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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
XXXXXXXXX.XXX, INC.,
F3 ACQUISITION CORPORATION,
FORWARD FREIGHT INC.
AND
XXXXX X. XXXXX AND XXXX X. XXXXXX
DATED EFFECTIVE AS OF MAY 20, 1999
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into effective as of May 20, 1999 by and among Xxxxxxxxx.xxx, inc., a
Delaware corporation ("PARENT"), F3 Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"), Forward
Freight Inc., a Texas corporation (the "COMPANY"), and Xxxxx X. Xxxxx and Xxxx
X. Xxxxxx (together, the "SHAREHOLDERS").
RECITALS
A. The Board of Directors of the Company, Parent and the Merger Sub
believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory Merger of
the Company with and into the Merger Sub (the "MERGER") and, in furtherance
thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("COMPANY CAPITAL STOCK") shall be converted into
the right to receive shares of Common Stock of Parent ("PARENT COMMON STOCK")
and other merger consideration set forth below.
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, and
the release of such amount shall be contingent upon certain events and
conditions, all as set forth in Article VII of this Agreement.
D. The Company, the Shareholders, Parent and the Merger Sub desire to
make certain representations, warranties, and other agreements in connection
with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Texas Business Corporation Act ("TEXAS LAW") and
the Delaware General Corporation Law ("DELAWARE LAW"), the Company shall be
merged with and into the Merger Sub, the separate corporate existence of the
Company shall cease, and Merger Sub shall continue as the surviving corporation
and as a wholly-owned subsidiary of Parent. The Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "CLOSING") will take place as
promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the
offices of Parent, 0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the "CLOSING
DATE." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing Articles of Merger and a Certificate of Merger in the
form of Exhibit A-1 and A-2 with the Secretary of State of the States of Texas
and Delaware, respectively (the "MERGER CERTIFICATES"), in accordance with the
applicable provisions of Texas Law and Delaware Law (the time of acceptance by
the Secretary of
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State of Texas and Delaware of such filing or such later time as may be
provided in the Merger Certificates being referred to herein as the "EFFECTIVE
TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Texas Law and
Delaware Law. 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.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of the Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
provisions of the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Articles of Incorporation.
(b) Unless otherwise determined by Parent, the Bylaws of the Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
provisions of the Bylaws of the Surviving Corporation until thereafter amended
in accordance with Delaware Law and as provided in the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to hold office in accordance with the Certificate of Incorporation
and Bylaws of the Surviving Corporation. Officers of Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation; provided, that effective upon Closing, Xxxx X. Xxxxxx shall be the
Chief Operating Officer of the Surviving Corporation.
1.6 MERGER CONSIDERATION. Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of
the Company Capital Stock, the following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock
of the Company (the "COMPANY COMMON STOCK") issued and outstanding immediately
prior to the Effective Time will be canceled and extinguished and converted
automatically into the right to receive a pro rata share of the merger
consideration as set forth in Schedule 1.6(a) (the "MERGER CONSIDERATION") as
follows: (i) a portion of the cash consideration of $500,000 payable as set
forth below, (ii) a portion of the stock consideration of 550,000 shares of
Parent Common Stock (the "STOCK CONSIDERATION") (subject to the adjustment as
set forth below), and (iii) a portion of the warrant consideration consisting
of the two-year warrants to purchase up to an aggregate of 200,000 shares
pursuant to the terms of the warrant agreement attached as Exhibit B., all upon
surrender of the certificates representing such shares of Company Common Stock
in the manner provided in Section 1.8; provided, that certain of such shares
included in the Merger Consideration shall be placed into escrow as set forth
below. The cash payments pursuant to this Agreement shall be made by Parent as
follows: $100,000 shall be paid to the Escrow Agent pursuant to the Escrow
Agreement and $400,000 shall be paid at Closing.
The Stock Consideration shall be subject to adjustment as follows: in
the event shares of Parent Common Stock begin trading in a recognized public
market at a price of less than $10 per share (as adjusted for any stock
splits), Parent shall pay to the Shareholders, within 30 days after
commencement of trading, cash or additional shares of Parent Common Stock (at
Parent's option), such that the value of the Stock Consideration is $10 per
share (with the additional shares valued at the then-current trading price).
