AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FUEL CORPORATION OF AMERICA
FLEXSCAN, INC.
AND
FCA ACQUISITION CORP.
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of July 15, 2005, among Fuel Corporation of America, a Nevada
corporation ("Parent"), flexSCAN, Inc., a Delaware corporation ("FlexSCAN")
and FCA Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("FCA Merger Sub").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law ("Delaware Law")
and the Nevada Corporation Law ("NCL"), Parent, FlexSCAN and FCA Merger Sub
intend to enter into a business combination transaction.
B. The Board of Directors of FlexSCAN (i) has determined that the
Merger (as defined in Section 1.2 below) is consistent with and in
furtherance of the long-term business strategy of FlexSCAN and fair to, and
in the best interests of, FlexSCAN and its stockholders, (ii) has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, (iii) has adopted a resolution declaring the Merger advisable and
(iv) has determined to recommend that the stockholders of FlexSCAN adopt this
Agreement.
C. The Board of Directors of Parent (i) has determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of Parent and fair to, and in the best interests of, Parent and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, (iii) has adopted a resolution
declaring the Merger advisable and (iv) has approved the issuance of shares
of Parent Common Stock (as defined below) pursuant to the Merger (the "Share
Issuance").
D. The Board of Directors of FCA Merger Sub (i) has determined that
the Merger is consistent with and in furtherance of the long-term business
strategy of FCA Merger Sub, respectively, and fair to and in the best
interests of, FCA Merger Sub and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this
Agreement; and (iii) has adopted a resolution declaring the Merger advisable.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2
hereof) and subject to and upon the terms and conditions of this Agreement
and the applicable provisions of Delaware Law, FCA Merger Sub shall be
merged with and into FlexSCAN (the "Merger"), the separate corporate
existence of FCA Merger Sub shall cease and FlexSCAN shall continue as the
surviving corporation and shall become a wholly-owned subsidiary of Parent.
The surviving corporation after the FlexSCAN Merger is sometimes referred to
hereinafter as the "FlexSCAN Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Article VII hereof, the closing of the Merger and the other
transactions contemplated by this Agreement (the "Closing") will take place
at the offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at a time and date to be specified by
the parties, but in no event later than two (2) business days following
satisfaction or waiver of the conditions set forth in Article VI hereof.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger (or like
instrument) (a "Certificate of Merger") with the Secretary of State of the
State of Delaware, in accordance with the relevant provisions of Delaware
Law (the times at which the Merger has become fully effective (or such later
time as may be agreed in writing by FlexSCAN and Parent and specified in the
Certificate of Merger) is referred to herein as the "Effective Time").
1.3 Effect of the Merger. (a) At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as provided herein, all the property, rights,
privileges, powers and franchises of FlexSCAN and FCA Merger Sub shall vest
in the FlexSCAN Surviving Corporation, and all debts, liabilities and duties
of FlexSCAN and FCA Merger Sub shall become the debts, liabilities and
duties of the FlexSCAN Surviving Corporation.
(b) Prior to or at the Effective Time, the properties and
assets of Parent and its Subsidiaries (as defined in Section 2.1) will be
free and clear of any and all encumbrances, charges, claims equitable
interests, liens, options, pledges, security interests, mortgages, rights of
first refusal or restrictions of any kind and nature (collectively, the
"Encumbrances"), except for such liabilities, accounts payable, debts,
adverse claims, duties, responsibilities and obligations of every kind or
nature, whether accrued or unaccrued, known or unknown, direct or indirect,
absolute, contingent, liquidated or unliquidated and whether arising under,
pursuant to or in connection with any contract, tort, strict liability or
otherwise (collectively the "Liabilities") of Parent which shall be set forth
in Schedule 3.5 .
(c) Promptly following the Effective Time, subject to
stockholder approval, it is expected that Parent will file an Amendment to
its Articles of Incorporation changing its name to "FlexSCAN, Inc." (the
"Amendment Articles").
1.4 Certificates of Incorporation; Bylaws. (a) Unless otherwise
determined by FlexSCAN prior to the Effective Time, at the Effective Time,
the Certificate of Incorporation of FCA Merger Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of
FlexSCAN Surviving Corporation at and after the Effective Time until
thereafter amended in accordance with the Delaware Law and the terms of such
Certificate of Incorporation; provided, however, that at the Effective Time,
Article I of the Certificate of Incorporation of the FlexSCAN Surviving
Corporation shall be amended and restated in its entirety to read as
follows: "The name of the corporation is FlexSCAN, Inc." The Certificate
of Incorporation of the FlexSCAN Surviving Corporation shall be approved by
Parent's counsel and FlexSCAN's counsel and shall be attached as Exhibit C
to this Agreement.
(b) Unless otherwise determined by FlexSCAN prior to the
Effective Time, (i) the Bylaws of FCA Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the FlexSCAN Surviving
Corporation at and after the Effective Time, until thereafter amended in
accordance with Delaware Law and the terms of Certificate of Incorporation of
the FlexSCAN Surviving Corporation and such By Laws.
1.5 FlexSCAN Directors and Officers. (a) Unless otherwise determined
by FlexSCAN prior to the Effective Time, the directors of FlexSCAN
immediately prior to the Effective Time shall be the directors of the
FlexSCAN Surviving Corporation and at and after the Effective Time, each to
hold the office of a director of the FlexSCAN Surviving Corporation in
accordance with the provisions of Delaware Law and the Certificate of
Incorporation and Bylaws of the FlexSCAN Surviving Corporation until their
successors are duly elected and qualified.
(b) Unless otherwise determined by FlexSCAN prior to the
Effective Time, the officers of FlexSCAN immediately prior to the Effective
Time shall be the officers of the FlexSCAN Surviving Corporation at and after
the Effective Time, each to hold office in accordance with the provisions of
the Bylaws of the FlexSCAN Surviving Corporation.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Parent, FlexSCAN and FCA Merger Sub or the holders
of any of the following securities, the following shall occur:
(a) Conversion of FlexSCAN Common Stock. Each share of Common
Stock, par value $0.001 per share of FlexSCAN (the "FlexSCAN Common Stock")
issued and outstanding immediately prior to the Effective Time (excluding any
share of FlexSCAN Common Stock to be canceled and extinguished pursuant to
Section 1.6(b) will be automatically converted (subject to Sections 1.6(e))
into 5.8494525 shares of Common Stock, par value $0.001 per share, of Parent
(the "Parent Common Stock") such that the holders of FlexSCAN Common Stock
will, in the aggregate, receive 30,516,992 shares of Parent Common Stock the
"FlexSCAN Merger Consideration"). If any shares of FlexSCAN Common Stock
outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with
FlexSCAN, then the shares of Parent Common Stock issued in exchange for such
shares of FlexSCAN Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly
be marked with appropriate legends.
(b) Cancellation of FlexSCAN Common Stock. Each share of
FlexSCAN Common Stock held by FlexSCAN or any direct or indirect wholly-owned
subsidiary of FlexSCAN immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) FlexSCAN Warrants. At the Effective Time, all warrants
to purchase FlexSCAN Common Stock then outstanding shall be assumed by Parent in
accordance with Section 5.4.
(d) Adjustments to FlexSCAN Merger Consideration. Except as
described in Section 1.8, the FlexSCAN Merger Consideration shall be adjusted
to reflect appropriately the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities
convertible into or exercisable or exchangeable for Parent Common Stock or
FlexSCAN Common Stock), reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Parent
Common Stock or FlexSCAN Common Stock occurring or having a record date on or
after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger. In lieu thereof any fractional
share will be rounded to the nearest whole share of Parent Common Stock (with
..5 being rounded up).
1.7 Surrender of Certificates. Parent to Provide Common Stock.
Promptly after the Effective Time, Parent shall make available in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.6(a) in exchange for outstanding shares of FlexSCAN Common Stock.
(b) Exchange Procedures. Promptly after the Effective Time,
Parent shall mail to each holder of record (as of the Effective Time) of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of FlexSCAN Common Stock (the "Certificates")
(i) a letter of transmittal in customary form (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Parent and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock pursuant
to Section 1.6(a). Upon surrender of Certificates for cancellation to the
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock into which
their shares of FlexSCAN Common Stock were converted pursuant to Section
1.6(a), and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed, from and after
the Effective Time, to evidence only the ownership of the number of whole
shares of Parent Common Stock into which such shares of FlexSCAN Common Stock
shall have been so converted (including any voting, notice or other rights
associated with the ownership of such shares of Parent Common Stock under the
Certificate of Incorporation or Bylaws of Parent or under the NCL).
(c) Transfers of Ownership. If certificates representing
shares of Parent Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered, it
will be a condition of the issuance thereof that the Certificates so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the persons requesting such exchange will have (i) paid to
Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of certificates representing shares of Parent Common
Stock in any name other than that of the registered holder of the
Certificates surrendered, or (ii) established to the satisfaction of Parent
or any agent designated by it that such tax has been paid or is not payable.
(d) Required Withholding. Each of the Parent and FlexSCAN
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of FlexSCAN Common Stock such amounts as may be
required to be deducted or withheld therefrom under the United States
Internal Revenue Code of 1986, as amended, (the "Code") or state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
(e) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, neither the Parent nor the FlexSCAN Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or FlexSCAN Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
1.8 No Further Ownership Rights in FlexSCAN Common Stock. All
shares of Parent Common Stock issued in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of FlexSCAN Common Stock. After the Effective
Time, there shall be no further registration of transfers on the records of
FlexSCAN Surviving Corporation of shares of FlexSCAN Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to FlexSCAN Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Parent shall
issue and pay in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof,
certificates representing the shares of Parent Common Stock into which the
shares of FlexSCAN Common Stock represented by such Certificates were
converted pursuant to Section 1.6(a); provided, however, that the Parent
may, in its discretion and as a condition precedent to the issuance of such
certificates representing shares of Parent Common Stock require the owner of
such lost, stolen or destroyed Certificates to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made
against Parent or FlexSCAN Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Treatment. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code. Each of the parties hereto adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations (the "Regulations").
Both prior to and after the Closing, each party's books and records shall be
maintained, and all federal, state and local income tax returns and
schedules thereto shall be filed in a manner consistent with the Merger
being qualified as a reverse triangular merger under Section 368(a)(2)(E) of
the Code (and comparable provisions of any applicable state or local laws).
