EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
GENEREX BIOTECHNOLOGY CORPORATION,
AGEXP ACQUISITION, INC.
and
ANTIGEN EXPRESS, INC.
Dated as of August 6, 2003.
AGREEMENT AND PLAN OF MERGER, dated as of August 6, 2003 (the "Agreement"),
among GENEREX BIOTECHNOLOGY CORPORATION, a Delaware corporation ("Parent"),
AGEXP ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and ANTIGEN EXPRESS, INC., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have each
determined that it is in the best interests of their respective Stockholders for
Parent to acquire the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of Parent,
Merger Sub and the Company have each approved the merger (the "Merger") of
Merger Sub with and into the Company, in accordance with the General Corporation
Law of the State of Delaware (the "DGCL") and subject to the conditions set
forth herein, which Merger will result in, among other things, the Company's
becoming a wholly owned subsidiary of Parent;
WHEREAS, as a condition to the willingness of, and as an inducement to, Parent
and Merger Sub to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, certain holders of Company Stock (as
defined herein), are entering into an agreement dated as of the date hereof (the
"Stockholders' Agreement") in the form of Exhibit A attached hereto, providing
for certain actions relating to the transactions contemplated by this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
DGCL, (a) Merger Sub shall be merged with and into the Company, (b) the
separate corporate existence of Merger Sub shall cease, and (c) the
Company shall, as the surviving corporation in the Merger, continue its
existence under Delaware law as a wholly owned subsidiary of Parent.
The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation".
1.2. Effective Time. As promptly as practicable after the satisfaction or,
to the extent permitted hereunder, waiver of the conditions set forth
in Article VI, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such
form as required by and executed in accordance with the relevant
provisions of the DGCL (the date and time of such filing, or such later
date and time as may be specified in the Certificate of Merger by
mutual agreement of Parent, Merger Sub and the Company, being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL,
including Section 259 thereof. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the assets,
property, rights, privileges, immunities, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certification of Incorporation; Bylaws. Unless otherwise determined by
Parent prior to the Effective Time, at the Effective Time and without
any further action on the part of the parties hereto, (a) the
Certificate of Incorporation of Merger Sub shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by the DGCL; provided that Article First of the Certificate of
Incorporation of Merger Sub shall be amended to read in its entirety as
follows: "The name of the corporation is `Antigen Express, Inc.'" and
(b) the Bylaws of Merger Sub shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by the DGCL.
1.5 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with
the Surviving Corporation's Certificate of Incorporation and Bylaws.
Xx. Xxxxxx X. Xxxxx and Xx. Xxxxxx X. Xxxxxxxxx will be directors of
Merger Sub immediately prior to the Effective Time together with such
other individuals selected by Parent in its sole discretion. The
officers of the Company immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation.
1.6 Conversion of Company Stock, Etc. At the Effective Time, by virtue of
the Merger and without any action on the part of the parties hereto or
the holders of the following securities:
(a) Subject to the provisions of this Article I, each share of
Common Stock, par value $.001 per share, of the Company (the
"Company Common Stock") and each share of Series D Convertible
Preferred Stock, $.01 par value per share, of the Company (the
"Series D Preferred Stock") issued and outstanding immediately
prior to the Effective Time (other than any shares of the
Company Stock to be canceled pursuant to Section 1.7 and
subject to Section 1.10 and Section 1.1) will be converted
automatically into the right to receive one (1) fully paid and
non-assessable share (the "General Exchange Ratio") of the
Common Stock, par value $0.01 per share (the "Parent Common
Stock"), of Parent.
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(b) Subject to the provisions of this Article I, each share of the
Company's Series B Convertible Preferred Stock, par value $.01
per share (the "Series B Preferred Stock"), Series C
Convertible Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), and Series E Convertible
Preferred Stock, par value $.01 per share (the "Series E
Preferred Stock" (the Company Common Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock are referred
to herein collectively as the "Company Stock"), issued and
outstanding immediately prior to the Effective Time (other
than any shares of Company Stock to be canceled pursuant to
Section 1.7 and subject to Section 1.10 and Section 1.1) will
be converted automatically into the right to receive the
number of fully paid and non-assessable shares of Parent
Common Stock set forth below opposite the title of such series
of stock (the shares into which the Company Stock shall be
converted pursuant to Section 1.6(a) and (b) are referred to
herein as the "Merger Consideration"):
Series B Preferred Stock: 1.667
Series C Preferred Stock: 2.0
Series E Preferred Stock: 1.85
(respectively, the "Series B Exchange Ratio", the "Series C
Exchange Ratio" and the "Series E Exchange Ratio"; the Series
B Exchange Ratio, the Series C Exchange Ratio, the Series D
Exchange Ratio, the Series E Exchange Ratio and the General
Exchange Ratio are referred to herein collectively as the
"Exchange Ratios").
(c) Each share of the Company Stock issued and outstanding
immediately prior to the Effective Time shall automatically be
redeemed and canceled and shall cease to exist, and each
holder of a certificate representing any such Company Stock
shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration upon surrender
of such certificate in accordance with Section 1.12 hereof,
without interest, and to receive the Additional Merger
Consideration in accordance with Section 1.6(d).
(d) Forthwith following the Effective Time, Parent shall issue to
each holder of Parent Common Stock into which Company Stock
shall have been converted pursuant to Section 1.6 (a) or (b)
and each holder as of the Effective Date of a Company Option
that shall be assumed pursuant to Section 1.8 hereof, for each
such share of Parent Common Stock held and each such share of
Parent Common Stock issuable upon exercise of such assumed
Company Option (all of such shares of Parent Common Stock
issued or issuable as of the Effective Date shall be referred
to below as the "Qualified Shares"), that number of fully paid
and non-assessable shares of Parent Common Stock equal to one
million (1,000,000) divided by the aggregate number of
Qualified Shares (the "Additional Merger Consideration").
Parent shall issue such shares in accordance with the
instructions received by the Exchange Agent with respect to
the shares exchanged pursuant to Section 1.6(a) and (b), as
modified by any further notice received by any holder of
Parent Common Stock, and in accordance with the information
requested by the Company from holders of Company Options who
were not holders of Company Stock as of the Closing. The
Additional Merger Consideration shall be held by Parent in
escrow until January 31, 2004 and then delivered to the
holders pursuant to the foregoing sentences.
1.7 Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Stock held in the treasury of the Company, if any, and each
share of Company Stock, if any, owned by Parent or Merger Sub, in each
case immediately prior to the Effective Time, shall be canceled and
extinguished without any conversion thereof and no payment or
distribution shall be made with respect thereto.
1.8 Stock Options and Warrants. At the Effective Time, all options to
purchase Company Stock then outstanding (the "Company Options") by
virtue of the Merger and without any action on the part of the holder
thereof, shall be assumed by Parent in accordance with Section 5.5
hereof.
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1.9 Capital Stock of Merger Sub. Each share of Common Stock, par value
$0.001 per share, of Merger Sub (the "Merger Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall be
automatically converted into one (1) validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation and
shall thereafter constitute all of the issued and outstanding capital
stock of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any shares of Merger Sub Common Stock shall
continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.10 Adjustments to Exchange Ratios. Without limiting any other provision of
this Agreement, the Exchange Ratios shall be adjusted to reflect fully
the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Parent
Common Stock or Company Stock), reorganization, recapitalization or
other like change with respect to Parent Common Stock or Company Stock
occurring after the date hereof and prior to the Effective Time.
1.11 Fractional Shares. No certificates representing fractional shares of
Parent Common Stock shall be issued in connection with the Merger, and
any fractional interest to which any holder of Company Stock is
entitled after aggregating all shares into which such holder's Company
Stock shall have been converted pursuant to Section 1.6(a) and (b)
shall be rounded to the nearest whole share (with one-half rounded up).
Any fractional interest to which any holder of Company Stock or Company
Options is entitled after aggregating all shares into which such
holder's Company Stock shall have been converted pursuant to Section
1.6(d) or which are otherwise issuable to such holder pursuant to
Section 1.6(d) shall be rounded to the nearest whole share (with
one-half rounded up).
1.12 Surrender of Certificates.
(a) Exchange Agent. StockTrans, Inc. will act as the exchange
agent in the Merger (the "Exchange Agent").
(b) Parent to Provide Common Stock. Parent has delivered to the
Exchange Agent for exchange in accordance with this Article I,
1,780,029 shares of Parent Common Stock to be exchanged
pursuant to Section 1.6(a) and (b).
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder
of record of a certificate or certificates (the
"Certificates") that represented as of the Effective Time
outstanding shares of Company Stock to be exchanged pursuant
to Section 1.6(a) and (b), a letter of transmittal (which
shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Parent may
reasonably specify) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of
a Certificate to the Exchange Agent, together with such letter
of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing the number of
whole shares of Parent Common Stock, after giving effect to
any required (as defined herein) Tax withholdings, and the
Certificate so surrendered shall forthwith be cancelled. At
any time following six (6) months after the Effective Time,
all or any number of shares of Parent Common Stock deposited
with or made available to the Exchange Agent pursuant to
Section 1.12(b), which remain undistributed to the holders of
the Certificates representing shares of Company Stock, shall
be delivered to Parent upon demand, and thereafter such
holders of unexchanged shares of Company Stock shall be
entitled to look only to Parent (subject to abandoned
property, escheat or other similar laws) only as general
creditors thereof with respect to the shares of Parent Common
Stock for payment upon due surrender of their Certificates.
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(d) Distributions with respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective
Time with respect to shares of Parent Common Stock with a
record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the
whole shares of Parent Common Stock represented thereby until
the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder
of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time and
payable between the Effective Time and the time of such
surrender with respect to such whole shares of Parent Common
Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than the
name in which the Certificate surrendered in exchange therefor
is registered, it will be a condition of the issuance thereof
that (i) the Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that
the Person requesting such exchange will have paid any
transfer or other Taxes required by reason of the issuance of
a certificate for shares of Parent Common Stock in a name
other than the name of the registered holder of the
Certificate surrendered, or (ii) established to the
satisfaction of Parent, or any agent designated by Parent,
that such Tax has been paid or is not applicable.
(f) No Liability. Notwithstanding anything to the contrary in this
Agreement, none of the Exchange Agent, Parent, the Merger Sub
or the Surviving Corporation shall be liable to a holder of a
Certificate for any Parent Common Stock that was properly
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(g) Withholding of Tax. Parent or the Exchange Agent will be
entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
Company Stock such amounts as Parent (or any Affiliate
thereof) or the Exchange Agent shall determine in good faith
they are required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of
federal, state, local or foreign Tax Law. To the extent that
amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the Company
Stock in respect of whom such deduction and withholding were
made by Parent.
1.13 Further Ownership Rights in Company Stock. All shares of Parent Common
Stock issued upon the surrender for exchange of Company Stock in
accordance with the terms of this Article I (including any cash paid in
respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Company Stock. At the
Effective Time, the stock transfer books of the Company shall be
closed, and thereafter there shall be no further registration of
transfers of shares of Company Stock on the records of the Surviving
Corporation. From and after the Effective Time, the holders of
Certificates evidencing ownership of shares of Company Stock
outstanding shall cease to have any rights with respect to such shares
of Company Stock except as otherwise provided for herein. If, after the
Effective Time, Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in
this Article I.
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1.14 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article VII, and subject to the provisions of Article VI,
the closing of the Merger (the "Closing") will take place at 10:00 a.m.
