxxxx and USCH are duly
qualified and authorized to do business and are in good standing as foreign
entities in all jurisdictions in which the nature of their activities and of
their properties (both owned and leased) make such qualifications necessary,
except for those jurisdictions in which failure to do so would not have a
Material Adverse Effect on Xxxxxx, USCH or their respective businesses. Xxxxxx
and USCH have made available to Netivation true, correct and complete copies of
Xxxxxx'x and USCH's articles of incorporation and bylaws, each as amended to
date.
2.2 SUBSIDIARIES . USCH owns no equity securities of any other
corporation, limited partnership or similar entity. Xxxxxx and USCH are not
participants in any joint venture, partnership or similar arrangement.
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2.3 CAPITALIZATION; VOTING RIGHTS . The authorized capital
stock of Xxxxxx consists of 1000 shares of Common Stock, of which 500 shares are
issued and outstanding. The authorized capital stock of USCH consists of 5000
shares of Common Stock, of which 1000 shares are issued and outstanding. EXHIBIT
A sets forth the names of the stockholders of Xxxxxx and USCH and the number of
shares of capital stock owned of record by each such stockholder. The
Stockholders together own all of the outstanding shares of capital stock of
USCH. All issued and outstanding shares of USCH's Common Stock (i) have been
duly authorized and validly issued, (ii) are fully paid and nonassessable and
(iii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any kind for the
purchase or acquisition from USCH of any of its securities.
2.4 AUTHORIZATION; BINDING OBLIGATIONS . Xxxxxx and USCH have
all requisite right, power and authority to enter into and to perform their
obligations under the Transactional Agreements to which Xxxxxx and USCH are or
may become a party. This Agreement constitutes the legal, valid and binding
obligation of Xxxxxx and USCH, enforceable against Xxxxxx and USCH in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies. Upon the
execution of each of the other Transactional Agreements at the Closing, each of
such other Transactional Agreements will constitute the legal, valid and binding
obligation of Xxxxxx and USCH, enforceable against Xxxxxx and USCH in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.
2.5 FINANCIAL STATEMENTS . Xxxxxx and USCH have delivered to
Netivation their unaudited balance sheets as of _________, 1999 (the "Statement
Date") and their unaudited operating statements for the eleven months ended
November, 1999 (collectively, the "Xxxxxx and USCH Financial Statements")
prepared in accordance with income tax accounting procedures. The Xxxxxx and
USCH Financial Statements are complete and correct in all material respects, and
present fairly the financial condition and position of the respective entity for
the periods covered thereby.
2.6 LIABILITIES . Xxxxxx and USCH have no material liabilities
and, to the Knowledge of Xxxxxx and USCH, have no material contingent
liabilities not otherwise disclosed in the Xxxxxx and USCH Financial Statements,
except current liabilities incurred in the Ordinary Course of Business
subsequent to the Statement Date which have not been, either in any individual
case or in the aggregate, materially adverse. All obligations of Xxxxxx and USCH
to affiliates, officers, members, directors and stockholders of Xxxxxx and USCH
are disclosed on the Xxxxxx and USCH Financial Statements.
2.7 AGREEMENTS; ACTION .
(a) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which Xxxxxx and USCH are a party or are bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, Xxxxxx or USCH in
excess of $10,000, or (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from Xxxxxx or USCH (other than licenses arising
from the purchase of "off the shelf" or other standard products), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of Xxxxxx'x or USCH's products or services or (iv) indemnification by Xxxxxx or
USCH with respect to infringements of proprietary rights.
(b) Xxxxxx and USCH have not (i) incurred any
indebtedness for money borrowed or any other liabilities (other than with
respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the Ordinary Course of Business or as disclosed in the
Xxxxxx and USCH Financial Statements) individually in excess of $10,000 or, in
excess of $15,000 in the aggregate, (ii) made any loans or advances to any
person, other than ordinary advances for travel expenses or (iii) sold,
exchanged or otherwise disposed of any of their assets or rights, other than the
sale of their inventory in the Ordinary Course of Business.
(c) For the purposes of subsections (a) and (b)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities Xxxxxx or USCH have reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
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2.8 OBLIGATIONS TO RELATED PARTIES . There are no obligations
of Xxxxxx or USCH to officers, directors, stockholders, members or employees of
either other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of Xxxxxx or USCH and
(c) for other standard employee benefits made generally available to all
employees. No such officer, director or stockholder, or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Xxxxxx or USCH (other than such contracts as relate to any such
person's ownership of capital stock or other securities of Xxxxxx or USCH).
Xxxxxx and USCH are not guarantors or indemnitors of any indebtedness of any
other person, firm or corporation.
2.9 ABSENCE OF CHANGES . Since the Statement Date, there has
not been:
(a) Any change in the assets, liabilities, financial
condition or operations of Xxxxxx or USCH from that reflected in the Xxxxxx and
USCH Financial Statements, other than changes in the Ordinary Course of
Business, none of which individually or in the aggregate has had or is expected
to have a Material Adverse Effect on such assets, liabilities, financial
condition or operations of Xxxxxx or USCH;
(b) Any resignation or termination of any key
officers of Xxxxxx or USCH; and Xxxxxx and USCH, to their Knowledge, do not know
of the impending resignation or termination of employment of any such officer;
(c) Any material change, except in the Ordinary
Course of Business, in the contingent obligations of Xxxxxx or USCH by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties,
business or prospects or financial condition of Xxxxxx or USCH;
(e) Any waiver by Xxxxxx or USCH of a valuable right
or of a material debt owed to them;
(f) Any direct or indirect loans made by Xxxxxx or
USCH to any stockholder, employee, officer or director of Xxxxxx or USCH,
other than advances made in the Ordinary Course of Business;
(g) Any material change in any compensation
arrangement or agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or
other distribution of the assets of Xxxxxx or USCH;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred,
assumed or guaranteed by Xxxxxx or USCH, except those for immaterial amounts and
for current liabilities incurred in the Ordinary Course of Business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which
Xxxxxx or USCH is a party or by which they are bound which materially and
adversely affects the business, assets, liabilities, financial condition,
operations or prospects of Xxxxxx or USCH; or
(m) Any other event or condition of any character
that, either individually or cumulatively, has materially and adversely affected
the business, assets, liabilities, financial condition, operations or prospects
of Xxxxxx or USCH. For purposes of this subsection (m), a material and adverse
effect shall only be deemed to occur if its monetary impact exceeds, or with the
passage of time, will exceed $10,000.
2.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Schedule 2.10
is a complete and accurate list of all material assets (whether leased or
owned), including intellectual property, of USCH. Xxxxxx and USCH
25
have good and marketable title to all of their properties and assets,
including, for USCH, those listed on Schedule 2.10, and good title to their
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes which have
not yet become due and payable, (ii) minor liens and encumbrances which do
not materially detract from the value of the property subject thereto or
materially impair the operations of USCH and (iii) those that have arisen
from purchase money security interests in an amount not to exceed $10,000.
None of the Stockholders has any right in or claim to any of the intellectual
property utilized by Xxxxxx or USCH. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by Xxxxxx and
USCH are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. Xxxxxx and USCH are in
compliance with all material terms of each lease to which they are a party or
are otherwise bound.
2.11 PATENTS AND TRADEMARKS . USCH owns or possesses
sufficient legal rights to all trademarks, service marks, trade names,
copyrights, trade secrets and licenses, and, to the Knowledge of USCH, to all
patents, information and other proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted, without any known
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing, nor is Xxxxxx or USCH bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. Xxxxxx and USCH have not
received any communications alleging that they either have violated or, by
conducting their business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. To Xxxxxx'x and USCH's
Knowledge, none of Xxxxxx'x or USCH's employees is obligated under any contract
(including licenses, covenants or commitments or any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to Xxxxxx'x and USCH's business
by the employees of Xxxxxx or USCH. The conduct of Xxxxxx'x and USCH's business
as proposed, will not, to the Knowledge of Xxxxxx and USCH, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any employee is
now obligated. Xxxxxx and USCH do not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by Xxxxxx or USCH, except for
inventions, trade secrets or proprietary information that have been assigned to
Xxxxxx and USCH.
