Exhibit 10.21
Agreement and Plan of Merger, dated as of March 5, 1999, among Rare
Medium, Inc., ICC Technologies, Inc., Rare Medium Texas I,
Inc., Big Hand, Inc., and the Stockholders of Big Hand, Inc.
AGREEMENT AND PLAN OF MERGER
AMONG
RARE MEDIUM, INC., ICC TECHNOLOGIES, INC.,
RARE MEDIUM TEXAS I, INC,
BIG HAND, INC.
AND
THE STOCKHOLDERS OF BIG HAND, INC. NAMED HEREIN
March 5, 1999
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into as
of March 5, 1999 by and among ICC Technologies, Inc., a Delaware corporation
("Parent"), Rare Medium, Inc., a New York corporation and a wholly-owned
subsidiary of Parent ("Rare Medium" or "Buyer"), Rare Medium Texas I, Inc., a
Delaware corporation and a wholly owned subsidiary of the Buyer (the
"Acquisition Subsidiary"), Big Hand, Inc., a Texas corporation (the "Company"),
and the stockholders of the Company named on the signature page hereto (each a
"Principal" and collectively, the "Principals"). The Buyer, Parent, the
Acquisition Subsidiary, the Company, and the Principals are referred to herein
individually as a "Party" and collectively as the "Parties."
This Agreement contemplates a tax-free merger of the Company into the
Acquisition Subsidiary. In such merger, the stockholders of the Company will
receive capital stock of the Parent in exchange for their capital stock of the
Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
THE MERGER
The Merger. Upon and subject to the terms and conditions of this
Agreement, the Company shall merge with and into the Acquisition Subsidiary
(with such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Company shall cease and the Acquisition Subsidiary shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Company and
the Acquisition Subsidiary file the certificate(s) of merger or other
appropriate documents prepared and executed in accordance with the relevant
provisions of each of the Delaware General Corporation Law with the Secretary of
State of the State of Delaware and the Texas Business Corporation Act (the
"Texas Act") with the Secretary of State of the State of Texas (collectively,
the "Certificates of Merger"). The Merger shall have the effects of a merger as
set forth in the Delaware General Corporation Law and the Texas Act.
1.1 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxxxxx LLP in New York, New York, commencing at 10:00 a.m. local time
on March 26, 1999 (provided that the physical presence of a party shall
not be required thereat if all appropriate documents required to be
delivered by such party have been received by mail or overnight
courier), or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby have not
been satisfied or waived by such date, on such mutually agreeable later
date as soon as practicable after the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (the "Closing Date").
1.2 Actions at the Closing. At the Closing, (a) the Company shall deliver
to the Buyer and the Acquisition Subsidiary the various certificates,
instruments and documents referred to in Section 5.2, (b) the Buyer,
the Acquisition Subsidiary and Parent shall deliver to the Company the
various certificates, instruments and documents referred to in Section
5.3, (c) the Company shall file with the Secretary of State of the
State of Texas a certificate of merger with respect to the Merger as
required by the Texas Act and the Acquisition Subsidiary shall file
with the Secretary of State of the State of Delaware a certificate of
merger with respect to the Merger as required by the Delaware General
Corporation Law, (d) each stockholder of the Company, other than
holders of Dissenting Shares (as defined in Section 1.6), shall deliver
to the Buyer for cancellation the certificate(s) representing his or
her Company Shares (as defined in Section 1.5(a)), (e) Parent shall
authorize the transfer agent for its shares of stock (the "Exchange
Agent") to issue to each holder of Company Shares who has delivered for
cancellation his or its certificates for Company Shares
("Certificates") pursuant to clause (d) of this Section certificate(s)
for the Initial Shares (as defined below) as provided in Section 1.5
below, and (e) the Buyer, Parent, the Principals and the Escrow Agent
(as defined therein) shall execute and
deliver the Escrow Agreement attached hereto as Exhibit A (the "Escrow
Agreement") and the Buyer shall deliver to the Escrow Agent a
certificate for the Escrow Shares (as defined below) being placed in
escrow (the "Escrow") on the Closing Date pursuant to Section 1.9.
1.3 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the
Acquisition Subsidiary, in order to consummate the transactions
contemplated by this Agreement.
1.4 Conversion of Shares; Merger Consideration. At the Effective Time, by
virtue of the Merger and without any action on the part of any Party
or the holder thereof:
Each share of common stock, $.01 par value per share, of the Company ("Company
Shares") issued and outstanding immediately prior to the Effective Time (other
than Company Shares owned beneficially by the Buyer, Parent, or the Acquisition
Subsidiary, Dissenting Shares (as defined in Section 1.6) and Company Shares
held in the Company's treasury) shall be converted into and represent the right
to receive (subject to the provisions of Section 1.9) the following
(collectively, the "Merger Consideration"): such number of shares of common
stock, $.01 par value per share, of Parent ("Parent Common Stock") as is equal
to the fraction: (x) the numerator of which shall be a fraction equal to (A) 95%
of the Purchase Price (as defined below) divided by (B) the Closing Price (as
defined below); and (y) the denominator of which shall be the Total Outstanding
Company Shares (as defined below). For purposes of this Agreement, the following
terms shall have the following meanings: "Total Outstanding Company Shares"
shall mean the total number of Company Shares outstanding at the Effective Time
(after giving effect to (x) the exercise of all options to purchase Company
Shares issued by the Company pursuant to its stock option plans or otherwise
("Options") as provided in Section 1.10, and (y) the conversion or exercise of
all outstanding securities convertible or exercisable into Company Shares);
"Purchase Price" shall mean the product of (x) two (2) and (y) the Gross
Revenues (as herein defined) of the Company for the twelve calendar months
ending February 28, 1999 (subject to adjustment as provided in Section 1.5(f));
"Gross Revenues" shall mean the gross revenues of the Company and its
consolidated subsidiaries determined on an accrual basis in accordance with U.S.
generally accepted accounting principles ("GAAP"); and "Closing Price" shall
mean the lower of (x) four dollars and fifty cents ($4.50) or (y) the average of
the last reported per share sale price of Parent Common Stock over the ten (10)
trading days prior to, but not including, the Closing Date as reported in The
Wall Street Journal or its successor. Stockholders of record of the Company (the
"Company Stockholders") shall be entitled to receive promptly following the
Closing all of the shares of Parent Common Stock into which their Company Shares
were converted pursuant to this Section 1.5(a); provided, that shares of Parent
Common Stock with an aggregate value of $800,000 (the "Escrow Shares"), based on
the Closing Price, which would otherwise have been issued to the Principals
shall instead be delivered to the Escrow Agent and be held in escrow subject to
the Escrow Agreement. Such total number of shares of Parent Common Stock minus
the Escrow Shares shall be referred to herein as the "Initial Shares". The
Initial Shares and the Escrow Shares shall together be referred to herein as the
"Merger Shares."
(a) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned
beneficially by the Buyer, Parent or the Acquisition Subsidiary
shall be cancelled and retired without payment of any
consideration therefor.
(b) Each share of common stock, $.01 par value per share, of the
Acquisition Subsidiary issued and outstanding immediately prior
to the Effective Time shall be converted into and thereafter
evidence one share of common stock, $.01 par value per share,
of the Surviving Corporation.
(c) An independent certified public accounting firm selected by
Buyer shall as soon as practicable after the Closing conduct a
post-Closing audit of the Company's balance sheet as of the
Closing Date (such balance sheet, as adjusted to the extent
necessary to enable such accounting firm to issue an
unqualified opinion, the "Closing Balance Sheet") and the
income statement used to determine the Purchase Price (such
income statement, as adjusted to enable such accounting firm to
issue an unqualified opinion, the "Income Statement"). If the
net worth of the Company as determined pursuant to the Closing
Balance Sheet (the "Audited Closing Net Worth") was less than
$100,000.00 as of the Closing Date, the Purchase Price shall be
reduced by an amount equal to the difference between
$100,000.00 and the Audited Closing Net Worth, with such
reduction in the
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Purchase Price offset against, and recoverable by Buyer from,
the Escrow Shares held in escrow pursuant to the Escrow
Agreement. If the Gross Revenues of the Company as determined
pursuant to the Income Statement were less than the Gross
Revenues used to initially determine the Purchase Price for
purposes of the Closing, the Purchase Price shall be
recalculated based upon the Income Statement and any reduction
in the Purchase Price shall be offset against, and recoverable
by Buyer from, the Escrow Shares pursuant to the Escrow
Agreement. If the Gross Revenues of the Company as determined
pursuant to the Income Statement were greater than the Gross
Revenues used to initially determine the Purchase Price for
purposes of the Closing, the Purchase Price shall be
recalculated based upon the Income Statement and shares of
Parent Common Stock with respect to any such increase in the
Purchase Price shall be issued to the former Company
Stockholders in accordance with Section 1.5 as soon as is
practicable following the determination of such adjustment.
Dissenting Shares.
For purposes of this Agreement, "Dissenting Shares" means Company Shares held as
of the Effective Time by a Company Stockholder who has not voted such Company
Shares in favor of the adoption of this Agreement and the Merger and with
respect to which appraisal shall have been duly demanded and perfected in
accordance with the Texas Act and not effectively withdrawn or forfeited prior
to the Effective Time. Dissenting Shares shall not be converted into or
represent the right to receive the Merger Consideration, unless such Company
Stockholder shall have forfeited his right to appraisal under the Texas Act or
withdrawn, with the consent of the Company, his demand for appraisal. If such
Company Stockholder has so forfeited or withdrawn his right to appraisal of
Dissenting Shares, then (i) as of the occurrence of such event, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Consideration issuable in
respect of such Company Shares pursuant to Sections 1.5(a), and (ii) promptly
following the occurrence of such event, the Buyer shall deliver to the Exchange
Agent a certificate representing such percentage of the Merger Shares to which
such holder is entitled pursuant to Sections 1.5(a) as is identical to the
percentage of such shares delivered to the Exchange Agent at (or promptly
following) the Closing with respect to the Company Stockholders other than the
Principals (which shares shall be considered Initial Shares for all purposes of
this Agreement).
(d) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares,
withdrawals of such demands, and any other instruments that
relate to such demands received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Texas Act. The
Company shall not, except with the prior written consent of the
Buyer, make any payment with respect to any demands for
appraisal of Company Shares or offer to settle or settle any
such demands.
Fractional Shares. No certificates or script representing fractional
Merger Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Merger Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Merger Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Merger Share shall, upon proper surrender of such person's
Certificates, receive such whole number of Merger Shares as is equal to the
precise number of Merger Shares to which such person would be entitled, rounded
up or down to the nearest whole number (with a fractional interest equal to .5
rounded to the nearest odd number); provided that each such holder shall receive
at least one Initial Share or Escrow Share, as the case may be.
