Agreement and Plan of Merger
among
Eos International, Inc.
Eos Acquisition Corp.
and
I.F.S. of New Jersey, Inc.
December 10, 2002
TABLE OF CONTENTS
Section Page
No. No.
ARTICLE I
THE MERGER
1.1 The Merger....................................................................................2
1.2 Certificate of Incorporation, Bylaws and Board of Directors...................................2
1.3 Effects of the Merger.........................................................................2
1.4 Manner of Conversion of Stock.................................................................2
1.5 Exchange of Certificates; Payment of Merger Consideration.....................................3
1.6 Tax Treatment.................................................................................4
1.7 Effective Time................................................................................4
1.8 Closing.......................................................................................5
1.9 Title; Risk of Loss...........................................................................5
ARTICLE II
DEFINITIONS
2.1 Definitions...................................................................................5
2.2 Other Definitional Provisions.................................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Power........................................................................11
3.2 Capitalization................................................................................12
3.3 Validity of Shares of Eos Common Stock........................................................13
3.4 Authorization; Binding Effect; No Breach......................................................13
3.5 Eos Reports; Financial Statements.............................................................14
3.6 Governmental Filings..........................................................................15
3.7 Assets of Eos.................................................................................15
3.8 Absence of Certain Changes....................................................................15
3.9 Litigation....................................................................................15
3.10 Brokerage.....................................................................................16
3.11 Insurance.....................................................................................16
3.12 Tax Matters...................................................................................16
3.13 Compliance with Laws...........................................................................18
3.14 Product Warranty...............................................................................19
3.15 Contingent Liabilities.........................................................................19
3.21 Disclosure.....................................................................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Power; The Company Shares.....................................................20
4.2 Capitalization.................................................................................20
4.3 Authorization; Binding Effect; No Breach.......................................................21
4.4 Subsidiaries; Investments......................................................................22
4.5 Financial Statements and Related Matters.......................................................22
4.6 Absence of Undisclosed Liabilities.............................................................23
4.7 Assets of the Company..........................................................................23
4.8 Absence of Certain Developments................................................................24
4.9 Governmental Filings...........................................................................25
4.10 Tax Matters....................................................................................25
4.11 Contracts and Commitments......................................................................27
4.12 Proprietary Rights.............................................................................29
4.13 Litigation.....................................................................................31
4.14 Brokerage......................................................................................31
4.15 Insurance......................................................................................31
4.16 Employees......................................................................................31
4.17 ERISA..........................................................................................31
4.18 Real Estate....................................................................................32
4.19 Compliance with Laws...........................................................................34
4.20 Product Warranty...............................................................................35
4.21 Powers of Attorney.............................................................................35
4.22 Bank Accounts..................................................................................35
4.23 Disclosure.....................................................................................35
ARTICLE V
COVENANTS
5.1 Issuance of Merger Consideration without Registration..........................................36
5.2 Access to Properties and Records; Confidentiality..............................................37
5.3 Tax Representation Letter......................................................................39
5.4 Tax Opinion Letter.............................................................................39
5.5 Company Affiliate Letter.......................................................................39
5.6 Conduct of Business of the Company.............................................................39
5.7 Negative Covenants.............................................................................40
5.8 Further Assurances.............................................................................42
5.9 Delivery of Financial Statements...............................................................42
5.10 Employment Agreements..........................................................................43
5.11 Exclusivity....................................................................................43
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of the Company to Effect the Merger..................................44
6.2 Conditions to Obligations of Eos to Effect the Merger..........................................46
ARTICLE VII
TERMINATION
7.1 Events of Termination..........................................................................48
7.2 Effect of Termination..........................................................................49
ARTICLE VIII
MISCELLANEOUS
8.1 Rights and Remedies............................................................................49
8.2 Waivers, Amendments to be in Writing...........................................................49
8.3 Successors and Assigns.........................................................................49
8.4 Governing Law..................................................................................49
8.5 Jurisdiction...................................................................................50
8.6 Notices........................................................................................50
8.7 Severability of Provisions.....................................................................51
8.8 Schedules......................................................................................51
8.9 Counterparts...................................................................................51
8.10 No Third-Party Beneficiaries...................................................................51
8.11 Headings.......................................................................................51
8.12 Merger and Integration.........................................................................51
8.13 Transaction Expenses...........................................................................51
8.14 Further Assurances.............................................................................51
8.15 Announcements..................................................................................52
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit Exhibit No.
Form of Investor Representation Certificate and Registration Rights Agreement............................A
Form of Tax Representation Letter....................................................................... B
Form of Tax Opinion Letter...............................................................................C
Form of Company Affiliate Letter........................................................................ D
SCHEDULES
Schedule 1.2(c) - Post-Merger Board of Directors of the Company
Schedule 1.2(d) - Post-Merger Officers of the Company
Schedule 3.1(a) - Jurisdictions in which Eos is Qualified to Conduct Business
Schedule 3.1(c) - Jurisdictions in which Subsidiaries of Eos are Qualified to Conduct
Business
Schedule 3.1(d) - Good Standing of each Subsidiary of Eos
Schedule 3.1(e) - Capitalization of each Subsidiary of Eos
Schedule 3.1(f) - Directors and Officers of Eos
Schedule 3.2(a) - Capitalization of Eos
Schedule 3.6 - Governmental Filings of Eos
Schedule 3.7 - Rights To Use Assets Used in the Business of Eos and each
Subsidiary
Schedule 3.9 - Litigation Involving Purchasers
Schedule 3.10 - Brokerage
Schedule 3.11 - Insurance Policies of Eos and each Subsidiary
Schedule 3.12 - Tax Matters of Eos and each Subsidiary
Schedule 3.13(a) - Legal Requirements of Eos and each Subsidiary
Schedule 3.13(b) - Compliance with Permits, Licenses, and other Authorizations by Eos and each
Subsidiary
Schedule 3.13(c) - Environmental and Safety Requirements of Eos and each Subsidiary
Schedule 3.14 - Product Warranty By Eos
Schedule 3.15 - Contingent Liabilities
Schedule 4.1(a) - Jurisdictions in which the Company is Qualified to do Business
Schedule 4.1(b) - Directors and Officers of the Company
Schedule 4.2(b) - Capitalization of the Company
Schedule 4.3 - Authorizations of the Company
Schedule 4.4 - Subsidiaries
Schedule 4.5 - Financial Statements of the Company
Schedule 4.6 - Additional Liabilities of the Company
Schedule 4.7 - Rights to Use Assets Used in the Business of the Company and each
Subsidiary
Schedule 4.8 - Changes Since the Latest Company Balance Sheet
Schedule 4.9 - Governmental Filings of the Company
Schedule 4.10 - Tax Matters of the Company
Schedule 4.11(a) - Contracts and Commitments of the Company
Schedule 4.11(c) - Compliance with Company Contracts
Schedule 4.11(e) - Affiliated Transactions
Schedule 4.12(a) - Proprietary Rights of the Company
Schedule 4.12(b) - Notice of Infringement or Misappropriation of Proprietary Rights of the
Company
Schedule 4.12(c) - Required Consents to Assignment of Proprietary Rights of the Company
Schedule 4.13 - Litigation of the Company
Schedule 4.14 - Brokerage
Schedule 4.15 - Insurance Policies of the Company
Schedule 4.16 - Employees of the Company
Schedule 4.17 - ERISA - the Company
Schedule 4.18(a) - Ownership of Real Property of the Company
Schedule 4.18(b) - Leased Real Property of the Company
Schedule 4.19(a) - Legal Requirements of the Company
Schedule 4.19(b) - Compliance with Permits, Licenses, and other Authorizations by the
Company
Schedule 4.19(c) - Environmental and Safety Requirements of the Company
Schedule 4.20 - Product Warranty by the Company
Schedule 4.21 - Powers of Attorney on Behalf of the Company
Schedule 4.22 - Bank Accounts of the Company
Schedule 5.5 - Certain Stockholders of the Company (Affiliate Letter)
Schedule 5.7(a)(iii) - Change in Authorized or Issued Capital Stock
Schedule 6.1(l) - Resignations of Certain Directors and Officers of Eos
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this “Agreement”) made as of December 10, 2002, by and among Eos
International, Inc., a Delaware corporation having its principal office at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (“Eos”), Eos Acquisition Corp., a New Jersey corporation wholly-owned by Eos having its
principal office at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (“Newco,” and together with Eos,
the “Purchasers”) and I.F.S. of New Jersey, Inc., a New Jersey corporation having its principal office at 0000
Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxx, 00000 (the “Company,” and together with the Purchasers, the “Parties”).
WHEREAS, Eos owns 100 shares of common stock, without par value, of Newco (the “Newco Common
Stock”), constituting all of the issued and outstanding capital stock of Newco;
WHEREAS, this Agreement contemplates a transaction in which (i) Newco will merge with and into
the Company (the “Merger”) pursuant to this Agreement and the Plan of Merger (as defined in Section 1.1) and the
applicable provisions of the laws of the State of New Jersey, (ii) Eos will issue the Merger Consideration (as
defined in Section 1.4(b)(i)) in accordance with Section 1.4, and (iii) Eos shall own such number of shares of
the Capital Stock of the Company (as defined herein), which shall constitute all of the outstanding Capital Stock
of the Company, as provided in Section 1.4;
WHEREAS, the Boards of Directors of each of Eos, Newco, and the Company have duly approved this
Agreement and the transactions contemplated hereby, including, without limitation, the Merger;
WHEREAS, immediately prior to or simultaneous with the Closing (as defined herein), Eos is to
close a private placement of its common stock (the “Private Placement”) resulting in an equity investment of at
least $7.5 million (before placement fees, legal, accounting fees and other expenses related thereto);
WHEREAS, prior to Closing, Newco and the Company are to obtain the approval of their respective
stockholders for the transactions contemplated by this Agreement; and
WHEREAS, capitalized terms used in this Agreement but not defined upon their first usage are
defined in Section 2.1.
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth
in this Agreement, the Parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.7), Newco will be merged with and
into the Company pursuant to this Agreement and the Plan of Merger (the “Plan of Merger”) to be filed with the
Treasurer of the State of New Jersey, and the separate existence of Newco shall cease. The Company shall be the
surviving corporation in the Merger and shall thereupon be a wholly-owned Subsidiary of Eos.
1.2 Certificate of Incorporation, Bylaws, and Board of Directors.
At the Effective Time:
(a)......the certificate of incorporation of the Company, as in force and effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the Company;
(b)......the bylaws of the Company, as in force and effect immediately prior to the Effective
Time, shall be the bylaws of the Company;
(c)......the board of directors of the Company serving after the Merger shall be those persons
listed as directors on Schedule 1.2(c);
(d)......the officers of the Company serving after the Merger and the positions held by each of
them shall be as set forth on Schedule 1.2(d).
1.3 Effects of the Merger. The Merger shall have the effects provided therefor by Chapter 10 of
the New Jersey Business Corporation Act.
1.4 Manner of Conversion of Stock. At the Effective Time, by virtue of the Merger and without any
action on the part of Eos, Newco, the Company, or any stockholder thereof, the shares of capital stock of the
Parties shall be converted as follows:
(a)......Capital Stock of Newco. Each share of capital stock of Newco issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of common
stock of the surviving Company.
(b)......Issuance of Merger Consideration.
.........(i) Each share of the Company Common Stock issued and outstanding immediately
prior to the Effective Time, excluding any treasury shares and shares to be canceled pursuant to this Agreement
(collectively, the “Company Shares”), shall become at the Effective Time the right to receive 159,880 shares of
Eos Common Stock and 10 shares of Eos Series E Junior Convertible Preferred Stock (the “Basic Exchange Ratio”);
provided, however, that each Minority Shareholder may elect in writing to Eos prior to the Company meeting (which
election is irrevocable), not to receive any Series E Junior Convertible Preferred Stock (the “Rejected Series E
Preferred Stock”) in which event (A) the merger consideration for shares held by such electing minority
shareholders will be 269,880 of Eos Common Stock for each share of Company Common Stock, and (B) each Majority
Shareholder will receive, in lieu of Eos Common Stock such Majority Shareholder would have received in the
absence of Rejected Series E Preferred Stock, Rejected Series E Preferred Stock pro rata based upon the record
ownership of Company Common Stock (the “Adjusted Exchange Ratio”) at the rate of one share of Series E Preferred
Stock for 11,000 shares of Eos Common Stock. The Basic Exchange Ratio and the Adjusted Exchange Ratio, as
applicable, is referred to herein as, the “Exchange Ratio.” The aggregate shares of Eos Common Stock and Eos
Series E Junior Convertible Preferred Stock issuable in the merger is referred to herein as, the “Merger
Consideration.” Each certificate representing the Merger Consideration shall be stamped or otherwise imprinted
with a restrictive legend indicating that the shares represented by such certificate have not been registered
under the Securities Act and are not transferable unless subject to registration or an exemption therefrom, as
set forth in an Opinion of Counsel acceptable to Eos. All shares of Capital Stock of the Company owned
directly or indirectly by the Company shall be canceled and retired and shall cease to exist and no capital stock
of Eos, cash or other consideration shall be paid or delivered in exchange therefor. In the event that Eos,
effects a recapitalization of the securities constituting the Merger Consideration effective on a date prior to
the Effective Time, Eos will equitably adjust the Exchange Ratio and the terms of the Series E Preferred Stock,
if appropriate, so that IFS shareholders entitled to receive Merger Consideration will receive as Merger
Consideration the securities that they would have received if they had held the Merger Consideration immediately
prior the effective date of such recapitalization.
.........(ii) Fractional Shares of Eos Common Stock. No fraction of a share of Eos Common
Stock will be issued in connection with the Merger. Calculations of the number of shares to be received by a
stockholder of the Company which result in a fractional share equal to 0.5 or more of a share of Eos Common Stock
will be rounded up to the nearest whole share of Eos Common Stock and such calculations which result in a
fractional share less than 0.5 of a share will be rounded down to the nearest whole share of Eos Common Stock.
.........(iii) Company Options and Warrants. At the Effective Time, any options, warrants,
or other rights exercisable for or convertible into shares of Capital Stock of the Company arising or granted by
the Company prior to the date hereof that are outstanding and unexercised immediately prior to the Effective Time
(“Company Derivative Securities”) shall terminate and no options shall be granted by the Company from the date
hereof through the Effective Time.
1.5 Exchange of Certificates; Payment of Merger Consideration.
(a) Certificate Delivery Requirements. Subject to the exercise of dissenters rights under Chapter 11 of the
New Jersey Business Corporation Act, immediately after the Effective Time, the Company shall submit a form of
Letter of Transmittal to each stockholder of the Company, pursuant to which each such stockholder of the Company
may surrender to Eos certificates representing Company Shares held by such stockholder (“Certificates”), duly
executed by such stockholder of the Company, against delivery of the portion of the Merger Consideration
deliverable to such stockholder of the Company. Each share of the Capital Stock of the Company shall entitle the
holder thereof to receive the portion of the Merger Consideration in accordance with a schedule of the Company’s
stockholders to be delivered by the Company to Eos immediately after the Closing. Until so surrendered, each
Certificate representing Company Shares shall be deemed for all purposes to evidence only the right to receive
the Merger Consideration in accordance with Section 1.4(b)(i), and from and after the Effective Time, the
stockholders of the Company shall each cease to have any rights as a stockholder of the Company, except for the
right to surrender Certificates in exchange for delivery of the Merger Consideration. &
(b) Exchange Procedures. Upon surrender by each stockholder of the Company of its Certificate(s) together
with a properly completed letter of transmittal, Eos shall deliver to each such stockholder a certificate
representing the number of whole shares of Eos Common Stock and whole and fractional shares of Series E Junior
Preferred Stock to which such stockholder is entitled pursuant to Section 1.4, and the Certificate(s) so
surrendered shall be canceled immediately.
(c) No Further Transfers of Capital Stock of the Company. As of the Effective Time, the stock transfer
books of the Company shall be closed, and thereafter there shall be no further registration of transfers on the
stock transfer books of the Company of the shares of the Company which were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates representing Company Shares that were
outstanding immediately prior to the Effective Time are presented to the Company for any reason, they shall be
canceled and exchanged as provided in Section 1.5(a).
(d) Lost, Stolen or Destroyed Certificates. If any Certificates evidencing Company Shares shall have been
lost, stolen or destroyed, then Eos shall cause the issuance of the appropriate portion of the Merger
Consideration to be made in exchange for such lost, stolen or destroyed certificates, upon the delivery to Eos of
an affidavit of that fact by the holder thereof; provided, however, that Eos may, in its sole discretion and as a
condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificates to
deliver an indemnification agreement, with such bond as Eos may reasonably direct as indemnity against any claim
that may be made against Eos with respect to the Certificates alleged to have been so lost, stolen or destroyed.
1.6 Tax Treatment. The Parties intend that the Merger qualify as a tax-free reorganization within
the meaning of Section 368 (a)(1)(A) of the Code, in accordance with Section 368(a)(2)(E) of the Code. Each
Party agrees that it will use all commercially reasonable efforts to assure that the Merger shall so qualify, and
Eos and the Company each hereby agree that subsequent to the Closing, neither it nor the surviving Company will
take any action, or take any position in a Tax Return, that may reasonably be expected to result in the failure
of the Merger to so qualify.
1.7 Effective Time. As soon as practicable following fulfillment or waiver of the conditions
specified in Article VI and the consummation of the Closing, and provided that this Agreement has not been
terminated pursuant to Article VIII, Eos and the Company shall file the certificate of merger with the Department
of Treasury of the State of New Jersey (the “Merger Certificate”). The effective date and time of the Merger
Certificate to be filed with the Treasurer of the State of New Jersey to effectuate the Merger is referred to
herein as, the “Effective Time.”
1.8 Closing. The closing shall take place at the offices of Pitney, Xxxxxx, Xxxx & Xxxxx, LLP, 000
Xxxxxx Xxxxx, Xxxxxxx Xxxx, Xxx Xxxxxx commencing at 10:00 a.m. local time (the “Closing”), or at such other time
and place as the Parties may agree, as soon as practicable after the later of (i) the day of (and immediately
following) the receipt of approval of the Merger by the stockholders of Newco and the stockholders of the
Company, and (ii) the day on which the last of the conditions set forth in Article VI is satisfied or duly
waived. The date and time of the Closing are herein referred to as the “Closing Date.”
1.9 Title; Risk of Loss. Legal title and risk of loss with respect to the Company Shares and the
business of the Company shall not pass to Eos until the Effective Time.
ARTICLE II
DEFINITIONS
2.1 Definitions. For purposes hereof, the following terms, when used herein with initial capital
letters, shall have the respective meanings set forth herein:
“Accredited Investor” has the meaning set forth in Regulation D promulgated under the
Securities Act.
“Adjusted Exchange Ratio” has the meaning set forth in Section 1.4(b)(1).
“Affiliate” of any Person means any other Person controlling, controlled by or under common
control with such Person.
“Agreement” means this Agreement and Plan of Merger, including all Exhibits and Schedules
hereto, as it may be amended from time to time in accordance with its terms.
