1
EXHIBIT 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
INNOVATIVE GAMING CORPORATION OF AMERICA,
a Minnesota corporation;
SCOTCH TWIST, INC.,
a Delaware corporation;
and
INNOVATIVE GAMING TECHNOLOGY CORP.,
a Nevada corporation.
------------------------
Dated as of August ____, 2001
------------------------
================================================================================
2
TABLE OF CONTENTS
ARTICLE I THE MERGER; EFFECTIVE TIME..............................................................................1
1.1. The Merger......................................................................................1
1.2. Effective Time of the Merger....................................................................1
1.3. Federal Income Tax Qualification................................................................2
ARTICLE II THE PURCHASER AND THE SURVIVING CORPORATION............................................................2
2.1. Articles of Incorporation of the Surviving Corporation..........................................2
2.2. Bylaws of the Surviving Corporation.............................................................2
2.3. Directors and Officers of the Surviving Corporation.............................................2
ARTICLE III CONVERSION AND EXCHANGE OF SHARES.....................................................................2
3.1. Merger Consideration............................................................................2
3.2. Exchange of Common Stock........................................................................5
3.3. No Further Rights in Common Stock...............................................................7
3.4. Closing.........................................................................................7
3.5. Dissenting Shares...............................................................................7
3.6. Supplementary Action............................................................................7
3.7. Transfer Taxes; Escheat.........................................................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................8
4.1. Due Organization; No Subsidiaries; Etc..........................................................8
4.2. Certificate of Incorporation and Bylaws; Records................................................9
4.3. Capitalization, Etc............................................................................10
4.4. Financial Statements...........................................................................10
4.5. Absence of Changes.............................................................................11
4.6. Title to Assets................................................................................13
4.7. Bank Accounts..................................................................................13
4.8. Receivables; Major Customers...................................................................13
4.9. Equipment, Etc.................................................................................13
4.10. Real Property; Leases..........................................................................13
4.11. Proprietary Assets.............................................................................14
4.12. Contracts......................................................................................16
4.13. Liabilities; Major Suppliers...................................................................17
4.14. Compliance With Legal Requirements.............................................................17
4.15. Governmental Authorizations....................................................................18
4.16. Tax Matters....................................................................................18
4.17. Employee and Labor Matters.....................................................................20
4.18. Benefit Plans; ERISA...........................................................................20
4.19. Environmental Matters..........................................................................20
4.20. Sale of Products; Performance of Services......................................................20
4.21. Insurance......................................................................................20
4.22. Related Party Transactions.....................................................................20
4.23. Proceedings; Orders............................................................................21
4.24. Authority; Binding Nature of Agreements........................................................21
4.25. Non-Contravention; Consents....................................................................22
4.26. Brokers; Professionals.........................................................................23
4.27. Full Disclosure................................................................................23
4.28. Powers of Attorney.............................................................................23
4.29. Takeover Statutes..............................................................................23
4.30. Voting Arrangements............................................................................24
4.31. Inventories....................................................................................24
i
3
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB.........................................24
5.1. Authority; Binding Nature of Agreement, Etc....................................................24
5.2. Proceedings; Orders............................................................................24
5.3. Non-Contravention; Consents....................................................................25
5.4. Brokers........................................................................................25
5.5. Full Disclosure................................................................................25
ARTICLE VI PRE-CLOSING COVENANTS OF THE COMPANY..................................................................26
6.1. Access and Investigation.......................................................................26
6.2. Operation of Business..........................................................................26
6.3. Filings and Consents...........................................................................29
6.4. Notification...................................................................................29
6.5. Payment of Indebtedness........................................................................30
6.6. No Negotiation.................................................................................30
6.7. Best Efforts...................................................................................30
6.8. Confidentiality; Publicity.....................................................................30
6.9. Inventor Agreement.............................................................................31
6.10. Affiliate Agreements...........................................................................31
6.11. Approval of Agreement..........................................................................31
6.12. Cooperation with Registration Statement and Proxy Statement....................................32
6.13. License; Termination of Licenses...............................................................32
6.14. Fractional Shares..............................................................................33
6.15. FIRPTA.........................................................................................33
6.16. No Short Sales.................................................................................33
ARTICLE VII PRE-CLOSING COVENANTS OF THE PURCHASER...............................................................33
7.1. Best Efforts...................................................................................33
7.2. Notification...................................................................................33
7.3. Proprietary Information........................................................................34
7.4. Filings and Consents...........................................................................35
7.5. Registration Statement; Proxy Statement........................................................35
7.6. Merger Sub Charter Documents...................................................................36
ARTICLE VIII CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE.........................................36
8.1. Satisfactory Completion of Pre-Acquisition Review..............................................36
8.2. Accuracy of Representations....................................................................36
8.3. Performance of Obligations.....................................................................37
8.4. Consents.......................................................................................37
8.5. No Adverse Change..............................................................................37
8.6. Additional Documents...........................................................................37
8.7. No Proceedings.................................................................................38
8.8. No Claim Regarding Stock Ownership or Sale Proceeds............................................38
8.9. Beneficial Ownership...........................................................................38
8.10. Tax Treatment..................................................................................38
8.11. No Prohibition.................................................................................38
8.12. No Injunction..................................................................................39
8.13. No Dissenting Shares...........................................................................39
8.14. Regulatory Approvals...........................................................................39
8.15. No Liabilities.................................................................................39
8.16. Effectiveness of Registration Statement........................................................39
8.17. Value of Initial Shares........................................................................39
ii
4
ARTICLE IX CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE.............................................39
9.1. Accuracy of Representations....................................................................39
9.2. Additional Documents...........................................................................40
9.3. Purchaser's Performance........................................................................40
9.4. Financing or Balance Sheet Enhancement.........................................................40
9.5. No Injunction..................................................................................41
9.6. Approval of Board of Directors and Stockholders................................................41
9.7. No Proceedings.................................................................................41
9.8. Nasdaq Listing.................................................................................41
9.9. Consummation of Xertain Merger.................................................................42
9.10. Effectiveness of Registration Statement........................................................42
9.11. Value of Initial Shares........................................................................42
9.12 Consents.......................................................................................42
ARTICLE X TERMINATION............................................................................................42
10.1. Termination Events.............................................................................42
10.2. Termination Procedures.........................................................................43
10.3. Effect of Termination..........................................................................43
10.4. Exclusivity of Termination Rights..............................................................44
ARTICLE XI CERTAIN RIGHTS OF OFFSET..............................................................................44
11.1. Reserve and Offset.............................................................................44
11.2. Notice and Other Procedures....................................................................44
ARTICLE XII MISCELLANEOUS PROVISIONS.............................................................................45
12.1. Survival of Representations and Warranties and Covenants.......................................45
12.2. Further Assurances.............................................................................45
12.3. Attorneys' Fees................................................................................45
12.4. Transfer Taxes.................................................................................45
12.5. Notices........................................................................................45
12.6. Confidentiality and Publicity..................................................................46
12.7. Headings.......................................................................................47
12.8. Counterparts...................................................................................47
12.9. Governing Law and Waiver of Jury Trial.........................................................47
12.10. Consent to Jurisdiction and Venue..............................................................47
12.11. Successors and Assigns.........................................................................48
12.12. Waiver.........................................................................................48
12.13. Amendments.....................................................................................48
12.14. Severability...................................................................................48
12.15. Parties in Interest............................................................................49
12.16. Entire Agreement...............................................................................49
12.17. Construction...................................................................................49
APPENDIX - Certain Definitions
iii
5
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Stockholder Representative Agreement
Exhibit C - Form of Inventor Agreement
Exhibit D - Form of Affiliate Agreement
Exhibit E - Form of the Company Counsel Opinion
Exhibit F - Form of the Purchaser Counsel Opinion
SCHEDULE 4.11(i) - Owned Patents
SCHEDULE 6.13 - License
iv
6
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
entered into as of August ___, 2001, by and among INNOVATIVE GAMING CORPORATION
OF AMERICA, a Minnesota corporation (the "Purchaser"), having its principal
place of business at 000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx, SCOTCH TWIST,
INC., a Delaware corporation (the "Company"), having its principal place of
business c/o Schupak Group, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, and INNOVATIVE GAMING TECHNOLOGY CORP., a Nevada corporation and a
wholly-owned subsidiary of the Purchaser ("Merger Sub"), the Company and Merger
Sub sometimes being hereafter collectively referred to as the "Constituent
Corporations." Certain capitalized terms used, but not elsewhere defined, in
this Agreement shall have the respective meanings given to them in the Appendix
to this Agreement.
RECITALS
The Board of Directors of the Purchaser and the Company each have
determined that it is in the best interests of their respective stockholders for
the Purchaser to acquire the Company by the merger (the "Merger") of the Company
with and into Merger Sub upon the terms and subject to the conditions set forth
herein.
AGREEMENT
The Purchaser, the Company and Merger Sub, intending to be legally bound,
and for good and valuable consideration, the adequacy of which is hereby
acknowledged, agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME
1.1. THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.2 hereof), the Company shall be
merged with and into Merger Sub, with Merger Sub being the surviving corporation
in the Merger (the "Surviving Corporation") and the separate existence of the
Company shall thereupon cease. The Merger shall have the effects set forth in
Section 92A.250 of the 1999 Nevada Revised Statues ("NRS") and Section 252 of
the Delaware General Corporation Law (the "DGCL"). Immediately following the
Effective Time, Merger Sub, as the Surviving Corporation, shall continue to be a
wholly-owned subsidiary of the Purchaser.
1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become effective upon
the completion of the filing of properly executed (i) Articles of Merger with
the Secretary of State of the State of Nevada and (ii) a Certificate of Merger
with the Secretary of State of the State of Delaware, with each such filing to
be made as soon as practicable after the closing of the Transactions upon
satisfaction or waiver of the conditions set forth in Article VIII and Article
IX hereof. When used in this Agreement, the term "Effective Time" with respect
to the Merger shall mean the date and time at which such Articles of Merger and
Certificate of Merger are
1
7
successfully filed with the respective Secretaries of the State of Nevada and
Delaware in accordance with this Section 1.2 or such time as may be described
therein.
1.3. FEDERAL INCOME TAX QUALIFICATION. The parties intend that the Merger
qualify as a "reorganization" under Section 368(a) of the Code, and each of the
Purchaser, the Company and Merger Sub be a "party to a reorganization," within
the meaning of Section 368(b) of the Code, with respect to the Merger.
ARTICLE II
THE PURCHASER AND THE SURVIVING CORPORATION
2.1. ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The Articles
of Incorporation of Merger Sub as in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation of the Merger until duly
amended in accordance with applicable law.
2.2. BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of Merger Sub as in
effect at the Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of Merger Sub at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office as
directors of the Surviving Corporation from the Effective Time until their
respective successors are duly elected or appointed and qualified in the
manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
(b) The officers of Merger Sub at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from
the Effective Time until removed or until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
3.1. MERGER CONSIDERATION. The aggregate consideration payable by the
Purchaser (the "Purchase Price") in connection with the Merger shall equal (i)
the Initial Payment, as defined below; (ii) the Initial Shares, as defined
below; and (iii) any earnout payments described in Section 3.1(b)(ii).
(a) Upon termination of the Due Diligence Review Period, provided this
Agreement is not terminated pursuant to Section 10.1(a)(iii) or Section
10.1(b)(vi), the Purchaser shall pay to the Escrow Agent, who will hold
such amount in Escrow pursuant to the Escrow Agreement in the form attached
hereto as Exhibit A to this Agreement, an aggregate cash amount equal to
seven hundred thousand dollars ($700,000) (the "Initial Payment") and shall
make a loan to the Company (the "Loan") in the original principal amount of
five hundred thousand
2
8
dollars ($500,000). The Loan shall be evidenced by a promissory note (the
"Note") with all outstanding principal and accrued interest due and payable
on the first anniversary date of the effective date of the note and shall
bear interest at the minimum applicable federal rate in effect on the date
of the note. Proceeds of the Loan shall be used to pay Liabilities of the
Company. Upon payment by the Purchaser to the Escrow Agent of the Initial
Payment, the Purchaser shall have no further Liability to any Stockholder
arising out of or in connection with the Initial Payment. The Escrow Agent
shall distribute a Stockholder's pro rata share of the Initial Payment
following the Closing upon confirmation from the Purchaser that such
Stockholder has delivered to the Purchaser the Certificates, as defined
below, representing such Stockholder's right to receive its pro rata share
of the Initial Payment. In the event of a termination of this Agreement by
the Company or the Purchaser pursuant to Article X, except for a
termination pursuant to Sections 10.1(a)(i), the Escrow Agent shall
thereafter distribute the Initial Payment in accordance with the Escrow
Agreement to the Company's stockholders of record on the date of any such
distribution and the Note shall be cancelled in full with no further
obligation of the Company to the Purchaser in respect thereof. In the event
of a termination of this Agreement pursuant to Section 10.1(a)(i), the
Escrow Agent shall promptly return the Initial Payment to the Purchaser.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Common Stock of the
Company outstanding immediately prior to the Effective Time shall, at the
Effective Time, be converted into the right to receive, from the Purchaser
or the Stockholder's Representative as provided in this Article III,
consideration per share of the Company's common stock equal to the pro rata
share of the Initial Payment plus the following:
(i) A number of shares of the Purchaser's Common Stock determined
by multiplying (A) a fraction, the numerator of which is one and the
denominator of which is the Company's Fully Diluted Common Stock times
(B) the quotient of (1) four million one hundred and forty thousand
(4,140,000) divided by (2) the volume weighted adjusted average
closing price of the Common Stock for the twenty (20) trading day
period ended three (3) trading days prior to the Closing Date, as
defined below, provided, that, in the event such average closing price
is greater than $1.38, the denominator of the fraction used to
determine the quotient in this Section 3.1(b)(i)(B) shall be $1.38.
The number of shares to be issued pursuant to this Section 3.1(b)(i)
shall be appropriately adjusted as reasonably necessary to adjust for
any stock split, stock dividend, subdivision, recapitalization or
combination of the Common Stock. For purposes of this Agreement, the
"Company's Fully Diluted Common Stock" shall mean the number of shares
of the Company's outstanding Common Stock on the Closing Date plus the
number of shares of the Company's Common Stock issuable upon the
exercise, conversion or exchange of all Derivative Securities of the
Company whether vested or unvested outstanding on the Closing Date.
The aggregate number of shares of Common Stock to be issued pursuant
to this Section 3(b)(i) shall be referred to in this Agreement as the
"Initial Shares."
(ii) The Earnout Consideration, which shall be due no later than
forty-five (45) days following the end of any calendar quarter in
which Purchaser has Acquired Technology Net Income and the report
specified in Section 3.1(b)(ii). In the event that the Earnout
Consideration paid during any year is less than the Minimum Earnout
Consideration, within sixty (60) days of the end of such year, the
Purchaser shall pay additional Earnout Consideration equal to the
difference between (a) the Minimum Earnout Consideration for the
3
9
applicable period and (b) the amount of Earnout Consideration paid
with respect to the applicable period. Purchaser shall pay interest at
the rate of 500 basis points over the then-prime rate of interest
published in the Wall Street Journal (or the highest rate allowed by
applicable law, whichever is less) ("Prime Rate") on all Earnout
Consideration paid after the applicable due dates. The Purchaser shall
determine the portion of any Earnout Consideration to be treated as
interest for tax purposes in consultation with the Stockholder
Representative. It is the intention of the Parties hereto that the
Company's Stockholders be entitled to continue to receive the Earnout
Consideration contemplated hereunder for the life of the Credit/Debit
Gaming Business notwithstanding any changes in form or structure by
which the Gaming Business is owned or conducted.
(A) The Earnout Consideration shall be paid in cash unless
the Purchaser reasonably determines that payment in all or part
Purchaser stock is advisable to maintain the qualification of the
Merger as a "reorganization" within the meaning of Section 368(a)
of the Code. Any payments of Earnout Consideration in Purchaser
stock shall be based upon the volume weighted adjusted average
closing price of the Common Stock for the twenty (20) trading day
period ending on the date such Earnout Consideration is due. All
cash remittances shall be made by check or by wire transfer or by
other method mutually agreed upon by the Purchaser and
Stockholder Representative to an account designated by the
Stockholder Representative in writing. Stock payments may be made
in common stock or, to the extent advisable to ensure compliance
with applicable Legal Requirements, preferred stock. Any
preferred stock issued shall be nonvoting, convertible into
common stock to the extent permissible under applicable Legal
Requirements, with a liquidation preference equal to its initial
price and no other preferences. All stock remittances shall be
issued pursuant to the Stockholder Representative's written
instructions.
