1
EXHIBIT 2.1
FUTURELINK CORP.
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
By and Among
FUTURELINK DISTRIBUTION CORP.
FUTURELINK MICHIGAN ACQUISITION CORP.
ASYNC TECHNOLOGIES, INC,
ASYNC TECHNICAL INSTITUTE, INC.
and
XXXXXXX X. XXXXXXXXXX
XXXXXXX X. XXXXXXXXXX
XXXX X. XXXXXXXXXX
Dated as of September 7, 1999
MORRISON, BROWN, SOSNOVITCH
0 XXXXXXX XXXXXX
XXXXX 000, X.X. XXX 00
XXXXXXX, XXXXXXX, XXXXXX
X0X 0X0
2
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this
"Agreement"), is made and entered into as of September 7, 1999, by and among
FUTURELINK DISTRIBUTION CORP., a Colorado corporation ("Parent"), FUTURELINK
MICHIGAN ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary
of Parent ("Merger Sub"), ASYNC TECHNOLOGIES, INC., a Michigan corporation (the
"Company"), ASYNC TECHNICAL INSTITUTE, INC., a Michigan corporation ("ATII"),
and XXXXXXX X. XXXXXXXXXX (the "Company Shareholder"), XXXXXXX X. XXXXXXXXXX,
and XXXX X. XXXXXXXXXX (collectively the "Non-Voting Shareholder"). Merger Sub
and the Company are sometimes collectively referred to herein as the
"Constituent Corporations".
WHEREAS, the Boards of Directors of Parent, Merger Sub, ATII
and the Company have each determined that it is in the best interest of their
respective companies and in the best interest of their respective shareholders
to consummate the business combination transaction provided for herein in which
the Company will, subject to the terms and conditions set forth herein, merge
with and into Merger Sub; and
WHEREAS, for federal income tax purposes, it is intended that
the merger will qualify as a tax-free reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code"); and
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the applicable provisions of the Delaware General Corporation
Law (the "DGCL"), at the Effective Time (as defined in Section 1.3 hereof), the
Company shall merge with and into Merger Sub (the "Merger"). Merger Sub shall be
the surviving company (hereinafter sometimes called the "Surviving Corporation")
in the Merger, and shall continue its corporate existence under the laws of the
State of Delaware. Upon consummation of the Merger, the separate corporate
existence of the Company shall terminate.
1.2 Closing. The closing of the transactions contemplated hereby (the "Closing")
shall take place as soon as practicable after a written satisfaction or waiver
of each of the conditions set forth in Article VII hereof shall have been
received by the Company or Parent, as the case may be, which date shall not be
later than October 31, 1999 (the "Closing Date"). The Closing shall take place
at the offices of Parent at MicroVisions, 0 Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx or at such other location as the parties hereto agree.
1.3 Effective Time. The Merger shall become effective upon the filing of an
Agreement of Merger with the Secretary of State of the State of Delaware and the
Secretary of State of the State of Michigan in such form as is required by, and
executed in accordance with the relevant provisions of, the DGCL and the
Michigan General Corporations Law on the Closing Date (the "Agreement of
Merger"). The term "Effective Time" shall be the date and time of the filing of
the Agreement of Merger as referenced in this subparagraph or such later time as
is specified in the Agreement of Merger.
- 2 -
3
1.4 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in this Agreement, the Agreement of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Articles of Incorporation; Bylaws. At the Effective Time, the Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law. At the Effective Time, the
Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law.
1.6 Directors and Officers. The directors and officers of Merger Sub immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
1.7 Tax Consequences. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code.
1.8 Pre-Merger Transactions. Prior to the Closing Date, ATII shall merge with
and into the Company and the Company shall be the surviving entity (the "Initial
Merger"). Parent and Merger Sub agree that the Company Shareholder may, prior to
the Closing Date but after the Initial Merger, carry out the following
pre-merger transactions:
(a) the Company may create a class of proportional voting common shares
and issue such shares to the following individuals for no or nominal
consideration provided that each such individual agrees to sell such
shares to Parent for the consideration set out in Section 2.2 on the
same terms and conditions set out herein and agrees to execute an
investment intent letter as required by Company and in a manner to
assure compliance with Michigan and federal securities laws in the
issuance of such shares, the form of which must be approved by Parent,
which approval shall not be unreasonably withheld:
Name Number of Shares
------------------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx 500
Xxxxxxx X. Spray 500
Xxxxxxx X. Xxxxxxxxxxx 500
Xxxx Xxxxxx 100
Xxxxxx Xxxxxx 100
Xxxx Xxxxxxxx 100
Xxxx Xxxxxxxxx 100
(b) the Company may issue non-voting common shares to the following individuals
for no or nominal consideration provided that each such individual agrees to
sell such shares to Parent for the consideration set out in Section 2.2 on the
same terms and conditions set out herein and agrees to execute an investment
intent letter as required by Company and in a manner to assure compliance with
Michigan
- 3 -
4
and federal securities laws in the issuance of such shares, the form of
which must be approved by Parent, which approval shall not be unreasonably
withheld:
Name Number of Shares
------------------------------------------------------------
Xxx Xxxxxxxxxx 6900
Xxxxxxx Spray 1800
Xxxxxxx Xxxxxxxxxxx 1500
Xxxx Xxxxxx 75
Xxxxxx Xxxxxx 75
Xxxx Xxxxxxxx 75
Xxxx X. Xxxxxxxxx 600
Xxxxxxx Xxxxx 900
Xxxxxx Xxxx 75
Xxxxx Xxxxxxx 75
Xxxxxxx Xxxxxx 225
Xxxxx Xxxxxx 150
R. Xxxxxxx Xxxxxx 150
Xxxxxxxx Xxxxxxx 75
Xxxx Xxxxx 75
Xxxx Xxxxxxx 75
Xxxxx Xxxxxxxxx 75
Xxxxx Xxxxx 75
Xxxxxxxx Xxxxx 75
Xxxxx Xxxxxxx 150
Company shall provide copies of all pre-merger transaction documents
contemplated by this Section 1.8 to Parent for review and comment prior to
effecting such transactions. Parent shall provide Company with written approval
and comment within five (5) business days after receipt of such copies.
1.9 Parent agrees that it shall, as part of the terms of their employment
agreements, provide the following signing bonuses for the following employees:
Name Bonus amount
---------------------------------------------------------
Xxxxxxx Spray $1,000,000.00
Xxxxxxx Xxxxxxxxxxx $ 300,000.00
Xxxxxxx Xxxxx $ 100,000.00
Xxxx Xxxxxxxxx $ 50,000.00
Xxxxx Xxxxxxx $ 50,000.00
In the event that any of such employees do not enter into an employment
agreement with Parent, Parent shall, provided that the conditions in Subsection
7.2(e) have been satisfied or waived by Parent, pay the bonus pertaining to such
employee to the Company Shareholder as additional Voting Common Cash
Consideration in accordance with Subsection 2.2(a).
- 4 -
5
ARTICLE II
MERGER CONSIDERATION; CONVERSION OF STOCK
2.1 Definitions. For purposes of this Agreement the following definitions shall
apply:
(a) "Company Stock" means all classes of stock of the Company, unless otherwise
specified and including stock issued in accordance with section 1.8 above;
(b) "Deposit" shall have the meaning set forth in Section 2.6;
(c) "knowledge" shall mean, as it relates to the Company, the knowledge of the
President, Chief Executive Officer, Treasurer, Secretary or any director of the
Company. The term "knowledge" shall mean, as it relates to Parent and Merger
Sub, the knowledge of the President, Chief Executive Officer, Chief Financial
Officer, Treasurer, Secretary or any director of Parent, Merger Sub and the
Subsidiaries.
(d) "Material Adverse Effect" means an action, event or occurrence if it has, or
could reasonably be expected to have, a material adverse effect on the financial
condition or results of operations of the Company or Parent (including their
subsidiaries), as the case may be; any item susceptible of measurement in
monetary terms which does not exceed the amount of $25,000 shall not be
considered a Material Adverse Effect;
(e) "Parent Stock" means the common stock of Parent;
(f) "Parent Stock Value" means the average of the closing sale prices (or last
bid prices if no closing sale prices are reported) of Parent Stock as reported
on the NASD OTC Bulletin Board for the ten (10) trading days immediately
preceding September 7, 1999.
2.2 Conversion of Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the Company or any holder
of Company Stock:
(a) each full voting common share of Company Stock outstanding immediately prior
to the Effective Time, shall automatically be converted into and become a right
to receive a pro rata portion of:
(i) cash in the amount of $4,500,000 less the Deposit ("Voting Common
Cash Consideration");
(ii) that number of shares of Parent Stock equal to $4,600,000 divided
by the Parent Stock Value ("Voting Common Stock Consideration"); and
(iii) fifty-two and one-half percent (52.5%) of the Contingent
Payments as defined in Section 2.3 ("Voting Common Contingent
Payments");
(b) each non-voting common share of Company Stock outstanding immediately prior
to the Effective Time, shall automatically be converted into and become a right
to receive a pro rata portion of that number of shares of Parent Stock equal to
$5,400,000 divided by the Parent Stock Value ("Non-Voting Cash Consideration");
(c) each proportional share of Company Stock outstanding immediately prior to
the Effective Time, shall automatically be converted into and become a right to
receive a pro rata portion of that number of
- 5 -
6
shares of Parent Stock equal to forty-seven and one-half percent (47.5%) of the
Contingent Payments ("Proportional Share Stock Consideration");
(the Voting Common Cash Consideration, Non-Voting Cash Consideration, Voting
Common Stock Consideration, Proportional Share Stock Consideration and Voting
Common Contingent Payments are collectively referred to as the "Merger
Consideration");
(d) all shares of Company Stock held at the Effective Time as treasury shares or
by a subsidiary of the Company shall be canceled and no payment shall be made
with respect thereto;
(e) each share of capital stock of Merger Sub issued and outstanding as of the
Effective Time shall be unaffected by the Merger and shall represent one share
of common stock of the Surviving Corporation after the Merger.