“Assets of the Company” mean the assets of the Company and its Subsidiaries shown on the Latest
Company Balance Sheet or acquired by the Company or any Subsidiary of the Company after the date of the Latest
Company Balance Sheet, less any assets disposed of by the Company or such Subsidiary in the ordinary course of
business after the date of the Latest Company Balance Sheet.
“Assets of Eos” mean the assets of Eos and its Subsidiaries shown on the Latest Eos Balance
Sheet or acquired by Eos or any Subsidiary of Eos after the date of the Latest Eos Balance Sheet, less any assets
disposed of by Eos or such Subsidiary in the ordinary course of business after the date of the Latest Eos Balance
Sheet.
“Basic Exchange Ratio” has the meaning set forth in Section 1.4(b)(i).
“Books and Records” means all lists, records and other information pertaining to assets,
accounts, personnel and referral sources of the Company, all lists and records pertaining to suppliers, customers
licensees and licensors of the Company, and all other books, books of original entry, ledgers, files and business
records of every kind relating or pertaining to the Business, in each case whether evidenced in writing,
electronically (including by computer) or otherwise.
“Business of the Company” means school consumer products fundraising.
“Capital Stock of the Company” has the meaning set forth in Section 4.2.
“Certificates” has the meaning set forth in Section 1.5(a).
“Closing” has the meaning set forth in Section 1.8.
“Closing Date” has the meaning set forth in Section 1.8.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the Preamble.
“Company Affiliate Letter” has the meaning set forth in Section 5.8.
“Company Derivative Securities” has the meaning set forth in Section 1.4(b)(iii).
“Company Meeting” has the meaning set forth in Section 5.1(a).
“Company Shares” has the meaning set forth in Section 1.4(b)(i).
“Tax Representation Letter” has the meaning set forth in Section 5.7.
“Effective Time” has the meaning set forth in Section 1.7.
“Employee Pension Plans” has the meaning set forth in Section 4.17(b).
“Employee Welfare Plans” has the meaning set forth in Section 4.17 (a).
“Environmental and Safety Requirements” means all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law, in each case concerning public health
and safety, worker health and safety and pollution or protection of the environment (including all those relating
to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, Release, threatened Release, control, or cleanup of any Hazardous
Substance.
“Environmental Lien” means any Lien, whether recorded or unrecorded, in favor of any Government
Entity relating to any liability arising under any Environmental and Safety Requirement.
“Eos” has the meaning set forth in the Preamble.
“Eos Bridge Lenders” means Weichert Enterprises, LLC, a Delaware limited liability company,
together with DL Holdings I, LLC, a Delaware limited liability company.
“Eos Common Stock” has the meaning set forth in Section 3.2 (a).
“Eos Derivative Securities” has the meaning set forth in Section 1.4(b)(iv).
“Eos Preferred Stock” has the meaning set forth in Section 3.2 (a).
“Eos Meeting” has the meaning set forth in Section 5.1(a).
“Eos Reports” has the meaning set forth in Section 3.5.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Ratio” has the meaning set forth in Section 1.4(b)(i).
“GAAP” means, at a given time, United States generally accepted accounting principles,
consistently applied.
“Government Entity” means the United States of America or any other nation, state, province, or
political subdivision thereof, or any entity, including any agency or commission, exercising executive,
legislative, judicial, regulatory or administrative functions of government.
“Hazardous Substance” means any hazardous, toxic, radioactive or chemical materials, mixtures,
substances or wastes; and (whether or not included in the foregoing), any pesticides, pollutants, contaminants,
petroleum products or by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
“Indebtedness” of any Person means, without duplication, any actual or contingent: (a)
indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which
such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business) and any commitment by which such
Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of
credit; (b) indebtedness guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse; (c) obligations under capitalized leases in respect of which such Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such
Person assures a creditor against loss; (d) any unsatisfied obligation of such Person for “withdrawal liability”
to a “multiemployer plan,” as such terms are defined under ERISA; and (e) any unfunded liability due to any
Person under any Plan.
“Investment” means, with respect to any Person, any direct or indirect purchase or other
acquisition by such Person of any notes, obligations, instruments, stock, securities or other ownership or
beneficial interest (including partnership interests and joint venture interests) of any other Person, and any
capital contribution by such Person to any other Person.
“Knowledge” or “to the Knowledge of” means, with respect to a Person, (a) the actual knowledge
of such Person (which includes the actual knowledge of all executive officers and directors of such Person) and
(b) the knowledge which a prudent business person would have obtained in the conduct of business after making
reasonable inquiry and reasonable diligence with respect to the particular matter in question.
“Legal Requirement” means any requirement arising under any law, statute, ordinance, treaty,
rule or regulation, and any requirement arising from a determination, direction, action or order of an arbitrator
or any Government Entity, including any Environmental and Safety Requirement.
“Lien” means any mortgage, pledge, security interest, encumbrance, easement, restriction on
use, restriction on transfer, charge, or other lien; provided, however, with respect to any Asset that is not
owned, “Lien” means any mortgage, pledge, security interest, encumbrance, easement, lease, restriction on use,
restriction on transfer, charge, or other lien on the right of the Company to use or have possession thereof.
“Loss” means, with respect to any Person, any diminution in value, consequential or other
damage, liability, demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty, fine or other
loss or expense, whether or not arising out of a third party claim, including all interest, penalties, reasonable
attorneys’ fees and expenses and all amounts paid or incurred in connection with any action, demand, proceeding,
investigation or claim by any third party (including any Government Entity) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the existence of, or relate to, any
other Loss, and the investigation, defense or settlement of any of the foregoing, together with any interest that
may accrue thereon.
“Majority Shareholder” means a shareholder of record of Company Common Stock who holds of
record 20% or more of the outstanding shares of Company Common Stock.
“Material Adverse Effect” means any material and adverse effect on the financial condition,
business, properties, assets, liabilities, or results of operations or prospects of the Person and any
Subsidiaries of such Person taken as a whole or the ability of the Person to consummate the transactions
contemplated by this Agreement in any material respect.
“Merger Consideration” has the meaning set forth in Section 1.4(b)(i).
“Minority Shareholder” means a shareholder of record of Company Common Stock who holds of
record less than 20% of the outstanding shares of Company Common Stock.
“Officer’s Certificate” of any Person means a certificate signed by such Person’s president or
chief financial officer (or an individual having comparable responsibilities with respect to such Person) stating
that (a) the individual signing such certificate has made or has caused to be made such investigations as are
necessary in order to permit such individual to verify the accuracy of the information set forth in such
certificate and (b) to the Knowledge of such individual, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the fact stated therein not misleading.
“Permitted Lien” means, as to the Company Shares, the Eos Shares (as defined herein), and, as
to other Assets of the Company, and Assets of Eos, (i) any Lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of Law with
respect to a Liability that is not yet due or delinquent, and (iii) any minor imperfection of title or similar
Lien which individually or in the aggregate with other such Liens could not reasonably be expected to materially
adversely affect the Business of the Company or the business of Eos, as the case may be.
“Person” means an individual, a partnership, a corporation, an association, a limited liability
company, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
“Plan of Merger” has the meaning set forth in Section 1.1.
“Plans” means all Employee Pension Plans, Employee Welfare Plans, Other Plans and Multiemployer
Plans to which a Party contributes or is a party.
“Proprietary Rights” means all of the following owned by, issued to, or licensed to a Party:
(a) all inventions (whether or not patentable or reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof; (b) all trademarks, service marks, trade dress, logos, trade
names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof
and including all goodwill associated therewith, and all applications, registrations, and renewals in connection
therewith; (c) all copyrightable works (including software developed by a Party for use in its business), all
copyrights, and all applications, registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade secrets and confidential
business information (including ideas, research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans and proposals); (f) the Software; (g) all
other proprietary rights; and (h) all copies and tangible embodiments thereof (in whatever form or medium).
“Quarterly Report” has the meaning set forth in Section 3.5.
“Rejected Series E Junior Preferred Stock” has the meaning set forth in Section 1.4(b)(i).
“Release” means a release or discharge of substances, including hazardous substances, as set
forth in CERCLA.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities of Xxx 0000, as amended.
“Software” means all computer programs, software, data bases, source codes, magnetic tape,
diskettes and punchcards used by or useful to a Party in the conduct of its business as currently conducted and
presently proposed to be conducted.
“Subsidiary” of any Person means any corporation, partnership, association or other business
entity which such Person, directly or indirectly, controls or in which such Person has a majority ownership
interest or, if less than a majority ownership interest, has the right to select Persons to serve on its
governing board. For purposes of this definition, a Person is deemed to have a majority ownership interest in a
partnership, association or other business entity if such Person is allocated a majority of the gains or losses
of such entity or is or controls the manager, the managing director, or the general partner of such entity.
“Superior Acquisition Proposal” means an unsolicited bona fide written offer or proposal, or
indication of interest in making an offer or proposal, to acquire control of the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock or sale of assets, which the Board
of Directors of the Company determines in its good faith judgement (after consultation with its independent
financial advisors and independent legal counsel) taking into account applicable legal, financial, regulatory and
other relevant aspects of the proposal or offer, the identity of the Person making the proposal or offer and
other relevant considerations, (i) is more favorable from a financial point of view to the Company’s shareholders
than this Agreement, and (ii) has conditions that are reasonably capable of being satisfied.
“Taxes” means any federal, state, county, local or foreign taxes, charges, fees, levies, other
assessments or withholding taxes or charges imposed by any Government Entity and includes any interest and
penalties (civil or criminal) on or additions to any such taxes.
“Tax Return” means any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto and any amendment thereof.
“Transaction Documents” means this Agreement, and all other agreements, instruments,
certificates and other documents to be entered into or delivered by any Party in connection with the Merger.
“Treasury Regulations” means the United States Treasury Regulations promulgated pursuant to the
Code.
2.2 Other Definitional Provisions.
(a)......Accounting Terms. Accounting terms which are not defined herein have the meanings
given to them under GAAP. To the extent that the definition of an accounting term set forth in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition in this Agreement will control. To the
extent that financial statements were prepared in accordance with GAAP, no change in accounting principles shall
be made from those utilized in preparing such financial statements (without regard to materiality) including with
respect to the nature of accounts, level of reserves or level of accruals. For purposes of the preceding
sentence, “changes in accounting principles” includes all changes in accounting principles, policies, practices,
procedures or methodologies with respect to financial statements, their classification or their display, as well
as all changes in practices, methods, conventions or assumptions (unless required by objective changes in
underlying events) utilized in making accounting estimates.
(b)......“Hereof,” etc. The terms “hereof,” “herein” and “hereunder” and terms of similar
import are references to this Agreement, including all exhibits and Schedules hereto, as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and exhibit references contained in this
Agreement are references to Sections, clauses, Schedules and exhibits in or to this Agreement, unless otherwise
specified.
(c)......“Including.” The term “including” means including, without limitation.
(d)......Successor Laws. Any reference to any particular Code section or any other law or
regulation will be interpreted to include any revision of or successor to that section regardless of how it is
numbered, classified, or codified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
As a material inducement to the Company to enter into this Agreement, Eos hereby represents and warrants
to the Company that:
3.1 Organization and Power
(a)......Eos is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Eos is duly qualified to do business in each jurisdiction in which it owns or
occupies real property, each jurisdiction in which its employees are assigned, and each jurisdiction in which its
ownership of property or conduct of business requires it to so qualify, except where the failure to be so
qualified would not have a material adverse effect on the business of Eos. Schedule 3.1(a) lists every
jurisdiction where Eos is duly qualified to do business, lists all states in which Eos owns, leases or is in
control of any personal property or real property and all states in which any employees of Eos are located, and
identifies each such employee and provides a brief description of such property. Eos has the requisite corporate
power necessary to own and operate its properties and enter into, deliver, and carry out the transactions
contemplated by the Transaction Documents. Eos owns all of the outstanding stock of Newco.
(b)......Newco is a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey. Newco has the requisite corporate power and authority and all licenses, permits
and authorizations necessary to enter into, deliver and carry out its obligations pursuant to the Transaction
Documents to which it is a party. Newco was formed by Eos for the sole purpose of entering into the transactions
contemplated by the Transaction Documents, and except for the rights and obligations created by this Agreement,
Newco has no assets, liabilities or operations of any nature. Newco is not a party to any agreement other than
this Agreement and has not engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated by this Agreement. Newco has the requisite corporate power
necessary to own and operate its properties and enter into, deliver, and carry out the transactions contemplated
by the Transaction Documents.
(c)......Schedule 3.1(c) lists each Subsidiary of Eos and the jurisdiction of organization for
each such Subsidiary of Eos and the jurisdictions in which each Subsidiary of Eos is qualified to conduct
business.
(d)......Except as set forth on Schedule 3.1(d), to the Knowledge of Eos, each Subsidiary of
Eos (excluding Newco) is a corporation duly organized, validly existing, and in good standing under the laws of
its respective jurisdiction of incorporation and is duly qualified to do business in each jurisdiction in which
it owns or occupies real property, each jurisdiction in which its employees are assigned, and each jurisdiction
in which its ownership of property or conduct of business requires it to so qualify, except to the extent that
such failure to do so does not materially interfere with such business or use of such property.
(e)......Except as set forth on Schedule 3.1(e), all of the issued and outstanding shares of
each Subsidiary of Eos are owned by Eos.
(f)......Schedule 3.1(f) lists the directors and officers of Eos. Eos represents and warrants
that Eos has delivered correct and complete copies of the articles of incorporation and bylaws of Eos, including
all amendments thereto, to the Company prior to the date of this Agreement. The minute books and stock transfer
ledgers of Eos, which Eos represents and warrants will be made available to the Company prior to Closing, contain
a true and complete record of all action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the board of directors and the committees of the board of directors.
3.2 Capitalization.
(a)......The authorized capital stock of Eos consists of 100,000,000 shares of Common Stock,
par value $0.01 per share (the “Eos Common Stock”) and 1,000,000 shares of preferred stock, par value $0.01 per
share (the “Eos Preferred Stock”). As of September 30, 2002, there were 56,132,098 shares of Eos Common Stock
outstanding, and no shares of Eos Preferred Stock outstanding. As of the date hereof, a total of 7,262,753
shares of Eos Common Stock were reserved for issuance pursuant to outstanding securities convertible into or
exchangeable for shares of Eos Common Stock and a total of 1,000 shares of Eos Series D Preferred Stock were
reserved for issuance to the Eos Bridge Lenders in connection with the restructure of Eos’ short-term bridge
loans. Except as set forth on Schedule 3.2(a), there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or other contracts or commitments that
could require Eos to issue, sell or otherwise cause to become outstanding any of its capital stock or equity
interests or other instruments convertible into such interests.
(b)......The authorized capital stock of Newco consists of 2,500 shares of common stock,
without par value, of which 100 shares are issued and outstanding. All of such issued and outstanding shares are
owned by Eos.
3.3 Validity of Shares of Eos Common Stock. The shares of Eos Common Stock and Series E Junior
Preferred Stock to be issued in connection with the Merger (the “Eos Shares”) have been duly authorized and will,
when issued in accordance with the terms hereof, be validly issued, fully paid and non-assessable, and free and
clear of any pre-emptive rights of the stockholders of Eos. Eos has, and at the Effective Time will have, a
sufficient number of authorized, unissued, or unreserved shares of Eos Common Stock and Series E Junior Preferred
Stock to issue the Merger Consideration.
3.4 Authorization; Binding Effect; No Breach.
(a)......The execution, delivery and performance by Eos of each Transaction Document to which
it is a party has been duly authorized by Eos by all necessary corporate proceedings. Each Transaction Document
to which Eos is a party constitutes a valid and binding obligation of Eos which is enforceable against Eos in
accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other laws affecting creditor’s rights generally, or by general equitable principles (regardless
of whether enforcement is sought in a proceeding at law or in equity). The execution, delivery and performance
by Eos of the Transaction Documents to which it is a party do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation
of, or (iv) require any authorization, consent, approval, exemption or other action by or declaration or notice
to any Government Entity pursuant to, the charter or bylaws of Eos or any agreement, instrument, or other
document, or any Legal Requirement, to which Eos or any of its assets is subject.
(b)......The execution, delivery and performance by Newco of each Transaction Document to which
it is a party has been duly authorized by Newco by all necessary corporate proceedings. Each Transaction
Document to which Newco is a party constitutes a valid and binding obligation of Newco which is enforceable
against Newco in accordance with its terms. The execution, delivery and performance by Newco of the Transaction
Documents to which it is a party do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or declaration or notice to any Government Entity
pursuant to, the charter or bylaws of Newco or any agreement, instrument, or other document, or any Legal
Requirement, to which Newco or any of its assets is subject.
(c)......On or prior to the date hereof, Eos has delivered (or otherwise made available) the
following documents to the Company:
.........(i) copies of the resolutions duly adopted by Eos’ board of directors authorizing
Eos’ execution, delivery and performance of this Agreement and the consummation of the Merger and all other
transactions contemplated by this Agreement, certified by an officer of Eos;
.........(ii) copies of the resolutions duly adopted by Newco’s board of directors
authorizing Newco’s execution, delivery and performance of this Agreement and the consummation of the Merger and
all other transactions contemplated by this Agreement, certified by an officer of Newco;
.........(iii) copies of the resolutions duly adopted by Eos as the stockholder of Newco
approving the Merger and this Agreement, certified by an officer of Newco; and
(iv) a certificate (dated not more than ten business days prior to the date hereof)
of the Secretary of State of the State of Delaware as to the good standing of Eos in Delaware.
3.5 Eos Reports; Financial Statements. Eos has filed with the SEC each registration statement,
report, proxy statement or information statement required to be filed by it since January 1, 2002 through the
date hereof, including (i) Eos’ Annual Report on Form 10-K for the year ended December 31, 2001 (the “Form
10-K”), and (ii) Eos’ Quarterly Reports on Form 10-Q for the calendar quarters ended March 31, 2002, June 30,
2002, and September 30, 2002 (the “Quarterly Reports”), copies of which have been made available to the Company.
The Form 10-K and the Quarterly Reports, together with all Current Reports on Form 8-K filed by Eos since January
1, 2002, are collectively referred to as, the “Eos Reports.”
(a)......As of their respective dates, the Eos Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable, and the rules and regulations of the
SEC thereunder applicable to the Eos Reports, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading.
(b)......As of their respective dates, the consolidated financial statements included in the
Form 10-K complied as to form in all material respects with then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Each of the consolidated balance sheets
included in or incorporated by reference into the Form 10-K (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of Eos and its subsidiaries as of its date
and each of the consolidated statements of income and of changes in cash flows included in or incorporated by
reference into the Form 10-K (including any related notes and schedules) fairly presents in all material respects
the results of operations and changes in cash flows, as the case may be, of Eos for the periods set forth
therein, in each case in accordance with GAAP, except as may be noted therein.
3.6 Governmental Filings. Except as set forth on Schedule 3.6, other than the filing of the Merger
Certificate with the State of New Jersey, the filing with the SEC of a Current Report on Form 8-K (and any
amendments thereto), the filing with the SEC of a Form D, filings with the SEC of notification pursuant to Rule
425 of the Securities Act, if necessary, and any filings that may be required to be filed with the States of
California, Texas, Indiana, New Jersey, and Delaware, respectively, subsequent to the Effective Time, no notices,
reports or other filings are required to be made by Eos with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Eos from, any Government Entity in connection with the
execution and delivery of this Agreement by Eos and the consummation of the transactions contemplated by the
Transaction Documents.