(Eastern time) on a date (the "Closing Date") to be mutually agreed
upon by the parties, which date shall be not later than the third (3rd)
Business Day after all the conditions set forth in Article VI shall
have been satisfied (or waived in accordance with Section 7.5, to the
extent the same may be waived), unless another time and/or date is
agreed by the parties hereto. The Closing shall take place at the
offices of Parent, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx,
Xxxxxx or such other place as the parties hereto otherwise agree.
1.15 Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing Company Stock shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by
the holder thereof, such shares of Parent Common Stock.
1.16 Tax Consequences. For federal income tax purposes, the parties intend
that the Merger be treated as a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall be, and is
hereby, adopted as a plan of reorganization for purposes of Section 368
of the Code. The parties shall not take a position on any Tax Return
(as defined herein) inconsistent with this Section 1.16.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as follows
except as set forth on the Company Disclosure Schedule:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under Delaware law and
has all the requisite corporate power and authority, and is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, waivers, qualifications, certificates,
Orders (as defined herein) and approvals (collectively, "Approvals")
necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted, except for such Approvals, the
failure of the Company to be in possession of which could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification
or licensing necessary, except where the failure to be so qualified
could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
2.2 Certificate of Incorporation and Bylaws. The Company has heretofore
furnished to Parent a true and complete copy of each of its and each of
its Subsidiaries' Certificate of Incorporation and Bylaws or equivalent
organizational documents, as amended or restated to the date hereof.
Such Certificate of Incorporation and Bylaws and equivalent
organizational documents of the Company and each of its Subsidiaries
are in full force and effect, and no other organizational documents are
applicable to or binding upon the Company or its Subsidiaries.
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2.3 Capitalization.
(a) The authorized capital of the Company consists of 3,200,000
shares of Company Common Stock, 100,000 shares of Series B
Preferred Stock, 100,000 shares of Series C Preferred Stock,
500,000 shares of Series D Preferred Stock and 135,135 shares
of Series E Preferred Stock, all with a par value of $.01 per
share. As of the date hereof, (i) 866,607 shares of Company
Common Stock are issued and outstanding; (ii) 100,000 shares
of Series B Preferred Stock, 18,900 shares of Series C
Preferred Stock, 500,000 shares of Series D Preferred Stock
and 112,920 shares of Series E Preferred Stock are issued and
outstanding; (iii) no shares of Company Stock are held in the
treasury of the Company; (iv) no shares of Company Common
Stock are held by any Subsidiary of the Company; and (v)
112,400 shares of Company Common Stock are duly reserved for
future issuance pursuant to Company Options granted. None of
the outstanding shares of Company Stock are subject to, nor
were they issued in violation of any, purchase option, call
option, right of first refusal, preemptive right, subscription
right or any similar right. Except as set forth above and in
the Company Disclosure Schedule, as of the date hereof, no
shares of voting or non-voting capital stock, other equity
interests, or other voting securities of the Company were
issued, reserved for issuance or outstanding. The Company
Disclosure Schedule lists all outstanding Company Options and
warrants to purchase Company Stock, the record holder thereof
and the exercise prices thereof. All outstanding shares of
capital stock of the Company were duly authorized and validly
issued and fully paid and non-assessable and not subject to
any kind of preemptive (or similar) rights. There are no
bonds, debentures, notes or other indebtedness of the Company
with voting rights (or convertible into, or exchangeable for,
securities with voting rights) on any matters on which
Stockholders of the Company may vote.
(b) The Company has no Subsidiaries.
(c) Except as described in the Company Disclosure Schedule, as of
the date hereof, there are no outstanding securities, options,
warrants, calls, rights, convertible or exchangeable
securities, commitments, agreements, arrangements or
undertakings of any kind (contingent or otherwise) to which
the Company is a party or by which it is bound obligating the
Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other
voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any
shares of capital stock (or options or warrants to acquire any
such shares) of the Company. Except as described in the
Company Disclosure Schedule, as of the date hereof, there are
no stock-appreciation rights, stock-based performance units,
"phantom" stock rights or other agreements, arrangements or
commitments of any character (contingent or otherwise)
pursuant to which any Person is or may be entitled to receive
any payment or other value based on the revenues, earnings or
financial performance, stock price performance or other
attribute of the Company or assets or calculated in accordance
therewith (collectively, "Stock-Based Rights") or to cause the
Company to file a registration statement under the Securities
Act, or which otherwise relate to the registration of any
securities of the Company. Except as set forth in the Company
Disclosure Schedule or the Stockholders' Agreement, there are
no voting trusts, proxies or other agreements, commitments or
understandings of any character to which the Company, to the
Knowledge (as defined herein) of the Company, any of the
Company's Stockholders is a party or by which any of them is
bound with respect to the issuance, holding, acquisition,
voting or disposition of any shares of capital stock of the
Company.
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2.4 Authority; Enforceability. The Company has all necessary corporate
power and authority to execute and deliver this Agreement and each
instrument required to be executed and delivered by it at the Closing,
and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by the
Company of this Agreement, the performance of its obligations
hereunder, and the consummation by the Company of the transactions
contemplated hereby, have been duly and validly authorized by all
corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger,
the approval and authorization of this Agreement by votes of the
holders of a majority of the outstanding Company Stock in accordance
with Delaware law and the Company's Certificate of Incorporation and
Bylaws) herein or therein. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
2.5 Required Vote. The Board of Directors of the Company has duly (i)
approved and declared advisable this Agreement, (ii) determined that
the transactions contemplated hereby are advisable, fair to and in the
best interests of the holders of Company Stock, (iii) resolved to
recommend adoption of this Agreement and the Merger to the Stockholders
of the Company, and (iv) directed that this Agreement be submitted to
the Stockholders of the Company for their approval and authorization.
The affirmative vote of a majority of all outstanding shares of Company
Stock is the only vote of the holders of any class or series of capital
stock of the Company necessary to approve and authorize this Agreement
and the Merger. As of August 6, 2003, the holders of the Company Stock
that are parties to the Stockholders' Agreement own (beneficially and
of record) and have the right to vote, in the aggregate, approximately
28.89% of the total issued and outstanding Company Stock.
2.6 No Conflict; Required Filings and Consents.
(a) The execution and delivery by the Company of this Agreement
and any instrument required by this Agreement to be executed
and delivered by the Company at the Closing do not, and the
performance of this Agreement or any instrument required by
this Agreement to be executed and delivered by the Company at
the Closing, shall not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of the Company, (ii)
conflict with or violate any Law or Order in each case
applicable to the Company or by which its properties or assets
are bound or affected, or (iii) result in any breach or
violation of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under,
or impair the Company's rights under, or give to others any
rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the
properties or assets of the Company pursuant to, any note,
bond, mortgage, indenture, Contract, permit, franchise or
other instrument or obligation to which the Company is a party
or by which the Company or its properties or assets is bound
or affected, except (A) as set forth in the Company Disclosure
Schedule or (B) in the case of clause (ii) or (iii) above, for
any such conflicts, breaches, violations, defaults or other
occurrences that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by the Company of this Agreement or
any instrument required by this Agreement to be executed and
delivered by the Company at the Closing do not, and the
performance of this Agreement and any instrument required by
this Agreement to be executed and delivered by the Company at
the Closing, shall not, require the Company to, except as set
forth in the Company Disclosure Schedule, obtain any Approval
of any Person or Approval of, observe any waiting period
imposed by, or make any filing with or notification to, any
Governmental Authority, domestic or foreign, except for (A)
compliance with applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state
securities laws ("Blue Sky Laws"), (B) the filing of the
Certificate of Merger in accordance with Delaware law or (C)
where the failure to obtain such Approvals, or to make such
filings or notifications, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
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2.7 Material Agreements.
(a) The Company Disclosure Schedule sets forth a true and complete
list, and if oral, an accurate and complete summary, of all
material Contracts to which the Company is a party as of the
date hereof (collectively, "Material Agreements"), including
the following agreements:
(i) employment Contracts with officers of the Company and
other Contracts with current or former officers,
directors or Stockholders of the Company, and all
severance, change in control or similar Contracts
with any current or former Stockholders, directors,
officers, employees or agents of the Company that
will result in any obligation (absolute or
contingent) of the Company to make any payment to any
current or former Stockholders, directors, officers,
employees or agents of the Company following either
the consummation of the transactions contemplated
hereby, termination of employment (or the relevant
relationship), or both;
(ii) labor Contracts (if any);
(iii) Contracts involving annual revenues, expenditures or
liabilities in excess of $50,000 per annum which are
not cancelable (without material penalty, cost or
other liability) within sixty (60) days;
(iv) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments and
Contracts providing for the borrowing or lending of
money, whether as borrower, lender or guarantor, in
each case, relating to indebtedness or obligations in
excess of $50,000;
(v) Contracts containing a covenant limiting the freedom
of the Company (or which purport to limit the freedom
of Parent) to engage in any line of business or
compete with any Person or operate at any location in
the world;
(vi) joint venture or partnership agreements or joint
development, distribution or similar agreements
pursuant to which any third party is entitled or
obligated to develop or distribute any products on
behalf of the Company or pursuant to which the
Company is entitled or obligated to develop or
distribute any products on behalf of any third party;
(vii) Contracts for the acquisition, directly or indirectly
(by merger or otherwise) of material assets (whether
tangible or intangible) or the capital stock of
another Person;
(viii) Contracts involving the issuance or repurchase of any
capital stock of the Company other than, with respect
to the issuance of Company Common Stock, the options
or warrants listed in the Company Disclosure
Schedule;
(ix) Contracts under which the Company has granted or
received exclusive rights;
(x) any interest rate swaps, caps, floors or option
agreements or any other interest rate risk management
arrangement or foreign exchange Contracts; and
(xi) Contracts for the license or supply of any geographic
or similar data to the Company.
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True and complete copies of all written Material Agreements
have been delivered or been made available to Parent by the
Company. The Company Disclosure Schedule sets forth a true and
complete list of all Contracts that would purport to bind
Parent following the consummation of the Merger.
(b) Other than Material Agreements that have terminated or expired
in accordance with their terms, each Material Agreement is in
full force and effect, is a valid and binding obligation of
the Company and is enforceable, in accordance with its terms,
against the Company except that the enforcement thereof may be
limited by (A) the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar Laws affecting creditors' rights generally, (B)
general principles of equity (whether in a proceeding in
equity or at law) and (C) an implied covenant of good faith
and fair dealing, and such Material Agreements will continue
to be valid, binding and enforceable in accordance with their
respective terms and in full force and effect immediately
following the consummation of the transactions contemplated
hereby, with no material alteration or acceleration or
increase in fees or liabilities. The Company is not alleged to
be and, to the best Knowledge of the Company, no other party
is or is alleged to be in default under, or in breach or
violation of, any Material Agreement and, to the best
Knowledge of the Company, no event has occurred which, with
the giving of notice or passage of time or both, would
constitute such a default, breach or violation. The
designation or definition of Material Agreements for purposes
of this Section 2.7 and the disclosures made pursuant thereto
will not be construed or utilized to expand, limit or define
the terms "material" and "Material Adverse Effect" as
otherwise referenced and used in this Agreement.
2.8 Compliance. The Company is in compliance with, and is not in default or
violation of, (i) the Certificate of Incorporation and Bylaws of the
Company, (ii) any Law or Order or by which its assets or properties are
bound or affected, and (iii) the terms of all notes, bonds, mortgages,
indentures, Contracts, permits, franchises and other instruments or
obligations to which the Company is a party or by which any of its
assets or properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such failures of compliance, defaults
and violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company
is in compliance with the terms of all Approvals, except where the
failure to so comply could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as set
forth in the Company Disclosure Schedule or as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect, the Company has not received notice of any revocation or
modification of any Approval of any federal, state, local or foreign
Governmental Authority that is material to the Company.