1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the FlexSCAN Surviving
Corporation (and/or its successor in interest) with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of FlexSCAN and FCA Merger Sub, the officers and directors of
Parent and the FlexSCAN Surviving Corporation shall be fully authorized (in
the name of FCA Merger Sub, FlexSCAN and otherwise) to take all such
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FLEXSCAN
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to Parent by FlexSCAN on or prior to entering
into this Agreement a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference (the "FlexSCAN Schedule"), FlexSCAN
hereby represents and warrants to each of Parent and FCA Merger Sub that:
2.1 Organization of FlexSCAN. (a) FlexSCAN is a corporation duly
organized, validly existing and in good standing under the laws of Delaware;
has the corporate power and authority to own, lease and operate its assets
and property and to carry on its business as now being conducted; and is
duly qualified to do business and in good standing as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
FlexSCAN Material Adverse Effect. As used in this Agreement, the term (i)
"Subsidiary" means the subsidiaries of FlexSCAN set forth in Schedule 2.1 of
the FlexSCAN Schedule and (ii) "FlexSCAN Material Adverse Effect" means a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of FlexSCAN and its Subsidiaries as a whole,
or on the ability of the FlexSCAN to consummate the transactions
contemplated by this Agreement; it being understood, however, that
FlexSCAN's continuing incurrence of losses, as long as such losses are in
the ordinary course of business and are comparable to those incurred by
FlexSCAN prior to the date hereof, shall not, alone, be deemed to be a
FlexSCAN Material Adverse Effect.
(b) FlexSCAN has delivered to Parent a true and complete list
of all of FlexSCAN's Subsidiaries, indicating the jurisdiction of
incorporation of each Subsidiary and FlexSCAN's equity interest therein.
(c) FlexSCAN has delivered or made available to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of FlexSCAN
and similar governing instruments of each of its Subsidiaries, each as
amended to date, and each such instrument is in full force and effect.
Neither FlexSCAN nor any of its Subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent
governing instruments.
2.2 FlexSCAN Capital Structure. The authorized capital stock of
FlexSCAN consists of 6,000,000 shares of Common Stock, par value $0.001 per
share, of which there were 4,783,533 shares issued and outstanding as of
July 15, 2005, 250,000 shares of Series A Preferred Stock, par value $0.001
per share, of which 194,899 are outstanding as of July 15, 2005 (the "Series
A Preferred Stock") and 300,000 shares of Series B Preferred Stock, par
value $0.001 per share, of which 265,000 are outstanding as of July 15, 2005
(the "Series B Preferred Stock" and together with the Series A Preferred
Stock, the "FlexSCAN Preferred Stock"). All outstanding shares of FlexSCAN
Common Stock and FlexSCAN Preferred Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of
FlexSCAN, or any agreement or document to which FlexSCAN is a party or by
which it is bound.
2.3 Obligations With Respect to Capital Stock. Except as set forth
in Section 2.2, there are no equity securities, partnership interests or
similar ownership interests of any class of FlexSCAN, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. Except for securities FlexSCAN owns, directly or
indirectly through one or more Subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
Subsidiary of FlexSCAN, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except as
set forth in Section 2.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which FlexSCAN or any of its Subsidiaries is a party or by which it is bound
obligating FlexSCAN or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition, of any shares
of capital stock of FlexSCAN or any of its Subsidiaries or obligating
FlexSCAN or any of its Subsidiaries to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or
agreement. Except as set forth in Schedule 2.3, there are no registration
rights and, to the knowledge of FlexSCAN there are no voting trusts, proxies
or other agreements or understandings with respect to any equity security of
any class of FlexSCAN or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its
Subsidiaries.
2.4 Authority. (a) FlexSCAN has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action on the part of
FlexSCAN, subject only to the adoption of this Agreement by FlexSCAN's
stockholders and the filing and recordation of the Certificate of Merger
pursuant to Delaware Law. A vote of the holders of at least a majority of
the outstanding shares of the FlexSCAN Common Stock and FlexSCAN Preferred
Stock is required for FlexSCAN's stockholders to approve and adopt this
Agreement and approve the Merger. This Agreement has been duly executed and
delivered by FlexSCAN and, assuming the due authorization, execution and
delivery by Parent and FCA Merger Sub, constitutes the valid and binding
obligations of FlexSCAN, enforceable in accordance with its respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws and
general principles of equity. The execution and delivery of this Agreement
by FlexSCAN does not, and the performance of this Agreement by FlexSCAN will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws
of FlexSCAN (the "FlexSCAN Charter Documents") or the equivalent
organizational documents of any of its Subsidiaries, (ii) subject to
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree
applicable to FlexSCAN or any of its Subsidiaries or by which its or any of
its respective properties is bound or affected, or (iii) except as set forth
in Schedule 2.4, result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or impair FlexSCAN's rights or alter the rights or obligations of any
third party under, or to FlexSCAN's knowledge, give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
FlexSCAN or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which FlexSCAN or any of its Subsidiaries is a
party or by which FlexSCAN or any of its Subsidiaries or any of its
respective properties are bound or affected, except to the extent such
conflict, violation, breach, default, impairment or other effect would not,
in the case of clause (ii) or (iii), individually or in the aggregate,
reasonably be expected to have a FlexSCAN Material Adverse Effect.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality (a
"Governmental Entity") is required by or with respect to FlexSCAN in
connection with the execution and delivery of this Agreement, or the
consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger with the Secretary of State of Delaware,
(ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, individually or
in the aggregate, would not be reasonably likely to have a FlexSCAN Material
Adverse Effect.
2.5 FlexSCAN Financial Statements. Attached to Schedule 2.5 of the
FlexSCAN Schedule are the audited consolidated balance sheets of FlexSCAN
and its Subsidiaries as of June 30, 2004 together with the related
consolidated statements of income and cash flows for the fiscal year of
FlexSCAN then ended June 30, 2003 all certified by Hoffski & Xxxxxx,
FlexSCAN's independent public accountants whose audit reports thereon are
included therewith (the "Year-End Financial Statements"). Prior to the
Effective Time, FlexSCAN shall provide to Parent, an unaudited consolidated
balance sheet of FlexSCAN and its Subsidiaries as of March 31, 2005 (the
"FlexSCAN Balance Sheet"), together with the related statements of income
and cash flows for the nine month period then ended (the "Interim Financial
Statements," and collectively with the Year-End Financial Statements, the
"FlexSCAN Financial Statements"). Each of the FlexSCAN Financial
Statements (including, in each case, any related notes thereto) was and will
be prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved, and
each fairly presents and will fairly present the consolidated financial
position of FlexSCAN and its Subsidiaries as of the respective dates thereof
and the consolidated results of its operations and cash flows and
stockholder equity for the periods indicated. Except as disclosed in the
FlexSCAN Financial Statements, FlexSCAN does not have any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of FlexSCAN, except liabilities incurred
since the date of the Year-End Financial Statements in the ordinary course
of business consistent with past practices and which would not reasonably be
expected to have a FlexSCAN Material Adverse Effect.
2.6 Absence of Certain Changes or Events. Except as contemplated by
this Agreement, since the date of the FlexSCAN Balance Sheet, FlexSCAN and
its Subsidiaries have conducted their respective businesses only in, and
have not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change that, individually or in the aggregate, has had or is reasonably
likely to have a FlexSCAN Material Adverse Effect; (ii) any material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by FlexSCAN or any of its
Subsidiaries, whether or not covered by insurance; (iii) any declaration,
setting aside or payment of any dividend or other distribution in cash,
stock or property in respect of the capital stock of FlexSCAN, except for
dividends or other distributions on its capital stock publicly announced
prior to the date hereof and except as expressly permitted hereby; (iv) any
event that would constitute a violation of Section 4.1 hereof if such event
occurred after the date of this Agreement and prior to the Effective Time;
or (v) any change by FlexSCAN in accounting principles, practices or
methods. Since the date of the FlexSCAN Balance Sheet, except as set forth
in Schedule 2.6, there has not been any increase in the compensation payable
or that could become payable by FlexSCAN to officers or key employees or any
amendment of the FlexSCAN Option Plan other than increases or amendments in
the ordinary course of business consistent with past practice or (y) as
required by any relevant employment agreement, option agreement or (z)
which, individually or in the aggregate, would not reasonably be expected to
have a FlexSCAN Material Adverse Effect.
2.7 Taxes. (a) For purposes of this Agreement, (i) "Taxes" shall
mean all Federal, state, local, foreign, provincial, territorial or other
taxes, imports, tariffs, fees, levies or other similar assessments or
liabilities and other charges of any kind, including income taxes, profits
taxes, franchise taxes, ad valorem taxes, excise taxes, withholding taxes,
stamp taxes or other taxes of or with respect to gross receipts, premiums,
real property, personal property, windfall profits, sales, use, transfers,
licensing, employment, social security, workers' compensation, unemployment,
payroll and franchises imposed by or under any law (meaning all laws,
statutes, ordinances and regulations of any governmental authority including
all decisions of any court having the effect of law); and any other taxes,
duties or assessments, together with all interest, penalties and additions
imposed with respect to such amounts; (ii) "Tax Returns" shall mean any
declaration, return, report, schedule, certificate, statement or other
similar document (including relating or supporting information) required to
be filed with any Taxing Authority (as defined below), or where none is
required to be filed with a Taxing Authority, the statement or other
document issued by the applicable Taxing Authority in connection with any
Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax; and (iii) "Taxing
Authority" shall mean any domestic, foreign, Federal, national, provincial,
state, county or municipal or other local government or court, any
subdivision, agency, commission or authority thereof, or any quasi-
governmental body exercising tax regulatory authority.
(b) FlexSCAN and each of its Subsidiaries, (i) have timely
filed all Tax Returns that are required to have been filed by it with all
appropriate Taxing Authorities (and all such returns are true and correct and
fairly reflect in all material respects its operations for tax purposes); and
(ii) have timely paid all Taxes shown as owing on such Tax Returns or
assessed by any Taxing Authority (other than Taxes the validity of which are
being contested in good faith by appropriate proceedings). Between June 30,
2004 and the Closing Date, neither FlexSCAN nor any of its Subsidiaries has
incurred (or will incur) a Tax liability other than a Tax liability in the
ordinary course of business and in accordance with past custom and practice.