[For example, if shares of Parent
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Common Stock are sold at $8 per share in an initial public offering, the amount
of the shortfall would be $2 per share. Parent would pay to the Shareholders $2
in cash per share or issue additional shares of Parent Common Stock valued at
$8 per share, at Parent's option, such that the aggregate value of the Stock
Consideration would equal $5,500,000.]
(b) CANCELLATION OF COMPANY-OWNED STOCK. Each share of Company
Capital Stock owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) CAPITAL STOCK OF MERGER SUB. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub or the
Company, each share of Common Stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall continue to be owned by Parent. Each stock certificate of Merger Sub
evidencing ownership of any such shares of Common Stock of the Merger Sub
shall, as of the Effective Time, evidence ownership of such shares of Common
Stock of the Surviving Corporation.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who, as of the Effective
Time, has not effectively withdrawn or lost (through failure to perfect or
otherwise) appraisal or dissenters' rights pursuant to Texas Law ("DISSENTING
SHARES") shall not be converted into or represent a right to receive Parent
Common Stock pursuant to Section 1.6, but the holder thereof shall only be
entitled to such rights as are granted by Texas Law.
(b) Notwithstanding the provisions of subsection (a), if after the
Effective Time any holder of Dissenting Shares shall effectively withdraw or
lose (through failure to perfect or otherwise) the right to appraisal, then, as
of the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock,
without interest thereon, upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to Texas Law (including
without limitation instruments concerning appraisal or dissenters' rights) and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under Texas
Law. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal of any
shares of Company Capital Stock or offer to settle or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) PARENT TO PROVIDE COMMON STOCK. At the Closing, Parent shall
deliver to the Shareholders for exchange in accordance with this Article I,
550,000 shares of Parent Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company Capital Stock; provided that, on
behalf of the holders of Company Capital Stock, Parent shall deposit into an
escrow account with BankOne Texas, N.A. (the "Escrow Agent") pursuant to the
Escrow Agreement attached hereto as Exhibit C 300,000 shares of Parent Common
Stock otherwise issuable pursuant to Section 1.6. The portion of the Escrow
Amount contributed on behalf of each holder of Company Capital Stock shall be
in proportion to the aggregate number of shares of Parent Common Stock which
such holder would otherwise be entitled to receive under Section 1.6 by virtue
of ownership of outstanding shares of Company Capital Stock.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Parent Common Stock declared or made
after the Effective Time and with
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a record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock.
(c) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, Parent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Parent Common Stock any, as may be required
pursuant to Section 1.6; provided, however, that Parent may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the Company
are fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary action.
1.13 OPTION TO SELL. The Shareholders shall have the right to sell to
Parent the 550,000 shares comprising the Stock Consideration for a price of
$8.00 per share, for a period of 60 days beginning on the second anniversary of
the Effective Date, in the event that the common stock of Parent does not
become traded during such two year period on a recognized trading market in the
United States of America. The option to sell granted hereby may be exercised by
the Shareholders, acting together or separately, by giving written notice of
the exercise of the option and surrender of the certificates representing the
Stock Consideration, duly endorsed for transfer. Following exercise of the
option and delivery of the certificates,
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Parent shall remit the purchase price for the shares by wire transfer within 30
days of receipt of the shares tendered for purchase.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS
Except as disclosed in a document dated as of the date hereof
specifically referencing the appropriate schedule or section number to the
representations, warranties or covenants in this Agreement which reasonably
identifies the basis for an exception to a representation, warranty or covenant
in this Agreement and which is delivered by the Company to Parent prior to the
execution of this Agreement (the "COMPANY SCHEDULES"), the Company and the
Shareholders represent and warrant to Parent and Merger Sub as set forth below.
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have, or would reasonably be
expected to have, a material adverse effect on the business, financial
condition, results of operations, assets (including intangible assets),
liabilities or prospects of the Company (hereinafter referred to as a "MATERIAL
ADVERSE EFFECT"). The Company has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company is as set forth in
SCHEDULE 2.2. The Company Capital Stock is held of record by the persons and in
the amounts set forth on SCHEDULE 1.6(a). All outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party
or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to
the Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company. The holders of
Company Capital Stock have been or will be given, or shall have properly
waived, any required notice prior to the Merger, and all such rights will be
terminated at or prior to the Effective Time. As a result of the Merger, the
Merger Sub will be the record and sole beneficial owner of all capital stock of
the Company and rights to acquire or receive such capital stock.
