EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EPL RESOURCES (DELAWARE) CORP.
SKYNET HOLDINGS, INC.
AND
THE PRINCIPAL SHAREHOLDERS OF
SKYNET HOLDINGS, INC.
Dated: September 28, 1998
EXHIBITS AND SCHEDULES
ARTICLE I: MERGER OF SKYNET WITH AND INTO ACQUIROR AND RELATED MATTERS......... 1
1.1 The Merger................................................................ 1
1.2 Conversion of Stock....................................................... 3
1.3 Merger Consideration...................................................... 3
1.4 Escrow Agreement.......................................................... 4
1.5 Additional Rights; Taking of Necessary Action; Further Action............. 5
1.6 No Further Rights or Transfers............................................ 5
ARTICLE II: THE CLOSING........................................................ 5
2.1 Closing Date.............................................................. 5
2.2 Closing Transactions...................................................... 5
ARTICLE III: CERTAIN CORPORATE ACTION.......................................... 9
3.1 SkyNet Corporate Action................................................... 9
3.2 Acquiror Corporate Action................................................. 9
ARTICLE IV: REPRESENTATIONS AND WARRANTIES..................................... 9
4.1 Representations and Warranties of SkyNet and the Principal Shareholders... 9
4.2 Representations and Warranties of Acquiror................................ 21
ARTICLE V: AGREEMENTS OF THE PARTIES........................................... 24
5.1 Access to Information..................................................... 24
5.2 Confidentiality; No Solicitation.......................................... 24
5.3 Interim Operations........................................................ 27
5.4 Consents.................................................................. 29
5.5 Filings; Registration Statement........................................... 29
5.6 All Reasonable Efforts.................................................... 29
5.7 Public Announcements...................................................... 30
5.8 Notification of Certain Matters........................................... 30
5.9 Expenses.................................................................. 30
5.10 Financial Statements..................................................... 30
5.11 Lock-Up.................................................................. 31
5.12 Private Offering......................................................... 31
5.13 Documents at Closing..................................................... 31
5.14 Prohibition on Trading in Acquiror Stock................................. 31
5.15 Reservation of Shares.................................................... 32
5.16 Employment Agreements.................................................... 32
5.17 Acknowledgment of Approvals.............................................. 32
5.18 Matters of Corporate Governance.......................................... 32
5.19 Production of Schedules and Exhibits..................................... 33
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EXHIBITS AND SCHEDULES
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER........................... 33
6.1 Conditions to Obligations of SkyNet and the Principal Shareholders........ 33
6.2 Conditions to Acquiror's Obligations...................................... 34
ARTICLE VII: INDEMNIFICATION................................................... 36
7.1 Indemnification........................................................... 36
ARTICLE VIII: TERMINATION...................................................... 37
8.1 Termination............................................................... 37
8.2 Notice and Effect of Termination.......................................... 38
8.3 Extension; Waiver......................................................... 38
8.4 Amendment and Modification................................................ 39
ARTICLE IX: MISCELLANEOUS...................................................... 39
9.1 Survival of Representations and Warranties; Remedies...................... 39
9.2 Notices................................................................... 40
9.3 Agreement; Assignment..................................................... 41
9.4 Binding Effect; Benefit................................................... 41
9.5 Headings.................................................................. 41
9.6 Counterparts.............................................................. 42
9.7 Governing Law............................................................. 42
9.8 Arbitration............................................................... 42
9.9 Severability.............................................................. 42
9.10 Release and Discharge.................................................... 42
9.11 Certain Definitions...................................................... 42
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EXHIBITS AND SCHEDULES
EXHIBITS
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Exhibit 1.3(b) - Allocation of Merger Consideration
Exhibit 1.4(a) - Acquiror Escrow Agreement
Exhibit 1.4(b) - Principal Shareholder Escrow Agreement
Exhibit 2.2(a)(ii) - Investment Letter
Exhibit 2.2(a)(x) - Xxxxx Employment Agreement
Exhibit 2.2(a)(xi) - Xxxxx Option Agreement
Exhibit 2.2(a)(xii) - Nizic Employment Agreement
Exhibit 2.2(a)(xiii) - Nizic Option Agreement
Exhibit 2.2(a)(xvii) - Amendment No. 1 to Subscription Agreement
SCHEDULES
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1.1(c)(vii) Officers and Directors of the Surviving Corporation
4.1(a) Articles of Incorporation and Bylaws of SkyNet and each
Subsidiary
4.1(c) Consents
4.1(d) Capitalization and Share Ownership
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(g) No Contingent Liabilities
4.1(h) Litigation
4.1(i) Taxes
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan (for which SkyNet has obligation to
contribute)
4.1(j)(iv) Material Employment Arrangements, Contracts, etc.
4.1(k) Insurance Coverage
4.1(o) Intellectual Property
4.1(p) Accounts Receivable
4.1(r)(i) Labor Relations; Employees
4.1(r)(ii) List of Employees
4.1(r)(v) Strikes, grievance proceedings, arbitrations, etc.
4.1(r)(vii) Employment and Benefit Arrangements
4.1(s) Suppliers and Clients
4.1(t) Conflicting Interests
4.1(u) Absence of Certain Changes or Events
4.2(a) Certificate of Incorporation and Bylaws of Acquiror
4.2(e) Acquiror Financial Statements
4.2(g) Contingent Liabilities
4.2(h) Litigation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of September 28, 1998, by and among EPL RESOURCES (DELAWARE) CORP., a
Delaware corporation, or its successor or assigns ("Acquiror"), SKYNET HOLDINGS,
INC., a Nevada corporation ("SkyNet"), Xxxxxxxxx X. Xxxxx, an individual
residing at _________________________________________ ("Xxxxx"), DEANSLEY
LIMITED, an Isle of Man Corporation ("Deansley"), Xxxx X. Xxxxxxxx, an
individual residing at __________________________________ ("Xxxxxxxx"),
Xxxxxxxxx Xxxxx, an individual residing at ______________________________
("Nizic") and FIR Construction Pty Limited, an Australian corporation ("FIR").
Xxxxx, Deansley, Xxxxxxxx, Nizic and FIR are hereafter collectively referred to
as the "Principal Shareholders."
RECITALS
WHEREAS, Acquiror and SkyNet have determined that it is in the best
interests of their respective shareholders for SkyNet to merge with and into
Acquiror upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, Acquiror and SkyNet intend that the transactions evidenced by this
Agreement shall qualify, to the best extent possible, as a tax-free
reorganization under the applicable provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code") (although the parties recognize
that their intentions are not binding upon the Internal Revenue Service); and
WHEREAS, the respective Boards of Directors of Acquiror and SkyNet have
each approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
MERGER OF SKYNET WITH AND INTO ACQUIROR
AND RELATED MATTERS
1.1 THE MERGER.
(a) Upon the terms and conditions of this Agreement, at the "Effective
Time" (as defined herein), SkyNet shall be merged with and into Acquiror (the
"Merger") in accordance with the provisions of the Delaware General Corporation
Law (the "DGCL") and the General
Corporation Law of Nevada ("NGCL") and the separate corporate existence of
SkyNet shall cease, and Acquiror shall continue as the surviving corporation
under the laws of the State of Delaware.
(b) The Merger shall become effective as of the filing of a
certificate of merger with the Secretary of State of the State of Delaware (the
"Certificate of Merger") and the filing of articles of merger (the "Articles of
Merger") with the Secretary of State of the State of Nevada in accordance with
the provisions of Section 252 of the DGCL and Section 92A.190 of the NGCL,
respectively, and the confirmation by the Articles of Merger that the Merger is
effective as of such filing date. The date and time when the Merger shall
become effective is referred to herein as the "Effective Time."
(c) At the Effective Time:
(i) Acquiror shall continue its existence under the laws of the State
of Delaware as the surviving corporation as "SkyNet Holdings, Inc.";
(ii) the separate corporate existence of SkyNet shall cease;
(iii) all rights, title and interests to all assets, whether tangible
or intangible and any property or property rights owned by the SkyNet shall be
allocated to and vested in Acquiror as the surviving corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of SkyNet shall be
allocated to Acquiror as the surviving corporation, which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than Acquiror as the surviving corporation, shall be
liable therefor;
(iv) the Certificate of Incorporation of the surviving corporation
shall be the Certificate of Incorporation of Acquiror as in effect immediately
prior to the consummation of the Merger;
(v) Each of Acquiror and SkyNet shall execute and deliver, and file or
cause to be filed with the Secretary of State of the State of Delaware, the
Certificate of Merger and with the Secretary of State of the State of Nevada,
the Articles of Merger, with such amendments thereto as the parties hereto shall
deem mutually acceptable.
(vi) the Bylaws of the surviving corporation shall be the Bylaws of
Acquiror as in effect immediately prior to the consummation of the Merger, and
shall continue in full force and effect until thereafter amended as provided by
law and such Bylaws; and
(vii) the officers and directors of Acquiror shall resign
upon the Effective Time and the officers and directors of the surviving
corporation shall consist of those individuals identified on Schedule
1.1(c)(vii), and such persons shall serve in such positions for their respective
terms provided by law or in the Bylaws of the surviving corporation and until
their respective successors are elected and qualified.
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1.2 CONVERSION OF STOCK.
(a) At the Effective Time:
(i) the shares representing 100% of the issued and outstanding common
stock of SkyNet ("SkyNet Common Stock") as of the Closing, other than SkyNet
Shareholders who elect to exercise dissenters' rights (the "Dissenting
Shareholders"), shall, by virtue of the Merger and without any action on the
part of any holder thereof, be converted into and represent the right to
receive, and shall be exchangeable for the merger consideration identified at
Section 1.3 hereafter (the "Merger Consideration");
(ii) each share of capital stock of SkyNet held in treasury as of the
Effective Time shall, by virtue of the Merger, be canceled without payment of
any consideration therefor and without any conversion thereof;
(iii) each share of Common Stock of SkyNet outstanding as of the
Effective Time, by virtue of the Merger, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist.
(b) From and after the Effective Time, there shall be no transfers on
the stock transfer books of SkyNet of shares of SkyNet Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates for shares of SkyNet Common Stock that were outstanding
immediately prior to the Effective Time, shall be delivered to SkyNet, they
shall be canceled and exchanged for the consideration to be received therefor in
connection with the Merger as provided in this Agreement.
1.3 MERGER CONSIDERATION.
(a) Subject to the provisions of Section 1.4 (b) hereafter, the Merger
Consideration, consisting of the total purchase price payable to the
shareholders of SkyNet (the "SkyNet Shareholders") in connection with the
acquisition by merger of SkyNet, shall be delivered, and, subject to adjustment
pursuant to Section 1.3(d) hereof, shall consist exclusively of 9,901,500 newly
issued shares of Common Stock, $.001 par value per share, of Acquiror (the
"Acquiror Shares").
(b) The Merger Consideration shall be allocated among the SkyNet
Shareholders in the proportion of their share ownership of the outstanding
SkyNet Common Stock at the Closing as set forth on Exhibit 1.3(b). It is
intended that the delivery of the Merger Consideration shall qualify as a tax-
free exchange under the Code.
(c) The shares of Acquiror Common Stock to be delivered at the Closing
shall be fully paid and non-assessable and shall be free and clear of all liens,
levies and encumbrances except that (i) all of such Acquiror Common Stock shall
be "restricted securities" pursuant to Rule 144, promulgated under the
Securities Act of 1933, as amended (the "Act"); and (ii) the shares of Acquiror
Common Stock issued to the Principal Shareholders will be subject to the lock-up
provisions set forth in Paragraph 5.11 hereof.
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(d) No fractional shares of stock shall be issued in the Merger, and
each holder of SkyNet Capital Stock entitled to receive as part of the Merger
Consideration fractional shares shall receive that number of shares of stock
rounded to the nearest whole number.