Dividends. No dividends or other distributions that are payable to the
holders of record of Parent Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Merger Shares until such holders surrender their Certificates.
Upon such surrender, the Buyer shall pay or deliver to the persons in whose name
the certificates representing such Merger Shares are issued any dividends or
other distributions that are payable to the holders of record of Parent Common
Stock as of a date on or after the Closing Date and which were paid or delivered
between the Effective Time and the time of such surrender; provided that no such
person shall be entitled to receive any interest on such dividends or other
distributions.
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Escrow. On the Closing Date, the Buyer, Parent, the Escrow Agent and
the Principals shall enter into the Escrow Agreement. On the Closing Date, (i)
the Buyer shall deliver to the Escrow Agent a certificate (issued in the name of
the Principals pro-rata based on the number of Company Shares held by each such
Principal) representing the Escrow Shares, as described in Sections 1.5(a), for
the purpose of securing the indemnification obligations of the Principals set
forth in this Agreement and (ii) the Principals shall deliver to the Escrow
Agent a stock power in blank, duly executed with signatures medallion
guaranteed. The Escrow Shares shall be held by the Escrow Agent under the Escrow
Agreement pursuant to the terms thereof. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party, and shall be held and
disbursed solely for the purposes and in accordance with the terms of the Escrow
Agreement.
Options and Bonus Pool.
(e) As of immediately prior to the Effective Time, all Options (as
defined above), whether vested or unvested, shall either be
cancelled or exercised in full. With respect to any such
Options that are exercised, the full exercise price in respect
thereof shall be remitted to the Company.
(f) The Company shall obtain, prior to the Closing, the agreement
from each holder of an Option that all Options held by such
holder shall either be cancelled or exercised in full as
provided in this Section (unless such agreement is not required
under the terms of the applicable agreement, instrument or plan
to effectuate such cancellation or exercise).
The Parties agree that shares of Parent Common Stock equal to (x) 5% of the
Purchase Price divided by (y) the Closing Price (as defined in Section 1.5(b))
(the "Bonus Pool") shall be issued, for no additional consideration, by Parent
promptly following the Effective Time to certain designated employees of the
Surviving Corporation pursuant to a schedule to be agreed upon between Buyer and
the Principals (the "Designated Employees"); provided, that, such shares shall
be issued pursuant to restricted stock agreements to be entered into between
Parent and each Designated Employee, which agreements shall provide, in addition
to such other terms and conditions as are customary and reasonable, (i) that
such shares shall vest on the first anniversary of the Effective Time (the
"Vesting Date"), (ii) that if any such Designated Employee is not an employee of
either the Surviving Company, Rare Medium or Parent (or any of their successors)
at any time prior to the Vesting Date, such shares as shall have been allocated
to such Designated Employee hereunder shall be forfeited by such employee and
returned to Parent; and (iii) that prior to the Vesting Date no Designated
Employee shall (x) sell, offer to sell, pledge, transfer or otherwise dispose of
any shares of Parent Common Stock received by him or her in respect of the Bonus
Pool, or (y) engage in any transaction with respect to any such shares the
intent or effect of which is to reduce the risk of owning such shares
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). Any shares in the Bonus
Pool forfeited by a Designated Employee as provided above (a "Former Designated
Employee") shall be cancelled by Buyer and, promptly following the Vesting Date,
all such forfeited shares shall be reissued to the Company Stockholders pro rata
based upon the number of Company Shares held by each such Company Stockholder as
of the Effective Time; and such Former Designated Employees shall no longer be
deemed Designated Employees and shall have no rights to or in respect of the
Bonus Pool.
Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation shall be the same as the Certificate of Incorporation of
the Acquisition Subsidiary immediately prior to the Effective Time.
1.5 By-laws. The By-laws of the Surviving Corporation shall be the same as
the By-laws of the Acquisition Subsidiary immediately prior to the
Effective Time.
1.6 Directors and Officers. The officers and directors of the Acquisition
Subsidiary shall become the officers and directors of the Surviving
Corporation as of the Effective Time.
1.7 No Further Rights. From and after the Effective Time, no Company Shares
shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided
herein or by law.
1.8 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares
shall thereafter be made. If, after the Effective Time, Certificates
are presented to the Surviving Corporation or the Exchange Agent, they
shall be cancelled and exchanged for the Merger Consideration in
accordance herewith (subject to Section 1.9) and subject to applicable
law in the case of Dissenting Shares.
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS
Except as set forth in the Disclosure Schedule attached hereto (which
schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Article II, the "Disclosure Schedule"), the Company and the
Principals jointly and severally represent and warrant to Buyer, Parent and
Acquisition Subsidiary, as of the date of this Agreement and as of the Closing
(which representations and warranties shall survive the Closing to the extent
provided in Section 6.3 hereof), as follows:
Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Texas. The Company is duly qualified to
conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the business,
business prospects, assets, results of operations or financial condition (a
"Material Adverse Effect") of the Company. The Company has all requisite
corporate power and authority to carry on the business in which it is engaged
and to own and use the properties owned and used by it. The Company has
furnished to the Buyer true and complete copies of its Certificate of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under or in violation of any provision of its
Certificate of Incorporation or By-laws.
1.9 Capitalization.
The authorized capital stock of the Company consists solely of 20,000,000 shares
of Common Stock, $.01 par value per share, of which 15,780,250 shares are issued
and outstanding, and no shares of such stock are held in the treasury of the
Company. Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list of (i) all stockholders of record of the Company, indicating the
number of Company Shares held of record by each stockholder, and (ii) all
holders of Options, indicating the number of Company Shares subject to each
Option and the exercise price thereof. Except as set forth on Section 2.2 of the
Disclosure Schedule, to the knowledge of the Company each stockholder of the
Company is an "accredited investor" within the definition set forth in Rule
501(a) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). All of the issued and outstanding Company Shares are, and all Company
Shares that may be issued upon exercise of Options will be, duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights.
There are no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition of any of its
capital stock, other than the Options listed in Section 2.2 of the Disclosure
Schedule. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares. All of the issued
and outstanding Company Shares were issued in compliance with applicable federal
and state securities laws.
(a) Except as set forth in this Section 2.2 or as reserved for future
grants of options under any stock option plan of the Company, there
are no equity securities of any class of the Company or any
Subsidiary (as defined in Section 2.5 below) or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth
in this Section or the Disclosure Schedule, there are no options,
warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any Subsidiary
is a party or by which it is bound obligating the Company or any
Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the
Company or any Subsidiary or obligating either of them to grant,
extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement,
including as a result of the transaction contemplated by this
Agreement.
Authorization of Transaction. The Company and the Principals have all
requisite power and authority to execute and deliver this Agreement and, subject
to obtaining the Requisite Stockholder Approval, to perform their
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respective obligations hereunder. The execution and delivery of this Agreement
and, subject to the adoption of this Agreement and the approval of the Merger by
a majority of the votes represented by the outstanding Company Shares entitled
to vote on this Agreement and the Merger (the "Requisite Stockholder Approval"),
the performance by the Company and the Principals of this Agreement and the
consummation by the Company and the Principals of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company and the Company Stockholders. This Agreement has been
duly and validly executed and delivered by the Company and the Principals and,
assuming the due authorization, execution and delivery hereof by each of Buyer,
Parent and Acquisition Subsidiary and subject to obtaining the Requisite
Stockholder Approval, constitutes a valid and binding obligation of the Company
and each Stockholder, enforceable against each of them in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditor's rights generally,
or by general equitable principles, and to the extent any indemnification or
contribution provisions thereof may be limited by applicable federal or state
securities laws.
1.10 Noncontravention. Subject to the filing of the Certificates of Merger
as required by applicable law and obtaining the Requisite Stockholder
Approval and except as set forth on Section 2.4 of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the
Company, nor the consummation of the transactions contemplated hereby,
will (a) conflict with or violate any provision of the charter or
By-laws of the Company, (b) require on the part of the Company or any
Subsidiary any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency
or commission or other governmental or regulatory authority or agency
(a "Governmental Entity"), (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security
Interest (as defined below) or other arrangement to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary
is bound or to which any of their assets is subject, (d) result in the
imposition of any Security Interest upon any assets of the Company or
any Subsidiary or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any Subsidiary
or any of their respective properties or assets. For purposes of this
Agreement, "Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and
similar legislation, and (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, in each case arising in the
ordinary course of business consistent with past custom and practice
and in amount (including with respect to frequency and amount)
("Ordinary Course of Business") of the Company and which would not have
a Material Adverse Effect on the Company and its Subsidiaries, taken as
a whole.
Subsidiaries. Section 2.5 of the Disclosure Schedule sets forth (a) the
name of each subsidiary of the Company (individually a "Subsidiary" and
collectively the "Subsidiaries"); (b) the name of each other corporation,
partnership or other entity in which the Company has, directly or indirectly, an
equity interest; (c) in the case of each corporation specified in (a) and (b)
above (i) the jurisdiction of its incorporation; (ii) the capitalization thereof
and the percentage of each class of voting capital stock owned directly or
indirectly by the Company; (iii) the names and percentage ownership of all
record and beneficial owners of shares of capital stock of each such
corporation; (iv) a description of any limitations on the holder's ability to
vote or alienate such securities; (v) a description of any outstanding options,
warrants or other rights to purchase or acquire securities of such corporation,
including those with respect to securities held by the Company; (vi) a
description of any other charge or impediment which would materially limit or
impair the ownership of such entity or interest or the ability effectively to
exercise the full rights of ownership of such entity or interest; and (vii) a
description of any contracts, commitments, understandings, arrangements or
restrictions by which any such corporation is bound to issue any additional
shares of its capital stock; and (d) in the case of each unincorporated entity
specified pursuant to (b) above, the equivalent of the information provided
pursuant to the preceding clause (c) with respect to corporate entities. Except
as set forth in Section 2.5 of the Disclosure Schedule, all shares of capital
stock of each corporation and ownership interests of each unincorporated entity
identified in the
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preceding sentence are owned directly or indirectly by the Company free and
clear of all mortgages, pledges, liens, security interests, encumbrances,
restrictions or charges of any kind. Each Subsidiary (i) is an entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation; (ii) has full power and authority to carry on its
business as it is now being conducted and to own, lease or operate its
properties and assets; and (iii) is duly qualified or licensed to do business as
a foreign corporation in good standing in every jurisdiction in which the
character or location of the properties and assets owned, leased or operated by
it or the conduct of its business requires such licensing or qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect on such Subsidiary. All of the outstanding capital stock of each
Subsidiary is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. The Company has heretofore delivered to Buyer
complete and correct copies of the charter and bylaws of each Subsidiary, as
presently in effect.