3.7 Assets of Eos.
(a)......The Assets of Eos (which, for purposes of this Section 3.7, includes the assets of
each Subsidiary of Eos) and other assets reflected in the Books and Records of Eos constitute all of the assets
and rights which are used or useful in the business of Eos as currently conducted and presently proposed to be
conducted;
(b)......Eos has good and marketable title to, or a valid leasehold interest in or other rights
to use (which other rights to use are described on the attached Schedule 3.7), all properties and assets used by
Eos in its business, located on its premises, shown on the Latest Eos Balance Sheet or acquired by Eos since the
date of the Latest Eos Balance Sheet, in each case free and clear of all Liens, other than Permitted Liens, and
other than (i) properties and assets disposed of in the ordinary course of business and consistent with past
practice by Eos since the date of the Latest Eos Balance Sheet (which disposals do not exceed $250,000 in the
aggregate) and (ii) Liens disclosed on the Latest Eos Balance Sheet (including any notes thereto); and
(c)......Eos’ equipment and other tangible assets are in good operating condition (subject to
normal wear and tear) and fit for use in the ordinary course of business of Eos and consistent with its past
practice.
3.8 Absence of Certain Changes. Except as disclosed in the Eos Reports filed prior to the date
hereof or in Schedule 3.8 hereto, since September 30, 2002, Eos and its Subsidiaries have conducted their
respective businesses only in, and have not engaged in any material transaction other than in, the ordinary and
usual course of such businesses and there has not been any material adverse change in the financial condition,
business, prospects or results of operations of Eos and its subsidiaries from September 30, 2002, through the
date of this Agreement.
3.9 Litigation. Except as set forth on Schedule 3.9, there are no civil, criminal or
administrative actions, suits, claims, hearing, investigations, arbitrations, or proceedings pending or, to the
Knowledge of Purchasers, threatened against Purchasers preventing, or which, if determined adversely to
Purchasers would prevent Eos or Newco from consummating the transactions contemplated by the Transaction
Documents.
3.10 Brokerage. Except as set forth on Schedule 3.10, there is no claim for brokerage commissions,
finders’ fees or similar compensation in connection with the transactions contemplated by the Transaction
Documents which is binding upon Eos or any of its Subsidiaries.
3.11 Insurance. The attached Schedule 3.11 contains a description (or a certificate of insurance) of
each insurance policy maintained by Eos or its Subsidiaries with respect to Eos, its Subsidiaries, its
properties, assets or business, and each such policy is in full force and effect. Eos is not in default of any
obligation pursuant to any insurance policy described on Schedule 3.11.
3.12 Tax Matters. Except as set forth in the attached Schedule 3.12 and except where a failure of
a statement in (a) through (w) below to be true or complete has not had or would not reasonable be likely to
have, individually or in the aggregate, a Material Adverse Effect:
(a) Eos and each Subsidiary of Eos has timely filed all Tax Returns that it was required
to file.
(b) All such Tax Returns were and are true, correct and complete in all respects.
(c) All Taxes owed by Eos and each Subsidiary of Eos (whether or not shown on any Tax
Return for all time periods through the Closing Date) have been paid. The amount of liability for unpaid Taxes
for all time periods ending on or before the Closing Date will not exceed the amount of current liability
accruals for Taxes (excluding reserves for deferred Taxes) as such accruals are reflected on the most recent Eos
balance sheet.
(d) No information related to Tax matters has been requested by any Taxing authority and
there are no ongoing examinations or claims against Eos or any Subsidiary of Eos for Taxes, and no notice of any
audit, examination, or claim for Taxes, whether pending or threatened, has been received.
(e) Eos and each Subsidiary of Eos currently are not the beneficiary of any extension of
time within which to file any Tax Return;
(f) No claim has ever been made by an authority in a jurisdiction where Eos or a
Subsidiary of Eos does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Eos
and each Subsidiary is not required to file Tax Returns in any jurisdiction in which it is not currently filing
Tax Returns.
(g) There are (and as of immediately following the Closing Date there will be) no Liens
other than Permitted Liens on any of the Assets of Eos or a Subsidiary of Eos that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Eos and each Subsidiary of Eos has withheld and paid over to the proper governmental
entities all Taxes required to have been withheld and paid over in all matters, including in connection with
amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.
(i) To the Knowledge of any director or officer of Eos, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely determined, would result in any Lien
on the Assets of Eos.
(j) There are no unresolved disputes or claims concerning the Tax liability of Eos or each
Subsidiary of Eos.
(k) Eos and each Subsidiary of Eos have never been, and are currently not, subject to a
Tax audit.
(l) Eos and each Subsidiary have never waived or extended any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency as to which
the period of extension has not elapsed.
(m) Eos has not filed any consent agreement under Section 341(f) of the Code concerning
collapsible corporations.
(n) Eos has never made any payments, is not obligated to make any payments, and is not a
party to any agreement that could obligate it to make, any payments that will not be deductible under Sections
280(G) and 404 of the Code.
(o) Eos has never been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code.
(p) Eos has disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of Federal Income Tax within the meaning of Section 6662 of the
Code.
(q) Eos and each Subsidiary of Eos are not a party to any Tax allocation, Tax indemnity or
Tax sharing agreement. Eos (A) has never been a member of an Affiliated Group filing a consolidated federal
income Tax Return and (B) has no liability for the Taxes of any Person (other than any of Eos) under
Treas. Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(r) Eos’ taxable year ends on December 31 of each year.
(s) Eos currently utilizes, and has utilized since inception, the accrual method of
accounting for income Tax purposes.
(t) There are no tax rulings, requests for rulings, closing agreements or changes of
accounting method relating to Eos or any of its Subsidiaries that could affect their liability for Taxes for any
period after the Closing Date.
(u) No property of Eos is “tax-exempt use property” within the meaning of Section 168(h)
of the Code.
(v) Eos is not a party to any lease made pursuant to Section 168(f) of the Code.
(w) Eos will not be required to include in a taxable period ending after the date of the
Closing income attributable to a prior taxable period that was not recognized in that prior taxable period as a
result of the installment method of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions
of state or local or foreign tax law.
3.13 Compliance with Laws. All references to Eos in this Section 3.13 refer to both Eos and to each
Subsidiary of Eos.
(a) Generally. Except as set forth on Schedule 3.13(a), and except as would not reasonably
be likely to have a Material Adverse Effect, Eos has not violated any Legal Requirement, and Eos has not received
notice alleging any such violation.
(b) Required Permits. Eos has complied with (and is in compliance with), in all material
respects, all permits, licenses and other authorizations required for the occupation of Eos facilities and the
operation of the business of Eos. The items described on the attached Schedule 3.13(b) constitute all of the
permits, filings, notices, licenses, consents, authorizations, accreditation, waivers, approvals and the like of,
to or with any Government Entity which are required for the consummation of the Merger, or any other transaction
contemplated by the Transaction Documents or the conduct of the business of Eos (as it is presently conducted by
Eos) thereafter.
(c) Environmental and Safety Matters. Without limiting the generality of Sections 3.13(a)
and (b), except as set forth on Schedule 3.13(c):
(i) Eos has complied, and is in compliance with, in all material respects, all
Environmental and Safety Requirements.
(ii) Without limiting the generality of the foregoing, Eos has obtained and
complied with, and is in compliance with, in all material respects, all permits, licenses and other
authorizations that may be required pursuant to Environmental and Safety Requirements for the occupation of its
facilities and the operation of the Business. A list of all such permits, licenses and other authorizations is
set forth on the attached Schedule 3.13(b).
(iii) Eos has not received any written o, to its Knowledge, oral notice, report or
other information regarding any liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) or
investigatory, remedial or corrective obligations, relating to it or its facilities and arising under
Environmental and Safety Requirements.
(iv) To the Knowledge of Eos, none of the following exists at any property or
facility owned, operated or occupied by Eos:
(1) underground storage tanks or surface impoundments
(2) asbestos-containing material in any form or condition; or
(3) materials or equipment containing polychlorinated biphenyls.
(v) Eos has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or Released any substance, including any Hazardous Substance, or owned or
operated any facility or property, so as to give rise to liabilities of Eos for response costs, natural resource
damages or attorneys’ fees pursuant to the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (“CERCLA”), or similar state or local Environmental and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the Merger will result in any
obligations for site investigation or cleanup, or notification to or consent of any Government Entity or third
parties, pursuant to any so-called “transaction-triggered” or “responsible property transfer” Environmental and
Safety Requirements.
(vii) Eos has not, either expressly or by operation of law, assumed or undertaken
any liability, including any obligation for corrective or remedial action, of any other Person relating to any
Environmental and Safety Requirements.
(viii) No Environmental Lien has attached to any property now or previously owned,
leased or operated by Eos.
(ix) Without limiting the foregoing, to the Knowledge of Eos, no facts, events or
conditions relating to the Leased Real Property, or other past or present facilities, properties or operations of
Eos will prevent, hinder or limit continued compliance with Environmental and Safety Requirements, give rise to
any investigatory, remedial or corrective obligations pursuant to Environmental and Safety Requirements, or give
rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including any relating to onsite or offsite Releases or threatened
Releases of Hazardous Substances, personal injury, property damage or natural resource damage.
3.14 Product Warranty. Except as set forth on the attached Schedule 3.14, and except as would not
reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect, all products
manufactured, serviced, distributed, sold or delivered by Eos have been manufactured, serviced, distributed, sold
and/or delivered in conformity with all applicable contractual commitments and all express and implied
warranties. No liability of Eos exists for replacement or other damages in connection with any such product.
3.15 Contingent Liabilities. As of the date of this Agreement, no contingent liability of Eos
exists, except as set forth on Schedule 3.15.
3.21 Disclosure. Neither this Article III nor any certificate or other item delivered to the
Company by or on behalf of Purchasers with respect to the transactions contemplated by the Transaction Documents
contains any untrue statement of a material fact or omits a material fact which is necessary to make any
statement contained herein or therein not misleading. There is no fact that Purchasers has not disclosed to the
Company in writing and of which Purchasers or any officer or director of either of the Purchasers is aware (other
than matters of a general economic nature) and that has had or could reasonable be expect to have a Material
Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to Purchasers to enter into this Agreement, the Company hereby represents and
warrants to Purchasers that:
4.1 Organization and Power; The Company Shares
(a) The Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of New Jersey. The Company is duly qualified to do business in each jurisdiction in
which it owns or occupies real property, each jurisdiction in which its employees are assigned, and each
jurisdiction in which its ownership of property or conduct of business requires it to so qualify, except where
the failure to be so qualified would not have a material adverse effect on the business of the Company. Schedule
4.1(a) lists every jurisdiction where the Company is duly qualified to do business, lists all states in which the
Company owns, leases or is in control of any personal property or real property and all states in which any
employees of the Company are located, and identifies each such employee and provides a brief description of such
property. The Company has the requisite corporate power necessary to own and operate its properties, carry on
the Business and enter into, deliver and carry out the transactions contemplated by the Transaction Documents.
(b) Schedule 4.1(b) lists the directors and officers of the Company. The Company
represents and warrants that the Company has delivered correct and complete copies of the certificate of
incorporation and bylaws of the Company, including all amendments thereto, to Eos prior to the date of the
Agreement. The minute books and stock transfer ledgers of the Company, which the Company represents and warrants
will be made available to Eos prior to Closing, contain a true and complete record of all corporate actions and
all transfers in the Capital Stock of the Company.
4.2 Capitalization.
(a) As of September 30, 2002, the authorized capital stock of the Company consists solely
of 100 shares common stock, without par value (the “Company Common Stock”), of which 100 shares are issued and
outstanding. All issued and outstanding shares of Company Common Stock on the date hereof are duly authorized,
validly issued, outstanding, fully paid and nonassessable.
(b) Except as set forth on Schedule 4.2(b):
(i) there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or commitments that could require the
Company to issue, sell or otherwise cause to become outstanding any of its capital stock or equity interests or
other instruments convertible into such interests;
(ii) there are no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights with respect to the Capital Stock of the Company;
(iii) there are no voting trusts, proxies or other agreements or understandings with
respect to the voting of the capital stock of the Company;
(iv) no officer or director of the Company has any rights in any specific property
of the Company.
(v) none of the Company nor any of its Affiliates has entered into any agreement,
or is bound by any obligation of any kind whatsoever, to transfer or dispose of the Company Shares or the
Business of the Company (or any portion thereof) to any Person other than Eos, and none of them has entered into
any agreement, nor are any of them bound by any obligation of any kind whatsoever, to issue any Company Common
Stock or any other securities of the Company to any Person.
(vi) since September 30, 2002, (i) the Company has not declared or made any payment
of any dividend or other distribution in respect of the Company Common Stock, (ii) the Company has not redeemed,
purchased, or otherwise acquired any of the Company’s capital stock or equity interests, and (iii) there has not
been any split, combination or reclassification or any shares of the Company Common Stock.
4.3 Authorization; Binding Effect; No Breach.
(a) The execution, delivery and performance by the Company of each Transaction Document to
which it is a party has been duly authorized by the Company. Each Transaction Document to which the Company is a
party constitutes a valid and binding obligation of the Company which is enforceable against the Company in
accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other laws affecting creditor’s rights generally, or by general equitable principles (regardless
of whether enforcement is sought in a proceeding at law or in equity). Except as set forth on Schedule 4.3, the
execution, delivery and performance of the Transaction Documents to which the Company is a party do not and will
not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any Lien upon any of the Company Shares or any of the Assets of the
Company under, (iv) give any third party the right to modify, terminate or accelerate any liability or obligation
of the Company under, (v) result in a violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or declaration or notice to any Government Entity pursuant to, the charter or bylaws
of the Company or any agreement, instrument or other document, or any Legal Requirement, to which the Company,
any of the Company Shares or any of the Assets of the Company is subject.
(b) On or prior to the date hereof, the Company has delivered (or otherwise made
available) the following documents to Eos:
(i) copies of the resolutions duly adopted by the Company’s board of directors
authorizing the Company’s execution, delivery and performance of this Agreement and the consummation of the
Merger and all other transactions contemplated by this Agreement, certified by an officer of the Company;
(ii) a certificate (dated not more than ten business days prior to the date hereof)
of the Treasurer of the State of New Jersey as to the good standing of the Company in New Jersey.
4.4 Subsidiaries; Investments. Except as set forth on the attached Schedule 4.4, the Company has
no Subsidiaries and does not own, or hold any rights to acquire, any capital stock or any other security,
interest, or Investment in any other Person other than investments that constitute cash or cash equivalents.
Schedule 4.4 sets forth the jurisdictions in which each Subsidiary of the Company, if any, is qualified to
conduct business.
4.5 Financial Statements and Related Matters.
(a) Financial Statements. The Company has delivered to Eos (i) the unaudited balance
sheet of each of the Company as of November 23, 2002 (the “Latest Company Balance Sheet”), the related unaudited
consolidated statements of income and cash flows for the two month period then ended as well as the interim
consolidated balance sheets at November 23, 2001, and the consolidated statements of income and cash flows for
the two month period ended November 23, 2001 (collectively, the “Unaudited Financial Statements”), and (ii) the
audited consolidated balance sheets of the Company as of September 28, 2002, and the audited related consolidated
statements of income and cash flows for the 12-month periods ending September 29, 2001 and September 30, 2000
(the “Audited Financial Statements”).
(i) Except as set forth on the attached Schedule 4.5, each of the Unaudited
Financial Statements (including in all cases the notes thereto, if any) presents fairly in all material respects
the financial condition of the Company as of the dates of such statements and the results of operation for such
periods, is accurate and complete, is consistent with the books and records of the Company (which, in turn, are
accurate and complete), has been prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby except as noted therein (subject to the absence of notes and audit adjustments), and is
consistent with the Audited Financial Statements, subject to any changes resulting from normal year-end audit
adjustments.
(ii) Except as set forth on the attached Schedule 4.5, each of the Audited
Financial Statements (including in all cases the notes thereto) presents fairly in all material respects the
financial condition of the Company as of the dates of such statements and the results of operation for such
periods, are accurate and complete, are consistent with the books and records of the Company (which, in turn, are
accurate and complete) and were prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby except as noted therein.
(b) Receivables. Except as would not reaosnably be likely to have, individually or in the
aggregate, a Material Adverse Effect, the notes and accounts receivable of the Company on the Closing Date
represent actual transactions, will be valid receivables, will be current and collectible, will not be subject to
valid counterclaims or setoffs and will be collected in accordance with their terms at the aggregate amount
recorded on the Company’s books and records as of the Closing, net of an amount of allowances for doubtful
accounts set forth on the Latest Company Balance Sheet, as adjusted for the passage of time through the Closing
Date in accordance with GAAP.
(c) Inventory. The inventory of the Company of the date of the Latest Company Balance
Sheet, net of the reserves applicable to such inventory set forth on the Latest Company Balance Sheet, as
adjusted for the passage of time through the Closing Date in accordance with GAAP, consists of a quantity and
quality which is usable and salable in the ordinary course of business, and the items of such inventory are not
defective, slow-moving, obsolete or damaged and are merchantable and fit for their particular use.
(d) Reserves. The allowance for possible other reserves set forth on the Latest Company
Balance Sheet was adequate at the time to cover all known or reasonably anticipated contingencies.
4.6 Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.6, as of the Closing
Date, neither the Company nor any Subsidiary of the Company has any liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to the Company, whether due or to become due, and
regardless of when asserted) other than: (a) the liabilities set forth on the face of the Latest Company Balance
Sheet, (b) current liabilities which have arisen after the date of the Latest Company Balance Sheet, in the
ordinary course of business and consistent with the Company’s past practice, as applicable (none of which is a
liability resulting from breach of contract, breach of warranty, tort, infringement, violation of law, claim or
lawsuit), and (c) other liabilities and obligations expressly disclosed and quantified in the other Schedules to
this Agreement.
4.7 Assets of the Company.
(a) The Assets of the Company and other assets reflected in the Books and Records of the
Company constitute all of the assets and rights which are used or useful in the Business as currently conducted;
(b) The Company has good and marketable title to, or a valid leasehold interest in or
other rights to use (which other rights to use are described on the attached Schedule 4.7), all properties and
assets used by it in the Business of the Company, located on its premises, shown on the Latest Company Balance
Sheet or acquired by the Company since the date of the Latest Company Balance Sheet, in each case free and clear
of all Liens, other than Permitted Liens, and other than (i) properties and assets disposed of in the ordinary
course of business and consistent with the Company’s past practice by the Company since the date of the Latest
Company Balance Sheet, and (ii) Liens disclosed on the Latest Company Balance Sheet (including any notes
thereto); and
(c) The Company’s equipment and other tangible assets, and the equipment and tangible
assets of each Subsidiary of the Company, are in good operating condition (subject to normal wear and tear) and
fit for use in the ordinary course of business of the Company and its Subsidiaries and consistent with its past
practice.