(B) The Purchaser will provide to the Stockholder
Representative a quarterly report within forty-five (45) days
following the end of each calendar quarter detailing the Acquired
Technology Net Income received during such calendar quarter,
including all Costs and Expenses. Upon request from the
Stockholder Representative, the Purchaser shall give to the
Stockholder Representative and his Representatives reasonable
access and audit and verification documentation as the
Stockholder Representative may reasonably request to assure the
Purchaser's compliance with the terms of this Agreement; provided
that such access and documentation shall not be more frequent
than quarterly. The Purchaser shall keep adequate records to
verify all reports and payments to be made to the Stockholder
Representative pursuant to this Agreement for a period of two (2)
years following the date of such reports and payments. The
Stockholder Representative shall have the right to select an
independent certified public accountant mutually agreeable to the
parties to audit no more frequently than annually all relevant
records of the Purchaser relating to calculation of the Earnout
Payment on reasonable notice to the Purchaser and during regular
business hours to verify the reports and payments required
hereunder. The independent certified public accountant shall
execute a confidentiality agreement with the Purchaser that
includes a prohibition on disclosing or using Confidential
Information of Purchaser obtained in connection with such
inspection, except to disclose to the Stockholder Representative
the amount of underpayment or overpayment uncovered in such
inspection and the basis for
4
10
such conclusions. Such audit shall be completed as expeditiously
as feasible, and Stockholder Representative shall provide the
Purchaser with reasonable documentation of such inspection within
five (5) business days of its completion. If such audit should
disclose any underreporting, subject to the Purchaser's rights to
object as provided below, the Purchaser shall pay to the
Stockholder Representative on behalf of the Stockholders such
amount plus interest from the date the Earnout Consideration was
initially due at the rate of 500 basis points over the then-Prime
Rate within thirty (30) days of the receipt of the written
documentation relating to such inspection. If such audit should
disclose any over-reporting, any future payments of Earnout
Consideration shall be reduced by an amount equal to such
over-reporting. The cost of such inspection shall be borne by the
Stockholders; provided, however, that if the Purchaser is
determined to have underpaid royalties by five percent (5%) or
more for the period covered by the inspection, then the
reasonable cost of such audit shall be borne by Purchaser. If
within fifteen (15) days after delivery of the written report of
such audit, the Purchaser notifies the Stockholder Representative
in writing of its objection to the calculation, the Purchaser and
the Stockholder Representative shall negotiate in good faith for
a period of thirty (30) days in an effort to agree on the Earnout
Consideration for the applicable period. Within fifteen (15) days
thereafter, either party may submit the dispute to arbitration.
(C) Any dispute arising out of, related to or in connection
with the calculation of the Earnout Consideration shall be
submitted to confidential, binding arbitration in Las Vegas,
Nevada before a single arbitrator, to be selected by the
Purchaser and the Stockholder Representative within fifteen (15)
days or otherwise selected pursuant to the procedures and rules
for commercial arbitration of the American Arbitration
Association, which procedures and rules shall govern each such
arbitration. The arbitrator shall only have authority to set the
Earnout Consideration in the amount claimed by the Purchaser or
the Stockholder Representative (i.e., the arbitrator cannot set
the Earnout Consideration between the amount claimed by the
Purchaser and the Stockholder Representative, below the amount
claimed by the Purchaser or above the amount claimed by the
Stockholder Representative). The party that loses such
arbitration shall be responsible for all costs of such
proceeding.
3.2. EXCHANGE OF COMMON STOCK.
(a) Immediately following the Effective Time, each record holder (a
"Stockholder") of any certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of common stock (the
"Certificates") of the Company shall be entitled to surrender his or her
Certificates to the Purchaser for cancellation in exchange for such
Stockholder's pro rata share of the Purchase Price to be paid pursuant to
Section 3.1(b), less any applicable transfer taxes, taxes related to FIRPTA
and back-up withholding taxes, and the Purchaser hereby agrees to cause
such consideration to be paid to such person as set forth in Section
3.1(b). Surrender of a Stockholder's Certificates to the Purchaser shall
also entitle a Stockholder to receive such Stockholder's pro rata share of
the Initial Payment from the Escrow Agent, pursuant to and subject to the
conditions of Section 3.1(a), less any applicable transfer taxes, taxes
related to FIRPTA and back-up withholding taxes which are required by law
to be withheld. If any Stockholder shall fail to surrender his or her
Certificates immediately following the Effective Time, the Purchaser shall
send to such Stockholder notice of the Merger and
5
11
instructions for use in effecting the surrender of the Certificates in
exchange for such Stockholder's pro rata share of the Purchase Price and
the Stockholder of such Certificate shall be entitled to receive in
exchange therefor, subject to the terms and conditions of Section 3.1(a)
and Section 3.1(b), solely such Stockholder's pro rata share of the
Purchase Price pursuant to Section 3.1(a) and Section 3.1(b), less any
applicable transfer taxes, taxes related to FIRPTA and back-up withholding
taxes which are required by law to be paid or withheld by the Purchaser
with respect thereto (which shall be treated for purposes of this Agreement
as having been paid to such Stockholder), and such Certificate shall
forthwith be cancelled. No interest shall be paid or accrued for the
benefit of holders of the Certificates on the consideration payable upon
the surrender of the Certificates. In no event shall the Purchaser issue
any fractional shares but shall instead round any fractional share up or
down to the nearest whole share. It shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed, accompanied by
separate original stock power, or otherwise in proper form for transfer.
(b) From and after the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of the Company's
common stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates formerly representing
shares of the Company's common stock are presented to the Surviving
Corporation for payment, they shall be cancelled and exchanged for a pro
rata share of the Purchase Price pursuant to Section 3.1(b) and the right
to receive from the Escrow Agent a pro rata share of the Initial Payment
pursuant to Section 3.1(a), in accordance with the procedures set forth in
this Section 3.2.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Purchaser
will issue or cause to be issued in exchange for such lost, stolen or
destroyed Certificate the pro rata amount of the Purchase Price pursuant to
Section 3.1(b) and the Escrow Agent will distribute the pro rata amount of
the Initial Payment pursuant to Section 3.1(a) for which the shares
represented by the Certificate are exchanged in accordance with this
Article III. When authorizing such issuance or payment in exchange
therefor, the Purchaser may, in its discretion and as a condition precedent
to the issuance or payment thereof, require the owner of such lost, stolen
or destroyed Certificate to give the Purchaser a bond in such sum as either
may direct as indemnity, or such other form of indemnity, as it shall
direct, against any claim that may be made against the Purchaser, the
Escrow Agent or the Stockholder Representative with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(d) The Purchaser may, at its option, discharge its obligations under
this Section 3.2 through attorneys for the Purchaser, the Company, the
Escrow Agent, the Stockholder Representative or a bank or trust reasonably
selected by the Purchaser to act as exchange agent in connection with the
Merger; provided, the Purchaser shall distribute the Initial Payment
through the Escrow Agent in accordance with the Escrow Agreement and the
Earnout Consideration through the Stockholder Representative, in accordance
with the Stockholder Representative Agreement substantially in the form
attached as Exhibit B to this Agreement; provided, further, that if no
Person is acting as the Escrow Agent or the Stockholder Representative, the
Purchaser may, at its option, distribute the Initial Payment or Earnout
Consideration as otherwise provided in this Section 3.2(d). Receipt of the
Purchase Price, or portion thereof, by any such agent shall be deemed to
constitute receipt by Stockholders and Purchaser shall have no further
Liability to any Stockholder in respect of such consideration.
6
12
3.3. NO FURTHER RIGHTS IN COMMON STOCK. All cash, or cash equivalents,
received by any Stockholder pursuant to this Agreement shall be deemed to have
been delivered and received in full satisfaction of all rights pertaining to
such Stockholder's common stock of the Company. At the Effective Time, the
holders of Certificates shall cease to have any rights with respect to common
stock of the Company (other than such rights as they may have as dissenting
stockholders under the DGCL), and their sole right shall be to receive their pro
rata share of the Purchase Price. Dissenting Holders shall have the rights
accorded by the DGCL.
3.4. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxxxxx
LLP, 12th Floor, 00000 XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000 at 10:00
a.m., local time, not later than five (5) business days following satisfaction
or waiver of all of the conditions set for the in Article VIII and Article IX of
this Agreement (the "Closing Date") or at such other date, time and place as the
parties shall otherwise agree.
3.5. DISSENTING SHARES.
(a) If holders of common stock of the Company are entitled to dissent
from the Merger and demand appraisal of any such common stock under
applicable law (each person electing to exercise such rights, a "Dissenting
Holder"), any shares of such common stock held by a Dissenting Holder as to
which appraisal has been so demanded ("Excluded Shares") shall not be
converted and exchanged as described in Sections 3.1 and 3.2, but shall
from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due such Dissenting Holder
pursuant to applicable law; provided, however, that common stock of the
Company held by a Dissenting Holder who shall, after the Effective Time,
withdraw its demand for appraisal or lose its rights of appraisal with
respect to such shares, in either case pursuant to applicable law, shall
not be deemed Excluded Shares, but shall be deemed to be converted, as of
the Effective Time, into the right to receive a pro rata portion of the
Purchase Price in accordance with this Agreement.
(b) The Company shall give the Purchaser prompt notice of any written
demands for appraisal of any shares of the Company's common stock,
withdrawals of such demands or failures to perfect appraisal rights
resulting in a loss of such rights, and any other instruments received by
the Company which relate to any such demand for appraisal. The Company
shall not voluntarily make any payment with respect to any demands or
potential demands for appraisal of the Company's Common Stock or offer to
settle or settle such demands or potential demands. From and after the
Effective Time, the Purchaser shall be responsible for any settlement of
claims with respect to any Dissenting Holders, which settlements may be
paid in cash, capital stock of the Purchaser or such other consideration as
the Purchaser shall determine.
3.6. SUPPLEMENTARY ACTION. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of
7
13
either Constituent Corporation, or otherwise to carry out the provisions of this
Agreement, the officers and directors of the Surviving Corporation are hereby
authorized and empowered on behalf of the Constituent Corporations, in the name
of and on behalf of either Constituent Corporation, as appropriate, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
3.7. TRANSFER TAXES; ESCHEAT.
(a) If any portion of the Purchase Price is to be paid to a Person
other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the Person
requesting such exchange shall pay the Purchaser any transfer or other
taxes required by reason of payment to other than the registered holder of
the Certificate surrendered or shall establish to the Purchaser's
satisfaction that any such tax has been paid or is not applicable.
(b) Notwithstanding anything in this Agreement to the contrary,
neither the Purchaser, the Escrow Agent, the Stockholder Representative nor
any other party hereto shall be liable to a holder of shares of common
stock of the Company for any portion of the Purchase Price delivered to a
public official pursuant to applicable escheat laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to and for the benefit of the Purchaser
and Merger Sub, as of the date hereof and as of the Closing Date, except with
respect to any particular subsection of this Article IV to the extent
specifically described in the corresponding subsection of that certain schedule
(the "Disclosure Schedule") dated as of the date of this Agreement and updated
as of the Closing Date, delivered to the Purchaser and Merger Sub on behalf of
the Company, a copy of which is attached hereto and incorporated herein by this
reference, as follows:
4.1. DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
necessary power and authority:
(i) to conduct its business in the manner in which its business
is currently being conducted and in the manner in which its business
is presently proposed to be conducted;
(ii) to own and use its assets in the manner in which its assets
are currently owned and used and in the manner in which its assets are
presently proposed to be owned and used; and
(iii) to perform its obligations under all Company Contracts.
8
14
(b) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed
name, trade name or name other than "Scotch Twist, Inc."
(c) The Company is qualified to do business as a foreign corporation
in all jurisdictions other than jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect. The Company is duly
qualified and in good standing as a foreign corporation in each of the
jurisdictions identified in Section 4.1 of the Disclosure Schedule.
(d) Section 4.1 of the Disclosure Schedule accurately sets forth (i)
the names of the members of the Company's Board of Directors, (ii) the
names and titles of the Company's officers, and (iii) the names of the
members of each committee of the Company's Board of Directors.
(e) Neither the Company nor any of its stockholders has ever approved,
or commenced any proceeding or made any election contemplating, the
dissolution or liquidation of the Company or the winding up or cessation of
the Company's business or affairs.
(f) The Company has no subsidiaries, and the Company has never owned,
beneficially or otherwise, any shares or other securities of, or any direct
or indirect interest of any nature in, any Entity.
4.2. CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS.
(a) The Company will promptly deliver to the Purchaser, but in no
event later than one week after the date of this Agreement, accurate and
complete copies of:
(i) the Company's Certificate of Incorporation and Bylaws,
including all amendments thereto;
(ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of the Company and
the Board of Directors of the Company.
There have been no meetings or other proceedings of the stockholders
of the Company or the Board of Directors of the Company that are not
reflected in such minutes or other records, or as to which the actions
adopted thereat or performed pursuant thereto have not been legally
ratified and approved by the stockholders of the Company, or its Board
of Directors, as applicable, by subsequent action reflected in such
minutes or other records.
(b) There has not been any violation of any of the provisions of the
Company's Articles of Incorporation or Bylaws or of any resolution adopted
by the Company's stockholders or the Company's Board of Directors, and no
event has occurred, and no condition or circumstance exists, that likely
would (with or without notice or lapse of time) constitute or result
directly or indirectly in such a violation.
9
15
(c) The books of account, stock records, minute books and other
records of the Company are true, correct, accurate, up to date and
complete, and have been maintained in accordance with sound and prudent
business practices. All of the records of the Company are in the actual
possession and direct control of the Company or its authorized
representative.
4.3. CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of an
aggregate of ten thousand shares (10,000), five thousand (5,000) of such
shares are common stock $.01 par value per share, and five thousand shares
(5,000) are preferred stock $.01 par value per share. 111.771 shares of
common stock have been issued and are outstanding.
(b) All of the Company's outstanding shares (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, (iii)
have been issued in full compliance with all applicable securities laws and
other applicable Legal Requirements, and (iv) are owned, beneficially and
of record, by the Persons set forth on Section 4.3 of the Disclosure
Schedule. Each of the Company's Stockholders that has acquired shares of
the Company's capital stock within the past four years is an "accredited
investor" as defined in Rule 501 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
(c) There are no:
(i) Contracts or arrangements under which the Company is or may
become obligated to sell or otherwise issue any shares of its capital
stock or any Derivative Securities; or
(ii) conditions or circumstances that would directly or
indirectly give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of
the Company.
(d) The Company has never repurchased, redeemed or otherwise
reacquired and has not agreed, committed or offered in writing or otherwise
to reacquire any shares of its capital stock.
4.4. FINANCIAL STATEMENTS.
(a) Prior to Closing, the Company shall have delivered to the
Purchaser the following financial statements and notes (collectively, the
"Financial Statements"):
(i) the unaudited balance sheet (the "Unaudited Balance Sheet")
of the Company as of a recent date, which has not been prepared in
accordance with GAAP; and
(ii) a balance sheet (the "Pre-Closing Balance Sheet") of the
Company as of a date not more than two (2) business days prior to the
Closing Date.
10
16
(b) The Financial Statements are and will be in accordance with the
books and records of the Company and present and will present fairly the
financial position of the Company as of the respective dates thereof.
(c) The Company has never conducted business operations and its only
assets are the Owned Patents. The Company has not prepared financial
statements in the Ordinary Course of Business.
(d) Section 4.4(d) of the Disclosure Schedule sets forth all of the
Company's Liabilities. As of the Effective Time, the amount of the
Company's Liabilities, excluding the Loan, will be zero dollars ($0).