(e) In addition to the Merger Consideration, Xxxxx and Nizic shall, in
consideration for entering into employment agreements with Acquiror, receive
options to purchase an aggregate of 1,400,000 shares of Acquiror's Common Stock.
The options shall have a term of five (5) years and shall be subject to an
exercise price equal to $3.00 per share. The options shall vest two (2) years
after the Closing. The options shall be granted solely in accordance with the
terms of the Option Agreements attached hereto as Exhibit 2.2(a)(xi) and
2.2(a)(xiii).
1.4 ESCROW AGREEMENT.
(a) In order to secure Acquiror's obligation to timely complete the
Private Offering identified at Section 5.12 hereafter, upon the Closing,
Acquiror shall have secured the agreement of certain of its principal
stockholders to place an aggregate of 2 million shares of Common Stock of the
Acquiror into escrow pursuant to the terms of the escrow agreement attached
hereto as Exhibit 1.4(a) (the "Acquiror Escrow Agreement"). The shares
deposited into escrow pursuant to the Acquiror Escrow Agreement (the "Acquiror
Escrow Shares") shall be released from escrow upon the closing of the "Minimum
Offering", as defined in Section 5.12 hereafter. In the event that a closing
with respect to the Minimum Offering is not completed within fifteen (15) days
after the date required for Closing of the Private Offering under Section 5.12,
250,000 of the Acquiror Escrow Shares shall be surrendered to Acquiror for
cancellation. At the conclusion of each additional fifteen (15) day period
thereafter that the Minimum Offering is not completed, an additional 250,000
Acquiror Escrow Shares shall be surrendered to Acquiror for cancellation. In
the event that the Private Offering fails to close, all of the Acquiror Escrow
Shares shall be surrendered to Acquiror for cancellation. While retained in
escrow, the beneficial owners of the Acquiror Escrow Shares shall retain full
voting rights with respect to any such Acquiror Escrow Shares.
(b) In order to secure the Principal Shareholders' indemnification
obligations under Article 7 hereof, 2 million shares of Acquiror Common Stock
issuable to the Principal Shareholders hereunder (the "Principal Shareholder
Escrow Shares") shall be placed into escrow pursuant to the escrow agreement
attached hereto as Exhibit 1.4(b) (the "Principal Shareholder Escrow
Agreement"). Subject to the terms of the Principal Shareholder Escrow
Agreement, 1,250,000 of the Principal Shareholder Escrow shares shall be
released from escrow upon completion of Audited Financial Statements in
compliance with Section 5.10 hereunder. Also subject to the terms of the
Principal Shareholder Escrow Agreement, the remaining Principal Shareholder
Escrow Shares (less those shares that are subject to claims for indemnification
under Section 7.1 hereunder and the Principal Shareholder Escrow Agreement)
shall be released to the Principal Shareholders one (1) year after the Closing.
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1.5 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of Acquiror, SkyNet and the Principal Shareholders, respectively,
shall use their best efforts to take all such action as may be necessary and
appropriate to effectuate the Merger under the NGCL and DGCL as promptly as
possible, including, without limitation, the filing of the Articles of Merger
and Certificate of Merger consistent with the terms of this Agreement. If at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement, the officers of such corporations
are fully authorized in the name of their corporations or otherwise, and
notwithstanding the Merger, to take, and shall take, all lawful and necessary
action.
1.6 NO FURTHER RIGHTS OR TRANSFERS.
At and after the Effective Time, the SkyNet Capital Stock outstanding
immediately prior to the Effective Time shall cease to provide the SkyNet
Shareholders thereof any rights as a shareholder of SkyNet, except for the right
to surrender the certificate or certificates representing such shares and to
receive the Merger Consideration to be received in the Merger as provided in
this Agreement.
ARTICLE II
THE CLOSING
2.1 CLOSING DATE.
Subject to satisfaction or waiver of all conditions precedent set
forth in Section 6 of this Agreement, the closing of the Merger (the "Closing")
shall take place at the offices of SkyNet at 000 Xxxxx Xxxxxxx Xxx., Xxxxxxxxx,
XX 00000, at 10:00 a.m., local time on (a) the later of: (i) the first Business
Day following the day upon which all appropriate Acquiror corporate action and
SkyNet corporate action have been taken in accordance with Section 3 of this
Agreement; or (ii) the day on which the last of the conditions precedent set
forth in Article 6 of this Agreement is fulfilled or waived; or (b) at such
other time, date and place as the parties may agree, but in no event shall such
date be later than October 2, 1998 unless such date is extended by the mutual
agreement of the parties.
2.2 CLOSING TRANSACTIONS.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) SKYNET AND THE PRINCIPAL SHAREHOLDERS WILL DELIVER, OR SHALL CAUSE
TO BE DELIVERED, TO THE ACQUIROR, THE FOLLOWING DOCUMENTS AND SHALL TAKE THE
FOLLOWING ACTIONS:
(i) The SkyNet Shareholders (other than Dissenting Shareholders) shall
surrender and deliver to Acquiror as the surviving corporation the certificate
or certificates representing all of such shares of SkyNet Common Stock;
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(ii) The SkyNet Shareholders (other than Dissenting Shareholders)
shall, to the extent necessary to comply with applicable federal and state
securities laws, execute and deliver at the Closing a copy of an Investment
Letter in the form attached to this Agreement as Exhibit 2.2(a)(ii) ("Investment
Letter");
(iii) Any outstanding shareholder agreements relating to the SkyNet
Capital Stock shall have been terminated and evidence of such termination
satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) SkyNet and the Principal Shareholders shall execute and deliver,
and file or cause to be filed with the Secretary of State of the State of
Nevada, Articles of Merger with such amendments thereto as the parties hereto
shall deem mutually acceptable;
(v) A certificate shall be executed by an authorized officer of SkyNet
and the Principal Shareholders to the effect that all representations and
warranties made by SkyNet and each of the Principal Shareholders under this
Agreement are true and correct as of the Closing, as though originally given to
Acquiror on said date;
(vi) A certificate of good standing shall be delivered by SkyNet and
the Principal Shareholders from the Secretary of State of the State of Nevada,
dated at or about the Closing, to the effect that such corporation is in good
standing under the laws of such state, similar good standing certificates shall
be provided for each of the Subsidiaries (as that term is defined in Section
4.1(a)(ii) hereof);
(vii) An incumbency certificate shall be delivered by SkyNet signed by
all of the officers thereof dated at or about the Closing;
(viii) Certified Articles of Incorporation shall be delivered by
SkyNet dated at or about the Closing and a copy of the Bylaws of SkyNet
certified by the Secretary of SkyNet dated at or about the Closing; similar
articles, Bylaws or other governing instruments will be delivered by each of the
Subsidiaries;
(ix) Certified Board and shareholder resolutions shall be delivered by
the Secretary of SkyNet dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(x) The employment agreement by and between the Acquiror and Xxxxx
(the "Xxxxx Employment Agreement") in the form attached to this Agreement as
Exhibit 2.2(a)(x) shall be executed and delivered by Xxxxx;
(xi) The Option Agreement by and between the Acquiror and Xxxxx (the
"Xxxxx Option Agreement") in the form attached to this Agreement as Exhibit
2.2(a)(xi) shall be executed and delivered by Xxxxx;
(xii) The employment agreement by and between the Acquiror and Nizic
(the "Nizic Employment Agreement") in the form attached to this Agreement as
Exhibit 2.2(a)(xii) shall be executed and delivered by Nizic;
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(xiii) The Option Agreement by and between the Acquiror and Nizic (the
"Nizic Option Agreement") in the form attached to this Agreement as Exhibit
2.2(a)(xiii) shall be executed and delivered by Nizic;
(xiv) The Principal Shareholder Escrow Agreement in the form attached
hereto as Exhibit 1.4(b) shall be executed and delivered by the Principal
Shareholders;
(xv) The Principal Shareholder Escrow Shares shall be delivered into
escrow pursuant to the Principal Shareholder Escrow Agreement;
(xvi) SkyNet shall deliver a copy of the release with respect to that
certain letter agreement dated September 17, 1998, by and between SkyNet and
Arizona Capital Group, Inc. which shall be certified by the President of SkyNet
and delivered to Acquirer;
(xvii) Each person who was issued shares of preferred stock, $.001 par
value per share, of SkyNet pursuant to a Subscription Agreement ("Subscription
Agreement") in connection with that certain Agreement Concerning The Exchange of
Capital Stock dated as of September 30, 1997 by and among, inter alia, SkyNet
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and the Principal Shareholders, shall execute and deliver Amendment No. 1 to
Subscription Agreement ("Amendment No. 1") in the form attached to this
Agreement as Exhibit 2.2(a)(xvii), together with certificates evidencing the
shares of preferred stock; and
(xviii) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
(b) ACQUIROR WILL DELIVER, OR SHALL CAUSE TO BE DELIVERED, TO SKYNET
AND THE PRINCIPAL SHAREHOLDERS, THE FOLLOWING DOCUMENTS AND SHALL TAKE THE
FOLLOWING ACTIONS:
(i) Subject to Section 1.4(b), Acquiror shall deliver or shall cause
to be delivered to the SkyNet Shareholders (other than Dissenting Shareholders)
a certificate or certificates representing the number of shares of Acquiror
Common Stock as such holder is entitled to receive in connection with the
Merger;
(ii) Acquiror shall execute and deliver, and file or cause to be filed
with the Secretary of State of the State of Delaware, the Certificate of Merger
with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(iii) Acquiror shall receive from the Secretary of State of Delaware a
final Certificate of Merger;
(iv) A certificate shall be executed by the Acquirer's President to
the effect that all representations and warranties of the Acquiror under this
Agreement are true and correct as of the Closing, as though originally given to
SkyNet and the Principal Shareholders on said date;
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(v) A certificate of good standing shall be delivered by Acquiror from
the Secretary of the State of Delaware dated at or about the Closing that
Acquiror is in good standing under the laws of said state;
(vi) Acquiror shall deliver the Acquiror Escrow Shares into Escrow
pursuant to the terms of the Acquiror Escrow Agreement;
(vii) An incumbency certificate shall be delivered by Acquiror signed
by all of its officers dated at or about the Closing;
(viii) Certified Certificate of Incorporation shall be delivered by
Acquiror dated at or about the Closing, and a copy of the Bylaws of Acquiror
certified by the Secretary of Acquiror dated at or about the Closing;
(ix) Certified Board and shareholder resolutions shall be delivered by
the Secretary of Acquiror dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(x) Acquiror will execute and deliver the Xxxxx Employment Agreement
the form of which is attached to this Agreement as Exhibit 2.2(a)(x);
(xi) Acquiror will execute and deliver the Nizic Employment Agreement
the form of which is attached to this Agreement as Exhibit 2.2(a)(xi);
(xii) Acquiror will execute and deliver the Nizic Option Agreement the
form of which is attached to this Agreement as Exhibit 2.2(a)(xiii);
(xiii) Acquiror will execute and deliver the Xxxxx Option Agreement
the form of which is attached to this Agreement as Exhibit 2.2(a)(xi);
(xiv) Acquiror will execute and deliver the Acquiror Escrow Agreement
to SkyNet and the Principal Shareholders the form of which is attached hereto as
Exhibit 1.4(a);
(xv) Each of the officers and directors of Acquiror shall have
tendered their resignation in form and substance satisfactory to SkyNet and the
Principal Shareholders; and
(xvi) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and shall have taken all such actions as are required under this
Agreement.