1.11 Financial Statements. The Company has provided to the Buyer the
consolidated balance sheets and consolidated statements of income,
changes in stockholders' equity and cash flows of the Company as of and
for each of the latest three completed fiscal years (the balance sheet
included therein and dated as of December 31, 1998 being referred to
herein as (the "Most Recent Balance Sheet"). Such financial statements
(collectively, the "Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, fairly present the consolidated financial
condition, results of operations and cash flows of the Company and the
Subsidiaries as of the respective dates thereof and for the periods
referred to therein and are consistent with the books and records of
the Company and the Subsidiaries.
1.12 Absence of Certain Changes. Since the date of the Most Recent Balance
Sheet, (a) there has not been any material adverse change in the
assets, business, financial condition or results of operations of the
Company or the Subsidiaries, taken as a whole, nor has there occurred
any event or development which could reasonably be foreseen to result
in such a material adverse change in the future, and (b) neither the
Company nor any Subsidiary has taken any of the actions set forth in
Section 4.5.
1.13 Undisclosed Liabilities. The Company has no liability (whether known
or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a)
liabilities shown on the Most Recent Balance Sheet, (b) liabilities
which have arisen since the Most Recent Balance Sheet in the Ordinary
Course of Business and not in excess of $25,000 in the aggregate or
$2,500 individually and (c) contractual liabilities incurred in the
Ordinary Course of Business which are not required by GAAP to be
reflected on a balance sheet and which are disclosed on Section 2.15 of
the Disclosure Schedule.
1.14 Tax Matters.
Each of the Company and each Subsidiary has filed all Tax Returns (as defined
below) that it was required to file prior to the date of this Agreement and all
such Tax Returns were correct and complete in all material respects. The Company
and the Subsidiaries have paid all Taxes (as defined below) that are shown to be
due on any such Tax Returns. The unpaid Taxes of the Company for tax periods
through the date of the Most Recent Balance Sheet do not exceed the accruals and
reserves for Taxes set forth on the Most Recent Balance Sheet. The Company has
no actual or potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included the Company during a prior period) other than the
Company. All Taxes that either the Company or any Subsidiary is or was required
by law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity. For purposes
of this Agreement, "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof. For purposes of this Agreement,
"Tax Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(a) The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the
7
Company or any Subsidiary since January 1, 1993. The federal income
Tax Returns of the Company and its Subsidiaries have never been
audited by the Internal Revenue Service. No examination or audit of
any Tax Returns of the Company or any Subsidiary by any
Governmental Entity is currently in progress or, to the knowledge
of the Company and the Principals, threatened or contemplated.
Neither the Company nor any Subsidiary has waived any statute of
limitations with respect to taxes or agreed to an extension of time
with respect to a tax assessment or deficiency.
(b) Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the Code and
none of their respective are subject to an election under Section
341(f) of the Code. Neither the Company nor any Subsidiary has been
a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(l)(A)(ii) of the Code. Neither
the Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement.
(c) The Company is not or has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the
Code). Neither the Company nor any Subsidiary has made an election
under Treasury Reg. Section 1.1502-20(g). Neither the Company nor
any Subsidiary is nor has any of them ever been required to make a
basis reduction pursuant to Treasury Reg. Section 1.1502-20(b) or
Treasury Reg. Section 1.337(d)-2T(b).
Assets. The Company and its Subsidiaries own or lease all tangible
assets necessary and sufficient for the conduct of their respective businesses
as presently conducted and as presently proposed to be conducted. Each such
tangible asset is free from material defects, has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purposes for which it
presently is used. No asset of the Company or any Subsidiary (tangible or
intangible) is subject to any Security Interest.
1.15 Real Property. Neither the Company nor any Subsidiary owns any real
property.
1.16 Intellectual Property.
Each of the Company and its Subsidiaries owns or has the right to use all
Intellectual Property (as defined below) incorporated in their respective
products or necessary for, or used in, the operation of their respective
businesses as presently conducted (the "Company Intellectual Property"). Each
item of Company Intellectual Property will be owned or available for use by the
Surviving Corporation on substantially identical terms and conditions
immediately following the Closing. The Company and the Subsidiaries each has
taken all reasonable measures to protect the proprietary nature of each item of
Company Intellectual Property, and to maintain in confidence all trade secrets
and confidential information, that it owns or uses, including, without
limitation, maintaining all registrations and paying all fees associated
therewith. To the knowledge of the Company and the Principals, (a) no other
person or entity has any rights to any of the Company Intellectual Property
owned by the Company or any Subsidiary (except pursuant to agreements or
licenses specified in Section 2.12(c) of the Disclosure Schedule), and (b) no
other person or entity is infringing, violating or misappropriating any of the
Company Intellectual Property. The Company has made available to the Buyer
complete and accurate copies of all written documentation in the Company's or
any Subsidiary's possession relating to claims or disputes known to any of them
concerning any item of Company Intellectual Property. For purposes of this
agreement, "Intellectual Property" means all (i) patents and patent
applications, (ii) copyrights and registrations thereof, (iii) mask works and
registrations and applications for registration thereof, (iv) computer software,
data and documentation, (v) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists and information, (vi) trademarks, service marks, trade names
and applications and registrations therefor and (vii) other proprietary rights
relating to any of the foregoing. Section 2.12(a) of the Disclosure Schedule
lists each patent, patent application, copyright registration, mask work
registration or application therefor, and trademark or service xxxx registration
or application therefor of the Company or any Subsidiary.
None of the activities or business presently conducted by the Company or any
Subsidiary infringes or violates, or constitutes a misappropriation of, any
8
Intellectual Property rights of any person or entity. Neither the Company nor
any Subsidiary has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation and no such claim has been
threatened by any third party. Section 2.12(c) of the Disclosure Schedule
identifies each license or other agreement (or type of license or other
agreement) pursuant to which the Company or any Subsidiary has licensed,
distributed or otherwise granted any rights to any third party with respect to,
any of Company Intellectual Property. Section 2.12(d) of the Disclosure Schedule
identifies each item of Company Intellectual Property that is owned by a party
other than the Company or any Subsidiary, and the license or agreement pursuant
to which the Company or any Subsidiary uses it (excluding off-the-shelf software
programs licensed by the Company or any Subsidiary pursuant to "shrink wrap"
licenses).
Neither the Company nor any Subsidiary has disclosed the source code
for any of the software owned by the Company or any Subsidiary and incorporated
in any of their products or necessary for the operation of their respective
businesses as presently conducted (the "Software") or, other than to the
creators or persons involved in the creation of such code, other confidential or
proprietary information constituting, embodied in or pertaining to the Software
to any person or entity and has taken reasonable measure to prevent such
disclosure. All of the Software that is, individually or in the aggregate,
material to the Company's business has been created by employees of the Company
or a Subsidiary within the scope of their employment or by independent
contractors who have executed agreements expressly assigning all right, title
and interest in the Software to the Company or a Subsidiary.
Inventory. All inventory of the Company and the Subsidiaries, whether
or not reflected on the Most Recent Balance Sheet, consists of a quality and
quantity useable and saleable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value on the Most Recent Balance
Sheet. The quantities of each type of inventory, whether raw materials,
work-in-process or finished goods, are not excessive in the present
circumstances of the Company and its Subsidiaries. Section 2.13 of the
Disclosure Schedule lists all of the Company's and each Subsidiary's work in
process (identified by project), the percentage of completion of each such
project, and the total agreed upon retail price the Company expects to receive
with respect to each such project.
1.17 Real Property Leases. Section 2.14 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the Company
or any Subsidiary and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to the Buyer
correct and complete copies of the leases and subleases (as amended to date)
listed in Section 2.14 of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 2.14 of the Disclosure Schedule: the lease or
sublease is legal, valid, binding, enforceable and in full force and effect;
the lease or sublease will continue to be legal, valid, binding, enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect prior to the Closing, subject to any consents
with respect thereto listed on Section 2.4 of the Disclosure Schedule;
no party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder; there
are no disputes, oral agreements or forbearance programs in effect as to the
lease or sublease; neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
all facilities leased or subleased thereunder are supplied with utilities and
other services necessary for the operation of said facilities; and
to the knowledge of the Company and the Principals, the owner of the facility
leased or subleased has good and clear record and marketable title to the parcel
of real property, free and clear of any Security Interest, easement, covenant or
other restriction, except for recorded easements, covenants, and other
restrictions which do not impair the intended uses, occupancy or value of the
property subject thereto.
Contracts. Section 2.15 of the Disclosure Schedule lists the following
written arrangements (including without limitation written agreements) to which
either the Company or a Subsidiary is a party: any written arrangement (or group
of related written arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $5,000 per annum;
9
any written arrangement (or group of related written arrangements) for the
purchase or sale of raw materials, commodities, supplies, products or other
personal property or for the furnishing or receipt of services (i) which calls
for performance over a period of more than one year, (ii) which involves more
than the sum of $5,000, or (iii) in which either the Company or any Subsidiary
has granted manufacturing rights, "most favored nation" pricing provisions or
exclusive marketing or distribution rights relating to any products or territory
or has agreed to purchase a minimum quantity of goods or services or has agreed
to purchase goods or services exclusively from a certain party; any written
arrangement establishing a partnership or joint venture;
any written arrangement (or group of related written arrangements) under which
it has created, incurred, assumed, or guaranteed (or may create, incur, assume,
or guarantee) indebtedness (including capitalized lease obligations) involving
more than $15,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
any written arrangement concerning confidentiality or noncompetition;
any written arrangement involving any of the Company Stockholders or their
affiliates, as defined in Rule 12b-2 under the Exchange Act ("Affiliates");
any written arrangement under which the consequences of a default or termination
could have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company and its
Subsidiaries, taken as a whole; and
any other written arrangement (or group of related written arrangements)
currently in existence or which any provisions thereof are currently binding on
the Company either (x) involving more than $15,000 or (y) not entered into in
the Ordinary Course of Business.
The Company has delivered to the Buyer a correct and complete copy of
each written arrangement (as amended to date) listed in Section 2.15 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid, binding and enforceable and in full force
and effect; (ii) the written arrangement will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing,
subject to obtaining the consents required by such arrangement that are listed
on Section 2.4 of the Disclosure Schedule; and (iii) no party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement. Neither the Company nor any
Subsidiary is a party to any oral contract, agreement or other arrangement
which, if reduced to written form, would be required to be listed in Section
2.15 of the Disclosure Schedule under the terms of this Section 2.15.
Accounts Receivable. All accounts receivable of the Company reflected
on the Most Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts on the Most Recent Balance Sheet. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen since the Most
Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet. Section
2.16 of the Disclosure Schedule lists an aging schedule of all accounts
receivable from any one person in excess of $15,000.
1.18 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary.