(f) all Parent Stock consideration granted hereunder shall require that the
recipients of such enter into a lock-up agreement agreeing to be bound by the
same lock-up provisions as the board of directors of Parent which currently
prohibits trading of Parent Stock until April 30, 2000, but may be extended by
underwriters of future financings for Parent. In any event, employees who hold
fewer than 50,000 common shares of Parent Stock shall be released from any
lock-up requirements by no later than December 31, 2000.
2.3 Contingent Payments. Upon achievement of the Gross Revenue (as defined
below) in excess of $8,000,000 (the "Condition") during the period from January
1, 1999 to December 31, 1999, Parent shall pay to the holders of full voting or
proportional voting Company Stock, as set forth in Sections 1.8 and 2.2 above,
that number of shares of Parent Stock equal to Two Dollars ($2.00) for every
dollar of Gross Revenue (as defined below) in excess of $8,000,000 (to a maximum
of $4,000,000 of Parent Stock) divided by the Parent Stock Value ("Contingent
Payments"). Such payments shall be paid not later than March 31, 2000.
For purposes hereof, "Gross Revenue" shall mean revenue of Company and Surviving
Corporation from all sources of business of the Company under the control and
supervision of Xxxxxxx Xxxxxxxxxx, including ASP sales onto the Calgary or
Irvine server farm of the Parent, but excluding revenue from passive
investments, interest, the sale of assets other than in the ordinary course of
business, or taxes or similar fees that are collected on behalf of a
governmental authority. It is contemplated by the parties hereto that the
Company's business will continue substantially unchanged until after December
31, 1999. In the event of a sale of all or substantially all of the assets or
stock of Parent after December 31, 1999 but prior to the date on which all
Contingent Payments are paid in full, all Contingent Payments remaining to be
earned shall be accelerated and payable upon the earlier of the closing of such
sale or March 31, 2000. In the event of a sale of all or substantially all of
the assets or stock of Parent after the Effective Time, but prior to December
31, 1999, Parent shall cause the successor or acquiring entity to assume all of
Parent's obligations hereunder, including the obligation to pay the Contingent
Payments when due.
2.4 Fractional Shares. Notwithstanding anything herein, with respect to each
holder of Company Stock, if the aggregate number of shares of Parent Stock
collectively issuable to such a holder for conversion of all of such holder's
Company Stock pursuant to Article II includes a fractional share, such
fractional share shall be rounded to the nearest whole number.
- 6 -
7
2.5 Certain Adjustments to Exchange Ratio. With respect to Article II, the
number of Parent Stock issued shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Stock), reorganization,
recapitalization or other like change with respect to Parent Stock, occurring
after the date hereof.
2.6 Deposit. Company Shareholder acknowledges receipt, as of the date hereof, of
a deposit in the amount of $600,000 which shall be held in escrow by Company
Shareholder's attorney, Spray & Associates, PLLC (the "Escrow Agent") in an
interest bearing account pending Closing or termination of the transaction
contemplated hereunder by either party for any reason and in accordance with the
escrow agreement attached as a Schedule hereto ("Escrow Agreement"). The amount
paid by Parent and any interest earned thereon pursuant to this Section 2.6 are
referred to herein as the "Deposit". The Deposit shall be applied to the Cash
Consideration as set out in Section 2.2 or upon notice from Parent or Company
Shareholder to the Escrow Agent that the Closing will not take place, the
Deposit shall be returned to Parent without deduction, except that upon notice
from Company Shareholder to Escrow Agent and Parent that the Closing will not
take place due to actions or inactions of the Parent and Parent has not disputed
such claim in writing within five (5) business days, the Deposit shall be
returned to the Parent less a deduction of $50,000 which shall be paid to
Company Shareholder. In the event that Parent disputes such claim, the dispute
shall be settled in accordance with the terms of the Escrow Agreement.
2.7 Payment of Merger Consideration. The Merger Consideration shall be payable
as follows:
(a) All cash consideration shall be paid at the Closing by wire transfer to an
account specified by Company Shareholder;
(b) Parent shall deliver to Company Shareholder at the Closing all stock
certificates representing stock consideration;
(c) Delivery of stock certificates representing the Contingent Payments and
Payments shall be made in accordance with Section 2.3 above;
2.8 Transfer Restrictions; Legends. The shares of Parent Stock issued in the
Merger shall not be transferable in the absence of an effective registration
statement under the Securities Act of 1933 as amended (the "Securities Act") or
an exemption therefrom. In the absence of an effective registration statement
under the Securities Act, neither such shares of Parent Stock nor any interest
therein shall be sold, transferred, assigned or otherwise disposed of, unless
Parent shall have previously received an opinion of counsel knowledgeable in
Federal securities law, in form and substance reasonably satisfactory to Parent,
to the effect that registration under the Securities Act is not required in
connection with such disposition. Parent covenants to submit a registration
statement, which registration statement shall include all Parent Stock and
Contingent Payment stock issued or to be issued in accordance with this
Agreement, in accordance with the Securities Act within twelve (12) months of
the Effective Time. Company and Company Shareholder acknowledge that any
registration is subject to approval of the Securities Exchange Commission.
The certificate or certificates representing the shares of Parent Stock
issued in the Merger shall bear the following legend restricting the transfer
thereof, in addition to any other legend required by applicable law:
- 7 -
8
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT, UNLESS AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED THAT SUCH
REGISTRATION IS NOT REQUIRED."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY SHAREHOLDER
In this Article, unless other wise specified, the term "Company" shall include
ATII. The Company and the Company Shareholder represent and warrant to Parent
and Merger Sub as follows:
3.1 Corporate Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan. The
Company has the corporate power and authority to own or lease its properties and
assets and to carry on its business as it is now being conducted, and, to its
knowledge after due inquiry, is qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such qualification
necessary.
3.2 Capitalization.
(a) The authorized capital stock of Async Technologies, Inc. consists of 120,000
shares of Company Stock, of which 33,900 full voting common shares are issued
and outstanding in the name of Xxxxxxx X. Xxxxxxxxxx and 3000 non-voting common
shares are issued in equal amount of 1,500 each to Xxxxxxx X. Xxxxxxxxxx and
Xxxx X. Xxxxxxxxxx as of the date hereof. The authorized capital stock of ATII
consists of 1,000 common shares (the "ATII Stock") of which 1,000 common shares
are issued and outstanding in the name of Xxxxxxx X. Xxxxxxxxxx as of the date
hereof. All of the issued and outstanding shares of Company Stock and ATII Stock
were duly authorized and validly issued and are fully paid. The Company
Shareholder is the owner of all of the Company Stock and ATII Stock outstanding,
free and clear of any liens or encumbrances, preemptive rights or rights of
first refusal. None of the outstanding shares of Company Stock or ATII Stock
were issued in violation of any applicable federal or state securities law. No
subscriptions, options or other rights to purchase or otherwise receive any
shares of Company Stock or ATII Stock or any other equity security of the
Company or any securities representing the right to purchase or otherwise
receive any shares of Company Stock or ATII Stock or any other equity security
of the Company are outstanding as of the date hereof. On the Closing Date the
holders of Company Stock shall be as set out in Section 1.8 and the
representations and warranties given in this subsection shall apply to the
shares issued in accordance with Section 1.8.
(b) The Company does not presently own or control, directly or indirectly, and
has no stock or other interest as owner or principal in, any other corporation,
partnership, limited liability company, joint venture, business, trust,
association or other business venture or entity.
- 8 -
9
3.3 Authority; No Violation.
(a) The Company has the requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations thereunder and to consummate
the transactions contemplated thereby. The Board of Directors of the Company has
unanimously approved this Agreement and the Merger and all transactions
contemplated thereby. The Company Shareholder and Non-voting shareholders, being
the controlling shareholders of the Company Stock at the Closing Date, have
approved this Agreement, the Merger and the transactions contemplated hereby. No
other corporate proceedings on the part of the Company are necessary to approve
this Agreement and to consummate the transactions contemplated thereby. This
Agreement and all other agreements and documents to be entered into in
connection herewith have been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by Parent and
Merger Sub) constitute valid and binding obligations of the Company, enforceable
against the Company, except as enforcement may be limited by general principles
of equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally. This Agreement and all other agreements and documents to be entered
into in connection herewith have been duly and validly executed and delivered by
the Company Shareholder and (assuming due authorization, execution and delivery
by Parent and Merger Sub) constitute valid and binding obligations of the
Company Shareholder, enforceable against the Company Shareholder, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the terms or provisions hereof, will,
assuming the consents and approvals referred to in Section 3.4 are obtained, (i)
violate any provision of the Articles of Incorporation or Bylaws of the Company,
(ii) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Company or any of its properties or
assets or (iii) to its knowledge, after due inquiry, violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of the Company under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Company is a party, or by which the Company or any of its properties or
assets may be bound or affected.
(c) Neither the execution and delivery of this Agreement by the Company
Shareholder, nor the consummation by the Company Shareholder of the transactions
contemplated hereby, nor compliance by the Company Shareholder with any of the
terms or provisions hereof, will, assuming that the consents and approvals
referred to in Section 3.4 hereof are obtained, (i) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company Shareholder or any of its properties or assets or (ii)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon the properties or assets of any of the Company
Shareholder under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which any of the Company Shareholder is a party, or
by
- 9 -
10
which the Company Shareholder or their respective properties or assets may be
bound or affected. Subparagraph (ii) hereof shall, with respect to verbal
contracts be limited to Company or Company Shareholder knowledge.
3.4 Consents and Approvals. Except for (a) the filing of Agreement of Merger
with the Secretary of State of the State of Delaware and the Secretary of State
of Michigan (b) such filings, authorizations or approvals as may be set forth in
Section 3.4 of the Company Disclosure Schedule, no consents, approvals, orders
or authorizations of or filings or registrations with any court, administrative
agency or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or with any third party are necessary with respect to the
Company the Company Shareholder in connection with (1) the execution and
delivery of this Agreement and (2) the consummation of the Merger and the other
transactions contemplated hereby.