4.5. ABSENCE OF CHANGES. Since June 30, 2001, except as otherwise
contemplated by this Agreement:
(a) no event has occurred that has had or is likely to have a Material
Adverse Effect;
(b) there has not been any material loss, damage or destruction to, or
any interruption in the use of, any of the Company's assets (whether or not
covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock;
(d) the Company has not sold or otherwise issued any shares of capital
stock or any Derivative Securities;
(e) the Company has not amended its Certificate of Incorporation or
Bylaws (other than as delivered to the Purchaser pursuant to Section
4.2(a)(i) above) and has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction other than as contemplated in
Sections 1.1 and 6.14;
(f) the Company has not purchased or otherwise acquired any asset from
any other Person, except for assets acquired by the Company in the Ordinary
Course of Business;
(g) the Company has not leased or licensed any asset from any other
Person except for assets leased or licensed in the Ordinary Course of
Business;
(h) the Company has not made any individual capital expenditure,
measured by invoice amount, in excess of $25,000;
(i) the Company has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold
by the Company in the Ordinary Course of Business;
11
17
(j) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness other than in the Ordinary Course of Business;
(k) the Company has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance
other than Permitted Liens;
(l) the Company has not made any loan or advance to any other Person;
(m) the Company has not (i) established or adopted any Employee
Benefit Plan or (ii) paid any bonus or made any profit sharing or similar
payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of
its directors, officers or employees;
(n) the Company has not entered into, and neither the Company nor any
of the assets owned or used by the Company has become bound by, any
Contract that is not an Excluded Contract;
(o) no Contract (other than an Excluded Contract) by which the Company
or any of the assets owned or used by the Company is or was bound, or under
which the Company has or had any rights or interest, has been amended or
terminated;
(p) the Company has not incurred, assumed or otherwise become subject
to any Liabilities, other than Liabilities incurred by the Company in the
Ordinary Course of Business;
(q) the Company has not discharged any Encumbrance or discharged or
paid any indebtedness or other Liability, except any that have been
discharged or paid in the Ordinary Course of Business;
(r) the Company has not forgiven any debt or otherwise released or
waived any right or claim;
(s) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(t) the Company has not made or changed any material election in
respect of Taxes, amended any Company Return, adopted or changed any
accounting method in respect of Taxes, entered into any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or closing
agreement, settlement or compromise of any claim or assessment in respect
of Taxes, or consented to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes with any
Governmental Body or otherwise;
(u) the Company has not entered into any transaction or taken any
other action outside the Ordinary Course of Business; and
12
18
(v) the Company has not agreed or committed (in writing or otherwise),
to take any of the actions referred to in clauses "(c)" through "(u)"
above.
4.6. TITLE TO ASSETS. The Company owns, free and clear of Encumbrances
other than Permitted Liens: all assets (i) reflected on the Unaudited Balance
Sheet and Pre-Closing Balance Sheet; (ii) acquired by the Company since the date
of the Unaudited Balance Sheet; and (iii) all other assets reflected in the
Company's books and records as being owned by the Company, and all of the
Company's rights under the Company Contracts.
4.7. BANK ACCOUNTS.
(a) Section 4.7 of the Disclosure Schedule accurately sets forth, with
respect to each account maintained by the Company or for its benefit or for
the benefit of its customers at any bank or other financial institution:
(i) the name and location of the institution at which such
account is maintained;
(ii) the name in which such account is maintained and the account
number of such account;
(iii) a description of such account and the purpose for which
such account is used;
(iv) the current balance in such account as of the date of this
Agreement;
(v) the rate of interest being earned on the funds in such
account; and
(vi) the names of all individuals authorized to draw on or make
withdrawals from such account.
(b) There are no safe deposit boxes or similar arrangements maintained
by or for the benefit of the Company.
4.8. RECEIVABLES; MAJOR CUSTOMERS. The Company has never had, does not
have, and at no time prior to the Closing will have any customers or accounts
receivable.
4.9. EQUIPMENT, ETC. The Company has never owned, does not own, and at no
time prior to the Closing will own any equipment, furniture, fixtures,
improvements and other tangible assets owned by the Company with an original
cost in excess of $500.
4.10. REAL PROPERTY; LEASES. The Company has never owned or leased, does
not own or lease, and at no time prior to the Closing will own or lease any real
property or any interest in real property.
13
19
4.11. PROPRIETARY ASSETS.
(a) Section 4.11(a) of the Disclosure Schedule contains an accurate
and complete list of any registered and unregistered trademarks, service
marks, and applications for registration therefor, copyright registrations,
applications for copyright registrations, mask work registrations, and
applications for mask work registrations of the Company, specifying as to
each the nature of such right, any jurisdiction that has issued a
registration with respect thereto or in which an application for such a
registration is pending, and any applicable registration or application
number.
(b) Section 4.11(b) of the Disclosure Schedule contains an accurate
and complete list of all licenses, sublicenses, and other agreements as to
which the Company is a party and pursuant to which any entity other than
the Company is authorized to use any Proprietary Asset.
(c) Section 4.11(c) of the Disclosure Schedule contains an accurate
and complete list of all licenses, sublicenses, and other agreements as to
which the Company is a party and pursuant to which the Company is
authorized to use any Intellectual Property Rights or Technology of any
third party other than end-user licenses granted to the Company relating to
"off the shelf" personal computer software that is generally available on
commercially reasonable terms from persons that are unaffiliated with the
Company and that is not incorporated into any product marketed, sold or
licensed by, or used in the provision of any service provided by, the
Company.
(d) The Company owns all right, title and interest in and to the
Proprietary Assets, and no other entity has any right to or interest in the
Proprietary Assets or any proceeds or other revenue relating thereto. Such
ownership is and will remain free and clear of all Encumbrances and
security interests. No other party has any rights with respect to any such
inventions or discoveries or the Owned Patents. Subject to Section 6.13(d),
the Company has taken and will continue to take all appropriate actions
pursuant to applicable federal, state and local law to perfect, protect its
interest in, and enforce the Proprietary Assets. No party to any license,
sublicense, or agreement listed in Section 4.11 of the Disclosure Schedule
is (or upon Closing, will be) in breach or default and no event has
occurred (or, upon Closing, will occur) which with notice or lapse of time
would constitute a material Breach or default or permit termination,
modification or acceleration thereunder. Except for licenses listed in
Paragraph (c) of Section 4.11 of the Disclosure Schedule as
royalty-bearing, there are (and upon Closing, will be) no royalties, fees,
or other payments payable by the Company to any person by reason of the
ownership, use, license, sale or disposition of any Proprietary Asset.
(e) To the Company's Knowledge, the use and disclosure of the
Proprietary Assets (including, without limitation, the practice of the
inventions described in the Owned Patents) does not infringe or
misappropriate any Intellectual Property Right of any person. The Company:
(i) has no Knowledge that any Proprietary Asset is involved in any
interference, reexamination, cancellation or opposition proceeding, or any
currently pending or threatened suit, action or proceeding arising out of a
right or claimed right of any person with respect to any Intellectual
Property Right; (ii) has not received any oral, written or other
communication that the Company is using or disclosing in an unauthorized
manner, infringing or misappropriating in
14
20
the conduct of its business as presently conducted or as proposed to be
conducted by the Company the right or claimed right of any person with
respect to any Intellectual Property Right; (iii) has any Knowledge that
any of the Proprietary Assets is being used or disclosed in an unauthorized
manner, infringed, or misappropriated by any person; and (v) except
pursuant to the licenses listed in Section 4.11(c) of the Disclosure
Schedule, has not entered into any agreement to indemnify any person
against any charge of unauthorized use or disclosure, infringement, or
misappropriation of any Intellectual Property Right. The Owned Patents and
all registered trademarks, service marks, collective marks, certification
marks, and registered copyrights listed in Section 4.11(a) of the
Disclosure Schedule are valid and in full force and were prosecuted in good
faith.
(f) The Company has taken reasonable steps sufficient to safeguard and
maintain the secrecy and confidentiality of and its proprietary rights in
all of the Proprietary Assets other than issued patents, patent
applications, or copyright or trademark registrations. Without limitation
on the generality of the foregoing, the Company will have obtained prior to
Closing confidentiality and inventions assignment agreements from all of
the directors, officers, consultants and independent contractors of the
Company (including the Inventors) involved in the creation or development
of the Proprietary Assets. No independent contractor who has performed
services related to the business of the Company has (or upon Closing, will
have) any right, title, or interest in any Proprietary Asset.
(g) The Company: (i) has not disclosed the source code for any of the
software owned by the Company that is used or proposed to be used in the
business of the Company (the "Software") or other information relating to
the detailed design, structure, or organization of the Software to any
person other than past or present employees and independent contractors of
the Company; (ii) has not entered into any agreement requiring the Company
to license or otherwise provide future versions, upgrades, or enhancements
of the any software in source code form; or (iii) has not entered into any
agreements granting any exclusive right to any Proprietary Asset.
(h) The execution, delivery and performance of this Agreement, and the
consummation of the Transactions, will not materially Breach, violate or
conflict with any agreement governing any Proprietary Asset, will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of any Proprietary Asset, or in any way impair the right of the
Company to use or bring any action for the unauthorized use or disclosure,
infringement, or misappropriation of any Proprietary Asset.
(i) For purposes of this Agreement, "Owned Patents" shall mean the
patents and patent applications (including patents issuing in respect of
the applications) listed on Schedule 4.11(i) of the Disclosure Schedule,
together with (i) any related continuation, continuation-in-part,
divisional, reissue, reexamination and substitution patents and patent
applications, and (ii) any counterparts (including foreign counterparts)
thereof and equivalents of the foregoing.
(j) For purposes of this Section 4.11, "use" includes make, have made,
reproduce, display or perform (publicly or otherwise), prepare derivative
works based on, offer for sale, sell, distribute, import, disclose,
license, sublicense, dispose of, and otherwise exploit.
15
21
4.12. CONTRACTS.
(a) Section 4.12 of the Disclosure Schedule identifies each Company
Contract, including each Contract with any reseller of the Company's
products. All the Company Contracts are in writing. The Company has
delivered to the Purchaser accurate and complete copies of all written
Company Contracts identified in Section 4.12 of the Disclosure Schedule,
including all amendments thereto.
(b) Each Company Contract is valid and in full force and effect, and
is enforceable by the Company in accordance with its terms.
(c) (i) The Company has not violated or Breached, or declared or
committed any default under, any Company Contract, except for such
violations or breaches as would not have a Material Adverse Effect;
(ii) no event has occurred, and no circumstance or condition
exists, that could (with or without notice or lapse of time) (A)
result in a violation or material Breach of any of the provisions of
any Company Contract, (B) give any Person the right to declare a
default or exercise any remedy or hinder any Company Contract, (C)
give any Person the right to accelerate the maturity or performance of
any Company Contract, or (D) give any Person the right to cancel,
terminate or modify any Company Contract; and
(iii) the Company has not to its Knowledge waived any of its
rights under any Company Contract.
(d) To the Company's Knowledge, each Person against which the Company
has or may acquire any rights under any Company Contract is solvent and is
able to satisfy such Person's current and future Liabilities to the Company
set forth in any such Contract.
(e) (i) The Company has never guaranteed or otherwise agreed to cause,
insure or become liable for, and has never pledged any of its assets to
secure, the performance or payment of any Liability of any other Person;
and
(ii) the Company has never been a party to or bound by (A) any
joint venture agreement, partnership agreement, profit sharing
agreement, cost sharing agreement, loss sharing agreement or similar
Contract, or (B) any Contract that creates or grants to any Person, or
provides for the creation or grant of, any stock appreciation right,
phantom stock right or similar right or interest.
(f) The performance of the Company Contracts will not result in any
violation of or failure to comply with any Legal Requirement, which
violation or failure could have a Material Adverse Effect.
(g) No Person is materially renegotiating, nor has or will have as a
result of the Transactions, the contractual right to materially
renegotiate, any amount paid or payable by or to the Company under any
Company Contract or any other term or provision of any Company Contract.
16
22
(h) The Contracts identified in Section 4.12 of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable
the Company to conduct its business in the manner in which its business is
currently being conducted.
4.13. LIABILITIES; MAJOR SUPPLIERS.
(a) Other than the Loan contemplated by Section 3.1(a), the Company
has no Liabilities, except for:
(i) Liabilities that will be reflected as part of the Unaudited
Balance Sheet;
(ii) Liabilities (of the type required to be reflected as current
liabilities on a balance sheet prepared in accordance with GAAP)
incurred by the Company in the Ordinary Course of Business since the
date of the Unaudited Balance Sheet, which Liabilities in the
aggregate do not exceed $25,000 as of the date hereof and will not
exceed zero dollars ($0); and
(iii) the Company's obligations under the Contracts listed in
Section 4.12 of the Disclosure Schedule.
(b) Section 4.13 of the Disclosure Schedule accurately identifies, and
provides an accurate and complete breakdown of the amounts paid to, each
Person that has received more than $25,000 from the Company within the last
twelve months.
4.14. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) The Company is in full compliance with each Legal Requirement that
is applicable to it or to the conduct of its business or the ownership or
use of any of its assets or products, except where the failure to be in
such compliance would not have a Material Adverse Effect.
(b) No event has occurred, and no condition or circumstance exists,
that likely would (with or without notice or lapse of time) constitute or
result, directly or indirectly, in a violation by the Company of, or a
failure on the part of the Company to comply with, any Legal Requirement,
except where the violation or failure of which would not have a Material
Adverse Effect.
(c) The Company has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Body, or any
other Person, regarding (i) any actual, alleged, possible or potential
violation of, or failure by it, its resellers or the end-users of its
products and services to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any
cleanup or any remedial, corrective or response action of any nature.
17
23
(d) To the Company's actual knowledge, no Governmental Body has
proposed, or is considering, any Legal Requirement that, if adopted or
otherwise put into effect would specifically affect the Company and could
reasonably be expected to have a Material Adverse Effect on the Company or
the market for its products and services.
4.15. GOVERNMENTAL AUTHORIZATIONS.
(a) Section 4.15 of the Disclosure Schedule identifies:
(i) each Governmental Authorization that is held by the Company;
and
(ii) each other Governmental Authorization that is held by any of
the Company's employees and is used in connection with the Company's
business.
The Company has delivered to the Purchaser accurate and complete copies of all
of the Governmental Authorizations identified in Section 4.15 of the Disclosure
Schedule, including all renewals thereof and all amendments thereto. Each
Governmental Authorization identified or required to be identified in Section
4.15 of the Disclosure Schedule is valid and in full force and effect.
(b) The Governmental Authorizations identified in Section 4.15 of the
Disclosure Schedule constitute all of the Governmental Authorizations
necessary (i) to enable the Company to conduct its business in the manner
in which its business is currently being conducted and is proposed to be
conducted, and (ii) to permit the Company to own and use its assets in the
manner in which they are currently owned and used and are proposed to be
used.
4.16. TAX MATTERS.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Company (whether pursuant to any
Tax Return or otherwise) has been duly paid in full on a timely basis other
than any Tax which is being contested in good faith by the Company. Any Tax
required to have been withheld or collected by the Company has been duly
withheld and collected, and (to the extent required) each such Tax has been
paid to the appropriate Governmental Body.
(b) Within seven (7) days of the date of this Agreement, the Company
shall deliver to the Purchaser accurate and complete copies of all the
Company Returns filed by the Company and Section 4.16 of the Disclosure
Schedule shall be supplemented to accurately identify all Tax Returns
required to be filed by or on behalf of the Company with any Governmental
Body with respect to any taxable period commencing January 1, 1998 and
ending on or before the Closing Date (the "Company Returns"). All the
Company Returns (including monthly payroll returns) (i) have been or will
be filed when due, and (ii) have been, or will be when filed, accurately
and completely prepared in full compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or
before the Closing Date, and all amounts otherwise payable in connection
with the Company Returns on or before the Closing Date, have been or will
be paid on or before the Closing Date. The Company has delivered to the
Purchaser accurate and complete copies of all the Company Returns (other
than monthly payroll returns) filed by the Company.
18
24
(c) The Company's Liability for unpaid Taxes for all periods ending on
or before the date of the Pre-Closing Balance Sheet does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) reported in the Pre-Closing Balance
Sheet.
(d) Section 4.16 of the Disclosure Schedule accurately identifies each
examination or audit of any Company Return that has been conducted by any
Governmental Body. The Company has delivered to the Purchaser accurate and
complete copies of all audit reports and similar documents (to which the
Company has access) relating to the Company Returns. No extension or waiver
of the limitation period applicable to any of the Company Returns has been
granted (by the Company or any other Person), and no such extension or
waiver has been requested from the Company.
(e) No claim or other Proceeding is pending or, to the Company's
Knowledge, has been threatened against or in respect of any Tax. There are
no unsatisfied Liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon, and related expenses) with respect
to any notice of deficiency or similar document received by the Company.