1.19 Insurance. Section 2.18 of the Disclosure Schedule sets forth the name
of the insurer, the name of the policyholder, the name of each covered
insured, the policy number, the period of coverage with respect to each
insurance policy and the annual premium in respect of each such policy
(including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability
and automobile insurance policies and bond and surety arrangements) to
which the Company or any Subsidiary has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past
five years. (i) Each such insurance policy is enforceable and in full
force and effect; (ii) such policy will continue to be enforceable and
in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing,
subject to obtaining any consents required pursuant to such policy that
are listed on Section 2.4 of the Disclosure Schedule; (iii) neither the
Company nor any Subsidiary is in breach or
10
default (including with respect to the payment of premiums or the
giving of notices) under such policy, and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration, under such
policy; and (iv) neither the Company nor any Subsidiary has received
any notice from the insurer disclaiming coverage or reserving rights
with respect to a particular claim or such policy in general. Neither
the Company nor any Subsidiary has incurred any loss, damage, expense
or liability covered by any such insurance policy for which it has not
properly asserted a claim under such policy. The Company and the
Subsidiaries are covered by insurance in scope and amount customary and
reasonable for the businesses in which each is engaged.
1.20 Litigation. Section 2.19 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order,
decree, stipulation or injunction and (b) any claim, complaint, action,
suit, proceeding, hearing or investigation of or in any Governmental
Entity or before any arbitrator to which the Company or any Subsidiary
is a party or, to the knowledge of the Company and the Principals,
either is threatened to be made a party. None of the complaints,
actions, suits, proceedings, hearings, and investigations set forth in
Section 2.19 of the Disclosure Schedule could have a material adverse
effect on the assets, business, financial condition, results of
operations or future prospects of the Company and the Subsidiaries,
taken as a whole.
1.21 Product Warranty. No product manufactured, sold, leased, licensed or
delivered by the Company or any Subsidiary is subject to any guaranty,
warranty, right of return or other indemnity which if enforced, either
individually or in the aggregate, would have a Material Adverse Effect
on the Company. The Company's standard terms and conditions of sale or
lease are set forth in Section 2.20 of the Disclosure Schedule. Section
2.20 of the Disclosure Schedule sets forth the aggregate expenses
incurred by the Company and the Subsidiaries in fulfilling their
obligations under their guaranty, warranty, right of return and
indemnity provisions during each of the fiscal years and the interim
period covered by the Financial Statements; and neither the Company nor
any Subsidiary knows of any reason why such expenses should
significantly increase as a percentage of sales in the future.
1.22 Employees; Labor Matters. Section 2.21 of the Disclosure Schedule
contains a list of all employees of each of the Company and each
Subsidiary, along with the position and the annual rate of compensation
of each such person and the amount and date of each such employee's
last raise. To the knowledge of the Company and the Principals, no key
employee or group of employees of the Company or any Subsidiary has any
plans to terminate employment with such employer. There are no
disputes, employee grievances or disciplinary actions pending, or to
the knowledge of the Company and the Principals threatened, involving
either the Company or any Subsidiary and any of its present or former
employees, except as disclosed on Section 2.21 of the Disclosure
Schedule. The Company and its Subsidiaries each has complied with all
provisions of law relating to employment and employment practices,
terms and conditions of employment, wages and hours, the failure to
comply with which would have a Material Adverse Effect upon the Company
and its Subsidiaries, taken as a whole. Neither the Company nor any
Subsidiary is engaged in any unfair labor practice and neither has any
liability for any arrears of wages or Taxes or penalties for failure to
comply with any such provisions of law. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining
disputes. Neither the Company nor the Principals have any knowledge of
any organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with
respect to employees of the Company or any Subsidiary.
1.23 Employee Benefits.
Section 2.22(a) of the Disclosure Schedule contains a complete and accurate list
of all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Company or any ERISA Affiliate (as defined below)(all such plans, whether
or not listed on such schedule, being referred to herein as the "Company
Employee Benefit Plans"). For purposes of this Agreement, "Employee Benefit
Plan" means any "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement involving direct or
indirect compensation, including without limitation insurance coverage,
severance benefits,
11
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m) of
the Code or the regulations under Section 414(o) of the Code), any of which
includes the Company or a Subsidiary. Complete and accurate copies of (i) all
Company Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Company Employee Benefit Plans, (iii) all related
trust agreements, insurance contracts and summary plan descriptions, and (iv)
all annual reports filed on IRS Form 5500, 5500C or 5500R for the last five plan
years for each Company Employee Benefit Plan, have been delivered to the Buyer.
Each Company Employee Benefit Plan has been administered in all material
respects in accordance with its terms and each of the Company and any ERISA
Affiliates has in all material respects met its obligations with respect to such
Company Employee Benefit Plan and has made all required contributions thereto.
The Company, each Subsidiary and all Company Employee Benefit Plans are in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and the regulations thereunder.
(a) There are no investigations by any Governmental Entity, termination
proceedings or other claims (except claims for benefits payable in
the normal operation of the Company Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders),
suits or proceedings against or involving any Company Employee
Benefit Plan or asserting any rights or claims to benefits under
any Company Employee Benefit Plan that could give rise to any
material liability of the Company, any Subsidiary or any ERISA
Affiliate.
(b) All the Company Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received
determination letters from the Internal Revenue Service to the
effect that such Company Employee Benefit Plans are qualified and
the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation
has not been threatened, and no such Company Employee Benefit Plan
has been amended since the date of its most recent determination
letter or application therefor in any respect, and no act or
omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(c) Neither the Company nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title
IV of ERISA.
(d) At no time has the Company or any ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA).
(e) There are no unfunded obligations under any Company Employee
Benefit Plan providing benefits after termination of employment to
any employee of the Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and
deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code
and insurance conversion privileges under state law.
(f) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or
any ERISA Affiliate that would subject the Company to any material
fine, penalty, tax or liability of any kind imposed under ERISA or
the Code.
(g) No Company Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within
the meaning of Section 501(c)(9) of the Code.
(h) No Company Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company from
amending or terminating any such Company Employee Benefit Plan.
(i) Section 2.22(j) of the Disclosure Schedule discloses each: (i)
agreement with any director, executive officer or other key
employee of the Company or any Subsidiary (A) the benefits of which
are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Company or any
Subsidiary of the nature of any of the transactions contemplated by
this Agreement, (B) providing any term of employment or
compensation guarantee or
12
(C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or
key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Company or any Subsidiary that
may be subject to the tax imposed by Section 4999 of the Code or
included in the determination of such person's "parachute payment"
under Section 280G of the Code; and (iii) agreement or plan binding
the Company or any Subsidiary, including without limitation any
stock option plan, stock appreciation right plan, restricted stock
plan, stock purchase plan, severance benefit plan, or any Employee
Benefit Plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by
this Agreement.
Environmental Matters.
Each of the Company and its Subsidiaries has complied with all applicable
Environmental Laws (as defined below), except for violations of Environmental
Laws that do not and will not, individually or in the aggregate, have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Company and its Subsidiaries, taken as a
whole. There is no pending or, to the knowledge of the Company or the
Principals, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law involving the Company or any Subsidiary, except for litigation, notices of
violations, formal administrative proceedings or investigations, inquiries or
information requests that will not, individually or in the aggregate, have a
material adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Company and its Subsidiaries, taken as a
whole. For purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wildlife, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
(j) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated
or controlled by the Company or any Subsidiary. With respect to any
such releases of Materials of Environmental Concern, the Company
and each Subsidiary have given all required notices to Governmental
Entities (copies of which have been provided to the Buyer). Neither
the Company nor any Subsidiary is aware of any releases of
Materials of Environmental Concern at parcels of real property or
facilities owned, operated or controlled by persons other than the
Company or a Subsidiary that could reasonably be expected to have
an impact on the real property or facilities owned, operated or
controlled by the Company or its Subsidiaries. For purposes of this
Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as
such term is defined under CERCLA), solid wastes and hazardous
wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum
and petroleum products, or any other material subject to regulation
under any Environmental Law.
13
(k) Set forth in Section 2.23(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits relating to
premises currently or previously owned or operated by the Company
or any Subsidiary (whether conducted by or on behalf of the Company
or a third party, and whether done at the initiative of the Company
or directed by a Governmental Entity or other third party) which
were issued or conducted during the past five years and which the
Company or any Subsidiary has possession of or access to. Complete
and accurate copies of each such report, or the results of each
such investigation or audit, have been provided to the Buyer.
(l) Set forth in Section 2.23(d) of the Disclosure Schedule is a list
of all of the solid and hazardous waste transporters and treatment,
storage and disposal facilities that have been utilized by the
Company or any Subsidiary since November 19, 1980. Neither the
Company nor any Subsidiary is aware of any material environmental
liability of any such transporter or facility.
Legal Compliance. Each of the Company and its Subsidiaries, and the
conduct and operations of their respective businesses, are in compliance with
each law (including rules and regulations thereunder) of any federal, state,
local or foreign government, or any Governmental Entity, which (a) affects or
relates to this Agreement or the transactions contemplated hereby or (b) is
applicable to the Company, any Subsidiary or their respective businesses, except
for any violation of or default under a law referred to in clause (b) above
which reasonably may be expected not to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
1.24 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued
or required under Environmental Laws and those relating to the
occupancy or use of owned or leased real property) ("Permits") issued
to or held by the Company or any Subsidiary. Such listed Permits are
the only Permits that are required for either the Company or any
Subsidiary to conduct its business as presently conducted or as
proposed to be conducted, except for those the absence of which would
not, individually or in the aggregate, have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole. Each such Permit
is in full force and effect and, to the best of the knowledge of the
Company and the Principals, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such
Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect following the Closing.
1.25 Certain Business Relationships With Affiliates. No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which
is used in the business of the Company or any Subsidiary other than as
set forth in Section 2.36 herein, (b) has any claim or cause of action
against the Company or any Subsidiary, or (c) owes any money to the
Company or any Subsidiary. Section 2.26 of the Disclosure Schedule
describes any transactions or relationships between the Company or any
Subsidiary and any Affiliate thereof which are reflected in the
statements of operations of the Company included in the Financial
Statements.
1.26 Brokers' Fees. Neither the Company nor any Subsidiary has any liability
or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
1.27 Books and Records. The minute books and other similar records of the
Company and each Subsidiary contain true and complete records of all
actions taken at any meetings of such company's stockholders, Board of
Directors or any committee thereof and of all written consents executed
in lieu of the holding of any such meeting. The books and records of
the Company and the Subsidiaries accurately reflect in all material
respects the assets, liabilities, business, financial condition and
results of operations of such entities and have been maintained in
accordance with good business and bookkeeping practices. The Company
has furnished or made available to Buyer or its representatives for
their examination true and complete copies of the Company's and the
Subsidiaries' minute books and their stock transfer books.