3.5 Financial Statements. The Company has heretofore delivered to Parent true
and correct copies of (a) an unaudited balance sheet of the Company at December
31, 1997, together with related unaudited statements of operations,
shareholders' equity and cash flows for the fiscal year then ended; (b) an
unaudited balance sheet of the Company (the "Reference Balance Sheet") at
December 31, 1998 (the "Reference Balance Sheet Date"), together with related
unaudited statements of operations, shareholders' equity and cash flows for the
fiscal year then ended (c) an unaudited balance sheet of the Company at June 30,
1999, together with related unaudited statements of operations, shareholders'
equity and cash flows for the fiscal period then ended and has covenanted to
deliver certain audited statements in accordance with section 5.2 (collectively,
the "Financial Statements"). Such Financial Statements, excepting footnotes,
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent throughout the periods indicated and with
each other. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods indicated
therein, subject to normal year-end audit adjustments. The Company has made
known, or caused to be made known, to the accountants or auditors who have
prepared the Financial Statements all material facts and circumstances which
could affect the preparation of the Financial Statements. Except as disclosed in
the Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. All financial
transactions of the Company relating to the Company business have been and will
be accurately recorded in the Company's books and records and, without limiting
the generality of the foregoing, all monies set aside or held in trust by the
Company for the benefit of another person are properly accrued or so held and
are completely and accurately recorded in the books and records of the Company
and no claim can be made against the Company in respect thereof in excess of the
amounts so set aside or held.
3.6 Absence of Undisclosed Liabilities. The Company has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those disclosed or reserved against in its Reference Balance Sheet,
(ii) those incurred in the ordinary course of business and not required to be
set forth in the Reference Balance Sheet under GAAP, and (iii) those incurred in
the ordinary course of business since the Reference Balance Sheet Date and
consistent with past practice.
3.7 Absence of Certain Changes. Except as set out in Section 3.7 of Company
Disclosure Schedule, the Company has conducted its business in the ordinary
course consistent with past practice since the Reference Balance Sheet Date, and
except for transactions contemplated or authorized hereby, there has not
occurred (i) any purchase or other acquisition of, sale, lease, disposition, or
other transfer of, or mortgage, pledge or subjection to any material encumbrance
or lien on, any material asset, tangible or intangible, of the Company, other
than in the ordinary course of business; (ii) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of
Company Stock, or any
- 10 -
11
split-up or other recapitalization in respect of Company Stock, or any direct or
indirect redemption, purchase or other acquisition by the Company of any shares
of Company Stock; (iii) any material contract entered into by the Company, other
than in the ordinary course of business and as provided to Parent, or any
termination of, or default under, any material contract to which the Company is
a party or by which it is bound; (iv) any amendment or change to the Articles of
Incorporation or Bylaws of the Company except for the transactions contemplated
in Section 1.8; (v) any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its directors or
employees, except ordinary increases or bonuses payable in the ordinary course
and except as contemplated in Section 1.8; (vi) any issuance, transfer, sale or
pledge by the Company of any shares of Company Stock or other securities or of
any commitment, option, right or privilege under which the Company is or may
become obligated to issue any shares of Company Stock or other securities,
except as contemplated in Section 1.8; (vii) any indebtedness for borrowed money
incurred by the Company, except such as may have been incurred or entered into
in the ordinary course of business not exceeding $30,000; (viii) any loan made
or agreed to be made by the Company, nor has the Company become liable or agreed
to become liable as a guarantor with respect to any loan; (ix) any loans to
employees, stockholders, directors or officers, (x) any waiver or compromise by
the Company of any right or rights or any payment, direct or indirect, of any
material debt, liability or other obligation, other than in the ordinary course
of business; (xi) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets, other than in the ordinary
course of business; (xii) any actual or, to the knowledge of the Company,
threatened termination or loss of (a) any contract, lease, license or other
agreement to which the Company was or is a party, (b) any certificate, license
or other authorization required for the continued operation by the Company of
any portion of any of its business, or (c) termination or loss of any customer
or other revenue source, which termination or loss could reasonably be expected
to result in loss of revenues to the Company in excess of $50,000 per year;
(xiii) any resignation of employment of any key officer or employee of the
Company; (xiv) any negotiation or agreement by the Company to do any of the
things described in the preceding clauses (i) through (xii) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement); or (xv) to the Company's knowledge, any other
event or circumstance that will have or could reasonably be expected to have a
Material Adverse Effect on the Company.
3.8 Legal Proceedings. There are no legal actions, suits, arbitrations or other
legal, administrative or governmental proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or its
properties, assets or business, and neither the Company nor the Company
Shareholder has knowledge of any facts which might result in or form the basis
for any such action, suit or other proceeding or which would challenge the
validity or propriety of the transactions contemplated by this Agreement. The
Company is not in default with respect to any judgment, order or decree of any
court or any governmental agency or instrumentality.
3.9 Governmental Authorization; Compliance with Laws. The Company has obtained
each federal, state, county, local or foreign governmental consent, license,
permit, grant, or other authorization of a Governmental Entity that is required
for the operation of the Company's business (the "Company Authorizations"), and
all of such Company Authorizations are in full force and effect. To the
Company's knowledge, the Company is in material compliance with all applicable
laws, statutes, orders, rules and regulations of any Governmental Entity
relating to the Company.
3.10 Title and Condition of Personal Property. The Company has marketable title
to all of its personal property owned by it, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character or claims
thereto, except (i) the lien of current taxes not yet due and payable and (ii)
liens securing debt which is reflected on the Reference Balance Sheet and listed
on the Company
- 11 -
12
Schedules. The property and equipment of the Company that are used in the
operations of its business are in all material respects in good operating
condition and repair.
3.11 Real and Leased Property. The Company does not own any fee simple interest
in real property. Section 3.11 of the Company Disclosure Schedule sets forth a
list of all real property leased or subleased by the Company (the "Leased
Property"). The Company has previously delivered to Parent a true and complete
copy of all of the lease and sublease agreements, as amended to date (the
"Leases") relating to the Leased Property. To the knowledge of the Company after
due inquiry, the Leases are valid, binding and in full force and effect, all
rent and other sums and charges payable thereunder are current, no notice of
default or termination under any of the Leases is outstanding, no termination
event or condition or uncured default on the part of the Company exists under
the Leases, and no event has occurred and no condition exists which, with the
giving of notice or the lapse of time or both, would constitute such a default
or termination event or condition.
3.12 Intellectual Property. The Company owns or licenses from another person all
inventions, patents, patent rights, computer software, trademarks, trademark
rights, service marks, service xxxx rights, trade names, trade name rights and
copyrights (collectively, the "Intellectual Property") necessary for its
business as presently conducted without any conflict with or infringement of the
valid rights of others and the lack of which could materially and adversely
affect the operations or condition, financial or otherwise, of the Company, and
the Company has not received any notice of infringement upon or conflict with
the asserted rights of others. Section 3.12 of the Company Disclosure Schedule
contains a complete list of all such patents, patent rights, registered
trademarks, registered service marks, registered copyrights, all agreements
related to the foregoing, and all agreements pursuant to which the Company
licenses Intellectual Property from or to a third party (excluding "shrink wrap"
license agreements relating solely to off the shelf software which is not
material to the Company's business). All Intellectual Property owned by the
Company is owned free and clear of all liens, adverse claims, encumbrances, or
restrictions, except for restrictions contained in the terms of the licenses
listed in Section 3.12 of the Company Disclosure Schedule. All Intellectual
Property licensed by the Company is the subject of a license agreement which is,
to the best of knowledge, legal, valid, binding and enforceable and in full
force and effect. The consummation of the transactions contemplated hereby will
not result in the termination or impairment of the Company's ownership of, or
right to use, any Intellectual Property. The Company has a valuable body of
trade secrets, including know-how, concepts, business plans, and other technical
data (the "Proprietary Information") relating to its business. The Company has
the right to use the Proprietary Information free and clear of any rights,
liens, encumbrances or claims of others. To its knowledge, the Company is not
aware, after reasonable investigation, that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the
Company's business.
3.13 Taxes.
(a) The Company has duly and timely filed (including applicable extensions
granted without penalty) all material Tax Returns (as hereinafter defined)
required to be filed at or prior to the Effective Time excepting sales tax
returns in states other than Michigan and Indiana, and such Tax Returns are true
and correct in all material respects, and the Company has paid in full or made
adequate provision in the financial statements of the Company (in accordance
with GAAP) for all Taxes (as hereinafter defined) shown to be due on such Tax
Returns. As of the date hereof (i) the Company has not requested any extension
of time within which to file any Tax Returns in respect of any fiscal year which
have not since
- 12 -
13
been filed and no request for waivers of the time to assess any Taxes are
pending or outstanding, (ii) no claim for Taxes has become a lien against the
property of the Company or is being asserted against the Company other than
liens for Taxes not yet due and payable, (iii) no audit of any Tax Return of the
Company is being conducted by a Tax authority, (iv) no extension of the statute
of limitations on the assessment of any Taxes has been granted to the Company
and is currently in effect, and (v) there is no agreement, contract or
arrangement to which the Company is a party that may result in the payment of
any amount that would not be deductible by reason of Sections 280G, 162 or 404
of the Code. The Company has not been nor will it be required to include any
adjustment in taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Merger.
(b) For the purposes of this Agreement, "Tax" or "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) with respect to Taxes.
3.14 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state or
local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste,
hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees,
workers or other persons, including the public.
(ii) "Facilities" shall mean all buildings and improvements located on
any real property leased or subleased by the Company.
(b) (i) the Company has received no notice (oral or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (ii) no notices, administrative actions
or suits are pending or, to the Company's knowledge, threatened
relating to a violation of any Environmental and Safety Laws; (iii) the
Company has not been notified that the Company is a potentially
responsible party under the federal Comprehensive Environmental
Response, Compensation and Liability Act, or state analog statute,
arising out of events occurring prior to the Closing Date; (iv) to the
Company's knowledge, the Company's uses of and activities within the
Facilities have at all times complied with all Environmental and Safety
Laws; and (v) the Company has all the permits and licenses required by
Environmental and Safety Laws to be issued and are in full compliance
with the terms and conditions of those permits.