4.8 Absence of Certain Developments. Since September 28, 2002, there has been no change in the
financial condition, operating results, assets, customer or supplier relations, employee relations, or business
prospects of the Company and no customer or vendor has any plans to terminate its relationship with the Company
which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 4.8 or otherwise expressly contemplated by this Agreement, since the date of the Latest
Company Balance Sheet, the Company has not:
(a) engaged in any activity which has resulted in (i) any acceleration or delay of the
collection of the Company’s accounts or notes receivable, (ii) any delay in the payment in the Company’s accounts
payable, or (iii) any increase in the Company’s purchases of raw materials, in each case as compared with the
Company’s custom and practice in the conduct of the Business immediately prior to the date of the Latest Company
Balance Sheet;
(b) discharged or satisfied any Lien or paid any obligation or liability, other than
current liabilities paid in the ordinary course of business and consistent with the Company’s past practice;
(c) mortgaged or pledged any of the Company Shares or any Asset or subjected any of the
Company Shares or any Asset to any Lien;
(d) sold, assigned, conveyed, transferred, canceled or waived any property, tangible asset
or other intangible asset or right of the Company other than in the ordinary course of business and consistent
with the Company’s past practice;
(e) waived any right of the Company other than in the ordinary course of business or
consistent with the Company’s past practice;
(f) made commitments for capital expenditures by the Company which, in the aggregate,
would exceed $1, 500,000;
(g) made any loan or advance to, or guarantee for the benefit of, or any Investment in,
any other Person on behalf of the Company;
(h) granted any bonus or any increase in wages, salary, or other compensation to any
employee of the Company (other than any bonus, increase in wages, or salaries granted in the ordinary course of
business and consistent with the Company’s past practice granted to any employee who is not affiliated with the
Company other than by reason of such Person’s employment by the Company);
(i) made any charitable contributions on behalf of the Company, except in the ordinary
course of business and consistent with the Company’s past practice;
(j) suffered damages, destruction or casualty losses which, in the aggregate, exceed
$100,000 (whether or not covered by insurance) to any Asset;
(k) received any indication from any supplier of the Company to the effect that such
supplier will stop, or decrease the rate of, supplying materials, products or services to the Company (whether or
not the Merger is consummated), or received any indication from any customer of the Company to the effect that
such customer will stop, or decrease the rate of, buying materials, products or services from the Company
(whether or not the Merger is consummated);
(l) entered into any transaction other than in the ordinary course of business and
consistent with the Company’s past practice, or entered into any other transaction, whether or not in the
ordinary course of business, which may adversely affect the Company;
(m) declared, set aside, or paid any dividend or made any distribution with respect to the
Company’s capital stock or equity interests or redeemed, purchased, or otherwise acquired any of the Company’s
capital stock or equity interests;
(n) adopted or amended any employee benefit or welfare plan relating to the employees of
the Company; or
(o) received any indication from any key employee to the effect that such key employee
will terminate employment with the Company; or
(p) agreed to do any act described in any of clauses 4.8(a) through (o).
4.9 Governmental Filings. Except as set forth on Schedule 4.9, other than the filing of the Merger
Certificate with the State of New Jersey, no notices, reports or other filings are required to be made by the
Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained
by the Company from, any Government Entity in connection with the execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated by the Transaction Documents.
4.10 Tax Matters. Except as set forth on Schedule 4.10 and except where a failure of a statement
in (a) through (w) below to be true or complete has not had or would not reasonable be likely to have,
individually or in the aggregate, a Material Adverse Effect:
(a) The Company has timely filed all Tax Returns that it was required to file.
(b) All such Tax Returns were and are true, correct and complete in all respects.
(c) All Taxes owed by the Company (whether or not shown on any Tax Return for all time
periods through the Closing Date) have been paid. The amount of liability for unpaid Taxes for all time periods
ending on or before the Closing Date will not exceed the amount of current liability accruals for Taxes
(excluding reserves for deferred Taxes) as such accruals are reflected on the Latest Company Balance Sheet.
(d) No information related to Tax matters has been requested by any Taxing authority and
there are no ongoing examinations or claims against the Company or any Subsidiary for Taxes, and no notice of any
audit, examination, or claim for Taxes, whether pending or threatened, has been received.
(e) The Company currently are not the beneficiary of any extension of time within which to
file any Tax Return, except with respect to such Tax Returns due in 2001;
(f) No claim has ever been made by an authority in a jurisdiction where the Company or a
Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. The Company
is not required to file Tax Returns in any jurisdiction in which it is not currently filing Tax Returns.
(g) There are (and as of immediately following the Closing Date there will be) no Liens
other than Permitted Liens on any of the Assets of the Company or a Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) The Company has withheld and paid over to the proper governmental entities all Taxes
required to have been withheld and paid over in all matters, including in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third party.
(i) To the Knowledge of any director or officer of the Company, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely determined, would result in any Lien
on the Assets of the Company.
(j) There are no unresolved disputes or claims concerning the Tax liability of the Company
or each Subsidiary.
(k) Since October 1997, the Company has not been, and is currently not, subject to a Tax
audit.
(l) The Company has never waived or extended any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency as to which the period
of extension has not elapsed.
(m) The Company has not filed any consent agreement under Section 341(f) of the Code
concerning collapsible corporations.
(n) The Company has never made any payments, is not obligated to make any payments, and is
not a party to any agreement that could obligate it to make any payments that will not be deductible under
Sections 280(G) and 404 of the Code.
(o) The Company has never been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code.
(p) The Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of Federal Income Tax within the meaning of Section
6662 of the Code.
(q) The Company is not a party to any Tax allocation, Tax indemnity or Tax sharing
agreement. The Company (A) has never been a member of an Affiliated Group filing a consolidated federal income
Tax Return and (B) has no liability for the Taxes of any Person (other than any of the Company) under
Treas. Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(r) The Company’s taxable year ends on the last Saturday of the month of September of each
year.
(s) The Company currently utilizes, and has utilized since inception, the accrual method
of accounting for income Tax purposes.
(t) There are no tax rulings, requests for rulings, closing agreements or changes of
accounting method relating to the Company or any of its Subsidiaries that could affect their liability for Taxes
for any period after the Closing Date.
(u) No property of the Company is “tax-exempt use property” within the meaning of Section
168(h) of the Code.
(v) The Company is not a party to any lease made pursuant to Section 168(f) of the Code.
(w) The Company will not be required to include in a taxable period ending after the date
of the Closing income attributable to a prior taxable period that was not recognized in that prior taxable period
as a result of the installment method of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions
of state or local or foreign tax law.
4.11 Contracts and Commitments.
(a) Contracts. Schedule 4.11(a) sets forth a complete list of all agreements to which the
Company is a party, which obligates the Company to make payments in any one calendar year in excess of $100,000,
in the aggregate (the “Contracts”). Other than this Agreement and the agreements described on Schedule 4.11(a),
the Company is not a party to any written or oral:
(i) pension, profit sharing, stock option, employee stock purchase or other plan
or arrangement providing for deferred or other compensation to employees or any other employee benefit, welfare
or stock plan or arrangement which is not described on the attached Schedule 4.17, or any contract with any labor
union, or any severance agreement;
(ii) contract for the employment or engagement as an independent contractor of any
Person on a full-time, part-time, consulting or other basis;
(iii) contract pursuant to which the Company has advanced or loaned funds, or agreed
to advance or loan funds, to any other Person, which obligates the Company to make payments in any one calendar
year in excess of $25,000 in the aggregate;
(iv) contract or indenture relating to any Indebtedness or the mortgaging, pledging
or otherwise placing a Lien on any of the Company Shares or any of the Assets of the Company;
(v) contract pursuant to which the Company is the lessee of, or holds or operates,
any real or personal property owned by any other Person;
(vi) contract pursuant to which the Company is the lessor of, or permits any third
party to hold or operate, any real or personal property owned by the Company or of which the Company is a lessee;
(vii) assignment, license, indemnification or other contract with respect to any
intangible property (including any Proprietary Right) which is material to the Business and is not described on
Schedule 4.12(a);
(viii) contract or agreement with respect to services rendered or goods sold or
leased to or from others, other than any customer purchase order accepted in the ordinary course of business and
in accordance with the Company’s past practice, which obligates the Company to make payments in any one calendar
year in excess of $25,000 in the aggregate;
(ix) contract prohibiting the Company from freely engaging in any business anywhere
in the world;
(x) other than a commission arrangement, independent sales representative or
distributorship agreement with respect to the Business, which obligates the Company to make payments in any one
calendar year in excess of $25,000 in the aggregate; or
(xi) executory contract (other than one described in Sections 4.11(a)(i) through
4.11(a)(x)) which is material to the Company or involves a consideration in excess of $100,000.
(b) Enforceability. Each Contract described on the attached Schedule 4.11(a) is a valid
and binding agreement of the Company, enforceable by the Company in accordance with its terms, except as such
enforceability against the other parties thereto may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors’ rights generally and (ii) applicable
equitable principles (whether considered in a proceeding at law or in equity).
(c) Compliance. Except as set forth on Schedule 4.11(c), the Company has performed all
material obligations required to be performed by it under each Contract, and the Company is not in default under
or in breach of (nor is it in receipt of any claim of any such default under or breach of) any such obligation.
No event has occurred which with the passage of time or the giving of notice (or both) would result in a default,
breach or event of noncompliance under any obligation of the Company pursuant to any Contract. The Company has
no present expectation or intention of not fully performing any obligation of the Company pursuant to any
Contract, and the Company has no Knowledge of any breach or anticipated breach by any other party to any Contract.
(d) Leases. With respect to each Contract which is a lease of personal property, the
Company holds a valid and existing leasehold interest under such lease for the term thereof.
(e) Affiliated Transactions. Except as set forth on Schedule 4.11(e), no officer,
director, stockholder or Affiliate of the Company (and no individual related by blood or marriage to any such
Person, and no entity in which any such Person or individual owns any beneficial interest) is a party to any
agreement, contract, commitment or transaction with the Company (other than this Agreement) or has any interest
in any property used by the Company.
(f) Copies. Purchasers’ legal counsel has been supplied with a true and correct copy of
each written Contract disclosed in Schedule 4.11, each as currently in effect.
4.12 Proprietary Rights.
(a) Schedule. The attached Schedule 4.12(a) contains a complete and accurate list of the
following Proprietary Rights, both domestic and foreign, that are material to the business of the Company and its
Subsidiaries: (i) all patented or registered Proprietary Rights owned by the Company or used in connection with
the Business, (ii) all pending patent applications and applications for registrations of other Proprietary Rights
filed by or on behalf of the Company or used in connection with the Business, (iii) all registered trade names,
trademarks, corporate names, and websites, and unregistered trade names, trademarks and service marks owned by
the Company or used in connection with the Business, (iv) all inventions, trade secrets or other proprietary
information not otherwise the subject of a patent, patent application, or registered application to register
Proprietary Rights, and (v) all registered and unregistered copyrights and computer software which are material
to the financial condition, operating results, assets, customer or supplier relations, employee relations or
business prospects of the Company. The attached Schedule 4.12(a) also contains a complete and accurate list of
all licenses, covenants not to xxx, and other rights granted by the Company to any third party, all licenses,
covenants not to xxx, and other rights granted by any third party to the Company, with respect to any Proprietary
Rights, a general description of all agreements or arrangements of escrows of source codes in favor of licensees
together with a description of the location of copies of all such agreements, provided, however, such list may
exclude any license for software that is a pre-packaged software product.
(b) Ownership; Claims. The Company believes that it owns and possesses all right, title
and interest in and to (or has the right to use pursuant to a valid and enforceable license) all Proprietary
Rights described on Schedule 4.12(a) which are material to the operation of the Company’s business and is not
aware of rights which it does not own or possess which it believes are material to its business as presently
conducted and as presently proposed to be conducted, and the Company has taken all necessary actions to maintain
and protect its interest in all the Proprietary Rights disclosed on Schedule 4.12(a). To the knowledge of the
Company, the owners of the Proprietary Rights licensed to the Company have taken all necessary actions to
maintain and protect the Proprietary Rights which are subject to such licenses in the United States and in the
United Kingdom.
(i) To the Knowledge of the Company, the Company owns in the entirety or has the
right to use all of the Proprietary Rights described on such Schedule and each other Proprietary Right which is
material to the conduct of the Business (in each case free and clear of all Liens and free of all claims to the
use by others).
(ii) Except as set forth on Schedule 4.12(b), there have been no claims made
against the Company asserting the invalidity, misuse or unenforceability of any of such Proprietary Rights, and
there are no grounds known to the Company for any such claim.
(iii) Except as set forth on Schedule 4.12(b), the Company has not received any
notice of (nor is it aware of any facts which indicate a likelihood of) any infringement or misappropriation by,
or conflict with, any Person with respect to any of such Proprietary Rights (including any demand or request that
the Company license rights from any Person).
(iv) To the Knowledge of the Company, the conduct of the Business has not
infringed, misappropriated, or violated, and does not infringe, misappropriate or violate in any respect, any
proprietary right of any other Person, nor, to the Knowledge of the Company, would Purchasers’ conduct of the
Business as presently conducted infringe, misappropriate or violate in any respect any proprietary right of any
other Person.
(v) To the Knowledge of the Company, such Proprietary Rights have not been
infringed, misappropriated or violated in any respect by any other Person.
(vi) The consummation of the transactions contemplated by this Agreement will have
no adverse effect on any such Proprietary Right.
(c) Except as set forth on Schedule 4.12(c), to the Knowledge of the Company, all
Proprietary Rights set forth on Schedule 4.12(a) may be assigned by the Company in accordance with this Agreement
without obtaining the prior consent of any Person other than a Party to this Agreement.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no action, suit, proceeding, order,
investigation or claim pending against or affecting the Company or the Business (or, to the Company’s Knowledge,
pending or threatened against or affecting any officer, director or employee of the Company), at law or in
equity, or before or by any Government Entity, including (a) with respect to the transactions contemplated by the
Transaction Documents, or (b) concerning the design, manufacture, rendering or sale by the Company of any product
or service or otherwise concerning the conduct of the Business, and, to the Company’s Knowledge, in the case of
subsections (a) and (b), there is no basis for any of the foregoing.
4.14 Brokerage. Except as set forth on Schedule 4.14, there is no claim for brokerage commissions,
finders’ fees or similar compensation in connection with the transactions contemplated by the Transaction
Documents which is binding upon the Company or to which the Company or any of the Company Shares or any of the
Assets of the Company is subject.
4.15 Insurance. The attached Schedule 4.15 contains a description (or a certificate of insurance)
of each insurance policy maintained by the Company with respect Company’s properties, assets or business, and
each such policy is in full force and effect. The Company is not in default of any obligation pursuant to any
insurance policy described on Schedule 4.15.
4.16 Employees.
(a) Continued Employment. Except as set forth on Schedule 4.16, to the Knowledge of the
Company, no executive or key employee of the Company or any group of employees of the Company has any plans to
terminate employment with the Company.
(b) Compliance and Restrictions. The Company has substantially complied with all laws
relating to the employment of labor, including provisions of such laws relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other taxes, and the Company has no
labor relations problem (including any union organization activities, threatened or actual strikes or work
stoppages or grievances). Except as set forth on Schedule 4.16, neither the Company nor any employees of the
Company are subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreement relating to, affecting, or in conflict with, the Business activities as presently conducted. Except as
set forth on Schedule 4.16, the consummation of this Agreement will not give rise to (i) the vesting of any
restricted stock of the Company, (ii) any change of control provisions set forth in any agreement between any
Person and the Company, (iii) any severance payments to become due and owing to any Person by the Company, or
(iv) any other similar benefits becoming payable.
4.17 ERISA. Except as set forth on the attached Schedule 4.17, with respect to all current
employees (including those on lay-off, disability or leave of absence), former employees, and retired employees
of the Company:
(a) the Company neither maintains nor contributes to any (i) employee welfare benefit
plans (as defined in Section 3(1) of ERISA) (“Employee Welfare Plans”), or (ii) any plan, policy or arrangement
which provides nonqualified deferred compensation, bonus or retirement benefits, severance or “change of control”
(as set forth in Code Section 280G) benefits, or life, disability, accident, vacation, tuition reimbursement or
other fringe benefits (“Other Plans”);
(b) the Company does not maintain, contribute to, or participate in any defined benefit
plan or defined contribution plan which are employee pension benefit plans (as defined in Section 3(2) of ERISA)
(“Employee Pension Plans”);
(c) the Company does not contribute to or participate in, and has neither contributed to
nor participated in for the past six years, any multiemployer plan (as defined in Section 3(37) of ERISA) (a
“Multiemployer Plan”);
(d) the Company does not maintain or have any obligation to contribute to or provide any
post-retirement health, accident or life insurance benefits to any Employee, other than limited medical benefits
required to be provided under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts) comply in form and in
operation in all material respects with the applicable requirements of ERISA and the Code;
(f) all required reports and descriptions (including all Form 5500 Annual Reports, Summary
Annual Reports, PBGC-1s and Summary Plan Descriptions) with respect to all Plans have been properly filed with
the appropriate Government Entity or distributed to participants, and the Company has complied substantially with
the requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or payments which are due on or
before the Closing Date have been paid to such Plan; and
(h) the Company has not incurred any liability to the Pension Benefit Guaranty Corporation
(the PBGC), the United States Internal Revenue Service, any multiemployer plan or otherwise with respect to any
employee pension benefit plan or with respect to any employee pension benefit plan currently or previously
maintained by members of the controlled group of companies (as defined in Sections 414(b) and (c) of the Code)
that includes the Company (the Controlled Group) that has not been satisfied in full, and no condition exists
that presents a risk to the Company or any member of the Controlled Group of incurring such a liability (other
than liability for premiums due the PBGC) which could reasonably be expected to have any adverse effect on the
Company or any of the Company Shares or any of the Assets of the Company after the Closing.
4.18 Real Estate.
(a) Owned Properties. Except as set forth on Schedule 4.18(a), the Company owns no real
property.
(b) Leased Property. The attached Schedule 4.18(b) lists and describes briefly all real
property leased or subleased to the Company and all other real property which is used in the Business and not
owned by the Company (the “Leased Real Property of the Company”). The Company has delivered to Purchasers’ legal
counsel correct and complete copies of the leases and subleases listed on Schedule 4.18(b) (collectively, the
“Company Leases”). With respect to the Leased Real Property and each of the Leases, except as set forth on
Schedule 4.18(b):
(i) such Company Lease is legal, valid, binding, enforceable, and in full force
and effect;
(ii) the Company is not aware that any party to such Company Lease is in breach or default, and the Company
is not aware that any event has occurred which, with notice or lapse of time, would constitute such a breach or
default or permit termination, modification, or acceleration of such Company Lease;
(iii) the Company is not aware that any party to such Company Lease has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or forbearance programs in effect as to such Company Lease;
(v) in the case of each Company Lease which is a sublease, the representations and warranties set forth in
clauses 4.18(b) (i) through (v) are true and correct with respect to the underlying lease;
(vi) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold created pursuant to such Company Lease;
(vii) none of the Company Leases has been modified in any respect, except to the extent that such
modifications are in writing and have been delivered or made available to Purchasers;
(viii) to the Knowledge of the Company, all buildings, improvements and other structures located upon the
Leased Real Property of the Company have received all approvals or Governmental Entities, including licenses and
permits, required in connection with the operation of the Business thereon and have been operated and maintained
in all material respects in accordance with all applicable Legal Requirements and the terms and conditions of the
Company Leases; and
(ix) to the Knowledge of the Company, all buildings, structures and other improvements located upon the
Leased Real Property of the Company, including all components thereof, are in good operating condition subject to
the provision of usual and customary maintenance in the ordinary course of business with respect to buildings,
structures and improvements of like age and construction and all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage and other utility lines and systems serving the Leased Real Property
of the Company are sufficient to enable the continued operation of the Leased Real Property of the Company in the
manner currently being used in connection with the operation of the Business of the Company.