1.28 Customers and Suppliers. No unfilled customer order or commitment
obligating either the Company or any Subsidiary to process, manufacture
or deliver products or perform services will result in a loss to the
Company or such Subsidiary upon completion of performance. No purchase
order or commitment of the Company or any Subsidiary is in excess of
normal requirements, nor are prices provided therein in excess of
current market prices for the products or services to be provided
thereunder. No material supplier of the Company or any Subsidiary has
indicated within the past year that it will stop, or materially
decrease the rate
14
of, supplying materials, products or services to the Company or such
Subsidiary and no material customer of either the Company or any
Subsidiary has indicated within the past year that it will stop, or
materially decrease the rate of, buying, leasing or licensing
materials, products or services from them. Section 2.29 of the
Disclosure Schedule sets forth a list of (a) each customer that
accounted for more than 5% of the consolidated revenues of the Company
during the last full fiscal year or the interim period through the Most
Recent Balance Sheet and the approximate amount of revenues accounted
for by such customer during each such period and (b) each supplier that
is the sole supplier of any significant product or component to either
the Company or any Subsidiary.
1.29 Company Action. The Board of Directors of the Company, at a meeting
duly called and held, has by the unanimous vote of all directors
present (i) determined that the Merger is fair and in the best
interests of the Company and its stockholders, (ii) adopted this
Agreement in accordance with the provisions of the Texas Act, and (iii)
directed that this Agreement and the Merger be submitted to the Company
Stockholders for their adoption and approval and resolved to recommend
that Company Stockholders vote in favor of the adoption of this
Agreement and the approval of the Merger.
1.30 Disclosure. No representation or warranty by the Company or the
Principals contained in this Agreement, and no statement contained in
the Disclosure Schedule or any other document, certificate or other
instrument delivered to or to be delivered by or on behalf of the
Company or the Principals pursuant to this Agreement, and no other
statement made by the Company, the Principals or any of their
representatives in connection with this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements
herein or therein not misleading. The Company has disclosed to the
Buyer all material information relating to the business of the Company
and its Subsidiaries or the transactions contemplated by this
Agreement.
1.31 Year 2000. Section 2.32 of the Disclosure Schedule attached hereto
identifies each "year 2000" audit, report or investigation that has
been performed by or on behalf of the Company or any Subsidiary with
respect to their businesses and operations, and the Company has
provided to the Buyer true and correct copies of all such audits,
reports or investigations. Except as set forth in such audits, reports
and investigations, neither the Company nor any Subsidiary is aware of
any failure of either (i) their computer software systems, or (ii)
other computer software used by or licensed to or by any of them from
or to third parties, to be Year 2000 Compliant. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to each system
referred to in the prior sentence, that such system (i) will accurately
receive, record, store, provide, recognize and process all date and
time data from, during, into and between the twentieth and twenty-first
centuries; (ii) will accurately perform all date-dependent calculations
and operations (including, without limitation, mathematical operations,
sorting, comparing and reporting) from, during, into and between the
twentieth and twenty- first centuries; and (iii) will not malfunction,
cease to function or provide invalid or incorrect results as a result
of (x) the change of century, (y) date data, including date data which
represents or references different centuries or more than one century
or (z) the occurrence of any particular date; in each case without
human intervention, other than original data entry. Neither the Company
nor any Subsidiary has provided any guarantee or warranty for any
product sold or licensed, or services provided, by the Company or any
Subsidiary to the effect that such product or service (i) complies with
or accounts for the fact of the arrival of the year 2000 or (ii) will
not be adversely affected with respect to functional interoperability,
performance or volume capacity (including without limitation the
processing and reporting of data) by virtue of the arrival of the year
2000.
Government Contracts. Neither the Company nor any Subsidiary has ever
been, nor as a result of the consummation of the transactions contemplated by
this Agreement is it reasonable to expect that any of them will be, suspended or
debarred from bidding on contracts or subcontracts for any agency of the United
States government, nor has such suspension or debarment been threatened or
action for such suspension or debarment been commenced. Neither the Company nor
any Subsidiary has ever been nor is any of them now being audited or
investigated by the United States Government Accounting Office, the United
States Department of Justice, the United States Department of Defense or any of
its agencies, the Defense Contract Audit Agency or the inspector general of any
agency of the United
15
States government, nor has such audit or investigation been threatened. There is
no valid basis for the Company's or any Subsidiary's suspension or debarment
from bidding on contracts or subcontracts for any agency of the United States
government and there is no valid basis for a claim pursuant to an audit or
investigation by the United States Government Accounting Office, the United
States Department of Justice, the United States Department of Defense or any of
its agencies, the Defense Contract Audit Agency or the inspector general of any
agency of the United States government, or any prime contractor.
Absence of Questionable Payments. Neither the Company, any Subsidiary
nor any director, officer, agent, employee or other person acting on behalf of
any of them has used any of the Company's or any Subsidiary's funds for improper
or unlawful contributions, payments, gifts or entertainment, or made any
improper or unlawful expenditures relating to political activity to government
officials or others. Neither the Company, any Subsidiary nor any current
director, officer, agent, employee or other person acting on behalf of any of
them has accepted or received any improper or unlawful contributions, payments,
gifts or expenditures.
Bank Accounts. Section 2.35 of the Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company or any Subsidiary
maintains safe deposit boxes or accounts of any nature and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
Insider Interests. No Company Stockholder nor any officer or director
of the Company or any Subsidiary has any interest (other than as stockholders of
the Company) (a) in any property, real or personal, tangible or intangible, used
in or directly pertaining to the Company's or any Subsidiary's business,
including, without limitation, inventions, patents, trademarks or trade names
other than the trade names and related logos Big Hand, Inc. and CircumStance,
Inc., and the two internet addresses (URL's) for the foregoing two trade names
which have been previously assigned to the Principals via an intellectual
property assignment agreement identified on Section 2.15 of the Disclosure
Schedule (the "Assignment Agreement"). The Principals hereby agree not to use,
and shall ensure that no other persons use, the property assigned pursuant to
the Assignment Agreement until after the expiration of 30 months from the date
of the Closing and after such time only in a manner which shall not cause
confusion in the market place as determined in good faith by Buyer and in no
event shall any such property be used in furtherance of any business, venture,
or enterprise which competes with Buyer's, its subsidiaries, and/or its
affiliates' business without the express written consent of Buyer.
Notwithstanding the foregoing restrictions, in the event of Buyer's filing for
bankruptcy, insolvency, or dissolution, the Principals shall have the immediate
right to employ and use the property described herein for any purpose, or (b) in
any agreement, contract, arrangement or obligation relating to the Company or
any Subsidiary, their present or prospective businesses or operations, except
for the employment agreements to be entered into between the Principals and the
Surviving Corporation at the Closing and the intellectual property assigned
pursuant to the Assignment Agreement.
REPRESENTATIONS AND WARRANTIES OF THE BUYER, PARENT
AND THE ACQUISITION SUBSIDIARY
Each of the Buyer, Parent and the Acquisition Subsidiary jointly and
severally represent and warrant to the Company and the Principals, as of the
date of this Agreement and as of the Closing (which representations and
warranties shall survive the Closing to the extent provided in Section 6.3
hereof), as follows:
Organization. Each of the Parent and the Acquisition Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. Each such
corporation is duly qualified to conduct business and is in corporate and tax
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on Parent and its subsidiaries, taken as a whole. Each
such corporation has all requisite corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Buyer has furnished to the Company true and complete copies of Parent's
Certificate of Incorporation and By-laws, each as amended and as in effect on
the date hereof. Neither Parent, Buyer
16
nor Acquisition Subsidiary is in default under or in violation of any provision
of its Certificate of Incorporation or By-laws.
1.32 Capitalization. The authorized capital stock of Parent consists of
50,050,000 shares of capital stock, of which 50,000,000 shares are
Parent Common Stock, of which 31,462,528 shares are issued and
outstanding on the date hereof, and 50,000 shares are preferred stock,
$.01 par value per share, of which no shares are issued and outstanding
on the date hereof. All of the issued and outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the Merger
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and
clear of all liens, claims, pledges, options, adverse claims or charges
of any nature whatsoever. All of the outstanding shares of capital
stock of Buyer are owned by Parent. All of the outstanding shares of
capital stock of Acquisition Subsidiary are owned by Buyer. As of the
date hereof, Parent has outstanding under its stock option plans option
grants to purchase approximately 6,000,000 shares of Parent Common
Stock.
1.33 Authorization of Transaction. Each of the Buyer, Parent and the
Acquisition Subsidiary has all requisite power and authority to execute
and deliver this Agreement and (in the case of the Buyer and Parent)
the Escrow Agreement and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and (in the
case of the Buyer and Parent) the Escrow Agreement by the Buyer, Parent
and the Acquisition Subsidiary, the performance of this Agreement and
(in the case of the Buyer and Parent) the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby by the
Buyer, Parent and the Acquisition Subsidiary have been duly and validly
authorized by all necessary corporate action on the part of the Buyer,
Parent and Acquisition Subsidiary. This Agreement has been duly and
validly executed and delivered by the Buyer, Parent and the Acquisition
Subsidiary and constitutes a valid and binding obligation of each of
them, enforceable against them in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditor's rights
generally, or by general equitable principles, and to the extent any
indemnification or contribution provisions thereof may be limited by
applicable federal or state securities laws.
1.34 Noncontravention. Subject to the filing of the Certificates of Merger
as required by applicable law, neither the execution and delivery of
this Agreement or (in the case of the Buyer and Parent) the Escrow
Agreement by the Buyer, Parent or the Acquisition Subsidiary, nor the
consummation by the Buyer, Parent or the Acquisition Subsidiary of the
transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Buyer, Parent or
the Acquisition Subsidiary, (b) require on the part of the Buyer,
Parent or the Acquisition Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, other
than any filing, permit, authorization, consent or approval which if
not obtained or made would not have a material adverse effect on the
assets, business, financial condition, results of operations or future
prospects of the Buyer or Parent or on the ability of the Parties to
consummate the transactions contemplated by this Agreement, (c)
conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the
acceleration of, create in any party any right to accelerate,
terminate, modify or cancel, or require any notice, consent or waiver
under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument
of indebtedness, Security Interest or other arrangement to which the
Buyer, Parent or Acquisition Subsidiary is a party or by which either
is bound or to which any of their assets are subject, other than any
conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a
material adverse effect on the assets, business, financial condition,
results of operations or future prospects of the Buyer or Parent or on
the ability of the Parties to consummate the transactions contemplated
by this Agreement, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or the Acquisition
Subsidiary or any of their properties or assets.