The assessment of any additional Taxes for periods for which Tax Returns have
been filed is not expected to exceed reserves made in accordance with GAAP
and reflected in the FlexSCAN Financial Statements and the FlexSCAN Balance
Sheet and, to FlexSCAN's knowledge, there are no material unresolved
questions or claims concerning FlexSCAN or any Subsidiaries' tax liability.
Neither FlexSCAN nor any Subsidiaries' Tax Returns have been reviewed or
audited by any Taxing Authority and no deficiencies for any Taxes have been
proposed, asserted or assessed either orally or in writing against FlexSCAN
or any of its Subsidiaries that are not adequately reserved for in accordance
with GAAP. No liens exist for Taxes (other than liens for Taxes not yet due
and payable) with respect to any of the assets or properties of FlexSCAN or
any Subsidiary.
(c) Neither FlexSCAN nor any Subsidiary has outstanding any
agreements or waivers extending, or having the effect of extending, the
statute of limitations with respect to the assessment or collection of any
Tax or the filing of any Tax Return.
(d) Neither FlexSCAN nor any Subsidiary is a party to or bound
by any tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(e) Except as set forth on Schedule 2.7, FlexSCAN shall not be
required to include in a taxable period ending after the Closing Date any
taxable income attributable to income that accrued in a prior taxable period
but was not recognized in any prior taxable period as a result of the
installment method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or any
comparable provision of state, local or foreign Tax law, or for any other
reason.
(f) Except as set forth on Schedule 2.7, neither FlexSCAN, nor
any of its Subsidiaries or affiliates, has made with respect to FlexSCAN any
consent under Section 341 of the Code, no property of FlexSCAN is "tax exempt
use property" within the meaning of Section 168(h) of the Code, and none of
the assets of FlexSCAN is subject to a lease under Section 7701(h) of the
Code or under any predecessor section thereof.
(g) FlexSCAN has complied in all material respects with all
applicable laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442,
3121, 3402 and 3406 of the Code or any comparable provision of any state,
local or foreign laws) and has, within the time and in the manner prescribed
by applicable law, withheld from and paid over to the proper Taxing
Authorities all amounts required to be so withheld and paid over under
applicable laws.
(h) The net operating losses ("NOL") of FlexSCAN or any of its
Subsidiaries are not, as of the date hereof, subject to Section 382 or 269 of
the Code, Regulation Section 1.1502-21(c), or any similar provisions or
Regulations otherwise limiting the use of the NOLs of FlexSCAN or its
Subsidiaries.
(i) FlexSCAN is not, and has not been for the five years
preceding the Closing, a "United States real property holding company" (as
such term is defined in Section 897(c)(2) of the Code).
(j) As of the date hereof, to the knowledge of FlexSCAN,
neither FlexSCAN nor any of its Subsidiaries or affiliates has taken or
agreed to take any action or failed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of Section
368(a) of the Code.
(k) Any deficiency resulting from any audit or examination
relating to Taxes of FlexSCAN by any Taxing Authority has been timely paid.
(l) Except as set forth on Schedule 2.7, no power of attorney
with respect to any Taxes has been executed or filed with any Taxing
Authority by or on behalf of FlexSCAN.
2.8 Patents and Trademarks. As used in this Agreement,
"Intellectual Property" means (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, divisionals, substitutions,
continuations-in-part, provisionals, revisions, extensions and re-
examinations thereof, (ii) all trademarks, service marks, trade names,
logos, corporate names and Internet domain names, including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all trade secrets
and confidential business information (including ideas, research and
development, copyrights, 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), (v) all computer programs
and software (including data and related documents), (vi) all know-how,
research information, research data and notebooks and (vii) all other
proprietary rights. Schedule 2.8 contains a complete list of all
Intellectual Property registered in FlexSCAN's name and material to
FlexSCAN's business as conducted as of the date hereof (collectively, the
"FlexSCAN Registered Intellectual Property"), which registrations are valid.
FlexSCAN's use of Intellectual Property does not constitute an infringement
of any third party's rights that could reasonably be expected to result in a
FlexSCAN Material Adverse Effect. Except as set forth on Schedule 2.8,
FlexSCAN owns, free and clear of any Liens, all right, title and interest to
the FlexSCAN Registered Intellectual Property. With respect to Intellectual
Property, other than the FlexSCAN Registered Intellectual Property, used or
held for use by FlexSCAN in its business as conducted as of the date hereof
(the "Other Intellectual Property"), FlexSCAN owns, controls or has a right
to use, to the extent necessary to conduct its business in a manner
generally consistent with its past practice, such Other Intellectual
Property which is material to FlexSCAN's business. Except as set forth on
Schedule 2.8, FlexSCAN is not a party to any outstanding options, licenses
or agreements of any kind relating to (i) any Other Intellectual Property
owned by any other person or entity or (ii) the FlexSCAN Registered
Intellectual Property. FlexSCAN has not during the preceding three years
received any communications or claims nor, to FlexSCAN's knowledge, is there
any threatened claim, alleging that FlexSCAN has infringed upon, or, by
conducting its business as proposed, would infringe upon the intellectual
property rights of any other person which such infringement would have a
FlexSCAN Material Adverse Effect. Except as set forth on Schedule 2.8, to
the knowledge of FlexSCAN, no third party has interfered with, infringed
upon or misappropriated any of FlexSCAN's rights to the FlexSCAN Registered
Intellectual Property or Other Intellectual Property which such
interference, infringement or misappropriation would constitute a FlexSCAN
Material Adverse Effect.
2.9 Compliance; Permits; Restrictions. (a) Except as disclosed on
Schedule 2.9 neither FlexSCAN nor any of its Subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to FlexSCAN or any of its Subsidiaries or by
which its or any of their respective properties is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
FlexSCAN or any of its Subsidiaries is a party or by which FlexSCAN or any
of its Subsidiaries or its or any of their respective properties is bound or
affected except for those conflicts, defaults or violations which would not
be reasonably expected to have a FlexSCAN Material Adverse Effect. Except
as disclosed on Schedule 2.9 to the knowledge of FlexSCAN, no investigation
or review by any Governmental Entity is pending or threatened against
FlexSCAN or its Subsidiaries, nor has any Governmental Entity indicated in
writing an intention to conduct the same other than those which would not
reasonably be expected to have a FlexSCAN Material Adverse Effect. There is
no agreement, judgment, injunction, order or decree binding upon FlexSCAN or
any of its Subsidiaries which has or would reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of
FlexSCAN or any of its Subsidiaries, any acquisition of material property by
FlexSCAN or any of its Subsidiaries or the conduct of business by FlexSCAN
as currently conducted.
(b) FlexSCAN and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which
would necessary to the conduct of the business of FlexSCAN except those the
absence of which would not, individually or in the aggregate, reasonably be
likely to have a FlexSCAN Material Adverse Effect (collectively, the
"FlexSCAN Permits"). FlexSCAN and its Subsidiaries are in compliance in all
material respects with the terms of the FlexSCAN Permits.
2.10 Litigation. Except as set forth on Schedule 2.10, as of the
date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending, including derivative suits brought by
or on behalf of FlexSCAN or as to which FlexSCAN or any of its Subsidiaries
has received any notice of assertion nor, to FlexSCAN's knowledge, is there
a threatened action, suit, proceeding, claim, arbitration or investigation
against FlexSCAN or any of its Subsidiaries seeking to delay, limit or
enjoin the transactions contemplated by this Agreement or which might
reasonably be expected to have a FlexSCAN Material Adverse Effect.
2.11 Brokers' and Finders' Fees. Except as set forth on Schedule
2.11, FlexSCAN has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.12 Labor Agreements and Actions; Employee Benefit Plans. (a)
FlexSCAN is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union
has requested or, to the knowledge of FlexSCAN, has sought to represent any
of the employees, representatives, or agents of FlexSCAN. There is no strike
or other labor dispute involving FlexSCAN pending or, to the knowledge of
FlexSCAN, threatened, nor is FlexSCAN aware of any labor organization
activity involving its employees.
(b) Schedule 2.12(b) contains a complete list of each pension,
profit-sharing or other retirement, bonus, deferred compensation, employment
agreement, severance agreement, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life
or other insurance, long- or short-term disability, fringe benefit, sick pay,
or vacation pay, or other employee benefit plan, program, agreement, or
arrangement or policy, whether formal or informal, funded or unfunded,
written or unwritten, and whether legally binding or not, sponsored,
maintained, contributed to or required to be contributed to by (i) FlexSCAN
with respect to current or former employees or any current or former director
or consultant of FlexSCAN, and/or (ii) any trade or business, whether or not
incorporated, that together with FlexSCAN would be deemed a "single employer"
that includes FlexSCAN within the meaning of Section 4001(a)(14) of ERISA,
and the rules and regulations promulgated thereunder (collectively, "FlexSCAN
Benefit Plans"); provided that each informal or unwritten FlexSCAN Benefit
Plan is described in summary form in Schedule 2.12(b). Schedule 2.12(b)
identifies each FlexSCAN Benefit Plan that is a "pension benefit plan" under
Section 3(2) of ERISA ("FlexSCAN Pension Plan"). Schedule 2.12(b) discloses
whether each FlexSCAN Benefit Plan that is an "employee welfare benefit plan"
under Section 3(1) of ERISA ("FlexSCAN Welfare Plan") is (i) unfunded, (ii)
insured, or (iii) funded through a "welfare benefit fund" within the meaning
of Section 419(e) of the Code or another funding mechanism.
(c) True and complete copies of all (i) FlexSCAN Benefit Plans,
including but not limited to, any trust instruments and insurance contracts
forming a part of any FlexSCAN Plans, and all amendments thereto and
summaries of unwritten FlexSCAN Benefit Plans; (ii) the three (3) most recent
actuarial valuations, if any, prepared for each FlexSCAN Plan; (iii) the
three (3) most recent reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each FlexSCAN Plan
or related trust; (iv) the most recent determination letters received from
the Internal Revenue Service, if any, for each FlexSCAN Plan and related
trust which is intended to satisfy the requirements of Section 401(a) of the
Code; (v) the most recent summary plan description, together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each FlexSCAN Plan; and (vi) all material communications to any
FlexSCAN Employees relating to each FlexSCAN Plan have been provided or made
available to Parent.