2.9 Financial Statements.
(a) The Company has not filed, nor is it obligated to file, any
forms, reports, schedules, statements or other documents with
the United States Securities and Exchange Commission (the
"SEC").
(b) The unaudited Balance Sheet and Income Statement (i) were
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout
the period involved, and (ii) fairly present the consolidated
financial position of the Company as of the date thereof and
the consolidated results of its operations and cash flows for
the period indicated.
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2.10 Absence of Certain Changes or Events.
(a) Except as described in the Company Disclosure Schedule, since
May 31, 2003, the Company has conducted its business only in
the ordinary and usual course and in a manner consistent with
past practice, and there has not been any change, development,
circumstance, condition, event, occurrence, damage,
destruction or loss that has had or could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b) Except as described in the Company Disclosure Schedule, since
May 31, 2003, (i) there has not been any change by the Company
in its accounting methods, principles or practices, any
revaluation by the Company of any of its assets, including,
writing down the value of inventory or writing off notes or
accounts receivable, and (ii) there has not been any action or
event, and the Company has not agreed in writing or otherwise
to take any action, that would have required the consent of
Parent pursuant to Section 4.1 had such action or event
occurred or been taken after the date hereof and prior to the
Effective Time.
2.11 No Undisclosed Liabilities. The Company does not have any liabilities
or obligations of any nature (whether absolute, accrued, fixed,
contingent or otherwise), and there is no existing fact, condition or
circumstance which could reasonably be expected to result in such
liabilities or obligations, except liabilities or obligations (i)
disclosed in the Company Disclosure Schedule, (ii) incurred in the
ordinary course of business or (iii) which do not have, and could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
2.12 Absence of Litigation. Except as described in the Company Disclosure
Schedule, there is no Litigation pending on behalf of or against or, to
the Knowledge of the Company, threatened against the Company, before or
subject to any Court or Governmental Authority which if adversely
determined could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company is not subject
to any outstanding Orders which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
2.13 Employee Benefit Plans.
(a) The Company Disclosure Schedule describes all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), including
without limitation multiemployer plans within the meaning of
Section 3(37) of ERISA, and all bonus, stock option, stock
purchase, stock appreciation rights, incentive, deferred
compensation, retirement or supplemental retirement,
severance, golden parachute, vacation, cafeteria, dependent
care, medical care, employee assistance program, education or
tuition assistance programs, insurance and other similar
fringe or employee benefit plans, programs or arrangements,
and any employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or
relating to, any present or former employee or director of the
Company, which is or has been entered into, contributed to,
established by, participated in and/or maintained by the
Company, any trade or business (whether or not incorporated)
which is a member of a controlled group or which is under
common control with the Company (an "ERISA Affiliate") within
the meaning of Section 414 of the Code, and with respect to
which the Company has any current liability (together, the
"Employee Plans"). The Company has provided to Parent correct
and complete copies of (where applicable) (a) all plan
documents, summary plan descriptions, summaries of material
modifications, amendments, and resolutions related to such
plans (b) the most recent determination letters received from
the IRS, if any, (c) the three most recent Form 5500 Annual
Reports, if any, (d) the most recent audited financial
statement and actuarial valuation, if any, and (e) all related
agreements, insurance Contracts and other Contracts which
implement each such Employee Plan. Except with regard to the
Company Options, there are no restrictions on the ability of
the sponsor of each Employee Plan (which is currently the
Company) to amend or terminate any Employee Plan, and each
Employee Plan may be transferred by the Company to Parent or
the Merger Sub, as the case may be.
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(b) There has been no "prohibited transaction", as such term is
defined in Section 406 of ERISA and Section 4975 of the Code,
with respect to any Employee Plan; there are no claims pending
(other than routine claims for benefits) or, to the Knowledge
of the Company, threatened against any Employee Plan or
against the assets of any Employee Plan, nor are there any
current or threatened Liens on the assets of any Employee
Plan; all Employee Plans conform to, and in their operation
and administration are in all material respects in compliance
with, the terms thereof and requirements prescribed by any and
all statutes (including ERISA and the Code), orders, and
governmental Regulations currently in effect with respect
thereto (including all applicable requirements for
notification, reporting and disclosure to participants of the
Department of Labor, Internal Revenue Service or Secretary of
the Treasury); the Company and ERISA Affiliates have performed
in all material respects all obligations required to be
performed by them under each Employee Plan and are not in
default under or violation of, and the Company has no
Knowledge of any default or violation by any other Person with
respect to, any of the Employee Plans. The transactions
contemplated herein will not directly or indirectly result in
an increase of benefits, acceleration of vesting or
acceleration of timing for payment of any benefit to any
participant or beneficiary, except as disclosed in the Company
Disclosure Schedule.
(c) The Company does not currently maintain, and has never
maintained, an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) that is or was intended to
qualify under Section 401(a) of the Code.
(d) Each Employee Plan that is a "group health plan" (within the
meaning of Code Section 5000(b)(1)) has been operated in
compliance in all material respects with the group health plan
continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA ("COBRA Coverage"),
Section 4980D of the Code and Sections 701 through 707 of
ERISA, Title XXII of the Public Health Service Act and the
provisions of the Social Security Act, to the extent such
requirements are applicable. Except as disclosed in the
Company Disclosure Schedule, no Employee Plan or written or
oral agreement exists which obligates the Company to provide
health care coverage, medical, surgical, hospitalization,
death or similar benefits (whether or not insured) to any
employee or former employee of the Company following such
employee's or former employee's termination of employment with
the Company, other than COBRA Coverage.
(e) Except as set forth in the Company Disclosure Schedule, (i) no
event has occurred and no condition exists that would subject
the Company, either directly or by reason of its affiliation
with any ERISA Affiliate, to any Tax, fine, Lien, penalty or
other liability imposed by ERISA; (ii) for each Employee Plan
with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the
most recent Form since the date thereof; (iii) no "reportable
event" (as such term is defined in Section 4043 of ERISA) has
occurred with respect to any Employee Plan; and (iv) all
awards, grants or bonuses made pursuant to any Employee Plan
have been, or will be, fully deductible by the Company
notwithstanding the provisions of Sections 162(m) and 280G of
the Code and the Regulations promulgated thereunder.
2.14 Employment and Labor Matters.
(a) The Company Disclosure Schedule identifies all employees and
consultants employed or engaged by the Company with an annual
base salary or compensation rate of $25,000 or higher and sets
forth each such individual's rate of pay or annual
compensation, job title and date of hire. Except as set forth
in the Company Disclosure Schedule, there are no employment,
consulting, collective bargaining, severance pay, continuation
12
pay, termination or indemnification agreements or other
similar Contracts of any nature (whether in writing or not)
between the Company and any current or former Stockholder,
officer, director, employee, consultant, labor organization or
other representative of any of the Company's employees, nor is
any such Contract currently being negotiated. Except as set
forth in the Company Disclosure Schedule, no individual will
accrue or receive additional benefits, service or accelerated
rights to payments under any Employee Plan or any of the
agreements set forth in the Company Disclosure Schedule,
including the right to receive any parachute payment, as
defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a
result of the transaction contemplated herein that could
result in the payment of any such benefits or payments. Except
as set forth in the Company Disclosure Schedule, the Company
is not delinquent in payments to any of its employees or
consultants for any wages, salaries, commissions, bonuses,
benefits or other compensation for any services or otherwise
arising under any policy, practice, agreement, plan, program
or Law. Except as set forth in the Company Disclosure
Schedule, the Company is not liable for any severance pay or
other payments to any employee or former employee arising from
the termination of employment, nor will the Company have any
liability under any benefit or severance policy, practice,
agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable Law or
otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the
termination by the Company of any persons employed by the
Company on or prior to the Effective Time. None of the
Company's employment policies or practices is currently being
audited or investigated by any Governmental Authority or
Court. There is no pending or, to the Knowledge of the
Company, threatened Litigation, unfair labor practice charge,
or other charge or inquiry against the Company brought by or
on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative
of the Company's employee, or other individual or any
Governmental Authority with respect to employment practices
brought by or before any Court or Governmental Authority.
(b) Except as set forth in the Company Disclosure Schedule, there
are no controversies pending or threatened, between the
Company and its employees; there are no activities or
proceedings of any labor union to organize any employees of
the Company; during the past five years there have been no
strikes, slowdowns, work stoppages, disputes, lockouts, or
threats thereof, by or with respect to any employees of the
Company. The Company is in compliance in all material respects
with all applicable Laws, Contracts, and policies relating to
employment, employment practices, wages, hours, and terms and
conditions of employment, including the obligations of the
Worker Adjustment and Retraining Notification Act of 1988, as
amended ("WARN"), and all other notification and bargaining
obligations arising under any collective bargaining agreement,
by Law or otherwise. The Company has not effectuated a "plant
closing" or "mass layoff" as those terms are defined in WARN,
affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company.
2.15 Title to Assets; Leases.
(a) Except as described in the Company Disclosure Schedule, the
Company has good and marketable title to all assets owned by
it, free and clear of all Liens. The Company owns no real
property.
(b) The Company Disclosure Schedule contains a list of all leases
of real property to which the Company is a party
(collectively, "Real Property"). Except as set forth in the
Company Disclosure Schedule, (i) each Real Property lease to
which the Company is a party is in full force and effect in
accordance with its terms, (ii) all rents and additional rents
due to date from the Company on each such lease have been
paid, (iii) the Company has not received written notice that
it is in material default thereunder, and (iv) there exists no
default by the Company under such lease. There are no leases,
subleases, licenses, concessions or any other agreements or
commitments to which the Company is a party granting to any
Person any right to possession, use occupancy or enjoyment of
any of the Real Property or any portion thereof.
13
2.16 Taxes. For purposes of this Agreement, "Tax" or "Taxes" shall mean
taxes and governmental impositions of any kind in the nature of (or
similar to) taxes, payable to any federal, state, local or foreign
taxing authority, including those on or measured by or referred to as
income, franchise, profits, gross receipts, capital ad valorem, custom
duties, alternative or add-on minimum taxes, estimated, environmental,
disability, registration, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, and
interest, penalties and additions to tax imposed with respect thereto;
and "Tax Returns" shall mean returns, reports and information
statements, including any schedule or attachment thereto, with respect
to Taxes required to be filed with the Internal Revenue Service or any
other governmental or taxing authority or agency, domestic or foreign,
including consolidated, combined and unitary tax returns. Except as set
forth in the Company Disclosure Schedule:
(a) All material income Tax Returns required to be filed by or on
behalf of the Company have been timely filed, and all such Tax
Returns are true, complete and correct in all material
respects.
(b) All material income Taxes payable by or with respect to the
Company (whether or not shown on any Tax Return) have been
timely paid, and adequate reserves (other than a reserve for
deferred Taxes established to reflect timing differences
between book and Tax treatment) in accordance with GAAP are
provided on the respective company's Balance Sheet for any
material Taxes not yet due. All assessments for material
income Taxes due and owing by or with respect to the Company
with respect to completed and settled examinations or
concluded litigation have been paid. The Company has not
incurred an income Tax liability from the date of the latest
Balance Sheet other than an income Tax liability incurred in
the ordinary course of business.
(c) No action, suit, proceeding, investigation, claim or audit has
formally commenced and no written notice has been given that
such audit or other proceeding is pending or threatened with
respect to the Company, and all material deficiencies proposed
as a result of such actions, suits, proceedings,
investigations, claims or audits have been paid, reserved
against or settled.