The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. The Company has not been,
and will not be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, individually or collectively,
could give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
(g) Except for such limitations as may result from the Transactions
contemplated by this Agreement and as set forth on Section 6.14(g) of the
Disclosure Schedule, the Company has no net operating losses or other tax
attributes presently subject to limitation under Code Sections 382, 383 or
384, or the federal consolidated return regulations.
(h) The Company is not (nor has it ever been) a party to any tax
sharing agreement or tax indemnity agreement and has not assumed the Tax
liability of any other person under contract.
(i) The Company has no Liability for Taxes resulting by reason of the
several liability of the Company pursuant to Treasury Regulations Section
1.1502-6 or any analogous state, local or foreign law or regulation or by
reason of the Company having been a member of any consolidated, combined or
unitary group on or prior to the Closing Date.
19
25
4.17. EMPLOYEE AND LABOR MATTERS.
(a) The Company has never had, does not have, and at no time prior to
the Closing will have any employees or consultants.
(b) The Company is not a party to or bound by, and has never been a
party to or bound by, and at no time prior to the Closing will be a party
to or bound by any Contract for employment or any union contract,
collective bargaining agreement or similar Contract and has not made any
offers in respect of the foregoing.
4.18. BENEFIT PLANS; ERISA.
(a) The Company has never had, does not have and at no time prior to
the Closing will have (or have approved) any Company Plans.
(b) There is no Person that (by reason of common control or otherwise)
is or has at any time been treated together with the Company as a single
employer within the meaning of Section 414 of the Code.
4.19. ENVIRONMENTAL MATTERS. The Company is in compliance with all
applicable Environmental Laws, except for such noncompliance as would not have a
Material Adverse Effect. The Company has not received any notice or other
communication (in writing or otherwise) that alleges that the Company is not in
compliance with any Environmental Law and to the Company's Knowledge there are
no circumstances that are reasonably likely to prevent or interfere with the
Company's compliance with any Environmental Law in the future.
4.20. SALE OF PRODUCTS; PERFORMANCE OF SERVICES. The Company has not had,
does not have and at no time prior to the Closing will have, any sales of any
products or services.
4.21. INSURANCE. The Company has never had, does not have, and at no time
prior to Closing will have, any insurance policy or application for any
insurance policy.
4.22. RELATED PARTY TRANSACTIONS.
(a) No Related Party has, and no Related Party has at any time since
December 31, 2000 had, any direct or indirect interest of any nature in any
asset used in or otherwise relating to the business of the Company.
(b) No Related Party is, or has at any time since December 31, 2000,
has been, indebted to the Company.
(c) Since December 31, 2000, no Related Party has entered into, or has
had any direct or indirect financial interest in, any Contract, transaction
or business dealing of any nature involving the Company.
(d) No Related Party is competing, or has at any time since December
31, 2000, competed, directly or indirectly, with the Company in any market
served by the Company.
20
26
(e) No Related Party has any claim or right against the Company other
than with respect to compensation due Related Parties who are officers or
employees of the Company.
(f) No event has occurred, and no condition or circumstance exists,
that likely would (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any claim or right in favor
of any Related Party against the Company.
4.23. PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding, and to the Company's Knowledge no
Person has threatened to commence any Proceeding:
(i) that involves the Company or that otherwise relates to or
could affect the Company's business, any of the assets owned or used
by the Company or any product or service offered for sale or license
by the Company (whether or not the Company is named as a party
thereto); or
(ii) that challenges, or that could have the effect of
preventing, delaying, making illegal or otherwise interfering with,
any of the transactions contemplated by this Agreement.
No event has occurred, and to the Company's Knowledge no claim, dispute or
other condition or circumstance exists, that could directly or indirectly
give rise to or serve as a basis for the commencement of any such
Proceeding.
(b) No Proceeding has ever been commenced by or against the Company,
and no Proceeding otherwise involving or relating to the Company has been
pending or, to the Company's Knowledge, threatened at any time.
(c) The Company has delivered to the Purchaser accurate and complete
copies of all pleadings, correspondence and other written materials to
which the Company has access that relate to the Proceedings, if any,
identified in Section 4.23 of the Disclosure Schedule.
(d) There is no Order to which the Company, any of the assets owned or
used by the Company or any product or service offered for sale or license
by the Company, is subject.
(e) To the Company's Knowledge, no officer or employee of the Company
is subject to any Order that prohibits such officer or employee from
engaging in or continuing any conduct, activity or practice relating to the
Company's business.
(f) To the Company's Knowledge, there is no proposed Order that, if
issued or otherwise put into effect, may have a Material Adverse Effect.
4.24. AUTHORITY; BINDING NATURE OF AGREEMENTS. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement and all other agreements, certificates and
instruments contemplated to be executed and delivered by the Company in
connection with this Agreement, and the execution, delivery and performance by
the Company of this Agreement and such other agreements, certificates and
21
27
instruments have been duly authorized by all necessary action on the part of the
Company and its stockholders, Board of Directors and officers. Each of this
Agreement and such other agreements, certificates and instruments constitutes,
or upon execution and delivery will constitute, the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
4.25. NON-CONTRAVENTION; CONSENTS.
(a) Neither the execution and delivery of this Agreement, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A) any
of the provisions of the Company's Certificate of Incorporation or
Bylaws, or (B) any resolution adopted by the Company's stockholders,
the Company's Board of Directors or any committee of the Company's
Board of Directors;
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the transactions contemplated hereby or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
the Company, or any of the assets owned or used by the Company, is
subject;
(iii) cause the Company to become subject to, or to become liable
for the payment of, any state or local Tax by any state or local
taxing authority or other state or local Governmental Body;
(iv) cause any of the assets owned or used by the Company to be
reassessed or revalued by any state or local taxing authority or other
Governmental Body;
(v) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the Company or any of its
employees or that otherwise relates to the Company's business or to
any of the assets owned or used by the Company;
(vi) contravene, conflict with or result in a violation or
material Breach of, or result in a default under, any provision of any
of the Company Contracts;
(vii) give any Person the right to (A) declare a default or
exercise any remedy under any Company Contract, (B) accelerate the
maturity or performance of any Company Contract, or (iii) cancel,
terminate or modify any Company Contract;
(viii) give any Person the right to any payment by the Company or
give rise to any acceleration or change in the award, grant, vesting
or determination of any Derivative Securities, severance payments or
other contingent obligations of any nature whatsoever of the Company
in favor of any Person, in any such case as a result of the change in
control of the Company or otherwise resulting from the Transactions;
22
28
(ix) result in the imposition or creation of any Encumbrance upon
or with respect to any asset owned or used by the Company; or
(x) contravene or constitute a default under any law or
regulation, any judgment, decree or order, or any contract, agreement
or other undertaking applicable to the Owned Patents.
(b) The Company was not, is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any
Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Transactions.
4.26. BROKERS; PROFESSIONALS. Other than as set forth in Section 6.5 of
this Agreement, the Company has no Liability or obligation to pay any fees,
commissions or costs to any broker, finder or agent in respect of this Agreement
or any of the Transactions.
4.27. FULL DISCLOSURE.
(a) None of the representations and warranties of the Company in this
Agreement contains or will contain as of the Closing Date any untrue
statement of material fact or omits or will omit as of the Closing Date to
state any material fact necessary to make any of the representations,
warranties or statements contained therein not misleading. To the extent
such representations permit omission of items otherwise required to be
discussed because they are not material or do not or would not have a
Material Adverse Effect, such omissions in the aggregate will not as of the
Closing Date and do not have a Material Adverse Effect.
(b) There is no fact within the actual knowledge of the Company (other
than publicly known facts relating exclusively to political or economic
matters of general applicability within the industry) that may have a
Material Adverse Effect.
(c) All of the information set forth in the Disclosure Schedule, and
all other information regarding the Company and its business, condition,
assets, Liabilities, operation, financial performance, net income and
prospects that has been furnished to the Purchaser or any of its
Representatives by or on behalf of the Company or any of the Company's
Representatives, is accurate and complete in all material respects. The
Company acknowledges and agrees that although the Purchaser may tender
certain assistance to the Company in the preparation of the Disclosure
Schedule, the provision of such assistance shall not be deemed to
constitute an admission by the Purchaser of the accuracy of the same or any
basis for any modification of any covenant, representation or warranty of
the Company and the Purchaser contained in this Agreement or any
Transactional Agreement.
4.28. POWERS OF ATTORNEY. The Company has not given and at no time prior to
the Closing will give a power of attorney to any Person.
4.29. TAKEOVER STATUTES. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute is applicable to the Merger,
except for such statutes or regulations as to which all necessary action has
been taken by the Company and its Board of Directors to permit the consummation
of the Merger in accordance with the terms hereof.
23
29
4.30. VOTING ARRANGEMENTS. To the Knowledge of the Company, there are no
outstanding stockholder agreements, voting trusts, proxies or other arrangements
or understandings among the Company's stockholders relating to the voting of
their respective shares of Common Stock.
4.31. INVENTORIES. The Company has never had, does not have, and at no time
prior to the Closing will have any inventories.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND MERGER SUB
The Purchaser and Merger Sub, jointly and severally, represent and warrant,
to and for the benefit of the Company, as of the date hereof and as of the
Closing Date, except with respect to any particular subsection of this Article V
to the extent specifically described in the corresponding subsection of that
certain schedule (the "Purchaser Disclosure Schedule") dated as of the date of
this Agreement and updated as of the Closing Date, delivered to the Company on
behalf of the Purchaser and Merger Sub, a copy of which is attached hereto and
incorporated herein by reference, as follows:
5.1. AUTHORITY; BINDING NATURE OF AGREEMENT, ETC.
(a) Each of the Purchaser and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Minnesota
Business Corporation Act and Title 7 of the NRS, respectively, and has the
absolute and unrestricted right, power and authority to enter into and
perform its obligations under this Agreement and all other agreements and
instruments contemplated to be executed and delivered by the Purchaser and
Merger Sub, respectively, in connection herewith;
(b) the execution, delivery and performance of this Agreement and all
other agreements and instruments contemplated to be executed and delivered
by the Purchaser and Merger Sub in connection herewith have been duly
authorized by all necessary action on the part of the Purchaser and Merger
Sub and their respective Boards of Directors; and
(c) this Agreement and all other agreements and instruments
contemplated to be executed and delivered by the Purchaser and Merger Sub
each constitutes the legal, valid and binding obligation of the Purchaser
and Merger Sub, enforceable against the Purchaser and Merger Sub, as
applicable, in accordance with its terms.
5.2. PROCEEDINGS; ORDERS. There is no pending, or to the Purchaser's or
Merger Sub's Knowledge threatened, Proceeding or Order that could, or proposed
Order that if issued or otherwise put into effect could, adversely affect the
ability of the Purchaser or Merger Sub to comply with or perform any covenant or
obligation under this Agreement, or could have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
24
30
5.3. NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of
this Agreement, nor the consummation or performance of any of the transactions
contemplated hereby, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Purchaser's or Merger Sub's Articles of Incorporation
or Certificate of Incorporation, as applicable, or Bylaws, or (ii) any
resolution adopted by the Purchaser's or Merger Sub's stockholders, the
Purchaser's or Merger Sub's Board of Directors or any committee of the
Purchaser's or Merger Sub's Board of Directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Purchaser or Merger Sub, or any
of the material assets owned or used by the Purchaser or Merger Sub, is
subject; or
(c) contravene, conflict with or result in a violation or Breach of,
or result in a default under, any provisions of a Contract to which the
Purchaser or Merger Sub is a party, the violation or Breach of which or
default under which would have a Material Adverse Effect on the Purchaser
or Merger Sub.
5.4. BROKERS. Neither the Purchaser nor Merger Sub has agreed or become
obligated to pay, nor has taken any action that likely would result in any
Person claiming to be entitled to receive, any brokerage commission, finder's
fee or similar commission or fee in connection with any of the Transactions.
5.5. FULL DISCLOSURE.
(a) None of the representations and warranties of the Purchaser or
Merger Sub in this Agreement contains or will contain as of the Closing
Date any untrue statement of material fact or omits or will omit as of the
Closing Date to state any material fact necessary to make any of the
representations, warranties or statements contained therein not misleading.
To the extent such representations permit omission of items otherwise
required to be discussed because they are not material or do not or would
not have a Material Adverse Effect, such omissions in the aggregate will
not as of the Closing Date and do not have a Material Adverse Effect.
(b) The Purchaser's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 and all other reports, or definitive proxy
statements filed subsequent to December 31, 2000 under the Securities Act,
or under Sections 13(a), 13(d), 14 or 15(d) of the Exchange Act, in the
form filed or to be filed (collectively, the "Regulatory Documents"), as of
the date filed, (A) complied and will comply in all material respects as to
form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (B) did not and will 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
not misleading; and each of the balance sheets contained in or incorporated
by reference into any such Regulatory Document (including the related notes
and schedules thereto) fairly presents, or will fairly present, the
financial position of the Purchaser as of its date, and each of the
statements of income and changes in stockholders' equity and cash flows or
equivalent statements in such Regulatory Documents (including any related
notes and schedules thereto) fairly presents, or will fairly
25
31
present, the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the Purchaser for the periods
to which they relate, in each case in accordance with GAAP consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of
unaudited statements.
ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as set forth in this Article VI.
6.1. ACCESS AND INVESTIGATION. The Company shall ensure that, at all times
during the Pre-Closing Period:
(a) the Company and its Representatives provide the Purchaser and its
Representatives with free and complete access at reasonable times and with
reasonable notice from the Purchaser to the Company's Representatives, to
the Company's premises and assets, and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company, subject to and conditioned on continuing compliance by the
Purchaser with Section 7.3 hereof;
(b) the Company and its Representatives shall provide the Purchaser
and its Representatives with such copies of existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company as the Purchaser may request in good faith; and
(c) the Company and its Representatives shall compile and provide the
Purchaser and its Representatives with such additional financial, operating
and other data and information regarding the Company as the Purchaser may
reasonably request in good faith.