3.15 Major Customers. Section 3.15 of the Company Disclosure Schedule sets forth
a list of the top twenty (20) customers (by revenue generated from such
customer) of the Company for the fiscal year ended August 28, 1999. There has
been no termination or cancellation of any relationship between the Company and
such customers.
- 13 -
14
3.16 Employment Agreements. Section 3.16 of the Company Disclosure Schedule
contains the names, job descriptions and annual salary rates and other
compensation of all officers, directors, employees and consultants of the
Company whose annual compensation by the Company exceeds $50,000. A list of all
employee policies, employee manuals or other written statements of rules or
policies as to working conditions, vacation and sick leave, and a complete copy
of each has been made available to Parent. Other than those provided to Parent
or those created in connection with this Agreement, there are no employment,
consulting, severance or indemnification arrangements, agreements or
understandings between the Company and any officer, director, consultant or
employee including, without limitation, any contracts to employ executive
officers, any severance, change in control or similar arrangements with any
officers, employees or agents of the Company that will result in any obligation
(absolute or contingent) of the Company to make any payment to any officer,
employee or agent of the Company following either the consummation of the
transactions contemplated hereby, termination of employment, or both.
3.17 Employee Benefit Plans. The Company has no employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended) except as listed in Section 3.17 of the Company Disclosure Schedule.
3.18 Labor Matters. (i) the Company is not a party to or otherwise bound by any
collective bargaining agreement or other labor union contract and currently
there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
affect the Company; (ii) to the Company's knowledge, there are no controversies,
strikes, slowdowns, work stoppages or labor disturbances pending or threatened
between the Company and any of its employees; (iii) there are no unfair labor
practice complaints pending against the Company before the National Labor
Relations Board or any other Governmental Entity or any current union
representation questions involving employees of the Company; (iv) the Company is
currently in material compliance with all applicable laws relating to the
employment of labor, (v) to the Company's knowledge, there is no charge or
proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or threatened with respect to
the Company; and (vi) to the Company's knowledge, after due inquiry, there is no
charge of discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other legally
protected category, which has been asserted or is now pending or threatened
before the United States Equal Employment Opportunity Commission, or any other
Governmental Entity in any jurisdiction in which the Company has employed or
currently employs any person.
3.19 Contracts and Commitments. Section 3.19 of the Company Disclosure Schedule
shall contain a complete and accurate list of all contracts and agreements
(including, without limitation, oral and informal arrangements) of the following
categories to which the Company is a party or by which it is bound as of the
date of this Agreement (the "Material Contracts"):
(a) material, distribution, license, sales, agency or advertising contracts;
(b) contracts involving payments to or by the Company in excess of $25,000 per
year which are not cancelable (without material penalty, cost or other
liability) within ninety (90) days, other than purchase orders made in the
ordinary course of business consistent with past practice;
(c) promissory notes, loans, agreements, indentures, evidences of indebtedness
or other instruments proving for the lending of money, whether as borrower,
lender or guarantor;
- 14 -
15
(d) contracts (other than Leases) containing covenants limiting the freedom of
the Company or Company Shareholder to engage in any line of business or compete
with any person or operate at any location;
(e) joint venture or partnership agreements or joint development or similar
agreements;
(f) agreements, contracts or other arrangements with any current or former
officer, director or employee of the Company or any affiliate of the Company;
(g) leases or similar agreements with any person under which (i) the Company is
lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by any person or (ii) the Company is a lessor or
sublessor of, or makes available for use by any person, any tangible personal
property owned or leased by the Company, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of $25,000 and is
not terminable by the Company by notice of not more than sixty (60) days for a
cost of less than $10,000;
(h) license, option or other agreements relating in whole or in part to the
Intellectual Property other than as described in Section 3.12 of the Company
Disclosure Schedule;
(i) contracts or other instruments under which (i) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
(ii) the Company has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business);
(j) contracts or other instruments under which the Company has, directly or
indirectly, made any advance, loan, extension of credit or capital contribution
to, or other investment in, any person, other than as disclosed elsewhere in the
Company Disclosure Schedule;
(k) mortgages, pledges, security agreements, deeds of trust or other instruments
granting a lien or other encumbrance upon any property of the Company;
(l) except for indemnification of persons in the By-Laws of the Company,
agreements or instruments providing for indemnification of any person with
respect to liabilities relating to any current or former business of the
Company, or any predecessor entity;
(m) contracts for the acquisition, sale or lease of any assets or capital stock
or other ownership interests outside the ordinary course of business or to
effect any merger of the Company; and
(n) any exclusive retainer agreement or arrangement with attorneys, accountants,
actuaries, appraisers, investment bankers or other professional advisors.
All forward commitments which have been entered into by the Company and which
remain unfulfilled have been entered into in the ordinary course of business.
The Company has provided parent with complete copies of all written contracts
and within two weeks of the date hereof, shall provide the information required
for Section 3.19 of the Company Disclosure Schedule including details of all
oral agreements.
- 15 -
16
3.20 Absence of Breaches or Defaults. The Company is not and, to the knowledge
of the Company, no other party is, in default under, or in breach or violation
of, any Material Contract and, to the knowledge of the Company, no event has
occurred which, with the giving of notice or passage of time or both would
constitute a default under any Material Contact. To the Company's and Company
Shareholder's knowledge, each Material Contract is valid, binding and
enforceable (subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law)) and is in full force and
effect, and assuming all consents required by the terms thereof or applicable
law have been obtained, such Material Contracts will continue to be valid,
binding and enforceable and in full force and effect immediately following the
consummation of the transactions contemplated hereby, in each case. No event has
occurred which either entitles, or would, on notice or lapse of time or both,
entitle the holder of any indebtedness for borrowed money affecting the Company
(except for the execution or consummation of this Agreement) to accelerate, or
which does accelerate, the maturity of any indebtedness affecting the Company.
3.21 Insurance. Section 3.21 of the Company Disclosure Schedule sets forth a
true and complete list of all insurance policies providing insurance coverage of
any nature to the Company. Such policies are sufficient for compliance by the
Company with all requirements of law and all material agreements to which the
Company is a party or by which any of its assets are bound. To the Company's and
Company Shareholder's knowledge, after due inquiry, all of such policies are in
full force and effect and are valid and enforceable in accordance with their
terms, and the Company has complied with all material terms and conditions of
such policies, including premium payments. None of the insurance carriers has
indicated to the Company an intention to cancel any such policy. The Company
does not have any claim pending against any of the insurance carriers under any
of such policies.
3.22 Brokers. Neither the Company nor any of its officers or directors has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement.
3.23 Resolutions. The resolutions of the board of directors and shareholders of
the Company made available to Parent are true and accurate summaries of the
events reported therein and reflect all transactions referred to in such
resolutions accurately. There are no further written resolutions since the time
of incorporation of the Company through the date of this Agreement,.
3.24 Representations Complete. To Company's and Company Shareholder's knowledge,
after due inquiry, none of the representations or warranties made by the Company
or the Company Shareholder herein or in any Schedule hereto, including the
Company Disclosure Schedule, or certificate furnished by the Company pursuant to
this Agreement, when all such documents are read together in their entirety,
contains or will contain at the Effective Time any untrue statement of a
material fact, or, to Company's and Company Shareholder's knowledge, after due
inquiry, omits or will omit at the Effective Time to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
3.25 Potential Conflicts of Interest. Except as set forth in Section 3.25 of the
Company Disclosure Schedule, no officer, director or stockholder of Company, and
no person directly or indirectly controlling or controlled by, or under the
direct or indirect control of, any of the foregoing persons:
(a) owns, directly or indirectly, any interest in, or is an officer, director,
employee or consultant of, any person which is a competitor, lessor, lessee,
customer or supplier of the Company;
- 16 -
17
(b) holds a beneficial interest in any contract or other agreement to which
Company is a party or by which it is obligated or bound or to which any of the
Assets may be subject;
(c) owns, directly or indirectly, in whole or in part, any tangible or
intangible property (including, without limitation, any Intellectual Property)
which Company is using or the use of which is necessary for the business of the
Company; or
(d) has any cause of action or other claim whatsoever against Company.
All purchases and sales or other transactions, if any, between Company and any
such persons have been made on the basis of prevailing market rates and all such
transactions have been made on terms no less favorable to Company than those
which would have been available from unrelated third parties. All business of
the Company has been conducted in the name of the Company and for the benefit of
the Company and there are no parties related, either directly or indirectly,
which are competing for the business of the Company.
3.27 Customs. Company has acted with reasonable care to properly value and
classify, in accordance with applicable tariff laws, rules and regulations, all
goods that Company exports out of the United States into any other country (the
"Exported Goods"). To Company's knowledge, there are currently no material
claims pending against Company by the U.S. Customs Service (or other foreign
customs authorities) relating to the valuation, classification or marketing of
the Exported Goods.
3.28 Insolvency. None of Company or Company Shareholder are insolvent, have
committed an act of bankruptcy, proposed a compromise or arrangement of their
creditors generally, had any petition or receiving order in bankruptcy filed
against them, taken any proceedings with respect to a compromise or arrangement
or to have a receiver appointed over any part of their assets, had an
encumbrancer take possession of any property, nor had an execution or distress
become enforceable or levied upon any of their property.
3.29 Qualification. No officer or director of Company is subject to any of the
disqualification provisions of Rule 505(b)(iii) under the Securities Act of
1933.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule attached hereto (the "Parent
Disclosure Schedule"), Parent and Merger Sub hereby jointly and severally
represent and warrant to the Company as follows:
4.1 Corporate Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws the State of Colorado and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Parent and Merger Sub have the corporate
power and authority to own or lease their respective properties and assets and
to carry on their respective businesses as they are now being conducted, and are
duly qualified to do business in each jurisdiction in which the nature of the
business conducted by them or the character or location of the properties and
assets owned or leased by them makes such qualification necessary, except where
the failure to be so qualified would not individually or in the aggregate have a
Material Adverse Effect.