2.12 COMPLIANCE WITH OTHER INSTRUMENTS . Xxxxxx and USCH are
not in violation or default of any term of their charter documents, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which either is party or by which either is bound or of any
judgment, decree, order, writ or, to Xxxxxx'x or USCH's Knowledge, any statute,
rule or regulation applicable to Xxxxxx or USCH which would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of Xxxxxx or USCH. The execution, delivery, and
performance of and compliance with the Transactional Agreements will not, with
or without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of Xxxxxx or USCH or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to Xxxxxx or USCH, or the business or
operations or any of their assets or properties.
2.13 LITIGATION . There is no action, suit, proceeding or
investigation pending, or to the Knowledge of Xxxxxx or USCH, currently
threatened against Xxxxxx or USCH that questions the validity of this Agreement
or Transactional Agreements or the right of Xxxxxx or USCH to enter into any of
such agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of Xxxxxx
or USCH, financially or otherwise, or any change in the current equity ownership
of Xxxxxx or USCH, nor is Xxxxxx or USCH aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to Xxxxxx or USCH) involving the prior
employment of any of Xxxxxx'x or USCH's employees, their use in connection with
Xxxxxx'x or USCH's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. Xxxxxx and USCH are not parties or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by Xxxxxx or USCH currently pending or which Xxxxxx or USCH
intends to initiate.
26
2.14 TAX RETURNS AND PAYMENTS .
(a) Each tax required to have been paid, or claimed
by any Governmental Body to be payable, by Xxxxxx or USCH (whether pursuant to
any tax return or otherwise) has been duly paid in full and on a timely basis.
Any tax required to have been withheld or collected by Xxxxxx or USCH, including
with respect to employees, has been duly withheld and collected; and (to the
extent required) each such tax has been paid to the appropriate Governmental
Body.
(b) All tax returns required to be filed by or on
behalf of Xxxxxx or USCH with any Governmental Body have been timely filed,
taking into account valid extensions (collectively, the "Xxxxxx and USCH
Returns"). All taxes required to be paid by Xxxxxx for the fiscal year 1998 have
either been paid in full or shall not result in any liability to Xxxxxx. All
Xxxxxx and USCH Returns (i) have been filed when due and (ii) have been
accurately and completely prepared in full compliance with all applicable legal
requirements, in all material respects. Xxxxxx has delivered to Netivation
accurate and complete copies of the 1998 Xxxxxx and USCH Returns.
(c) There have been no examinations or audits of any
Xxxxxx and USCH Returns, and, to the Knowledge of Xxxxxx and USCH, no such
examination or audit has been proposed or scheduled by any Governmental Body.
Xxxxxx and USCH have delivered to Netivation accurate and complete copies of all
audit reports and similar documents (to which Xxxxxx has access) relating to the
Xxxxxx and USCH Returns.
(d) No claim or proceeding is pending or, to the
Knowledge of Xxxxxx or USCH, has been threatened against Xxxxxx or USCH in
respect of any tax. There are no unsatisfied Liabilities for taxes (including
Liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by Xxxxxx or USCH. There are no liens for taxes upon any of the assets of Xxxxxx
or USCH, except liens for current taxes not yet due and payable. Xxxxxx and USCH
have not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code.
(e) To the Knowledge of Xxxxxx and USCH, there is no
agreement, plan, arrangement or other contract covering any employee or
independent contractor or former employee or independent contractor of Xxxxxx or
USCH that, individually or collectively, could give rise, directly or
indirectly, to the payment of any amount that would not be deductible by reason
of Section 280G or Section 162 of the Code. Xxxxxx and USCH are not, and have
never been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar contract.
2.15 EMPLOYEES . Xxxxxx and USCH are not parties to or bound
by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. To the Knowledge of
Xxxxxx and USCH, no employee of Xxxxxx or USCH, nor any consultant with whom
Xxxxxx or USCH have contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, Xxxxxx
or USCH because of the nature of the business to be conducted by Xxxxxx or USCH;
and to the Knowledge of Xxxxxx and USCH the continued employment by Xxxxxx or
USCH of its present employees, and the performance of Xxxxxx'x and USCH's
contracts with its independent contractors, will not result in any such
violation. Xxxxxx and USCH have not received any notice alleging that any such
violation has occurred. No employee of Xxxxxx or USCH has been granted the right
to continued employment by Xxxxxx or USCH or to any material compensation
following termination of employment with Xxxxxx or USCH. To the Knowledge of
Xxxxxx and USCH, no officer or key employee, or any group of key employees,
intends to terminate their employment with Xxxxxx or USCH, nor does Xxxxxx or
USCH have a present intention to terminate the employment of any officer, key
employee or group of key employees.
2.16 REGISTRATION RIGHTS . Xxxxxx and USCH are not presently
under any obligation, and have not granted any rights, to register any of their
presently outstanding securities or any of its securities that may hereafter be
issued.
27
2.17 COMPLIANCE WITH LEGAL REQUIREMENTS; CONSENTS .
(a) Xxxxxx and USCH are, and have at all times since
inception been, in full compliance with each legal requirement that is or was
applicable to them or to the conduct of their business or the ownership or use
of any of their assets, except where the failure to comply with each such legal
requirement has not had and will not have a Material Adverse Effect on Xxxxxx or
USCH.
(b) Neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a
violation of (i) any of the provisions of Xxxxxx'x or USCH's articles of
incorporation or bylaws, or (ii) any resolution adopted by Xxxxxx'x or USCH's
stockholders or Xxxxxx'x or USCH's board of directors;
(ii) contravene, conflict with or result in
a violation of, or give any Governmental Body or other Person the right to
exercise any remedy or obtain any relief under, any legal requirement or any
order to which Xxxxxx or USCH, or any of the assets owned or used by Xxxxxx or
USCH, is subject;
(iii) contravene, conflict with or result in
a violation or Breach of, or result in a default under, any provision of any
contract to which Xxxxxx or USCH is a party; or
(iv) give any Person the right to (A)
declare a default or exercise any remedy under any contract to which Xxxxxx or
USCH is a party, (B) accelerate the maturity or performance of any contract to
which Xxxxxx or USCH is a party or (C) cancel, terminate or modify any contract
to which Xxxxxx or USCH is a party.
Neither Xxxxxx, USCH nor any of the Stockholders was, is or
will be required to make any filing with or give any notice to, or to obtain any
consent from, any Person other than Stockholders' spouses in connection with the
execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
2.18 STOCKHOLDERS . Each Stockholder represents that (i) he,
she or it has the absolute and unrestricted right, power and authority to enter
into and to perform his, her or its obligations under each of the Transactional
Agreements to which such Stockholder is or may become a party, (b) this
Agreement constitutes his, her or its legal, valid and binding obligation,
enforceable against such Stockholder in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies and (c) upon the execution of
each of the other Transactional Agreements at the Closing, each of such other
Transactional Agreements will constitute the legal, valid and binding obligation
of such Stockholder, enforceable against such Stockholder in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.19 FULL DISCLOSURE . This Agreement does not (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information of or with respect to
Xxxxxx, USCH and the Stockholders contained and to be contained herein (in light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading. Xxxxxx
and USCH have provided Netivation and Netivation's Representatives with full and
complete access to all of Xxxxxx'x and USCH's records and other documents and
data.
2.20 RELIANCE ON REPRESENTATIONS AND WARRANTIES . Xxxxxx,
USCH, and the Stockholders acknowledge that they have not relied on any
representations or warranties from Netivation or Merger Sub that are not
contained within this Agreement.