1.35 Reports and Financial Statements. Parent has previously furnished to
the Company complete and accurate copies, as amended or supplemented,
of each report, schedule and proxy statement filed with the Securities
and Exchange Commission (the "SEC") on or after December 31, 1997
(collectively, the "Buyer Reports"). As
17
of their respective dates, the Buyer Reports did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
To the knowledge of senior management of Parent, no material adverse
development has occurred with respect to Parent's business since its
most recently filed Form 10-Q, except as disclosed in any Buyer Report
(including, without limitation, any Form 8-K) filed or amended after
the date of such Form 10-Q and except for any changes in the economy in
general (or in the overall industry in which Parent operates) or in any
stock market or trading system (including, without limitation, any
change in the value of any trading indicies with respect thereto).
1.36 Brokers' Fees. Neither the Buyer, Parent nor the Acquisition Subsidiary
has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated
by this Agreement.
1.37 Experience. Rare Medium acknowledges that Rare Medium and its
representatives are experienced in, and capable of, evaluating the
financial condition and prospects of corporations like the Company.
Rare Medium has had access to the records of the Company and has had
the opportunity to ask questions concerning the Company's business,
financial condition, prior transactions, and corporate history. Rare
Medium further understands that the financial statements of the Company
previously provided to Rare Medium have not been audited. The foregoing
however, shall not limit or modify the representation and warranties of
the Company or the Principals contained in Article II.
COVENANTS
Best Efforts. Each of the Parties shall use its best efforts, to the
extent commercially reasonable, to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
1.38 Notices and Consents. The Company shall use its best efforts to obtain
(and cause each Subsidiary to obtain), at its expense, all such
waivers, permits, consents, approvals or other authorizations from
third parties and Governmental Entities, and to effect all such
registrations, filings and notices with or to third parties and
Governmental Entities, as may be required by or with respect to the
Company or the Subsidiaries in connection with the transactions
contemplated by this Agreement (including without limitation those
listed in Section 2.4 or Section 2.25 of the Disclosure Schedule).
1.39 Stockholder Consents/Agreements.
The Company shall use its best efforts to obtain the Requisite Stockholder
Approval as soon as reasonably practical after the date hereof.
(a) Until this Agreement is terminated in accordance herewith, each
Principal agrees (i) to vote all Company Shares that are
beneficially owned by him, or for which he has voting authority, in
favor of the adoption of this Agreement and the approval of the
Merger, (ii) to otherwise use his best efforts to obtain the
Requisite Stockholder Approval, and (iii) not to (A) sell, offer to
sell, pledge, transfer or otherwise dispose of any Company Shares,
or (B) engage in any transaction, whether or not with respect to
any Company Shares or any interest herein, the intent or effect of
which is to reduce the risk of owning any Company Shares
(including, by way of example and not limitation, engaging in put,
call, short-sale, straddle or similar market transactions);
provided, that, the term ""best efforts" as used in this section
shall not require any Principal to incur any material expense or
commence or participate in any litigation.
Restriction on Sale of Parent Common Stock.
Each of the Principals agrees that, for a period of eighteen (18) months after
the Effective Time of the Merger, such stockholder will not (i) sell, offer to
sell, pledge, transfer or otherwise dispose of any shares of Parent Common Stock
received by him, her or it in the Merger, or (ii) engage in any transaction,
whether or not with respect to any shares of Parent Common Stock or any interest
herein, the intent or effect of which is to reduce the risk of owning the shares
of Parent Common Stock acquired hereunder (including, by way of example and not
limitation, engaging in put, call, short-sale, straddle or similar market
transactions); provided, that, notwithstanding the foregoing after the one (1)
year
18
anniversary of the Effective Time, any Principal may enter into any of the
foregoing transactions, except that, until such eighteen (18) month period has
expired, no Principal or any such transferee shall sell, or enter into any
transaction with respect to, any such shares on the public market (which shall
be deemed to include any stock exchange or dealer quotation system, including
NASDAQ), whether pursuant to Rule 144 promulgated by the Securities and Exchange
Commission or otherwise and provided, further that no Principal (or any such
transferee) shall sell or otherwise transfer any such shares unless and until
the transferee of such shares enters into a written agreement with Buyer
agreeing to the restrictions contained in this Section 4.5. The transfer of any
shares of ICC Common Stock among the former Company Stockholders required by the
Stock Purchase Agreement dated November 16, 1998 among the Company and its
stockholders within the first thirty days following the Effective Time shall not
be deemed a violation of this Section; provided the recipient of any such shares
is bound by either this Section or has executed a lock-up letter contemplated by
Section 5.2(i).
(b) All shares of Parent Common Stock subject to the provisions of
paragraph (a) above shall, until the expiration of the stated time
periods, bear a legend substantially as follows: "The shares
represented by this certificate may not be offered, sold, pledged,
transferred or otherwise disposed of except in accordance with the
conditions specified in that certain Agreement and Plan of Merger
Agreement , dated March __, 1999, by and among the holder of this
certificate, ICC Technologies, Inc. and the other parties thereto,
a copy of which may be inspected by the holder of the certificate
at the principal offices of ICC Technologies, Inc. or furnished by
ICC Technologies, Inc. to the holder of this certificate upon
written request and without charge."
Operation of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Effective Time (or termination
of this Agreement), the Company and each Subsidiary shall conduct its operations
in the Ordinary Course of Business and in compliance with all applicable laws
and regulations and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organization, keep its physical
assets in good working condition (normal wear and tear excepted), keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, prior to
the Effective Time (or termination of this Agreement), neither the Company nor
any Subsidiary shall, without the prior written consent of the Buyer:
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of, or redeem or repurchase, any stock of any class or any other
securities or any rights, warrants or options to acquire any such stock or other
securities (except pursuant to the conversion or exercise of convertible
securities or Options outstanding on the date hereof), or amend any of the terms
of any such convertible securities or Options; provided, that, this subsection
(a) shall not prohibit the transfer of any Company Shares among the Company
Stockholders required by the Stock Purchase Agreement dated November 16, 1998
among the Company and its stockholders prior to the Effective Time;
(c) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(d) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations
of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or
entity;
(e) enter into (including the hiring of any new employees, other than
at-will employees), adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement (whether written
or oral) of the type described in Section 2.22(j) or (except for
normal increases in the Ordinary Course of Business) increase in
any manner the compensation or fringe benefits of, or materially
modify the employment terms of, its directors, officers or
employees, generally or
19
individually, or pay any benefit not required by the terms in
effect on the date hereof of any existing Employee Benefit Plan;
(f) acquire, sell, lease, encumber or dispose of any assets or property
(including without limitation any shares or other equity interests
in or securities of any corporation, partnership, association or
other business organization or division thereof), other than
purchases and sales of assets in the Ordinary Course of Business;
(g) amend its charter or By-laws;
(h) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally
applicable change in GAAP;
(i) discharge or satisfy any Security Interest or pay any obligation or
liability other than in the Ordinary Course of Business (except
that the foregoing shall not restrict the Company from paying its
accountants, attorneys and financial advisors fees and expenses
incurred with respect to this Agreement and the transactions
contemplated hereby, subject to Section 8.11);
(j) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
(k) sell, assign, transfer or license any Intellectual Property, other
than in the Ordinary Course of Business;
(l) enter into, amend, terminate, take or omit to take any action that
would constitute a violation of or default under, or waive any
material right under, any contract or agreement; except for any
such transactions which are in the Ordinary Course of Business and
which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a
whole;
(m) make or commit to make any capital expenditure in excess of $4,000
per item or $20,000 in the aggregate;
(n) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take
action would result in (i) any of the representations and
warranties of the Company or the Principals set forth in this
Agreement becoming untrue or (ii) any of the conditions to the
Merger set forth in Article V not being satisfied; or
(o) agree in writing or otherwise to take any of the foregoing actions.
Full Access. The Company shall permit representatives of the Buyer to
have full access (at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company) to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to the Company and its Subsidiaries.
Each of the Buyer, Parent and the Acquisition Subsidiary (a) shall treat and
hold as confidential any Confidential Information (as defined below), (b) shall
not use any of the Confidential Information except in connection with this
Agreement, and (c) if this Agreement is terminated for any reason whatsoever,
shall return to the Company all tangible embodiments (and all copies) thereof
which are in its possession. For purposes of this Agreement, "Confidential
Information" means any confidential or proprietary information of the Company or
any Subsidiary that is furnished in writing to the Buyer, Parent or the
Acquisition Subsidiary by the Company or such Subsidiary in connection with this
Agreement; provided, however, that it shall not include any information (i)
which, at the time of disclosure, is available publicly, (ii) which, after
disclosure, becomes available publicly through no fault of the Buyer, Parent or
the Acquisition Subsidiary, or (iii) which the Buyer, Parent or the Acquisition
Subsidiary knew or to which the Buyer, Parent or the Acquisition Subsidiary had
access prior to disclosure.
1.40 Notice of Breaches. Each party hereto shall promptly deliver to the
others written notice of any event or development that would (a) render
any statement, representation or warranty of such party in this
Agreement (including the Disclosure Schedule) inaccurate or incomplete
in any material respect, or (b) constitute or result in a breach by
such party of, or a failure by such party to comply with, any agreement
or covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such misrepresentation
or breach.
Exclusivity. Neither the Company nor any Principal shall, and the
Company and the Principals shall use their respective best efforts to cause
their respective Affiliates and each of their officers, directors, employees,
representatives and agents not to, directly or indirectly, (a) encourage,
solicit, initiate, engage or participate in discussions or
20
negotiations with any person or entity (other than the Buyer and Parent)
concerning any merger, consolidation, sale of material assets, tender offer,
recapitalization, accumulation of Company Shares, proxy solicitation or other
business combination involving the Company, any Subsidiary or any division of
the Company or (b) provide any non-public information concerning the business,
properties or assets of the Company or any Subsidiary to any person or entity
(other than the Buyer). The Company shall immediately notify the Buyer of, and
shall disclose to the Buyer all details of, any inquiries, discussions or
negotiations of the nature described in the first sentence of this Section 4.8.
Without the prior written consent of Parent, neither the Company, any Subsidiary
nor any Stockholder or any of their respective representatives will disclose to
any other person the fact that the Confidential Information has been made
available, or any of the terms, conditions or other facts with respect to the
Merger, including the status thereof, except as required by law or permitted
under the terms of this Agreement.
Principal Guaranties. As soon as is practicable following the Closing,
Buyer shall eliminate the personal liability of the Principals with respect to
obligations of the Company secured by any guaranties made in connection with any
contract or agreement listed in the Disclosure Schedule.
CONDITIONS TO CONSUMMATION OF MERGER
Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
this Agreement and the Merger shall have received the Requisite Stockholder
Approval;
(a) no action, suit or proceeding shall be pending or threatened by or
before any Governmental Entity wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (iii) affect
adversely the right of the Buyer to own, operate or control any of
the assets and operations of the Surviving Corporation following
the Merger, and no such judgment, order, decree, stipulation or
injunction shall be in effect; and
(b) the execution by Buyer, Parent, the Principals and the Escrow Agent
of the Escrow Agreement; provided that no party who refuses to sign
such agreement may utilize this subsection if the terms of the
Escrow Agreement are substantially as set forth in Exhibit A
attached hereto.