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ARTICLE III
CERTAIN CORPORATE ACTION
3.1 SKYNET CORPORATE ACTION.
(a) SkyNet, acting through its Board of Directors, shall, in
accordance with applicable Nevada law, its Articles of Incorporation and Bylaws
(i) duly call, give notice of, convene and hold a special meeting ("Special
Meeting") of its shareholders as soon as practicable following the execution of
this Agreement for the purpose of considering and approving this Agreement or,
alternatively, obtain the unanimous written consent of its shareholders to this
Agreement; (ii) subject to its fiduciary duties under applicable law, include in
the proxy statement for, or any information statement with respect to, the
Special Meeting (or solicitation of unanimous written consents) the
recommendation of its board of directors that this Agreement be approved by the
shareholders of SkyNet; (iii) use its best efforts to obtain and furnish the
information relating to Acquiror which Acquiror shall request to be included in
such proxy statement or information statement in order that the offer and sale
of the Acquiror Common Stock to be issued in connection with the Merger shall
comply with the provisions of the Securities Act of 1933, as amended (the "Act")
and the rules and regulations promulgated thereunder including Regulation D and
Rule 506 thereunder; (iv) permit Acquiror to review such proxy statement or
information statement prior to the delivery of such proxy statement or
information statement to any shareholder of SkyNet; and (v) subject to the
fiduciary duties of the board of directors of SkyNet under applicable law, to
obtain the necessary approval of the Agreement by the shareholders of SkyNet.
(b) SkyNet shall cause to occur all other corporate action necessary
to effect the Merger and to consummate the other transactions contemplated
hereby.
3.2 ACQUIROR CORPORATE ACTION.
Acquiror shall cause to occur all corporate action necessary to effect
the Merger and to consummate the other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SKYNET AND THE PRINCIPAL
SHAREHOLDERS.
As a material inducement to Acquiror to execute this Agreement and
consummate the Merger and other transactions contemplated hereby, SkyNet and the
Principal Shareholders, jointly and severally, hereby make the following
representations and warranties to Acquiror. The representations and warranties
are true and correct in all material respects at this date, and will be true and
correct in all material respects on the Closing as though made on and as of such
date.
(a) CORPORATE EXISTENCE AND POWER.
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(i) SkyNet is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except where the failure to
have any of the foregoing would not have a Material Adverse Effect. Except as
set forth on Schedule 4.1(a), SkyNet is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. True, correct and complete copies of the Articles of
Incorporation and Bylaws of SkyNet as amended to date are attached hereto as
Schedule 4.1(a) and are made a part hereof.
(ii) SkyNet owns no interest in any other entity other than DPE
International Limited, a California corporation, SkyNet Worldwide Express Pty
Limited, an Australian corporation, SkyNet, Inc., a New York Corporation, and
Sky International Limited, a corporation organized under the laws of England
(collectively the "Subsidiaries" and individually a "Subsidiary"). Each
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the state or country of its incorporation, and has
all corporate powers and all government licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
Each Subsidiary is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities make such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) DUE AUTHORIZATION AND REQUISITE APPROVALS. (i) This Agreement has
been duly authorized, executed and delivered by SkyNet and the Principal
Shareholders and constitutes a valid and binding agreement of SkyNet and the
Principal Shareholders, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors rights generally or by the application of equitable principles. As of
the Closing all corporate action on the part of SkyNet required under applicable
law in order to consummate the Merger will have occurred; and (ii) the Board of
Directors of SkyNet has approved the execution of this Agreement and the
consummation of the Merger Transaction and related actions contemplated hereby.
(c) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated hereby will not:
(i) conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of SkyNet or any of the Subsidiaries; or (ii) conflict
with or result in any violation or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of a right or obligation or loss under, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree, or,
to the best of their knowledge, statute, law, ordinance, rule or regulation
applicable to SkyNet, any of the Subsidiaries or the Principal Shareholders or
their
10
properties or assets, or result in the creation or imposition of any mortgage,
lien, pledge, charge or security interest of any kind ("Encumbrance") on any
assets of SkyNet or the Subsidiaries, except such as is not reasonably likely to
have a Material Adverse Effect or prevent SkyNet or the Principal Shareholders
from consummating the transactions contemplated by this Agreement. Except as set
forth on Schedule 4.1(c), no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to SkyNet or any Subsidiary in
connection with the execution and delivery of this Agreement by SkyNet and the
Principal Shareholders or the consummation by SkyNet and the Principal
Shareholders of the transactions contemplated hereby, except the filing of the
Articles of Merger.
(d) CAPITALIZATION AND SHARE OWNERSHIP. The authorized capital stock
of SkyNet consists solely of Twenty Million (20,000,000) shares of common stock,
$.001 par value per share. There are currently 5,658,000 shares of SkyNet
Common Stock outstanding, of which the Principal Shareholders own 5,192,708
shares. The Principal Shareholders are the beneficial owners of a majority of
the outstanding shares entitled to vote on the Merger, and by their signatures
at the end hereof, have indicated their consent to the Merger and the
transactions contemplated hereby. The outstanding shares of capital stock of
SkyNet have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as set forth in this
Section 4.1(d) and on Schedule 4.1(d), there are outstanding (A) no shares of
capital stock or other voting securities of SkyNet, (B) no securities of SkyNet
convertible into or exchangeable for shares of capital stock or voting
securities of SkyNet and (C) no options, warrants or other rights to acquire
from SkyNet, and no obligation of SkyNet to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of SkyNet, and there are no agreements or commitments to do
any of the foregoing. There are no voting trusts or voting agreements
applicable to any capital stock of SkyNet. The SkyNet Common Stock to be
surrendered in the Merger will be owned of record and beneficially, by the
SkyNet Shareholders, free and clear of all liens and encumbrances of any kind
and nature, and have not been sold, pledged, assigned or otherwise transferred.
There are no agreements (other than this Agreement) to sell, pledge, assign or
otherwise transfer such securities. Except as set forth on Schedule 4.1(d), all
of the issued and outstanding shares of Capital Stock of the subsidiaries are
owned by SkyNet.
(e) FINANCIAL STATEMENTS. SkyNet shall prepare and deliver to
Acquiror, no less than five (5) days prior to Closing, copies of unaudited
consolidated financial statements of SkyNet and the Subsidiaries for the fiscal
years ended June 30, 1998, June 30, 1997 and June 30, 1996 (collectively, the
"Financial Statements"). Such Financial Statements will have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods reported upon and will fairly present in all material
respects the financial position of SkyNet and its Subsidiaries as of the dates
thereof and the results of operations for the periods then ended.
(f) REAL PROPERTIES.
(i) SkyNet and the Subsidiaries currently lease real property at those
locations identified on Schedule 4.1(f)(i) hereto pursuant to the true, correct
and complete copies
11
of the lease agreements attached to Schedule 4.1(f)(i). SkyNet and the
Subsidiaries own or lease no other real estate. None of the leasehold interests
held by SkyNet or the Subsidiaries is subject to any Encumbrance, except (a)
liens for ad valorem taxes not yet due or being contested in good faith; and (b)
contractual or statutory mechanics or materialmen's liens or other statutory or
common law Encumbrances relating to obligations of SkyNet that are not
delinquent or are being contested in good faith. There are no Encumbrances which
materially interfere with the present use of such leasehold interests.
(ii) Except as described on Schedule 4.1(f)(ii) hereto, neither SkyNet
nor any Subsidiary has received any written notice from any governmental entity
having jurisdiction over SkyNet or the Subsidiaries or over any of the real
property leased by SkyNet or the Subsidiaries of any violation by SkyNet or the
Subsidiaries of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by SkyNet or the Subsidiaries or of any
condemnation or eminent domain proceeding.
(iii) Except such as has not had and is not reasonably likely to have
a Material Adverse Effect, all of the buildings leased by SkyNet or the
Subsidiaries and all plumbing, HVAC, electrical, mechanical and similar systems
are in good repair and adequate for their current use, ordinary wear and tear
excepted.
(iv) Except as described on Schedule 4.1(f)(iv), neither SkyNet nor
any Subsidiary is a party to any lease, sublease, lease assignment or other
agreement for the use or occupancy of any of the leasehold premises wherein
SkyNet or the Subsidiary is the landlord, sub-landlord or assignor, whether by
name, as successor-in-interest or otherwise. There are no outstanding
agreements with any party to acquire the leasehold premises or any portion
thereof or any interest therein.
(v) All certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by SkyNet or the Subsidiaries have been issued, are fully paid for and
are in full force and effect, will survive the Closing and will not be
invalidated, violated or otherwise adversely affected by the Merger or the other
transactions contemplated by this Agreement.
(g) NO CONTINGENT LIABILITIES. Except contained within the Financial
Statements or otherwise as described on Schedule 4.1(g), at the Closing, SkyNet
and the Subsidiaries shall have no material liabilities, whether related to tax
or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise, and to the best knowledge of the Principal Shareholders, after due
inquiry, there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, except as and to the
extent reflected on this Agreement or any Schedule or Exhibit hereto or which
has been incurred in the ordinary course of business and as accurately reflected
on the books and records of SkyNet or the Subsidiaries.
12
(h) LITIGATION. Except as described on Schedule 4.1(h) hereto there
is no action, suit, investigation or proceeding (or, to the knowledge of SkyNet
or the Principal Shareholders, any basis therefor) pending against, or to the
knowledge of SkyNet threatened, against or affecting SkyNet or the Subsidiaries
or any of their properties before any court or arbitrator or any governmental
body, agency or official that (i) if adversely determined against SkyNet or the
Subsidiaries, would have a Material Adverse Effect or (ii) in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the Merger or
any of the other transactions contemplated by the Agreement.
(i) TAXES. Except as disclosed on Schedule 4.1(i), SkyNet and the
Subsidiaries have timely filed all tax returns required to be filed by them, or
will timely file when due all tax returns required to be filed by them between
the date hereof and the Closing. SkyNet and the Subsidiaries have paid in a
timely fashion or will pay when due in a timely fashion, all taxes required to
be paid in respect of the periods covered by such returns, and the books and the
financial statements of SkyNet reflect, or will reflect, adequate reserves for
all taxes payable by SkyNet and the Subsidiaries which have been, or will be,
accrued but are not yet due. Neither SkyNet nor any of the Subsidiaries is
delinquent in the payment of any material tax, assessment or governmental
charge. No deficiencies for any taxes have been proposed, asserted or assessed
against SkyNet or any Subsidiary. SkyNet and the Principal Shareholders are not
aware of any facts which would constitute the basis for the proposal or
assertion of any such deficiency and there is no action, suit, proceeding, audit
or claim now pending or threatened against SkyNet or the Subsidiaries, asserting
any deficiency in the payment of taxes. All taxes which SkyNet or the
Subsidiaries are required by law to withhold and collect have been duly withheld
and collected, and have been timely paid over to the proper authorities to the
extent due and payable. For the purposes of this Agreement, the term "tax"
shall include all federal state, local and foreign income, property, sales,
excise and other taxes of any nature whatsoever. Neither SkyNet nor the
Subsidiaries nor any member of any affiliated or combined group of which SkyNet
is or has been a member has granted any extension or waiver of the limitation
period applicable to any tax returns. There are no Encumbrances for taxes upon
the assets of SkyNet or the Subsidiaries. There are no tax sharing or tax
allocation agreements to which SkyNet is now or ever has been a party. SkyNet
will not be required under Section 481(c) of the Internal Revenue Code of 1986,
as amended (the "Code"), to include any material adjustment in taxable income
for any period subsequent to the Merger. SkyNet (a) has not been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was SkyNet) and (b) has no liability for the
taxes of any person (other than SkyNet) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Schedule 4.1(j)(i) identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is subject to any provision of ERISA, and either (i)
is maintained, administered or contributed to by SkyNet or any affiliate (as
defined below), (ii) covers any employee or former employee of SkyNet or any
affiliate or (iii) under which SkyNet or any affiliate has any liability.