28
2.21 SECURITIES LAWS MATTERS . Each Stockholder understands
that the Netivation Stock has not been registered under the Securities Act and
that the Netivation Stock being issued in the Transaction is being issued
pursuant to a private placement exemption from registration under Section 4(2)
of the Securities Act, based in part upon the Stockholders' representations
contained in this Agreement. Each Stockholder hereby severally and not jointly
represents and warrants as follows:
(a) KNOWLEDGE AND EXPERIENCE. Each Stockholder is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act. Each Stockholder is knowledgeable and has substantial experience
in evaluating and investing in transactions in companies similar to Netivation
so that such Stockholder is capable of evaluating the merits and risks of his
investment in Netivation. Each Stockholder has by reason of such Stockholder's
business or financial knowledge and experience, the capacity to protect such
Stockholder's own interests in connection with the Transaction. Further, each
Stockholder is aware of no publication of any advertisement in connection with
the Transaction. Each Stockholder can bear the economic risk of the Transaction.
Each Stockholder has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, including affiliate status, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Each Stockholder acknowledges that he or she
will be required to hold Netivation stock for a period of one year prior to
resale in a public market transaction involving a broker or dealer, consistent
with Rule 144.
(b) NETIVATION INFORMATION. Each Stockholder has had
an opportunity to discuss Netivation's business, management and financial
affairs, both as currently conducted and as proposed to be conducted following
the Merger, with directors, officers and management of Netivation and has had
the opportunity to review Netivation's operations and facilities. Each
Stockholder has also had the opportunity to ask questions of, and receive
answers from, Netivation and its management regarding the terms and conditions
of the Transaction and the receipt of Netivation Stock.
(c) ACQUISITION FOR OWN ACCOUNT. Each Stockholder is
acquiring the Netivation Stock for such Stockholder's own account for investment
only, and not with a view towards distribution.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION
Except as set forth in Schedule 3 (the "Netivation Schedule of
Exceptions"), Netivation and Merger Sub, as appropriate, jointly and severally
represent and warrant, to and for the benefit of Xxxxxx, USCH, and the
Stockholders as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION .
(a) Netivation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Netivation has all requisite corporate power and authority to own and operate
its properties and assets, to execute and deliver this Agreement and the
Transactional Agreements, to issue and sell the Netivation Stock, to carry out
the provisions of this Agreement and the Transactional Agreements and to carry
on its business as presently conducted and as presently proposed to be
conducted. Netivation is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) make such
qualifications necessary, except for those jurisdictions in which failure to do
so would not have a Material Adverse Effect on Netivation or its business.
Netivation has made available to Xxxxxx true, correct and complete copies of the
Netivation's certificate of incorporation and bylaws, each as amended to date.
(b) Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merger Sub has all requisite corporate power and authority to own and operate
its properties and assets, to execute and deliver the Transactional Agreements,
to carry out the provisions of the Transactional Agreements and to carry on its
business as presently conducted and as presently proposed to be conducted.
3.2 SUBSIDIARIES . Except for Merger Sub, Xxxxxxxxxx.xxx
Merger Corp., Xxxxxxxxxx.xxx Merger Three Corp., InterLink Services, Inc., The
Online Medical Bookstore, Inc., MEDMarket, Inc., Raintree Communications
Corporation, Xxxxxxxxxxxxxxxx.xxx, Inc., and Public Disclosure, Inc. all of
which are wholly-owned
29
subsidiaries of Netivation, and XXxxxxxxxxx.xxx, Netivation owns no equity
securities of any other corporation, limited partnership or similar entity.
Netivation is not a participant in any joint venture, partnership or similar
arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS .
(a) The authorized capital stock of Netivation, as of
January 9, 2000, consists of (a) 30,000,000 shares of Common Stock, of which
10,743,483 shares are issued and outstanding, and (b) 2,000,000 shares of
Preferred Stock, of which no shares are issued and outstanding. All issued and
outstanding shares of Netivation's Common Stock and Preferred Stock (i) have
been duly authorized and validly issued, (ii) are fully paid and nonassessable
and (iii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. The Netivation Stock has been duly
authorized and, when issued in compliance with the provisions of this Agreement
and its certificate of incorporation, will be validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
other than liabilities imposed upon stockholders generally by the provisions of
Delaware Law, and will not be subject to any other restrictions, except as set
forth in or provided by this Agreement and as may be imposed by applicable law.
(b) The authorized capital stock of Merger Sub
consists of one thousand (1,000) shares of Common Stock, one hundred (100)
shares of which have been issued to Netivation. All of the issued and
outstanding shares of Common Stock of Merger Sub (i) have been duly authorized
and validly issued, (ii) are fully paid and nonassessable, (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities, and (iv) are owned directly by Netivation.
3.4 AUTHORIZATION; BINDING OBLIGATIONS . Each of Netivation
and Merger Sub has all requisite right, power and authority to enter into and to
perform its obligations under the Transactional Agreements to which Netivation
and Merger Sub, as the case may be, is or may become a party. This Agreement
constitutes the legal, valid and binding obligation of each of Netivation and
Merger Sub, enforceable against them in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. Upon the execution of each of
the other Transactional Agreements at the Closing, each of such other
Transactional Agreements will constitute the legal, valid and binding obligation
of Netivation, enforceable against Netivation in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.5 FULL DISCLOSURE . Netivation has delivered to Xxxxxx an
accurate and complete copy of its Registration Statement on Form SB-2 No.
333-74569 filed with the Securities and Exchange Commission (the "SEC") on June
22, 1999 (the "Registration Statement"), and its 10Qs filed on August 16, 1999
and November 15, 1999 (the "10Qs"). The Registration Statement and the 10Qs (i)
comply in all material respects with the applicable requirements of the
Securities Act and (ii) do not contain any untrue statements of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Netivation shall promptly provide the
Stockholders with copies of all public releases made by Netivation from the time
of the execution of this Agreement to the Closing. Netivation acknowledges that
the disclosures, and any updates, referenced in this Section 3.5 shall be relied
on by the Stockholders. Netivation has also filed with the SEC a Form 8-K on
November 10, 1999, regarding the acquisitions of Xxxxxxxxxxxxxxxx.xxx,
MEDMarket, Public Disclosure, and Raintree Communications. The Form 8-K would
not have been timely filed if the acquisitions are determined to be material.
3.6 LITIGATION . There is no material action, suit, proceeding
or investigation pending, or to the Knowledge of Netivation, currently
threatened against Netivation that questions the validity of this Agreement or
Transactional Agreements or the right of Netivation to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS . Neither the execution
and delivery of any of the Transactional Agreements, nor the consummation or
performance of any of the Transactions, will materially, directly or indirectly,
(with or without notice or lapse of time):
30
(i) contravene, conflict with or result in a
violation of (A) any of the provisions of Netivation's certificate of
incorporation or bylaws, or (B) any resolution adopted by Netivation's
stockholders or Netivation's board of directors;
(ii) contravene, conflict with or result in
a violation of, or give any Governmental Body or other Person the right to
exercise any remedy or obtain any relief under, any legal requirement or any
order to which Netivation, or any of the assets owned or used by Netivation, is
subject;
(iii) contravene, conflict with or result in
a violation or Breach of, or result in a default under, any provision of any
contract to which Netivation is a party; or
(iv) give any Person the right to (A)
declare a default or exercise any remedy under any contract to which Netivation
is a party, (B) accelerate the maturity or performance of any contract to which
Netivation is a party or (C) cancel, terminate or modify any contract to which
Netivation is a party.
3.8 CONSENTS . Other than filings to be made in accordance
with the Delaware Law, neither Netivation nor Merger Sub was, is or will be
required to make any filing with or give any notice to, or to obtain any consent
from, any Person in connection with the execution and delivery of any of the
Transactional Agreements or the consummation or performance of any of the
Transactions.
3.9 CURRENT OWNERSHIP OF NETIVATION STOCK BY THE STOCKHOLDERS.
Netivation acknowledges that the Stockholders currently own 1,000 shares of
Netivation common stock purchased on the independent decision of the
Stockholders in the open securities market. Netivation acknowledges that the
Stockholders have no management control, voting control, or other advantage on
account of such stock ownership.
3.10 RELIANCE ON REPRESENTATIONS AND WARRANTIES . Netivation
acknowledges that it has not relied on any representations or warranties from
Xxxxxx, USCH, or the Stockholders that are not contained within this Agreement.