(d) Except as set forth in the Company Disclosure Schedule, the
Company has not requested, or been granted any waiver of any
federal, state, local or foreign statute of limitations with
respect to, or any extension of a period for the assessment
of, any income Tax. No extension or waiver of time within
which to file any income Tax Return of, or applicable to, the
Company has been granted or requested which has not since
expired.
(e) Except as set forth in the Company Disclosure Schedule, the
Company is not and has never been (nor does the Company have
any liability for unpaid Taxes because it once was) a member
of an affiliated, consolidated, combined or unitary group, and
the Company is not a party to any Tax allocation or sharing
agreement, and the Company is not liable for the Taxes of any
other person under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as
transferee or successor, by Contract, or otherwise.
14
(f) Except as disclosed in the Company Disclosure Schedule, the
Company has not made any material payments, are not obligated
to make any material payments, and is not a party to any
agreements that under any circumstances could obligate any of
them to make any material payments, that will not be
deductible under Section 280G of the Code.
(g) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(h) Except where the failure to do so would not have a Material
Adverse Effect on the Company, the Company has complied with
all applicable Laws relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441, 1442 and 3406 of the Code or
similar provisions under any foreign Laws) and have, within
the time and in the manner required by Law, withheld from
employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid
over under all applicable Laws.
(i) The Company has not made an election under Section 341(f) of
the Code.
2.17 Environmental Matters.
(a) Except as described in the Company Disclosure Schedule, and
except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: (i)
the Company complies and has complied, during all applicable
statute of limitations periods, with all applicable
Environmental Laws, and possess and comply, and have possessed
and complied during all applicable statute of limitations
periods, with all Environmental Permits; (ii) to the Knowledge
of the Company, there are and have been no Materials of
Environmental Concern or other conditions at any property
owned by the Company now or in the past that are in
circumstances that could reasonably be expected to give rise
to any liability of the Company, or result in costs to the
Company arising out of any Environmental Law; (iii) no
Litigation (including, to the Knowledge of the Company, any
notice of violation or alleged violation), under any
Environmental Law or with respect to any Materials of
Environmental Concern to which the Company is, or to the
Knowledge of the Company will be, named as a party, or
affecting its business, is pending or, to the Knowledge of the
Company, threatened; nor is the Company the subject of any
investigation or the recipient of any request for information
in connection with any such Litigation or potential
Litigation; (iv) there are no Orders or agreements under any
Environmental Law or with respect to any Materials of
Environmental Concern to which the Company is a party or
affecting its business.
(b) The Company has furnished to Parent true and complete copies
of all Environmental Reports in the possession or control of
the Company.
(c) For purposes of this Agreement, the terms below are defined as
follows:
"Environmental Laws" shall mean any and all Laws, Orders,
guidelines, codes, or other legally enforceable requirement
(including, without limitation, common law) of any foreign
government, the United States, or any state, local, municipal
or other Governmental Authority, regulating, relating to or
imposing liability or standards of conduct concerning
protection of the environment.
"Environmental Permits" shall mean any and all permits,
licenses, registrations, notifications, exemptions and any
other Approvals required of the Company under any
Environmental Law.
15
"Environmental Report" shall mean any report, study,
assessment, audit, or other similar document that addresses
any issue of actual or potential non-compliance with, actual
or potential liability under or cost arising out of, or actual
or potential impact on business in connection with, any
Environmental Law or any proposed or anticipated change in or
addition to Environmental Law, that may in any way affect the
Company or any entity for which it may be liable.
"Materials of Environmental Concern" shall mean any gasoline
or petroleum (including crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other substances of any
kind, whether or not any such substance is defined as
hazardous or toxic under any Environmental Law, that is
regulated pursuant to or could give rise to liability under
any Environmental Law.
2.18 Intellectual Property.
(a) The Company Disclosure Schedule sets forth, for the
Intellectual Property owned by the Company, a complete and
accurate list of all United States and foreign patent,
copyright, trademark, service xxxx, trade dress, domain name
and other registrations, and applications, indicating for
each, the applicable jurisdiction, registration number (or
application number), and date issued or filed, and all
material unregistered Intellectual Property.
(b) All registered Intellectual Property of the Company is
currently in compliance in all material respects with all
legal requirements (including timely filings, proofs and
payments of fees), to the Knowledge of the Company, is valid
and enforceable, and is not subject to any filings, fees or
other actions falling due within ninety (90) days after the
Effective Time. No registered Intellectual Property of the
Company has been or is now involved in any cancellation,
dispute or Litigation, and, to the Knowledge of the Company,
no such action is threatened. No patent of the Company has
been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
(c) The Company Disclosure Schedule sets forth a complete and
accurate list of all licenses, sublicenses, consent, royalty
or other agreements concerning Intellectual Property to which
the Company is a party or by which any of its assets are bound
(other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail
acquisition price of less than $10,000) (collectively,
"License Agreements"). All of the Company's License Agreements
are valid and binding obligations of the Company, enforceable
in accordance with their terms, and there exists no event or
condition which will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default by the Company under any such License
Agreement, except for violations, breaches, or defaults which
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(d) The Company exclusively owns or has the valid right to use all
of the Intellectual Property necessary for the conduct of the
Company's business as currently conducted or contemplated to
be conducted and for the ownership, maintenance and operation
of the Company's properties and assets. No royalties,
honoraria or other fees are payable by the Company to any
third parties for the use of or right to use any Intellectual
Property, except as set forth in the Company Disclosure
Schedule.
16
(e) Except as disclosed in the Company Disclosure Schedule, (i) to
the Knowledge of the Company, the conduct of the Company's
business as currently conducted or planned to be conducted
does not infringe or otherwise impair or conflict with
("Infringe") any Intellectual Property rights (other than
patents) of any third party, and the Intellectual Property
rights of the Company are not being Infringed by any third
party and (ii) there is no Litigation or Order pending or
outstanding, to the Knowledge of the Company, threatened or
imminent, that seeks to limit or challenge or that concerns
the ownership, use, validity or enforceability of any
Intellectual Property of the Company.
(f) Except as set forth in the Company Disclosure Schedule, the
consummation of the transactions contemplated hereby will not
result in the alteration, loss or impairment of the validity,
enforceability or the Company's right to own or use any of the
Intellectual Property, nor will such transactions require the
Approval of any Governmental Authority or third party in
respect of any Intellectual Property.
(g) The Company Disclosure Schedule does not own any material
Software and licenses no Software other than generally
commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less
than $10,000.
(h) The Company has taken all reasonable steps to protect the
Company's rights in its confidential information and trade
secrets. Without limiting the foregoing, the Company requires
each employee, consultant and contractor to execute and,
except as disclosed in the Company Disclosure Schedule, each
employee, consultant and contractor has executed, appropriate
agreements that are substantially consistent with the
Company's standard forms thereof (true and complete copies of
which have been delivered to Parent). Except under
confidentiality obligations, there has been no material
disclosure of any of the Company's confidential information or
trade secrets to any third party.
2.19 Insurance. The Company Disclosure Schedule sets forth a true and
complete list of all material insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company. There is no claim by
the Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums payable under all such policies
and bonds have been paid and the Company is otherwise in full
compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage), and the
Company shall maintain in full force and effect all such insurance
during the period from the date hereof through the Closing Date. Such
policies of insurance and bonds are of the type and in amounts
customarily carried by Persons conducting businesses similar to those
of the Company and reasonable in light of the assets of the Company. To
the Knowledge of the Company, there is no threatened termination of or
material premium increase with respect to any of such policies or
bonds.
2.20 No Restrictions on the Merger; Takeover Statutes. The Board of
Directors of the Company has, prior to the date hereof, approved this
Agreement and the Merger and the other transactions contemplated hereby
and such approval is sufficient to render inapplicable to this
Agreement, the Merger and any other transactions contemplated hereby,
the restrictions on business combinations of Section 203 of the DGCL.
No Delaware law or other takeover statute or similar Law and no
provision of the Certificate of Incorporation or Bylaws, or other
organizational documents or governing instruments of the Company or any
Material Agreement to which it is a party (a) would or would purport to
impose restrictions which might adversely affect or delay the
consummation of the transactions contemplated by this Agreement, or (b)
as a result of the consummation of the transactions contemplated by
this Agreement or the acquisition of securities of the Company or the
Surviving Corporation by Parent or Merger Sub (i) would or would
purport to restrict or impair the ability of Parent to vote or
otherwise exercise the rights of a Stockholder with respect to
securities of the Company that may be acquired or controlled by Parent,
or (ii) would or would purport to entitle any Person to acquire
securities of the Company.
17
2.21 Brokers. No broker, financial advisor, finder or investment banker or
other Person is entitled to any broker's, financial advisor's, finder's
or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of the Company.
2.22 Certain Business Practices. As of the date hereof, neither the Company
nor any director, officer, employee or agent of the Company has (i)
used any funds for unlawful contributions, gifts, entertainment or
other unlawful payments relating to political activity, (ii) made any
unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended,
or (iv) made any other unlawful payment.
2.23 Interested Party Transactions. Except as disclosed in the Company
Disclosure Schedule, (i) there are no existing and there has been no
Contract, transaction, indebtedness or other arrangement, or any
related series thereof, between the Company and any its directors,
officers or Stockholders (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and (ii) except for
the Company Options, at the Closing, all such Contracts, transactions,
indebtedness and other arrangements shall be terminated (except for
amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses).
2.24 Disclaimer of Other Representation and Warranties. The Company does not
make, and has not made, any representations or warranties relating to
the Company or in connection with the transactions contemplated hereby
other than those expressly set forth in this Article II. No person has
been authorized by the Company to make any representation or warranty
relating to the Company, the business of the Company or otherwise in
connection with the transactions contemplated hereby except as set
forth in this Article II and, if made, such representation or warranty
must not be relied upon as having been authorized by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant to
the Company as follows:
3.1 Organization and Qualification. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under
the laws of Delaware. Parent has all the requisite corporate power and
authority, and is in possession of all Approvals necessary to own,
lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to be so qualified,
existing and in good standing or to have such power, authority and
Approvals could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of Parent and Merger
Sub is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed
and in good standing that could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Merger Sub is a newly-formed single purpose entity which has been
formed solely for the purposes of the Merger and will not carry on any
business or engage in any activities other than those reasonably
related to the Merger.
18
3.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent
consists of (i) 50,000,000 shares of Parent Common Stock, par
value $.001 per share, of which, as of August 6, 2003,
approximately 25,275,208 shares were issued and outstanding,
(ii) 1,000,000 shares of preferred stock, par value $.001 per
share, of which, as of August 6, 2003, approximately 1,123
shares were issued and outstanding and designated as Series A
preferred stock, and (iii) 1,000 shares of special voting
rights preferred stock, par value $.001 per share, of which,
as of August 6, 2003, 1000 shares were issued and outstanding.
All of the outstanding shares of Parent Common Stock are, and
all shares to be issued as part of the Merger Consideration
and the Additional Merger Consideration will be, when issued
in accordance with the terms hereof, duly authorized, validly
issued, fully paid and non-assessable.
(b) As of the date hereof, the authorized capital stock of Merger
Sub consists of 1,000 shares of Merger Sub Common Stock, of
which 1,000 shares of Merger Sub Common Stock are outstanding.
All of the outstanding shares of Merger Sub Common Stock are
owned by Parent.