(d) All "employee benefit plans" within the meaning of Section
3(3) of ERISA, other than "multiemployer plans" within the meaning of Section
3(37) of ERISA, covering FlexSCAN Employees (the "FlexSCAN Plans"), to the
extent subject to ERISA, are in substantial compliance with ERISA, the Code,
and all other applicable law. Each FlexSCAN Pension Plan which is intended
to be qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to TRA or
a timely application for such determination is now pending or a request for
such determination filed within the remedial amendment period of Section
401(b) of the Code is pending, and FlexSCAN is not aware of any circumstances
likely to result in revocation of any such favorable determination letter.
As of the date hereof, other than claims for benefits submitted in the
ordinary course by participants or beneficiaries under the FlexSCAN Benefit
Plans, no material claim against any FlexSCAN Benefit Plan, and no legal or
regulatory proceeding (including any audit or voluntary compliance resolution
or closing agreement program proceeding) involving, any FlexSCAN Benefit
Plan, is pending, or to the knowledge of FlexSCAN, threatened.
(e) Neither FlexSCAN nor any of its Subsidiaries has engaged in
a transaction with respect to any FlexSCAN Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject
FlexSCAN or any Subsidiary to a tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA in an amount which would be material.
(f) No current or former FlexSCAN Pension Plan or pension plan
of any of its Subsidiaries, or any entity which is considered one employer
with FlexSCAN under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"), is or has ever been subject to Title IV of ERISA or
Section 412 of the Code. No FlexSCAN Benefit Plan constitutes a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(g) All contributions required to be made under the terms of
any FlexSCAN Plan have been timely made or have been reflected on the audited
financial statements of the FlexSCAN.
(h) Neither FlexSCAN nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any FlexSCAN Plan or
has ever represented, promised or contracted (whether in oral or written
form) to any employee(s) that such employee(s) would be provided with retiree
health or life benefits which would have a material impact on FlexSCAN,
except as required under Section 601 of ERISA.
(i) Except as set forth in Schedule 2.12, the consummation of
the transactions contemplated by this Agreement will not (x) entitle any
employees of FlexSCAN or any employees of its Subsidiaries to severance pay,
(y) accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable under or trigger any other material
obligation pursuant to, any of the FlexSCAN Benefit Plans or (z) result in
any breach or violation of, or a default under, any of the FlexSCAN Benefit
Plans.
(j) Any amount that could be received (whether in cash,
property, or vesting of property) as a result of the transaction contemplated
by this Agreement by any officer, director, employee or independent
contractor of FlexSCAN or any of its Subsidiaries, who is a "disqualified
individual" (as defined in proposed Treasury Regulation Section 1.280G-1),
under any employment arrangement or FlexSCAN Benefit Plan would not be
characterized as an "excess parachute payment" (as defined in Section 280G of
the Code).
(k) All FlexSCAN Benefit Plans covering current or former non-
U.S. Employees complies in all material respects with applicable law, and no
unfunded liabilities exist with respect to any FlexSCAN Benefit Plan that
covers such non-U.S. Employees.
(l) Schedule 2.12(l) contains a complete and correct list of
employment agreements for senior officers of FlexSCAN; copies of each such
agreement have been provided or made available to Parent or Parent's counsel.
2.13 Absence of Liens and Encumbrances. FlexSCAN and each of its
Subsidiaries has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free
and clear of any Liens and Encumbrances except (i) as reflected in the
FlexSCAN Financial Statements, (ii) for liens or taxes not yet due and
payable and (iii) for such imperfections of title and encumbrances, if any,
which would not be reasonably expected to have a FlexSCAN Material Adverse
Effect.
2.14 Environmental Matters. (a) Hazardous Materials Activities.
Except as would not reasonably be likely to result in a material liability
to FlexSCAN (in any individual case or in the aggregate), (i) neither
FlexSCAN nor any of its Subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
pollutants, contaminants, wastes, any toxic, radioactive or otherwise
hazardous materials ("Hazardous Materials") in violation of any law in
effect on or before the Closing Date, and (ii) neither FlexSCAN nor any of
its Subsidiaries has disposed of, transported, sold, used, released, exposed
its employees or others to or manufactured any product containing a
Hazardous Material (collectively, "Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to FlexSCAN's knowledge, threatened concerning any FlexSCAN
Permit relating to any environmental matter, Hazardous Material or any
Hazardous Materials Activity of FlexSCAN or any of its Subsidiaries.
FlexSCAN is not aware of any fact or circumstance which could involve
FlexSCAN or any of its Subsidiaries in any environmental litigation or impose
upon FlexSCAN or any of its Subsidiaries any environmental liability.
2.15 Agreements. (a) Except as set forth in Schedule 2.15(a), there
are no written agreements between FlexSCAN and any of its officers,
directors, employees or shareholders or any affiliate thereof.
(b) Except as set forth in Schedule 2.15(b), there are no
written agreements, to which FlexSCAN is a party or by which it is bound
which (i) involve obligations (contingent or otherwise) of, or payments to,
FlexSCAN in excess of $100,000, (ii) are material to the conduct and
operations of FlexSCAN's business or properties (including, without
limitation, the license of any Intellectual Property to or from FlexSCAN),
(iii) restrict or materially adversely affect the development, manufacture,
sale, marketing or distribution of FlexSCAN's products or services, (iv)
relating to the employment or compensation of any employee or consultant, (v)
of duration of six months or more and not cancelable without penalty by
FlexSCAN on 30 days or less notice or (vi) relating to the sale, lease,
pledge or other disposition of any material assets of or to FlexSCAN.
(c) Except as set forth in Schedule 2.15(c), neither FlexSCAN
nor any of its Subsidiaries, nor to FlexSCAN's knowledge any other party to a
FlexSCAN Contract (as defined below), is in breach, violation or default
under, and neither FlexSCAN nor any of its Subsidiaries has been notified
that it has breached, violated or defaulted under, any of the material terms
or conditions of any of the agreements, contracts or commitments to which
FlexSCAN or any of its Subsidiaries is a party or by which FlexSCAN or any of
its Subsidiaries is bound that are required to be disclosed in Schedules
3.15(a) or 3.15(b) (any such agreement, contract or commitment, a "FlexSCAN
Contract") in such a manner as would permit any other party to cancel or
terminate any such FlexSCAN Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches,
violations or defaults, in the aggregate).
(d) Each of the FlexSCAN Contracts are legal, valid, binding
and enforceable and in full force and effect with respect to the FlexSCAN and
any of its Subsidiaries with respect to each other party thereto, in either
case subject to the effect of bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
except as the availability of equitable remedies may be limited by general
principles of equity; and the FlexSCAN Contracts will continue to be legal,
valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior
to the Closing subject to the effect of bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally
and except as the availability of equitable remedies may be limited by
general principles of equity.
(e) Neither FlexSCAN nor any of its Subsidiaries have been
notified that any party to any of the FlexSCAN Contracts intends to cancel,
terminate, proposes to amend, not renew or exercise an option under any of
FlexSCAN Contracts, whether in connection with the transactions contemplated
hereby or otherwise nor is FlexSCAN or any Subsidiary aware of any intention
by any party to any FlexSCAN Contract to effect any of the foregoing.
2.16 Board Approval. The Board of Directors of FlexSCAN has, as of
the date of this Agreement, (i) determined that the Merger is fair to and in
the best interests of FlexSCAN and its stockholders, (ii) determined to
recommend that the stockholders of FlexSCAN adopt this Agreement and (iii)
duly approved the Merger, this Agreement and the transactions contemplated
hereby.
2.17 Accredited or Sophisticated Investors. Prior to the Closing,
FlexSCAN will have obtained executed accredited investor questionnaires from
each of its stockholders or representations that such stockholders are
sophisticated investors. Based on such questionnaires or representations,
all of the FlexSCAN stockholders are accredited investors or sophisticated
investors and FlexSCAN does not have more than 35 sophisticated investors
who are stockholders of FlexSCAN.
2.18 Disclosure. No representation or warranty of the parties to
this Agreement and no statement in the Schedules omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND FLEXSCAN MERGER SUB
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to FlexSCAN by Parent on or prior to entering
into this Agreement a copy of which is attached hereto as Exhibit B and
incorporated herein by this reference (the "Parent Schedule"), each of Parent
and FlexSCAN Sub hereby represents and warrants to FlexSCAN that:
3.1 Organization of Parent and FCA Merger Sub. (a) Each of Parent
and FCA Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation; has
the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted; and is duly
qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a
Parent Material Adverse Effect. As used in this Agreement, the term (i)
"Subsidiary" means the FCA Merger Sub and (ii) "Parent Material Adverse
Effect" means a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of Parent and its
Subsidiaries as a whole or on the ability of Parent to consummate the
transactions contemplated by this Agreement; it being understood, however,
that Parent's continuing incurrence of losses, as long as such losses are in
the ordinary course of business and are comparable to those incurred by
Parent prior to the date hereof, shall not, alone, be deemed to be a Parent
Material Adverse Effect.
(b) Parent has delivered to FlexSCAN a true and complete list
of all of Parent's Subsidiaries, indicating the jurisdiction of each
Subsidiary and Parent's equity interest therein.
(c) Parent has delivered or made available to FlexSCAN a true
and correct copy of the Articles of Incorporation and Bylaws of each of
Parent and FCA Merger Sub and similar governing instruments of each of
Parent's Subsidiaries, each as amended to date, and each such instrument is
in full force and effect. Neither Parent, FCA Merger Sub or any of Parent's
Subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent governing instruments.
3.2 Capital Structure. The authorized capital stock of Parent
consists of 50,000,000 shares of Common Stock, par value $0.001 per share,
of which there were 2,435,848 shares issued and outstanding as of June 30,
2004 and 1,500,000 shares of Preferred Stock, par value $0.001 per share, of
which there were no shares issued and outstanding as of June 30, 2004. The
authorized capital stock of FCA Merger Sub consists of 100 shares of Common
Stock, par value $0.001 per share, of which there were 100 shares issued and
outstanding as of July __, 2005. All outstanding shares of Parent and FCA
Merger Sub Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute,
the Articles of Incorporation or Bylaws of Parent and FCA Merger Sub or any
agreement or document to which Parent or FCA Merger Sub is a party or by
which it is bound. As of the date hereof, , Parent did not have any options
or warrants to purchase common stock outstanding.