2.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries and does not otherwise own and has never otherwise owned any
shares of capital stock or any interest in, or control, directly or indirectly,
any other corporation, partnership, association, joint venture or other
business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the Merger and
this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is the affirmative
vote of two-thirds of the
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outstanding shares of Company Common Stock. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger and this Agreement by the
Company's shareholders. The Company's Board of Directors has unanimously
approved the Merger of the Company and this Agreement. This Agreement has been
duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies. Subject only to the approval of the Merger and this Agreement by the
Company's shareholders, the execution and delivery of this Agreement by the
Company does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "CONFLICT") (i)
any provision of the Articles of Incorporation or Bylaws of the Company or (ii)
any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets, except with respect to the preceding clause (ii) for any Conflict which
could not reasonably be expected to have a Material Adverse Effect. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality, agency
or commission ("GOVERNMENTAL ENTITY") or any third party (so as not to trigger
any Conflict) is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Merger
Certificates with the Delaware Secretary of State and the Texas Secretary of
State, (ii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
SCHEDULE 2.4, and (iv) where the failure to obtain or make any such consent,
waiver, approval, order, authorization, registration, declaration or filing
could not reasonably be expected to have a Material Adverse Effect.
2.5 COMPANY FINANCIAL STATEMENTS.
(a) SCHEDULE 2.5 sets forth the Company's audited balance sheet as
of December 31, 1998 on a combined basis with Forward Communications, Inc. and
FCI Services, Inc. (the "BALANCE SHEET") and the related audited statements of
operations, shareholders' equity and cash flows for the twelve-month period
then ended and the footnotes thereto as well as a combined unaudited balance
sheet as of March 31, 1999 (the "INTERIM BALANCE SHEET") and the related
unaudited statements of operations for the three-month period then ended
(collectively, the "COMPANY FINANCIALS"). The Company Financials are correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other. The Company
Financials present fairly the financial condition and operating results of the
Company included therein as of the dates and during the periods indicated
therein, subject to normal year-end adjustments and the absence of full
footnote disclosure in the case of unaudited financial statements, which such
adjustments will not be material in amount or significance.
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 2.6, the
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (which is required to be reflected in
financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, has not been reflected in
the Interim Balance Sheet.
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2.7 NO CHANGES. Except as set forth in SCHEDULE 2.7, since the date of
the Interim Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Interim Balance Sheet and consistent
with past practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance)
having a loss value in excess of $25,000;
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets in excess of
$25,000;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of the
Company Capital Stock, or any split, combination or reclassification in respect
of any shares of Company Capital Stock, or any issuance or authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Capital Stock;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers or directors and, except
in the ordinary course of business, to any employees or advisors, or the
declaration, payment or commitment or obligation of any kind for the payment of
a bonus or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurrence by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, or creation of any security interest in any of the
Company's assets or properties, except for commercial loans not exceeding
$25,000 in the aggregate and incurred in the ordinary course of business, and
advances to employees for travel and business expenses in the ordinary course
of business, consistent with past practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company not in the ordinary course of business;
(n) commencement or notice or threat of commencement of any lawsuit
or proceeding against or investigation of the Company or its affairs, or any
reasonable basis for any of the foregoing;
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(o) notice of any claim or potential claim of ownership by a third
party of Company Intellectual Property Rights (as defined in Section 2.11
below) or of infringement by the Company of any third party's intellectual
property rights;
(p) material change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or charged
by persons who have licensed Company Intellectual Property Rights to the
Company;
(q) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
(r) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses
(a) through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX"
or, collectively, "TAXES", means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in SCHEDULE 2.8:
(i) The Company, as of the Effective Time, will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns
are true and correct and have been completed in accordance with applicable law.
(ii) The Company, as of the Effective Time: (A) will have paid
or accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA
and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is currently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against on the Balance Sheet, whether asserted or unasserted, contingent or
otherwise, and the Company does not have any knowledge of any basis for the
assertion of any such liability attributable to the Company, or its assets or
operations.
(vi) The Company has provided to Parent copies of all federal
and state income and all state sales and use Tax Returns for all periods since
the date of the Company's incorporation.