SECTION 4 - CERTAIN COVENANTS OF XXXXXX, USCH
AND THE STOCKHOLDERS
4.1 ACCESS AND INVESTIGATION . Xxxxxx, USCH and the
Stockholders shall ensure that, at all times during the Pre-Closing Period:
(a) Xxxxxx, USCH and their Representatives provide
Netivation and its Representatives with access, during normal business hours
upon reasonable notice, to Xxxxxx'x and USCH's Representatives, personnel and
assets and to all existing books, records, tax returns, work papers and other
documents and information relating to Xxxxxx and USCH;
(b) Xxxxxx, USCH and their Representatives provide
Netivation and its Representatives with such copies of existing books, records,
tax returns, work papers and other documents and information relating to Xxxxxx
or USCH as Netivation may request in good faith; and
(c) Xxxxxx, USCH and their Representatives compile
and provide Netivation and its Representatives with such additional financial,
operating and other data and information regarding Xxxxxx and USCH as Netivation
may request in good faith. Without limiting the generality of the foregoing,
during the Pre-Closing Period, Xxxxxx and USCH shall promptly provide Netivation
with copies of:
(i) all material operating and financial
reports prepared by Xxxxxx and USCH for its senior management, including copies
of the unaudited monthly balance sheets of Xxxxxx and USCH and the related
unaudited monthly statements of operations, statements of stockholders' equity
and statements of cash flows;
(ii) any written materials or communications
sent by or on behalf of Xxxxxx or USCH to its stockholders generally;
31
(iii) any material notice, document or other
communication sent by or on behalf of Xxxxxx or USCH to any party to any Xxxxxx
or USCH contract or sent to Xxxxxx or USCH by any party to any Xxxxxx or USCH
contract (other than any communication that relates solely to commercial
transactions of the type sent in the Ordinary Course of Business);
(iv) any written notice, report or other
document filed with or sent to any Governmental Body in connection with the
Merger or any of the other Transactions; and
(v) any material written notice, report or
other document received by Xxxxxx from any Governmental Body.
4.2 OPERATION OF BUSINESS . Xxxxxx, USCH and the Stockholders
shall ensure that, during the Pre-Closing Period:
(a) Xxxxxx and USCH conducts their operations
exclusively in the Ordinary Course of Business and in the same manner as such
operations have been conducted prior to the date of this Agreement;
(b) Xxxxxx and USCH use their commercially reasonable
efforts to preserve intact their current business organization, keep available
the services of their current officers and employees and maintain their
relations and good will with suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with Xxxxxx or USCH;
(c) Xxxxxx and USCH keep in full force all existing
insurance policies;
(d) Xxxxxx'x and USCH's officers confer regularly,
upon request, with Netivation concerning operational matters and otherwise
report regularly, upon request, to Netivation concerning the status of Xxxxxx'x
and USCH's business, condition, assets, liabilities, operations, financial
performance and prospects;
(e) Xxxxxx and USCH immediately notify Netivation of
any inquiry, proposal or offer from any Person relating to any Acquisition
Transaction;
(f) Xxxxxx or USCH do not declare, accrue, set aside
or pay any dividend or make any other distribution in respect of any shares of
capital stock or other securities, and do not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities;
(g) Xxxxxx or USCH do not sell or otherwise issue any
shares of capital stock or any other securities;
(h) Xxxxxx or USCH do not amend their articles of
incorporation or bylaws, and do not effect or become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) Xxxxxx or USCH do not form any subsidiary or
acquire any equity interest or other interest in any other entity;
(j) Xxxxxx or USCH do not make any capital
expenditure, except for capital expenditures that are made in the Ordinary
Course of Business and that do not exceed $10,000;
(k) Xxxxxx or USCH do not (i) lend money to any
Person or (ii) incur, assume or otherwise become subject to any Liability,
except for current liabilities incurred in the Ordinary Course of Business;
(l) Xxxxxx or USCH do not establish or adopt any
employee benefit plan, nor pay or agree to pay any bonus nor make any
profit-sharing or similar payment to, nor increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of their directors, officers or employees (except for regularly
scheduled salary increases in the Ordinary Course of Business);
32
(m) Xxxxxx or USCH do not change any of their methods
of accounting or accounting practices in any respect;
(n) Xxxxxx or USCH do not commence any Proceeding,
except in the Ordinary Course of Business;
(o) Xxxxxx or USCH do not enter into any transaction
or take any other action of the type referred to in Section 2.9;
(p) Xxxxxx or USCH do not enter into any transaction
or take any other action outside the Ordinary Course of Business;
(q) Xxxxxx or USCH do not enter into any transaction
or take any other action that is reasonably likely to cause or constitute a
Breach of any representation or warranty made by Xxxxxx, USCH or the
Stockholders; and
(r) Xxxxxx or USCH do not agree, commit or offer (in
writing or otherwise), or attempt, to take any of the actions described in
clauses "(f)" through "(q)" of this Section 4.2.
4.3 USCH STOCKHOLDERS' MEETING . USCH shall, in accordance
with its articles of incorporation and bylaws and the applicable requirements of
Virginia Law, call and hold a special meeting of its stockholders, or solicit
written consents from its stockholders, as promptly as practicable for the
purpose of permitting them to consider and to vote upon and approve the Merger
and this Agreement. USCH shall use its best efforts (i) to solicit from each of
such stockholders a proxy or consent in favor of the approval of the Merger and
this Agreement and (ii) to cause each of such stockholders to execute and
deliver to Netivation a Prospective Offeree Questionnaire in a form acceptable
to Netivation certifying, among other items, as to whether each of such
stockholders is an "accredited investor" as such term is defined in Rule 501
under the Securities Act.
4.4 NO NEGOTIATION . Xxxxxx and USCH shall ensure that, during
the Pre-Closing Period, neither Xxxxxx, USCH nor any of their Representatives
directly or indirectly:
(a) solicits or encourages the initiation of any
inquiry, proposal or offer from any Person (other than Netivation) relating to
any Acquisition Transaction;
(b) participates in any discussions or negotiations
with, or provides any non-public information to, any Person (other than
Netivation) relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry,
proposal or offer from any Person (other than Netivation) relating to any
Acquisition Transaction.
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES
5.1 NOTIFICATION; OPPORTUNITY TO CURE .
(a) During the Pre-Closing Period, each party shall
promptly notify the other party in writing of:
(i) the discovery by that party of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement that caused or constitutes a Breach of any
representation or warranty made by that party in this Agreement;
(ii) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute a Breach of any representation or warranty made
by that party in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
33
(iii) any Breach of any covenant or
obligation of that party; and
(iv) any event, condition, fact or
circumstance that may make the timely satisfaction of any of the conditions set
forth in Section 6 or Section 7 impossible or unlikely.
(b) Upon receipt of any notification pursuant to
Section 5.1(a), the party receiving notification shall send written notice to
the other party of its/their decision to seek termination of this Agreement or
pursue any other available remedy. The party seeking termination shall provide
the other party a reasonable opportunity to cure, but in no event less than ten
(10) days.
(c) During the Pre-Closing Period, each party shall
promptly notify the other party, as appropriate, in writing of the awareness by
that party or its representatives of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement or thereafter
that caused or constitutes or will cause or constitute a Breach of any
representation or warranty made by the other party in this Agreement.
(d) Upon receipt of any notification pursuant to
Section 5.1(c), the party receiving notification shall send written notice to
the other party of its/their intent to cure the defect. The parties shall
provide a reasonable opportunity to cure the defect, but in no event less than
ten (10) days. Neither party shall have the right to xxx for indemnity for any
defect that the party seeking indemnification was aware of prior to or during
the Pre-Closing Period for which no notification pursuant to Section 5.1(c) was
given to the other party, as appropriate.