6.2. OPERATION OF BUSINESS. The Company shall ensure that, during the
Pre-Closing Period:
(a) the Company conducts its operations exclusively in the Ordinary
Course of Business and in substantially the same manner as such operations
have been conducted for the twelve-month period prior to the date of this
Agreement;
(b) the Company preserves intact its current business organization and
uses its commercially reasonable efforts to keep available the services of
its current officers;
(c) the Company's officers confer regularly with the Purchaser
concerning operational matters and otherwise report as often as reasonably
requested by the Purchaser concerning the status of the Company's business,
condition, assets, Liabilities, operations, financial performance and
prospects and notify the Purchaser immediately of any emergency or other
change in the business and of any Governmental or third party complaints or
investigations commenced, or to the Company's Knowledge, threatened,
against the Company (or communication indicating that the same may be
contemplated);
26
32
(d) the Company promptly notifies the Purchaser of any written bona
fide inquiry, proposal or offer from any Person relating to any Acquisition
Transaction and any other inquiry, proposal or offer from any Person
relating to any Acquisition Transaction on terms that, when considered as a
whole, are at least as favorable as those contained in and contemplated by
this Agreement;
(e) the Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, except as contemplated by this Agreement and does not repurchase,
redeem or otherwise reacquire any shares of capital stock or any Derivative
Securities;
(f) the Company does not sell or otherwise grant or issue any shares
of capital stock or any Derivative Securities except as contemplated by
this Agreement;
(g) the Company does not amend its Articles of Incorporation or
Bylaws, and does not effect or become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction (other than as disclosed in
Section 4.2 of the Disclosure Schedule) except as contemplated by this
Agreement;
(h) the Company does not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(i) except for the repayment of the Liabilities as contemplated by
Section 8.15, the Company does not make any capital expenditure in excess
of $10,000 or otherwise outside the Ordinary Course of Business;
(j) the Company does not enter into or permit any of the assets owned
or used by the Company to become bound by any Contract, except for any
Excluded Contract nor enter into, amend or modify any transaction or
Contract between it and any Related Party;
(k) the Company does not incur, assume or otherwise become subject to
any Liability, except for current liabilities (of the type required to be
reflected in a balance sheet prepared in accordance with GAAP) incurred in
the Ordinary Course of Business;
(l) the Company does not establish or adopt any Employee Benefit Plan,
and does not pay any bonus or make any profit sharing or similar payment
to, or increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(m) the Company does not change any of its methods of accounting or
accounting practices in any respect;
(n) the Company does not make or change any material election in
respect of Taxes, amend any Company Return, adopt or change any accounting
method in respect of Taxes, enter into any tax allocation agreement, tax
sharing agreement, tax indemnity agreement or
27
33
closing agreement, settlement or compromise of any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes with any
Governmental Body or otherwise;
(o) the Company does not commence any Proceeding;
(p) except as contemplated by this Agreement, the Company does not (i)
acquire, dispose of, transfer, lease, license, mortgage, pledge or encumber
any fixed or other assets, other than in the Ordinary Course of Business;
(ii) incur or assume any indebtedness for borrowed money or any other
Liabilities, other than Liabilities (other than indebtedness for borrowed
money) incurred in the Ordinary Course of Business; (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person, other than in the Ordinary Course of Business; or (iv) make any
loans, advances or capital contributions to, or investments in, any other
Person;
(q) the Company pays its debts and Taxes when due, subject to good
faith disputes thereof, and pays or performs its other obligations when
due;
(r) the Company does not disclose to any Person, other than to any of
the Company's Representatives that are subject to agreements of
confidentiality and to the Purchaser, any proprietary or confidential
information relating to the Company or its business, nor transfer to any
Person any Proprietary Asset, nor enter into any licensing or other
agreement relating to any Proprietary Asset;
(s) the Company does not enter into or amend any Contracts pursuant to
which any other Person is granted distribution, marketing or other rights
of any type or scope with respect to any of its services, products or
Proprietary Assets;
(t) the Company does not pay, discharge or satisfy any amount where
such prepayment causes the Company to incur a penalty, charge or fee;
(u) the Company does not hire any new director-level or officer-level
employee;
(v) the Company gives all notices and other information required prior
to the Effective Time to be given to the employees of the Company and any
applicable Governmental Body under the WARN Act, the National Labor
Relations Act, the Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the Transactions;
(w) the Company shall not revalue any of its assets, including without
limitation, writing down the value of inventory or writing off notes or
accounts receivable, except as required under GAAP and in the Ordinary
Course of Business;
(x) the Company does not enter into any transaction or take any other
action outside the Ordinary Course of Business;
28
34
(y) the Company does not enter into any transaction or take any other
action that could reasonably be expected to cause or constitute a material
Breach of any representation, warranty or covenant made by the Company in
this Agreement;
(z) the Company does not enter into, amend or modify any Contract with
any Related Party;
(aa) the Company does not enter into any Contract related to the
leasing of property or equipment other than in the Ordinary Course of
Business; and
(bb) the Company does not enter into any Contract or arrangement to do
any of the actions outlined in (f) through (bb) above.
6.3. FILINGS AND CONSENTS. The Company shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by the
Company or the Stockholders in connection with the execution and delivery
of this Agreement or in connection with the consummation or performance of
any of the Transactions is made or given as soon as possible after the date
of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by the Company in
connection with the execution and delivery of this Agreement or in
connection with the consummation or performance of any of the Transactions
(including each of the Consents identified in Section 4.25 of the
Disclosure Schedule) is obtained as soon as possible after the date of this
Agreement and remains in full force and effect through the Closing Date;
(c) the Company promptly delivers to the Purchaser a copy of each
filing made, each notice given and each Consent obtained by the Company
during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Company and its Representatives
cooperate with the Purchaser and with the Purchaser's Representatives, and
prepare and make available such documents and take such other actions as
the Purchaser may reasonably request in good faith, in connection with any
filing, notice or Consent that the Purchaser is required or elects to make,
give or obtain.
6.4. NOTIFICATION. During the Pre-Closing Period, the Company shall
promptly notify the Purchaser of:
(a) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a Breach of any representation or
warranty made by the Company in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
a Breach of any representation or warranty made by the Company in this
Agreement if (i) such representation or warranty had
29
35
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (ii) such extent, condition,
fact or circumstance had occurred, arisen or existed on or prior to the
date of this Agreement;
(c) any Breach of any covenant or obligation of the Company;
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article VIII or
Article IX impossible or unlikely; and
(e) the discovery by the Company of any fact or event that has
resulted in or is likely to result in a Material Adverse Change.
6.5. PAYMENT OF INDEBTEDNESS. The Company shall cause all indebtedness and
other Liabilities owed by any Related Party to the Company and, except for the
Loan, all indebtedness and other Liabilities of the Company, including fees,
costs and expenses of the Company in connection with the Transactions including
all accrued amounts to be paid by the Company to the Escrow Agent pursuant to
the Escrow Agreement (such fees, costs and expenses collectively, the
"Transactional Expenses"), to be paid in full on or prior to the Closing.
6.6. NO NEGOTIATION. The Company shall ensure that neither the Company nor
any of the Company's Representatives directly or indirectly:
(a) solicits or encourages the initiation of any inquiry, proposal or
offer from any Person (other than the Purchaser) relating to any
Acquisition Transaction;
(b) participates in any discussions or negotiations with, or provides
any non-public information to, any Person (other than the Purchaser)
relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry, proposal or offer
from any Person (other than the Purchaser) relating to any Acquisition
Transaction.
6.7. BEST EFFORTS. During the Pre-Closing Period, the Company shall use its
Best Efforts to cause the conditions set forth in Article VIII to be satisfied
on a timely basis, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties set forth in Article IV of this
Agreement becoming untrue, in any of the conditions of Closing set forth in
Article VIII not being satisfied or in the business of the Company becoming
materially less valuable.
6.8. CONFIDENTIALITY; PUBLICITY. The Company shall ensure that, during the
Pre-Closing Period:
(a) the Company and its Representatives keep strictly confidential the
terms of this Agreement;
30
36
(b) neither the Company nor any of its Representatives issues or
disseminates any press release or other disclosure intended for broad
public dissemination of any nature regarding any of the transactions
contemplated by this Agreement, except to the extent that the Company is
required by law to make any such disclosure regarding such transactions or
as jointly agreed by the Company and the Purchaser; and
(c) if the Company is required by law to make any disclosure regarding
the transactions contemplated by this Agreement, the Company advises the
Purchaser, at least five (5) business days before making such disclosure,
of the nature and content of the intended disclosure.
(d) the Company agrees that in the event of a Breach or threatened
Breach by it of this Section 6.8, the Purchaser and Merger Sub would suffer
irreparable harm and shall be entitled (in addition to any remedy that may
be available at law or in equity) to injunctive relief restraining such
Breach or threatened Breach without the having to post a bond.
6.9. INVENTOR AGREEMENT. The Company shall ensure that Xxxxx X. Xxxxxx
shall execute and deliver an Inventor Agreement, substantially in the form
attached hereto as Exhibit C (the "Inventor Agreement").
6.10. AFFILIATE AGREEMENTS. The Company shall ensure that each Stockholder
that is also an Affiliate of the Company as determined in the reasonable
discretion of the Purchaser shall execute and deliver an Affiliate Agreement,
substantially in the form attached hereto as Exhibit D (each, an "Affiliate
Agreement").
6.11. APPROVAL OF AGREEMENT. The Company shall ensure that during the
Pre-Closing Period the Company approves or adopts, as applicable, as promptly as
practicable after the date hereof, by all necessary further action of its Board
of Directors, and shall use its Best Efforts to ensure that the Company's
stockholders approve or adopt, as applicable, this Agreement and the other
Transactional Agreements to which the Company is a party. The Company shall make
a solicitation of the Company's stockholders by means of the Proxy Statement and
other disclosure documents reasonably deemed appropriate by the Purchaser. In
furtherance, and not in limitation, of the foregoing, the Company, acting
through its Board of Directors, shall, in accordance with all applicable Legal
Requirements and the Company's Certificate of Incorporation and Bylaws (i)
promptly and duly call, give notice of, convene and hold as soon as practicable
a meeting (or solicit an action by written consent in lieu thereof) of the
Company's stockholders for the purpose of voting to approve and adopt this
Agreement and the other Transactional Agreements to which the Company is a
party, and (ii) recommend approval and adoption of this Agreement and the other
Transactional Agreements to which the Company is a party by the Company's
stockholders (such recommendation to be made by the Company's Board of Directors
acting unanimously) and take all lawful action to solicit such approval. The
timing and procedures of such meeting (or consent solicitation) shall be subject
to the reasonable approval of the Purchaser and shall be completed as promptly
as practicable.
31
37
6.12. COOPERATION WITH REGISTRATION STATEMENT AND PROXY STATEMENT.
(a) The Company agrees to cooperate in, and shall ensure that its
stockholders and Affiliates cooperate in, the preparation of the
Registration Statement and the Proxy Statement. The Company agrees to
promptly furnish to the Purchaser all information concerning the Company
and its stockholders and Affiliates as may be reasonably requested by
Purchaser in connection with the filing of the Registration Statement and
Proxy Statement described in Section 7.5.
(b) The Company agrees that the information supplied or to be supplied
by it for inclusion in (i) the Registration Statement or Proxy Statement
will, at the time the Registration Statement or Proxy Statement and each
amendment or supplement thereto, if any, becomes effective under the
Securities Act, not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make any statement therein not misleading; and (ii) the Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to the
Company's stockholders and at the time of the special meeting or written
consent of the stockholders of the Company, not contain any untrue
statement of material fact or omit to state any material fact required to
be stated therein or necessary to make any statement therein not
misleading, in the light of the circumstances under which such statement is
made, or necessary to correct any statement in any earlier statement in the
Proxy Statement or any amendment or supplement thereto. The Company further
agrees that if it shall become aware prior to the Effective Time of any
information furnished by it that would cause any statement in the
Registration Statement or the Proxy Statement to be false or misleading
with respect to any material fact, or an omission of any material fact
necessary to make any statement therein not false or misleading, in light
of the circumstances under which such statement is made, it shall promptly
inform the Purchaser and shall take the necessary steps to correct the
Registration Statement or the Proxy Statement.
6.13. LICENSE; TERMINATION OF LICENSES.
(a) The Company hereby grants the Purchaser a license (the "License")
on the terms and conditions set forth in Schedule 6.13 hereto.
(b) Upon the request of the Purchaser and to the extent permitted by
such agreements, prior to the Closing Date, the Company shall terminate
that certain (i) Xxxxxx'x Operating Company Inc. Technology Development and
Licensing Agreement, Amended and Restated, dated as of June 20, 1996, by
and between Xxxxxx'x Operating Company Inc., a Delaware corporation, and
Scotch Twist, Inc., a Delaware corporation, and/or (ii) license contained
in that certain Agreement, dated as of July 1, 1997, by and between Bally
Gaming International Inc., a Delaware corporation, and the Company. The
Company shall provide the Purchaser written documentation evidencing any
requested termination.
(c) All rights and licenses granted under this Agreement by the
Company to the Purchaser are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights
to "intellectual property" as defined under Section 101 of the Bankruptcy
Code. The parties agree that the Purchaser, as a licensee of such right
under this Agreement, shall retain and may fully exercise all of its rights
32
38
and elections under the Bankruptcy Code. On or after the Effective Date,
the Company shall take all steps reasonably requested by the Purchaser to
perfect, and provide constructive notice of, the licenses, immunities,
releases and other rights granted hereunder, including, without limitation,
filings in the U.S. Patent and Trademark Office and under the Uniform
Commercial Code.
(d) From the date of this Agreement up to and through the earlier of
Closing or termination of this Agreement, Purchaser agrees to, and Company
hereby authorizes Purchaser to, perform all actions reasonably necessary
and to pay all costs for maintaining and continuing to prosecute any and
all Proprietary Assets, including Owned Patents, based on the foregoing,
worldwide. Costs include, but are not limited to, fees payable to
governmental entities such as patent offices, fee paying services such as
annuity paying services, attorney fees, and related disbursements. In no
event shall Purchaser's obligations under this Section 6.13(d) exceed an
aggregate of fifty thousand dollars ($50,000).
6.14. FRACTIONAL SHARES. The Company shall eliminate all fractional shares,
by way of stock split or other method reasonably approved by Purchaser.
6.15. FIRPTA. The Company shall furnish to the Purchaser within thirty (30)
days prior to the Closing Date certification in the form required by Treasury
Regulation Section 1.1445-2(c)(3) that the stock of the Company is not a U.S.
real property interest. In addition, simultaneously with delivery of such
certification, the Company shall have provided the Purchaser, as agent for the
Company, a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulations Section 1.897-2(h)(2) along with written
authorization for the Purchaser to deliver such notice form to the Internal
Revenue Service on behalf of the Company upon the Closing of the Merger.
6.16. NO SHORT SALES. Neither the Company, any of its Stockholders nor any
Affiliate of the Company or any Stockholder shall enter into any transaction to
short the Common Stock on or prior to the Closing Date.
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees as set forth in this Article VII.
7.1. BEST EFFORTS. During the Pre-Closing Period, the Purchaser shall use
its Best Efforts to cause the conditions set forth in Article IX to be satisfied
on a timely basis, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties set forth in this Agreement becoming
untrue, in any of the conditions of closing set forth in Article IX not being
satisfied, or in the business of the Company becoming materially less valuable.
7.2. NOTIFICATION. During the Pre-Closing Period, the Purchaser shall
promptly notify the Company in writing of:
33
39
(a) the discovery by the Purchaser of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a Breach of any representation or
warranty made by the Purchaser in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
a Breach of any representation or warranty made by the Purchaser or Merger
Sub in this Agreement if (i) such representation or warranty had been made
as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (ii) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(c) any Breach of any covenant or obligation of the Purchaser or
Merger Sub; and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article VIII or
Article IX impossible or unlikely.
7.3. PROPRIETARY INFORMATION. Unless and until the Closing occurs, the
Purchaser shall keep and retain in confidence any and all of the confidential
and proprietary information respecting the Company set forth or referenced in
the Disclosure Schedule or otherwise provided to the Purchaser by the Company in
connection with or in anticipation of the Transactions, irrespective of the form
in which it is delivered or when delivered (the "Proprietary Information").
Proprietary Information shall not include information that (i) was known by the
Purchaser or its Representatives, without an obligation to maintain its
confidentiality prior to receipt from the Company or its Representatives, (ii)
is or becomes generally known to the public without violation of this Agreement,
(iii) is obtained by the Purchaser or its Representatives from a third party
having the right to disclose it without an obligation of confidentiality, or
(iv) is independently developed by the Purchaser or its Representatives without
the use or assistance of any Proprietary Information previously disclosed to the
Purchaser in confidence by the Company or any agent or Representative thereof,
in contemplation or furtherance of the Transactions. In the event the Agreement
is terminated prior to Closing for any reason, the Purchaser agrees to return to
the Company all of the Proprietary Information subject to this Section 7.3
(including all copies) in its possession or under its control, other than
analyses, compilations and derivative works, that is capable of being returned
and to purge, shred or otherwise destroy all such Proprietary Information not
returned which is capable of being purged, shredded or destroyed. The Purchaser
shall, and shall cause each of its Representatives to, keep and maintain all
Proprietary Information confidential following any expiration or termination of
this Agreement in any case in which Closing does not occur. Nothing herein shall
be construed to restrict or prevent the Purchaser and its affiliates from
working internally or with other parties in or on or from acquiring other
parties that work in or on, fields, products or processes similar or identical
to or competitive with those of the Company, and such actions shall not be used
as a basis for a claim of "inevitable disclosure or use" of Proprietary
Information in contravention or breach of this Agreement; provided that none of
the Proprietary Information disclosed to the Purchaser hereunder or otherwise in
contemplation of the Transactions by the Company or its Representatives is used
for any such purposes.
34
40
7.4. FILINGS AND CONSENTS. The Purchaser shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by the
Purchaser in connection with the execution and delivery of this Agreement
or in connection with the consummation or performance of any of the
Transactions is made or given as soon as possible after the date of this
Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by the Company in
connection with the execution and delivery of this Agreement or in
connection with the consummation or performance of any of the Transactions
is obtained as soon as possible after the date of this Agreement and
remains in full force and effect through the Closing Date;
(c) the Purchaser promptly delivers to the Company a copy of each
filing made, each notice given and each Consent obtained by the Purchaser
during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Purchaser and its
Representatives cooperate with the Company and with the Company's
Representatives, and prepare and make available such documents and take
such other actions as the Company may reasonably request in good faith in
connection with any filing, notice or Consent the Company is required or
elects to make, give or obtain.