- 17 -
18
4.2 Authority; No Violation.
(a) Each of Parent and Merger Sub has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The Board of
Directors of Parent has (i) approved this Agreement and the Merger and all
transactions contemplated hereby, (ii) determined that the Merger is in the best
interests of the shareholders of Parent and is on terms that are fair to such
shareholders and (iii) determined that this Agreement is advisable and
recommended that the shareholders of Parent, if required by law, approve this
Agreement and consummation of the Merger. The Board of Directors and the
shareholder of Merger Sub have approved this Agreement and the Merger and all
transactions contemplated hereby. Except for such approvals of Parent's
shareholders as may be required by law or Parent's Articles of Incorporation, no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement and all other agreements and documents to be entered into in
connection herewith have been duly and validly executed and delivered by Parent
and Merger Sub and (assuming due authorization, execution and delivery by the
Company and the Company Shareholder) constitute valid and binding obligations of
Parent and Merger Sub, enforceable against each of them, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by Parent and Merger
Sub, nor the consummation by Parent and Merger Sub of the transactions
contemplated hereby, nor compliance by Parent and Merger Sub with any of the
terms or provisions hereof, will, assuming that the consents and approvals
referred to in Section 4.5 hereof are duly obtained, (i) violate any provision
of the Articles of Incorporation or Bylaws of Parent or Merger Sub, (ii) violate
any material statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Parent or Merger Sub or any of their
respective properties or assets, or (iii) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Parent or Merger Sub under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or Merger Sub is a party, or by which either of them
or any of their respective properties or assets may be bound or affected.
4.3 Capitalization of Parent and Merger Sub.
(a) As of the date of this Agreement, the authorized capital stock of Parent
consists solely of (i) 100,000,000 shares of Parent Stock and 5,000,000 shares
of preferred stock (none issued). The number of shares are issued and
outstanding as at August 1, 1999 are as set out in the Proxy Statement delivered
to shareholders with respect to the Shareholders' Meeting of September 23, 1999,
(the "Proxy Statement"). No shares are issued and held in treasury (which does
not include the shares reserved for issuance) and no shares are held by
Subsidiaries of Parent. All convertible debt shares, warrants, options and
convertible equity shares, if any, are set out in the Proxy Statement as at the
date set out therein. Certain shares of Parent Stock have been issued but not
paid for, underlying certain convertible debt financings, which Parent does not
consider to be fully paid and non-assessable until conversion or exercise of the
outstanding security. Each outstanding share of Parent Stock is, and all shares
of Parent Stock to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and
- 18 -
19
nonassessable, and each outstanding share of Parent Stock has not been, and all
shares of Parent Stock to be issued in connection with the Merger will not be,
issued in violation of any preemptive or similar rights or any applicable
securities laws.
(b) Merger Sub's authorized capital stock consists solely of 1500 shares of
common stock, no par value per share ("Merger Sub Common Stock"), of which, as
of the date hereof, 500 shares are issued and outstanding and none are reserved
for issuance. As of the date hereof, all of the outstanding shares of Merger Sub
Common Stock are owned free and clear of any liens, claims or encumbrances by
Parent.
(c) Parent is the sole record and beneficial owner of all the outstanding
securities of each of its Subsidiaries. There are no outstanding subscriptions,
options, warrants, calls, commitments, agreements, or obligations of any
character calling for the purchase, redemption or issuance of any equity
securities of any Subsidiary, nor are there outstanding any securities which are
convertible into or exchangeable for any equity securities of any Subsidiary,
and neither Parent nor any Subsidiary has any obligation of any kind to issue
any additional securities or to pay for or repurchase any securities of any
subsidiaries or their predecessors.
4.4 Consents and Approvals. Neither the execution and delivery of this Agreement
by Parent or Merger Sub nor the consummation of the transactions contemplated
hereby will require any action or consent or approval of, or review by, or
registration or filing by Parent or any of its affiliates with, any third party
or any Governmental Entity, other than (i) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement, (ii) approval, if necessary, of this Agreement by the requisite vote
of the shareholders of Parent, (iii) consent of Executive LAN Management, Inc.,
which consent has been given as of the date of this Agreement, and (iv) those
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Parent and its Subsidiaries taken as a whole
or a Material Adverse Effect on the ability of the parties to consummate the
transactions contemplated hereby.
4.5 Financial Statements and SEC Documents. Since January 1, 1999, Parent has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act (all of the foregoing and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, with amendments read together with underlying documents, are
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of Parent included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved and fairly and accurately present in all material respects the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as disclosed in such financial
statements, Parent is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
- 19 -
20
4.6 Legal Proceedings. Except as disclosed in the Form 10-Q filed on August 17,
1999, and a general letter to the Application Service Provider industry as a
whole dated July 13, 1999 claiming that the business of the ASP consortium may
conflict with U.S. Patent # 5,775,995 issued July 7, 1998, a copy of which has
been delivered to the Company, there are no legal actions, suits, arbitrations
or other legal, administrative or governmental proceedings or investigations
pending or, to the knowledge of Parent, threatened against Parent or any
Subsidiary or their properties, assets or business in which an unfavorable
outcome, ruling or finding would have a Material Adverse Effect, and Parent is
not aware of any facts which might result in or form the basis for any such
action, suit or other proceeding or which would challenge the validity or
propriety of the transactions contemplated by this Agreement. Neither Parent nor
any Subsidiary is in default with respect to any judgment, order or decree of
any court or any governmental agency or instrumentality which would have a
Material Adverse Effect.
4.7. Governmental Authorization; Compliance with Laws. Parent and its
Subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity that is required for the operation of the business of Parent
and its Subsidiaries (the "Parent Authorizations"), and all of such Parent
Authorizations are in full force and effect, except where the failure to obtain
or have any such Parent Authorizations could not reasonably be expected to have
a Material Adverse Effect on Parent. To Parent's knowledge, Parent and the
Subsidiaries are in material compliance with all applicable laws, statutes,
orders, rules and regulations of any Governmental Entity relating to them,
except where the failure to do so would not have a Material Adverse Effect.
4.8 Taxes. Parent and the Subsidiaries have duly and timely filed (including
applicable extensions granted without penalty) all material Tax Returns required
to be filed at or prior to the Effective Time, and such Tax Returns are true and
correct in all material respects, except where failure to do so would not have a
Material Adverse Effect, and Parent and the Subsidiaries have paid in full or
made adequate provision in the consolidated financial statements of Parent (in
accordance with GAAP) for all material Taxes shown to be due on such Tax Returns
except where failure to do so would not have a Material Adverse Effect. As of
the date hereof (i) neither Parent nor any Subsidiary has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, (ii) no claim for Taxes has become
a lien against the property of Parent or any Subsidiary or is being asserted
against Parent or any Subsidiary other than liens for Taxes not yet due and
payable, (iii) no audit of any Tax Return of Parent or any Subsidiary is being
conducted by a Tax authority, (iv) no extension of the statute of limitations on
the assessment of any Taxes has been granted to Parent or any Subsidiary and is
currently in effect, and (v) there is no agreement, contract or arrangement to
which Parent or any Subsidiary is a party that may result in the payment of any
amount that would not be deductible by reason of Sections 280G, 162 or 404 of
the Code. Neither Parent nor any Subsidiary has not been nor will they be
required to include any adjustment in taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger.
4.9 Environmental Matters.
(a) For purposes hereof, "Parent Facilities" shall mean all buildings and
improvements located on any real property leased or subleased by Parent or any
Subsidiary.
(b) (i) Neither Parent nor any Subsidiary has received notice (oral or written)
of any noncompliance of the Parent Facilities or its past or present operations
with Environmental and Safety Laws; (ii) no
- 20 -
21
notices, administrative actions or suits are pending or, to Parent's knowledge,
threatened relating to a violation of any Environmental and Safety Laws; (iii)
Neither Parent nor any Subsidiary has been notified that it is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act, or state analog statute, arising out of events
occurring prior to the Closing Date; (iv) to Parent's knowledge, Parent's and
the Subsidiaries' uses of and activities within the Facilities have at all times
complied with all Environmental and Safety Laws; and (v) Parent and the
Subsidiaries have all the permits and licenses required by Environmental and
Safety Laws to be issued and are in full compliance with the terms and
conditions of those permits.
4.10 Insolvency. Parent is not insolvent. Since January 20, 1998, Parent has not
committed an act of bankruptcy, proposed a compromise or arrangement of its
creditors generally, had any petition or receiving order in bankruptcy filed
against it, taken any proceedings with respect to a compromise or arrangement or
to have a receiver appointed over any part of its assets, had an encumbrancer
take possession of any property, nor had an execution or distress become
enforceable or levied upon any of its property.