Copies of such plans and, if applicable, related trust agreements) and all
amendments
13
thereto and any written interpretations thereof have been furnished to Acquiror,
together, if applicable, with (x) the most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (y) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to collectively herein as
the "Employee Plans." Any Form 5500 for any plan year of any Employee Plan that
has not been filed, but for which the filing date has passed on the date of this
Agreement, shall be filed prior to the date of the Merger. For purposes of this
Section, "affiliate" of any Person means any other Person which, together with
such Person, would be treated as a single employer for any purpose under Section
414 of the Code.
(ii) Schedule 4.1(j)(ii) identifies all Employee Plans to which SkyNet
currently has any obligation to contribute. SkyNet is not a party to any
multiemployer plan as defined in Section 4001(a) (3) of ERISA ("Multiemployer
Plans"), and neither SkyNet nor any affiliate has any outstanding liability to
contribute to any Multiemployer Plan, for delinquent contributions or for
withdrawal liability pursuant to Section 4201 of ERISA.
(iii) There are no Employee Plans that are intended to be qualified
plans under Section 401(a) of the Code, except as may have been shown and
identified as such on the list referred to in subparagraphs (i) or (ii) above.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Plan, other than any failure to comply that is not
reasonably likely to have a Material Adverse Effect.
(iv) Schedule 4.1(j)(iv) identifies each material employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that is not an Employee Plan and (A) is
entered into, maintained or contributed to, as the case may be by SkyNet, any
Subsidiary or any of their respective affiliates or (B) covers any employee or
former employee of SkyNet, or any Subsidiary or any of their respective
affiliates or (C) under which SkyNet, any Subsidiary or any of their respective
affiliates has liability. Such contracts, plans and arrangements as are
described above, copies of all of which have been furnished previously to
Acquiror, are referred to collectively herein as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Benefit Arrangement other than
any failure to comply that is not reasonably likely to have a Material Adverse
Effect.
(v) Neither SkyNet nor any affiliate has or maintains and has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of SkyNet
or any affiliate or former affiliate, except as may be required pursuant to the
provisions of COBRA.
14
(k) INSURANCE COVERAGE. Schedule 4.1(k) sets forth a list of all
SkyNet key-man life insurance policies. SkyNet and the Subsidiaries maintain
insurance covering their assets, business, equipment, properties, operations,
employees, officers and directors with such coverage, in such amounts, and with
such deductibles and premiums as are consistent with insurance coverage provided
for other companies of comparable size and in comparable industries. All of
such policies are in full force and effect and all premiums payable have been
paid in full and SkyNet and the Subsidiaries are in full compliance with the
terms and conditions of such policies. Neither SkyNet nor any Subsidiary has
received any notice from any issuer of such policies of its intention to cancel
or refusal to renew any policy issued by it or of its intention to renew any
such policy based on a material increase in premium rates other than in the
ordinary course of business. None of such policies are subject to cancellation
by virtue of the Merger or the consummation of the other transactions
contemplated by this Agreement. There is no claim by SkyNet pending under any
of such policies as to which coverage has been questioned or denied.
(l) COMPLIANCE WITH LAWS. To the best of knowledge of the Principal
Shareholders, neither SkyNet nor any Subsidiary is in violation of, nor has any
such entity violated, any applicable provisions of any laws, statues, ordinances
or regulations, other than as would not be reasonably likely to have a Material
Adverse Effect or constitute a felony. Without limiting the generality of the
foregoing, to the best knowledge of the Principal Shareholders, SkyNet and the
Subsidiaries have all licenses, permits, certificates and authorizations needed
or required for the conduct of business of SkyNet and the Subsidiaries as
presently conducted and for the use of its properties and premises occupied by
it, except where the failure to obtain a licenses, permit, certificate or
authorization would not have a Material Adverse Effect.
(m) INVESTMENT BANKING FEES. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, SkyNet or the Principal Shareholders to act on its or their
behalf who might be entitled to any fee or commission from SkyNet, the Principal
Shareholders, Acquiror or any of their respective affiliates upon consummation
of the transactions contemplated by this Agreement.
(n) PERSONAL PROPERTY. SkyNet and the Subsidiaries have good and valid
title to all of their personal property, tangible and intangible, reflected on
the Financial Statements and to all other personal property owned by them, free
and clear of any Encumbrance. SkyNet and the Subsidiaries are the owner of all
of its personal property now located in or upon their leased premises and of all
personal property which is used in the operation of their business. All such
equipment, furniture and fixtures and other tangible personal property are in
good operating condition and repair and do not require any repairs other than
normal routine maintenance to maintain such property in good operating condition
and repair.
(o) INTELLECTUAL PROPERTY; INTANGIBLE PROPERTY. The corporate names
of SkyNet and the trade names and service marks listed on Schedule 4.1(o) are
the only names and service marks which are used by SkyNet in the operation of
its business (the "Names and Service Marks"). SkyNet and the Subsidiaries have
not done business and have not been known by any other name other than by its
Names and Service Marks. [SkyNet owns and has the exclusive right within the
states and countries in which it and its Subsidiaries operate, to use all
intellectual
15
property presently in use by it and its Subsidiaries and necessary for the
operation of its businesses as now being conducted, which intellectual property
includes, but is not limited to, patents, trademarks, trade names, service
marks, copyrights, trade secrets, customer lists, inventions, formulas, methods,
processes and other proprietary information.] There are no outstanding licenses
or consents granting third parties the right to use any intellectual property
owned by SkyNet or the Subsidiaries. No royalties or fees are payable by SkyNet
to any third party by reason of the use of any of its intellectual property.
Neither SkyNet nor any subsidiary has received notice of any adversely held
patent, invention, trademark, copyright, service xxxx or tradename of any
person, or any claims of any other person relating to any of the intellectual
property subject hereto, and there is no reasonable basis for any such charge or
claim. There is no presently known or threatened use or encroachment of any such
intellectual property.
(p) ACCOUNTS RECEIVABLE. The accounts receivable of SkyNet and its
Subsidiaries referred to within the Financial Statements constitute valid claims
in the full amount thereof against the debtors charged therewith on the books of
SkyNet and its Subsidiaries to which each such account is payable and has been
acquired in the ordinary course of business. Except as set forth in Schedule
4.1(p), the accounts receivable are fully collectible to the extent of the face
value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Financial Statements) in the due course of normal commercial
dealings. To the best knowledge of the Principal Shareholders, no account
debtor has any valid setoff, deduction or defense with respect thereto, and no
account debtor has asserted any such setoff, deduction or defense. There are no
accounts receivable which arise pursuant to an agreement with the United States
Government or any agency or instrumentality thereof.
(q) CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. Neither
SkyNet nor any Subsidiary is a party to or bound by any oral, written or implied
contracts, agreements, leases, powers of attorney, guaranties, surety
arrangements or other commitments excluding equipment and furniture leases
entered into in the ordinary course of business (which do not exceed $100,000 in
liabilities or commitments in the aggregate), except for the following (which
are hereinafter collectively called the "Material Contracts"):
(i) The leases and agreements described on Schedules 4.1(f), 4.1(j)(i)
and (ii) and 4.1(r)(i); and
(ii) Agreements involving a maximum possible expenditure or obligation
on the part of SkyNet or any Subsidiary to expend more than Twenty-Five Thousand
Dollars ($25,000) separately or less than Fifty Thousand Dollars ($50,000) in
the aggregate.
The Material Contracts constitute all of the material agreements and
instruments which are necessary and desirable to operate the business as
currently conducted by SkyNet and the Subsidiaries. True, correct and complete
copies of each Material Contract described and listed under subsection 4.1(q)
will be made available to Acquiror within ten (10) business days prior to the
Closing Date. The term "Material Contract" excludes purchase orders entered
into in the ordinary course for personalty or inventory which may be returned to
the vendor without penalty. All of the Material Contracts are valid, binding
and enforceable against the respective parties
16
thereto in accordance with their respective terms. Following the Merger, the
Acquiror as the surviving entity shall become entitled to all rights of SkyNet
under such of the Material Contracts as if the Acquiror were the original party
to such Material Contracts. All parties to all of the Material Contracts have
performed all obligations required to be performed to date under such Material
Contracts, and neither SkyNet, the Subsidiaries, and, to the best of their
knowledge, nor any other party, is in default or in arrears under the terms
thereof, and no condition exists or event has occurred which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. The
consummation of this Agreement and the Merger will not result in an impairment
or termination of any of the rights of SkyNet or the Subsidiaries under any
Material Contract. None of the terms or provisions of any Material Contract
materially adversely affects the business, prospects, financial condition or
results of operations of SkyNet or the Subsidiaries.
(r) LABOR RELATIONS; EMPLOYEES.
(i) Set forth on Schedule 4.1(r)(i) is a list of:
(A) All collective bargaining agreements and other agreements
requiring arbitration of employment disputes, and any written amendments
thereto, as well as all arbitration awards decided under any such agreements,
and all oral assurances or modifications, past practices, and/or arrangements
made in relation thereto, to which SkyNet or any Subsidiary is a party or by
which it is bound; and
(B) All employment agreements, and all severance agreements which have
not been fully performed, to which SkyNet or any Subsidiary is a party or by
which it is bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all key management
employees of SkyNet or any Subsidiary, broken down by location, together with
their rate of compensation and title.
(iii) SkyNet will deliver to Acquiror true and correct copies of all
of the documents referred to on Schedule 4.1(r)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to the employees of SkyNet and its
Subsidiaries.
(iv) There is no union representing or purporting to represent any of
the employees of SkyNet or any Subsidiary, and neither SkyNet nor any Subsidiary
is subject to or currently negotiating any collective bargaining agreements with
any union representing or purporting to represent the employees of any of the
foregoing.
(v) Except as set forth on Schedule 4.1(r)(v) :
(A) There are no strikes, slow downs or other work stoppages,
grievance proceedings, arbitrations, labor disputes or representation questions
pending or, to the best knowledge of SkyNet and the Principal Shareholders,
threatened;
17
(B) SkyNet and the Subsidiaries have complied in all material respects
with all laws relating to labor, employment and employment practices, including
without limitation, any provisions thereof relating to wages, hours and other
terms of employment, collective bargaining, nondiscrimination and the payment of
social security, unemployment compensation and similar taxes, and neither SkyNet
nor any Subsidiary is (1) liable for any arrearages of wages or any taxes or
penalties for failure to comply with any of the foregoing or (2) delinquent in
the payment of any severance, salary, bonus, commission or other direct or
indirect compensation for services performed by any employee to the date hereof,
or any amount required to be reimbursed to any employee or former employee; and
(C) There are no charges, suits, actions, administrative proceedings,
investigations and/or claims pending or threatened against SkyNet or any
Subsidiary, whether domestic or foreign, before any court, governmental agency,
department, board or instrumentality, or before any arbitrator (collectively
"Actions"), concerning or in any way relating to the employees or employment
practices of SkyNet or any Subsidiary, including, without limitation, Actions
involving unfair labor practices, wrongful discharge and/or any other
restrictions on the right of SkyNet or any Subsidiary to terminate its
respective employees, employment discrimination, occupational safety and health,
and workers' compensation.
(vi) There are no express or implied agreements, policies, practices,
or procedures, whether written or oral, pursuant to which any employee of SkyNet
or any Subsidiary is not terminable at will and except as required by law, no
employee is entitled to any benefit or to participate in any employee benefit
plan of SkyNet following such termination of employment.