3.3 Obligations With Respect to Capital Stock. Except as set forth
in Section 3.2, there are no equity securities, partnership interests or
similar ownership interests of any class of Parent or FCA Merger Sub, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more Subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any
class of any Subsidiary of Parent, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Parent or any of its Subsidiaries is a
party or by which it is bound obligating Parent or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption
or acquisition, of any shares of capital stock of Parent or any of its
Subsidiaries or obligating Parent or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant,
equity security, partnership interest or similar ownership interest, call,
right, commitment or agreement. Except as set forth on Section 3.2, there
are no registration rights and, to the knowledge of Parent there are no
voting trusts, proxies or other agreements or understandings with respect to
any equity security of any class of Parent or with respect to any equity
security partnership interest or similar ownership interest of any class of
any of its Subsidiaries.
3.4 Authority. (a) Each of Parent and FCA Merger Sub has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the
part of each of Parent and FCA Merger Sub, subject only to the filing and
recordation of the Certificate of Merger pursuant to Delaware Law. This
Agreement has been duly executed and delivered by each of Parent and FCA
Merger Sub and, assuming the due authorization, execution and delivery by
FlexSCAN, constitutes the valid and binding obligations of each of Parent
and FCA Merger Sub, enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws and
general principles of equity. The execution and delivery of this Agreement
by each of Parent and FCA Merger Sub, do not, and the performance of this
Agreement by each of Parent and FCA Merger Sub, will not, (i) conflict with
or violate the Articles of Incorporation or Bylaws of Parent, or FCA Merger
Sub, respectively, (collectively, the "Parent Charter Documents") or (ii)
subject to compliance with the requirements set forth in Section 3.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to Parent, FCA Merger Sub or any of Parent's
Subsidiaries, respectively, or by which its or any of their respective
properties is bound or affected, result in any breach of, or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or impair any of, Parent's or FCA Merger Sub's rights or
alter the rights or obligations of any third party under, or to Parent's
knowledge, give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance on
any of the properties or assets of Parent, FCA Merger Sub or any of Parent's
Subsidiaries, respectively, pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any of Parent, FCA Merger Sub or any of
Parent's Subsidiaries is a party or by which Parent, FCA Merger Sub or any
of Parent's Subsidiaries, or any of their respective properties are bound or
affected, except to the extent such conflict, violation, breach, default,
impairment or other effect would not, in the case of clause (ii) or (iii),
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required
by or with respect to any of Parent or FCA Merger Sub in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Secretary of State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, individually or in the
aggregate, would not be reasonably likely to have a Parent Material Adverse
Effect.
3.5 Parent SEC Filings; Parent Financial Statements. (a) The Parent
has filed all forms, reports and documents required to be filed with the SEC
since the initial filing date of the registration statement for the Parent's
initial public offering. All such required forms, reports and documents
(including the financial statements, exhibits and schedules thereto and
those documents that the Parent may file subsequent to the date hereof) are
collectively referred to herein as the "Parent SEC Reports." As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to
such Parent SEC Reports, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports (the "Parent
Financials"), including any Parent SEC Reports filed after the date hereof
until the Closing, as of their respective dates, (i) complied as to form in
all material respects with the published rules and regulations of the SEC
with respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-QSB under the Exchange
Act) and (iii) fairly presented the financial position of the Parent at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount.
The balance sheet of the Parent as of March 31, 2005 is hereinafter referred
to as the "Parent Balance Sheet." Except as disclosed in the Parent
Financials, the Parent does not have any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance
sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Parent, except liabilities (i) provided for in the Parent Balance Sheet, or
(ii) incurred since the date of the Parent Balance Sheet in the ordinary
course of business consistent with past practices and which would not
reasonably be expected to have a Parent Material Adverse Effect.
(c) Parent has heretofore furnished to FlexSCAN a complete and
correct copy of any amendments or modifications to the Parent SEC Reports, if
any, which have not yet been filed with the SEC but which will be required to
be filed, to agreements, documents or other instruments which previously had
been filed by the Parent with the SEC pursuant to the Securities Act or the
Exchange Act.
(d) Attached to Schedule 3.5 of the Parent Schedule are the
audited consolidated balance sheets of Parent and its Subsidiaries as of
December 31, 2004 together with the related consolidated statements of income
and cash flows for the fiscal years of Parent then ended December 31, 2004
all certified by Xxxxxxx International, Parent's former independent public
accountants whose audit reports thereon are included therewith (the "Parent
Financial Statements"). Each of the Parent Financial Statements (including,
in each case, any related notes thereto) was prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved, and each
fairly presents the consolidated financial position of Parent and its
Subsidiaries as of the respective dates thereof and the consolidated results
of its operations and cash flows and stockholder equity for the periods
indicated. Except as disclosed in the Parent Financial Statements, Parent
does not have any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes
to the consolidated financial statements prepared in accordance with GAAP
which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Parent, except liabilities
incurred since the date of the Parent Financial Statements in the ordinary
course of business consistent with past practices and which would not
reasonably be expected to have a Parent Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Reports filed prior to the date hereof or as contemplated by
this Agreement, since the date of the Parent Balance Sheet, Parent and its
Subsidiaries have conducted their respective businesses only in, and have
not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change that individually or in the aggregate, has had or is reasonably
likely to have a Parent Material Adverse Effect; (ii) any material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by Parent or any of its
Subsidiaries, whether or not covered by insurance; (iii) any declaration,
setting aside or payment of any dividend or other distribution in cash,
stock or property in respect of the capital stock of Parent, except for
dividends or other distributions on its capital stock publicly announced
prior to the date hereof and except as expressly permitted hereby; (iv) any
event that would constitute a violation of Section 4.2 hereof if such event
occurred after the date of this Agreement and prior to the Effective Time;
or (v) any change by Parent in accounting principles, practices or methods.
3.7 Tax Matters. (a) Parent and each of its Subsidiaries (i) have
timely filed all Tax Returns that are required to have been filed by it with
all appropriate Taxing Authorities (and all such returns are true and
correct and fairly reflect in all material respects its operations for tax
purposes); and (ii) have timely paid all Taxes shown as owing on such Tax
Returns or assessed by any Taxing Authority (other than Taxes the validity
of which are being contested in good faith by appropriate proceedings).
Between December 31, 2003 and the Closing Date, neither Parent nor any of
its Subsidiaries has incurred (or will incur) a Tax liability other than a
Tax liability in the ordinary course of business and in accordance with past
custom and practice. The assessment of any additional Taxes for periods for
which Tax Returns have been filed is not expected to exceed reserves made in
accordance with GAAP and reflected in the Parent Financial Statements and
the Parent Balance Sheet and, to Parent's knowledge, there are no material
unresolved questions or claims concerning Parent's tax liability. Neither
Parent's nor any Subsidiaries' Tax Returns have been reviewed or audited by
any Taxing Authority and no deficiencies for any Taxes have been proposed,
asserted or assessed either orally or in writing against Parent or any of
its Subsidiaries that are not adequately reserved for in accordance with
GAAP. No liens exist for Taxes (other than liens for Taxes not yet due and
payable) with respect to any of the assets or properties of Parent or any
Subsidiary.
(b) Neither Parent nor any Subsidiary has outstanding any
agreements or waivers extending, or having the effect of extending, the
statute of limitations with respect to the assessment or collection of any
Tax or the filing of any Tax Return.
(c) Neither Parent nor any Subsidiary is a party to or bound by
any tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(d) Parent shall not be required to include in a taxable period
ending after the Closing Date any taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481
of the Code or any comparable provision of state, local or foreign Tax law,
or for any other reason.
(e) Except as set forth on Schedule 3.7, neither Parent, nor
any of its Subsidiaries or affiliates, has made with respect to Parent, any
consent under Section 341 of the Code, no property of Parent is "tax exempt
use property" within the meaning of Section 168(h) of the Code, and none of
the assets of Parent is subject to a lease under Section 7701(h) of the Code
or under any predecessor section thereof.
(f) Parent has complied in all material respects with all
applicable laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442,
3121, 3402 and 3406 of the Code or any comparable provision of any state,
local or foreign laws) and has, within the time and in the manner prescribed
by applicable law, withheld from and paid over to the proper Taxing
Authorities all amounts required to be so withheld and paid over under
applicable laws.
(g) The net operating losses ("NOL") of Parent or any of its
Subsidiaries are not, as of the date hereof, subject to Section 382 or 269 of
the Code, Regulation Section 1.1502-21(c), or any similar provisions or
Regulations otherwise limiting the use of the NOLs of Parent or its
Subsidiaries.
(h) Parent is not, and has not been for the five years
preceding the Closing, a "United States real property holding company" (as
such term is defined in Section 897(c)(2) of the Code).
(i) As of the date hereof, to the knowledge of Parent, neither
Parent nor any of its Subsidiaries has taken or agreed to take any action or
failed to take any action that would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code.
(j) Any deficiency resulting from any audit or examination
relating to Taxes of Parent by any Taxing Authority has been timely paid.
(k) Except as set forth on Schedule 3.7, no power of attorney
with respect to any Taxes has been executed or filed with any Taxing
Authority by or on behalf of Parent.
(l) The total adjusted tax basis of the assets of Parent equal
or exceed the sum of any liabilities of Parent.
3.8 Patents and Trademarks. Schedule 3.8 contains a complete list
of all Intellectual Property registered in Parent's name and material to
Parent's business as conducted as of the date hereof (collectively, the
"Registered Intellectual Property"), which registrations are valid. Parent's
use of Intellectual Property does not constitute an infringement of any
third party's rights that could reasonably be expected to result in a Parent
Material Adverse Effect. Except as set forth on Schedule 3.8, Parent owns,
free and clear of any liens, claims, encumbrances, security interests and
rights of redemption (collectively, the "Liens"), all right, title and
interest to the Registered Intellectual Property. With respect to
Intellectual Property, other than the Registered Intellectual Property, used
or held for use by Parent in its business as conducted as of the date hereof
(the "Other Intellectual Property"), Parent owns, controls or has a right to
use, to the extent necessary to conduct its business in a manner generally
consistent with its past practice, such Other Intellectual Property which is
material to Parent's business. Except as set forth on Schedule 3.8, Parent
is not a party to any outstanding options, licenses or agreements of any
kind relating to (i) any Other Intellectual Property owned by any other
person or entity, or (ii) the Registered Intellectual Property. Parent has
not during the preceding three years received any communications or claims
nor, to Parent's knowledge, is there any threatened claim, alleging that
Parent has infringed upon, or, by conducting its business as proposed, would
infringe upon the intellectual property rights of any other person which
such infringement would have a Parent Material Adverse Effect. Except as
set forth on Schedule 3.8, to the knowledge of Parent, no third party has
interfered with, infringed upon or misappropriated any of Parent's rights to
the Registered Intellectual Property or Other Intellectual Property which
such interference, infringement or misappropriation would constitute a
Parent Material Adverse Effect.