4.11 Representations Complete. None of the representations or warranties made by
Parent or Merger Sub herein or in any Schedule hereto, including the Parent
Disclosure Schedule, or certificate furnished by the Parent pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of this Agreement
and continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the written consent of Parent, the Company
shall carry on its business in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, and except as
previously disclosed by the Company to Parent in writing or as otherwise
contemplated by this Agreement or consented to in writing by Parent, the Company
shall not:
(a) declare or pay any dividends on, or make other distributions in respect of,
any shares of Company Stock, excepting Company Shareholder draws which shall be
taken in a manner and in amounts consistent with past practice;
(b) (i) except in accordance with section 1.8, repurchase, redeem or otherwise
acquire any shares of Company Stock, or any securities convertible into or
exercisable for any shares of Company Stock, (ii) split, combine or reclassify
any shares of Company Stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Company Stock, or (iii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares;
(c) except in accordance with section 1.8, amend its Articles of Incorporation
or Bylaws;
- 21 -
22
(d) make any capital expenditures in excess of $25,000 other than those which
are made in the ordinary course of business or are necessary to maintain
existing assets in good repair;
(e) enter into any new line of business, except as contemplated hereby;
(f) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial 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 any assets, which would be material, individually or in the aggregate,
to the Company;
(g) take any action that is intended or may reasonably be expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue, or in any of the conditions to the Merger not being satisfied;
(h) make a material change in its methods of accounting in effect at December
31, 1998, except as required by changes in GAAP or as concurred with by the
Company's independent auditors;
(i) (i) except as required by applicable law or as required to maintain
qualification pursuant to the Code, adopt, amend, or terminate any employee
benefit plan or any agreement, arrangement, plan or policy between the Company
and one or more of its current or former directors, officers or employees, or
(ii) except as provided in Sections 1.8 above, normal increases in the ordinary
course of business consistent with past practice or as required by applicable
law, increase in any manner the compensation or fringe benefits of any director,
officer or employee, nor any payments thereto except as is consistent with past
practice;
(j) other than activities in the ordinary course of business consistent with
past practice, sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements;
(k) other than in the ordinary course of business consistent with past practice,
incur any indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity;
(l) other than agreements in the ordinary course of business that do not require
payments by the Company in excess of $50,000 per year per individual agreement
or an aggregate of $150,000 per year for all such agreements, create, renew,
amend or terminate or give notice of a proposed renewal, amendment or
termination of, any material contract, agreement or lease for goods, services or
office space to which the Company is a party or by which the Company or its
properties are bound; or
(m) agree to do any of the foregoing prior to the Effective Time.
5.2 Filings and Audits . Company Shareholder agrees to make all filings
necessary under Section 13(d) of the Securities Exchange Act of 1934, as
amended, in a timely manner as required by law, and will, prior to closing,
cause the Company to deliver, at Company Shareholder's expense, audited
financial statements for the periods ended December 31, 1997 and 1998,
accompanied by the report of Xxxx Jevaharian, CPA.
- 22 -
23
5.3 Covenants of Parent. During the period from the date of this Agreement and
continuing until the Effective Time, Parent shall not, without the prior written
consent of the Company, not to be unreasonably withheld, nor permit any of its
Subsidiaries to:
(a) enter into any new line of business, except as contemplated hereby
or in the Proxy Statement; or
(b) take any action that is intended or may reasonably be expected to
result in any of their representations and warranties set forth in this
Agreement being or becoming untrue, or in any of the conditions to the Merger
not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement. As promptly as practicable after the
execution of this Agreement, Parent shall, if shareholder approval is required,
prepare and file with the SEC a proxy statement (together with all amendments
thereto "Proxy Statement") for use in connection with the Special Meeting (as
defined below). Parent shall prepare the Proxy Statement in compliance with
applicable federal and state securities laws and with the applicable provisions
of Colorado law. As promptly as practicable after the preparation of the Proxy
Statement and the completion of the SEC's review, if any, of such Proxy
Statement, the Proxy Statement shall be mailed to the shareholders of Parent.
None of the information supplied in the Proxy Statement shall, at the date it or
any amendments or supplements thereto are mailed to the shareholders in
connection with the Special Meeting, at the time of the Special Meeting, or at
the Closing, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. Company and Company Shareholder shall cooperate with Parent and
provide any information required for the Proxy Statement or any other necessary
securities filings.
6.2 Shareholders' Meeting. As promptly as practicable after the date hereof, if
required, Parent shall call and hold a special meeting of its shareholders for
the purpose of approving this Agreement and the transactions contemplated hereby
(the "Special Meeting"). Parent shall use its best efforts to solicit from its
shareholders proxies in favor of the approval of this Agreement and the
transactions contemplated hereby pursuant to the Proxy Statement.
6.3 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Company shall afford to Parent and their respective
officers, employees, accountants, counsel and other representatives, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, customers,
suppliers, officers, employees, accountants, counsel and other representatives.
Company shall not be required to provide access to or to disclose information
where such access or disclosure would jeopardize any attorney-client privilege
or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
- 23 -
24
(b) Each party hereto agrees to, and shall cause its employees, agents,
directors, advisors and representatives to, (i) treat and hold as confidential
and not disclose to any person, firm, corporation, association or other entity
for any purpose or reason whatsoever all information relating to trade secrets,
processes, patent or trademark applications, product development, price,
customer and supplier lists, pricing and marketing plans, policies and
strategies, operations methods, business development techniques, business
acquisition plans, new personnel acquisition plans and any other confidential
information with respect to the business of the other party, (ii) in the event
that it or any of its employees, agents, advisors, directors or representatives
becomes legally compelled to disclose any such information, provide the other
party with prompt written notice of such requirement so that such party may seek
a protective order or other remedy or waive compliance with this Section 6.3(b),
and (iii) in the event that such protective order or other remedy is not
obtained, or the other party waives compliance with this Section 6.3(b), furnish
only that portion of such confidential information which is legally required to
be provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information; provided, however, that this
Section shall not apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by either
party, their respective agents, representatives, employees, advisors, or
directors. The parties agree and acknowledge that remedies at law for any breach
of their obligations under this Section are inadequate and that in addition
thereto the non-breaching party shall be entitled to seek equitable relief,
including injunction and specific performance, in the event of any such breach,
without the necessity of demonstrating the inadequacy of money damages.
6.4 Public Disclosure. Unless otherwise permitted by this Agreement, Parent and
the Company shall consult with each other before issuing any press release or
otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law.
6.5 Compliance with Securities Laws. Parent shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Parent Stock in connection with the
Merger.
6.6 Solicitation. Prior to the Closing Date, each of the Company and the Company
Shareholder shall not, directly or indirectly, in any way solicit, initiate
contact with, or enter into or conduct any discussions or negotiations, or enter
into any agreements, whether written or oral, with any other firm, entity or
individual, with respect to the sale of the stock or assets or the merger or
other business combination of the Company with any other entity. Each of the
Company and the Company Shareholder shall, if it is the recipient of such an
offer, immediately notify Parent of such event and the details of such offer.
6.7 Best Efforts and Further Assurances. Each of the parties to this Agreement
shall use its best efforts to effectuate the transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to Closing under this
Agreement. Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby. The
parties hereto agree that, subsequent to the Effective Time, they will at the
request of the other party, execute and deliver such additional conveyances,
transfers and other assurances as, in the opinion of such party's counsel, are
reasonably required to carry out the intent of this Agreement. The Company
Shareholder agrees to take all steps reasonably required by Parent to
- 24 -
25
assist Parent in retaining the goodwill of the Company and in particular to
retain all employees who have entered into employment agreements with Parent
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. If required, Parent shall have obtained the requisite
approval of this Agreement and the transactions contemplated hereby by its
shareholders.
(b) No Injunctions or Restraints; Illegality. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) Governmental Approval. All approvals, waivers and consents from each
Governmental Entity necessary for consummation of or in connection with the
Merger and the several transactions contemplated hereby shall have been
obtained.
7.2 Conditions to Obligations of Parent and Merger Sub. The obligation of Parent
and Merger Sub to effect the Merger is also subject to the satisfaction or
waiver by Parent and Merger Sub at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and warranties of the
Company and Company Shareholder set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date. Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and Chief
Financial Officer to that effect.
(b) Performance of Obligations of the Company. The Company and the Company
Shareholder shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer and Chief Financial Officer to that
effect.
(c) No Material Adverse Changes. There shall not have occurred any material
adverse change in the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations or results of
operations of the Company, taken as a whole.
(d) Third Party Consents. Parent shall have been furnished with evidence
satisfactory to it of the consent or approval of those persons whose consent or
approval shall be required in connection with the Merger including those set
forth on Section 3.4 of the Company Disclosure Schedule.
- 25 -
26
(e) Employment Agreements. Xxxxxxx Xxxxxxxxxx, Xxxx Spray, Xxxx Xxxxxxxxxxx and
at least eighty percent of all employees shall have entered into employment
agreements with Parent in a mutually satisfactory form. All such employees shall
have entered into lock-up agreements as described in Subsection 2.2(f). Xxxxxxx
Xxxxxxxxxx'x employment agreement shall be for a minimum term of three years and
shall contain non-competition covenants during the term and for two years after
the end of the term of the Executive Employment Agreement or earlier
termination. There shall be no penalty to the Company or Company Shareholder in
the event this Agreement is terminated for inability to acquire the required
number of employee agreements set forth herein.
(f) Legal Opinion. Company shall have caused a legal opinion from Xxxxxx,
Xxxxxxx & Xxxxxxx, counsel to the Company, in a form satisfactory to Parent, in
its sole discretion, to be delivered to Parent, except that Parent shall not
require an opinion regard any environmental matter.
(g) Encumbrance. Company and Company Shareholder shall have caused any
encumbrances on the Company Stock (and assets of the Company, insofar as any
such encumbrance secures debt of any person other than that of the Company) to
have been removed, vacated or discharged on or prior to the Closing Date.
(h) Financing. Parent shall have obtained financing for the transactions
contemplated hereby on terms satisfactory to Parent.
(i) Micro Visions Merger. Parent shall have closed its merger transaction with
Executive LAN Management, Inc. prior to the Closing Date.
(j) Closing Deliveries. In addition to any other instruments and documents
required to be delivered by Company and Company Shareholder pursuant to this
agreement, Company and/or Company Shareholder shall have delivered to Parent on
or before the Closing Date such certificates, instruments and documentation as
are reasonably required in the opinion of Parent's counsel to complete the
transactions contemplated herein.
(k) Due Diligence. Parent shall have been satisfied in its sole discretion with
its review of due diligence materials supplied, either prior to or subsequent to
the date hereof, to Parent by Company and Company Shareholder including without
limitation the audited financial statements referred to in Section 5.2 and such
other materials as Parent requires Company or Company shareholder to produce
acting reasonably.
(l) Pre-Merger Transactions. Parent shall be satisfied that all conditions of
the pre-merger transactions set out in section 1.8 have been completed.
7.3 Conditions to the Obligations of Company and Company Shareholder. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and warranties of Parent
and 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 though made on and as of
the Closing Date. The Company shall have received a certificate signed (i) on
behalf of Parent by its Chief Executive Officer and Chief Financial Officer and
(ii) on behalf of Merger Sub by its President , in each case to the foregoing
effect.