Conditions to Obligations of the Buyer, Parent and the Acquisition
Subsidiary. The obligation of each of the Buyer, Parent and the Acquisition
Subsidiary to consummate the Merger is subject to the satisfaction or waiver by
such Party of the following additional conditions: there shall be no Dissenting
Shares as of the Effective Time;
(c) the Company and each Subsidiary shall have obtained all of the
waivers, permits, consents, approvals or other authorizations, and
effected all of the registrations, filings and notices, referred to
in Section 4.2;
(d) the representations and warranties of the Company and the
Principals set forth in Article II shall be true and correct when
made on the date hereof and as of the Effective Time as if made as
of the Effective Time, except for representations and warranties
expressly made only as of a specific date, which shall be true and
correct as of such date;
(e) the Company shall have performed or complied (and caused the
Subsidiaries to have performed or complied) with the agreements and
covenants required to be performed or complied with under this
Agreement as of or prior to the Effective Time;
(f) the Company shall have delivered to the Buyer, Parent and the
Acquisition Subsidiary a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that each of
the conditions specified in clauses (a) and (b) of Section 5.1 and
clauses (a) through (d) of this Section 5.2 have been satisfied in
all respects;
(g) the Buyer, Parent the Acquisition Subsidiary shall have received
from counsel to the Company an opinion with respect to the matters
and in a form as substantially set forth in Exhibit B attached
21
hereto, addressed to the Buyer, Parent and the Acquisition
Subsidiary and dated as of the Closing Date;
(h) each Stockholder and such other employees of the Company as shall
be determined by Buyer prior to Closing shall have entered into an
employment agreement with the Buyer and/or the Surviving
Corporation on terms and conditions acceptable to Buyer;
(i) the Buyer shall have received from each of the Principals and each
other Company Stockholder the investment representation letter in
substantially the form of Exhibit C and the issuance of the Merger
Shares as contemplated hereby shall, in the opinion of counsel to
the Buyer, be exempt from the registration requirements of the
Securities Act of 1933, as amended;
(j) each Company Stockholder (other than the Principals) shall have
executed and delivered to Buyer a lock-up letter agreeing in form
and substance to the restrictions contained in Section 4.4;
(k) all Options shall have been exercised or cancelled and the
agreement of each holder of an Option shall have been obtained as
contemplated by Section 1.10 of this Agreement; and
(l) all actions to be taken by the Company, the Subsidiaries and the
Company Stockholders in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer, Parent and the Acquisition Subsidiary.
Conditions to Obligations of the Company. The obligation of the Company
to consummate the Merger is subject to the satisfaction of the following
additional conditions: the representations and warranties of the Buyer, Parent
and the Acquisition Subsidiary set forth in Article III shall be true and
correct when made on the date hereof and shall be true and correct as of the
Effective Time as if made as of the Effective Time, except for representations
and warranties expressly made only as of a specific date, which shall be true
and correct as of such date;
(m) each of the Buyer, Parent and the Acquisition Subsidiary shall have
performed or complied with its agreements and covenants required to
be performed or complied with under this Agreement as of or prior
to the Effective Time;
(n) each of the Buyer, Parent and the Acquisition Subsidiary shall have
delivered to the Company a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that each of
the conditions specified in clauses (a) and (b) of Section 5.1 and
clauses (a) and (b) of this Section 5.3 is satisfied in all
respects;
(o) the Company shall have received from counsel to the Buyer, Parent
and the Acquisition Subsidiary an opinion with respect to the
matters and in a form as substantially set forth in Exhibit D
attached hereto, addressed to the Company and the Principals and
dated as of the Closing Date;
(p) each Principal shall have entered into an employment agreement with
the Buyer and/or the Surviving Corporation on terms and conditions
acceptable to such Principal; and
(q) all actions to be taken by the Buyer, Parent and the Acquisition
Subsidiary in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to
the Company.
INDEMNIFICATION
Indemnification.
The Principals shall indemnify the Surviving Corporation, Parent, the Buyer,
their successors and assigns, and the officers, directors, affiliates,
employees, controlling persons and agents of the foregoing (collectively, the
"Buyer Indemnified Persons"), and hold each of them harmless against and in
respect of any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and
22
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) (collectively, "Damages") incurred or suffered by any of them by
reason of (i) a breach of any of the representations or warranties made by the
Company or the Principals in this Agreement, (ii) the nonperformance (whether
partial or total) of any covenants or agreements made by the Company, the
Subsidiaries or the Principals in this Agreement, (iii) the failure of any
Company Stockholder to have good, valid and marketable title to the issued and
outstanding Company Shares held by such Company Stockholder, free and clear of
all liens, claims, pledges, options, adverse claims or charges of any nature
whatsoever, or (iv) any claim by a stockholder or former stockholder of the
Company or any Subsidiary, or any other person, firm, corporation or entity,
seeking to assert, or based upon: (A) ownership or rights to ownership of any
shares of stock of the Company or any Subsidiary; (B) any rights of a
stockholder (other than the right to receive the Merger Consideration pursuant
to this Agreement or appraisal rights under the applicable provisions of the
Texas Act), including any option, preemptive rights or rights to notice or to
vote; (C) any rights under the Certificate of Incorporation or By-laws of the
Company or any Subsidiary; or (D) any claim that his, her or its shares were
wrongfully repurchased by the Company or any Subsidiary.
Parent agrees to indemnify and to hold harmless the Principals, the Company
Stockholders, and their successors, assigns heirs, and legatees (the
"Indemnified Persons") against and in respect of any and all Damages incurred or
suffered by them by reason of (i) a breach of any of the representations or
warranties made by the Buyer, Parent or the Acquisition Subsidiary in this
Agreement, (ii) the nonperformance (whether partial or total) of any covenants
or agreements made by the Buyer, Parent or the Acquisition Subsidiary in this
Agreement, or (iii) the failure of the Merger Shares to be either duly
authorized, validly issued, fully paid and nonassessable or delivered to the
Company Stockholders by Parent free and clear of all liens, claims, pledges,
options, adverse claims or charges of any nature whatsoever.
Method of Asserting Claims.
If any person entitled to indemnification pursuant to Section 6.1 hereof (an
"Indemnitee") is threatened in writing with any claim, or any claim is presented
in writing to, or any action or proceeding is formally commenced against, any of
the Indemnitees which may give rise to the right of indemnification hereunder,
the Indemnitee will promptly give written notice thereof to each indemnifying
party; provided, however, that any delay by an Indemnitee in so notifying the
indemnifying party shall not relieve the indemnifying party of any liability to
any of the Indemnitees hereunder except to the extent that the indemnifying
party shall have been actually prejudiced as a result of such failure. The
indemnifying party or parties, by delivery of written notice to an Indemnitee
within 30 days of notice of claim to indemnity from an Indemnitee, may elect to
assume the defense of such claim, action or proceeding at the expense of the
indemnifying party; provided, however, that (a) unless such written notice shall
be accompanied by a written agreement of each indemnifying party acknowledging
the liability of the indemnifying parties to the Indemnitees as a result of this
Agreement for any indemnified damage which any Indemnitee might incur or suffer
as a result of such claim, action or proceeding or the contesting thereof, each
indemnifying party shall be jointly and severally liable for the attorneys' fees
and expenses of the Indemnitee, if any, incurred in connection with defending
such claim; (b) counsel undertaking such defense shall be reasonably acceptable
to the Indemnitee; (c) the indemnifying parties shall mutually elect to contest
such claim, action or proceeding and shall conduct and settle such contest in a
joint manner, and if the indemnifying parties shall fail at any time to agree,
the Indemnitee shall have no obligation to contest such claim, action or
proceeding and (d) if the Indemnitee requests in writing that such claim, action
or proceeding not to be contested, then it shall not be contested but shall not
be covered by the indemnities provided herein. The indemnifying parties may
settle an indemnifiable matter after delivering a written description of the
proposed settlement to and receiving consent from the Indemnitee. In the event
the Indemnitee unreasonably declines to consent to such settlement, then the
Indemnitee shall have no right to indemnification beyond the amount of the
proposed settlement. In the event the indemnifying parties jointly elect to
contest an indemnifiable matter, the Surviving Corporation, Parent and the
Principals shall permit each other reasonable access, subject to the provisions
of Section 4.6 hereof, to their respective books and records and shall otherwise
cooperate in connection with such claim. If the indemnifying parties do not
jointly elect to contest an indemnifiable matter, they shall cooperate with the
Indemnitee to the extent any of them has knowledge of facts or circumstances
relating to such matter, and the Indemnitee shall have the exclusive right to
prosecute, defend, compromise, settle or pay any claim, but the Indemnitee shall
not be obligated to do so; provided,
23
however, that, should the Indemnitee elect not to exercise its right exclusively
to prosecute, defend, compromise, settle or pay such claim, any indemnifying
party may elect to do so at its sole expense.
To secure their obligations pursuant to the provisions of this Section, the
Principals agree to escrow shares of Parent Common Stock issuable to them in the
Merger with an aggregate value of $800,000.00 (based upon the Closing Price),
pursuant to the terms and conditions of the Escrow Agreement. Indemnity
obligations hereunder shall be satisfied, in the case of indemnification of any
Buyer Indemnified Person, through the release of Parent Common Stock pursuant to
the Escrow Agreement, such shares to be valued as of the last reported sale on
the last trading day prior to the release as reported in The Wall Street
Journal, or its successor.
Survival. The representations and warranties of the Parties set forth
in this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until 12 months after the Closing
Date and shall not be affected by any examination made for or on behalf of any
Party or the knowledge of any of their respective officers, directors,
stockholders, employees or agents. Notwithstanding the foregoing, the
representations and warranties contained in Section 2.23 relating to
environmental matters shall survive the Closing and the consummation of the
transactions contemplated thereby indefinitely; and the representations and
warranties contained in Section 2.9 relating to tax matters shall survive the
Closing and the consummation of the transactions contemplated thereby and
continue until the expiration of the applicable statute of limitations relating
to such tax representations. If a notice is given in accordance with the Escrow
Agreement before expiration of such periods, then (notwithstanding the
expiration of such time period) the representation or warranty applicable to
such claim shall survive until, but only for purposes of, the resolution of such
claim.
Limitation.
Notwithstanding anything to the contrary herein, except as provided in Section
6.4(c), the aggregate liability of the Principals for Damages under this Article
VI shall not exceed the fair market value of the Escrow Shares, as determined in
accordance with the Escrow Agreement, and the sole remedy of any Buyer
Indemnified Person hereunder shall be to make a claim against the Escrow Shares
as provided in the Escrow Agreement. Notwithstanding anything to the contrary
herein, except as provided in Section 6.4(c), the aggregate liability of Parent
for Damages under this Article VI shall not exceed $800,000.