3.3 Authority; Enforceability. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and
delivered by it at the Closing, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by each of Parent and Merger
Sub of this Agreement and each instrument required hereby to be
executed and delivered by Parent and Merger Sub at the Closing and the
performance of their respective obligations hereunder and thereunder
have been duly and validly authorized by the Board of Directors of each
of Parent and Merger Sub and by Parent as the sole Stockholder of
Merger Sub. Except for filing of the Certificate of Merger, no other
corporate proceedings on the part of Parent or Merger Sub are necessary
to authorize the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent
and Merger Sub and, assuming due authorization, execution and delivery
hereof by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each
of Parent and Merger Sub in accordance with its terms.
3.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery by Parent and Merger Sub of this
Agreement do not, and the performance of this Agreement by
Parent or Merger Sub shall not, (i) conflict with or violate
the Certificate of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Merger Sub, or (ii)
conflict with or violate any Law or Order in each case
applicable to Parent or Merger Sub or by which its or any of
their respective properties is bound or affected, except in
the case of clause (ii) above, for any such conflicts or
violations that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by Parent and Merger Sub of this
Agreement do not, and the performance by Parent and Merger Sub
of this Agreement shall not, require Parent or Merger Sub to
obtain the Approval of, observe any waiting period imposed by,
or make any filing with or notification to, any Governmental
Authority, domestic or foreign, except for (A) compliance with
applicable requirements of the Securities Act, the Exchange
Act, Blue Sky Laws, or the pre-Merger notification
requirements of the HSR Act or Foreign Competition Laws, (B)
the filing of the Certificate of Merger in accordance with
Delaware law, (C) the filing of a listing application or other
documents as required by the Nasdaq SmallCap Market
("Nasdaq"), or (D) where the failure to obtain such Approvals,
or to make such filings or notifications, would not
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
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3.5 SEC Filings; Financial Statements.
(a) Parent has filed all reports and documents required to be
filed with the SEC since December 31, 2001 (collectively, the
"Parent SEC Reports") pursuant to the federal securities Laws
and Regulations of the SEC promulgated thereunder, and all
Parent SEC Reports have been filed in all material respects on
a timely basis. The Parent SEC Reports were prepared in
accordance, and complied as of their respective filing dates
in all material respects, with the requirements of the
Exchange Act and the Regulations promulgated thereunder and
did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the
date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Parent SEC
Reports (i) complied in all material respects with applicable
accounting requirements and the published Regulations of the
SEC with respect thereto, (ii) were prepared in accordance
with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent
basis throughout the periods involved (except as may be
expressly described in the notes thereto), and (iii) fairly
presents the consolidated financial position of Parent as at
the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements
included in the Company's Form 10-Q reports were or are
subject to normal and recurring year-end adjustments that have
not been and are not expected to be material in amount to
Parent.
3.6 Absence of Litigation. Except as expressly described in the Parent SEC
Reports filed and publicly available prior to the date hereof, there is
no Litigation pending on behalf of or against or, to the Knowledge of
Parent, threatened against Parent, any of its Subsidiaries, or any of
their respective properties or rights, before or subject to any Court
or Governmental Authority which if adversely determined would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither Parent nor any of its Subsidiaries is
subject to any outstanding Litigation or Order which, individually or
in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect.
3.7 Registration Statement. None of the information supplied by Parent for
inclusion in the Registration Statement (as defined in section 5.1(b))
shall, at the time such document is filed, at the time amended or
supplemented, or at the time the Registration Statement is declared
effective by the SEC, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Registration Statement will comply as to form in all material respects
with the provisions of the Securities Act. Notwithstanding the
foregoing, Parent makes no representation, warranty or covenant with
respect to any information supplied by the Company which is contained
in the Registration Statement.
3.8 Tax Matters. To the Knowledge of Parent, neither Parent and Merger Sub
nor any of their Affiliates has taken or agreed to take any action or
failed to take any action that would prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of
the Code. It is the present intention of Parent to continue at least
one significant historic business line of the Company, or to use at
least a significant portion of the Company's historic assets in a
business, in each case within the meaning of Treas. Reg. section
1.368-1(d).
20
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, between the date hereof and the Effective
Time, except as expressly required or permitted by this Agreement or
unless Parent shall otherwise agree in writing in advance, the Company
shall conduct and shall cause the businesses of each of its
Subsidiaries to be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice and in
compliance with applicable laws. The Company shall use its reasonable
best efforts to preserve intact the business organization and assets of
the Company and each of its Subsidiaries, and to operate, and cause
each of its Subsidiaries to operate, according to plans and budgets
provided to Parent, to keep available the services of the present
officers, employees and consultants of the Company and each of its
Subsidiaries, to maintain in effect Material Agreements and to preserve
the present relationships of the Company and each of its Subsidiaries
with advertisers, sponsors, customers, licensees, suppliers and other
Persons with which the Company or any of its Subsidiaries has business
relations. By way of amplification and not limitation, neither the
Company nor any of its Subsidiaries shall, between the date hereof and
the Effective Time, directly or indirectly do, or propose to do, any of
the following without the prior written consent of Parent:
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws or equivalent organizational document of the Company or
any of its Subsidiaries or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the
corporate structure or ownership of the Company or any of its
Subsidiaries;
(b) issue, grant, sell, transfer, deliver, pledge, promise,
dispose of or encumber, or authorize the issuance, grant,
sale, transfer, deliverance, pledge, promise, disposition or
encumbrance of, any shares of capital stock of any class
(common or preferred), or any options, warrants, convertible
or exchangeable securities or other rights of any kind to
acquire any shares of capital stock or any other ownership
interest or Stock-Based Rights of the Company or any of its
Subsidiaries (except for the issuance of Company Common Stock
issuable pursuant to the Company Options); adopt, ratify or
effectuate a Stockholders' rights plan or agreement; or
redeem, purchase or otherwise acquire, directly or indirectly,
any of the capital stock of the Company or interest in or
securities of any Subsidiary;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock (except that a
wholly owned Subsidiary of the Company may declare and pay a
dividend to its parent); split, combine or reclassify any of
its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution
for, shares of its capital stock; or amend the terms of,
repurchase, redeem or otherwise acquire, or permit any
Subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of its Subsidiaries; or
propose to do any of the foregoing;
(d) sell, transfer, deliver, lease, license, sublicense, mortgage,
pledge, encumber or otherwise dispose of (in whole or in
part), or create, incur, assume or subject any Lien on, any of
the assets of the Company or any of its Subsidiaries
(including any Intellectual Property), except for (i) the sale
of goods or licenses of Intellectual Property in the ordinary
course of business and in a manner consistent with past
practice (x) involving annual revenues or receipts of less
than or equal to $50,000, or involving annual expenditures or
liabilities of less than or equal to $50,000, and (y) having a
term of less than or equal to eighteen months, or (ii)
dispositions of other immaterial assets in the ordinary course
of business and in a manner consistent with past practice;
21
(e) acquire (by merger, consolidation, acquisition of stock or
assets or otherwise) or organize any corporation, limited
liability company, partnership, joint venture, trust or other
entity or any business organization or division thereof; incur
any indebtedness for borrowed money or issue any debt
securities or any warrants or rights to acquire any debt
security or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any
Person, or make any loans, advances or enter into any
financial commitments; or authorize or make any capital
expenditures which are, in the aggregate, in excess of
$100,000 for the Company and its Subsidiaries taken as a
whole;
(f) hire or terminate any employee or consultant, except in the
ordinary course of business consistent with past practice;
increase the compensation or fringe benefits (including,
without limitation, bonus) payable or to become payable to its
officers or employees, except for increases in salary or wages
of employees of the Company or its Subsidiaries who are not
officers of the Company in the ordinary course of business
consistent with past practice, or loan or advance any money or
other asset or property to, or grant any bonus, severance or
termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the
Company or any of its Subsidiaries, or establish, adopt, enter
into, terminate or amend any Employee Plan or any collective
bargaining, bonus, profit sharing, thrift, compensation, stock
option, stock purchase, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for
the benefit of any current or former directors, officers or
employees;
(g) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition,
payments of accounts payable and collection of accounts
receivable) unless required by a change in Law or GAAP used by
it;
(h) (i) other than in the ordinary course consistent with past
practice, enter into any agreement that if entered into prior
to the date hereof would be a Material Agreement as defined in
Section 2.7(a) (excluding Section 2.7(a)(iii)); (ii) modify or
amend in any material respect, transfer or terminate any
Material Agreement or waive, release or assign any rights or
claims thereto or thereunder; (iii) enter into or extend any
lease with respect to Real Property with any third party; (iv)
modify, amend or transfer in any way or terminate any
standstill or confidentiality agreement with any third party,
or waive, release or assign any rights or claims thereto or
thereunder; (v) enter into, modify or amend any License
Agreement or other Contract to provide exclusive rights or
obligations; or (vi) enter into, modify or amend any License
Agreement or other Contract that (x) involves annual revenues
or receipts of greater than $100,000, (y) involves annual
expenditures or liabilities of greater than $100,000 or (z)
has a term of greater than eighteen months;
(i) make any material Tax election other than an election in the
ordinary course of business consistent with the past practices
of the Company or settle or compromise any federal, state,
local or foreign income tax liability or agree to an extension
of a statute of limitations;
22
(j) pay, discharge, satisfy or settle any Litigation or waive,
assign or release any material rights or claims except, in the
case of Litigation, any Litigation which settlement would not:
(A) impose any injunctive or similar Order on the Company or
any of its Subsidiaries or restrict in any way the business of
the Company or any of its Subsidiaries or (B) exceed $100,000
in cost or value to the Company or any of its Subsidiaries.
The Company and its Subsidiaries shall not pay, discharge or
satisfy any liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), except in
the ordinary course of business consistent with past practice
in an amount or value not exceeding $50,000 in any instance or
series of related instances or $100,000 in the aggregate or in
accordance with their terms as in effect as of the date
hereof;
(k) engage in, enter into or amend any Contract, transaction,
indebtedness or other arrangement with, directly or
indirectly, any of the directors, officers, Stockholders or
other Affiliates of the Company and its Subsidiaries, or any
of their respective Affiliates or family members, except for
(i) amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses and (ii) those items
existing as of the date hereof and listed in the Company
Disclosure Schedule;
(l) fail to maintain in full force and effect all self-insurance
and insurance, as the case may be, currently in effect;
(m) take any action that (without regard to any action taken, or
agreed to be taken, by Parent or any of its Affiliates) would
prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code; or
(n) authorize, recommend, propose or announce an intention to do
any of the foregoing, or agree or enter into or amend any
Contract or arrangement to do any of the foregoing.