(vii) Except as set forth in Schedule 4.1(r)(vii), SkyNet or any
Subsidiary is not a party to any oral or written (A) agreement with any
executive officer or other key employee of SkyNet or any Subsidiary (1) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving SkyNet of the nature of the
transactions contemplated by this Agreement, (2) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(viii) SkyNet has not taken any action which requires or, taken
together with the transactions contemplated hereby, would require the giving of
any notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(s) SUPPLIERS AND CUSTOMERS. Set forth on Schedule 4.1(s) is a list of
the ten largest customers of SkyNet and its Subsidiaries based on the percentage
of revenue represented
18
by those customers for the fiscal year ended June 30, 1998. The relationship of
SkyNet and its Subsidiaries with their suppliers and customers are good
commercial working relationships and no material supplier or customer of SkyNet
and its Subsidiaries has canceled, curtailed or otherwise terminated or
threatened to cancel or otherwise terminate, his or its relationship with SkyNet
or any of its Subsidiaries. SkyNet and the Principal Shareholders have no
knowledge, or reason to believe, that the Merger or any other transaction
contemplated hereby would adversely affect any such material supplier or
customer relationship.
(t) CONFLICTING INTERESTS. Except as set forth on Schedule 4.1(t), no
director, officer, employee or SkyNet Shareholder, and no relative or affiliate
of any of the foregoing (i) sells or purchases goods or services from SkyNet or
has any pecuniary interest in any supplier or client of any of the foregoing or
in any other business enterprise with which SkyNet conducts business or with
which any of the foregoing is in competition, or (ii) is indebted to SkyNet
except for money borrowed and as set forth on the Financial Statements.
(u) ENVIRONMENTAL PROTECTION. Neither SkyNet nor any Subsidiary has
been notified by any governmental authority, agency or third party, and SkyNet
and the Principal Shareholders have no knowledge, of any violation by such
person of any Environmental Statute (as defined below). All registrations by
SkyNet with, licenses from or permits issued by governmental agencies pursuant
to environmental, health and safety laws are in full force and effect. The term
"Environmental Statutes" means all statutes, ordinances, regulations, orders and
requirements of common law concerning discharges to the air, soil, surface water
or groundwater and concerning the storage, treatment or disposal of any waste or
hazardous substance. There is no hazardous substance at any premises currently
or previously occupied by SkyNet or the Subsidiaries. Neither SkyNet nor any
Subsidiary has received any notice or any request for information, notice of
claim, demand or other notification that it may be potentially responsible with
respect to any investigation or clean-up of any threatened or actual release of
hazardous substances. All hazardous wastes and substances have been stored,
treated, disposed of and transported in conformance with all requirements
applicable to such hazardous substances and wastes.
(v) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the extent
set forth on the Financial Statements, to the extent contained in this
Agreement, or as set forth on Schedule 4.1(v), between June 30, 1998 (the date
of the most recent Financial Statements) and the Closing, there will be no (i)
any material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of SkyNet or any of its
Subsidiaries, (ii) any entry by SkyNet or any of its Subsidiaries into any
material commitment or transaction which is not in the ordinary course of
business; (iii) any change by SkyNet or any of its Subsidiaries in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of SkyNet or any Subsidiary, or any direct
or indirect redemption, purchase or any other type of acquisition by SkyNet, or
any direct or indirect redemption, purchase or any other type of acquisition by
SkyNet of any shares of its capital stock or any other securities for an
aggregate sum not in excess of $5,000, (v) any agreement by SkyNet, whether in
writing or otherwise, to take any action which, if taken prior to the date of
this Agreement, would have made any
19
representation or warranty in this Section 4.1 untrue or incorrect; (vi) any
acquisition of the assets of SkyNet, other than in the ordinary course of
business and consistent with past practice and not in excess of $5,000 in the
aggregate; or (vii) any execution of any agreement with any executive officer of
SkyNet providing for his or her employment, or any increase in the compensation
or in severance or termination benefits payable or to become payable by SkyNet
to its officers or key employees, or any material increase in benefits under any
collective bargaining agreement or in benefits under any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan or
arrangement or understanding (whether or not legally binding) providing benefits
to any present or former employee of SkyNet. Since the date of the Financial
Statements, there has not been and there is not threatened, any material adverse
change in financial condition, business, results of operations or prospects of
the business or any material physical damage or loss to any of the properties or
assets of the business or to the premises occupied in connection with the
business, whether or not such loss is covered by insurance.
(w) INVESTMENT INTENT.
(i) The shares of Acquiror Common Stock are not being registered under
the Act on the basis of the statutory exemption provided by Section 4(2) thereof
and Regulation D promulgated thereunder, relating to transactions not involving
a public offering, and the Acquiror's reliance on the statutory exemption
thereof is based in part on the representations contained in this Agreement;
(ii) The Principal Shareholders of SkyNet represent (a) that they have
such knowledge and experience in financial and business matters that they are
capable of adequately evaluating the risk of investing in the Acquiror; (b) that
they have been advised that the shares of Acquiror Common Stock to be issued to
each of them by the Acquiror will not be registered under the Act and
accordingly, the SkyNet Shareholders may only be able to sell or otherwise
dispose of such shares in accordance with Rule 144 or as otherwise provided in
this Agreement; (c) that the shares of Acquiror Common Stock will be held for
investment and not with a view to, or for resale in connection with the public
offering or distribution thereof; (d) that the shares of Acquiror Common Stock
so issued will not be sold without registration thereof under the Act (unless
such shares are subject to registration or in the opinion of counsel to the
Acquiror an exemption from such registration is available), or in violation of
any law; (e) the shares of Acquiror Common Stock will be subjected to the lock-
up provisions set forth in Paragraph 5.11 hereof; and (f) that the certificate
or certificates representing the shares of Acquiror Common Stock to be issued
will be imprinted with a legend in form and substance substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, OR THE
20
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE
COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the Shares and to take such other action including, but not limited
to, the placing of a "stop-transfer" order on the transfer agent's books and
records to assure compliance with the Act, as amended.
(iii) The Principal Shareholders have, either upon the date hereof or
before the Closing hereunder, been afforded the opportunity to review and is
familiar with all material information regarding Acquiror and have based their
decision to invest solely on the information contained therein, and the
information contained within this Agreement and the associated exhibits and
schedules, and have not been furnished with any other literature, prospectus or
other information except as included in such material or this Agreement;
(iv) The Principal Shareholders are able to bear the economic risks of
an investment in the shares of Acquiror Common Stock and that their overall
commitment to their investments which are not readily marketable is not
disproportionate to their net worth; and
(v) The Principal Shareholders understand that no federal or state
agency has approved or disapproved the shares of Acquiror Common Stock, passed
upon or endorsed the merits of the transfer of such shares set forth within this
Agreement or made any finding or determination as to the fairness of such shares
for investment.
(X) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by SkyNet or the Principal Shareholders to Acquiror in
connection with the Merger or the other transactions contemplated hereby,
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
SkyNet or the Principal Shareholders which may have a Material Adverse Effect on
the business, prospects, financial condition or results of operations of SkyNet
or of any of its properties or assets which has not been set forth in this
Agreement as an exhibit or schedule hereto
4.2 REPRESENTATIONS AND WARRANTIES OF ACQUIROR.
As a material inducement to SkyNet and the Principal Shareholders to
execute this Agreement and to consummate the Merger and the other transactions
contemplated hereby, Acquiror hereby makes the following representations and
warranties:
(A) CORPORATE EXISTENCE AND POWER. Acquiror is presently a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
21
Acquiror has all corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where the failure to have any of the foregoing would not have a Material
Adverse Effect. Acquiror is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws of Acquiror as amended to date are attached hereto as
Schedule 4.2(a) and are made a part hereof.
(B) DUE AUTHORIZATION. This Agreement, and as of the Closing the
other agreements described herein to which Acquiror is a party, has been, or as
of the Closing will be, duly authorized, executed and delivered by Acquiror and
constitutes, or as of the Closing will constitute, a valid and binding agreement
of Acquiror, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors rights generally or by the application of equitable principles. As of
the Closing all corporate action on the part of Acquiror required under
applicable law in order to consummate the Merger will have occurred.
(C) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated thereby will not
(i) conflict with or result in any violation of any provision of the Certificate
of Incorporation or Certificate of Incorporation, or Bylaws of Acquiror or (ii)
conflict with or result in any violation or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any right or obligation or to a loss or a
benefit under, any provision of the charter or Bylaws of Acquiror or any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquiror or its
properties or assets or result in the creation or imposition of any Encumbrance
on any asset of Acquiror, except, only as to clause (ii) above, such as is not
reasonably likely to have a Material Adverse Effect or prevent Acquiror from
consummating the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by or with
respect to Acquiror in connection with the execution and delivery of this
Agreement or the consummation them of the transactions contemplated hereby,
except the filing of a certificate of merger with the Secretary of the State of
Delaware.
(D) CAPITALIZATION.
(i) As of the Closing, the outstanding capital stock of the Acquiror
shall consist solely of 5,625,000 shares of common stock, par value $.001 per
share. All shares of capital stock of Acquiror outstanding as of the Closing,
will have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights, and upon the issuance of the shares
of Acquiror Common Stock to be issued in the Merger, such shares will be
22
duly authorized, validly issued, fully paid and nonassessable shares of Acquiror
Common Stock. Other than the Options granted to Xxxxx and Nizic, as more fully
described within Exhibits 2.2(a)(xi) and 2.2(a)(xiii), and other than options to
purchase 400,000 shares of Common Stock issued in connection with investment
banking services rendered (the "Investment Banking Options"), Acquiror shall as
of the Closing, have no outstanding options, warrants or other convertible
securities. The Investment Banking Options shall have a term of five (5) years
and shall be subject to an exercise price equal to $3.00 per share. The
Investment Banking Options shall vest pro rata over a four (4) year period
commencing one (1) year after the Closing.
(ii) Acquiror has a sufficient number of its authorized but unissued
shares of Acquiror Common Stock to permit it to issue the number of shares of
Acquiror Common Stock due in connection with the Merger and the related
transactions.
(E) FINANCIAL STATEMENTS. Acquiror shall deliver to SkyNet and the
principal Shareholders, no less than five (5) days prior to Closing, copies of
audited financial statements of Acquiror for the fiscal years ended December 31,
1997, December 31, 1996 and the interim period ended April 20, 1998
(collectively, the "Acquiror Financial Statements"). Such Acquiror Financial
Statements will have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods reported upon
and will fairly present in all material respects the financial position of
Acquiror as of the dates thereof and the results of operations for the periods
then ended.
(F) REAL PROPERTIES. Acquiror neither owns nor leases any real
property.
(G) NO CONTINGENT LIABILITIES. Except contained within the Acquiror
Financial Statements or otherwise as described on Schedule 4.2(g) or agreed to
by the parties hereto, at the Closing, Acquiror shall have no material
liabilities, whether related to tax or non-tax matters, known or unknown, due or
not yet due, liquidated or unliquidated, fixed or contingent, determined or
determinable in amount or otherwise, and to the knowledge of the Acquiror, there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except as and to the
extent reflected on this Agreement or any Schedule or Exhibit hereto or which
has been incurred in the ordinary course of business and as accurately reflected
on the books and records of Acquiror.
(H) LITIGATION. Except as described on Schedule 4.2(h) hereto there
is no action, suit, investigation or proceeding (or, to the knowledge of
Acquiror any basis therefor) pending against, or to the knowledge of Acquiror
threatened, against or affecting Acquiror or any of its properties before any
court or arbitrator or any governmental body, agency or official that (i) if
adversely determined against Acquiror, would have a Material Adverse Effect or
(ii) in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the Merger or any of the other transactions contemplated by the Agreement.
(I) COMPLIANCE WITH LAWS. To the knowledge of Acquiror, the Acquiror
is not in violation of, nor has it violated, any applicable provisions of any
laws, statues, ordinances or regulations, other than as would not be reasonably
likely to have a Material Adverse Effect or constitute a felony.
23
(J) NON-REPORTING COMPANY. Certain shares of Common Stock of Acquiror
are eligible for trading on the OTC Electronic Bulletin Board by virtue of
certain broker-dealers having filed a Form 211 with the NASD and Acquiror having
provided information required under SEC Rule 15(c)2-11 to certain broker dealers
and all such information included therein is true and correct in all material
respects. Acquiror does not file reports under the Securities and Exchange Act
of 1934, as amended.