7.5. REGISTRATION STATEMENT; PROXY STATEMENT.
(a) The Purchaser agrees to prepare a registration statement on Form
S-4 or other applicable form (the "Registration Statement") to be filed by
the Purchaser with the SEC in connection with the issuance of the Initial
Shares and the resale of the Initial Shares by Affiliates of the Company,
including the prospectus and other proxy solicitation materials of the
Purchaser and the Company constituting a part thereof in order to solicit
approval from the respective stockholders of the Purchaser and the Company
(the "Proxy Statement") and all related documents. The registration of the
resale of Common Stock by Affiliates of the Company may be by separate
registration statement in the Purchaser's discretion, which separate
registration statement shall be deemed to be included in the definition of
"Registration Statement." The Purchaser shall permit the review of such
Registration Statement by the Company. The Purchaser agrees to file the
Registration Statement and the Proxy Statement in preliminary and
definitive form with each such Governmental Body (including the SEC) as may
be required as soon as reasonably practicable. The Purchaser agrees to use
its Best Efforts to cause the Registration Statement and any required
amendments or supplements thereto to be declared effective under the
Securities Act and distributed to the Purchaser's and the Company's
stockholders as promptly as reasonably practicable after filing thereof.
The Purchaser agrees to use its Best Efforts to register or qualify the
Initial Shares and any resale thereof by Affiliates of the Company under
such other securities or state blue sky laws of such jurisdictions as the
Company or such Affiliates may reasonably request, except that the
Purchaser shall not for any such purpose be required to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified or to file a general consent to service of process in any such
states or jurisdictions.
35
41
(b) The Purchaser agrees that the information supplied or to be
supplied by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and
each amendment or supplement thereto, if any, becomes effective under the
Securities Act, not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make any statement therein not misleading; and (ii) the Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to
stockholders and at the time of the special meeting or the written consent
of the stockholders of the Purchaser, not contain any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary to make any statement therein not misleading or
necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. The Purchaser further
agrees that if it shall become aware prior to the Effective Time of any
information furnished by it that would cause any statement in the
Registration Statement or the Proxy Statement to be false or misleading
with respect to any material fact, or an omission of any material fact
necessary to make any statement therein not false or misleading, in light
of the circumstances under which such statement is made, it shall promptly
inform the Company and shall take the necessary steps to correct the
Registration Statement or the Proxy Statement.
7.6. MERGER SUB CHARTER DOCUMENTS. The Purchaser has provided the Company
with an accurate and complete copy of Merger Sub's Articles of Incorporation and
Bylaws. The Purchaser shall not, and shall cause Merger Sub to not, alter, amend
or modify such Articles of Incorporation or Bylaws, other than as may be
required by any Governmental Body or to comply with any Legal Requirement or to
obtain any Governmental Authorization or Consent (including each Consent related
to applicable gaming Governmental Bodies), without the prior written Consent of
the Company or the Company's stockholders holding a majority of the voting
shares of the Company, which Consent shall not be unreasonably withheld.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to Consummate the Merger and to take the other
actions required to be taken by the Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part, in accordance
with Section 12.12):
8.1. SATISFACTORY COMPLETION OF PRE-ACQUISITION REVIEW. The Purchaser shall
not have determined to exercise its right of termination set forth in Section
10.1(a)(iii).
8.2. ACCURACY OF REPRESENTATIONS. All of the representations and warranties
made by the Company in this Agreement (considered collectively), and each of
said representations and warranties (considered individually), shall have been
complete and accurate in all material respects as of the date of this Agreement
and shall be complete and accurate in all material respects as of the Closing
Date.
36
42
8.3. PERFORMANCE OF OBLIGATIONS. All covenants and obligations that the
Company is required to comply with or to perform pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of said covenants
and obligations (considered individually), shall have been duly complied with
and performed in all material respects.
8.4. CONSENTS. All Consents, including each Consent related to applicable
gaming Governmental Bodies and the approval by the Purchaser's stockholders,
required to consummate the Merger and the other Transactions shall have been
obtained and shall be in full force and effect.
8.5. NO ADVERSE CHANGE. There shall have been no Material Adverse Change in
respect of the Company since the date of this Agreement.
8.6. ADDITIONAL DOCUMENTS. The Purchaser shall have received the following
documents:
(a) an opinion letter from Xxxxxxx Berlin Shereff Xxxxxxxx, LLP,
counsel to the Company, dated the Closing Date, in substantially the form
of Exhibit E, which shall include an opinion that none of the Stockholders
is a member of a "group" under Section 13(d) or 13(g) of the Exchange Act;
(b) evidence reasonably satisfactory to the Purchaser that the
approvals and authorizations referenced in Section 4.24 with respect to the
Company remain in full force and effect;
(c) a certificate duly executed by the President of the Company
certifying that (i) each of the representations and warranties made by the
Company in this Agreement was accurate in all material respects as of the
date of the Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date and (ii) each of the covenants
and obligations that the Company is required to have complied with or
performed pursuant to this Agreement at or prior to the Closing has been
duly complied with and performed in all respects;
(d) copies of resolutions of the Board of Directors of the Company,
and copies of the resolutions of the meeting of the Company stockholders
(or written consent in lieu thereof), each certified by the Secretary of
the Company, and each duly and validly authorizing the execution, delivery
and performance of this Agreement and the other Transactional Agreements to
which the Company is or is to be a party and the Transactions (such
resolution of the Board of Directors to have been adopted by the unanimous
vote of its members);
(e) final bills for all Transactional Expenses indicating payment in
full;
(f) each Transactional Agreement, duly executed and delivered by each
of the respective parties thereto (other than the Purchaser and Merger
Sub);
(g) copies of all corporate documents of the Company as the Purchaser
shall reasonably request;
37
43
(h) copy of any tax clearance certificate or similar document required
under applicable Legal Requirements for the Company to effect the Merger;
(i) good standing certificate relating to the Company from the
Secretary of State of the State of Delaware, dated as of a recent date and
in substance reasonably satisfactory to the Purchaser;
(j) the Financial Statements and the Pre-Closing Balance Sheet;
(k) resignations of all directors and officers of the Company; and
(l) such other documents as the Purchaser may reasonably request for
the purpose of (i) evidencing the accuracy of any representation or
warranty made by the Company, (ii) evidencing the compliance by the
Company, or the performance by the Company of, any covenant or obligation
set forth in this Agreement, (iii) evidencing the satisfaction of any
condition set forth in this Article VIII, or (iv) otherwise facilitating
the consummation or performance of any of the Transactions.
8.7. NO PROCEEDINGS. Since the date of this Agreement, there shall not have
been commenced or threatened against the Purchaser or the Company, or against
any Person affiliated with the Purchaser or the Company, any Proceeding (i)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Transactions, or (ii) that may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions
or having a Material Adverse Effect.
8.8. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. No Person shall
have made or threatened any claim asserting that such Person (i) may be the
holder or the beneficial owner of, or may have the right to acquire or to obtain
beneficial ownership of, any capital stock or any Derivative Securities, or (ii)
may otherwise be entitled to all or any portion of the Purchase Price.
8.9. BENEFICIAL OWNERSHIP. Giving effect to the consummation of the
Transactions, none of the Stockholders, either individually or by application of
Rule 13d-5(b)(i) promulgated by the SEC under the Exchange Act, shall have
acquired "beneficial ownership" (as defined under the Rules of the SEC
promulgated in connection with Sections 13(d) and 13(g) of the Exchange Act) of
greater than 4.9% of the Common Stock of the Purchaser.
8.10. TAX TREATMENT. Neither the Company nor any of the Stockholders shall
take any action that is reasonably likely to cause the Merger not to qualify as
a reorganization within the meaning of Section 368(a) of the Code.
8.11. NO PROHIBITION. Neither the consummation nor the performance of any
of the transactions contemplated by this Agreement will, directly or indirectly
(with or without notice or lapse of time), contravene or conflict with or result
in a violation of, or cause the Purchaser or any Person affiliated with the
Purchaser to suffer any adverse consequence under, (i) any applicable Legal
Requirement or Order, or (ii) any Legal Requirement or Order that has been
proposed by or before any Governmental Body.
38
44
8.12. NO INJUNCTION. There shall not be in effect any injunction that shall
have been entered by a court of competent jurisdiction since the date of this
Agreement and that prohibits the Merger of the Company and Merger Sub.
8.13. NO DISSENTING SHARES. There shall be no Excluded Shares.
8.14. REGULATORY APPROVALS. No statute, rule, regulation, executive order,
stay, decree, or judgment shall have been enacted, entered, issued, promulgated
or enforced by any court or Governmental Body which prohibits or restricts the
consummation of the Merger or any of the other Transactions. Other than the
filing of the Agreement of Merger with the Secretaries of State of Nevada and
Delaware, all Consents (including those related to gaming) which are necessary
for the consummation of the Merger or any of the other Transactions, other than
Consents the failure to obtain which would not materially adversely affect the
consummation of the Merger or any of the other Transactions or in the aggregate
have a Material Adverse Effect on the Surviving Corporation shall have been
filed, occurred or been obtained and shall be in full force and effect.
8.15. NO LIABILITIES. The Company shall have no outstanding Liabilities and
all Transactional Expenses shall have been paid in full. At the Purchaser's sole
discretion, the Purchaser may elect to consummate this transaction despite
Company's failure to comply with this Section 8.15; provided, that in such event
Purchaser shall have the right to release the number of Initial Shares and, at
its option, set off future earnout payments under Section 3.1(b)(ii) in an
aggregate amount not to exceed the total amount of all unpaid Liabilities and
Transactional Expenses.
8.16. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC, there shall not have been issued
any stop order in connection therewith and all registrations or qualifications
with any state blue sky authorities required by Section 7.5 shall have been made
and shall be effective.
8.17. VALUE OF INITIAL SHARES. The aggregate value of the Initial Shares to
be issued on the Closing Date pursuant to Section 3.1(b)(i) shall be equal to or
greater than one million two hundred thousand dollars ($1,200,000).
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S
OBLIGATION TO CLOSE
The Company's obligation to Consummate the Merger and to take the other
actions required to be taken by the Company at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Company, in whole or in part, in accordance
with Section 12.12):
9.1. ACCURACY OF REPRESENTATIONS. All of the representations and warranties
made by the Purchaser and Merger Sub in this Agreement (considered
collectively), and each of said representations and warranties (considered
individually), shall have been complete and accurate in all material respects as
of the date of this Agreement and shall be complete and accurate in all material
respects as of the Closing Date.
39
45
9.2. ADDITIONAL DOCUMENTS. The Company shall have received the following
documents:
(a) an opinion letter from Maslon, Edelman, Xxxxxx & Brand, counsel to
the Purchaser, dated the Closing Date, substantially in the form of Exhibit
F.
(b) evidence reasonably satisfactory to the Company that the approvals
and authorizations referenced in Section 5.1 with respect to the Purchaser
and Merger Sub remain in full force and effect;
(c) certificates duly executed by the President of each of the
Purchaser and Merger Sub certifying that (i) each of the representations
and warranties made by the Purchaser and Merger Sub, respectively, in this
Agreement was accurate in all material respects as of the date of this
Agreement and is accurate in all material respects as of the Closing Date
as if made on the Closing Date and (ii) each of the covenants and
obligations that the Purchaser is required to have complied with or
performed pursuant to this Agreement at or prior to the Closing has been
duly complied with and performed in all respects, duly executed by the
Purchaser;
(d) copies of resolutions of the Board of Directors of the Purchaser
and Merger Sub, and copies of the resolutions of the stockholder of Merger
Sub, each certified by the Secretary of the Company or Merger Sub, as
applicable, and each duly and validly authorizing the execution, delivery
and performance of this Agreement and the other Transactional Agreements to
which the Purchaser or Merger Sub, as applicable, is a party and the
Transactions;
(e) copy of any tax clearance certificate or similar document required
under applicable Legal Requirements for the Company and Merger Sub to
effect the Merger;
(f) good standing certificate relating to the Merger Sub from the
Secretary of State of the State of Nevada, dated as of a recent date and in
substance reasonably satisfactory to the Company;
(g) such other documents as the Company may request in good faith for
the purpose of (i) evidencing the accuracy of any representation or
warranty made by the Purchaser or Merger Sub, (ii) evidencing the
compliance by the Purchaser with, or the performance by the Purchaser of,
any covenant or obligation set forth in this Agreement, (iii) evidencing
the satisfaction of any condition set forth in this Article IX, or (iv)
otherwise facilitating the consummation or performance of any of the
Transactions; and
(h) each of the Transactional Documents duly executed and delivered by
the Purchaser and Merger Sub, as applicable.
9.3. PURCHASER'S PERFORMANCE. All of the covenants and obligations that the
Purchaser is required to comply with or to perform pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of said covenants
and obligations (considered individually), shall have been duly complied with
and performed in all material respects.
9.4. FINANCING OR BALANCE SHEET ENHANCEMENT. The Purchaser shall have
completed an Acceptable Financing, with written notice of the failure to obtain
40
46
such Acceptable Financing to be provided by the Purchaser to the Company on or
before June 1, 2002 in the event of such failure. For purposes of this
Agreement, an "Acceptable Financing" shall mean that the Purchaser has raised an
aggregate minimum of $10 million in a combination of one or more of the
following: (i) equity or debt financing through one or a combination of (A) the
sale of Common Stock; (B) the sale of the Purchaser's Convertible Preferred
Stock, provided that such Convertible Preferred Stock (1) must have a dividend
rate not higher than 10% per annum, and (2) shall contain no conversion
provisions other than at a fixed exchange ratio (adjusted for standard
antidilution adjustments, including price-based antidilution adjustments), which
ratio, subject to any such adjustments, shall provide that each share of
Preferred Stock may be combined into a number of shares of Common Stock having a
value equal to the original issue price plus any accrued but unpaid dividends,
where the value of the Common Stock shall be not less than 90% of the market
price of the Common Stock on the date of issuance of the Preferred; and (C) a
debt financing which meets the following qualifications: (1) must have an
interest rate not higher than 13% per annum; (2) no amortization or sinking fund
payments required for five years or longer; and (3) no conversion provisions for
the debt, other than at a fixed exchange ratio (adjusted for standard
antidilution adjustments, including price-based antidilution adjustments), which
ratio, subject to any such adjustments, shall not value the Common Stock into
which the debt may be converted at a price less than 90% of the market price of
the Common Stock at the time of issuance of such debt; or (ii) working capital
in excess of that required for payment of current Liabilities, and funds to fund
expenses of operations as reflected in the Purchaser's business plan, including
anticipated or necessary capital expenditures, as determined in the reasonable
judgment of the Stockholder Representative, or as certified by the Purchaser's
Chief Executive Officer or Chief Financial Officer, in writing.
9.5. NO INJUNCTION. There shall not be in effect any injunction that shall
have been entered by a court of competent jurisdiction since the date of this
Agreement and that prohibits the Merger of the Company and Merger Sub.
9.6. APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS.
(a) The Board of Directors of the Purchaser and Merger Sub shall have
approved the execution of this Agreement by the Company and shall have
approved the consummation of the Transactions.
(b) The sole stockholder of Merger Sub shall have approved the
execution of this Agreement by Merger Sub and shall have approved the
consummation of the Transactions.
9.7. NO PROCEEDINGS. Since the date of this Agreement, there shall not have
been commenced or threatened against the Purchaser, or against any Person
affiliated with the Purchaser, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the transactions
contemplated by this Agreement, or (b) that may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transaction or
having a Material Adverse Effect.
9.8. NASDAQ LISTING. The Purchaser's Common Stock shall be listed on the
Nasdaq Small Cap Market.
41
47
9.9. CONSUMMATION OF XERTAIN MERGER. The merger involving the Purchaser and
Xertain Inc., a Delaware corporation, shall have been consummated.
9.10. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC, there shall not have been issued
any stop order in connection therewith and all registrations or qualifications
with any state blue sky authorities required by Section 7.5 shall have been made
and shall be effective.
9.11. VALUE OF INITIAL SHARES. The aggregate value of the Initial Shares to
be issued on the Closing Date pursuant to Section 3.1(b)(i) shall be equal to or
greater than one million two hundred thousand dollars ($1,200,000).
9.12. CONSENTS. All Consents, including each Consent related to applicable
gaming Governmental Bodies, required to consummate the Merger and the other
Transactions shall have been obtained and shall be in full force and effect.