(e) If any event, condition, fact or circumstance
that is required to be disclosed by the parties pursuant to Section 5.1(a)
requires any change in their respective Schedule of Exceptions, or if any such
event, condition, fact or circumstance would require such a change assuming
their respective Schedule of Exceptions were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the disclosing parties shall promptly deliver to the
non-disclosing parties an update to their respective Schedule of Exceptions
specifying such change. No such update shall be deemed to supplement or amend
their respective Schedule of Exceptions for the purpose of (i) determining the
accuracy of any of the representations and warranties made by the disclosing
party in this Agreement for purposes of Section 6.1 or Section 7.1, but shall be
deemed to supplement or amend their respective Schedule of Exceptions for
purposes of Section 9 or (ii) determining whether any of the other conditions
set forth in Section 6 or Section 7 have been satisfied.
5.2 FILINGS AND CONSENTS . As promptly as practicable after
the execution of this Agreement, each party to this Agreement (i) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Transactions and (ii) shall use all
commercially reasonable efforts to obtain all consents (if any) required to be
obtained (pursuant to any applicable legal requirement or contract, or
otherwise) by such party in connection with the Transactions. Each of the
parties shall (upon request) promptly deliver to the other a copy of each such
filing made, each such notice given and each such consent obtained by Xxxxxx,
USCH, Merger Sub, or Netivation, as the case may be, during the Pre-Closing
Period
5.3 PUBLIC ANNOUNCEMENTS . During the Pre-Closing Period, (i)
neither Xxxxxx, USCH, the Stockholders, Merger Sub, nor Netivation shall (and
neither Xxxxxx, USCH, the Stockholders, Merger Sub, nor Netivation shall permit
any of their respective Representatives to) issue any press release or make any
public statement regarding this Agreement or the Transactions, without the other
parties' prior written consent, and (ii) each party will use reasonable efforts
to consult with the other parties prior to issuing any press release or making
any public statement regarding the Merger; PROVIDED THAT Netivation shall be
free to make any disclosure regarding the Merger that it deems necessary in
connection with filings with the SEC made in connection with the Registration
Statement.
5.4 BEST EFFORTS . During the Pre-Closing Period, (i)
Xxxxxx and USCH shall use commercially reasonable efforts to cause the
conditions set forth in Section 6 to be satisfied on a timely basis and (ii)
Netivation and Merger Sub shall use their commercially reasonable efforts to
cause the conditions set forth in Section 7 to be satisfied on a timely basis
and Netivation will take all actions necessary to cause Merger Sub to perform
its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in
34
this Agreement. Xxxxxx will take all actions necessary to cause USCH to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
5.5 TAX MATTERS . At or prior to the Closing, (a) Stockholders
and USCH shall execute and deliver to Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields,
Chtd. and to Netivation a tax representation letter, in a form reasonably
acceptable to such parties, and (b) Netivation shall execute and deliver to
Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields, Chtd. and to Stockholders a tax
representation letter, in a form reasonably acceptable to such parties. All
parties hereto will use all of their respective reasonable efforts to cause the
transactions contemplated hereby to qualify as a reorganization under the
provisions of Section 368(a) of the Code and will not take any action at any
time that could reasonably be expected to cause loss of such qualification. All
parties hereto agree to comply with applicable reporting requirements of the
Code and U.S. Treasury Regulations for such a reorganization. Netivation and
Merger Sub have not made any representations, warranties, or covenants with
regards to tax matters in relation to the activities of Xxxxxx, USCH, or the
Stockholders made in connection or anticipation of the Transactions. Xxxxxx,
USCH, and the Stockholders have not made any representations, warranties, or
covenants with regards to tax matters in relation to the activities of
Netivation or Merger Sub made in connection or anticipation of the Transactions.
5.6 RESALE . Each Stockholder shall not sell or otherwise
transfer any Netivation Stock until the requirements of Rule 144 are satisfied
for such sale or transfer unless the stock is earlier registered. Netivation
shall endeavor to timely cooperate with the Stockholders regarding the resale of
Netivation Stock once the requirements in the preceding sentence have been
satisfied.
5.7 CONFIDENTIALITY . Netivation shall maintain in strict
confidence all due diligence information obtained from Xxxxxx or USCH pursuant
to Section 4.1 and shall disclose such information to its employees, agents and
representatives on a "need-to-know" basis. Netivation shall use all such
information so obtained from Xxxxxx and USCH only for the purposes of evaluating
and completing the Transactions. If the Merger is not completed, Netivation
shall return all such information to USCH. Upon written request, Netivation and
its agents and representatives shall sign reasonable confidentiality agreements
confirming the foregoing as reasonably required by Xxxxxx.
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF NETIVATION AND MERGER SUB
The obligations of Netivation and Merger Sub to effect the
Transactions are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Netivation, in
whole or in part, in accordance with Section 10.11):
6.1 ACCURACY OF REPRESENTATIONS . Each of the representations
and warranties made by Xxxxxx, USCH and the Stockholders in this Agreement shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time.
6.2 PERFORMANCE OF COVENANTS . Each covenant and obligation
that Xxxxxx, USCH or any of the Stockholders is required to comply with or to
perform pursuant to this Agreement at or prior to the Closing shall have been
duly complied with and performed in all material respects.
6.3 STOCKHOLDER APPROVAL . The principal terms of the Merger
shall have been duly approved by the stockholders of Xxxxxx and USCH in
accordance with the provisions of Virginia Law and applicable agreements.
6.4 CONSENTS . All consents required to be obtained by Xxxxxx
and USCH in connection with the Transactions shall have been obtained and shall
be in full force and effect.
6.5 NO MATERIAL ADVERSE CHANGE . Except for adverse changes
that result from general economic conditions, there shall have been no material
adverse change in Xxxxxx'x or USCH's business, condition, assets, liabilities,
operations, financial performance or prospects since the date of this Agreement.
35
6.6 AGREEMENTS AND DOCUMENTS . Netivation shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) a legal opinion from counsel for Xxxxxx, USCH and
the Stockholders, substantially in the form of EXHIBIT E1;
(b) Consulting Agreements, substantially in the forms
of EXHIBIT F1 and F2, executed by Xxxx Xxxxxx and Xxxxxxx Xxxxxx;
(c) the Escrow Agreement, substantially in the form
of EXHIBIT G;
(d) a Tax Representation Letter executed by Xxxxxx
and USCH;
(e) a Prospective Offeree Questionnaire substantially
in the form of EXHIBIT H executed by each Stockholder;
(f) written resignations of all officers and
directors of USCH, effective as of the Closing Date;
(g) a certificate executed by each of the
Stockholders containing the representation and warranty of each such Stockholder
that (i) each of the representations and warranties made by Xxxxxx, USCH and the
Stockholders in this Agreement is accurate in all material respects as of the
Closing Date as if made on the Closing Date and (ii) the conditions set forth in
this Section 6 have been duly satisfied (the "Stockholders' Closing
Certificate");
(h) a certificate executed by Xxxxxx and USCH
containing the representation and warranty of Xxxxxx and USCH that (i) each of
the representations and warranties made by Xxxxxx and USCH in this Agreement are
accurate in all material respects as of the Closing Date as if made on the
Closing Date and (ii) the conditions set forth in this Section 6 have been duly
satisfied; and
(i) such other documents, to the extent such
documents are reasonably available or should be reasonably available, as
Netivation may reasonably request in good faith for the purpose of (i)
evidencing the accuracy of any representation or warranty made by Xxxxxx, USCH
or the Stockholders, (ii) evidencing the compliance by Xxxxxx, USCH or the
Stockholders with, or the performance by Xxxxxx, USCH or the Stockholders of,
any covenant or obligation set forth in this Agreement, (iii) evidencing the
compliance with any applicable federal or state securities law, (iv) evidencing
the satisfaction of any condition set forth in this Section 6 or (v) otherwise
facilitating the consummation or performance of any of the Transactions.
6.7 NO RESTRAINTS . No temporary restraining order,
preliminary or permanent injunction or other order preventing the consummation
of the Merger shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 NO PROCEEDINGS . No Person shall have commenced or
threatened to commence any Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Netivation of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.9 SECURITIES LAW COMPLIANCE . All applicable requirements of
the Securities Act and any applicable state securities laws shall have been
satisfied.