(K) INVESTMENT BANKING FEES. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by Acquiror to act on its behalf who might be entitled to any fee or
commission from SkyNet, the SkyNet Shareholders or Acquiror or any of their
respective affiliates upon consummation of the transactions contemplated by this
Agreement.
(L) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror to SkyNet and the Principal Shareholders in
connection with the Merger or the other transactions contemplated hereby, or any
information furnished by Acquiror taken as a whole contains or will contain any
untrue statement of any material fact or omit or will omit to state any material
fact required to be stated in order to make such statement, information,
document or other instruments, in light of the circumstances in which they are
made, not misleading. There is no fact known to Acquiror taken as a whole which
may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Acquiror taken as a whole or of any of its
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 ACCESS TO INFORMATION.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Section 8, and in each case
subject to Section 5.2 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party.
5.2 CONFIDENTIALITY; NO SOLICITATION.
(A) CONFIDENTIALITY OF SKYNET-RELATED INFORMATION. With respect to
information concerning SkyNet that is made available to Acquiror pursuant to the
terms of this
24
Agreement, Acquiror agrees that it shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the Merger and related transactions and shall not disseminate or
disclose any of such information other than to its directors, officers,
employees, shareholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Acquiror of the
confidential nature of such information and directed by Acquiror in writing to
treat such information confidentially). If this Agreement is terminated pursuant
to the provisions of Section 8, Acquiror shall immediately return all such
information, all copies thereof and all information prepared by Acquiror based
upon the same; provided, however, that one copy of all such material may be
retained by Acquiror's outside legal counsel for purposes only of resolving any
disputes under this Agreement. The above limitations on use, dissemination and
disclosure shall not apply to information that (i) is learned by Acquiror from a
third party entitled to disclose it; (ii) becomes known publicly other than
through Acquiror or any party who received the same through Acquiror, provided
that Acquiror has no knowledge that the disclosing party was subject to an
obligation of confidentiality; (iii) is required by law or court order to be
disclosed by Acquiror; or (iv) is disclosed with the express prior written
consent thereto of SkyNet. Acquiror shall undertake all necessary steps to
ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this paragraph (a).
Notwithstanding anything contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose information which is
otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party, at the expense of the non-disclosing
party in, obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(B) CONFIDENTIALITY OF ACQUIROR-RELATED INFORMATION. With respect to
information concerning Acquiror that is made available to SkyNet and the
Principal Shareholders pursuant to the provisions of this Agreement, SkyNet and
the Principal Shareholders agree that they shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the Merger and the related transactions, and shall not disseminate or
disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by SkyNet or the
Principal Shareholders of the confidential nature of such information and
directed by such party in writing to treat such information confidentially). If
this Agreement is terminated pursuant to the provisions of Section 8, SkyNet and
the Principal Shareholders agree to return immediately all such information, all
copies thereof and all information prepared by either of them based upon the
same; provided, however, that one copy of all such material may be retained by
SkyNet's outside legal counsel for purposes only of resolving any disputes under
this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by SkyNet or the Principal
Shareholders from a third party entitled to disclose it; (ii) becomes known
publicly other than
25
through SkyNet, the Principal Shareholders or any party who received the same
through SkyNet or the Principal Shareholders, provided that SkyNet or the
Principal Shareholders have no knowledge that the disclosing party was subject
to an obligation of confidentiality; (iii) is required by law or court order to
be disclosed by SkyNet; or (iv) is disclosed with the express prior written
consent thereto of Acquiror. SkyNet or the Principal Shareholders agree to
undertake all necessary steps to ensure that the secrecy and confidentiality of
such information will be maintained in accordance with the provisions of this
paragraph (b). Notwithstanding any thing contained herein to the contrary, in
the event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(C) NONDISCLOSURE. Neither SkyNet, the Principal Shareholders nor
Acquiror shall disclose to the public or to any third party the existence of
this Agreement or the transactions contemplated hereby or any other material
non-public information concerning or relating to the other party hereto, other
than with the express prior written consent of the other party hereto, except as
may be required by law or court order or to enforce the rights of such
disclosing party under this Agreement, in which event the contents of any
proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of its
directors, officers, employees, shareholders, affiliates, agents and
representative who need to know such information for the sole purpose of
evaluating the Merger, and to any party whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(D) NO SOLICITATION. In consideration of the substantial expenditure
of time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated by this Agreement, the Principal Shareholders, SkyNet
or any of their respective affiliates will not, prior to the earlier of the
Closing or the termination of this Agreement, directly or indirectly, through
any officer, director, agent or otherwise: (i) solicit, initiate or encourage
the submission of inquiries, proposals or offers from any person or entity
relating to any acquisition or purchase of assets of or any equity interest in
SkyNet or any affiliate thereof or any tender offer (including a self-tender
offer), exchange offer, merger, consolidation, business combination, sale of a
substantial amount of assets or sale of securities, liquidation, dissolution or
similar transaction involving SkyNet or its affiliates (a "Transaction
Proposal"); (b) enter into or participate in any discussions or negotiations
regarding a Transaction Proposal, or furnish to any other person or entity any
information with respect to the business, properties or assets of SkyNet or its
affiliates in connection with a Transaction Proposal; or (c) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage any effort
or attempt by any other person to do or seek a Transaction Proposal. SkyNet or
the Principal Shareholders shall promptly notify Acquiror if
26
any such proposal or offer, or any inquiry or contact with any person or entity
with respect thereto is made.
5.3 INTERIM OPERATIONS.
During the period from the date of this Agreement and continuing until
the Closing:
(A) INTERIM OPERATIONS OF SKYNET AND SUBSIDIARIES. SkyNet agrees
(except as expressly contemplated by this Agreement, including any Exhibits and
Schedules hereto, or to the extent that Acquiror shall otherwise consent in
writing) that:
(i) Ordinary Course. SkyNet and its Subsidiaries shall carry on their
---------------
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them;
(ii) Dividends; Changes in Stock. SkyNet and its Subsidiaries shall
---------------------------
not and shall not propose to (a) declare, set aside or pay any dividend, on, or
make other distributions in respect of, any of their capital stock, (b) split,
combine or reclassify any of their capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of their capital stock (c) redeem, repurchase or
otherwise acquire any shares of their capital stock or (d) otherwise change
their capitalization.
(iii) Issuance of Securities. Except as contemplated by this
----------------------
Agreement, SkyNet shall not sell, issue, pledge, authorize or propose the sale
or issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. SkyNet shall not amend its Articles of
-------------------
Incorporation or its Bylaws. None of the Subsidiaries shall amend their
respective corporate charters or governing documents.
(v) No Dispositions. SkyNet and its Subsidiaries shall not sell,
---------------
lease, pledge, encumber or otherwise dispose of or agree to sell, lease, pledge,
encumber or otherwise dispose of, any of their material assets except in the
ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $100,000 in value of such assets.
(vi) Indebtedness. SkyNet and its Subsidiaries shall not incur any
------------
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others other than
in the ordinary course of business consistent with prior practice and in no
event amounting in the aggregate to more than $100,000.
27
(vii) Benefit Plans; Etc. SkyNet and its Subsidiaries shall
------------------
not adopt or amend in any material respect any collective bargaining agreement
or Employee Benefit Plan (as defined herein).
(viii) Executive Compensation. SkyNet and its Subsidiaries
----------------------
shall not grant to any executive officer any increase in compensation or in
severance or termination pay, or enter into any employment agreement with any
executive officer.
(ix) Acquisitions. SkyNet and its Subsidiaries shall not acquire (by
------------
merger, consolidation or acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or subdivision thereof,
or make any investment by either purchase of stock or securities, contributions
to capital , property transfer or, except in the ordinary course of business,
purchase of any property or assets, of any other individual or entity.
(x) Tax Elections. SkyNet and its Subsidiaries shall not make any
-------------
material tax election or settle or compromise any material federal, state, local
or foreign tax liability.
(xi) Waivers and Releases. SkyNet and its Subsidiaries shall not
--------------------
waive, release, grant or transfer any rights of material value or modify or
change in any material respect any Material Agreement other than in the ordinary
course of business and consistent with past practice.
(xii) Other Actions. SkyNet and its Subsidiaries shall not
-------------
enter into any agreement or arrangement to do any of the foregoing. SkyNet and
its Subsidiaries shall not take any action, or fail to take any action, that is
reasonably likely to result in any of the representations and warranties of them
set forth in this Agreement becoming untrue in any material respect.
(B) INTERIM OPERATIONS OF ACQUIROR. Acquiror agrees (except as
expressly contemplated by this Agreement, including any Exhibits and Schedules
hereto, or to the extent that SkyNet and the Principal Shareholders shall
otherwise consent) that:
(i) Ordinary Course. Acquiror shall conduct no business activity
---------------
other than in connection with the transactions contemplated by this Agreement in
connection with the Merger.
(ii) Dividends; Changes in Stock. Except as necessary to effect a
---------------------------
reincorporation into Delaware, or to increase its outstanding shares so as to
satisfy the condition precedent identified at Section 6.1(h) hereof, Acquiror
shall not (and shall not propose to) (a) declare or pay any dividend, on, or
make other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (c) repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
28
(iii) No Dispositions. Acquiror shall not sell, lease,
---------------
pledge, encumber or otherwise dispose of, or agree to sell, lease, pledge,
encumber or otherwise dispose of, any of its assets that are material, or any
other assets except in the ordinary course of business consistent with prior
practice.
(iv) Placement Activities. Prior to the Closing, Acquiror shall have
---------------------
completed a private placement to accredited investors which, after expenses,
yields net proceeds of no less than $500,000 to Acquiror.
(v) Other Actions. Acquiror shall take any action, or fail to take
-------------
any action, that is reasonably likely to result in any of its representations
and warranties set forth in this Agreement becoming untrue in any material
respect.
5.4 CONSENTS.
(a) Aquiror, SkyNet and the Principal Shareholders shall cooperate and
use their best efforts to obtain, prior to the Closing, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts as are necessary for the consummation of
the transactions contemplated by this Agreement; provided, however, that no loan
agreement or contract for borrowed monies shall be repaid and no contract shall
be amended materially to increase the amount payable thereunder or otherwise to
be materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
5.5 FILINGS; REGISTRATION STATEMENT.
(a) Acquiror, SkyNet and the Principal Shareholders shall, as promptly
as practicable, make any required filing, and any other required submissions,
under any law, statute, order rule or regulation with respect to the Merger and
the related transactions and shall cooperate with each other with respect to the
foregoing.
(b) As promptly as possible following the completion of the Audited
Financial Statements, Acquiror shall prepare and file with the Securities and
Exchange Commission, a registration statement for the purposes of registering
the reoffer and redistribution of shares of Common Stock with the Securities and
Exchange Commission under the Act, and shall, by virtue of such undertaking,
become a "reporting company" under the Securities Exchange Act of 1934. The
shares of Acquiror's Common Stock to be included for public reoffer and
redistribution as part of the registration statement shall include the shares
sold in the Private Offering identified at Section 5.12 hereafter, the shares
previously issued by Acquiror as part of the private placement transaction
identified at Section 5.3(b)(iv) hereafter, as well as 150,000 shares issued to
the Principal Shareholders hereunder which the Principal Shareholders are
entitled to sell under Section 5.11 hereafter within the first year following
the Closing.
5.6 ALL REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as
29
advised by their counsel, each of the parties to this Agreement shall use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, as soon as reasonable practicable, to consummate the Merger and
the other transactions contemplated by this Agreement.