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(vii) There are (and as of immediately following the Effective
Date there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("LIENS") on the assets of the Company relating
to or attributable to Taxes.
(viii) The Company does not have any knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company.
(ix) The Company's assets are not treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement to which the Company is a party, including but
not limited to the provisions of this Agreement, covering any employee or
former employee of the Company that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to
Sections 404, 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xiii) The Company is not, nor has it been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) No adjustment relating to any Return filed by the Company
has been proposed formally or, to the knowledge of the Company, informally by
any tax authority to the Company or any representative thereof.
(xv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or otherwise binding upon the Company which has
or reasonably could be expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company does not own real property, nor has the Company
ever owned any real property. SCHEDULE 2.10(a) sets forth a list of all real
property currently, or at any time in the past, leased by the Company, the name
of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. All such current leases are in full force and
effect, are valid and effective in accordance with their respective terms,
11
and there is not, under any of such leases, any existing default or event of
default (or event which with notice or lapse of time, or both, would constitute
a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in SCHEDULE 2.10(b) and except
for liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent,
and which do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.
(c) The Company has sole and exclusive ownership, free and clear of
any Liens, of all customer files and other customer information relating to the
Company's current and former customers (the "CUSTOMER INFORMATION"). No person
other than a Company possesses any claim or rights with respect to use of the
Customer Information.
2.11 INTELLECTUAL PROPERTY.
Schedule 2.11 sets forth all trade names, trademarks, service marks,
and copyrights and their registrations and other intellectual property, owned
by the Company or in which it has any rights or licenses, together with a brief
description of each. The Stockholders have no knowledge of any infringement or
alleged infringement by others of any of the Company's trade names, trademarks,
service marks, or copyrights or other intellectual property. The Company has
not infringed, nor is now infringing, on any trade name, trademark, service
xxxx, or copyright or other intellectual property belonging to any other
person, firm, or corporation. Except as set forth in Schedule 2.11, the Company
is not a party to any license, agreement, or arrangement, whether as licensor,
licensee, franchisor (other than as franchisor pursuant to the franchise
agreements set forth in Schedule 2.11), franchisee, or otherwise, with respect
to any trade names, trademarks, service marks, or applications for them, or any
copyrights or other intellectual property rights. The Company owns, or holds
adequate licenses or other rights to use, all trade names, trademarks, service
marks, and copyrights and other intellectual property necessary for its
business as now conducted by it, and that use does not, and will not, conflict
with, infringe on, or otherwise violate any rights of others.
2.11A Y2K COMPLIANCE. The Company has taken reasonable steps to ensure
that its products (including existing products and technology and products and
technology currently under development) will accurately record, store, process,
calculate and present calendar dates falling on and after (and if applicable,
spans of time including) January 1, 2000, and will calculate any information
dependent on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999,
or calculate any information dependent on or relating to such dates
(collectively, "YEAR 2000 COMPLIANT"). The Company has taken reasonable steps
to ensure that its products will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
All of the Company's internal computer and technology products and systems are
Year 2000 Compliant.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth on SCHEDULE 2.12(a), the Company does not
have, is not a party to and is not bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
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(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement, contract or
commitment (excluding "at will" employee relationships) with an employee or
individual consultant or salesperson or any consulting or sales agreement,
contract or commitment under which any firm or other organization provides
services to the Company,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $50,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $50,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit, including guaranties referred to in
clause (viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $50,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which the Company has granted
or may grant in the future, to any party, a source-code license or option or
other right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, as are all noted in SCHEDULE 2.12(b), the
Company has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any End-User License or any agreement, contract or commitment required to be
set forth on SCHEDULE 2.12(a) or SCHEDULE 2.11(b)
13
(any such agreement, contract or commitment, a "CONTRACT"). Each Contract is in
full force and effect and, except as otherwise disclosed in SCHEDULE 2.12(b),
is not subject to any material default thereunder, of which the Company has
knowledge, by any party obligated to the Company pursuant thereto. Following
the Effective Time, the Company will be permitted to exercise all of the
Company's rights under the Contracts without the payment of any additional
amounts or consideration other than ongoing fees, royalties or payments which
the Company would otherwise be required to pay had the transactions
contemplated by this Agreement not occurred.