6.10 DISSENTERS RIGHTS . No stockholder of USCH shall have
exercised dissenters rights with respect to approval of the Transactions.
6.11 UNACCREDITED INVESTORS . The Prospective Offeree
Questionnaires delivered pursuant to Section 6.6 shall indicate that no more
than 35 of the stockholders of USCH are "unaccredited investors," as defined by
Rule 501 under the Securities Act.
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6.12 PROCEEDINGS AND DOCUMENTS . All corporate and other
proceedings in connection with the Transactions and all documents and
instruments incident to such Transactions shall be reasonably satisfactory in
substance and form to the parties to this Agreement.
6.13 CORPORATE APPROVALS . This Agreement and the consummation
of the Transactions shall have been approved by all necessary corporate action
on the part of Xxxxxx, USCH, Netivation, Merger Sub and the Stockholders.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF XXXXXX, USCH AND THE STOCKHOLDERS
The obligations of Xxxxxx, USCH and the Stockholders to effect
the Transactions are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived solely by Agent
(described in 10.1 below), in whole or in part, in accordance with Section
10.11):
7.1 ACCURACY OF REPRESENTATIONS . Each of the representations
and warranties made by Netivation and Merger Sub in this Agreement shall have
been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS . Each covenant and obligation
that Netivation and Merger Sub are required to comply with or to perform
pursuant to this Agreement at or prior to the Closing shall have been duly
complied with and performed in all material respects.
7.3 CONSENTS . All consents required to be obtained by
Netivation in connection with the Transactions shall have been obtained and
shall be in full force and effect.
7.4 AGREEMENTS AND DOCUMENTS . Stockholders shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) the Escrow Agreement, substantially in the form
of EXHIBIT G;
(b) Consulting Agreements, substantially in the forms
of EXHIBIT F1 and F2, executed by Xxxx Xxxxxx and Xxxxxxx Xxxxxx;
(c) a Tax Representation Letter executed by
Netivation;
(d) a certificate executed by Netivation containing
the representation and warranty of Netivation that (i) each of the
representations and warranties made by Netivation in this Agreement is accurate
in all material respects as of the Closing Date as if made on the Closing Date
and (ii) the conditions set forth in this Section 7 have been duly satisfied;
(e) a legal opinion from counsel for Netivation,
substantially in the form of EXHIBIT E2; and
(f) such other documents as Agent may reasonably
request in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by Netivation, (ii) evidencing the compliance by
Netivation with, or the performance by Netivation of, any covenant or obligation
set forth in this Agreement, (iii) evidencing the compliance with any applicable
federal or state securities law, (iv) evidencing the satisfaction of any
condition set forth in this Section 7 or (v) otherwise facilitating the
consummation or performance of any of the Transactions.
7.5 NO RESTRAINTS . No temporary restraining order,
preliminary or permanent injunction or other order preventing the consummation
of the Merger shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
37
7.6 NO PROCEEDINGS . No Person shall have commenced or
threatened to commence any Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Netivation of any material right pertaining to its
ownership of stock of the Surviving Corporation.
7.7 CORPORATE APPROVALS . This Agreement and the consummation
of the Transactions shall have been approved by all necessary corporate action
on the part of Netivation and Merger Sub.
7.8 STOCK PRICE. The market price of Netivation common stock,
as quoted on the Nasdaq National Market, shall not have closed below $5.35 per
share as of the Effective Time. If said stock price does close before $5.35 per
share at the Effective Time, then (i) Xxxxxx, USCH, and the Stockholders may
proceed with the Closing at their option; or (ii) notwithstanding the
termination provisions of Section 8, the parties shall wait for a period of up
to eight calendar weeks for the price of Netivation common stock to close at or
above $5.35 per share before proceeding with the Closing.
SECTION 8 - TERMINATION
8.1 TERMINATION EVENTS . This Agreement may be terminated
prior to the Closing:
(a) by Netivation if (i) there is a material Breach
of any covenant or obligation of Xxxxxx, USCH or any of the Stockholders or (ii)
Netivation reasonably determines that the timely satisfaction of any condition
set forth in Section 6 has become impossible (other than as a result of any
failure on the part of Netivation or Merger Sub to comply with or perform any
covenant or obligation of Netivation or Merger Sub set forth in this Agreement);
(b) by the Agent (as defined in Section 10.1) if (i)
there is a material Breach of any covenant or obligation of Netivation or (ii)
the Agent reasonably determines that the timely satisfaction of any condition
set forth in Section 7 has become impossible (other than as a result of any
failure on the part of Xxxxxx, USCH or any of the Stockholders to comply with or
perform any covenant or obligation of Xxxxxx, USCH or the Stockholders set forth
in this Agreement);
(c) by Netivation at or after the Scheduled Closing
Time if any condition set forth in Section 6 has not been satisfied by the
Scheduled Closing Time;
(d) by the Agent at or after the Scheduled Closing
Time if any condition set forth in Section 7 has not been satisfied by the
Scheduled Closing Time;
(e) by Netivation if the Closing has not taken place
on or before January 31, 2000 (other than as a result of any failure on the part
of Netivation or Merger Sub to comply with or perform any covenant or obligation
of Netivation or Merger Sub set forth in this Agreement);
(f) by the Agent if the Closing has not taken place
on or before January 31, 2000 (other than as a result of the failure on the part
of Xxxxxx, USCH or any of the Stockholders to comply with or perform any
covenant or obligation of Xxxxxx, USCH or the Stockholders set forth in this
Agreement); or
(g) by the mutual consent of Netivation, Xxxxxx and
the Agent.
8.2 TERMINATION PROCEDURES . If Netivation wishes to terminate
this Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Netivation shall deliver to the Agent a written notice stating that Netivation
is terminating this Agreement and setting forth a brief description of the basis
on which Netivation is terminating this Agreement. If the Agent wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section
8.1(f), the Agent shall deliver to Netivation a written notice terminating this
Agreement and setting forth a brief description of the basis on which this
Agreement is terminated.
8.3 EFFECT OF TERMINATION . If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement shall automatically terminate; PROVIDED, HOWEVER, that: (a)
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neither Xxxxxx, USCH nor the Stockholders nor Netivation shall be relieved of
any obligation or liability arising from any prior Breach by such party of
any provision of this Agreement; (b) the parties shall, in all events, remain
bound by and continue to be subject to the provisions set forth in Section 9;
and (c) Xxxxxx, USCH and Netivation shall, in all events, remain bound by and
continue to be subject to Section 5.3.
SECTION 9 - INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS .
(a) The representations, warranties and covenants of
each party pursuant to this Agreement shall survive the Closing and shall expire
on the first anniversary of the Closing Date; PROVIDED, HOWEVER, (i) that fraud
claims and claims under Section 2.14 shall survive for the statute of
limitations applicable to claims based on such matters and (ii) that if, at any
time prior to the first anniversary of the Closing Date, any Netivation
Indemnitee seeking indemnification under this Section 9 (acting in good faith)
delivers to the Agent a written notice alleging the existence of a Breach of any
of the representations and warranties made by Xxxxxx, USCH or any of the
Stockholders or a Breach of any covenant contained herein (and setting forth in
reasonable detail the basis for such Netivation Indemnitee's belief that such a
Breach may exist) and asserting a claim for recovery under Section 9.2 based on
such alleged Breach, then the claim asserted in such notice shall survive the
first anniversary of the Closing Date until such time as such claim is fully and
finally resolved.
(b) The representations, warranties, covenants and
obligations of Xxxxxx, USCH and the Stockholders, and the rights and remedies
that may be exercised by the Netivation Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished to, or any
investigation made by or Knowledge of (other than the items shown on the Xxxxxx
Schedule of Exceptions), any of the Netivation Indemnitees or their
Representatives.
(c) For purposes of this Agreement, each statement or
other item of information set forth in the Schedule of Exceptions or in any
update to the Schedule of Exceptions shall be deemed to be a representation and
warranty made in this Agreement.