5.7 PUBLIC ANNOUNCEMENTS.
Acquiror, SkyNet and the Principal Shareholders shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this Agreement or the other transactions
contemplated by this Agreement and shall not issue any other press release or
make any other public statement without prior consultation with the other
parties, except as may be required by law or, with respect to Acquiror, by
obligations pursuant to any listing agreement with an national securities
exchange.
5.8 NOTIFICATION OF CERTAIN MATTERS.
SkyNet and the Principal Shareholders shall give prompt notice to
Acquiror, and Acquiror shall give prompt notice to SkyNet and the Principal
Shareholders, of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would cause any of its representations or
warranties in this Agreement to be untrue or inaccurate in any material respect,
as to SkyNet and the Principal Shareholders, at or prior to the Closing, and, as
to Acquiror, as of the Closing and (b) any material failure of SkyNet and the
Principal Shareholders, on the one hand, or Acquiror, on the other hand, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by them under this Agreement; provided, however,
the delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available to the party receiving such notice under this
Agreement as expressly provided in this Agreement.
5.9 EXPENSES.
All costs and expenses incurred in connection with the Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated.
5.10 FINANCIAL STATEMENTS.
SkyNet and the Principal Shareholders shall cooperate with the
Acquiror following the Closing so that within sixty (60) days of the Closing,
Acquiror shall cause to be prepared an audit of the Financial Statements of
SkyNet (the "Audited Financial Statements"). The Audited Financial Statements
shall not reflect any material adverse changes from the Financial Statements.
For the purpose of this Section 5.10, the term "material adverse change" shall
mean any reduction reflected within the Audited Financial Statements of ten
percent (10%) or more of the SkyNet revenues, net income (loss) or shareholders'
equity from the corresponding period of the Financial Statements provided under
Section 4.1(e) only if such reduction exceeds $100,000.
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5.11 LOCK-UP.
In addition to any prohibition on transfers or sales under applicable
federal or state securities laws, the Principal Shareholders shall not sell,
transfer, encumber or otherwise dispose of the shares of Acquiror Common Stock
issued to them hereunder for a period of two (2) years following the Closing.
Notwithstanding such limitation, commencing 90 days after the Closing, the
foregoing lock-up provision shall be inapplicable to the resale by each of the
Principal Shareholders of 50,000 shares of Acquiror Common Stock; provided,
however, that any resale of such shares prior to one (1) year after the Closing
shall be on terms and to parties reasonably acceptable to the Acquiror Designee
to the Acquiror Board of Directors. During the one (1) year period commencing
one (1) year after the Closing, each Principal Shareholder shall be permitted to
resell up to 50,000 additional shares of Acquiror Common Stock in accordance
with Securities and Exchange Commission Rule 144, if applicable.
5.12 PRIVATE OFFERING.
Promptly following the Closing, Acquiror agrees to undertake a private
placement (the "Private Offering") to accredited and institutional investors
which is intended to yield proceeds, after payment of all sales commissions, of
between $2.5 million (the "Minimum Offering") and $5.0 million (the "Maximum
Offering") through the sale of shares of newly issued restricted common stock at
$2.00 per share. The Minimum Offering will be completed by the later of: (i)
ten (10) days after the completion of the Audited Financial Statements; or (ii)
sixty (60) days after the Closing. The Private Offering may be completed through
the use of broker-dealers who are registered with the Securities and Exchange
Commission and in good standing with the NASD, upon payment of a sales
commission not to exceed 7% of the gross proceeds. As more fully set forth
within Section 1.4 of this Agreement, the Acquiror has agreed to cause certain
of its principal stockholders to place 2 million shares of its Common Stock in
escrow in order to secure timely completion of the Minimum Offering.
5.13 DOCUMENTS AT CLOSING.
Each party to this Agreement agrees to execute and deliver at the
Closing those documents identified in Section 2.2.
5.14 PROHIBITION ON TRADING IN ACQUIROR STOCK.
SkyNet and the Principal Shareholders acknowledge that the United
States Securities Laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of the Acquiror, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Acquiror. Accordingly, until the Closing, the Principal Shareholders
agree that they will not purchase or sell any securities of the Acquiror, or
communicate such information to any other person under circumstances in which it
is reasonably foreseeable that such person is likely to purchase or sell
securities of the Acquiror, until counsel for Acquiror believes that any such
non-public information has been adequately disseminated to the public.
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5.15 RESERVATION OF SHARES.
As of the Closing, Acquiror shall have authorized and reserved for
issuance sufficient shares of Common Stock to permit the issuance of the shares
of Acquiror Common Stock due in connection with the Merger and the transactions
contemplated by this Agreement.
5.16 EMPLOYMENT AGREEMENTS AND OPTION AGREEMENTS.
After the execution of this Agreement and prior to the Closing, the
Acquiror and each of Xxxxx and Nizic shall use all reasonable efforts to
negotiate and agree upon the form of the employment agreements and option
agreements by and between Acquiror and each of Xxxxx and Nizic.
5.17 ACKNOWLEDGMENT OF APPROVALS; WRITTEN CONSENT OF STOCKHOLDERS.
By virtue of their respective signatures to this Agreement, Acquiror,
SkyNet and the Principal Shareholders acknowledge their approval of this
Agreement and their consent to the consummation of the transactions identified
herein and, with respect to the Principal Shareholders, shall constitute their
approval of the Merger and this Agreement by written consent in accordance with
Section 78.320 of the Nevada General Corporation Law on and as of the date
hereof with respect to all of the shares of SkyNet Common Stock owned by such
Principal Shareholder on and as of the date hereof.
5.18 MATTERS OF CORPORATE GOVERNANCE.
(a) Concurrent with the Closing, members of Acquiror's Board of
Directors shall resign and shall be replaced with a Board of Directors of five
(5) members, consisting of: (i) one designee of Acquiror's Board of Directors
immediately prior to the Closing (the "Acquiror Designee"); (ii) two (2)
designees of the Principal Shareholders; (iii) a designee of the Acquiror
Designee, who shall be acceptable to the Principal Shareholders; and (iv) a
designee of the Principal Shareholders, who shall be acceptable to the Acquiror
Designee.
(b) For a period of two (2) years following the Closing, the Principal
Shareholders agree to vote their shares of Acquiror Common Stock at every Annual
Meeting of Stockholders, at any Special Meeting of Stockholders called for the
purpose of electing members to the Board of Directors, or will act by consent or
otherwise take such action as is required, to vote for and elect a Board of
Directors in the manner identified in subparagraph (a) above. The Principal
Shareholders further agree not to take any action inconsistent with this Section
5.18, including voting any shares of Acquiror Common Stock to amend the
Company's By-laws or Certificate of Incorporation in a manner inconsistent with
this Section 5.18.
(c) For a period of two years following the Closing, approval of any
of the following transaction shall require the affirmative vote of 80% of the
members of Acquiror's Board of Directors: (i) any merger, consolidation, sale of
all or substantially all of the assets of Acquiror or recapitalization involving
Acquiror; (ii) transactions between Acquiror and any interested party (including
all directors, executive officers, or principal (i.e., over 5%) stockholders);
(iii) any modification to the terms of this Agreement or any other agreements
32
entered into upon the Closing; (iv) any issuance of shares of Acquiror's Common
Stock, Preferred Stock or securities exercisable or convertible into shares of
Acquiror's Common Stock or Preferred Stock, equal to or exceeding 10% of the
Acquiror's then outstanding shares of Common Stock or voting power; and (v) any
amendment to the Company's By-laws or Certificate of Incorporation.
Notwithstanding anything contained in this Agreement to the contrary, commencing
two years after the Closing, a super-majority vote of the Acquiror's Board of
Directors shall not be required to approve any transaction except as may be
required under applicable Delaware law.
5.19 PRODUCTION OF SCHEDULES AND EXHIBITS.
Within five (5) days prior to the Closing, each of the parties hereto
shall produce, to the extent not previously done, to the other, all of the
Schedules and Exhibits required to be produced pursuant to the Agreement. The
Schedules and Exhibits produced subsequent to the execution of this Agreement,
shall be given such force and effect as though such Schedules and Exhibits which
were produced upon execution of this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF SKYNET AND THE PRINCIPAL SHAREHOLDERS.
The obligations of SkyNet and the Principal Shareholders to consummate
the Merger and the other transactions contemplated to be consummated by it at
the Closing are subject to the satisfaction (or waiver by SkyNet and the
Principal Shareholders) at or prior to the Closing (or at such other time prior
thereto as may be expressly provided in this Agreement) of each of the following
conditions:
(a) The representations and warranties of Acquiror set out in this
Agreement shall be true and correct in all material respects at and as of the
time of the Closing as though such representations and warranties were made at
and as of such time.
(b) Acquiror shall have complied in a timely manner and in all
material respects with the respective covenants and agreements set out in this
Agreement.
(c) The Merger shall have been approved by Acquiror in accordance with
the provisions of the DGCL. The Board of Directors and stockholders of Acquiror
shall have approved the execution of this Agreement and the Merger thereby.
(d) Acquiror shall enter into the Xxxxx Employment Agreement and the
Nizic Employment Agreement.
(e) Acquiror shall enter into the Xxxxx Option Agreement and the Nizic
Option Agreement.
33
(f) Acquiror shall enter into, and the Acquiror Escrow Shares shall be
delivered pursuant to, the Acquiror Escrow Agreement the form of which is
attached hereto as Exhibit 1.4(a).
(g) There shall be delivered to SkyNet and the Principal Shareholders
an officer's certificate of Acquiror to the effect that all of the
representations and warranties of Acquiror set forth herein are true and
complete in all material respects as of the Closing, and the Acquiror has
complied in all material respects with the covenants and agreements set forth
herein that are required to be complied with by the Closing.
(h) Acquiror shall have completed a private placement to accredited
investors which, after expenses, produced net proceeds of no less than $500,000.
Acquiror shall, upon the Closing, have cash on deposit of no less than $500,000,
subject only to those liabilities reflected within the Acquiror Financial
Statements, Schedule 4.2(g) and any additional liabilities incurred in
connection with this transaction that have been agreed to by all parties hereto.
(i) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(j) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or the related transactions.