2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
2.13, no officer, director or shareholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest
in any entity that purchases from or sells or furnishes to, the Company, any
goods or services or (iii) a beneficial interest in any contract or agreement
set forth in SCHEDULE 2.12(a) or SCHEDULE 2.11(b); provided, that ownership of
no more than one percent (1%) of the outstanding voting stock of a publicly
traded corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
2.14 COMPLIANCE WITH LAWS. Except as set forth in Schedule 2.14, the
Company has complied in all material respects with, is not in material
violation of, and has not received any notices of violation with respect to,
any foreign, federal, state or local statute, law or regulation.
2.15 LITIGATION. Except as set forth in SCHEDULE 2.15, there is no
action, suit or proceeding of any nature pending, or to the Company's
knowledge, threatened against the Company, its properties or any of its
officers or directors, in their respective capacities as such. Except as set
forth in SCHEDULE 2.15, there is no investigation pending or threatened against
the Company, its properties or any of its officers or directors by or before
any Governmental Entity. SCHEDULE 2.15 sets forth, with respect to any pending
or threatened action, suit, proceeding or investigation, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
2.16 INSURANCE. The Company maintains valid and enforceable insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, and operations of the Company, and such insurance policies and
fidelity bonds, which are identified in SCHEDULE 2.16, contain provisions which
are reasonable and customary in the Company's industry, and there is no claim
by the Company pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.17 MINUTE BOOKS. The minute book of the Company made available to
counsel for Parent is the only minute book of the Company and contains a
reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of
incorporation of the Company.
2.18 ENVIRONMENTAL MATTERS.
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(a) HAZARDOUS MATERIALS. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased. No
Hazardous Materials (as defined below) are present as a result of the actions
or omissions of the Company, or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water
thereof, that the Company has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all
of the foregoing being collectively referred to as "HAZARDOUS MATERIALS
ACTIVITIES") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
the Company's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
(e) DEFINITION OF "HAZARDOUS MATERIALS". As used herein, "HAZARDOUS
MATERIALS" shall mean any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
and the regulations promulgated pursuant to such laws.
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on SCHEDULE 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) PLANS. Schedule 2.20 hereto contains a true and complete list
of all the following agreements or plans of the Company which are in effect and
which pertain to any of the Personnel:
(i) "employee welfare benefit plans" and "employee pension
benefit plans," as defined in Sections 3(l) and 3(2), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred
compensation, stock purchase,
15
stock option, incentive, bonus, vacation, severance, disability, health,
hospitalization, medical, life insurance, vision, dental, prescription drug,
supplemental unemployment, layoff, automobile, apprenticeship and training, day
care, scholarship, group legal benefits, fringe benefits, or other employee
benefit plan, program, policy, or arrangement, whether written or unwritten,
formal or informal, which the Company maintains or to which the Company has any
outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the " Plans").
(iii) The Company does not presently contribute and/or has
never contributed or been obligated to contribute to a multiemployer plan as
defined in section 3(37)(A) of ERISA.
(iv) No Plan is subject to Title IV of ERISA.
(v) No Plan has been terminated nor has any accumulated funding
deficiency (as defined in Code Section 412(a)) been incurred, nor has any
waiver from the Internal Revenue Service been received or requested.
(b) EMPLOYMENT MATTERS. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other
benefits or obligations for Employees (other than routine payments to be made
in the normal course of business and consistent with past practice).
(c) LABOR. No work stoppage or labor strike against the Company is
pending or, to the best knowledge of the Company, threatened. Except as set
forth in SCHEDULE 2.20(c), The Company is not involved in or, to the knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a liability to the Company. Except as set forth in
SCHEDULE 2.20(c), the Company is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
2.21 EMPLOYEES. To the Company's knowledge, no employee of the Company
(i) is in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed
to be conducted by the Company or to the use of trade secrets or proprietary
information of others and (ii) has given notice to the Company, nor is the
Company otherwise aware, that any employee intends to terminate his or her
employment with the Company.
2.22 NO INTERFERENCE OR CONFLICT. To the knowledge of the Company, no
shareholder, officer, employee or consultant of the Company is obligated under
any contract or agreement subject to any judgment, decree or order of any court
or administrative agency that would interfere with such person's efforts to
promote the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business as
16
presently conducted or proposed to be conducted nor any activity of such
officers, directors, employees or consultants in connection with the carrying
on of the Company's business as presently conducted or currently proposed to be
conducted, will, to the knowledge of the Company, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract or agreement under which any of such officers, directors,
employees or consultants is now bound.