ARTICLE X
TERMINATION
10.1. TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by the Purchaser if:
(i) there is a material Breach of any representation, warranty,
covenant or obligation of the Company under this Agreement or of the
Inventor under the Inventor Agreement;
(ii) the Purchaser reasonably determines that the timely
satisfaction of any condition set forth in Article VIII has become
impossible or impractical (other than as a result of any failure on
the part of the Purchaser to comply with or perform its covenants and
obligations under this Agreement);
(iii) the Purchaser is not, in its reasonable discretion,
satisfied with the results of its due diligence review of the Company,
provided that the Purchaser's right to terminate pursuant to this
Section 10.1(a)(iii) shall exist only during the Due Diligence Review
Period;
(iv) a Governmental Authorization required for consummation of
the Merger and the other Transactions shall have been denied by final
nonappealable action of the Governmental Body responsible for such
Governmental Authorization or a Governmental Body issues a final
nonappealable order blocking the Merger; or
(v) the Company modifies or amends its Disclosure Schedule and
discloses any items or events that have resulted in or are likely to
result in a Material Adverse Change.
42
48
(b) by the Company if:
(i) there is a material Breach of any representation, warranty,
covenant or obligation of the Purchaser;
(ii) the Company reasonably determines that the timely
satisfaction of any condition set forth in Article IX has become
impossible or impractical (other than as a result of any failure on
the part of the Company to comply with or perform any covenant or
obligation set forth in this Agreement);
(iii) a Governmental Authorization required for consummation of
the Merger and the other Transactions shall have been denied by final
nonappealable action of the Governmental Body responsible for such
Governmental Authorization or a Governmental Body issues a final
nonappealable order blocking the Merger;
(iv) the Purchaser modifies or amends its Disclosure Schedule and
disclosed any items or events that have resulted in or are likely to
result in a Material Adverse Change;
(v) the Purchaser or Merger Sub modifies the Purchaser Disclosure
Schedule and discloses any items or events that have resulted in or
are likely to result in a Material Adverse Change; or
(vi) the Company is not, in its reasonable discretion, satisfied
with the results of its due diligence review of the Purchaser;
provided, that the Company's right to terminate pursuant to this
Section 10.1(b)(vi) shall exist only during the Due Diligence Review
Period.
(c) by the Purchaser or the Company if the Closing has not taken place
on or before June 1, 2002 (other than as a result of any failure on the
part of the party seeking to terminate this Agreement to materially comply
with or perform its covenants and obligations under this Agreement); and
(d) by the mutual written consent of the Purchaser and the Company.
10.2. TERMINATION PROCEDURES. If the Purchaser wishes to terminate this
Agreement pursuant to Section 10.1(a) or Section 10.1(c), the Purchaser shall
deliver to the Company a written notice stating that the Purchaser is
terminating this Agreement and setting forth a brief description of the basis on
which the Purchaser is terminating this Agreement. If the Company wishes to
terminate this Agreement pursuant to Section 10.1(b) or Section 10.1(c), the
Company shall deliver to the Purchaser a written notice stating that the Company
is terminating this Agreement and setting forth a brief description of the basis
on which the Company is terminating this Agreement.
10.3. EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that the Company and Purchaser shall, in all
events, remain bound by and continue to be subject to their respective
obligations under Sections 3.1(a), 6.8 and 7.3.
43
49
10.4. EXCLUSIVITY OF TERMINATION RIGHTS. The termination rights and
obligations provided in this Article X shall be deemed to be exclusive. Other
than as provided in Section 10.3, the parties shall not have any other or
further Liabilities to or with respect to one another by reason of this
Agreement or its termination.
ARTICLE XI
CERTAIN RIGHTS OF OFFSET
11.1. RESERVE AND OFFSET. In the event of any (i) actual or threatened
Breach of any representation or warranty made in Section 4.11 of this Agreement
or in the Inventor Agreement, (ii) actual or threatened Tax Liability of the
Purchaser, the Company or Merger Sub arising out of or resulting from the
failure of the Merger to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code, (iii) Breach by the Company of the covenant to pay
all Company Liabilities (including any Transactional Expenses) on or prior to
Closing as set forth in Section 6.5 notwithstanding any waiver of the condition
related thereto set forth in Section 8.15, or (iv) reimbursement or indemnity
obligation of the Company pursuant to the Escrow Agreement which is not
satisfied in full on or prior to the Closing, the Purchaser shall be entitled to
withhold from any cash and stock otherwise payable under Section 3.1(b)(ii) an
amount equal to the Purchaser's reasonable estimate of Damages (including, for
this purpose, Taxes of the Company and Merger Sub) arising out of, related to or
in connection with each such threatened Breach, Tax Liability or Company
reimbursement or indemnity obligation (the "Reserve"), against which the
Purchaser may offset and retain an amount (such amount, the "Offset") equal to
(A) all of such Damages in respect of each such Breach or Company reimbursement
or indemnity obligation or (B) fifty percent (50%) of such Damages in respect of
each such Tax Liability. In the event that the amount the Purchaser would be
entitled to retain as an Offset is less than the applicable Reserve, then the
Reserve shall automatically be increased to an amount equal to such Offset.
11.2. NOTICE AND OTHER PROCEDURES.
(a) If the Purchaser withholds a Reserve or makes an Offset against a
Reserve, it shall promptly give written notice of such Reserve (a "Reserve
Notice") or Offset (an "Offset Notice") to the Stockholder Representative,
including a brief description of the facts upon which such Reserve or
Offset is based.
(b) If within fifteen (15) days after delivery of a Reserve Notice or
Offset Notice the Stockholder Representative notifies the Purchaser in
writing of his objection to the Reserve or Offset, the Purchaser and the
Stockholder Representative shall negotiate in good faith for a period of
thirty (30) days in an effort to agree on the appropriate Reserve or
Offset. Within fifteen (15) days thereafter, either party may submit the
dispute to arbitration as described in this Section 11.2(b). Any dispute
arising out of, related to or in connection with this Article XI shall be
submitted to confidential, binding arbitration in Las Vegas, Nevada before
a single arbitrator, to be selected by the Purchaser and the Stockholder
Representative within fifteen (15) days or otherwise selected pursuant to
the procedures and rules for commercial arbitration of the American
Arbitration Association, which procedures and rules shall govern each such
arbitration. The arbitrator shall only have authority to
44
50
set the Reserve or Offset in the amount claimed by the Purchaser or the
Stockholder Representative (i.e., the arbitrator cannot set a Reserve or
award an Offset between the amount claimed by the Purchaser and the
Stockholder Representative, above the amount claimed by the Purchaser or
below the amount claimed by the Stockholder Representative). The party that
loses such arbitration shall be responsible for all costs of such
proceeding.
(c) The right to set a Reserve and to retain an Offset for Damages for
any Breach, Tax Liability or Company reimbursement or indemnity obligation
pursuant to the Escrow Agreement against the cash and stock pursuant to
Section 3.1(b)(ii) in accordance with this Article XI shall be the
Purchaser's sole and exclusive remedy for any Damages in the event of a
Breach, Tax Liability or Company reimbursement or indemnity obligation
pursuant to the Escrow Agreement described in Section 11.1, except that for
a Breach of the covenant set forth in Section 6.5, the Purchaser may, in
its sole discretion, apply the Offset against any of the Consideration
described in Section 3.1(b)(i).
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. All of the
representations and warranties, covenants and obligations of the parties to be
performed on or prior to the Closing Date, shall terminate, and be deemed to
have been satisfied and discharged in full, at the Closing.
12.2. FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the Transactions.
12.3. ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Agreement, or the certificate, opinions and other instruments
and documents delivered in connection herewith, or the enforcement of any
provision of such items is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).
12.4. TRANSFER TAXES. Except as otherwise provided in this Agreement,
including any Exhibit, schedule or Appendix, each Stockholder shall be
individually responsible for his, her or its respective sales, use and transfer
taxes, including but not limited to any value added, stock transfer, gross
receipts, stamp duty and real, personal or intangible property transfer taxes,
due by reason of the consummation of the transactions contemplated by this
Agreement, including but not limited to any interest or penalties in respect
thereof.
12.5. NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by telecopier) to the
address or telecopier number set forth beneath the name of such party below (or
to such other address or telecopier number as such party shall have specified in
a written notice given to the other parties hereto):
45
51
if to the Company or Stockholders:
Scotch Twist, Inc.
c/o Schupak Group
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
if to the Purchaser or the Merger Sub:
Innovative Gaming Corporation of America
000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Executive V.P. and General Counsel
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxxx & Xxxxxxxx LLP
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
12.6. CONFIDENTIALITY AND PUBLICITY. The Company shall take reasonable
steps to ensure that on and at all times after the date of this Agreement:
(a) it and each of its Representatives shall not issue or disseminate
any press release or other publicity concerning any of the Transactions
contemplated by this Agreement, or permit any press release or other
publicity concerning any of such Transactions to be issued or otherwise
disseminated by or on behalf of it or any of the Stockholders or
Representatives without the Purchaser's and the Merger Sub's prior written
consent, and the Stockholders shall continue to keep the terms of this
Agreement strictly confidential; and
46
52
(b) it and each of its Representatives shall keep strictly
confidential, and shall not use, or disclose to any other Person, any
non-public document or other information in its possession that relates
directly or indirectly to the business of the Company, the Merger Sub, the
Purchaser or any affiliate of the Purchaser and while in possession thereof
will not directly or indirectly effectuate any trades in the Purchaser's
Common Stock.
(c) The confidentiality provisions set forth in this Section 12.6 are
not exclusive and are independent of and do not affect any other
confidentiality provisions by or among any of the parties to this
Agreement.
12.7. HEADINGS. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
12.8. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
12.9. GOVERNING LAW AND WAIVER OF JURY TRIAL. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of Nevada (without giving effect to principles of conflicts of
laws). The parties irrevocably waive the right to a jury trial in connection
with any legal proceeding arising out of or relating to this Agreement or any of
the Transaction Agreements or the enforcement of any provision of this Agreement
or any of the Transactional Agreements.
12.10. CONSENT TO JURISDICTION AND VENUE.
(a) Each party hereby irrevocably and unconditionally consents and
agrees that all actions, suits or other proceedings arising under or in
connection with this Agreement or any of the Transactional Agreements shall
be tried and litigated in the state or federal courts located in the City
of Las Vegas, County of Xxxxx, State of Nevada, which courts shall have
exclusive jurisdiction to hear and determine any and all claims,
controversies and disputes arising out of or related to this Agreement or
any of the Transactional Agreements.
(b) Each party hereby (a) irrevocably submits to the jurisdiction of
any such court and consents in advance to such jurisdiction in any action,
suit or other proceeding commenced in any such court, (b) waives any right
it may have to assert the doctrine of forum non conveniens or any objection
that such person may have based upon lack of personal jurisdiction or
improper venue, and (c) consents to the granting of such legal or equitable
relief as is deemed appropriate by such court. Each party hereby waives
personal service of the summons, complaint or other process issued in any
such action, suit or other proceeding and agrees that service of such
summons, complaint and other process may be made by sending (a) the
original such document through a nationally recognized express delivery
service, (b) an email notification with the relevant tracking number for
such express delivery service, and (c) a copy of such document by
facsimile, each addressed to such party at the addresses set forth in
Section 12.5 (Notices) and that service so made shall be deemed completed
upon such Person's actual receipt of (b) and (c).
47
53
(c) To the extent permitted under the applicable laws of any such
jurisdiction, each party hereby waives, in respect of any such action, suit
or other proceeding, the jurisdiction of any other court or courts that now
or hereafter, by reason of such Person's present or future domicile, or
otherwise, may be available to it.
12.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns (if any); the Merger Sub and its
successors and assigns (if any); and the Purchaser and its successors and
assigns (if any). This Agreement shall inure to the benefit of the Company, the
Merger Sub, the Purchaser, and the respective successors and assigns (if any) of
the foregoing. The Purchaser may freely assign all (but not less than all) of
its rights under this Agreement and its ownership of the Owned Patents to any
other Person without obtaining the consent or approval of any other party hereto
or any other Person; provided, that an assignment of less than all rights under
this Agreement or ownership of less than all of the Owned Patents shall require
the written consent of the Company prior to Closing and of the Stockholders
after Closing.
12.12. WAIVER.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it
is given.
(c) Notwithstanding Section 12.12(b), any of the Company's conditions
set forth in Article VIII may be waived by the Company on the written
consent or approval of the holders of two-thirds (2/3) of the outstanding
voting securities of the Company. The Company hereby agrees that in the
event of any such written consent or approval, the Company will take all
further actions reasonably requested by the Purchaser in order to effect
the foregoing waiver.
12.13. AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser, Merger Sub and the Company.
12.14. SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
48
54
12.15. PARTIES IN INTEREST. Except for the stockholders, none of the
provisions of this Agreement is intended to provide any rights or remedies to
any Person other than the parties hereto and their respective successors and
assigns (if any).
12.16. ENTIRE AGREEMENT. This Agreement (including the Appendix, Schedules
and Exhibits hereto) sets forth the entire understanding of the parties relating
to the subject matter hereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof.
12.17. CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) For purposes of this Agreement, a Contract, obligation, Liability,
transaction, change, Breach, Encumbrance, Proceeding or other matter or
event shall be deemed to be "material" if the aggregate amount or value
involved with respect to all such Contracts, obligations, Liabilities,
transactions, charges, Breaches, Encumbrances, Proceedings or other matters
or events is material, and a "Material Adverse Effect" shall be deemed to
arise if there is, or reasonably would be expected to be, a Material
Adverse Effect on the value of the Transactions, viewed as a whole, to the
Purchaser, the ability of the Company to comply with or perform any
covenant or obligation under this Agreement, or on the business, condition,
assets, Liabilities, operations, financial performance, results of
operations or prospects of the Company, viewed as a whole, or if it may
have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
(e) Except as otherwise indicated, all references in this Agreement to
"Sections," "Exhibits" and "Schedules" are intended to refer to Sections of
this Agreement and Exhibits and Schedules to this Agreement.
(f) For purposes of this Agreement, when the Company's representations
and warranties are given with respect to the conduct of its business or use
of assets as "presently proposed," it shall mean in accordance with the
Company's future plans without giving effect to changes in such plans which
may be effected by the Purchaser, whether or not known to the Company.
49
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first written above.
"THE PURCHASER": INNOVATIVE GAMING CORPORATION OF AMERICA,
a Minnesota corporation
By:
--------------------------------------
Attest: By:
--------------------------------------
Secretary
"THE COMPANY": SCOTCH TWIST, INC.,
a Delaware corporation
By:
--------------------------------------
President
Attest: By:
--------------------------------------
Secretary
"MERGER SUB": INNOVATIVE GAMING TECHNOLOGY CORP.,
a Nevada corporation
By:
--------------------------------------
President
Attest: By:
--------------------------------------
Secretary
50
56
APPENDIX
CERTAIN DEFINITIONS
FOR PURPOSES OF THE AGREEMENT (INCLUDING THIS APPENDIX):
"Acceptable Financing" shall have the meaning specified in Section 9.4 of
this Agreement.
"Acquired Technology" shall mean (i) the Owned Patents, (ii) any and all
source code relating to the foregoing, and (iii) any and all Intellectual
Property Rights relating to the foregoing.
"Acquired Technology Net Income" shall mean any and all revenues received
by Purchaser and its Affiliates from the Credit/Debit Gaming Business less any
Costs and Expenses. In instances where the Purchaser or its Affiliates receive
Acquired Technology Net Income from any product or service relating to the
Credit/Debit Gaming Business ("Credit/Debit Gaming Portion") where such product
or service is bundled with any other products or services ("Other Portion", and
collectively with Credit/Debit Gaming Business Portion, the "Bundle"), Acquired
Technology Net Income shall equal the portion of the net income of the Bundle
that is attributable to the Credit/Debit Gaming Business Portion, based on the
respective stand-alone prices in good faith and reasonably specified by
Purchaser for the products and services that make up the Bundle (with net income
for such other products and services to be determined in the same manner as
Acquired Technology Net Income).
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the Ordinary Course of
Business);
(b) the issuance, sale or other disposition of (i) any capital stock
of the Company or (ii) any Derivative Security; or
(c) any, merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company.