9.2 INDEMNIFICATION BY THE STOCKHOLDERS .
(a) Subject to the provisions of this Section 9, the
Stockholders, jointly and severally, shall indemnify and hold harmless each of
the Netivation Indemnitees from and against the amount of any Damages incurred
by any of the Netivation Indemnitees directly or indirectly as a result of (i)
any Breach of a representation or warranty of Xxxxxx, USCH or any of the
Stockholders contained in Section 2 hereof or in any instrument delivered
pursuant to this Agreement (each as modified by the Xxxxxx Schedule of
Exceptions delivered by Xxxxxx, USCH and the Stockholders on the date of this
Agreement and not as modified by any revisions to such Xxxxxx Schedule of
Exceptions after such date), (ii) any Breach of any covenant or obligation
contained herein , (iii) any final determination of Xxxxxx'x or USCH's net tax
liability for the fiscal year immediately prior to the Closing or (iv) any
Breach of any representation or warranty made in the Stockholders' Closing
Certificate.
(b) The Stockholders acknowledge and agree that, if
there is any Breach of any representation or warranty or other provision
relating to Xxxxxx or USCH or Xxxxxx'x or USCH's business, condition, assets,
Liabilities, operations, financial performance or net income (or any aspect or
portion thereof), then Netivation itself shall be deemed, by virtue of its
ownership of the capital stock of USCH, to have incurred Damages as result of
such Breach or Liability.
(c) Each Stockholder waives and acknowledges and
agrees that such Stockholder shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other similar right or remedy against the Surviving Corporation in connection
with any indemnification obligation or any other Liability to which such
Stockholder may become subject under the Transactional Agreements or otherwise
in connection with any of the Transactions.
(d) Claims for Damages made by the Netivation
Indemnitees pursuant to the provisions of Sections 9.2(a) or 9.5 shall be
limited to an amount equal to (i) the fair market value on the date such claim
is fully and finally resolved of the Netivation Stock, which was received by the
Stockholders on the Closing
39
Date and still held by the Stockholders on the date such claim is fully and
finally resolved; plus (ii) the amount realized from the sale of Netivation
Stock, which was received on the Closing Date but sold by the Stockholders
prior to the full and final resolution of such claim; plus (iii) $400,000 and
any interest earned thereon by the Stockholders. The provisions of this
Section 9.2 shall not apply to claims for willful misconduct, fraud, bad
faith or recklessness on the part of Xxxxxx, USCH or any Stockholder.
9.3 INDEMNIFICATION BY NETIVATION.
(a) Subject to the provisions of this Section 9,
Netivation and Merger Sub shall indemnify and hold harmless each of the
Stockholders from and against the amount of any Damages incurred by any of the
Stockholders directly or indirectly as a result of (i) any Breach of a
representation or warranty of Netivation contained in Section 9.3 hereof or in
any instrument delivered pursuant to this Agreement or (ii) any Breach of any
covenant or obligation contained herein
(b) Netivation acknowledges and agrees that, if and
to the extent that there are any Damages as a result of any Breach of any
representation or warranty, then the Stockholders shall be deemed, by virtue of
such Stockholders ownership of the Netivation Stock, to have incurred Damages as
result of such Breach or Liability.
(c) Netivation waives and acknowledges and agrees
that Netivation shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
similar right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other Liability to which Netivation may become
subject under the Transactional Agreements or otherwise in connection with any
of the Transactions.
(d) Claims for Damages made by the Stockholders
pursuant to the provisions of Sections 9.3(a) shall be limited to an amount
equal to $450,000 minus the total of (i) the product of the number of shares of
Netivation Stock held by the Stockholders, at the time of the claim, multiplied
by the fair market value of said shares on the date such claim is fully and
finally resolved; plus (ii) the total sales price of the shares of Netivation
Stock sold prior to the full resolution of such claim by the Stockholders. The
provisions of this Section 9.3 shall not apply to claims for willful misconduct,
fraud, bad faith or recklessness on the part of Netivation.
9.4 INTEREST . Any party that is required to indemnify any
other party pursuant to this Section 9 with respect to any Damages shall also be
required to pay such other party interest on the amount of such Damages (for the
period commencing as of the date on which such other party first incurred or
otherwise became subject to such Damages and ending on the date on which the
applicable indemnification payment is made by such party) at a floating rate
equal to three (3) percentage points above the rate of interest publicly
announced by Bank of America, N.T. & S.A. from time to time as its prime, base
or reference rate. (For purposes of this Section 9.4, a party that suffers
Damages by virtue of being required to pay any judgment or to make any
settlement payment to any third party with respect to any third party claim
against such party shall be deemed to have first become subject to such Damages
at the time such party pays such judgment or makes such settlement payment.)
9.5 DEFENSE OF THIRD PARTY CLAIMS . In the event of the
assertion or commencement by any Person not a party to this Agreement (a "Third
Party")of any claim or Proceeding (whether against Xxxxxx or USCH, against any
other Netivation Indemnitee or any other Person) with respect to which any of
the parties to this Agreement (the "Indemnifying Party") may become obligated to
indemnify, hold harmless, compensate or reimburse any other party to this
Agreement (the "Indemnitee") pursuant to this Section 9, the Indemnifying Party
shall have the right, at its election, to proceed with the defense of such claim
or Proceeding, provided however, that the Indemnifying Party must conduct the
defense of the Third Party's claim actively and diligently thereafter in order
to preserve its rights in this regard; and provided further that the Indemnitee
may retain separate co-counsel at its sole cost and expense. If the Indemnifying
Party so proceeds with the defense of any such claim or Proceeding:
(a) all expenses relating to the defense of such
claim or Proceeding (whether or not incurred by the Indemnitee) shall be borne
and paid exclusively by the Indemnifying Party;
40
(b) the Indemnifying Party shall make available to
the Indemnitee any documents and materials in the possession or control of any
Indemnifying Party that may be necessary to the defense of such claim or
Proceeding; and
(c) The Indemnifying Party shall keep the Indemnitee
informed of all material developments and events relating to such claim or
Proceeding.
9.6 INDEMNITY RESERVE . In order to secure Netivation's and
each Netivation Indemnitee's rights of indemnity, the Stockholders shall place
50,000 shares of Netivation Stock in escrow in accordance with the terms of the
Escrow Agreement, substantially in the form attached hereto as EXHIBIT G.
9.7 EXERCISE OF REMEDIES BY NETIVATION INDEMNITEES OTHER THAN
NETIVATION . No Netivation Indemnitee (other than Netivation or any successor
thereto or assignee thereof) shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Netivation (or
any successor thereto or assignee thereof) shall have consented to the assertion
of such indemnification claim or the exercise of such other remedy.
SECTION 10 - MISCELLANEOUS PROVISIONS
10.1 STOCKHOLDERS' AGENT .
(a) The Stockholders hereby irrevocably nominate,
constitute and appoint Xxxx Xxxxxx as the agent and true and lawful
attorney-in-fact of the Stockholders (the "Agent"), with full power of
substitution, to act in the name, place and stead of the Stockholders for
purposes of executing any documents and taking any actions that the Agent may,
in his/her sole discretion, determine to be necessary, desirable or appropriate
in connection with any of the Transactional Agreements or any of the
Transactions on behalf of the Stockholders. Xxxx Xxxxxx hereby accepts his
appointment as Agent.
(b) The Stockholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Stockholders (in the name of any or all of the Stockholders or otherwise) any
and all documents that the Agent may, in his sole discretion, determine to be
necessary, desirable or appropriate, in such forms and containing such
provisions as the Agent may, in his sole discretion, determine to be appropriate
(including the Stockholders' Closing Certificate and any amendment to or waiver
of rights under any of the Transactional Agreements). Notwithstanding anything
to the contrary contained in the Transactional Agreements:
(i) Netivation shall be entitled to deal
exclusively with the Agent, acting on behalf of the Stockholders, on all matters
relating to the Transactional Agreements and the respective Transactions
(including all matters relating to any notice to, or any consent to be given or
action to be taken by, any Stockholder, including any matters set forth in
Section 9); and
(ii) each Netivation Indemnitee shall be
entitled to rely conclusively (without further evidence of any kind whatsoever)
on any document executed or purported to be executed on behalf of any
Stockholder by the Agent, and on any other action taken or purported to be taken
on behalf of any Stockholder by the Agent, as fully binding upon such
Stockholder.