4.2 Solicitation of Other Proposals.
(a) From the date hereof until the earlier of the Effective Time
or the termination of this Agreement in accordance with its
terms, the Company shall not, nor shall it permit any of its
Affiliates or Subsidiaries to, nor shall it authorize or
permit any of its or their respective Stockholders, directors,
officers, employees, representatives or agents (collectively,
the "Company Representatives"), to directly or indirectly, (i)
solicit, facilitate, initiate, entertain, encourage or take
any action to solicit, facilitate, initiate, entertain or
encourage, any inquiries or communications or the making of
any proposal or offer that constitutes or may constitute an
Acquisition Proposal (as defined herein) or (ii) participate
or engage in any discussions or negotiations with, or provide
any information to or take any other action with the intent to
facilitate the efforts of, any Person concerning any possible
Acquisition Proposal or any inquiry or communication which
might reasonably be expected to result in an Acquisition
Proposal. For purposes of this Agreement, the term
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any person (other than Parent, Merger Sub or any of
their Affiliates) relating to any merger, consolidation,
recapitalization, liquidation or other direct or indirect
business combination, involving the Company or any Material
Subsidiary (as defined herein) or the issuance or acquisition
of shares of capital stock or other equity securities of the
Company or any Material Subsidiary representing 20% or more of
the outstanding capital stock of the Company or such Material
Subsidiary or any tender or exchange offer that if consummated
would result in any Person, together with all Affiliates
thereof, beneficially owning shares of capital stock or other
equity securities of the Company or any Material Subsidiary
representing 20% or more of the outstanding capital stock of
the Company or such Material Subsidiary, or the sale, lease,
exchange, license (whether exclusive or not), or other
disposition of any significant portion of the Intellectual
Property or any significant portion of the business or other
assets of the Company or any Material Subsidiary, or any other
transaction, the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially
delay the consummation of the transactions contemplated hereby
or which would reasonably be expected to diminish
significantly the benefits to Parent or its Affiliates of the
23
transactions contemplated hereby. The Company shall
immediately cease and cause to be terminated, and shall cause
its Subsidiaries and all Company Representatives to
immediately terminate and cause to be terminated, all existing
discussions or negotiations with any Persons conducted
heretofore with respect to, or that could reasonably be
expected to lead to, an Acquisition Proposal. The Company
shall promptly notify each Company Representative of its
obligations under this Section 4.2. Without limiting the
foregoing, it is agreed that any violation of the restrictions
set forth above by any Affiliate or Subsidiary of the Company
or any Company Representative, whether or not such Person is
purporting to act on behalf of the Company, shall be deemed to
be a breach of this Section 4.2(a) by the Company.
(b) For purposes of this Agreement, "Material Subsidiary" means
any Subsidiary of the Company whose consolidated revenues, net
income or assets constitute 20% or more of the revenues, net
income or assets of the Company and its Subsidiaries taken as
a whole.
(c) In addition to the other obligations of the Company set forth
in this Section 4.2, the Company shall immediately advise
Parent orally and in writing of any request for information
with respect to any Acquisition Proposal, or any inquiry with
respect to or which could result in an Acquisition Proposal,
the material terms and conditions of such request, Acquisition
Proposal or inquiry, and the identity of the Person making the
same.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Company Stockholders' Approval; Registration Statement.
(a) The Company shall, promptly following the date hereof, use all
reasonable efforts to obtain the necessary approval of the
Merger and this Agreement by its Stockholders.
(b) Promptly, but in any event no later than the earlier of (a)
thirty (30) days following the effective date of Parent's Form
S-3 that is currently before the SEC, or (b) ninety (90) days
following the Effective Date, Parent shall prepare and file
with the SEC a registration statement on Form S-3 to register
the sale of the Merger Consideration and the Additional Merger
Consideration (the "Registration Statement") and the parties
hereto shall use all reasonable efforts to have such
Registration Statement declared effective by the SEC as
promptly as practicable after such filing. Parent shall obtain
and furnish the information required to be included in the
Registration Statement and, after consultation with the
Company, respond promptly to any comments made by the SEC with
respect to the Registration Statement.
(c) Parent shall, as promptly as practicable, make all necessary
filings with respect to the Merger under the Securities Act
and the Exchange Act and the Regulations thereunder and under
applicable Blue Sky or similar securities Laws, and shall use
all reasonable efforts to obtain required Approvals with
respect thereto.
24
5.2 Access to Information; Confidentiality.
(a) Upon reasonable notice, the Company shall afford to the
officers, employees, accountants, counsel and other
representatives and agents of Parent (collectively, "Parent
Representatives"), reasonable access, during the period prior
to the Effective Time, to all its properties, books,
Contracts, commitments and records and, during such period,
the Company shall furnish promptly to the other all
information concerning its business, properties, books,
Contracts, commitments, record and personnel as Parent may
reasonably request. The Company shall make available to the
other party the appropriate individuals for discussion of such
entity's business, properties and personnel as Parent or the
Parent Representatives may reasonably request. No
investigation pursuant to this Section 5.2(a) shall affect any
representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
(b) Parent shall keep all information obtained pursuant to Section
5.2(a) confidential in accordance with the terms of the
Confidential Disclosure Agreement dated May 1, 2003 (the
"Confidentiality Agreement") between Parent and the Company.
Anything contained in the Confidentiality Agreement to the
contrary notwithstanding, the Company and Parent hereby agree
that each such party may issue press release(s) or make other
public announcements in accordance with Section 5.10.
5.4 Reasonable Best Efforts; Further Assurances.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each party hereto shall use its reasonable best
efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and to assist and cooperate with the other
party or parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated hereby, and by the Related
Agreements. The Company and Parent shall each use its
reasonable best efforts to (i) as promptly as practicable,
obtain all Approvals (including those referred to in Sections
2.6(a) and 2.6(b) and the Company Disclosure Schedule), and
the Company and Parent shall make all filings under applicable
Law required in connection with the authorization, execution
and delivery of this Agreement by the Company and Parent and
the consummation by them of the transactions contemplated
hereby and thereby, including the Merger (in connection with
which Parent and the Company will cooperate with each other in
connection with the making of all such filings, including
providing copies of all such documents to the non-filing party
and its advisors prior to filings and, if requested, will
accept all reasonable additions, deletions or changes
suggested in connection therewith); (ii) lift, rescind or
mitigate the effects of any injunction or other Order
adversely affecting the ability of any party hereto to
consummate the transactions contemplated hereby and thereby
and to prevent, with respect to any threatened or such
injunction or other Order, the issuance or entry thereof,
provided, however, that neither Parent nor any of its
Affiliates shall be under any obligation to (x) make
proposals, execute or carry out agreements or submit to Orders
providing for the sale or other disposition or holding
separate (through the establishment of a trust or otherwise)
of any assets or categories of assets of Parent, any of its
Affiliates, including its Subsidiaries, the Company or the
holding separate of Company Stock or imposing or seeking to
impose any limitation on the ability of Parent or any of its
Affiliates, including its Subsidiaries, to conduct their
business or own such assets or to acquire, hold or exercise
full rights of ownership of Company Stock, or (y) otherwise
take any step to avoid or eliminate any impediment which may
be asserted under any Law governing competition, monopolies or
restrictive trade practices which, in the reasonable judgment
of Parent, might result in a limitation of the benefit
expected to be derived by Parent as a result of the
transactions contemplated hereby or might adversely affect the
Company or Parent or any of Parent's Affiliates, including its
Subsidiaries. Neither party hereto will take any action which
results in any of the representations or warranties made by
such party pursuant to Articles II or III, as the case may be,
becoming untrue or inaccurate in any material respect.
25
(b) The parties hereto shall use their reasonable best efforts to
satisfy or cause to be satisfied all of the conditions
precedent that are set forth in Article VI, as applicable to
each of them, and to cause the transactions contemplated by
this Agreement to be consummated. Each party hereto, at the
reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting
completely the consummation of this Agreement and the
transactions contemplated hereby.
(c) The Company and Parent shall cooperate with one another:
(i) in determining whether any action by or in respect
of, or filing with, any Governmental Authority or
other third party, is required, or any Approvals are
required to be obtained from parties in connection
with the consummation of the Merger;
(iii) in seeking any Approvals or making any filings in
connection with the consummation of the Merger,
including furnishing information required in
connection therewith, and seeking timely to obtain
any such Approvals, or making any filings.
(d) The Company shall use its reasonable best efforts to cause its
Affiliates and other Persons to transfer and assign all rights
necessary for the Company to continue to conduct its business
consistent with historical operations and as currently
conducted, pursuant to documentation and in a manner
reasonably acceptable to Parent.
5.5 Stock Options and Stock Plan; Options.
(a) At the Effective Time, each outstanding Company Option,
whether vested or unvested, will be assumed by Parent. Each
such Company Option so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and
conditions in effect immediately prior to the Effective Time,
except that such Company Option will be exercisable solely for
that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Stock that were
purchasable under such Company Option immediately prior to the
Effective Time multiplied by the General Exchange Ratio,
rounded to the nearest whole number of shares of Parent Common
Stock (with one-half rounded up), and the per-share exercise
price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option will be equal to the
quotient determined by dividing the exercise price per share
of Company Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the General
Exchange Ratio, and rounding the resulting exercise price up
to the nearest whole cent. If the sale of stock issuable upon
exercise of assumed Company Options cannot be covered by
Parent's current registration on Form S-8, the sale of such
stock will also be included in the Registration Statement.
(b) Parent shall reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of
Company Options assumed by Parent under this Agreement. Parent
shall file as soon as practicable after the Effective Date a
registration statement on Form S-8 under the Securities Act
covering the shares of Parent Common Stock issuable upon the
exercise of the Company Options assumed by Parent pursuant to
Section 5.5(a), and shall use its reasonable efforts to cause
such registration statement to become effective as soon
thereafter as practicable and to maintain such registration in
effect until the exercise or expiration of such assumed
Company Options.
(c) The vesting of each Company Option shall not accelerate as a
result of, or in connection with, the transactions
contemplated hereby, except to the extent required by the
existing terms thereof. In addition, the Company shall ensure
that no discretion is exercised by the Board of Directors or
any committee thereof or any other body or Person so as to
cause the vesting of any Company Option or any other warrant
or right to acquire shares of Company Stock to accelerate.
26
5.6 Employee Benefits.
(a) Parent agrees that individuals who are employed by the Company
immediately prior to the Effective Time shall become employees
of the Surviving Corporation upon the Effective Time (each
such employee, a "Company Employee"); provided, however, that
this Section 5.6(a) shall not be construed to limit the
ability of the Company to terminate the employment of any
Company Employee at any time.
(b) After the Effective Time and on a schedule determined by
Parent in connection with its integration of its business with
that of the Company, the Company Employees shall be eligible
to participate in the employee benefit plans of Parent to the
same extent as employees of Parent. The Company Employees will
be allowed credit for their service with the Company for
purposes of vesting, calculating the number of vacation days
to which such employees are entitled, subject to a maximum of
five incremental days of vacation, and participation only (and
not for entitlement (except as provided with respect to
vacation) or benefit accrual purposes), with respect to the
employee benefit plans in which such Company Employees are
allowed by Parent to participate following the Effective Time.
5.7 Reorganization.
(a) The Company shall not knowingly take, or knowingly permit any
controlled Affiliate of the Company to take, any action that
could prevent the Merger from being treated as a
"reorganization" within the meaning of Section 368 of the
Code.
(b) Parent will continue at least one significant historic
business line of the Company, or use at least a significant
portion of the Company's historic business assets in a
business, in each case within the meaning of Treas. Reg.
section 1.368-1(d), except that Parent may transfer the
Company's historic business assets (i) to a corporation that
is a member of Parent's "qualified group" within the meaning
of Treas. Reg. section 1.368-1(d)(4)(ii), or (ii) to a
partnership if (A) one or more members of the Parent's
"qualified group" have active substantial management functions
as a partner with respect to the Company's historic business
or (B) members of Parent's "qualified group" in the aggregate
own an interest in the partnership representing a significant
interest in the Company's historic business, in each case
within the meaning of Treas. Reg. section 1.368-1(d)(4)(iii).
5.8 Notification of Certain Matters.
(a) Prior to the Effective Time, the Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the
Company, of the occurrence, or non-occurrence, of any event
the occurrence, or non-occurrence, of which results in any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect (or, in the case
of any representation or warranty qualified by its terms by
materiality or Material Adverse Effect, then untrue or
inaccurate in any respect) and any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or
satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 5.8 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such
notice.