Except with respect to claims based on fraud, the rights of the Indemnitees
under this Article VI shall be the exclusive remedy of the Buyer Indemnified
Persons and the Indemnified Persons with respect to claims resulting from or
relating to any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of any party hereto contained in this Agreement (provided
that nothing contained in this Agreement shall limit or restrict any right or
remedy Parent, the Buyer or the Surviving Corporation may have under any
Environmental Law). No Company Stockholder shall have any right of contribution
against the Company with respect to any breach by the Company of any of its
representations, warranties, covenants or agreements.
TERMINATION
Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval) as provided below:
the Parties may terminate this Agreement by mutual written consent;
(r) the Buyer may terminate this Agreement by giving written notice to
the Company in the event the Company, any Subsidiary or any Company
Stockholder is in material breach, and the Company may terminate
this Agreement by giving written notice to the Buyer and the
Acquisition Subsidiary in the event the Buyer or the Acquisition
Subsidiary is in material breach, of any representation, warranty
or covenant contained in this Agreement, and such breach is not
remedied within 10 days of delivery of written notice thereof;
(s) any Party may terminate this Agreement by giving written notice to
the other Parties at any time after the Company Stockholders have
voted on whether to approve this Agreement and the Merger in the
event this Agreement and the Merger failed to receive the Requisite
Stockholder Approval;
(t) Buyer may terminate this Agreement by giving written notice to the
Company if the Closing shall not have occurred on or before the
45th day following the date of this Agreement by reason of the
24
failure of any condition precedent under Section 5.1 or 5.2 hereof
(unless the failure results primarily from a breach by the Buyer,
Parent or the Acquisition Subsidiary of any representation,
warranty or covenant contained in this Agreement); or
(u) the Company may terminate this Agreement by giving written notice
to the Buyer if the Closing shall not have occurred on or before
the 45th day following the date of this Agreement by reason of the
failure of any condition precedent under Section 5.1 or 5.3 hereof
(unless the failure results primarily from a breach by the Company
or any Principal of any representation, warranty or covenant
contained in this Agreement).
Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for breaches of this Agreement); provided, however, that the
confidentiality provisions contained in Section 4.6 shall survive any such
termination.
MISCELLANEOUS
Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
1.41 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns; provided, however, that
(a) the provisions in Article I concerning issuance of the Merger
Consideration are intended for the benefit of the Company Stockholders,
and (b) the provisions in Section 1.10(c) are intended for the benefit
of the Designated Employees.
1.42 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by
or among the Parties, written or oral, with respect to the subject
matter hereof, including the letter of intent dated October 13, 1998
and any nondisclosure agreement entered into prior to the date hereof.
1.43 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties; provided that
the Acquisition Subsidiary may assign its rights, interests and
obligations hereunder to an Affiliate of the Buyer.
1.44 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. Facsimile
signatures delivered shall be deemed to constitute originals.
1.45 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
1.46 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid; one business day after
it is sent via a reputable nationwide overnight courier service; or
upon receipt if delivered personally, in each case to the intended
recipient as set forth below:
If to the Company or the Principals: Copy to:
Xxxxx X'Xxxxx Block & Xxxxxxxx, P.C.
c/o Big Hand, Inc. 00000 Xxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxxx Xxxxx 0000
Xxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
25
Attn: Xxxxx Xxxx, Esq.
If to the Buyer, Parent or Acquisition Copy to:
Subsidiary:
Rare Medium, Inc. Xxxxxxxx & Xxxxxxxx XXX
00 Xxxx 00xx Xxxxxx 1290 Avenue of the Americas
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx Attention: Xxxx X. Xxxxxxx, Esq.
ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means, but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the party for whom it is intended.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New York.
1.47 Amendments and Waivers. The Parties may mutually amend any provision of
this Agreement at any time prior to the Effective Time; provided,
however, that any amendment effected subsequent to the Requisite
Stockholder Approval shall be subject to the restrictions contained in
any applicable provision of the either the Delaware General Corporation
Law or the Texas Act. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all of
the Parties. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or
not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
1.48 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
1.49 Expenses. Except as set forth in the Escrow Agreement, each of the
Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that if the Merger
is consummated, the Company shall not incur
26
more than an aggregate of $30,000 in legal and accounting fees and
expenses in connection with the Merger (excluding the post closing
audit), and any fees and expenses incurred by the Company in excess of
such amount shall be recovered by the Buyer pursuant to Article VI.
1.50 Specific Performance. Each of the Parties acknowledges and agrees that
one or more of the other Parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction
over the Parties and the matter (subject to the provisions of Section
8.13), in addition to any other remedy to which it may be entitled, at
law or in equity.
1.51 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in the Southern
District of New York in any action or proceeding arising out of or
relating to this Agreement, (b) agrees that all claims in respect of
the action or proceeding may be heard and determined in any such court,
and (c) agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect
thereto. Any Party may make service on another Party by sending or
delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section
8.7. Nothing in this Section 8.13, however, shall affect the right of
any Party to serve legal process in any other manner permitted by law.
1.52 Construction. The language used in this Agreement shall be deemed to be
the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
Party. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
1.53 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and
made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ICC TECHNOLOGIES, INC.
By:/s/Xxxxx Xxxxxx
---------------
Name:
Title:
RARE MEDIUM TEXAS I, INC.
By:/s/Xxxxx Xxxxxx
---------------
Name:
Title:
RARE MEDIUM, INC.
By:/s/Xxxxx Xxxxxx
---------------
Name:
Title:
27
BIG HAND, INC.
By:/s/Xxxxx X'Xxxxx
-----------------
Name:
Title:
THE PRINCIPALS:
/s/ Xxxxx X'Xxxxx
------------------
Xxxxx X'Xxxxx
/s/ Xxx Xxxxx
------------------
Xxx Xxxxx
/s/ Xxx Xxxxxx
------------------
Xxx Xxxxxx
/s/ Xxxx Xxxxx
------------------
Xxxx Xxxxx
28
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..................................................................................1
1.1 The Merger.................................................................................1
1.2 The Closing................................................................................1
1.3 Actions at the Closing.....................................................................1
1.4 Additional Action..........................................................................2
1.5 Conversion of Shares; Merger Consideration.................................................2
1.6 Dissenting Shares..........................................................................3
1.7 Fractional Shares..........................................................................3
1.8 Dividends..................................................................................3
1.9 Escrow.....................................................................................4
1.10 Options and Bonus Pool.....................................................................4
1.11 Certificate of Incorporation...............................................................4
1.12 By-laws....................................................................................4
1.13 Directors and Officers.....................................................................4
1.14 No Further Rights..........................................................................4
1.15 Closing of Transfer Books..................................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS...........................5
2.1 Organization, Qualification and Corporate Power............................................5
2.2 Capitalization.............................................................................5
2.3 Authorization of Transaction...............................................................5
2.4 Noncontravention...........................................................................6
2.5 Subsidiaries...............................................................................6
2.6 Financial Statements.......................................................................7
2.7 Absence of Certain Changes.................................................................7
2.8 Undisclosed Liabilities....................................................................7
2.9 Tax Matters................................................................................7
2.10 Assets.....................................................................................8
2.11 Real Property..............................................................................8
2.12 Intellectual Property......................................................................8
2.13 Inventory..................................................................................9
2.14 Real Property Leases.......................................................................9
2.15 Contracts..................................................................................9
2.16 Accounts Receivable.......................................................................10
2.17 Powers of Attorney........................................................................10
2.18 Insurance.................................................................................10
2.19 Litigation................................................................................11
2.20 Product Warranty..........................................................................11
2.21 Employees; Labor Matters..................................................................11
2.22 Employee Benefits.........................................................................11
2.23 Environmental Matters.....................................................................13
2.24 Legal Compliance..........................................................................14
2.25 Permits...................................................................................14
2.26 Certain Business Relationships With Affiliates............................................14
2.27 Brokers'Fees..............................................................................14
2.28 Books and Records.........................................................................14
2.29 Customers and Suppliers...................................................................14
2.30 Company Action............................................................................15
2.31 Disclosure................................................................................15
2.32 Year 2000.................................................................................15
2.33 Government Contracts......................................................................15
2.34 Absence of Questionable Payments..........................................................16
2.35 Bank Accounts.............................................................................16
2.36 Insider Interests.........................................................................16
29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER, PARENT AND THE ACQUISITION SUBSIDIARY.......16
3.1 Organization..............................................................................16
3.2 Capitalization............................................................................17
3.3 Authorization of Transaction..............................................................17
3.4 Noncontravention..........................................................................17
3.5 Reports and Financial Statements..........................................................17
3.6 Brokers'Fees..............................................................................18
3.7 Experience................................................................................18
ARTICLE IV COVENANTS.................................................................................18
4.1 Best Efforts..............................................................................18
4.2 Notices and Consents......................................................................18
4.3 Stockholder Consents/Agreements...........................................................18
4.4 Restriction on Sale of Parent Common Stock................................................18
4.5 Operation of Business.....................................................................19
4.6 Full Access...............................................................................20
4.7 Notice of Breaches........................................................................20
4.8 Exclusivity...............................................................................20
4.9 Principal Guaranties......................................................................21
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER.......................................................21
5.1 Conditions to Each Party's Obligations....................................................21
5.2 Conditions to Obligations of the Buyer and the Acquisition Subsidiary.....................21
5.3 Conditions to Obligations of the Company..................................................22
ARTICLE VI INDEMNIFICATION...........................................................................22
6.1 Indemnification...........................................................................22
6.2 Method of Asserting Claims................................................................23
6.3 Survival..................................................................................24
6.4 Limitation................................................................................24
ARTICLE VII TERMINATION..............................................................................24
7.1 Termination of Agreement..................................................................24
7.2 Effect of Termination.....................................................................25
ARTICLE VIII MISCELLANEOUS...........................................................................25
8.1 Press Releases and Announcements..........................................................25
8.2 No Third Party Beneficiaries..............................................................25
8.3 Entire Agreement..........................................................................25
8.4 Succession and Assignment.................................................................25
8.5 Counterparts..............................................................................25
8.6 Headings..................................................................................25
8.7 Notices...................................................................................25
8.8 Governing Law.............................................................................26
8.9 Amendments and Waivers....................................................................26
8.10 Severability..............................................................................26
8.11 Expenses..................................................................................26
8.12 Specific Performance......................................................................27
8.13 Submission to Jurisdiction................................................................27
8.14 Construction..............................................................................27
8.15 Incorporation of Exhibits and Schedules...................................................27
30
EXHIBITS:
A - Escrow Agreement
B - Opinion of Seller's Counsel
C - Investment Representation Letter
D - Opinion of Buyer's Counsel
31