"Affiliate" has the meaning set forth in Rule 405 promulgated by the SEC
under the Securities Act.
"Affiliate Agreement" shall have the meaning specified in Section 6.10 of
this Agreement.
"Agreement" shall mean the Agreement and Plan of Merger and a
Reorganization to which this Appendix is attached (including the Appendix,
Disclosure Schedule, Purchaser Disclosure Schedule and all other Schedules and
Exhibits), as it may be amended from time to time.
A-1
57
"Best Efforts" shall mean the reasonable efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible. An obligation to use "Best
Efforts" under the Agreement does not and will not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Transactions.
"Breach" shall be deemed to be a "Breach" of a representation, warranty,
covenant, obligation or other provision if there is or has been any inaccuracy
in or breach of, or any failure to comply with or perform, such representation,
warranty, covenant, obligation or other provision. Breaches of the
representations and warranties made by the Company in Section 4.2, 4.3, 4.4(c)
or 4.11 of this Agreement shall be determined without regard to any information
or disclosures appearing in the portions of the Disclosure Schedule relevant to
such Sections (including cross-references from other sections of such Disclosure
Schedules).
"Bundle" shall have the meaning set forth in the definition of Acquired
Technology Net Income.
"Certificates" shall have the meaning specified in Section 3.2(a) of the
Agreement.
"Closing" shall have the meaning specified in Section 3.4 of the Agreement.
"Closing Date" shall have the meaning specified in Section 3.4 of the
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, $0.01 par value per share, of
the Purchaser.
"Company" shall mean Scotch Twist, Inc., a Delaware corporation.
"Company Contract" shall mean any Contract:
(a) to which the Company is a party;
(b) by which the Company or any of its assets is or may become bound
or under which the Company has, or may become subject to, any obligation;
or
(c) under which the Company has or may acquire any right or interest.
"Company Plan" shall mean any Current Benefit Plan or Past Benefit Plan.
"Company Returns" shall have the meaning specified in Section 4.16(b) of
the Agreement.
"Company's Fully Diluted Common Stock shall have the meaning specified in
Section 3.1(b)(i) of this Agreement.
A-2
58
"Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"Constituent Corporation" shall mean Merger Sub and the Company,
collectively.
"Contract" shall mean, with respect to any Person, any written, oral,
implied or other agreement, contract, arrangement, obligation, promise or
undertaking that is legally binding.
"Costs and Expenses" shall mean with respect to any products or services
the reasonable direct costs and expenses incurred by Purchaser and its
Affiliates, including: cost of goods sold, including, without limitation, direct
manufacturing costs, and costs of materials, production, supplies and labor;
sales and marketing costs; costs and expenses incurred to obtain third party
hardware, software or other Intellectual Property Rights that are integrated
into or used in connection with such products or services; sales, tariff duties
and/or use taxes or other Taxes directly imposed (other than Tax on the
Purchaser's income); brokers' or agents' commissions; shipping and insurance;
refunds, credits and similar allowances; and any other costs and expenses
directly related to the products and services of the Credit/Debit Gaming
Business. Costs and Expenses shall exclude general and administrative expenses,
capital expenses and overhead.
"Credit/Debit Gaming Business" shall mean the processing of credit or debit
transactions for players using Gaming Devices, where such player use is
underwritten or otherwise paid for or assured by a credit source other than a
casino or gaming operator of such Gaming Device (or an Affiliate of a casino or
gaming operator). "Credit/Debit Gaming Business" includes, but is not limited
to, the sale, marketing, permitted licensing or sublicensing, bundling,
distribution, or other exploitation of Gaming Devices.
"Credit/Debit Gaming Portion" shall have the meaning set forth in the
definition of Acquired Technology Net Income.
"Current Benefit Plan" shall mean any Employee Benefit Plan that is
currently in effect and:
(a) that was established or adopted by the Company or any ERISA
Affiliate or is maintained or sponsored by the Company;
(b) in which the Company participates;
(c) with respect to which the Company or any ERISA Affiliate is or may
be required or permitted to make any contribution; or
(d) with respect to which the Company or any ERISA Affiliate is or may
become subject to any Liability.
"DGCL" shall have the meaning specified in Section 1.1 of this Agreement.
A-3
59
"Damages" shall mean the amount of any loss, damage, injury, decline in
value, Liability, claim, fee (including any legal fee, expert fee, accounting
fee or advisory fee), charge, cost (including any cost of investigation) or
expense of any nature.
"Derivative Security" shall mean any subscription, option, call, right or
warrant or other instrument (in each case, whether or not currently exercisable)
(a) to acquire any shares of the capital stock or other securities of the
Company or (b) that is or may become convertible into or exchangeable for any
shares of the capital stock or securities of the Company.
"Disclosure Schedule" shall have the meaning specified in Article IV of
this Agreement.
"Dissenting Holder" shall have the meaning specified in Section 3.5(a) of
this Agreement.
"Due Diligence Review Period" shall mean the period commencing on the date
of this Agreement and terminating at 11:59 p.m. on September 15, 2001.
"Earnout Consideration" shall mean an amount equal to twenty-five percent
(25%) of all Acquired Technology Net Income.
"Effective Time" shall have the meaning specified in Section 1.2 of this
Agreement.
"Employee Benefit Plan" shall have the meaning specified in Section 3(3) of
ERISA.
"Encumbrance" shall mean any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"Entity" shall mean any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership, limited
liability the Company, joint venture, estate, trust, cooperative, foundation,
society, political party, union, the Company (including any limited liability
company or joint stock company), firm or other enterprise, association,
organization or entity.
"Environmental Law" shall mean any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" shall mean any Person that is, was or would be treated as
a single employer with the Company under Section 414 of the Code.
"Escrow Agent" shall mean the Escrow Agent pursuant to the Escrow Agreement
attached to this Agreement as Exhibit A.
A-4
60
"Escrow Agreement" shall have the meaning specified in Section 3.2 of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Contract" shall mean any Contract that meets each of the
following requirements:
(a) the Company has entered into such Contract in the Ordinary Course
of Business;
(b) such Contract has a term of less than ninety (90) days or may be
terminated by the Company (without penalty) within ninety (90) days after
the delivery of a termination notice by the Company; and
(c) such Contract does not contemplate or involve the payment of cash
or other consideration in an amount or having a value in excess of $25,000.
"Excluded Shares" shall have the meaning specified in Section 3.5(a) of
this Agreement.
"Financial Statements" shall have the meaning specified in Section 4.4(a)
of this Agreement.
"FIRPTA" shall mean the Foreign Investment in Real Property Act.
"GAAP" shall mean Generally Accepted Accounting Principles, applied on a
basis consistent with the basis on which the Financial Statements were prepared.
"Gaming Device" shall mean an entertainment device or system that
incorporates or uses all or any part of the Acquired Technology.
"Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement,
waiver, certification, designation, rating, registration, qualification or
authorization that is issued, granted, given or otherwise made available by
or under the authority of any Governmental Body or pursuant to any Legal
Requirement; or (b) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
A-5
61
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
"Initial Payment" shall have the meaning specified in Section 3.1(a) of
this Agreement.
"Initial Shares" shall have the meaning specified in Section 3.1(b)(i) of
this Agreement.
"Intellectual Property Rights" shall mean all intellectual property rights,
including, without limitation, patents, patent applications, copyrights,
copyright registrations, applications for copyright registrations, mask works,
mask work registrations, applications for mask work registrations, trade
secrets, trademarks and service marks, registrations therefor and applications
for registrations therefor, trade names, domain names and trade dress.
"Inventor" means each named inventor on the Owned Patents.
"Inventor Agreement" shall have the meaning specified in Section 6.9 of
this Agreement.
"Knowledge" - A Person shall be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such Person is actually aware of such fact or other matter; or
(b) a prudent Person could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reasonable
investigation concerning the existence of such fact or other matter;
provided, however, that there is no obligation to conduct intellectual
property searches or other intellectual property investigations outside the
Company.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, principle of common
law, ordinance, code, edict, decree, treaty, convention, rule, regulation,
ruling, directive, requirement, determination or decision of any Governmental
Body.
"Liability" shall mean any debt, obligation, duty or liability of any
nature including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability, regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with GAAP and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.
A-6
62
"License" shall have the meaning specified in Section 6.13(a) of this
Agreement.
"Loan" shall have the meaning specified in Section 3.1(a) of this
Agreement.
"Material Adverse Change" shall mean a change that is material and adverse
in the assets, business, financial condition or results of operations of the
Person in question and its subsidiaries, taken as a whole, other than a change:
(a) that is directly attributable to the announcement of the
Transactions contemplated by this Agreement (including loss of personnel,
customers or supplies or the delay or cancellation of orders or products);
(b) as a result of general economic conditions; or
(c) as a result of liabilities directly incurred in connection with
this Agreement or the Transactions (including litigation brought or
threatened against a party or any member of its Board of Directors in
respect of this Agreement).
"Material Adverse Effect" shall have the meaning specified in Section
12.17(d) of this Agreement.
"Merger" shall have the meaning specified in the Recitals of this
Agreement.
"Merger Sub" shall mean Innovative Gaming Technology Corp., a Nevada
corporation.
"Minimum Earnout Consideration" shall mean with respect to the years ended
December 31, 2002 and 2003, $0; the year ended December 31, 2004, $500,000; the
year ended December 31, 2005, $1.5 million; the year ended December 31, 2006,
$2.5 million; and the year ended December 31, 2007, $3.5 million.
Notwithstanding anything in this Agreement to the contrary, the Minimum Earnout
Consideration shall equal $0 in the event any Legal Requirement or Order
prohibits or restrains the Credit/Debit Gaming Business.
"NRS" shall have the meaning specified in Section 1.1 of this Agreement.
"Offset" shall have the meaning specified in Section 11.1 of this
Agreement.
"Offset Notice" shall have the meaning specified in Section 11.2(a) of this
Agreement.
"Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, pronouncement,
determination, decision, opinion, verdict, sentence, subpoena, writ or
award that is issued, made, entered, rendered or otherwise put into effect
by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
A-7
63
(b) Contract with any Governmental Body that is entered into in
connection with any Proceeding.
"Ordinary Course of Business" shall mean an action taken by or on behalf of
the Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is consistent with the Company's past practices and is
taken in the ordinary course of the Company's normal operations; and
(b) such action is not required to be authorized by the Company's
stockholders, the Company's Board of Directors or any committee of the
Company's Board of Directors and does not require any other separate or
special authorization of any nature.
"Other Portion" shall have the meaning set forth in the definition of
Acquired Technology Net Income.
"Owned Patents" shall have the meaning specified in Section 4.11(i) of this
Agreement.
"Past Benefit Plan" shall mean any Employee Benefit Plan (other than a
Current Benefit Plan):
(a) of which the Company or any ERISA Affiliate has ever been a "plan
sponsor" (as defined in Section 3(16)(B) of ERISA) or that otherwise has at
any time been established, adopted, maintained or sponsored by the Company
or by any ERISA Affiliate;
(b) in which the Company or any ERISA Affiliate has ever participated;
(c) with respect to which the Company or any ERISA Affiliate has ever
made, or has ever been required or permitted to make, any contribution; or
(d) with respect to which the Company or any ERISA Affiliate has ever
been subject to any Liability.
"Permitted Liens" shall mean (a) liens securing the payment of any Taxes or
levies which are not yet delinquent or which are being contested in good faith,
(b) materialmen's, mechanics', carriers', workmen's, repairmen's or other
similar liens incurred in the Ordinary Course of Business securing obligations
that are not yet due, (b) zoning restrictions, easements, licenses, restrictions
on the use of real property or minor irregularities relating thereto, which do
not materially impair, alone or in the aggregate, the use of the property
affected thereby in the operation of the Company's business or the values of any
or all of such property for the purpose of such business, (d) workers'
compensation and unemployment compensation liens for amounts not yet due and
payable, and (e) contractual and statutory liens in favor of landlord or
lessors.
"Person" shall mean any individual, Entity or Governmental Body.
A-8
64
"Pre-Closing Balance Sheet" shall have the meaning specified in Section
4.4(a)(ii) of this Agreement.
"Pre-Closing Period" shall mean the period commencing as of the date of
this Agreement and ending on the Closing Date.
"presently proposed" shall have the meaning specified in Section 12.17(f)
of this Agreement.
"Prime Rate" shall have the meaning set forth in Section 3.1(b)(ii) of this
Agreement.
"Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation, commenced,
brought, conducted or heard by or before, or otherwise has involved, any
Governmental Body or any arbitrator or arbitration panel.
"Proprietary Assets" means the Intellectual Property Rights and Technology
that are owned by, licensed to or that are useful in connection with the
Company's business as presently conducted or proposed to be conducted.
Proprietary Assets includes, without limitation, the Owned Patents.
"Proprietary Information" shall have the meaning specified in Section 7.3
of this Agreement.
"Proxy Statement" shall have the meaning specified in Section 7.5(a) of
this Agreement.
"Purchase Price" shall have the meaning specified in Section 3.1 of this
Agreement.
"Purchaser" shall mean Innovative Gaming Corporation of America, a
Minnesota corporation.
"Purchaser Disclosure Schedule" shall have the meaning specified in the
preamble of Article IV of this Agreement.
"Purchaser Group" shall have the meaning specified in Schedule 6.13 of this
Agreement.
"Regulatory Documents" shall have the meaning specified in Section 5.5(b)
of this Agreement.
"Registration Statement" shall have the meaning specified in Section 7.5 of
this Agreement.
A-9
65
"Related Party." Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is, or who has at any time been, an officer of
the Company;
(b) each member of the family of each of the individuals referred to
in clause (a) above;
(c) any Entity (other than the Company) in which any one of the
Persons referred to in clauses (a) or (b) above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.
"Representatives" shall mean officers, directors, employees, attorneys,
accountants, advisors and representatives.
"Reserve" shall have the meaning specified in Section 11.1 of this
Agreement.
"Reserve Notice" shall have the meaning specified in Section 11.2(a) of
this Agreement.
"SEC" shall have the meaning specified in Section 4.3(b) of this Agreement.
"Securities Act" shall have the meaning specified in Section 4.3(b) of this
Agreement.
"Software" shall have the meaning specified in Section 4.11(g) of this
Agreement.
"Stockholder" shall have the meaning specified in Section 3.2(a) of this
Agreement.
"Stockholder Representative" shall mean Xxxxxx Xxxxxxx, as attorney-in-fact
and agent, for each of the Stockholders, in connection with certain matters
contemplated by this Agreement as described herein, and any duly appointed
successor.
"subsidiary" shall mean, when used with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner or
of which at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporations or
other organizations is directly or indirectly owned or controlled by such party
or any one or more of the subsidiaries.
"Surviving Corporation" shall have the meaning specified in Section 1.1 of
this Agreement.
"Tax" shall mean any tax (including any income tax, franchise tax, capital
gains tax, estimated tax, gross receipts tax, value added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, occupation tax, inventory tax, occupancy tax,
A-10
66
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (i) imposed,
assessed or collected by or under the authority of any Governmental Body, or
(ii) payable pursuant to any tax sharing agreement or similar Contract.
"Tax Return" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Technology" means any means ideas, concepts, techniques, know-how,
inventions, discoveries, methods, processes, creations, works, documentation,
drawings, designs, specifications, schematics, descriptions, development tools,
test suites, diagnostic materials, prototypes and samples, software (including
firmware) (in source code, object code or any other form) and other
copyrightable subject matter (in any form), data, and other materials and
information in any form (whether written, electronic, graphic or otherwise).
Technology with respect to a system, component or other item includes any
related materials for development, operation, maintenance and training.
"Transactional Agreements" shall mean this Agreement, the Inventor
Agreement, each Affiliate Agreement, the Escrow Agreement, the Stockholder
Representative Agreement, the Company's Closing Certificate and all other
agreements, certificates and instruments executed or contemplated to be executed
by the Company in connection with the Transactions.
"Transactional Expenses" shall have the meaning specified in Section 6.5 of
this Agreement.
"Transactions" shall mean (i) the execution and delivery of the respective
Transactional Agreements, and (ii) all of the transactions contemplated by the
respective Transactional Agreements, including, the Merger.
"Unaudited Balance Sheet" shall have the meaning specified in Section
4.4(a)(i) of this Agreement.
"use" for purposes of Section 4.11 of this Agreement shall have the meaning
specified in subsection 4.11(j) thereof.
A-11