(b) Prior to the Effective Time, each of the Company and Parent
shall give prompt notice to the other of (i) any notice or
other communication from any Person alleging that the Approval
of such Person is or may be required in connection with the
Merger or the Related Agreements, (ii) any notice or other
communication from any Governmental Authority in connection
with the Merger or the Related Agreements, (iii) any
Litigation, relating to or involving or otherwise affecting
the Company or its Subsidiaries or Parent that relates to the
Merger or the Related Agreements; (iv) the occurrence of a
default or event that, with notice or lapse of time or both,
will become a default under any Material Agreement of the
Company; and (v) any change that could reasonably be expected
to have a Material Adverse Effect on the Company or Parent or
is likely to delay or impede the ability of either Parent or
the Company to consummate the transactions contemplated by
this Agreement or the Related Agreements or to fulfill their
respective obligations set forth herein or therein.
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(c) Prior to the Effective Time, each of the Company parties or
and Parent shall give (or shall cause their respective
Subsidiaries to give) any notices to third Persons, and use,
and cause their respective Subsidiaries to use, its reasonable
best efforts to obtain any consents from third Persons (i)
necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, (ii) otherwise required under
any Contracts in connection with the consummation of the
transactions contemplated hereby or (iii) required to prevent
a Material Adverse Effect on the Company or Parent from
occurring. If any party shall fail to obtain any such consent
from a third Person, such party shall use its reasonable best
efforts, and will take any such actions reasonably requested
by the other parties, to limit the adverse effect upon the
Company and Parent, their respective Subsidiaries, and their
respective businesses resulting, or which would result after
the Effective Time, from the failure to obtain such consent.
5.9 Listing on Nasdaq. Parent shall use its reasonable best efforts to
cause the Parent Common Stock to be issued in the Merger and pursuant
to Parent's options to be issued pursuant to Section 5.5 to be approved
for listing on Nasdaq, subject to official notice of issuance, prior to
the Effective Time.
5.10 Public Announcements. Parent and the Company shall consult with and
obtain the approval of the other party before issuing any press release
or other public announcement with respect to the Merger or this
Agreement and shall not issue any such press release prior to such
consultation and approval, except as may be required by Law or any
listing agreement related to the trading of the shares of either party
on any national securities exchange or national automated quotation
system, in which case the party proposing to issue such press release
or make such public announcement shall use its reasonable best efforts
to consult in good faith with the other party before issuing any such
press release or making any such public announcement.
5.11 Takeover Laws. If any form of anti-takeover statute, Regulation or
charter provision or Contract is or shall become applicable to the
Merger or the transactions contemplated hereby or by the Related
Agreements, the Company and the Board of Directors of the Company shall
grant such Approvals and take such actions as are necessary under such
Laws and provisions so that the transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise act to eliminate or
minimize the effects of such Law, provision or Contract on the
transactions contemplated hereby or thereby.
5.12 Indemnification; Directors and Officer Insurance.
(a) All rights to indemnification, advancement of Litigation
expenses and limitation of personal liability existing in
favor of the directors and officers of the Company and its
Subsidiaries under the provisions existing on the date hereof
in their respective certificates of incorporation, bylaws or
similar organizational documents, as well as related director
indemnification agreements in accordance with their terms in
existence on the date hereof, shall, with respect to any
matter existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement),
survive the Effective Time for a period of not less than six
years.
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(b) The provisions of this Section 5.12 are intended to be for the
benefit of, and shall be enforceable by, each Person entitled
to indemnification hereunder and the heirs and representatives
of such Person.
5.13 Stockholders' Agreement. The Company shall use its reasonable best
efforts, on behalf of Parent and pursuant to the request of Parent, to
cause each Stockholder of the Company named on the signature pages to
the Stockholders' Agreement to execute and deliver to Parent,
concurrently with the execution of this Agreement, and to comply with,
the Stockholders' Agreement.
5.14 Release Agreements. The Company shall use its reasonable best efforts,
on behalf of Parent and pursuant to the request of Parent, to cause Xx.
Xxxxxx X. Xxxxx and Xx. Xxxxxx X. Xxxxxxxxx to execute and deliver to
Parent, and to comply with, a release agreement in the form of Exhibit
C attached hereto (the "Release Agreements") prior to the Effective
Time, providing for, among other things, release of the Company, Parent
and the Surviving Corporation and their respective Affiliates from any
and all claims, known and unknown, that such Person has or may have
against such Persons through the Effective Time.
5.15 Parent Funding Commitment. Parent will advance to the Surviving
Corporation an aggregate amount of not less than $2,000,000 ratably
over the two (2) year period following the Effective Date which
advances will be debt, equity or a combination thereof in the sole
discretion of Parent. Such advances will be utilized by the Surviving
Corporation solely in accordance with a budget agreed to by Parent and
the Company prior to the Closing Date.
ARTICLE VI
CONDITIONS OF MERGER
6.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the
Stockholders of the Company in accordance with the DGCL and
the Certificate of Incorporation and Bylaws of the Company;
(b) Nasdaq Listing. The shares of Parent Common Stock issuable to
the Stockholders of the Company pursuant to this Agreement
shall have been approved for listing on Nasdaq subject to
official notice of issuance.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or
other Order (whether temporary, preliminary or permanent)
issued by any Court of competent jurisdiction or other legal
restraint or prohibition shall be in effect which prevents the
consummation of the Merger on substantially the same terms and
conferring on Parent substantially all the rights and benefits
as contemplated herein, nor shall any proceeding brought by
any Governmental Authority, domestic or foreign, seeking any
of the foregoing be pending, and there shall not be any action
taken, or any Law or Order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation
of the Merger on substantially the same terms and conferring
on Parent substantially all the rights and benefits as
contemplated herein illegal.
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(f) Tax Opinions. Parent and the Company shall have received
written opinions of, respectively, Xxxxxx Xxxxxxx Xxxxxx &
Xxxxxxx, LLC and Xxxxx Xxxx LLP, in form and substance
reasonably satisfactory to them to the effect that the Merger
will constitute a reorganization within the meaning of Section
368(a) of the Code. The issuance of each of such opinions
shall be conditioned on the receipt by such tax counsel of
representation letters from each of Parent, Merger Sub and the
Company. The specific provisions of each such representation
letter shall be in form and substance reasonably satisfactory
to such tax counsel, and each such representation letter shall
be dated on or before the date of such opinion and shall not
have been withdrawn or modified in any material respect.
(g) Other Opinions. Parent and the Company shall have received
written opinions of, respectively, Xxxxx Xxxx LLP and Xxxxxx
Xxxxxxx Xxxxxx & Xxxxxxx, LLC, in form and substance
reasonably satisfactory to them, regarding due authorization,
enforceability, no conflicts and securities law compliance.
(h) Employment Agreements. Xx. Xxxxxx X. Xxxxx and Xx. Xxxxxx X.
Xxxxxxxxx shall have entered into employment agreements with
the Company in form and substance satisfactory to such
individuals and the Parent.
6.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in this Agreement and the
Related Agreements shall be true and correct on and as of the
Effective Time, with the same force and effect as if made on
and as of the Effective Time (other than representations and
warranties which address matters only as of a particular date,
in which case such representations and warranties shall be
true and correct, on and as of such particular date).
(b) Agreements and Covenants. The Company shall have performed or
complied with all agreements and covenants required by this
Agreement and the Related Agreements to be performed or
complied with by it on or prior to the Effective Time, except
for any failure to perform or comply with such agreements and
covenants which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and
Parent and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer and Chief
Financial Officer of the Company.
(c) Third Party Consents. Parent shall have received evidence, in
form and substance reasonably satisfactory to it, that those
Approvals of Governmental Authorities and other third parties
set forth in the Company Disclosure Schedule (or not described
in the Company Disclosure Schedule but required to be so
described) have been obtained, except where failure to have
been so obtained, either individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect.
(d) Related Agreements. Each of the Stockholders' Agreement and
the Release Agreements (collectively, the "Related
Agreements") shall be in full force and effect as of the
Effective Time, and each Person who or which is required or
contemplated by the parties hereto to be a party to any
Related Agreement who or which did not theretofore enter into
such Related Agreement shall execute and deliver such Related
Agreement.
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6.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct on and as of the Effective
Time (other than representations and warranties which address
matters only as of a particular date, in which case such
representations and warranties shall be true and correct on
and as of such particular date).
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, except for any failure
to perform or comply with such agreements and covenants which
would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of
Parent or Merger Sub to consummate the Merger, and the Company
shall have received a certificate to such effect signed by the
Chief Financial Officer of Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the Stockholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not have
been consummated on or before August 31, 2003; provided,
however, that if the Merger shall not have been consummated
solely due to the waiting period (or any extension thereof) or
approvals under the HSR Act or any Foreign Competition Laws
not having expired or been terminated or received, then such
date shall be extended to January 31, 2004; and provided,
further, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose
willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure
of the Merger to have been consummated on or before such date;
(c) By either Parent or the Company, if a Court or Governmental
Authority shall have issued an Order or taken any other
action, in each case which has become final and non-appealable
and which restrains, enjoins or otherwise prohibits the
Merger;
(d) By either Parent or the Company, if, at the Company
Stockholders' Meeting (including any adjournment or
postponement thereof), the requisite vote of the Stockholders
of the Company to approve and adopt this Agreement and to
consummate the Merger shall not have been obtained;
(e) By Parent, if the Board of Directors of the Company or any
committee thereof shall have (i) failed to present and
recommend the approval and adoption of this Agreement and the
Merger to the Stockholders of the Company, or withdrawn or
modified, or proposed to withdraw or modify, in a manner
adverse to Parent or Merger Sub, its recommendation or
approval of the Merger, this Agreement or the transactions
contemplated hereby, (ii) upon a request by Parent to publicly
reaffirm the approval and recommendation of the Merger, this
Agreement and the transactions contemplated hereby, failed to
do so within two Business Days after such request is made, or
(iii) resolved or announced its intention to do any of the
foregoing;
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(f) By Parent, if any Person (other than Parent or an Affiliate of
Parent) acquires beneficial ownership of or the right to
acquire 20% or more of the outstanding shares of capital stock
or other equity interests of the Company or any Material
Subsidiary;
(g) By Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (i) at
any time that any of the representations and warranties of the
Company herein become untrue or inaccurate such that Section
6.2(a) would not be satisfied (treating such time as if it
were the Effective Time for purposes of this Section 7.1(g)),
or (ii) there has been a breach on the part of the Company of
any of its covenants or agreements contained in this Agreement
such that Section 6.2(b) would not be satisfied (treating such
time as if it were the Effective Time for purposes of this
Section 7.1(g)), and, in both case (i) and case (ii), such
breach (if curable) has not been cured within 30 days after
notice to the Company;
(h) By the Company, if it is not in material breach of its
obligations under this Agreement, and if (i) at any time that
any of the representations and warranties of Parent or Merger
Sub herein become untrue or inaccurate such that Section
6.3(a) would not be satisfied (treating such time as if it
were the Effective Time for purposes of this Section 7.1(h))
or (ii) there has been a breach on the part of Parent or
Merger Sub of any of their respective covenants or agreements
contained in this Agreement such that Section 6.3(b) would not
be satisfied (treating such time as if it were the Effective
Time for purposes of this Section 7.1(g)), and such breach (if
curable) has not been cured within 30 days after notice to
Parent; or
(i) By Parent, if any of the Stockholders of the Company that is a
party to the Stockholders' Agreement shall have breached or
failed to perform in any material respect any representation,
warranty, covenant or agreement contained therein, that,
individually or in the aggregate, would reasonably be expected
to have a material adverse effect on or materially impede the
ability of the parties to consummate the Merger as
contemplated herein.