4.19 Compliance with Laws.
(a) Generally. Except as set forth on Schedule 4.19(a), and except as would not
reasonably be likely to have a Material Adverse Effect, the Company has not violated any Legal Requirement, and
the Company has not received notice alleging any such violation.
(b) Required Permits. The Company has complied with (and is in compliance with) in all
material respects, all permits, licenses and other authorizations required for the occupation of the Company’s
facilities and the operation of the Business of the Company. The items described on the attached Schedule
4.19(b) constitute all of the permits, filings, notices, licenses, consents, authorizations, accreditation,
waivers, approvals and the like of, to or with any Government Entity which are required for the consummation of
the Merger, or any other transaction contemplated by the Transaction Documents or the conduct of the Business (as
it is presently conducted by the Company) thereafter.
(c) Environmental and Safety Matters. Without limiting the generality of Sections 4.19(a)
and (b), except as set forth on Schedule 4.19(c):
(i) The Company has complied, and is in compliance with, in all material respects,
all Environmental and Safety Requirements.
(ii) Without limiting the generality of the foregoing, the Company has obtained and
complied with, and is in compliance with, in all material respects, all permits, licenses and other
authorizations that may be required pursuant to Environmental and Safety Requirements for the occupation of its
facilities and the operation of the Business. A list of all such permits, licenses and other authorizations is
set forth on the attached Schedule 4.19(b).
(iii) The Company has not received any written or, to its Knowledge, oral notice,
report or other information regarding any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) or investigatory, remedial or corrective obligations, relating to it or its facilities and arising
under Environmental and Safety Requirements.
(iv) To the Knowledge of the Company, none of the following exists at any property
or facility owned, operated or occupied by the Company:
(1) underground storage tanks or surface impoundments
(2) asbestos-containing material in any form or condition; or
(3) materials or equipment containing polychlorinated biphenyls.
(v) The Company has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or Released any substance, including any Hazardous Substance, or owned or
operated any facility or property, so as to give rise to liabilities of the Company for response costs, natural
resource damages or attorneys’ fees pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (“CERCLA”), or similar state or local Environmental and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the Merger will result in any
obligations for site investigation or cleanup, or notification to or consent of any Government Entity or third
parties, pursuant to any so-called “transaction-triggered” or “responsible property transfer” Environmental and
Safety Requirements.
(vii) The Company has not, either expressly or by operation of law, assumed or
undertaken any liability, including any obligation for corrective or remedial action, of any other Person
relating to any Environmental and Safety Requirements.
(viii) No Environmental Lien has attached to any property now or previously owned,
leased or operated by the Company.
(ix) Without limiting the foregoing, to the Company’s Knowledge, no facts, events
or conditions relating to the Leased Real Property, or other past or present facilities, properties or operations
of the Company will prevent, hinder or limit continued compliance with Environmental and Safety Requirements,
give rise to any investigatory, remedial or corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements, including any relating to onsite or offsite
Releases or threatened Releases of Hazardous Substances, personal injury, property damage or natural resource
damage.
4.20 Product Warranty. Except as set forth on the attached Schedule 4.20, and except as would not
reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect, all products
manufactured, serviced, distributed, sold or delivered by the Company have been manufactured, serviced,
distributed, sold and/or delivered in conformity with all applicable contractual commitments and all express and
implied warranties. No liability of the Company exists or has been asserted for replacement or other damages in
connection with any such product.
4.21 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the
Company, except as set forth on Schedule 4.21.
4.22 Bank Accounts. Schedule 4.22 identifies the names and locations of all banks, depositories and
other financial institutions in which the Company or any other Person on behalf of the Company, has an account or
safe deposit box and the names of all persons authorized to draw on such accounts or to have access to such safe
deposit boxes.
4.23 Disclosure. Neither this Article IV nor any schedule, attachment, written statement,
certificate or similar item supplied to Purchasers by or on behalf of the Company with respect to the
transactions contemplated by the Transaction Documents contains any untrue statement of a material fact or omits
a material fact necessary to make each statement contained herein or therein not misleading. There is no fact
which the Company has not disclosed to Purchasers in writing and of which the Company or any officer or director
of the Company is aware (other than matters of a general economic nature) and which has had or could reasonably
be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS
5.1 Issuance of Merger Consideration without Registration.
(a) Eos shall issue the Merger Consideration without registration under the Securities Act
in reliance on the safe harbor provided in Regulation D of the Securities Act or such other safe harbor or
exemption from registration as Eos may deem appropriate. Eos shall take any action required to be taken under
state blue sky or securities laws in connection with the issuance of the Merger Consideration pursuant to the
Merger, and the Company shall furnish Eos all information concerning the Company and the holders of its Capital
Stock and shall take any action as Eos may reasonably request in connection with any such action.
(b) At or prior to the Effective Time, the Company shall deliver to Eos executed
confirmations from each stockholder of the Company (other than those exercising dissenter’s rights),
substantially in the form of Exhibit A attached hereto (an “Investor Representation Certificate with Registration
Rights Agreement”) that such stockholder is either an Accredited Investor or that such stockholder, alone or
with such stockholder’s representative:
(i) has such knowledge and experience in financial and business matters that such
stockholder is capable of evaluating the merits and risks of the investment in Eos Common Stock;
(ii) understands that an investment in Eos Common Stock involves certain risks and
such stockholder is able to bear the economic risk of losing the entire investment in the Eos Common Stock;
(iii) understands that the Eos Common Stock has not been registered under the
Securities Act or the securities laws of any other state and are therefore subject to substantial restrictions on
transfer;
(iv) understands that unless Eos registers the Eos Common Stock for resale under
federal or state securities laws, and, such stockholder may be precluded from selling or otherwise transferring
or disposing of the Eos Common Stock or any portion thereof and may have to bear the economic risk of investment
in the Eos Common Stock for an indefinite period of time;
(v) understands that no federal or state agency has approved or disapproved the
Eos Common Stock, passed upon or endorsed the merits of the offering thereof, or made any finding or
determination as to the fairness of the Eos Common Stock for investment;
(vi) acknowledges that such stockholder has had an opportunity to consult with
counsel and other advisers about an investment in the Eos Common Stock and that all material documents, records
and books pertaining to this investment have, on request, been made available to such stockholder and such
stockholder’s advisers;
(vii) acknowledges that Eos has made available to such stockholder and to such
stockholder’s advisors, the opportunity to ask questions of, and receive answers from, Eos concerning Eos and to
obtain any additional necessary to verify the accuracy of the information given to such stockholder or otherwise
make an informed investment decision;
(viii) understands that the Eos Common Stock is being offered and issued in reliance
on specific exemptions from the registration requirements of federal and state securities laws and that Eos and
controlling persons thereof are relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings set forth herein in order to determine the applicability of such
exemptions and the suitability of such stockholder to acquire the Eos Common Stock; and
(ix) understands and acknowledges that, as a result of the Merger, such stockholder
will receive shares of Eos Common Stock for all of such stockholder’s shares of Company Common Stock.
5.2. Access to Properties and Records; Confidentiality.
(a) Eos shall permit the Company and its agents and representatives, including, without
limitation, officers, directors, employees, attorneys, auditors, accountants, and financial advisors
(collectively, “Company Representatives”), and the Company shall permit Eos and its agents and representatives,
including, without limitation, officers, directors, employees, attorneys, auditors, accountants, and financial
advisors (collectively, the “Eos Representatives”), reasonable access to their respective properties, and shall
disclose and make available to the Company and the Company Representatives or Eos and the Eos Representatives, as
the case may be, all Books and Records thereof, including all books, papers and records, electronic or otherwise,
relating to their respective assets, stock ownership, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general ledger and books of original entry),
tax records, minute books of directors’ and stockholders’ meetings, organizational documents, bylaws, material
contracts and agreements, filings with any regulatory authority, independent auditors’ work papers (subject to
the receipt by such auditors of a standard access representation letter), litigation files, plans affecting
employees, and any other business activities or prospects in which the Company and the Company Representatives
or Eos and the Eos Representatives may have a reasonable interest. Neither party shall be required to provide
access to or to disclose information where such access or disclosure would violate or prejudice the rights of any
customer or would contravene any law, rule, regulation, order or judgment or, in the case of a document which is
subject to an attorney-client privilege, would compromise the right of the disclosing party to claim that
privilege. The parties will use all reasonable efforts to obtain waivers of any such restriction (other than the
attorney client privilege) and in any event make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) All information furnished by the parties hereto previously in connection with
transactions contemplated by this Agreement or pursuant hereto shall be used only for the purposes of evaluating
the Merger contemplated hereby, and for use in connection with the preparation and filing of any filings required
to be made by Eos with the SEC or any other Government Entity, including all preliminary filing thereof and
amendments thereto. Except as required to be disclosed in connection with such filings, all such information
shall be kept confidential and shall be treated as the sole property of the party delivering the information
until consummation of the Merger contemplated hereby and, if such Merger shall not occur, each party and each
party’s Representatives shall return to the other party all documents or other materials containing, reflecting
or referring to such information, will not retain any copies of such information, shall keep confidential all
such information, and shall not directly or indirectly use such information for any competitive or commercial
purposes or any other purpose not expressing permitted hereby.
(i) Each party hereto shall inform its Representatives of the terms of this
Section 5.2.
(ii) Any breach of this Section 5.2 by a Representative of a party hereto shall
conclusively be deemed to be a breach thereof by such party.
(iii) In the event that the Merger contemplated hereby does not occur or this
Agreement is terminated, all documents, notes and other writings prepared by a party hereto or its
representatives based on information furnished by the other party, and all other documents and records obtained
from another party hereto in connection herewith, shall be promptly destroyed; provided, that, Eos may retain and
utilize such information and materials as may be required by Eos for the preparation and filing of any Current
Report on Form 8-K by Eos with the SEC solely for such purposes. The obligation to keep such information
confidential shall continue indefinitely from the date the proposed Merger is abandoned, but shall not apply to:
(1) any information which:
(A) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure thereof to it by the other party;
(B) was then generally known to the public other than as a
result of a disclosure by any party hereto or its Representative;
(C) became known to the public through no fault of the party
receiving such information; or
(D) was disclosed to the party receiving such information by a
third party not bound by an obligation of confidentiality; or
(2) disclosures pursuant to a legal, regulatory or examination
requirement or in accordance with an order of a court of competent jurisdiction, provided that in the event of
any disclosure required by this clause (2), the disclosing party will give reasonable prior written notice of
such disclosure to the other parties and shall not disclose any such information without an opinion of counsel
supporting its position that such information must be disclosed.
(c) In addition to all other remedies that may be available to any party hereto in
connection with a breach by any other party hereto of its or its Representative’s obligations under this Section
5.2, each party hereto shall be entitled to specific performance and injunctive and other equitable relief with
respect to this Section 5.2. Each party hereto waives, and agrees to use all reasonable efforts to cause its
Representatives to waive, any requirement to secure or post a bond in connection with any such relief.
5.3 Tax Representation Letter. The Company shall secure and deliver to Eos at or prior to Closing
executed representations and warranties of the Company, in substantially the form of Exhibit B attached hereto
(the “Tax Representation Letter”), which are required for the issuance of an Opinion of Counsel regarding the tax
status of the Merger.
5.4 Tax Opinion Letter. Eos shall secure and deliver to the Company an opinion of Pitney, Xxxxxx,
Xxxx & Xxxxx LLP, substantially in the form of Exhibit C attached hereto (the “Tax Opinion Letter”), to the
effect that the receipt of the Eos Common Stock to be issued in connection with the Merger by the stockholders of
the Company will be tax-free in accordance with Section 354 of the Code and that such shares have been duly
authorized, validly issued, fully paid and non-assessable, and free and clear of any pre-emptive rights of the
stockholders of Eos, and addressing such other matters as shall reasonably be requested by the Company and its
counsel.
5.5 Company Affiliate Letter. At or prior to Closing, the Company shall deliver to Eos a
representation letter, substantially in the form of Exhibit D annexed hereto, executed by each of the
stockholders of the Company set forth on Schedule 5.5, which acknowledges each such stockholder’s understanding
of such stockholder’s responsibilities under, and restrictions on transfer of shares imposed by, Rules 144 and
145 of the Securities Act with respect to the shares of Eos Common Stock acquired by such stockholder pursuant to
this Agreement (the “Company Affiliate Letter”).
5.6 Conduct of the Business of the Company. During the period from the date of this Agreement to
the Effective Time, the Company shall conduct its business only in the ordinary course and consistent with
prudent business practice, except for transactions permitted hereunder or with the prior written consent of Eos,
which consent will not be unreasonably withheld. The Company shall use its reasonable best efforts to:
(a) preserve its business organization intact;
(b) keep available to itself the present services of their respective employees; and
(c) preserve for itself and Eos the goodwill of its customers and others with whom
business relationships exist.
5.7 Negative Covenants.
(a) Company Negative Covenants. From the date hereof to the Effective Time, except as
otherwise approved by Eos in writing, or as permitted or required by this Agreement, the Company shall not:
(i) change any provision of its Certificate of Incorporation or any similar
governing documents;
(ii) change any provision of its By-Laws without the consent of Eos which consent
shall not be unreasonably withheld;
(iii) except as set forth on Schedule 5.7(a)(iii), change the number of shares of
its authorized or issued capital stock or issue or grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to its authorized or issued capital stock, or any
securities convertible into shares of such stock, or split, combine, reclassify, redeem, or repurchase any shares
of its capital stock, or declare, set aside or pay any dividend, or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock;
(iv) grant any severance or termination pay to, or enter into or amend any employment
or severance agreement with, any of its directors, officers or employees; adopt any new employee benefit plan or
arrangement of any type; or award any increase in compensation or benefits to its directors, officers or
employees;
(v) sell or dispose of any substantial amount of assets or voluntarily incur any
significant liabilities other than in the ordinary course of business consistent with past practices and policies
or in response to substantial financial demands upon the business of the Company;
(vi) make any capital expenditures other than pursuant to binding commitments
existing on the date hereof, expenditures necessary to maintain existing assets in good repair and expenditures
described in business plans or budgets previously furnished to Eos.
(vii) file any applications or make any contract with respect to branching or site
location or relocation;
(viii) agree to acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity or make any new investments in securities without the
prior written consent of Eos;
(ix) make any material change in its accounting methods or practices, other than
changes required in accordance with GAAP or regulatory authorities;
(x) take any action that would result in any of its representations and warranties
contained in Article IV of this Agreement not being true and correct in any material respect at the Effective
Time or that would cause any of its conditions to Closing not to be satisfied;
(xi) purchase any shares of Eos Common Stock; or
(xii) agree to do any of the foregoing.
(b) Eos Negative Covenants. From the date hereof to the Effective Time, except as otherwise
approved by the Company in writing, or as permitted or required by this Agreement, neither Eos nor any Subsidiary
of Eos will:
(i) change any provision of its Certificate of Incorporation or any similar
governing documents;
(ii) change any provision of its By-Laws without the consent of the Company, which
consent shall not be unreasonably withheld;
(iii) change the number of shares of its authorized or issued capital stock or issue
or grant any option, warrant, call, commitment, subscription, right to purchase or agreement of any character
relating to its authorized or issued capital stock, or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of its capital stock, or declare, set aside or pay any dividend, or other
distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock;
(iv) adopt any new employee benefit plan or arrangement of any type, or award any
increase in compensation or benefits to its directors, officers or employees;
(v) sell or dispose of any substantial amount of assets or voluntarily incur any
significant liabilities other than in the ordinary course of business consistent with past practices and policies
or in response to substantial financial demands upon the business of Eos or any Subsidiary of Eos;
(vi) make any capital expenditures other than pursuant to binding commitments
existing on the date hereof, expenditures necessary to maintain existing assets in good repair and expenditures
described in business plans or budgets previously furnished to the Company;
(vii) file any applications or make any contract with respect to branching or site
location or relocation, unless Eos is required to relocate its business operations;
(viii) agree to acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity or make any new investments in securities without the
prior written consent of the Company;
(ix) make any material change in its accounting methods or practices, other than
changes required in accordance with GAAP or regulatory authorities;
(x) take any action that would result in any of its representations and warranties
contained in Article III of this Agreement not being true and correct in any material respect at the Effective
Time or that would cause any of its conditions to Closing not to be satisfied;
(xi) purchase any shares of the Company Common Stock; or
(xii) agree to do any of the foregoing.
5.8 Further Assurances.
(a) Subject to the terms and conditions herein provided, each of the parties hereto agrees
to use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to satisfy the conditions to Closing
and to consummate and make effective the transactions contemplated by this Agreement, including, without
limitation, using reasonable efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement and
using its reasonable best efforts to prevent the breach of any representation, warranty, covenant or agreement of
such party contained or referred to in this Agreement and to promptly remedy the same. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all such necessary action. Nothing in
this section shall be construed to require any party to participate in any threatened or actual legal,
administrative or other proceedings (other than proceedings, actions or investigations to which it is a party or
subject or threatened to be made a party or subject) in connection with consummation of the transactions
contemplated by this Agreement unless such party shall consent in advance and in writing to such participation
and the other party agrees to reimburse and indemnify such party for and against any and all costs and damages
related thereto if the Merger is not consummated.
(b) Eos agrees that from the date hereof to the Effective Time, except as otherwise
approved by the Company in writing or as permitted or required by this Agreement, Eos will use reasonable
business efforts to maintain and preserve intact its business organization, properties, leases, employees and
advantageous business relationships, and Eos will not, nor will it permit any Subsidiary of Eos to, take any
action: (i) that would result in any of its representations and warranties contained in Article III of this
Agreement not being true and correct in any material respect at, or prior to, the Effective Time, or (ii) that
would cause any of its conditions to Closing not to be satisfied, or (iii) that would constitute a breach or
default of its obligations under this Agreement.
5.9 Delivery of Financial Statements. The Company shall deliver to Eos all financial statements of
the Company required to be filed by Eos in accordance with Item 2 of Current Report on Form 8-K for filing with
the Securities and Exchange Commission on such Form 8-K at or prior to the Effective Time.
5.10 Employment Agreements. At or prior to Closing, the Company shall enter into employment
agreements with Xxxxx X. Xxxxxxx, Xxxx X. Xxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx, III, Xxxxx
Xxxxxxxxx-Xxxxxxx, and Xxxxxx X. Xxxxx.