- 26 -
27
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed (i) on behalf of Parent by its
Chief Executive Officer and Chief Financial Officer and (ii) on behalf of Merger
Sub by its President, in each case to such effect.
(c) No Material Adverse Changes. There shall not have occurred any material
adverse change in the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations or results of
operations of Parent and its Subsidiaries, taken as a whole.
(d) Drop in Parent Stock Share Price. Parent Stock price on the date of closing
shall not have fallen to such a level so as to cause the Share Consideration to
not qualify for the tax treatment contemplated by IRC Section 368(a)(2)(D).
(e) Options. Parent shall have granted Company Shareholder the right to
distribute 500,000 options to purchase Parent Stock, issued in accordance with
Parent's stock option plan, to the Company Shareholder and employees and
independent contractors of Company who have continued their employment or
contract with Parent after the Closing Date. Such options shall be priced at
market value when issued. The right to grant the option shall vest with the
Company Shareholder on Closing and Company Shareholder shall, within 120 days of
Closing grant such options. Company Shareholder acknowledges that the right to
grant such options is subject to shareholder or director approval.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual consent of the Company, Parent and Merger Sub in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Parent or the Company if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within thirty (30) days
following written notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing and which breach shall
constitute a Material Adverse Effect;
(c) by either Parent or the Company if there shall have been a material breach
of any of the covenants or agreements set forth in this Agreement on the part of
the other party, which breach shall not have been cured within thirty (30) days
following receipt by the breaching party of written notice of such breach from
the other party hereto, or which breach, by its nature, cannot be cured prior to
the Closing and which breach shall constitute a Material Adverse Effect.
(d) by Company or Company Shareholder after October 31, 1999 without penalty of
any kind.
- 27 -
28
8.2 Effect of Termination. In the event of termination of this Agreement by
either Parent or the Company as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect except that (i) Sections 6.3(b), 6.4
and 10.3 shall survive any termination of this Agreement and notwithstanding
anything to the contrary contained in this Agreement, no party shall be relieved
or released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement. Except as set forth in section 2.6 above, the
Company Shareholder shall promptly cause its attorney to return the Deposit to
Parent. The Company and Company shareholder acknowledge that Parent will be
expending resources and time and as a result will be foregoing other potential
transactions during the period from the date hereof until the Closing Date. The
parties hereto have agreed that a fee (the "Break-up Fee") shall be paid by the
Company and/or the Company Shareholder to the Parent in the event that the
Company or Company Shareholder directly or indirectly:
(a) accepts any offer or enter into any agreement with any other party
with respect to any sale or other disposition of the Purchased Shares,
Business or Assets prior to the Time of Closing; or
(b) solicit, initiate, entertain or encourage enquiries, submissions,
discussions, proposals or offers from any other person for the sale or
other disposition of the Purchased Shares, Business or Assets prior to
the Time of Closing.
The Break-up Fee payable by the Company and/or Company Shareholder shall be Five
Hundred Thousand Dollars ($500,000) payable within 48 hours of any of the
occurrence of an event in (a) or (b) above and, in such event, the Deposit shall
also be returned to the Parent without deduction.
8.3 Amendment. Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of the Parent. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, each of the
parties hereto, by action taken or authorized by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other 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 a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
INDEMNIFICATION AND ESCROW FUND
9.1 Indemnity. (a) The Company Shareholder shall indemnify, defend, protect and
hold harmless Parent and its successors and assigns, subsidiaries, directors,
officers, employees, agents and affiliates (each a "Parent Indemnified Person"),
at all times from and after the date of this Agreement (subject to any
limitations provided in this Article IX) against all losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses ("Losses") (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation ("Legal Expenses")) based upon,
- 28 -
29
resulting from or arising out of (i) any inaccuracy or breach of any
representation, or warranty of the Company or the Company Shareholder contained
in this Agreement, (ii) the breach by the Company or the Company Shareholder of,
or the failure by the Company or the Company Shareholder to observe, any of its
covenants or other agreements contained in this Agreement and (iii) from any
liability of the Company for the matters listed in the Indemnity Schedule.
(b) Parent shall indemnify, defend, protect and hold harmless the
Company Shareholder and its trustees, agents, successors and assigns (the
"Shareholder Indemnified Person") at all times from and after the date of this
Agreement (subject to any limitations set forth in this Article IX) against all
Losses (including specifically, but without limitation, Legal Expenses) based
upon, resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of Parent contained in this Agreement, and (b) the
breach by Parent of, or the failure by Parent to observe, any of its covenants
or other agreements contained in or made pursuant to this Agreement.
9.2 Indemnification Procedures.
(a) Promptly after receipt by any person entitled to indemnification under
Section 9.1 (an "indemnified party") of notice of the commencement of any
action, suit or proceeding by a person not a party to this Agreement in respect
of which the indemnified party will seek indemnification hereunder (a "Third
Party Action"), the indemnified party shall notify the person that is obligated
to provide such indemnification (the "indemnifying party") thereof in writing,
but any failure to so notify the indemnifying party shall not relieve it from
any liability that it may have to the indemnified party under Section 9.1,
except to the extent that the indemnifying party is prejudiced by the failure to
give such notice. The indemnifying party shall be entitled to participate in the
defense of such Third Party Action and to assume control of such defense
(including settlement of such Third Party Action) with counsel reasonably
satisfactory to such indemnified party; provided, however, that:
(i) the indemnified party shall be entitled to participate in
the defense of such Third Party Action and to employ counsel
at its own expense (which shall not constitute Legal Expenses
for purposes of this Agreement) to assist in the handling of
such Third Party Action;
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any
settlement of such Third Party Action or ceasing to defend
against such Third Party Action, if pursuant to or as a result
of such settlement or cessation, injunctive or other equitable
relief would be imposed against the indemnified party or the
indemnified party would be adversely affected thereby;
(iii) no indemnifying party shall consent to the entry of any
judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by each claimant or
plaintiff to each indemnified party of a release from all
liability in respect of such Third Party Action; and
(iv) the indemnifying party shall not be entitled to control
the defense of any Third Party Action unless the indemnifying
party confirms in writing its assumption of such defense and
continues to pursue the defense reasonably and in good faith.
After written notice by the indemnifying party to the
indemnified party of its election to assume control of the
defense of any such Third Party Action in accordance with the
foregoing, (i) the indemnifying party shall not be liable to
such indemnified party hereunder for any
- 29 -
30
Legal Expenses subsequently incurred by such indemnified party
attributable to defending against such Third Party Action, and
(ii) as long as the indemnifying party is reasonably
contesting such Third Party Action in good faith, the
indemnified party shall not admit any liability with respect
to, or settle, compromise or discharge the claim underlying,
such Third Party Action without the indemnifying party's prior
written consent. If the indemnifying party does not assume
control of the defense of such Third Party Action in
accordance with this Section 9.2, the indemnified party shall
have the right to defend and/or settle such Third Party Action
in such manner as it may deem appropriate at the cost and
expense of the indemnifying party, and the indemnifying party
will promptly reimburse the indemnified party therefor in
accordance with this Section 9.2. The reimbursement of fees,
costs and expenses required by this Section 9.2 shall be made
by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred.
(b) If an indemnified party has actual knowledge of any facts or circumstances
other than the commencement of a Third Party Action which cause in good faith it
to believe that it is entitled to indemnification under this Article IX then
such indemnified party shall promptly give the indemnifying party notice thereof
in writing, but any failure to so notify the indemnifying party shall not
relieve it from any liability that it may have to the indemnified party under
Section 9.1, as the case may be, except to the extent that the indemnifying
party is prejudiced by the failure to give such notice.
9.3 Limitations and Payment of Claims.
(a) The right of indemnification or other claim against Parent or the Company
Shareholder with respect to each representation, warranty, covenant and
agreement contained in this Agreement shall, except with respect to
representations, warranties, covenants and agreements set forth in Sections 3.2,
3.10 and 3.14 which shall survive forever, terminate on the date (the "Survival
Date") occurring on (i) the thirtieth day after the expiration of the applicable
statute of limitations (or extensions or waivers thereof) relating to the
representations, warranties, covenants and agreements set forth in Sections 3.8,
3.9, 3.13 and 4.6, and (ii) the first anniversary of the Closing Date with
respect to all other representations, warranties, covenants and agreements
contained in this Agreement, except in so far as a claim has been asserted by
either party and not been resolved prior to expiration of the applicable periods
set forth in item (i) or (ii) above.
(b) The Company Shareholder shall not be liable to any Parent Indemnified Person
for any claim under this Agreement unless the aggregate of Losses suffered by
all Parent Indemnified Persons considered together exceeds $100,000, and then
only to the extent of such excess. Parent shall not be liable to any Shareholder
Indemnified Person for any claim under this Agreement unless the aggregate of
Losses suffered by all Shareholder Indemnified Persons considered together
exceeds $100,000, and then only to the extent of such excess.
(c) All amounts owed by the Company Shareholder to a Parent Indemnified Person
under this Article IX may be paid, at the election of the Company Shareholder,
either in (i) cash or (ii) shares of Parent Stock. All amounts owed by Parent to
a Shareholder Indemnified Person under this Article IX shall be paid in shares
of Parent Stock. Any shares of Parent Stock issued, surrendered or transferred
as payment of amounts owed pursuant to this Article IX shall be valued at the
average of the closing sale prices (or last bid prices if no closing sale prices
are reported) of Parent Stock as reported on the NASD OTC Bulletin Board (or on
such other exchange or quotation system as the Parent Stock may be traded at
such time) for the ten (10) trading days immediately preceding the date such
payment is required to be made.
- 30 -
31
(d) In no event shall Company or Company Shareholder be liable to Parent
Indemnified Person for any amount exceeding the actual consideration received
under this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made in this Agreement shall
survive the Closing and shall terminate on the dates that the right to
indemnification under such representations, warranties, covenants or agreements
terminates as provided in Section 9.1, and they shall not be affected in any
respect by any examination or investigation conducted by or on behalf of the
parties hereto and any information which any party may receive pursuant to the
schedules hereto or otherwise.