3.9 Compliance; Permits; Restrictions. Except as disclosed on
Schedule 3.9,
(a) Neither Parent nor any of its Subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its Subsidiaries or by
which its or any of their respective properties is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its Subsidiaries is a party or by which Parent or any of its Subsidiaries or
its or any of their respective properties is bound or affected except for
those conflicts, defaults or violations which would not be reasonably
expected to have a Parent Material Adverse Effect. Except as disclosed on
Schedule 3.9 to the knowledge of Parent, no investigation or review by any
Governmental Entity is pending or threatened against Parent or any of its
Subsidiaries, nor has any Governmental Entity indicated in writing an
intention to conduct the same; other than those which would not reasonably be
expected to have a Parent Material Adverse Effect. There is no agreement,
judgment, injunction, order or decree binding upon Parent or any of its
Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Parent or any of
its Subsidiaries, any acquisition of material property by Parent or any of
its Subsidiaries or the conduct of business by Parent as currently conducted.
(b) Parent and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which
are necessary to the conduct of the business of Parent except those the
absence of which would not, individually or in the aggregate, be reasonably
likely to have a Parent Material Adverse Effect, (collectively, the "Parent
Permits"). Parent and its Subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
3.10 Litigation. As of the date of this Agreement, there is no
action, suit, proceeding, claim, arbitration or investigation pending,
including derivative suits brought by or on behalf of Parent, or as to which
Parent or any of its Subsidiaries has received any written notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Parent or any of its
Subsidiaries seeking to delay, limit or enjoin the transactions contemplated
by this Agreement or which might reasonably be expected to have a Parent
Material Adverse Effect.
3.11 Brokers' and Finders' Fees. Parent has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby except as disclosed on
Schedule 3.11.
3.12 Labor Agreements and Actions, Employee Benefit Plans. (a) Parent
is not bound by or subject to (and none of its assets or properties is bound
by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of Parent, has sought to represent any of the
employees, representatives, or agents of Parent. There is no strike or
other labor dispute involving Parent pending or, to the knowledge of Parent,
threatened, nor is Parent aware of any labor organization activity involving
its employees.
(b) Parent has no pension, profit-sharing or other retirement,
bonus, deferred compensation, employment agreement, severance agreement,
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, long- or short-
term disability, fringe benefit, sick pay, or vacation pay, or other employee
benefit plan, program, agreement, or arrangement or policy, whether formal or
informal, funded or unfunded, written or unwritten, and whether legally
binding or not, sponsored, maintained, contributed to or required to be
contributed to by (i) Parent with respect to current or former employees or
any current or former director or consultant of Parent, and/or (ii) any trade
or business, whether or not incorporated, that together with Parent would be
deemed a "single employer" that includes Parent within the meaning of Section
4001(a)(14) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA "), and the rules and regulations promulgated thereunder
(collectively, "Parent Benefit Plans"). Parent has no Benefit Plan that is a
"pension benefit plan" under Section 3(2) of ERISA ("Parent Pension Plan").
Parent also has no Parent Benefit Plan that is an "employee welfare benefit
plan" under Section 3(1) of ERISA ("Parent Welfare Plan") which is (i)
unfunded, (ii) insured, or (iii) funded through a "welfare benefit fund"
within the meaning of Section 419(e) of the Code or another funding
mechanism.
(c) True and complete copies of all (i) Parent Benefit Plans,
including, but not limited to, any trust instruments and insurance contracts
forming a part of any Parent Benefit Plans, and all amendments thereto and
summaries of unwritten Parent Benefit Plans; (ii) the three (3) most recent
actuarial valuations, if any, prepared for each Parent Benefit Plan; (iii)
the three (3) most recent reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each Parent Benefit
Plan or related trust; (iv) the most recent determination letters received
from the Internal Revenue Service, if any, for each Parent Benefit Plan and
related trust which is intended to satisfy the requirements of Section 401(a)
of the Code; (v) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA
with respect to each Parent Benefit Plan; and (vi) all material
communications to any Employees relating to each Parent Benefit Plan have
been provided or made available to FlexSCAN.
(d) All "employee benefit plans" within the meaning of Section
3(3) of ERISA, other than "multiemployer plans" within the meaning of Section
3(37) of ERISA, covering Parent Employees (the "Parent ERISA Plans"), to the
extent subject to ERISA, are in substantial compliance with ERISA, the Code,
and all other applicable law. Each Parent Pension Plan which is intended to
be qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to "TRA"
(as defined in Section 1 of Rev. Proc. 93-39) or a timely application for
such determination is now pending or a request for such determination filed
within the remedial amendment period of Section 401(b) of the Code is
pending, and Parent is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. As of the date hereof,
other than claims for benefits submitted in the ordinary course by
participants or beneficiaries under the Parent Benefit Plans, no material
claim against any Parent Benefit Plan, and no legal or regulatory proceeding
(including any audit or voluntary compliance resolution or closing agreement
program proceeding) involving any Parent Benefit Plan, is pending, or to the
knowledge of Parent, threatened.
(e) Neither Parent nor any of its Subsidiaries has engaged in a
transaction with respect to any Parent Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject Parent or
any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which would be material.
(f) No current or former Parent Pension Plan of Parent or any
of its Subsidiaries, or any ERISA Affiliate, is or has ever been subject to
Title IV of ERISA or Section 412 of the Code. No Parent Benefit Plan
constitutes a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(g) All contributions required to be made under the terms of
any Parent Plan have been timely made or have been reflected on the audited
financial statements of Parent.
(h) Neither Parent nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Parent Plan or has
ever represented, promised or contracted (whether in oral or written form) to
any employee(s) that such employee(s) would be provided with retiree health
or life benefits which would have a material impact on Parent, except as
required under section 601 of ERISA.
(i) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any employees of Parent or employees of any of
its Subsidiaries to severance pay, (y) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable
under or trigger any other material obligation pursuant to, any of the Parent
Benefit Plans or (z) result in any breach or violation of, or a default
under, any of the Parent Benefit Plans.
(j) Any amount that could be received (whether in cash,
property, or vesting of property) as a result of the transaction contemplated
by this Agreement by any officer, director, employee or independent
contractor of Parent or any of its Subsidiaries, who is a "disqualified
individual" (as defined in proposed Treasury Regulation Section 1.280G-1),
under any employment arrangement or Parent Benefit Plan would not be
characterized as an "excess parachute payment" (as defined in Section 280G of
the Code).
(k) All Parent Benefit Plans covering current or former non-
U.S. Employees complies in all material respects with applicable law. No
unfunded liabilities exist with respect to any Parent Benefit Plan that
covers such non-U.S. Employees.
(l) Schedule 3.12(l) contains a complete and correct list of
employment agreements for senior officers of Parent; copies of each such
agreement have been provided or made available to FlexSCAN or FlexSCAN's
counsel.
3.13 Absence of Liens and Encumbrances. Parent and each of its
Subsidiaries has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free
and clear of any Liens and Encumbrances except (i) as reflected in the
Parent Financial Statements, (ii) for liens for taxes not yet due and
payable and (iii) for such imperfections of title and encumbrances, if any,
which would not be reasonably expected to have a Parent Material Adverse
Effect.
3.14 Environmental Matters. (a) Hazardous Materials Activities.
Except as would not reasonably be likely to result in a material liability
to Parent (in any individual case or in the aggregate), (i) neither Parent
nor any of its Subsidiaries has transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous
Materials in violation of any law in effect on or before the Closing Date,
and (ii) neither Parent nor any of its Subsidiaries has engaged in,
Hazardous Materials Activities in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as
of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Parent's knowledge, threatened concerning any Parent Permit
relating to any environmental matter, Hazardous Material or any Hazardous
Materials Activity of Parent or any of its Subsidiaries. Parent is not aware
of any fact or circumstance which could involve Parent or any of its
Subsidiaries in any environmental litigation or impose upon Parent or any of
its Subsidiaries any environmental liability.
3.15 Agreements. (a) There are no written agreements between Parent
and any of its officers, directors, employees or shareholders or any
affiliate thereof.
(b) There are no written agreements to which Parent is a party
or by which it is bound which (i) involve obligations (contingent or
otherwise) of, or payments to, Parent in excess of $25,000, (ii) are material
to the conduct and operations of Parent's business or properties (including,
without limitation, the license of any Intellectual Property to or from
Parent), (iii) restrict or materially adversely affect the development,
manufacture, sale, marketing or distribution of Parent's products or
services, (iv) relating to the employment or compensation of any employee or
consultant, (v) of duration of six months or more and not cancelable without
penalty by Parent on 30 days or less notice or (vi) relating to the sale,
lease, pledge or other disposition of any material assets of or to Parent.
(c) Parent nor any of its Subsidiaries, nor to Parent's
knowledge any other party to a Parent Contract (as defined below), is in
breach, violation or default under, and neither Parent nor any of its
Subsidiaries has been notified that it has breached, violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which Parent or any of its Subsidiaries is a
party or by which it is bound that are required to be disclosed in Schedules
3.15(a) or 3.15(b) (any such agreement, contract or commitment, a "Parent
Contract") in such a manner as would permit any other party to cancel or
terminate any such Parent Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches,
violations or defaults, in the aggregate).
(d) Each of the Parent Contracts are legal, valid, binding and
enforceable and in full force and effect with respect to Parent and any of
its Subsidiaries with respect to each other party thereto, in either case
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as
the availability of equitable remedies may be limited by general principles
of equity; and the Parent Contracts will continue to be legal, valid, binding
and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the
Closing subject to the effect of bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
except as the availability of equitable remedies may be limited by general
principles of equity.