2.23 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Company possesses all
material consents, licenses, permits, grants or other authorizations issued to
the Company by a Governmental Entity (i) pursuant to which the Company
currently operates or holds any interest in any of its properties or (ii) which
is required for the operation of its business or the holding of any such
interest therein (collectively called "COMPANY AUTHORIZATIONS"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its
business or hold any interest in its properties or assets.
2.24 INVESTMENT REPRESENTATIONS.
(a) The Shareholders are acquiring the Stock Consideration for
their own account, not as nominee or agent, for investment and not with a view
to, or for resale in connection with, any distribution in violation of the
Securities Act, or any state securities laws, and they have has no present
intention of, or agreement relating to, selling, granting participation in or
otherwise distributing such interests in violation of such laws.
(b) The Shareholders understand that (i) the Stock Consideration
has not been registered under the Securities Act of 1933 (the "Securities Act")
or any state securities laws by reason of specific exemptions therefrom, that
the Stock Consideration may be sold, transferred or otherwise disposed of only
if such disposition is registered under the Securities Act and applicable state
securities laws or is exempt from such registration, and that they must
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration; and (ii)
each certificate representing the Stock Consideration will be endorsed with a
legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS AND UNTIL EITHER (A)
SUCH SHARES ARE REGISTERED UNDER THE APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR (B) AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED."
(c) The Shareholders are knowledgeable and experienced investors
and have had an opportunity to ask questions and review information about the
business and financial condition of Parent.
2.25 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Company in this Agreement (as modified by the Company Schedules),
nor any statement made in any schedule or certificate furnished by the Company
pursuant to this Agreement, or furnished in or in connection with documents
mailed or delivered to the shareholders of the Company in connection with
soliciting their consent to this Agreement and the Merger, 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.
2.26 DISCLOSURE. No statement by the Company or the Shareholders
contained in this Agreement and the exhibits attached hereto and any written
statement or certificate furnished or to be
17
furnished to Parent pursuant hereto or in connection with the transactions
contemplated hereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a document dated as of the date hereof
specifically referencing the appropriate schedule or section number to the
representations, warranties or covenants in this Agreement which reasonably
identifies the basis for an exception to a representation, warranty or covenant
in this Agreement and which is delivered by Parent to Company prior to the
execution of this Agreement (the "PARENT SCHEDULES"), Parent and Merger Sub
represent and warrant to the Company and the Shareholders as set forth below.
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on Parent and
Merger Sub as a whole.
3.2 AUTHORITY. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. The execution and delivery of
this Agreement by Parent and Merger Sub does not, and, as of the Effective
Time, the consummation of the transactions contemplated hereby will not,
constitute a Conflict with (i) any provision of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
properties or assets, except, with respect to the preceding clause (ii), for
any Conflict which could not reasonably be expected to have a material adverse
effect on the business, financial condition, results of operations, assets
(including intangible assets), liabilities or prospects of Parent ("PARENT
MATERIAL ADVERSE EFFECT"). No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Conflict) is required by or with respect
to Parent or Merger Sub in connection with Parent's or Merger Sub's execution
and delivery of this Agreement or its consummation of the transactions
contemplated hereby, except (i) the filing of the Merger Agreement with the
Delaware Secretary of State and the Texas Secretary of State, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) for such other consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings which are set forth on
SCHEDULE 3.2, and (iv) where the failure to obtain or make any such consent,
waiver, approval, order, authorization, registration, declaration or filing
could not reasonably be expected to have a Parent Material Adverse Effect.
18
3.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 30,000,000 shares of
Common Stock, of which 9,351,917 shares were issued and outstanding as of May
20, 1999, and 1,000,000 shares of Preferred Stock, none of which are issued or
outstanding. All of the outstanding shares of Parent Common Stock are validly
issued, fully paid, nonassessable and free of preemptive rights. The authorized
capital stock of Merger Sub consists of 1,000 shares of Common Stock, all of
which, as of the date hereof, are issued and outstanding and are held by Parent.
All such shares have been duly authorized, and all such issued and outstanding
shares have been validly issued, are fully paid and nonassessable and are free
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid and
non-assessable, and free of preemptive rights.