10.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given when delivered personally, 24 hours after sent by
facsimile (with confirmation), 3 days after mailed by registered or certified
mail (return receipt requested) or 1 day after sent by a nationally recognized
overnight courier (next day delivery) (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Company to:
Async Technologies, Inc.
0000 X. Xxxx Xxxxx Xxxx
Xxxxx X-000
Xxxxxx Xxxx, Xxxxxxxx
00000
Fax: (248) - 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx
with a copy to:
Spray & Associates
X.X. Xxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Spray
(b) if to Parent, to:
Futurelink Distribution Corp.
000-000-0 Xxxxxx XX
Xxxxxxx, Xxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
- 31 -
32
with copies to:
Xxxxxxxx Xxxxx Sosnovitch
0 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
XXX 0X0
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
Jeffer, Mangels, Xxxxxx & Xxxxxxx LLP
2121 Avenue of the Stars, Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
(c) if to the Company Shareholder, to:
Xxxxxxx X. Xxxxxxxxxx
0000 X. Xxxx Xxxx Xx.
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Spray & Associates
X.X. Xxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Spray
(d) if to the Non-Voting Shareholder, to:
Xxxxxxx X. Xxxxxxxxxx
0000 Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
Fax: (248) - 000-0000
with a copy to:
Spray & Associates
X.X. Xxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Spray
- 32 -
33
Xxxx X. Xxxxxxxxxx
0000 Xxxxx Xxxxxxx #000
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Spray & Associates
X.X. Xxx 000
Xxxxx Xxxx, XX 00000-0000
10.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING DELAWARE
LAW).
10.4 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the Merger
is not affected in any manner materially adverse to any party.
10.5 Assignment; Binding Effect; Benefit. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. 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.
Notwithstanding anything contained in this Agreement to the contrary, other than
Section 6.3, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and permitted assigns any rights or remedies under or by reason of
this Agreement.
10.6 Expenses. All costs and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby shall be paid by Parent
except that Company Shareholder shall pay for any costs of Parent with respect
to reviewing and implementing Company's and Company Shareholders' tax planning,
including legal and accounting fees. All costs and expenses incurred by the
Company or the Company Shareholder in connection with this Agreement and the
transactions contemplated hereby shall be paid by Company Shareholder, except
that Company shall pay any and all costs, fees and/or expenses incurred in
connection with the legal opinion referenced in section 7.2(f) above to a
maximum amount mutually agreeable to the parties.
10.7 Headings. The descriptive headings contained in this Agreement are included
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.8 Entire Agreement. This Agreement (including the Exhibits, Schedules, the
Parent Disclosure Schedule and the Company Disclosure Schedule) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.
- 33 -
34
10.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization and Merger as of the date first written above.
PARENT
FUTURELINK DISTRIBUTION CORP.
By: [signed: X. Xxxxxxx]
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
MERGER SUB
FUTURELINK MICHIGAN ACQUISITION CORP.
By: [signed: X. Xxxxxxx]
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
COMPANY
ASYNC TECHNOLOGIES, INC.
By: [signed: Xxxxxxx X. Xxxxxxxxx]
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
ASYNC TECHNICAL INSTITUTE, INC.
By: [signed: Xxxxxxx X. Xxxxxxxxx]
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
COMPANY SHAREHOLDER
[signed: Xxxxxxx X. Spray] [signed: Xxxxxxx X. Xxxxxxxxxx]
---------------------------------- ----------------------------------------
WITNESS XXXXXXX X. XXXXXXXXXX
- 34 -
35
INDEMNITY SCHEDULE
Company shareholder shall hold Parent harmless from any Losses from any of the
following:
1. Non-filing of sales tax returns instates other than Michigan and Indiana and
any liability for non-collection of sales taxes in such states.
- 35 -
36
COMPANY DISCLOSURE SCHEDULE
Section 3.2
(b) Async Technologies, Inc., is a principal member of Thin Client Organization
(TCO, LLC).
Section 3.3(b)
The following contracts and/or agreement contain prohibitions on assignment. Per
agreement of the parties, the Company will make best efforts to obtain waivers
of these provisions.
1) Sales Agency Agreement between Async Technologies, Inc., and AT&T Corp.
dated November, 1997.
2) Brooktrout Technology, Inc., authorized reseller agreement effective date
1/1/97.
3) Citrix Solutions Network Platinum renewal membership agreement dated 4/20/99.
4) Citrix Authorized Learning Center Agreement dated 7/22/98.
5) Compaq Authorized Reseller Sales Agreement dated 7/22/97.
6) Thin Client Organization, LLC, Limited Liability Company Agreement dated
November, 1998.
7) Data General Commercial Systems Integrator discount purchase
agreement dated 1/15/99.
8) Commerce Place building lease dated 9/1/99.
9) MTX, Incorporated Master Reseller Agreement #990702-00C dated 7/2/99.
10) V-One Secure Business Solutions Provider Reseller Agreement dated 3/30/98.
11) Omnioffices/Chicago Northwest, Inc., Mail Address Link Lease dated 4/15/96.
12) All Franklin Bank loan guarantee and other financial documents.
13) All company insurance policies.
14) 401(k) plan .
15) Meijer, Inc., Service Agreement dated 7/13/99.
Section 3.3(c)
All Franklin Bank loan, guarantee and other financial documents.
Section 3.7
(i) Commerce Place building lease dated 9/1/99.
(ii) Shareholder Draws by Company Shareholder Verbal agreement with Xxxxx
Xxxxxxx to xxxxx 10% interest in Async Technical Institute, Inc. when and if
Async Technical Institute, Inc. became solvent. Company Shareholder will make
best efforts to obtain a waiver of this verbal agreement.
(iii) Verbal agreement referenced in section 3.7(ii) above.
(iv) Amendment to Articles of Incorporation to create second class on non-voting
common stock with 60,000 authorized shares
(vi) Verbal agreement referenced in section 3.7(ii) above.
(viii) $1,500.00 loan with a remaining balance of of less than $1,000.00 to
technical department employee Xxxxx Xxxxx, who is repaying the loan at the rate
of $100.00 per pay period (as shown on the internal balance sheet of Async
Technologies, Inc.).
(ix) See 3.7 viii above.
(xii) Xxxxxxx Xxxxx employment agreement; Xxxxxxx Xxxxxxxxx employment
agreement; Xxxxxx Xxxxxx employment agreement.
(xiii) See 3.7 xii above; also, Xxxxxx Xxxxxx resignation of employment.
Section 3.8
There are no lawsuits or other proceedings described in this section pending or
threatened against the Company. However, the Company has a potential cause of
action against former employee, Xxxxxx Xxxxxx, for violation of the
non-competition agreement contained in his employment agreement.
- 36 -
37
Section 3.9
State sales tax licenses for jurisdictions in which the Company conducts
business, except Indiana and Michigan, have not been obtained.
Section 3.10
Franklin Bank all assets security interest.
Section 3.11
Commerce Place Office Complex at 0000 X. Xxxx Xxxxx Xxxx, Xxxxxx Xxxx,
XX 00000.
Section 3.12
Any and all copyrights and trademarks granted by operation of law in the
Goodwill and name of Async Technologies, Inc., and Async Technical Institute,
Inc.
Per the agreement of the parties, the remainder of this section will be
completed prior to the Closing Date.
Section 3.13
Async Technical Institute, Inc. mistakenly failed to included a required form in
its original Subchapter S election form to the Internal Revenue Service. The
Subchapter S election has since been resubmitted with all required forms on the
advice and with the knowledge of the Internal Revenue Service. The new
application has not, however, been completely through the processing stage with
the Internal Revenue Service. Async Technical Institute, Inc. has been advised
that the Subchapter S election will apply for the tax year 1999, but will not
apply for the tax year 1998.
Secetion 3.15
See attached schedule 3.15.
Section 3.16
See attached employee information labeled "schedule 3.16". Company does not
maintain any written employee policies, employee manuals or other statements of
rules or policies as to working conditions, vacation and sick leave other than
as set forth in the employment agreements previously produced to Parent
(employment agreements previously produced to Parent are indicated on schedule
3.16 with a check xxxx).
Section 3.17
Async Technologies, Inc., 401(k) plan.
Section 3.19
By agreement of the parties, this schedule will be forwarded to Parent no later
than October 1, 1999.
Section 3.20
Other than as set forth in section 3.3 above, none.
Section 3.21
Frankenmuth Mutual Insurance Company Business Owners Policy
Frankenmuth Mutual Insurance Company Workers Compensation & Employers Liability
Policy
Frankenmuth Mutual Insurance Company Comprehensive General Liability
Frankenmuth Mutual Insurance Company Automobile Liability
Frankenmuth Mutual Insurance Company Commercial Umbrella Policy
Frankenmuth Mutual Insurance Company Business Protector Policy
- 37 -
38
Frankenmuth Mutual Insurance Company Property Coverage Policy
Frankenmuth Mutual Insurance Company Liability Policy
Frankenmuth Mutual Insurance Company Inland Marine Coverage
Blue Cross Blue Shield of Michigan Health Insurance Policy
American Community Dental, Vision, and Life Insurance Policy
Section 3.25
Xxx X. Xxxxxxxxxx, as employee of Intelligent Signage, Inc., is a consultant to
Lakeside Software, Inc., a supplier of the Company. Lakeside Software, Inc., is
wholly owned by Xxxxxxx X. Xxxxxxxxxx, brother of Company Shareholder and
shareholder of Company. Xxx Xxxxxxxxxx, consultant to Company is the father of
Company Shareholder, Xxxxxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxxxxxx, and father - in
-law of Xxxxxxx Spray (employee of Company). Xxxx X. Xxxxxxxxxx is an employee
of Lakeside Software, Inc., a supplier of Company and is a shareholder in
Company. Xxxxx Xxxxxxxxxx, an employee of Company, is the sole shareholder of
Intelligent Signage, Inc., consulting company to Company.
- 38 -