(c) The Stockholders recognize and intend that the
power of attorney granted herein (i) is coupled with an interest and is
irrevocable, (ii) may be delegated by the Agent and (iii) shall survive the
death or incapacity of each of the Stockholders.
(d) The Agent shall be entitled to treat as genuine,
and as the document it purports to be, any letter, facsimile, telex or other
document that is believed by him to be genuine and to have been telexed,
telegraphed, faxed or cabled by any Stockholder or to have been signed and
presented by a Stockholder.
(e) If the Agent shall die, become disabled or
otherwise be unable to fulfill his responsibilities hereunder, then the
Stockholders shall, within ten (10) days after such death or disability, appoint
a successor agent and, immediately thereafter, shall notify Netivation of the
identity of such successor. Any such
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successor shall succeed the Agent as Agent hereunder. If for any reason there
is no Agent at any time, all references herein to the Agent shall be deemed
to refer to the Stockholders.
(f) All expenses incurred by the Agent in connection
with the performance of his duties as Agent shall be borne and paid by the
Stockholders.
10.2 FURTHER ASSURANCES . Each party hereto shall execute and
cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
10.3 FEES AND EXPENSES . Subject to Section 9, each party to
this Agreement shall bear and pay all fees, costs and expenses (including legal
fees and accounting fees) that have been incurred or that are incurred in the
future by such party in connection with the Transactions, including all fees,
costs and expenses incurred by such party in connection with or by virtue of (a)
the investigation and review conducted by Netivation and its Representatives
with respect to Xxxxxx'x and USCH's business (and the furnishing of information
to Netivation and its Representatives in connection with such investigation and
review), (ii) the negotiation, preparation and review of this Agreement
(including the Netivation Schedule of Exceptions and the Xxxxxx Schedule of
Exceptions) and all agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the Transactions,
(iii) the preparation and submission of any filing or notice required to be made
or given in connection with any of the Transactions and the obtaining of any
consent required to be obtained in connection with any of such Transactions and
(iv) the consummation of the Merger. Notwithstanding the provisions of the
Section 10.3, Netivation shall pay up to $500 of Xxxxxx'x and USCH's fees
incurred in association with filings required to be made in connection with the
Transaction, provided that such fees do not include expenses related to
professional services.
10.4 ATTORNEYS' FEES . If any action or Proceeding relating to
this Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES . Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or overnight delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto):
if to Netivation: Xxxxxxxxxx.xxx, Inc.
000 Xxxxxxxxxx Xxxx, Xxxxx X
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx,
President and Chief Executive
Officer
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxx Xxxxxxx Rock &
Fields, Chtd.
000 X. Xxxxxxx Xxxx., 00xx Xxxxx
Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
if to the Agent X.X. Xxx 000
or any of the 0000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx: XxXxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
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with a copy to: Xxxxxx X. Xxxxx, Atty., P.C.
0000 Xxx Xxx
Xxxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Any of the above addresses may be changed at any time by
notice given as provided above; PROVIDED, HOWEVER, that any such notice of
change of address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received on the date
of delivery, if hand delivered, telecopied or by overnight courier, and three
(3) business days after the date of mailing, if mailed by certified mail, return
receipt requested.
10.6 HEADINGS . The boldface headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
10.7 COUNTERPARTS . This Agreement may be executed in several
counterparts and transmitted by facsimile, each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.
10.8 GOVERNING LAW . This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of Idaho (without giving effect to principles of conflicts of laws).
10.9 SUCCESSORS AND ASSIGNS . This Agreement shall be binding
upon: Xxxxxx and its successors and assigns (if any); USCH and its successors
and assigns (if any); the Stockholders and their respective personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any); Netivation and its successors and assigns (if any); and Merger
Sub and its successors and assigns (if any). This Agreement shall inure to the
benefit of: Xxxxxx; USCH; the Stockholders; Netivation; Merger Sub; the
Netivation Indemnitees; and the respective successors and assigns (if any) of
the foregoing. Each party may freely assign any or all of its rights (but not
its obligations) under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any affiliate without obtaining the
consent or approval of any other party hereto or of any other Person.
10.10 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE . The rights
and remedies of the parties hereto shall be cumulative (and not alternative).
The parties to this Agreement agree that, in the event of any Breach or
threatened Breach by any party to this Agreement of any covenant, obligation or
other provision set forth in this Agreement for the benefit of any other party
to this Agreement, such other party shall be entitled (in addition to any other
remedy that may be available to it) to (i) a decree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining such
Breach or threatened Breach.
10.11 WAIVER .
(a) No failure on the part of any Person to exercise
any power, right, privilege or remedy under this Agreement, and no delay on the
part of any Person in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.12 AMENDMENTS . This Agreement may not be amended,
modified, altered or supplemented other than by means of a written instrument
duly executed and delivered on behalf of all of the parties hereto.
10.13 TIME OF THE ESSENCE . Time is of the essence of this
Agreement.
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10.14 SEVERABILITY . In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
10.15 PARTIES IN INTEREST . Except for the provisions of
Section 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.16 MEDIATION AND ARBITRATION. Any disputes or claims
arising hereunder shall be mediated by a mediation service in Washington, D.C.,
having no fewer than three (3) years of operating experience in Washington,
D.C.. If after good faith by the parties to this Agreement mediation is
unsuccessful in any particular, then as to any remaining controversy or claim
arising out of or relating to this Agreement or the breach thereof, same shall
be settled by arbitration in Washington, D.C., in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If the amount of the controversy or claim is less than
$200,000 following mediation efforts, the arbitration shall be conducted by a
single arbitrator, but if the amount exceeds $200,000, then the arbitration
shall be conducted by a panel of three arbitrator who are experienced in
corporate matters and contract disputes. The prevailing party in any arbitration
hereunder shall be entitled to the recovery from the other party of its
reasonable attorneys' fees and costs of the proceeding.
10.17 ENTIRE AGREEMENT . This Agreement and the other
agreements referred to herein set forth the entire understanding of the parties
hereto relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
10.18 CROSS-GUARANTEE . Each of Netivation and Merger Sub
cross-guarantee the performance of the obligations of each other created by the
terms of this Agreement. Each of Xxxxxx, USCH and the Stockholders
cross-guarantee the performance of the obligations of each other created by the
terms of this Agreement.
10.19 CONSTRUCTION .
(a) For purposes of this Agreement, whenever the
context requires: the singular number shall include the plural, and vice versa;
the masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement.
(c) As used in this Agreement, the words "include"
and "including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in
this Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
[Remainder of Page Intentionally Left Blank]
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The parties hereto have caused this Agreement to be executed and
delivered as of the date first set forth above.
NETIVATION:
XXXXXXXXXX.XXX, INC.,
a Delaware corporation
By
-----------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
MERGER SUB:
XXXXXXXXXX.XXX MERGER SEVEN CORP.,
a Delaware corporation
By
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Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
XXXXXX:
XXXXXX, INC.,
a Virginia corporation
By
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Xxxx Xxxxxx
President
USCH:
U.S. CONGRESS HANDBOOK, INC.,
a Virginia corporation
By
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Xxxx Xxxxxx
President
STOCKHOLDERS:
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Xxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
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AGENT:
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Xxxx Xxxxxx
SECRETARY'S CERTIFICATE
I, Xxxx X. Xxxxxx, Secretary of Xxxxxxxxxx.xxx Merger Seven Corp.,
hereby certify that this Agreement has been adopted pursuant to the first
sentence of Title 8, Section 251(f) of the Delaware Corporations Laws, and that
the conditions specified in that sentence have been satisfied.
-----------------------------------------
Xxxx X. Xxxxxx, Secretary
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