3.4 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Parent has received any notice of
assertion against Parent, which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
3.5 PARENT FINANCIAL STATEMENTS.
(a) SCHEDULE 3.5 sets forth Parent's unaudited balance sheet as of
April 30, 1999 (the "PARENT FINANCIALS"). Parent Financials are correct in all
material respects and present fairly the financial condition of Parent included
as of the dates and during the periods indicated therein, subject to normal
year-end adjustments and the absence of full footnote disclosure in the case of
unaudited financial statements, which such adjustments will not be material in
amount or significance.
3.6 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.6,
Parent does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (which is required to be reflected in
financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, has not been reflected in
the Interim Balance Sheet.
3.7 NO CHANGES. Except as set forth in SCHEDULE 3.7, since the date of
the Interim Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by Parent except in the ordinary course of business
as conducted on the date of the Interim Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of Parent;
(c) capital expenditure or commitment by Parent, either individually
or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of Parent (whether or not covered by insurance) having a
loss value in excess of $25,000;
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by Parent;
(g) revaluation by Parent of any of its assets, in excess of $25,000.
19
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of Parent, or any direct or
indirect redemption, purchase or other acquisition by Parent of Parent Capital
Stock, or any split, combination or reclassification in respect of any shares of
Parent Capital Stock, or any issuance or authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Parent Capital Stock;
(i) increase in the salary or other compensation payable or to become
payable by Parent to any of its officers or directors and, except in the
ordinary course of business, to any employees or advisors, or the declaration,
payment or commitment or obligation of any kind for the payment of a bonus or
other additional salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the assets or
properties of Parent, except in the ordinary course of business as conducted on
that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which Parent is a party or by which it is bound;
(l) loan by Parent to any person or entity, incurrence by Parent of
any indebtedness, guaranteeing by Parent of any indebtedness, issuance or sale
of any debt securities of Parent or guaranteeing of any debt securities of
others, or creation of any security interest in any of Parent's assets or
properties, except for commercial loans not exceeding $25,000 in the aggregate,
and advances to employees for travel and business expenses in the ordinary
course of business, consistent with past practices;
(m) waiver or release of any right or claim of Parent, including any
write-off or other compromise of any account receivable of Parent not in the
ordinary course of business;
(n) commencement or notice or threat of commencement of any lawsuit
or proceeding against or investigation of Parent or its affairs, or any
reasonable basis for any of the foregoing;
(o) notice of any claim or potential claim of ownership by a third
party of Parent Intellectual Property Rights (as defined in Section 3.11 below)
or of infringement by Parent of any third party's intellectual property rights;
(p) material change in pricing or royalties set or charged by Parent
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Parent Intellectual Property Rights to Parent;
(q) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on Parent; or
(r) negotiation or agreement by Parent or any officer or employees
thereof to do any of the things described in the preceding clauses (a) through
(q) (other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
3.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree
to which Parent is a party or otherwise binding upon Parent which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of Parent, any acquisition of property (tangible or
intangible) by Parent or the conduct of business by Parent. Without limiting
the foregoing, Parent has not entered into any agreement under which Parent is
restricted from selling, licensing or otherwise distributing any of its
20
products to any class of customers, in any geographic area, during any period
of time or in any segment of the market.
3.9 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Parent does not own real property, nor has Parent ever owned any
real property. SCHEDULE 3.9(a) sets forth a list of all real property currently,
or at any time in the past, leased by Parent, the name of the lessor, the date
of the lease and each amendment thereto and, with respect to any current lease,
the aggregate annual rental and/or other fees payable under any such lease. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default).
(b) Parent has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in Parent Financials or in SCHEDULE 3.9(b) and except for
liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
(c) Parent has sole and exclusive ownership, free and clear of any
Liens, of all customer files and other customer information relating to Parent's
current and former customers (the "CUSTOMER INFORMATION"). No person other than
Parent possesses any claim or rights with respect to use of the Customer
Information.