5.11 Exclusivity.
(a) Between the date of this Agreement and the earlier to occur of the Closing or the
termination of this Agreement in accordance with Section 7.1, neither Eos nor any person acting on its behalf
shall hold discussions with, negotiate with, provide any information to, or initiate, encourage, solicit, or
agree to any offer from, any person other than the Company, regarding any merger, sale of securities, sale of
assets, sale of liabilities, or similar transaction involving Eos or any transaction that could be expected to
impede, delay, interfere with, prevent, or dilute the benefits to the Company of the transactions contemplated
hereby, unless:
(i) the board of directors of Eos determines in good faith based on written advice
of its outside legal counsel that the action is necessary for the board of directors of Eos to comply with its
fiduciary duties to the shareholders of Eos under applicable law; and
(ii) prior to entering into negotiations, the board of directors of Eos receives
from the other party an executed confidentiality agreement and proposal with terms no less favorable to Eos than
those contained in this Agreement; and
(iii) prior to entering into any such negotiations, Eos provides written notice to
the Company that includes the terms of the proposal, the identity of the person making the proposal, and the fact
that clauses (a) and (b) of this Section 5.11(a) have been satisfied.
(b) Between the date of this Agreement and the earlier to occur of the Closing or the
termination of this Agreement in accordance with Section 7.1, neither the Company nor any person acting on its
behalf shall hold discussions, negotiate with, provide any information to, or initiate, encourage, solicit, or
agree to any offer from, any person other than Eos regarding any merger, sale of securities, sale of assets, sale
of liabilities, or similar transaction involving the Company or any transaction that could be expected to impede,
delay, interfere with, prevent, or dilute the benefits to Eos of the transactions contemplated hereby, unless the
board of directors of the Company determines in good faith based on written advice of its outside legal counsel
that the action is necessary for the board of directors of the Company to comply with its fiduciary duties to the
stockholders of the Company under applicable law, or the following occurs:
(i) prior to entering into negotiations, the board of directors of the Company
receives from the other party an executed confidentiality agreement and a Superior Acquisition Proposal; and
(ii) prior to entering into any such negotiations, the Company provides written
notice to Eos that includes the terms of the Superior Acquisition Proposal, the identity of the person making
such Superior Acquisition Proposal.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of the Company to Effect the Merger. The obligations of the Company
to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the
additional following conditions:
(a) Each representation and warranty set forth in Article III shall be true and correct in
all material respects as of the Closing.
(b) Purchasers shall have performed in all material respects each covenant or other
obligation required to be performed by them pursuant to the Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the Transaction Documents shall
not be prohibited by any Legal Requirement or subject the Company to any penalty or liability arising under any
Legal Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or threatened before any Government
Entity the result of which could prevent or prohibit the consummation of any transaction pursuant to the
Transaction Documents, cause any such transaction to be rescinded following such consummation or adversely affect
Purchasers performance of their obligations pursuant to the Transaction Documents, and no judgment, order,
decree, stipulation, injunction or charge having any such effect shall exist.
(e) All filings, notices, licenses, consents, authorizations, accreditation, waivers,
approvals and the like of, to or with any Government Entity or any other Person that are required for the
Purchasers to consummate the Merger or any other transaction contemplated by the Transaction Documents or to own
the Company Shares or to conduct the Business thereafter (the “Purchasers’ Consents”) shall have been duly made
or obtained.
(f) Eos shall have delivered to the Company a Certificate dated the Closing Date, signed
by the Chairman of Eos stating that the conditions set forth in Section 6.1 (a) through (e) above and Section
6.1(m) through (u) below have been satisfied.
(g) Eos shall have delivered to the Company a copy of the resolutions duly adopted by Eos’
board of directors authorizing Eos’ execution, delivery and performance of the Transaction Documents to which Eos
is a party and the consummation of the Merger and all other transactions contemplated by the Transaction
Documents, as in effect as of the Closing, certified by an officer of Eos.
(h) Eos shall have delivered to the Company a copy of the resolutions duly adopted by
Newco’s board of directors authorizing Newco’s execution, delivery and performance of the Transaction Documents to
which Newco is a party and the consummation of the Merger and all other transactions contemplated by the
Transaction Documents, as in effect as of the Closing, certified by an officer of Newco.
(i) Eos shall have delivered to the Company a copy of the resolutions duly adopted by Eos
as the stockholder of Newco approving the Merger and this Agreement, certified by an officer of Newco.
(j) Eos shall have delivered to the Company a certificate (dated not more than five
business days prior to the Closing) of the Secretary of State of the State of Delaware as to the good standing of
Eos in Delaware and a certificate (dated not more than five business days prior to the Closing) of the Treasurer
of the State of New Jersey as to the good standing of Newco in New Jersey.
(k) Eos shall have delivered to the Company copies of the Purchasers’ Consents.
(l) On the Closing Date, Eos shall have unrestricted cash of no less than $2,300,000 after
giving effect to payments owed by Eos to the Eos Bridge Lenders and the costs of the transactions contemplated by
this Agreement and restricted cash of no less than $1,200,000 for certain specified costs approved by management.
(m) Eos shall have restructured its bonus compensation obligation to Xxxxx Xxxx, Chairman
of the Board of Eos, in a manner reasonably satisfactory to the Board of Directors of the Company.
(n) Eos shall have restructured Eos’ promissory note made to Avon Products, Inc.,
originally dated January 15, 1999, and amended on June 21, 2001 (the “Avon Note”), in a manner reasonably
satisfactory to the Board of Directors of the Company.
(o) Eos shall have obtained proceeds from a Private Placement with gross proceeds to Eos
of at least $7.5 million from the sale of 15,000,000 shares of Eos Common Stock.
(p) Eos shall have entered into the Registration Rights Agreement, substantially in the
form of Exhibit 1 to the Investors Representation Certificate with Registration Rights Agreement, the form of
which is attached hereto as Exhibit A, with each of the holders of the Company Common Stock, or their assignees,
providing for registration rights with respect to the Merger Consideration on terms no less favorable than the
registration rights granted to the investors in the Private Placement. The rights granted to the recipients of
the Merger Consideration shall be comparable to the rights granted to the investors in the Private Placement with
respect to the Eos Common Stock in all respects.
(q) After giving effect to the closing of the Private Placement and the issuance of the
Merger Consideration, there shall be no more than 100,000,000 shares of Eos Common Stock outstanding on a fully
diluted basis.
(r) The Company shall have received the Tax Opinion Letter.
(s) The Merger shall have been approved and adopted by the requisite vote of the holders
of the Company’s Common Stock prior to the Effective Time.
(t) At or prior to Closing, Eos shall have satisfied its short-term bridge loans though a
combination of cash payment and the issuance to the Eos Bridge Lenders of Series D Preferred Stock (the “Series D
Preferred Stock”) with a liquidation preference not to exceed $2.5 million plus the accrued interest on its
short-term bridge loans to the date of issuance of the Series D Preferred Stock, subject to increase thereafter
at a rate of 13% per annum.
(u) PNC Bank, as lender to the Company, shall have consented to the Merger.
6.2 Conditions to Obligations of Eos to Effect the Merger. The obligations of Eos to effect the
Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the additional
following conditions.
(a) The Company shall have delivered the Tax Representation Letter (as defined in Section
5.4 hereof), duly executed by the Company.
(b) The Company shall have delivered the Company Affiliate Letter (as defined in Section
5.5 hereof), duly executed by each of the stockholders of the Company set forth on Schedule 5.5.
(c) Each representation and warranty set forth in Article IV shall be true and correct in
all material respects as of the Closing, and the Audited Financial Statements shall present fairly in all
material respects the consolidated financial condition of the Company as of the dates of such statements and the
results of operation for such periods, shall be accurate and complete, shall be consistent with the books and
records of the Company (which, in turn, are, and shall be, accurate and complete) and shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods covered thereby except as noted therein.
(d) The Company shall have performed in all material respects each covenant or other
obligation required to be performed by them pursuant to the Transaction Documents prior to the Closing.
(e) The consummation of the transactions contemplated by the Transaction Documents shall
not be prohibited by any Legal Requirement or subject Purchasers, any of the Company Shares or any of the Assets
of the Company to any penalty or liability arising under any Legal Requirement or imposed by any Government
Entity.
(f) No action, suit or proceeding shall be pending or threatened before any Government
Entity the result of which could prevent or prohibit the consummation of any transaction pursuant to the
Transaction Documents, cause any such transaction to be rescinded following such consummation or adversely affect
Purchasers’ right to conduct the Business or the Company’s performance of its obligations pursuant to the
Transaction Documents, and no judgment, order, decree, stipulation, injunction or charge having any such effect
shall exist.
(g) All filings, notices, licenses, consents, authorizations, accreditation, waivers,
approvals and the like of, to or with any Government Entity or any other Person that are required for the Company
to consummate the Merger or any other transaction contemplated by the Transaction Documents or to own and
transfer the Company Shares or permit the conduct of the Business by Purchasers thereafter (the “Company’s
Consents”) shall have been duly made or obtained.
(h) The Company shall have delivered to Purchasers a Certificate, dated the Closing Date,
signed by the President of the Company stating that the conditions set forth in Sections 6.2(c) through (h) have
been satisfied.
(i) The Company shall have delivered to Purchasers a copy of the resolutions duly adopted
by the Company’s board of directors authorizing the Company’s execution, delivery and performance of the
Transaction Documents to which the Company is a party and the consummation of the Merger and all other
transactions contemplated by the Transaction Documents, as in effect as of the Closing, certified by an officer
of the Company;
(j) The Company shall have delivered to Purchasers a certificate (dated not more than five
business days prior to the Closing) of the Treasurer of the State of New Jersey as to the good standing of the
Company in New Jersey.
(k) The Company shall have delivered to Purchasers the Books and Records;
(l) The Company shall have delivered to Purchasers copies of the Company Consents.
(m) No more than an aggregate of 100 shares of Common Stock of the Company shall be
outstanding (including shares of Common Stock of the Company issuable upon the exercise or conversion of any
security).
(n) The Merger shall have been approved and adopted at the Company Meeting by the all of
the shareholders of record of the Company’s Common Stock; provided, however, that Eos may waive this condition if
holders of 98% of the holders of record of the Company’s Common Stock vote for the merger at the Company meeting.
(o) The Company shall have delivered to Eos Investor Representation Letters duly executed
by each stockholder of the Company.
(p) At or prior to Closing, Eos shall have satisfied its short-term bridge loans though a
combination of cash payment and the issuance to the Eos Bridge Lenders of preferred stock with a liquidation
preference not to exceed $2.5 million plus the accrued interest on its short-term bridge loans at the date of
issuance of the preferred stock.
(q) PNC Bank, as lender to Discovery Toys, Inc., shall have consented to the restructured
Avon Note.
(r) A committee of independent directors of the Board of Directors of Eos shall have
approved the Merger and received a fairness opinion concluding that the Merger is fair from a financial point of
view to the shareholders of Eos.
ARTICLE VII
TERMINATION
7.1 Events of Termination. This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Eos and the Company,
(a) by mutual consent of the Boards of Directors of Eos and the Company;
(b) by either Eos or the Company if the Merger shall not have been consummated on or
before March 31, 2003, provided the terminating party is not otherwise in material breach of its obligations
under this Agreement;
(c) by either Eos or the Company if this Agreement is not approved by the stockholders of
the Company prior to January 8, 2003;
(d) by either Eos or the Company in the event of (i) a breach by the other party of any
representation or warranty contained herein, which breach has not been cured within 10 days after the giving of
written notice to the breaching party of such breach and which breach, individually or in the aggregate when
combined with other such breaches, would cause the conditions set forth in Section 6.1 or 6.2, as the case may
be, not to be met if the date of the action described above were the date of the Closing or (ii) a material
breach by the other party of any of the covenants or agreements contained herein, which breach has not been cured
within 30 days after the giving of written notice to the breaching party of such breach;
(e) by Eos if any of the conditions specified in Section 6.2 have not been met or waived
by Eos at such time as such conditions can no longer be satisfied;
(f) by the Company if any of the conditions specified in Section 6.1 have not been met or
waived by the Company at such time as such conditions can no longer be satisfied;
(g) by the Company if the Company receives a Superior Acquisition Proposal; and
(h) by Eos if the stockholders of the Company, representing greater than 2% of the
outstanding Capital Stock of the Company in the aggregate, assert dissenter’s rights or elect to assert
dissenter’s rights under the New Jersey Business Corporation Act.
7.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to Section 7.1, this
Agreement, except for the provisions of Article VII, shall become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders. Notwithstanding the foregoing, nothing in
this Section 7.2 shall relieve any Party of liability for a material breach of any provision of this Agreement
(b) Neither Eos nor the Company may terminate this Agreement in the event of (i) a breach
of any of its own representations or warranties contained herein, or (ii) for its own failure to meet any of its
respective conditions specified in Article VI of this Agreement; provided, however, that the Company may
terminate this Agreement upon the failure of its shareholders to approve and adopt the Merger.
ARTICLE VIII
MISCELLANEOUS
8.1 Rights and Remedies. No course of dealing between the Parties or failure or delay in
exercising any right, remedy, power or privilege (each, a “right”) pursuant to this Agreement will operate as a
waiver of any rights of any Party, nor will any single or partial exercise of any right under this Agreement
preclude any other or further exercise of such right or the exercise of any other right. Except as expressly set
forth herein, the rights provided pursuant to this Agreement are cumulative and not exhaustive of any other
rights which may be provided by law.
8.2 Waivers, Amendments to be in Writing. No waiver, amendment, modification or supplement of this
Agreement will be binding upon a Party unless such waiver, amendment, modification or supplement is set forth in
writing and is executed by such Party.
8.3 Successors and Assigns. Except as otherwise expressly provided in this Agreement, all
covenants and agreements set forth in this Agreement by or on behalf of the Company and Eos will bind and inure
to the benefit of the respective successors and assigns of the Company and Eos, whether so expressed or not.
Notwithstanding the foregoing, neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by either party without the prior written consent of the other party.
8.4 Governing Law. This Agreement will be governed by and construed in accordance with the
domestic laws of the State of New Jersey, without giving effect to any choice of law or conflict rule of any
jurisdiction that would cause the laws of any other jurisdiction to be applied. In furtherance of the foregoing,
the internal law of the State of New Jersey will control the interpretation and construction of this Agreement,
even if under any choice of law or conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.
8.5 Jurisdiction. Each of the Parties hereby (i) irrevocably submits to the jurisdiction of the
state courts of, and the federal courts located in, the State of New Jersey in any action or proceeding arising
out of or relating to, this Agreement, (ii) waives, and agrees to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that
the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such
court, and waives and agrees not to seek any review by any court of any other jurisdiction which may be called
upon to grant an enforcement of the judgment of any such court.
8.6 Notices.
(a) All demands, notices, communications and reports (“Notices”) provided for in this
Agreement will be in writing and will be either personally delivered, mailed by first class mail (postage
prepaid) or sent by reputable overnight courier service (delivery charges prepaid) to any Party at the address
specified below, or at such address, to the attention of such other Person, and with such other copy, as the
recipient party has specified by prior written Notice to the sending Party pursuant to the provisions of this
Section 8.6.
If to the Company:
I.F.S. of New Jersey, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, President
Facsimile Number: (000) 000-0000
with a copy, which will not constitute notice to the Company or the Surviving Company (prior to the
Closing), to:
Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx, P.C.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
If to Purchasers:
Eos International, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx, Chairman
Facsimile Number: (000) 000-0000
with a copy, which will not constitute notice to Eos, Newco or the Company, to:
Pitney, Xxxxxx, Xxxx & Xxxxx LLP
000 Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Xx.
Facsimile Number: (000) 000-0000
(b) Any such notice will be deemed to have been given when delivered personally, on the
third business day after deposit in the U.S. mail or on the business day after deposit with a reputable overnight
courier service (with proof of such deposit), as the case may be.
8.7 Severability of Provisions. If any provision of this Agreement is held to be invalid for any
reason whatsoever, then such provision will be deemed severable from the remaining provisions of this Agreement
and will in no way affect the validity or enforceability of any other provision of this Agreement.
8.8 Schedules. The Schedules constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
8.9 Counterparts. The Parties may execute this Agreement in separate counterparts (no one of which
need contain the signatures of all Parties), each of which will be an original and all of which together will
constitute one and the same instrument.
8.10 No Third-Party Beneficiaries. Except as otherwise expressly provided in this Agreement, no
Person which is not a Party will have any right or obligation pursuant to this Agreement.
8.11 Headings. The headings used in this Agreement are for the purpose of reference only and will
not affect the meaning or interpretation of any provision of this Agreement.
8.12 Merger and Integration. Except as otherwise provided in this Agreement, this Agreement sets
forth the entire understanding of the Parties relating to the subject matter hereof, and all prior
understandings, whether written or oral, are superseded by this Agreement.
8.13 Transaction Expenses. Except as contemplated by Section 7.1, Eos (for itself and for Newco)
and the Company, whether or not the Merger is consummated, shall bear their own respective legal and other fees
and expenses with respect to the Merger.
8.14 Further Assurances. From and after the Closing, Eos and the Company will, and will cause their
respective Affiliates to, execute all documents and take any other action which it is reasonably requested to
execute or take to further effectuate the transactions contemplated by the Transaction Documents.
8.15 Announcements. Eos and the Company shall cooperate with each other in the development and
distribution of all news releases and other public filings and disclosures with respect to this Agreement or the
Merger transactions contemplated hereby, and Eos and the Company agree that unless approved mutually by them in
advance, neither Eos nor the Company, directly or indirectly, will issue any press release or written statement
for general circulation relating primarily to the transactions contemplated hereby, except as may be otherwise
required by law or regulation upon the advice of counsel.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
I.F.S. OF NEW JERSEY, INC.
By: XXXXX X. XXXXXXX
Name: Xxxxx X. Xxxxxxx
Title: President
EOS INTERNATIONAL, INC.
By: XXXXX X. XXXX
Name: Xxxxx X. Xxxx
Title: Chairman
EOS ACQUISITION CORP.
By: XXXXX X. XXXX
Name: Xxxxx X. Xxxx
Title: President
Exhibit A
FORM OF INVESTOR REPRESENTATIONS CERTIFICATE WITH REGISTRATION RIGHTS AGREEMENT
This INVESTOR CERTIFICATE (this “Certificate”), is certified by [___________________________], an
individual residing at [__________________] (the “Investor”), to EOS INTERNATIONAL, INC., a Delaware corporation
(“Eos”).
Concurrently with the execution and delivery of this Certificate, Eos, Eos Acquisition Corp., a New
Jersey corporation (“Newco”), and I.F.S. of New Jersey, Inc., a New Jersey corporation (the “Company”), are
engaging in the consummation of a transaction as contemplated by the Agreement and Plan of Merger, dated as of
December 10, 2002, pursuant to which Newco will merge with and into the Company (the “Merger”), the Company will
become a subsidiary of Eos, and Eos will issue and the Investor will receive common stock of Eos (the
“Securities”).
The Investor understands that Eos may, pursuant to applicable law, under some circumstances have certain
duties or obligations to confirm the suitability of the Investor as an equity investor in the Securities.
To assist Eos in satisfying such duties and obligations, the Investor is executing and delivering this
Certificate to Eos.