6.2 CONDITIONS TO ACQUIROR'S OBLIGATIONS.
The obligation of Acquiror to consummate the Merger and the other
transactions contemplated to be consummated by it at the Closing are subject to
the satisfaction (or waiver by Acquiror) at or prior to the Closing (or at such
other time prior thereto as may be expressly provided in this Agreement) of each
of the following conditions:
(a) No SkyNet Shareholder shall have filed with SkyNet, prior to or
after the SkyNet shareholder meeting at which a vote is to be taken with respect
to a proposal to approve this Agreement, a written notice of intent to demand
payment for his, her or its shares of SkyNet Common Stock, as required by
Section 92A.420 of the NGCL in order for such shareholder to perfect the right
to dissent from such proposed action and no SkyNet Shareholder shall have the
right to make such demand at any time in the future;
(b) The representations and warranties of SkyNet and the Principal
Shareholders set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations and
warranties were made at and as of such time;
34
(c) SkyNet and the Principal Shareholders shall have complied in a
timely manner and in all material respects with its covenants and agreements set
out in this Agreement;
(d) There shall be delivered to Acquiror an officer's certificate of
SkyNet to the effect that all of the representations and warranties of SkyNet
set forth herein are true and complete in all material respects as of the
Closing, and that SkyNet has complied in all material respects with covenants
and agreements set forth herein required to be complied with by the Closing; and
there shall be delivered to Acquiror a certificate signed by the Principal
Shareholders to the effect that the representations and warranties of the SkyNet
and the Principal Shareholders set forth herein are true and correct in all
material respects and that the Sky Net and the Principal Shareholders have
complied in all material respects with their covenants and agreements required
to be complied with them by Closing;
(e) Xxxxx shall have entered into the Xxxxx Employment Agreement with
Acquiror;
(f) Xxxxx shall have entered into the Xxxxx Option Agreement with
Acquiror;
(g) Nizic shall have entered into the Nizic Employment Agreement with
Acquiror;
(h) Nizic shall have entered into the Nizic Option Agreement with
Acquiror;
(i) The Principal Shareholders shall have entered into, and the
Principal Shareholder Escrow Shares be delivered pursuant to, the Principal
Shareholder Escrow Agreement the form of which is attached hereto as Exhibit
1.4(b);
(j) Each SkyNet Shareholder (other than Dissenting Shareholders) shall
have executed and delivered an Investment Letter;
(k) All persons who were parties to the Subscription Agreement shall
have executed and delivered Amendment No. 1 together with certificates
representing any shares of preferred stock purportedly issued under the
Subscription Agreement;
(l) SkyNet shall have entered into a release with Arizona Capital
Group, Inc. with respect to any and all of the rights and obligations of SkyNet
and Arizona Capital Group, Inc. under that certain letter agreement dated
September 17, 1998 by and between SkyNet and Arizona Capital Group, Inc.;
(m) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured;
35
(n) The Acquiror shall have completed a due diligence investigation
with respect to the business, operations, financial condition and prospects of
SkyNet and its Subsidiaries and shall have been satisfied with the results of
its due diligence investigation with such satisfaction to be determined in the
sole and absolute discretion of Acquiror;
(o) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or the related transactions; and
(p) The Board of Directors of SkyNet and the SkyNet shareholders shall
have approved the Merger in accordance with the NGCL.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
(a) Principal Shareholders. The Principal Shareholders shall
----------------------
indemnify, defend and hold harmless Acquiror from and against any and all
demands, claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") incurred by Acquiror which arise out of
or result from a misrepresentation, breach of warranty, or breach of any
covenant or agreement of SkyNet or the Principal Shareholders contained herein
or in the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by SkyNet or the Principal Shareholder pursuant hereto or in
connection with the transactions contemplated hereby or thereby; provided that
such indemnification obligations hereunder shall be limited to the 2,000,000
shares of Acquiror Common Stock delivered into escrow pursuant to the Principal
Shareholder Escrow Agreement.
(b) Acquiror. Acquiror shall indemnify, defend and hold harmless
--------
SkyNet and the Principal Shareholders from and against any and all Claims, as
defined at subsection 7.1(a) above, incurred by SkyNet and/or the Principal
Shareholders which arise out of or result from a misrepresentation, breach of
warranty or breach of any covenant of Acquiror contained herein or in the
Schedules annexed hereto or in any deed, exhibit, closing certificate, schedule
or any ancillary certificates or other documents or instruments furnished by
Acquiror pursuant hereto or in connection with the transactions contemplated
hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All claims for
------------------------------------------------
indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any Claim for which a party
-------------------
(the "Indemnitee") would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party
the Indemnitee shall promptly notify the other party (the "Indemnitor") of such
Claim, specifying the nature thereof, the
36
applicable provision in this Agreement or other instrument under which the Claim
arises, and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense. If the
Indemnitor has disputed the Claim, as provided above, and shall not defend such
Claim, the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense. Neither Indemnitee nor
Indemnitor shall be liable for any settlement of any Claim without the prior
written consent of the other party.
(ii) Non-Third Party Claims. In the event that the Indemnitee should
-----------------------
have a Claim for indemnification hereunder which does not involve a Claim being
asserted against it or sought to be collected by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such Claim to the Indemnitor.
If the Indemnitor does not notify the Indemnitee within the Notice Period that
it disputes such Claim, the Indemnitor shall pay the amount thereof to the
Indemnitee. If the Indemnitor disputes the amount of such Claim, the
controversy in question shall be submitted to arbitration pursuant to Section
9.8 hereafter.
(d) Right of Set-Off. Subject to the terms of the Principal
----------------
Shareholder Escrow Agreement, in the event a Claim arises pursuant to
subparagraph 7.1(a), Acquiror shall have the right to apply the amount of the
Claim which is agreed to by the other parties against the Principal Shareholder
Escrow Shares identified at subparagraph 1.4(b).
ARTICLE VIII
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at
any time prior to or at the Closing:
(a) by mutual written consent of Acquiror, SkyNet and the Principal
Shareholders;
(b) by any of Acquiror, SkyNet or the Principal Shareholders;
37
(i) if the Closing shall not have occurred on or before October 15,
1998, unless otherwise extended in writing by all of the parties hereto;
provided, however, that the right to terminate this Agreement under this Section
8.1(b)(i) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental body,
regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by SkyNet and the Principal Shareholders if any of the conditions
specified in Section 6.1 have not been met or if satisfaction of such a
condition is or becomes impossible (other than through the failure of SkyNet or
the Principal Shareholders to comply with their respective obligations under
this Agreement) and SkyNet and the Principal Shareholders have not waived such
conditions on or before the Closing; or
(d) by Acquiror if any of the conditions specified in Section 6.2 have
not been met or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Acquiror to comply with their respective
obligations under this Agreement) and Acquiror has not waived such condition on
or before the Closing.
8.2 NOTICE AND EFFECT OF TERMINATION.
In the event of the termination and abandonment of this Agreement
pursuant to Section 8.1, written notice thereof shall forthwith be given to the
other party or parties specifying the provision pursuant to which such
termination is made. Upon termination, this Agreement shall forthwith become
void and all obligations of the parties under this Agreement will terminate
without any liability on the part of any party or its directors, officers or
shareholders and none of the parties shall have any claim or action against any
other party, except that the provisions of this Section 8.2 and Sections 5.2,
5.7 and 5.9, shall survive any termination of this Agreement. Nothing contained
in this Section 8.2 shall relieve any party from any liability for any breach of
this Agreement other than in the event of a termination pursuant to Section 8.1.
8.3 EXTENSION; WAIVER.
Any time prior to the Closing, the parties may (a) extend the time for
the performance of any of the obligations or other acts of any other party under
or relating to this Agreement; (b) waive any inaccuracies in the representations
or warranties by any other party or (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
Any agreement on the part of any other party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
38
8.4 AMENDMENT AND MODIFICATION.
This Agreement may be amended, whether before or after the vote of the
SkyNet Shareholders or shareholders of Acquiror, by written agreement of
Acquiror, SkyNet and the Principal Shareholders; provided, however, that after
the approval, if any, of this Agreement by the SkyNet Shareholders, no such
amendment shall reduce or change the consideration to be received by any SkyNet
Shareholder in connection with the Merger as set out in Section 1.3 hereof or
shall otherwise adversely affect the rights under this Agreement of the SkyNet
Shareholders without the approval of such adversely affected shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of Acquiror, SkyNet and the Principal Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES.
All representations and warranties contained in or made pursuant to
this Agreement or in any agreement, certificate, document or statement delivered
pursuant hereto shall survive the Closing for a period of one (1) year from the
Closing Date, unless otherwise specified in such agreement, certificate or
document; provided, however, that notwithstanding the foregoing, (i) the
representations and warranties set forth in Section 4.1(u) (relating to
environmental matters), Section 4.1(e) (relating to the Financial Statements),
Section 4.1(g) (relating to contingent liabilities) and Section 4.1(i) (relating
to taxes) and all covenants and agreements of the parties relating to the
subject matter(s) thereof shall survive the Closing forever. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
The rights and remedies of the parties to this Agreement are
cumulative, not alternative. In addition to their respective rights to damages
or other remedies they may have, and without limitation thereof, Acquiror shall
have the right to obtain injunctive relief to restrain any breach or otherwise
to specifically enforce the provisions of this Agreement, it being agreed by the
parties that money damages alone would be inadequate to compensate Acquiror for
such breach or other failure to perform the obligations of SkyNet and the
Principal Shareholders under this Agreement.
39
9.2 NOTICES.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date if delivered personally, or
upon the second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to SkyNet, to it at: with a copy to:
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn.: Xxx Xxxxx
(b) if to Acquiror to it at: with a copy to:
c/o Synergy Group International, Inc. Xxxxxxx X. Xxxxx, Esquire
4725 East Sunrise Drive Xxxxxxxx Xxxxxxxxx, P.C.
Xxxxxx, XX 00000 Eleven Penn Center, 14th
Floor
Attn.: Xxxxxxx Xxxxxx Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
(c) if to Xxxxxxxxx X. Xxxxx: with a copy to
Foxholes
Winter Hill Road
Cookham Xxxx SL6 6PJ
England
(d) if to Xxxxxxxxx Xxxxx: with a copy to:
c/o SkyNet Holdings, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
40
(e) if to Deansley Limited: with a copy to:
00 Xxxxxxxx Xxxx
Xxxxxxx, Xxxx xx Xxx 0X0 0XX
(f) if to Xxxx X. Xxxxxxxx: with a copy to:
000 Xxxx Xxxx.
00-000
Xxxxxxx Xxxxxxx, XX 00000
(g) if to Fir: with a copy to:
c/o SkyNet Holdings, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxx
9.3 AGREEMENT; ASSIGNMENT.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 BINDING EFFECT; BENEFIT.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.5 HEADINGS.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
41
9.6 COUNTERPARTS.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.7 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
9.8 ARBITRATION.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided finally in an arbitration proceeding conforming to the Rules of
the American Arbitration Association applicable to commercial arbitration then
in effect at the time of the dispute. The arbitration shall take place in Los
Angeles, California. The decision of the Arbitrators shall be conclusively
binding upon the parties and final, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. The parties shall share equally
the costs of the arbitration.
9.9 SEVERABILITY.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.10 RELEASE AND DISCHARGE.
By virtue of their execution of this Agreement, as of the Closing and
thereafter, the Principal Shareholders hereby agree to release, remise and
forever discharge SkyNet from and against any and all debts, obligations,
liabilities and amounts owing from SkyNet to the Principal Shareholders prior to
the Closing, and SkyNet is not obligated to take any action or make any payments
to third parties on behalf of the Principal Shareholders.
9.11 CERTAIN DEFINITIONS.
As used herein:
(A) "AFFILIATE" shall have the meanings ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended to date (the "Exchange Act");
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(B) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
a day on which federally chartered financial institutions are not open for
business in the City of Philadelphia, Pennsylvania.
(C) "KNOWLEDGE" shall mean the actual current knowledge of the party ,
and/or the executive management of the party to this Agreement, as the case may
be, to whom knowledge is ascribed.
(D) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(E) "PERSON" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
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IN WITNESS WHEREOF, Acquiror, SkyNet and the Principal Shareholders have caused
this Agreement to be signed by their respective officers hereunto duly
authorized, all as of the date first written above.
EPL RESOURCES (DELAWARE) CORP.,
a Delaware Corporation
By: /s/ Xxxxxxx Xxxxxx
------------------
Name: Xxxxxxx Xxxxxx
Title: President
SKYNET HOLDINGS, INC.,
a Nevada corporation.
By: /s/ Xxxxxxxxx Xxxxx
-------------------
Xxxxxxxxx Xxxxx
Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
/s/ Xxxxxxxxx Xxxxx
-------------------
Signature
Name: Xxxxxxxxx Xxxxx
Address:
/s/ Xxxxxxxxx X. Xxxxx
----------------------
Signature
Name: Xxxxxxxxx X. Xxxxx
Address:
/s/ Xxxx Xxxxxxxx
-----------------
Signature
Name: Xxxx X. Xxxxxxxx
Address:
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DEANSLEY LIMITED, an
Isle of Man corporation
By: /s/ E.N. Xxxxxx
---------------
Name: E.N. Xxxxxx
Title: Director
FIR CONSTRUCTION PTY LIMITED,
an Australian Corporation
By: /s/ Xxxxxxxxx Xxxxx
--------------------
Name: Xxxxxxxxx Xxxxx
Title:Managing Director
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