(e) Neither Parent nor any of its Subsidiaries have been
notified that any party to any of the Parent Contracts intends to cancel,
terminate, proposes to amend, not renew or exercise an option under any of
the Parent Contracts, whether in connection with the transactions
contemplated hereby or otherwise nor is Parent or any Subsidiary aware of any
intention by any party to any Parent Contract to effect any of the foregoing.
3.16 Board Approval. The Board of Directors of Parent has, as of the
date of this Agreement, (i) determined that the Merger is fair to, advisable
and in the best interests of Parent and its stockholders, (ii) has approved
the Share Issuance and (iii) duly approved the Merger, this Agreement and
the transactions contemplated hereby.
3.17 Interim Operations of FCA Merger Sub. FCA Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby
and has engaged in no other business other than incident to its creation and
this Agreement and the transactions contemplated hereby.
3.18 Disclosure. No representation or warranty of the parties to
this Agreement and no statement in the Schedules omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Parties. During the period from the
date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, each of
FlexSCAN and its Subsidiaries and Parent and its Subsidiaries shall carry on
their respective business in the ordinary course in substantially the same
manner as heretofore conducted and in substantial compliance with all
applicable laws and regulations, pay their respective debts and taxes when
due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due subject to good faith disputes over such
obligations, and use their commercially reasonable efforts consistent with
past practices and policies to (i) preserve intact their present business
organization, (ii) keep available the services of each of their present
officers and employees, respectively, and (iii) preserve their relationships
with customers, suppliers, distributors, licensors, licensees and others
with which each party has business dealings material to their respective
business.
4.2 Covenants of Parent. Except as permitted by the terms of this
Agreement, without the prior written consent of FlexSCAN, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Parent shall not do any of the following and shall not permit its
Subsidiaries to do any of the following:
(a) Except as required by law, waive any stock repurchase
rights, accelerate, amend or change the period of exercisability of options
or restricted stock, or reprise options granted under any employee,
consultant, director or other stock plans or authorize cash payments in
exchange for any options granted under any of such plans;
(b) Except as required by applicable law, grant any severance
or termination pay to any officer or employee except pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing or made available to FlexSCAN, or adopt any
new severance plan, or amend or modify or alter in any manner any severance
plan, agreement or arrangement existing on the date hereof;
(c) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property)
in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(d) Except as provided under Section 6.2(f) below, purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock of Parent or its Subsidiaries, except (i) repurchases of unvested
shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof (or any such agreements entered into
in the ordinary course of business consistent with past practice by Parent
with employees hired after the date hereof), (ii) for the purpose of funding
or providing benefits under any stock option and incentive compensation
plans, directors plans, and stock purchase and dividend reinvestment plans in
accordance with past practice;
(e) Issue, deliver, sell, authorize, pledge or otherwise
encumber or propose any of the foregoing with respect to any shares of
capital stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into shares of capital stock, or enter
into other agreements or commitments of any character obligating it to issue
any such shares or convertible securities, or any equity-based awards
(whether payable in shares, cash or otherwise) other than the issuance,
delivery and/or sale of shares of Parent Common Stock (as appropriately
adjusted for stock splits and the like) pursuant to the exercise of stock
options or warrants outstanding as of the date of this Agreement.
(f) Cause, permit or submit to a vote of Parent's stockholders
any amendments to the Parent Charter Documents (or similar governing
instruments of any of its Subsidiaries);
(g) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to enter into any joint ventures, strategic partnerships or
strategic investments;
(h) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except in the ordinary course of business consistent
with past practice, except for the sale, lease, licensing, encumbering or
disposition (other than through licensing permitted by clause (c)) of
property or assets which are not material, individually or in the aggregate,
to the business of Parent and its Subsidiaries;
(i) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Parent, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than in connection with the
financing of working capital consistent with past practice;
(j) Adopt or amend employee stock purchase or employee stock
option plan; or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practice with employees who
are terminable "at will"); pay any special bonus or special remuneration to
any director or employee; or increase the salaries, wage rates, compensation
or other fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants except, in each case, as
may be required by law and except for (i) salary increases in the ordinary
course of business consistent with past practice for non-officer employees,
(ii) salary increases for officers in an amount not exceeding 5% of such
officer's salary on the date hereof and (iii) as set forth on Schedule
4.2(j);
(k) Pay, discharge, settle or satisfy any litigation (whether
or not commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the Parent Balance Sheet or incurred since the date of such
financial statements, or (ii) waive the benefits of, agree to modify in any
manner, terminate, release any person from or knowingly fail to enforce the
confidentiality or nondisclosure provisions of any agreement to which Parent
or any of its Subsidiaries is a party or of which Parent or any of its
Subsidiaries is a beneficiary, in the case of both (i) and (ii) of this
Section 4.1(k);
(l) Except in the ordinary course of business consistent with
past practice, and except as provided under Section 6.2(f) below, materially
modify, amend or terminate any Parent Contracts disclosed in Schedule 3.15 of
the Parent Schedule or waive, delay the exercise of, release or assign any
material rights or claims thereunder without providing prior notice to
Parent;
(m) Except as required by GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(n) Make any Tax election or accounting method change (except
as required by GAAP) inconsistent with past practice that, individually or in
the aggregate, is reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of Parent or any of its
Subsidiaries, settle or compromise any material Tax liability or consent to
any extension or waiver of any limitation period with respect to Taxes; or
(o) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (n) above.
4.3 Covenants of FlexSCAN. Except as disclosed on Schedule 4.3 of
the FlexSCAN Schedule, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, FlexSCAN and each of its Subsidiaries
shall not (i) amend the FlexSCAN Charter Documents (other than to change its
name); (ii) split, combine or reclassify its outstanding shares of capital
stock; or (iii) declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock other than dividends from
its wholly-owned Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Public Disclosure. Parent and FlexSCAN will consult with each
other, and to the extent practicable, agree, before issuing any press
release or otherwise making any public statement with respect to the Merger
or this Agreement and will not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange or Nasdaq,
in which case reasonable efforts to consult with the other party will be
made prior to such release or public statement. The parties will agree to
the text of the joint press release announcing the signing of this
Agreement.
5.2 Commercially Reasonable Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including to accomplish the following: (i) causing the conditions
precedent set forth in Article VI to be satisfied; (ii) obtaining all
necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities; (iii) making all necessary
registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any); (iv) avoiding
any suit, claim, action, investigation or proceeding by any Governmental
Entity challenging the Merger or any other transaction contemplated by this
Agreement; (v) obtaining all consents, approvals or waivers from third
parties required as a result of the transactions contemplated in this
Agreement; (vi) defending any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court
or other Governmental Entity vacated or reversed; and (vii) executing or
delivering any additional instruments reasonably necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) Parent shall give prompt notice to FlexSCAN upon becoming
aware that any representation or warranty made by it or FCA Merger Sub
contained in this Agreement has become untrue or inaccurate, or of any
failure of Parent or FCA Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case, where the conditions set forth in
Section 6.2(a) or Section 6.2(b) would not be satisfied as a result thereof;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) FlexSCAN shall give prompt notice to Parent upon becoming
aware that any representation or warranty made by it contained in this
Agreement has become untrue or inaccurate, or of any failure of FlexSCAN to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in
each case, where the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.3 Third Party Consents. On or before the Closing Date, Parent and
FlexSCAN will each use its commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its Subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.4 FlexSCAN Stock Option Plan. (a) At the Effective Time, the
FlexSCAN 2005 Equity Compensation Incentive Plan (the "2005 Plan"), shall,
by virtue of the Merger, be assumed by Parent. At the Effective Time, (i) all
references in the related stock option agreements to FlexSCAN shall be
deemed to refer to Parent and (ii) Parent shall assume all of FlexSCAN 's
obligations with respect to FlexSCAN 's options as so amended.
(b) At the Effective Time, each outstanding warrant to purchase
shares of FlexSCAN Common Stock (each, a "FlexSCAN Warrant"), whether or not
vested, shall, by virtue of the Merger, be assumed by Parent. Each FlexSCAN
Warrant so assumed by Parent under this Agreement will continue to have, and
be subject to, the same terms and conditions of such options or warrants
immediately prior to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions and provisions regarding the
acceleration of vesting and exercisability on certain transactions), except
that (i) each FlexSCAN Warrant will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock as determined pursuant to Section 1.6(a), (ii) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed FlexSCAN Warrant will be equal to the exercise
price per share of FlexSCAN Common Stock at which such FlexSCAN Stock
Warrant was exercisable immediately prior to the Effective Time and (iii)
all vesting periods with respect thereto shall, to the extent provided by
the terms thereof, accelerate, and be subject to any other rights which
arise under the warrant agreements related thereto. At the Effective Time,
(x) all references in the related stock warrant agreements to FlexSCAN shall
be deemed to refer to Parent and (ii) Parent shall assume all of FlexSCAN 's
obligations with respect to FlexSCAN 's warrants as so amended. As promptly
as reasonably practicable after the Effective Time, Parent shall issue to
each holder of an outstanding FlexSCAN Warrant a document evidencing the
foregoing assumption by Parent.
5.5 Parent Stock Options and Warrants. At the Effective Time, each
outstanding option to purchase shares of Parent Common Stock (each, a
"Parent Stock Option") under the Parent Option Plan or otherwise, whether or
not vested, and each outstanding Parent Warrant, whether or not then
exercisable, shall, by virtue of the Merger, be canceled.
5.6 Parent Board of Directors. Prior to the Effective Time, the
Board of Directors of Parent, in accordance with applicable law and the
Parent Charter Documents, shall take all necessary action (which action may
include the resignation of existing directors) to cause the Board of
Directors of Parent, as of the Effective Time, to appoint each of Xxxxxx
Xxxxx, Xxxxxxx Xxxxxxxx, Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxx and Xxxxx X.
Xxxxx as directors of Parent.
5.7 Parent Management. Prior to the Effective Time, the Board of
Directors of Parent, in accordance with applicable law and the Parent
Charter Documents shall take all necessary action to appoint Xxxxxx Xxxxx as
Chairman and Chief Executive Officer of Parent, Xxxxxxx X. Xxxxxx as Chief
Financial Officer of Parent.