The Investor represents, warrants, covenants, and agrees to and with Eos as follows:
Section 1 Accredited Investor and Purchaser Representative. The Investor either:
___ (a) is an “Accredited Investor” (as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”)) qualifying for one or more categories as checked
below:
____ (1) an individual whose individual net worth, or joint net worth with that
individual’s spouse, exceeds $1,000,000;
____ (2) an individual who had an individual income in excess of $200,000 in each of the
last two calendar years or joint income with that person’s spouse in excess of $300,000 in each
of those years and who reasonably expects to reach the same income level in the current
calendar year; or
____ (3) an individual who is a director or executive officer of Eos.
___ (b) has retained the services of a “Purchaser Representative” (as defined in Rule 501(h)
under the Securities Act). To the best of Investor’s knowledge [______________________], retained by the
Investor as the Investor’s Purchaser Representative has knowledge and experience in financial and business
matters and is capable of evaluating, alone, or together with the Investor, the merits and risks of the
prospective investment. The Purchase Representative has represented in writing that the Purchaser Representative
has such requisite knowledge and has satisfied all of the conditions specified in Rule 501(h) under the
Securities Act. The Investor has acknowledged in writing during the course of the transaction that
[_________________] is the Investor’s Purchaser Representative in connection with evaluating the merits and risks
of the issuance of the Securities in connection with the Merger.
Section 2 Disclosures
(a) The Investor has received within a reasonable time prior to the issuance of the
Securities, the following information:
(i) a copy of Eos’ most recent Form 10-K;
(ii) all periodic or quarterly reports, proxy statements, or information statements
filed by Eos since December 31, 2001 and a brief description of the Securities, the use of the proceeds of the
offering, and any material changes in Eos’ affairs that are not disclosed in the documents furnished.
(b) The Investor has been provided all exhibits to any report by Eos, described above,
filed with the Securities and Exchange Commission that the Investor has requested in writing.
(c) The Investor has been provided with an opportunity to ask a representative of Eos
questions about the Securities and the transaction.
(d) The Investor has been provided in writing the limitations on selling, transferring,
reselling or otherwise disposing of the Securities, including without limitation that the Securities cannot be
resold without registration under the Securities Act or an exemption therefrom.
.....................................
Section 3 Investor’s Confirmation. Investor acknowledges that the Investor, either as an
Accredited Investor or that the Investor, alone or with such Investor’s Purchaser Representative:
(a) has such knowledge and experience in financial and business matters that the Investor
is capable of evaluating the merits and risks of the investment in the Securities;
1.2. (b) understands that an investment in the Securities involves certain risks and
the Investor is able to bear the economic risk of losing the entire investment in the Securities;
1.3. (c) understands that the Securities have not been registered under the Securities
Act or the securities laws of any other state and are therefore subject to substantial restrictions on transfer;
1.4. (d) understands that unless Eos registers the Securities for resale under any
federal or state securities laws, the Investor may be precluded from selling or otherwise transferring or
disposing of the Securities or any portion thereof and may have to bear the economic risk of investment in the
Securities for an indefinite period of time;
1.5. (e) understands that no federal or state agency has approved or disapproved the
Securities, passed upon or endorsed the merits of the offering thereof, or made any finding or determination as
to the fairness of the Securities for investment;
1.6. (f) acknowledges that the Investor has had an opportunity to consult with counsel
and other advisers about an investment in the Securities and that all material documents, records and books
pertaining to this investment have, on request, been made available to the Investor and the Investor’s advisers;
1.7. (g) acknowledges that Eos has made available to the Investor and to the Investor’s
advisors, the opportunity to ask questions of, and receive answers from, Eos concerning Eos and to obtain any
additional necessary to verify the accuracy of the information given to the Investor or otherwise make an
informed investment decision;
(h) understands that the Securities is being offered and issued in reliance on specific
exemptions from the registration requirements of federal and state securities laws and that Eos and controlling
persons thereof are relying upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the applicability of the exemptions and
the suitability of the Investor to acquire the Securities; and
(i) understands and acknowledges that, as a result of the Merger, the Investor will
receive shares of Securities in exchange for all of the Investor’s shares of capital stock of the Company.
Section 4 Investor’s Intentions
(a) The Investor is acquiring the Securities for investment purposes only and for the
Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part
thereof.
(b) The Investor has no present intention of selling, granting any participation in, or
otherwise distributing the Securities.
(c) ...The Investor has assumed that he may have to bear the entire economic risk of
its investment in the Securities for an indefinite period of time.
(d)......The Investor acknowledges that he does not anticipate that the Securities will
achieve, initially or over time, a specific rate of return of appreciation in value.
Section 5 ........Registration Rights Agreement.
Investor shall enter into a Registration Rights Agreement with Eos substantially in the form of
Exhibit 1 annexed hereto.
[End of Text of Certificate; Signature Page to Follow]
IN WITNESS WHEREOF, the Investor has duly executed, and delivered this Certificate, intending
it to be his legal, valid, binding, and enforceable obligation, as of the date set forth below.
...................................
................................... _____________________________
Print Name: _____________________________
Dated: December [__], 2002
EXHIBIT 1
TO THE
INVESTOR CERTIFICATE
FORM OF
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of December
[__], 2002 (the “Effective Time”), by and between Eos International, Inc., a Delaware corporation (“Eos”) and
____________________, an individual residing at ___________________________ (“Investor”).
WHEREAS, this Agreement is in connection with the Agreement and Plan of Merger, dated as of
December 10, 2002 (the “Merger Agreement”), among Eos, Eos Acquisition Corp., a New Jersey corporation (“Newco”),
I.F.S. of New Jersey, Inc., a New Jersey corporation (the “Company”), which provides that each share of Company
Common Stock (as defined below) issued and outstanding immediately prior to the effective time of the merger of
Newco with and into the Company (the “Effective Time of Merger”) shall be converted at the Effective Time of
Merger into the right to receive 159,880 shares of Eos Common Stock and 10 shares of Eos Series E Junior
Convertible Preferred Stock, unless minority shareholders of IFS elect to receive shares of Eos Common Stock
only; and
WHEREAS, minority shareholders of the Company may elect not to receive any Series E Junior
Convertible Preferred Stock (the “Rejected Series E Preferred Stock”), in which event (A) the merger
consideration for shares held by such electing minority shareholders will be 269,880 of Eos Common Stock for each
share of Company Common Stock, and (B) each majority shareholder of IFS will receive, in lieu of common stock of
Eos such majority shareholder would have received in the absence of Rejected Series E Preferred Stock, Rejected
Series E Preferred Stock pro rata based upon the record ownership of Company Common Stock at the rate of one
share of Series E Preferred Stock for 11,000 shares of Eos Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. For purposes hereof, the following, terms, when used herein with initial capital
letters, shall have the respective meanings set forth herein:
“Company Common Stock” means 100 shares common stock, without par value.
“Eos Common Stock” means common stock of Eos, par value $0.01 per share.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Investor” has the meaning specified in the recitals of this Agreement.
“Merger” means the merger of Newco with and into the Company.
............................
“Private Placement Closing” means the closing of the transactions contemplated by the Private
Placement Subscription Agreements, which shall take place on a date designated by Eos, which date shall be on or
before January 8, 2003.
“Private Placement Financing” means the private investment in private equity financing received
by Eos pursuant to the Private Placement Subscription Agreements, which will provide Eos Private Placement
Financing in an aggregate amount of at least $7.5 million.
“Private Placement Financing Investors” shall mean those investors that have executed a Private
Placement Subscription Agreement with Eos.
“Private Placement Subscription Agreements” shall mean those subscription agreements by and
between Eos and certain investors, which will provide Eos Private Placement Financing in an aggregate amount of
at least $7.5 million. A “Private Placement Subscription Agreement” shall mean a subscription agreement by and
between Eos and any investor, which will provide a portion of the Private Placement Financing.
“Register,” “registered” and “registration” refer to a registration of the offering and sale or
resale of Common Stock effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of such registration statement.
“Registrable Securities” means Rights Registrable Securities and Subscription Registrable
Securities.
“Rights Registrable Securities” means all Shares of Common Stock acquired by the Investor in
connection with the Merger Agreement, including shares of Eos Common Stock issuable upon the conversion of Eos
Series E Junior Convertible Preferred Stock, any other shares of Common Stock or other securities issued in
respect of such Shares by way of a stock dividend or stock split or in connection with a combination or
subdivision of Eos Common Stock or by way of a recapitalization, merger or consolidation or reorganization of
Eos, and, in the event that any shares of Eos Series E Junior Convertible Preferred Stock are not convertible
into Eos Common Stock 180 days after the date of the Private Placement Closing, then Rights Registrable
Securities shall include any shares of Eos Series E Junior Convertible Preferred Stock then held by the Investor;
provided, however, that, as to any particular securities, such securities will cease to be Rights Registrable
Securities when they have been sold pursuant to registration or in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale and the
purchaser and seller receive an opinion of counsel for Eos, which shall be in form and substance reasonably
satisfactory to the purchaser and seller and their respective counsel, to the effect that such stock in the hands
of the purchaser is freely transferable without restriction or registration under the Securities Act in any
public or private transaction.
“SEC” means the Securities and Exchange Commission.
......................................................
“Securities Act” means the Securities Act of 1933, as amended.
“Shares” means the number of shares of Common Stock set forth in the recital.
“Subscription Registrable Securities” means all shares of Common Stock acquired by the Private
Placement Financing Investor pursuant any Private Placement Subscription Agreement and any other shares of Common
Stock or other securities issued in respect of such Shares by way of a stock dividend or stock split or in
connection with a combination or subdivision of Eos Common Stock or by way of a recapitalization, merger or
consolidation or reorganization of Eos; provided, however, that, as to any particular securities, such securities
will cease to be Subscription Registrable Securities when they have been sold pursuant to registration or in a
transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section
4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale and the purchaser and seller receive an opinion of counsel for Eos, which shall be in
form and substance reasonably satisfactory to the purchaser and seller and their respective counsel, to the
effect that such stock in the hands of the purchaser is freely transferable without restriction or registration
under the Securities Act in any public or private transaction.
1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings when used in any
certificates, reports or other documents made or delivered pursuant hereto or thereto, unless the context
otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning when used in the plural, and
vice versa.
(c) All accounting terms shall have a meaning determined in accordance with GAAP.
(d) As used herein, the neuter gender shall also denote the masculine and feminine, and the
masculine gender shall also denote the neuter and feminine, where the context so permits.
(e) The words “hereof,” “herein” and “hereunder,” and words of similar import, when used in
this Agreement shall refer to this Agreement as a whole (including any Exhibits hereto) and not to any particular
provision of this Agreement.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Transfer of Registration Rights. The Investor may assign the registration rights with respect
to the Registrable Securities to any party or parties to which it may from time to time transfer the Registrable
Securities, provided that the transferee agrees in writing with Eos to be bound by the applicable provisions of
this Agreement regarding such registration rights and indemnification relating thereto. Upon assignment of any
registration rights pursuant to this Section 2.1, the Investor shall deliver to Eos a notice of such assignment
which includes the identity and address of any assignee and such other information reasonably requested by Eos in
connection with effecting any such registration (collectively, the Investor and each such subsequent holder is
referred to as a “Holder”).
2.2 Registration.
(a)......Eos shall use commercially reasonable efforts to register with the SEC the
Subscription Registrable Securities within 180 days after the date of the Private Placement Closing pursuant to
the terms and conditions of the Private Placement Subscription Agreements. Eos shall register the Rights
Registrable Securities pursuant to the same Shelf Registration Statement used to register the Subscription
Registrable Securities.
.........(b)......The parties acknowledge that Eos is ineligible to use Form S-3 under the
Securities Act until April 10, 2003. Eos shall use commercially reasonable efforts to file within 180 days after
the date of the Closing, a registration statement on Form S-3 or a similar form of “evergreen” registration
statement which covers the resale of all the Registrable Securities under an appropriate form under Rule 415 of
the Securities Act, or any similar rule that may be adopted by the SEC; provided, that, if Eos is, for any
reason, unable or ineligible following April 10, 2003 to utilize a Form S-3 or a similar form of “evergreen”
registration statement Eos shall file a Form S-1 registration statement (the “Shelf Registration Statement”).
Eos shall use best efforts to cause the SEC to declare the Shelf Registration Statement effective as soon as
practicable after filing and to thereafter maintain the effectiveness of the Shelf Registration Statement until
such time as Eos reasonably determines, based on a written opinion of counsel, that the Holders, acting
separately, will be eligible to sell all of the Registrable Securities then respectively owned by the Holders
without the need for continued registration of the Registrable Securities in the three month period immediately
following the termination of the effectiveness of the Shelf Registration Statement pursuant to Rule 144
promulgated under the Securities Act. Eos’ obligations contained in this Section 2.2(b) shall terminate on the
earlier of the expiration period of Rule 144(k) under the Securities Act with respect to the Registrable
Securities or two years after the issue date of the Shares or such shorter period that will terminate when all of
the Registrable Securities covered by the Shelf Registration Statement have been sold.
(c) The Shelf Registration Statement filed pursuant to Section 2.2(b) hereof will not be
deemed to be effective unless it has been declared effective by the SEC; provided, however, that, if after it has
been declared effective, the offering of the Registrable Securities pursuant to the Shelf Registration Statement
is interfered with by any stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, the Shelf Registration Statement will be deemed not to be effective and the Holders
shall be prohibited from making offers and sales of Registrable Securities pursuant to the Shelf Registration
Statement during the period of such interference.
2.3 Right of Suspension.
(a) Notwithstanding any other provision of this Agreement or any related agreement, Eos
shall have the right at any time to prohibit or suspend offers and sales of the Registrable Securities covered by
the Shelf Registration Statement whenever, and for so long as, in the sole reasonable judgment of Eos (i) Eos
determines that effecting such a registration or continuing such disposition at such time would have an adverse
effect upon a proposed sale of all (or substantially all) of the assets of Eos or a merger, acquisition,
reorganization, recapitalization or similar current transaction materially affecting the capital, structure or
equity ownership of Eos, (ii) there exists a material development or a potential material development with
respect to or involving Eos that Eos would be obligated to disclose in the prospectus or offering circular used
in connection with the Shelf Registration Statement, which disclosure would in the judgment of Eos be premature
or otherwise inadvisable at such time, or (iii) an event has occurred that makes any statement made in the Shelf
Registration Statement or related prospectus or offering circular or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which requires the making of any changes in
the Shelf Registration Statement, prospectus or offering circular so that it will not contain any untrue
statement of a material fact required to be stated therein or necessary to make the statements therein not
misleading or omit to state any material fact required to be stated therein or necessary to make the statement
therein, not misleading (a “Suspension Event”). In the event that Eos shall determine to so prohibit or suspend
offers and sales, Eos shall, in addition to performing those acts required to be performed by the Securities Act
and/or the Exchange Act, or as may be deemed advisable by Eos, deliver notice in writing to each Holder signed by
the Chief Financial Officer or Chief Executive Officer of Eos and, upon receipt of such notice, the use of the
Shelf Registration Statement and prospectus or offering circular, as the case may be, will be suspended and will
not recommence until, in addition to those acts required to be performed by the Securities Act and/or the
Exchange Act (including, but not limited to the preparation and filing of any post-effective amendments to the
Shelf Registration Statement and the SEC review and declaration of effectiveness thereof), or as may be deemed
advisable by Eos, including (x) such Holders’ receipt from Eos of copies of the supplemented or amended
prospectus or offering circular or (y) the Holders are advised in writing by Eos that the prospectus or offering
circular may be used. Eos will exercise reasonable commercial efforts to ensure that the use of the Registration
Statement and prospectus or offering circular may be resumed as quickly as practicable, and will provide prompt
notice to Holders when such use may be resumed.
(b) Eos’ right to prohibit or suspend offers and sales of the Registrable Securities
covered by the Shelf Registration Statement described above shall be for a period of time (“Suspension Period”)
beginning on the date of the occurrence of the Suspension Event and expiring on the earlier to occur of (i) the
date on which the Suspension Event ceases, or (ii) 60 days after the occurrence of the Suspension Event;
provided, however, that there are not be more than two Suspension Periods in any 12 month period.
2.4 Registration Procedures.
(a) In case of the Shelf Registration Statement effected by Eos subject to this Article 2,
Eos shall keep the Investor, on behalf of each Holder, (or if the Investor has transferred all Registrable
Securities to a single Holder who continues to hold all such Registrable Securities, then Eos shall keep the
Holder) advised in writing as to the initiation of such registration, and as to the completion thereof. In
addition, subject to Sections 2.2 and 2.3 above, Eos shall, to the extent applicable to the Shelf Registration
Statement:
1.8. (i) prepare and file with the SEC such amendments and supplements to the Shelf Registration
Statement as may be necessary to keep such registration, effective and comply with provisions of the Securities
Act with respect to the disposition of all securities covered thereby during the period referred to in
Section 2.2;
(ii).....update, correct, amend and supplement the Shelf Registration Statement as
necessary;
(iii)....notify Holder when the Shelf Registration Statement is declared effective by
the SEC, and furnish such number of prospectuses, including preliminary prospectuses, and other documents
incident thereto as Holder may reasonably request from time to time;
(iv).....use its commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such jurisdictions of the United States
where an exemption is not available and as Holder may reasonably request to enable it to consummate the
disposition in such jurisdiction of the Registrable Securities (provided that Eos will not be required to (i)
qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for
this provision, or (ii) consent to general service of process in any such jurisdiction, or (iii) subject itself
to taxation in any jurisdiction where it is not already subject to taxation);
(v)......notify Holder at any time when a prospectus relating to the Registrable
Securities is required to be delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Shelf Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading;
(vi).....cause all such Registrable Securities to be listed on each securities exchange
on which similar securities issued by Eos are then listed and obtain all necessary approvals from the Nasdaq
Stock Market for trading thereon if similar securities issued by Eos are then traded thereon;
(vii)....provide a transfer agent and registrar for all such Registrable Securities not
later than the effective date of the Shelf Registration Statement; and
(viii)...upon the sale of any Registrable Securities pursuant to the Shelf Registration
Statement, direct the transfer agent to remove all restrictive legends from all certificates or other instruments
evidencing the Registrable Securities.
(b) Notwithstanding anything stated or implied to the contrary in Section 2.4(a) above,
Eos shall not be required to consent to any underwritten offering of the Registrable Securities or to any
specific underwriter participating in any underwritten public offering of the Registrable Securities.
(c) Each Holder agrees that upon receipt of any notice from Eos of the happening of any
event of the kind described in Section 2.4(a)(v), such Holder will forthwith discontinue such Holder’s
disposition of Registrable Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus and, if so
directed by Eos, will deliver to Eos at Eos’ expense all copies, other than permanent file copies, then in such
Holder’s possession, of the prospectus relating to such Registrable Securities current at the time of receipt of
such notice.
(d) Except as required by law, all expenses incurred by Eos in complying with this Article
2, including but not limited to, all registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel and accountants for Eos, blue sky fees and expenses (including fees and disbursements of
counsel related to all blue sky matters) (“Registration Expenses”) incurred in connection with any registration,
qualification or compliance pursuant to this Article 2 shall be borne by Eos. All underwriting discounts and
selling commissions applicable to a sale incurred in connection with any registration of Registrable Securities
and the legal fees and other expenses of a Holder shall be borne by such Holder.