7.2 Effect of Termination. Except as provided in this Section 7.2, in the
event of the termination of this Agreement pursuant to Section 7.1,
this Agreement (other than this Section 7.2 and Sections 2.21, 5.3(b),
5.10, 7.3 and Article VIII, which shall survive such termination) will
forthwith become void, and there will be no liability on the part of
Parent, Merger Sub or the Company or any of their respective officers
or directors to the other and all rights and obligations of any party
hereto will cease, except that nothing herein will relieve any party
from liability for any breach, prior to termination of this Agreement
in accordance with its terms, of any representation, warranty, covenant
or agreement contained in this Agreement.
7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is
consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to all filing fees
payable in connection with filings made under the HSR Act or
Foreign Competition Laws.
32
(b) In the event that Parent terminates this Agreement pursuant to
Section 7.1(d), Section 7.1(e), Section 7.1(f), 7.1(i) or
7.1(g) (due to a willful breach of any covenant or agreement
contained herein by the Company), then the Company shall pay
to Parent, simultaneously with such termination of this
Agreement, a fee in cash equal to $25,000 (the "Termination
Fee") plus the amount of Parent Stipulated Expenses (as
defined below), which Termination Fee and Parent Stipulated
Expenses shall be payable by wire transfer of immediately
available funds to an account specified by Parent.
(c) If this Agreement is terminated pursuant to Section 7.1(g),
then the Company shall reimburse Parent for all Parent
Stipulated Expenses not later than two Business Days after the
date of such termination. As used in this Agreement, the term
"Parent Stipulated Expenses" shall mean those fees and
expenses actually incurred by Parent in connection with this
Agreement, the Related Agreements and the transactions
contemplated hereby and thereby, including fees and expenses
of counsel, investment bankers, accountants, experts,
consultants and other Parent Representatives; provided that
such amount shall not exceed $150,000.
(d) If this Agreement is terminated pursuant to Section 7.1(h),
then Parent shall reimburse the Company for all Company
Stipulated Expenses not later than two Business Days after the
date of such termination. As used in this Agreement, the term
"Company Stipulated Expenses" shall mean those fees and
expenses actually incurred by the Company in connection with
this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby, including fees and expenses
of counsel, investment bankers, accountants, experts,
consultants and other Company Representatives; provided that
such amount shall not exceed $150,000.
(e) Nothing in this Section 7.3 shall be deemed to be exclusive of
any other rights or remedies any party may have hereunder or
under any Related Agreement or at law or in equity for any
breach of this Agreement or any of the Related Agreements.
7.4 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time; provided, however, that, after
approval of the Merger by the Stockholders of the Company, no amendment
may be made which would reduce the amount or change the type of
consideration into which each share of Company Stock shall be converted
upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by all of the parties hereto.
7.5 Waiver. At any time prior to the Effective Time, any party hereto may
extend the time for the performance of any of the obligations or other
acts required hereunder, waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant
hereto and waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The representations,
warranties and agreements of each party hereto will remain operative
and in full force and effect regardless of any investigation made by or
on behalf of any other party hereto, any Person controlling any such
party or any of their officers, directors, representatives or agents
whether prior to or after the execution of this Agreement.
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8.2 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally recognized overnight courier or by
registered or certified mail, postage prepaid, return receipt
requested, or by electronic mail, with a copy thereof to be delivered
or sent as provided above or by facsimile or telecopier, as follows:
(a) If to Parent or Merger Sub:
Generex Biotechnology Corporation
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
E-Mail: xxxxxxxxx@xxxxxxx.xxx
Attention: Xxxx X. Xxxxxxxx, Exec. V.P. & Gen. Counsel
(b) If to the Company:
Antigen Express, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx, XXX 00000
Facsimile: (000) 000-0000
E-Mail: xxxxxxx@xxxxxxxxx.xxx
Attention: Xx. Xxxxxx X. Xxxxx, Chairman & CEO
or to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in
accordance herewith. All such notices or communications shall
be deemed to be received (i) in the case of personal delivery,
nationally recognized overnight courier or registered or
certified mail, on the date of such delivery and (ii) in the
case of facsimile or telecopier or electronic mail, upon
confirmed receipt.
8.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "Affiliate" means any Person that directly or indirectly,
through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned
Person, including, with respect to the Company, any
corporation, partnership, limited liability company or joint
venture in which the Company (either alone, or through or
together with any other Subsidiary) has, directly or
indirectly, an interest of 10% or more.
(b) "Balance Sheet" means the balance sheet of the Company as of
May 31, 2003.
(c) "beneficial owner" (including the terms "beneficial ownership"
and "to beneficially own") with respect to a Person's
ownership of any securities means such Person or any of such
Person's Affiliates or associates (as defined in Rule 12b-2
under the Exchange Act) is deemed to beneficially own,
directly or indirectly, within the meaning of Rule 13d-3 under
the Exchange Act.
(d) "Business Day" means any day other than a Saturday, Sunday or
day on which banks are permitted to close in the State of New
York, USA or in the Province of Ontario, Canada.
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(e) "Company Disclosure Schedule" means a schedule of even date
herewith delivered by the Company to Parent concurrently with
the execution of this Agreement, which, among other things,
will identify exceptions and other matters with respect to the
representations, warranties and covenants of the Company
contained in certain specific sections and subsections.
(f) "Contract" means any contract, plan, undertaking,
understanding, agreement, license, lease, note, mortgage or
other binding commitment, whether written or oral.
(g) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the
ownership of stock, as trustee or executor, by Contract or
credit arrangement or otherwise.
(h) "Court" means any court or arbitration tribunal of the United
States, any domestic state, or any foreign country, and any
political subdivision or agency thereof.
(i) "Governmental Authority" means any governmental agency or
authority of the United States, any domestic state, or any
foreign country, and any political subdivision or agency
thereof, and includes any authority having governmental or
quasi-governmental powers, including any administrative agency
or commission.
(j) "Income Statement" means the income statement of the Company
as of May 31, 2003.
(k) "Intellectual Property" means all United States and foreign
intellectual property, including all worldwide trademarks,
service marks, trade names, URLs and Internet domain names,
designs, slogans, logos, trade dress, together with all
goodwill related to the foregoing; patents, copyrights,
Software, technology, trade secrets and other confidential
information, customer lists, know-how, processes, formulae,
algorithms, models, user interfaces, inventions, advertising
and promotional materials, and all registrations,
applications, recordings, renewals, continuations,
continuations-in-part, divisions, reissues, reexaminations,
foreign counterparts, and other legal protections and rights
related to the foregoing.
(l) "Knowledge" means (i) in the case an individual, knowledge of
a particular fact or other matter if such individual is
actually aware of such fact or other matter and (ii) in the
case of an entity (other than an individual) such entity will
be deemed to have "Knowledge" of a particular fact or other
matter if any individual who is serving, or has at any time
served, as an officer, partner, executor, or trustee of such
Person has, or at any time had, Knowledge (as contemplated by
clause (i) of this Section 8.4(k)) of such fact or other
matter.
(m) "Law" means all laws, statutes, ordinances and Regulations of
any Governmental Agency including all decisions of Courts
having the effect of law in each such jurisdiction.
(n) "Lien" means any mortgage, pledge, security interest,
attachment, encumbrance, lien (statutory or otherwise),
license, claim, option, conditional sale agreement, right of
first refusal, first offer, termination, participation or
purchase or charge of any kind (including any agreement to
give any of the foregoing); provided, however, that the term
"Lien" shall not include (i) statutory liens for Taxes, which
are not yet due and payable or are being contested in good
faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or
rental agreements confined to the premises rented, (iii)
deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old
age pension or other social security programs mandated under
applicable Laws, (iv) statutory or common law liens in favor
of carriers, warehousemen, mechanics and materialmen, to
secure claims for labor, materials or supplies and other like
liens, and (v) restrictions on transfer of securities imposed
by applicable state and federal securities Laws.
35
(o) "Litigation" means any claim, suit, action, arbitration, cause
of action, claim, complaint, criminal prosecution,
investigation, demand letter, or proceeding, whether at law or
at equity, before or by any Court or Governmental Authority,
any arbitrator or other tribunal.
(p) "Material Adverse Effect" means any fact, event, change,
development, circumstance or effect (i) that, when such term
is used in relation to the Company, (A) is materially adverse
to the business, condition (financial or otherwise), results
of operations, assets, liabilities, properties or prospects of
the Company, or (B) would materially impair or delay the
ability of the Company to perform its obligations hereunder,
including the consummation of the Merger, or (ii) that, when
such term is used in relation to Parent or Merger Sub, (A) is
materially adverse to the business, condition (financial or
otherwise), results of operations, assets, liabilities,
properties or prospects of Parent and its Subsidiaries, taken
as a whole, or (B) would materially impair or delay the
ability of the Parent or Merger Sub to perform its obligations
hereunder, including the consummation of the Merger.
(q) "Order" means any judgment, order, writ, injunction, ruling or
decree of, or any settlement under the jurisdiction of, any
Court or Governmental Authority.
(r) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, limited
liability company, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act).
(s) "Regulation" means any rule or regulation of any Governmental
Authority having the effect of Law.
(t) "Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii)
databases and compilations, including any and all data and
collections of data, whether machine readable, on paper or
otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the
foregoing, (iv) the technology supporting, and the contents
and audiovisual displays of any Internet site(s) operated by
or on behalf of Company or any of its Subsidiaries, and (v)
all documentation and other works of authorship, including
user manuals and training materials, relating to any of the
foregoing.
(u) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other Person means any corporation,
partnership, joint venture, limited liability company or other
legal entity of which the Company, the Surviving Corporation,
Parent or such other Person, as the case may be, owns,
directly or indirectly, greater than 50% of the stock or other
equity interests the holder of which is generally entitled to
vote as a general partner or for the election of the board of
directors or other governing body of a corporation,
partnership, joint venture, limited liability company or other
legal entity.
8.5 Interpretation. When a reference is made in this Agreement to Sections,
subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless
otherwise indicated. The words "include", "includes" and "including"
when used herein shall be deemed in each case to be followed by the
words "without limitation". The word "herein" and similar references
mean, except where a specific Section or Article reference is expressly
indicated, the entire Agreement rather than any specific Section or
Article. The table of contents and the headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
36
8.6 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law, or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
8.7 Entire Agreement. This Agreement (including all exhibits and schedules
hereto and thereto) and other documents and instruments delivered in
connection herewith constitute the entire agreement and supersedes all
prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them,
with respect to the subject matter hereof and thereof.
8.8 Assignment. This Agreement shall not be assigned by operation of Law or
otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any Affiliate, provided, that no such
assignment shall relieve the assigning party of its obligations
hereunder.
8.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except as set forth in
Section 5.13, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
8.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or
agreement herein, nor will any single or partial exercise of any such
right preclude other or further exercise thereof or of any other right.
All rights and remedies existing under this Agreement are cumulative
to, and not exclusive to, and not exclusive of, any rights or remedies
otherwise available.
8.11 Governing Law. This Agreement and the rights and duties of the parties
hereunder shall be governed by, and construed in accordance with, the
Law of the Commonwealth of Massachusetts.
8.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GENEREX BIOTECHNOLOGY CORPORATION
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By:
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__/s/_____________________________________________
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Name: Xxxx X. Xxxxxxx
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Title: President & Chief Executive Officer
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37
AGEXP ACQUISITION, INC.
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By:
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____/s/___________________________________________
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Name: Xxxx X. Xxxxxxx
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Title: Director
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ANTIGEN EXPRESS, INC.
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By:
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______/s/_________________________________________
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Name: Xx. Xxxxxx X. Xxxxx
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Title: Chairman & Chief Executive Officer
--------------------------------------------------------------------------------
38