5.8 Conveyance Taxes. Parent, FlexSCAN and FCA Merger Sub shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding (i) any real
property transfer gains, sales, use, transfer, value-added, stock transfer
and stamp Taxes, (ii) any recording, registration and other fees, and (iii)
any similar Taxes or fees that become payable in connection with the
transactions contemplated hereby. The Taxes described in clause (i) shall
be paid equally by Parent and FlexSCAN.
5.9 No Negotiation. Until the Effective Date, or such time, if any,
as this Agreement is terminated pursuant to Article VI below, neither Parent
nor FlexSCAN shall, nor shall they permit any of their respective
affiliates, directors, officers, employees, investment bankers, attorneys or
other agents, advisors or representatives to, directly or indirectly, (a)
sell, offer or agree to sell its business, by sale of shares or assets,
merger or otherwise (each an "Acquisition Transaction") other than pursuant
to this Agreement, (b) solicit or initiate the submission of any proposal
for an Acquisition Transaction, or (c) participate in any discussions or
negotiations with, or furnish any information concerning its business to,
any corporation, person or other entity in connection with a possible
Acquisition Transaction other than pursuant to this Agreement.
5.10 Indemnity Agreement. On the Closing Date, Parent, FlexSCAN and
Tryant, LLC shall have entered into the Indemnity Agreement (the "Indemnity
Agreement") attached hereto as Exhibit D to this Agreement.
5.11 Lock-Up/Leak-Out and Registration Rights Agreement. On the
Closing Date, Parent and Tryant, LLC shall have entered into the Lock-
Up/Leak-Out and Registration Rights Agreement (the "Lock-Up/Leak-Out and
Registration Rights Agreement") attached hereto as Exhibit E to this
Agreement.
5.12 Conversion of Preferred Stock. Prior to or upon the Closing
Date, FlexSCAN shall have obtained the written consent of the holders of a
majority in interest of each of the Series A Preferred Stock and Series B
Preferred Stock to convert such FlexSCAN Preferred Stock into FlexSCAN
Common Stock.
5.13 Survival after Closing. All of the covenants and obligations of
the parties to this Agreement, which by their terms are to be performed or
will become effective after the Closing, including without limitation, those
contained in Sections 1.6, 1.11, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10 and 5.11
shall survive the Closing.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect the
Mergers shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions, any of which may be waived if waived in writing
by both Parent and FlexSCAN:
(a) Stockholder Approval. This Agreement shall have been
adopted and the Merger shall have been duly approved by the requisite vote
under applicable law and the FlexSCAN Charter Documents by the stockholders
of FlexSCAN.
(b) No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger.
(c) Schedules. Each of the parties hereto shall have delivered
to each other complete and accurate Schedules to this Agreement and such
Schedules shall have been approved by the recipient.
(d) Exhibits. The parties shall mutually agree upon the form
and substance of all the agreements attached as Exhibits to this Agreement,
which agreements shall be executed and delivered to each other at the Closing
Date.
6.2 Additional Conditions to Obligations of FlexSCAN. The
obligation of FlexSCAN to effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by FlexSCAN:
(a) Representations and Warranties. The representations and
warranties of Parent and FCA Merger Sub set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date
as if made on and as of the Closing Date (except to the extent any such
representation and warranty expressly speaks as of an earlier date) and
FlexSCAN shall have received a certificate signed on behalf of Parent by the
Chief Executive Officer of Parent to such effect; provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are
not so true and correct unless the failure of such representations or
warranties to be so true and correct, individually or in the aggregate, has
had, or is reasonably likely to have, a Parent Material Adverse Effect.
(b) Agreements and Covenants. Each of Parent and FCA Merger
Sub shall have performed or complied with, in all material respects, all
agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Closing Date, and FlexSCAN shall
have received a certificate to such effect signed on behalf of each of Parent
and FCA Merger Sub by an authorized officer of FlexSCAN.
(c) OTC Bulletin Board. At the Effective Time, the shares
of Parent shall be quoted on the OTC Bulletin Board.
(d) Indemnity Agreement. Parent, FlexSCAN and Tryant, LLC
shall have entered into the Indemnity Agreement.
(e) Lock-Up/Leak-Out and Registration Rights Agreement.
Parent and Tryant, LLC shall have entered into the Lock-
Up/Leak-Out and Registration Rights Agreement.
(f) No Closing Material Adverse Effect. Since the date hereof,
there has not occurred a Parent Material Adverse Effect. For purposes of the
preceding sentence and Section 6.2(a), the occurrence of any of the following
events or circumstances, in and of themselves and in combination with any of
the others, shall not constitute a Parent Material Adverse Effect:
(1) any litigation or threat of litigation filed or
made after the date hereof challenging any of the
transactions contemplated herein or any shareholder
litigation or threat of shareholder litigation filed
or made after the date hereof resulting from this
Agreement or the transactions contemplated herein;
(2) any adverse change, event or effect that is
demonstrated to be caused primarily by conditions
generally affecting the United States economy; and
(3) any adverse change, event or effect that is
demonstrated to be caused primarily by conditions
generally affecting the healthcare or services
industries.
(g) Conversion of FlexSCAN Preferred Stock. The FlexSCAN
Preferred Stock shall have been converted into FlexSCAN Common Stock.
6.3 Additional Conditions to the Obligations of Parent and FCA
Merger Sub. The obligations of Parent and FCA Merger Sub to effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of FlexSCAN set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as if made on and
as of the Closing Date (except to the extent any such representation and
warranty expressly speaks as of an earlier date) and Parent shall have
received a certificate signed on behalf of FlexSCAN by the Chief Executive
Officer of FlexSCAN to such effect; provided, however, that notwithstanding
anything herein to the contrary, this Section 6.3(a) shall be deemed to have
been satisfied even if such representations or warranties are not so true and
correct unless the failure of such representations or warranties to be so
true and correct, individually or in the aggregate, has had, or is reasonably
likely to have, a FlexSCAN Material Adverse Effect.
(b) Agreements and Covenants. FlexSCAN shall have performed or
complied with, in all material respects, all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior
to the Closing Date, and Parent shall have received a certificate to such
effect signed on behalf of FlexSCAN by an authorized officer of FlexSCAN.
(c) No Closing Material Adverse Effect. Since the date hereof,
there has not occurred a FlexSCAN Material Adverse Effect. For purposes of
the preceding sentence and Section 6.3(a), the occurrence of any of the
following events or circumstances, in and of themselves and in combination
with any of the others, shall not constitute a FlexSCAN Material Adverse
Effect:
(1) any litigation or threat of litigation filed or
made after the date hereof challenging any of the
transactions contemplated herein or any shareholder
litigation or threat of shareholder litigation filed
or made after the date hereof resulting from this
Agreement or the transactions contemplated herein;
(2) any adverse change, event or effect that is
demonstrated to be caused primarily by conditions
generally affecting the United States economy; and
(3) any adverse change, event or effect that is
demonstrated to be caused primarily by conditions
generally affecting the healthcare, biotechnology, or
services industries.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the requisite approval of the
stockholders of FlexSCAN:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and FlexSCAN; or
(b) by either Parent or FlexSCAN if the Merger shall not have
been consummated by August 15, 2005, which date shall be automatically
extended for an additional period of up to two (2) weeks, as it may be
necessary to obtain the requisite stockholder approval by the stockholders of
FlexSCAN (such date, or such other date that may be agreed by mutual written
consent, being the "Outside Date") for any reason; provided, however, that
the right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal
cause of, or resulted in the failure of, the Merger to occur on or before
such date if such action or failure to act constitutes a breach of this
Agreement; or
(c) by either Parent or FlexSCAN if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action shall
have become final and nonappealable or any law, order, rule or regulation
that is in effect or is adopted or issued, which has the effect of
prohibiting the Merger.
7.2 Fees and Expenses. All Expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such Expenses whether or not the Merger is consummated. As
used in this Agreement, "Expenses" shall include all reasonable out-of-
pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters relating to the closing
of the Merger and the other transactions contemplated hereby.
7.3 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time; provided, however, that, after the
approval and adoption of this Agreement by the stockholders of FlexSCAN,
there shall not be any amendment that by law requires further approval by
the stockholders of FlexSCAN without the further approval of such
stockholders. This Agreement may not be amended by the parties hereto
except by execution of an instrument in writing signed on behalf of each of
Parent, FlexSCAN and FCA Merger Sub.
7.4 Extension; Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or conditions
for the benefit of such party contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of
such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given on the day of delivery if delivered
personally or sent via telecopy (receipt confirmed) or on the second
business day after being sent if delivered by commercial delivery service,
to the parties at the following addresses or telecopy numbers (or at such
other address or telecopy numbers for a party as shall be specified by like
notice):
(a) if to Parent or FCA Merger Sub:
Tryant LLC
0000 Xxxx 0000 Xxxxx
Xxxxx Xxxxx, Xxxx 00000
Attention: Xxxx Xxxxxx
Telecopier: 000-000-0000
(b) if to FlexSCAN, to
flexSCAN, Inc.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Telecopier: 000-000-0000
8.2 Interpretation. (a) When a reference is made in this Agreement
to Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement. Unless
otherwise indicated the words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When reference is made
herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all
direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means
with respect to a party hereto, with respect to any matter in question, that
any of the officers of such party has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "person" shall
mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any limited liability
company or joint stock company), firm or other enterprise, association,
organization, entity or Governmental Entity.
(d) For purposes of this Agreement, an "agreement,"
"arrangement," "contract," "commitment" or "plan" shall mean a legally
binding, written agreement, arrangement, contract, commitment or plan, as the
case may be.
8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party, it being understood
that all parties need not sign the same counterpart.
8.4 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Parent Schedule and
the FlexSCAN Schedule constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
8.5 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder
of this Agreement will continue in full force and effect and the application
of such provision to other persons or circumstances will be interpreted so
as reasonably to effect the intent of the parties hereto. The parties
further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.6 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which t they are entitled at law or in equity. In any action at
law or suit in equity to enforce this Agreement or the rights of any of the
parties hereunder, the prevailing party in such action or suit shall be
entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
8.8 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement
or other document will be construed against the party drafting such
agreement or document.
8.9 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
8.10 Waiver of Jury Trial. EACH OF PARENT, FLEXSCAN AND FLEXSCAN
MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, FLEXSCAN AND FLEXSCAN MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
FUEL CORPORATION OF AMERICA
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
FCA ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
FLEXSCAN, INC.
By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