2.5 Conditions to Registration Obligations.
(a)......Eos shall not be obligated to effect the registration of the Registrable Securities
pursuant to Section 2.2 unless the Holders of Registrable Securities being included in the Shelf Registration
Statement consent to customary conditions of a reasonable nature that are imposed by Eos, including, but not
limited to, the following:
(i)......conditions prohibiting the sale of Registrable Securities by each Holder until
the registration shall have been declared effective by the SEC; and
(ii).....conditions requiring each Holder to comply with all applicable provisions of
the Securities Act and the Exchange Act including, but not limited to, the prospectus delivery requirements of
the Securities Act.
(b)......Eos may require a written acknowledgement from each Holder that the Holder has and is
complying with the requirements of Sections 5.2(a)(i) and (ii).
2.6 Terms and Conditions of Registration. In connection with the registration pursuant to this
Article 2, and subject to the other terms and conditions of this Agreement, Eos shall in its sole discretion
determine the terms and conditions of such registration, including, without limitation, the timing thereof; the
scope of the offering contemplated thereby (i.e., whether the offering shall be a combined primary offering and a
secondary offering or limited only to a secondary offering); the manner of distribution of Registrable Securities
consistent with the plan of distribution agreed upon by Eos and the Holders; the period of effectiveness of
registration for permissible sales of Registrable Securities thereunder subject to the provisions of Section 2.2
hereof; and all other material aspects of the registration and the registration process to the extent consistent
herewith.
2.7 Further Information. Eos may require each Holder of Registrable Securities to promptly furnish
to Eos such information regarding the Holders and the proposed distribution by such Holder as Eos may from time
to time reasonably request in writing. Notwithstanding anything herein to the contrary, no Holder of Registrable
Securities may include any of its Registrable Securities in an Shelf Registration Statement pursuant to this
Section 2 unless and until such Holder (i) furnishes to Eos within 20 days of receipt of a request therefor, the
information specified in Items 507 and 508 of Regulation S-K, as applicable, of the Securities Act for use in
connection with the Shelf Registration Statement or prospectus included therein and (ii) agrees to promptly
furnish additional information regarding the Holder required to be disclosed in order to make the information
previously furnished to Eos no materially misleading. Each Holder shall indemnify Eos with respect to such
information in accordance with Article 3 hereof. The Investor hereby represents and warrants to Eos that it has
accurately and completely provided the requested information and answered the questions numbered (a) through (d)
on the signature pages of this Agreement which the Investor has completed and returned to Eos, and the Investor
agrees and acknowledges that Eos may rely on such information as being true and correct for purposes of preparing
and filing the Shelf Registration Statement at the time of filing thereof and at the time it is declared
effective, unless the Investor has notified Eos in writing to the contrary prior to such time.
2. ARTICLE 3
3. INDEMNIFICATION
3.1 Indemnification Generally. Eos, on the one hand, and the Investor, on the other hand, shall
indemnify the other from and against any and all losses, damages, liabilities, claims, charges, actions,
proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys’ fees and expenses) or deficiencies resulting from any breach of a
representation and warranty, covenant or agreement by the other and all claims, charges, actions or proceedings
incident to or arising out of the foregoing.
3.2 Indemnification Relating to Registration Rights.
(a)......With respect to any registration, effected or to be effected pursuant to Article 2 of
this Agreement, Eos shall indemnify each Holder of Registrable Securities whose securities are included or are to
be included therein, each of such Holder’s directors and officers, each underwriter (as defined in the Securities
Act) of the securities sold by such Holder (if any), and each Person who controls (within the meaning of the
Securities Act) any such Holder or underwriter (a “Controlling Person”) from and against all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any
nature whatsoever (including, without limitation, reasonable attorneys’ fees and expenses) or deficiencies of any
such Holder or any such underwriter or Controlling Person concerning:
.........(i)......any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any related registration statement,
notification or the like) incident to any such registration;
.........(ii).....any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statement therein, in the light of the circumstances under which it
was made, not misleading; or
.........(iii)....any violation by Eos of the Securities Act or any rule or regulation
promulgated thereunder applicable to Eos, or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to Eos,
in each case, relating to any action or inaction required of Eos in connection with any such registration, and
subject to Section 3.3 below will reimburse each such person entitled to indemnity under this Section 3.2 for all
legal and other expenses reasonably incurred in connection with investigating or defending any such loss, damage,
liability, claim, charge, action, proceeding, demand, judgment, settlement or deficiency; provided, however,
that, the foregoing indemnity and reimbursement obligation shall not be applicable to the extent that any such
matter arises out of or is based on any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information furnished to Eos by or on behalf of
such Holder or by or on behalf of such an underwriter specifically for use in such prospectus, offering circular
or other document.
(b)......With respect to any registration, qualification or compliance effected or to be
effected pursuant to this Agreement, each Holder of Registrable Securities whose securities are included or are
to be included therein, shall indemnify Eos from and against all losses, damages, liabilities, claims, charges,
actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including,
without limitation, reasonable attorneys’ fees and expenses) or deficiencies of Eos concerning:
.........(i)......any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or compliance;
.........(ii).....any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statement therein, in the light of the circumstances under which it
was made, not misleading; or
.........(iii)....any violation by such Holder of the Securities Act or any rule or regulation
promulgated thereunder applicable to Eos or such Holder or of any blue sky or other state securities laws or any
rule or regulation promulgated thereunder applicable to Eos or such Holder,
in each case, relating to any action or inaction required of such Holder in connection with any such
registration, qualification or compliance, and subject to Section 3.3 below will reimburse Eos for all legal and
other expenses reasonably incurred in connection with investigating or defending any such loss, damage,
liability, claim, charge, action, proceeding, demand, judgment, settlement or deficiency; provided, however,
that, the foregoing indemnity and reimbursement obligation shall only be applicable to the extent that any such
matter arises out of or is based on any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in reliance upon and in conformity with written information furnished to Eos by or on behalf of
the Holder specifically for use in such prospectus, offering circular or other document; provided, however, that,
the obligation of the Holder hereunder shall be limited to an amount equal to the proceeds to the Holder of
Registrable Securities sold as contemplated hereunder.
3.3 Indemnification Procedures. Each Person entitled to indemnification under this Section (an
“Indemnified Party”) shall give notice as promptly as reasonably practicable to each party required to provide
indemnification under this Section (an “Indemnifying Party”) of any action commenced against or by it in respect
of which indemnity may be sought hereunder, but failure to so notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it may have otherwise than on account of this indemnity agreement so
long as such failure shall not have materially prejudiced the position of the Indemnifying Party. Upon such
notification, the Indemnifying Party shall assume the defense of such action if it is a claim brought by a third
party, if and after such assumption the Indemnifying Party shall not be entitled to reimbursement of any expenses
incurred by it in connection with such action except as described below. In any such action, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the contrary or (ii) the named parties in any such action (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing or conflicting interests between them. The
Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent
(which shall not be unreasonably withheld or delayed by such Indemnifying Party), but if settled with such
consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified
Party from and against any loss, damage or liability by reason of such settlement or judgment.
ARTICLE 4
MISCELLANEOUS
4.1 Notices. All notices, requests, demands, claims, and other communications hereunder shall be
in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed
overnight delivery, or facsimile transmission if such transmission is confirmed by delivery by certified or
registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such party shall subsequently designate in
writing to the other party):
(a) if to Eos to:
Eos International, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Chairman
Fax: (000) 000-0000
with a copy, which shall not alone constitute notice, to:
Pitney, Xxxxxx, Xxxx & Xxxxx LLP
Delivery Address:
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Mail Address:
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Xx.
Fax: (000) 000-0000
(b) if to the Investor, to the address set forth next to its name in the recitals of this
Agreement.
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or
having been given when delivered if delivered by hand, by messenger or by courier, or if sent by facsimile, upon
confirmation of receipt.
4.2 Entire Agreement. This Agreement (including any exhibits or schedules attached hereto) and
other documents delivered at the Effective Time pursuant hereto, contain the entire understanding of the parties
in respect of its subject matter and supersedes all prior agreements and understandings between or among the
parties with respect to such subject matter. The exhibits and schedules, if any, constitute a part hereof as
though set forth in full above.
4.3 Expenses; Taxes. Except as otherwise provided in this Agreement, the parties shall pay their
own fees and expenses, including their own counsel fees, incurred in connection with this Agreement or any
transaction contemplated hereby. Any sales tax, stamp duty, deed transfer or other tax (except taxes based on
the income of the Investor) arising out of the issuance of the Shares by Eos to the Investor in connection with
the Merger Agreement and consummation of the transactions contemplated by this Agreement shall be paid by Eos.
4.4 Amendment; Waiver. This Agreement may not be modified, amended, supplemented, canceled or
discharged, except by written instrument executed by both parties. No failure to exercise, and no delay in
exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing
between the parties. No extension of time for performance of any obligations or other acts hereunder or under
any other agreement shall be deemed to be an extension of the time for performance of any other obligations or
any other acts. The rights and remedies of the parties under this Agreement are in addition to all other rights
and remedies, at law or equity, that they may have against each other.
4.5 Binding Effect; Assignment. The rights and obligations of this Agreement shall bind and inure
to the benefit of the parties and their respective successors and legal assigns. The rights and obligations of
this Agreement may not be assigned by any party without the prior written consent of the other party.
4.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one and the same instrument.
4.7 Headings. The headings contained in this Agreement are for convenience of reference only and
are not to be given any legal effect and shall not affect the meaning or interpretation of this Agreement.
4.8 Governing Law; Interpretation. This Agreement shall be construed in accordance with and
governed for all purposes by the laws of the State of New Jersey applicable to contracts executed and to be
wholly performed within such State.
4.9 Severability. The parties stipulate that the terms and provisions of this Agreement are fair
and reasonable as of the date of this Agreement. However, any provision of this Agreement shall be determined by
a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. If, moreover, any of those provisions shall for any reason be determined by a
court of competent jurisdiction to be unenforceable because excessively broad or vague as to duration, activity
or subject, it shall be construed by limiting, reducing or defining it, so as to be enforceable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
.......................... EOS INTERNATIONAL, INC.
.......................... By:_________________________
Name: Xxxxx Xxxx
Title: Chairman
INVESTOR
___________________________
Name:
CERTIFICATE OF DESIGNATIONS
of
SERIES E JUNIOR CONVERTIBLE PREFERRED STOCK
of
Eos International, Inc.
_______________________________________________
(Pursuant to Section 151 of the
Delaware General Corporation Law)
________________________________________________
Eos International, Inc., a corporation organized and existing under the General Corporation Law
of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution
was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation
Law on December 10, 2002 at a meeting duly called and held:
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the
Corporation (hereinafter called the “Board of Directors”) in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the Board of Directors
hereby creates a series of preferred stock, $0.01 par value, of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of this series shall be designated as
“Series E Junior Convertible Preferred Stock” (the “Series E Preferred Stock”) and the number of shares
constituting the Series E Preferred Stock shall be 1,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no increase shall be made after shares of Series E Preferred
Stock have been issued and no decrease shall reduce the number of shares of Series E Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series E Preferred Stock. Certificates representing ownership in the Series E
Preferred Stock shall contain a legend that the Series E Preferred Stock is mandatorily convertible into shares
of Common Stock of the Corporation (the “Common Stock”) as provided in Section 7. The rights of the holders of
the Series E Preferred Stock shall be junior to and subordinate to the rights of the holders of the Series D
Preferred Stock.
Section 2. Dividends and Distributions. Subject to the rights of the holders of
any shares of any series of preferred stock (or any other stock) ranking senior to the Series E Preferred Stock
with respect to dividends, the holders of shares of Series E Preferred Stock shall be entitled to receive
dividends when, as and if declared by the Board of Directors out of funds legally available for that purpose;
provided, however, that holders of the Series E Preferred Stock shall be entitled to receive only such dividends
as are granted to holders of the Common Stock for which purpose each share of Series E Preferred Stock shall be
considered as 11,000 shares of Common Stock.
Section 3. Voting Rights; Repurchase; Issuance of Other Securities. Except as required by
law, holders of Series E Preferred Stock shall have the same voting rights as and will vote together with holders
of the Common Stock. Each share of the Series E Preferred Stock shall be entitled to 11,000 votes. The
Corporation shall have the right to issue preferred stock ranking senior to or on a parity with (either as to
dividends or upon liquidation, dissolution or winding up) the Series E Preferred Stock without the vote or
consent of the holders of Series E Preferred Stock.
Section 4. Certain Restrictions.
(a) So long as any shares of the Series E Preferred Stock remain outstanding, the
Corporation shall not redeem or purchase or otherwise acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise acquire (a) shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series E Preferred Stock, or (b) shares of any such junior stock
pursuant to the terms of compensation plans relating to officers, directors, employees or consultants of the
Corporation or any of its Subsidiaries, or (c) shares of any such junior stock pursuant to the exercise of
dissenters’ rights or otherwise as required by law, or (d) fractional shares of any such junior stock in
connection with any capital reorganization, or (e) shares used as consideration for the exercise of derivative
securities issued by the Corporation.
(b) The Corporation shall not permit any Subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series E Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock subject to the conditions and
restrictions on issuance set forth herein or in the Certificate of Incorporation, including any Certificate of
Designations creating a series of preferred stock or any similar stock, or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon the voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the holders of shares of Series E
Preferred Stock shall have a right prior to the payment of any amount to any class of preferred stock of the
Corporation junior to the Series E Preferred Stock, and on a pro rata basis with any preferred stock of the
Corporation on parity with (either as to dividends or upon liquidation, dissolution or winding up) the Series E
Preferred Stock, to be paid for each share an amount (the “Liquidation Preference”) equal to $0.01. If the assets
of the Corporation are not sufficient to pay the full amount of the Liquidation Preference to all holders of
shares of Series E Preferred Stock, the assets shall be distributed ratably among the holders of shares of Series
E Preferred Stock according to the number of shares held by each. After payment in full of the Liquidation
Preference to the holders of shares of Series E Preferred Stock, the remaining assets of the Corporation shall be
distributed among the holders of shares of Series E Preferred Stock, Common Stock and other securities junior to
the Series E Preferred Stock, as set forth elsewhere in the Certificate of Incorporation.
Section 7. Mandatory Conversion.
(a) All shares of Series E Preferred Stock shall become, automatically, without any
action by the holders thereof, shares of Common Stock (the “Conversion”) immediately upon the Corporation having
a sufficient number of authorized and unissued and not otherwise issuable upon the exercise of outstanding
warrants or options or upon conversion of other securities (other than conversion of the Series E Preferred
Stock) shares of Common Stock sufficient to convert all shares of the Series E Preferred Stock into shares of
Common Stock at the Exchange Ratio. For the purposes hereof, the “Exchange Ratio” shall mean the issuance of
11,000 shares of Common Stock for each share of Series E Preferred Stock.
(b) Within two days following the date on which the Corporation has a sufficient number of
authorized shares of Common Stock to convert all shares of the Series E Preferred Stock into shares of Common
Stock at the Exchange Ratio, the Secretary of the Corporation will certify to such in the minutes of the
Corporation (the “Certification”). Effective immediately upon the Certification, all shares of Series E
Preferred Stock then outstanding shall be deemed converted to shares of Common Stock based on the Exchange
Ratio. Within two days following the Certification and simultaneous Conversion, the Corporation shall issue a
letter to all holders of the Series E Preferred Stock notifying such holders that the Series E Preferred Stock
has been converted into Common Stock and the date of the Conversion.
(c) Immediately upon the Conversion, all stock certificates representing ownership of
Series E Preferred Stock shall be deemed to represent ownership in Common Stock, with the number of shares of
Common Stock thereby represented to be determined in accordance with the Exchange Ratio. Following the
Conversion, holders of Series E Preferred Stock may, but are not required to, submit certificates representing
ownership in Series E Preferred Stock for certificates representing ownership in Common Stock. Upon the
Conversion, no shares of Series E Preferred Stock shall remain outstanding .
Section 8. No Right of Redemption. Holders of the Series E Preferred Stock shall have no
right whatsoever to cause the Corporation to redeem all or any number of the outstanding shares of the Series E
Preferred Stock at any time. The Corporation shall have no right whatsoever to redeem all or any number of the
outstanding shares of the Series E Preferred Stock at any time.
Section 9. Anti-Dilution Adjustment. In the event that the Corporation shall at any time
or from time to time, after the issuance of shares of Series E Preferred Stock but prior to the Conversion, (w)
make a dividend or distribution on the outstanding shares of Common Stock payable in Capital Stock, (x) subdivide
the outstanding shares of Common Stock into a larger number of shares, (y) combine the outstanding shares of
Common Stock into a smaller number of shares or (z) issue any shares of its Capital Stock in a reclassification
of the Common Stock (an “Event”), then, and in each such case, (I) the aggregate number of shares of Common Stock
which the holder would be entitled to receive upon the Conversion, (II) the number of shares of Common Stock
deemed held for each share of Series E Preferred Stock for purposes of Section 2 and (III) the number of votes
per share of Series E Preferred Stock for purposes of Section 3 shall be adjusted (and any other appropriate
actions shall be taken by the Corporation) so that such holder of Series E Preferred Stock shall be entitled to
(X) receive upon Conversion the appropriate number of shares of Common Stock, (Y) the appropriate number of
shares of Common Stock deemed held for purposes of Section 2 consistent with the determination made in clause
(I), and (Z) the appropriate number of votes per share of Series E Preferred Stock for purposes of Section 3
consistent with the determination made in clause (I), which in each case shall reflect the occurrence of the
Event. An adjustment made pursuant to this Section 9 shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such dividend or distribution or (y) in
the case of any such subdivision, combination or reclassification, to the close of business on the day upon which
such corporate action becomes effective.
Section 10. Definitions.
(i) “Capital Stock” means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalent (however designated and whether voting or non-voting)
of such Person’s capital stock and any and all rights, warrants or options exchangeable for or convertible into
such capital stock (but excluding any debt security whether or not it is exchangeable for or convertible into
such capital stock).
(i) “Person” means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint venture, joint stock company,
governmental body, or other entity of any kind.
(ii) “Subsidiary” of the Corporation means (a) any corporation, association
or other business entity of which more than 50% of the Voting Power is held by the Corporation or a Subsidiary
and (b) any partnership (i) the sole general partner or the managing general partner of which is the Corporation
or a Subsidiary of the Corporation or (ii) the only general partners of which are the Corporation or of one or
more Subsidiaries of the Corporation (or any combination thereof).
(iii) “Voting Power” of a Person is deemed to be held by a second Person if
shares or other interests of the first Person’s capital stock or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or trustees thereof and to vote on
matters generally submitted to a vote of equity holders is at the time owned or controlled, directly or
indirectly, by the second Person or by one or more Subsidiaries of the second Person (or a combination thereof).
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation
this __ day of December, 2002.
EOS INTERNATIONAL, INC.
By: _____________________________
Name:
Title:
ATTACHMENTS
The Agreement and Plan of Merger dated as of December 10, 2002 among Eos Intenational, Inc.,
Eos Acquisition Corp., and I.F.S. of New Jersey, Inc. includes all attachments thereto except
such attachments believed to be by Eos not material to an investor's understanding of
the transaction, inlcuding the form of tax representations made by the parties, a draft of a
proposed tax opinion of counsel, and the form of affiliate letter relating to post merger trading,
copies of which shall be furnished supplementary to the SEC upon request.