3.10 INTELLECTUAL PROPERTY.
Schedule 3.10 sets forth all trade names, trademarks, service marks,
and copyrights and their registrations, owned by Parent or in which it has any
rights or licenses, together with a brief description of each. The Stockholders
have no knowledge of any infringement or alleged infringement by others of any
trade name, trademark, service xxxx, or copyright. Parent has not infringed,
nor is now infringing, on any trade name, trademark, service xxxx, or copyright
belonging to any other person, firm, or corporation. Except as set forth in
Schedule 3.10, Parent is not a party to any license, agreement, or arrangement,
whether as licensor, licensee, franchisor (other than as franchisor pursuant to
the franchise agreements set forth in Schedule 3.10), franchisee, or otherwise,
with respect to any trade names, trademarks, service marks, or applications for
them, or any copyrights. Parent owns, or holds adequate licenses or other
rights to use, all trade names, trademarks, service marks, and copyrights
necessary for its business as now conducted by it, and that use does not, and
will not, conflict with, infringe on, or otherwise violate any rights of
others.
3.11 Y2K COMPLIANCE.
Parent has taken reasonable steps to ensure that its products
(including existing products and technology and products and technology
currently under development) will accurately record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans of
time including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"YEAR 2000 COMPLIANT"). Parent has taken reasonable steps to ensure that its
products will lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000. All of Parent's internal
computer and technology products and systems are Year 2000 Compliant.
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3.12 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth on SCHEDULE 3.12(a), Parent does not have,
is not a party to and is not bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement, contract or
commitment (excluding "at will" employee relationships) with an employee or
individual consultant or salesperson or any consulting or sales agreement,
contract or commitment under which any firm or other organization provides
services to Parent,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of $50,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of Parent to engage in any line of business or to
compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $50,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of Parent's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $50,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
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(xvi) any agreement pursuant to which Parent has granted or may
grant in the future, to any party, a source-code license or option or other
right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that involves
$50,000 or more or is not cancelable without penalty within thirty (30) days.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, as are all noted in SCHEDULE 3.12(b), Parent
has not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
End-User License or any agreement, contract or commitment required to be set
forth on SCHEDULE 3.12(a) or SCHEDULE 3.12(b) (any such agreement, contract or
commitment, a "CONTRACT"). Each Contract is in full force and effect and, except
as otherwise disclosed in SCHEDULE 3.12(b), is not subject to any material
default thereunder, of which Parent has knowledge, by any party obligated to a
Parent pursuant thereto. Following the Effective Time, Parent will be permitted
to exercise all of such Parent's rights under the Contracts without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Parent would otherwise be required to pay had the transactions
contemplated by this Agreement not occurred.
3.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
3.13, no officer, director or shareholder of Parent (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that Parent
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest
in any entity that purchases from or sells or furnishes to, Parent, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in SCHEDULE 3.12(a) or SCHEDULE 3.12(b); provided, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 3.13.
3.14 COMPLIANCE WITH LAWS. Parent has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
3.15 INSURANCE. Parent maintains valid and enforceable insurance
policies and fidelity bonds covering its assets, business, equipment,
properties, and operations, and such insurance policies and fidelity bonds,
which are identified in SCHEDULE 3.15, contain provisions which are reasonable
and customary in Parent's industry, and there is no claim by Parent pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Parent is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
Parent has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
3.16 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIALS. Parent has not operated any underground
storage tanks, and has no knowledge of the existence, at any time, of any
underground storage tank (or related piping or pumps), at any property that
Parent has at any time owned, operated, occupied or leased. No Hazardous
Materials (as defined below) are present as a result of the actions or omissions
of Parent, or, to Parent's knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that Parent has at any
time owned, operated, occupied or leased.
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(b) HAZARDOUS MATERIALS ACTIVITIES. Parent has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Effective Time, nor has Parent disposed of, transported, sold, or manufactured
any product containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "HAZARDOUS MATERIALS ACTIVITIES") in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. Parent currently holds all environmental approvals,
permits, licenses, clearances and consents (the "ENVIRONMENTAL PERMITS")
necessary for the conduct of such Parent's Hazardous Material Activities and
other businesses of such Parent as such activities and businesses are currently
being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of Parent. Parent is not aware of
any fact or circumstance which could involve Parent in any environmental
litigation or impose upon Parent any environmental liability.
(e) DEFINITION OF "HAZARDOUS MATERIALS". As used herein, "HAZARDOUS
MATERIALS" shall mean any substance that has been designated by any Governmental
Entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, oil and petroleum products, urea-formaldehyde and
all substances listed as a "hazardous substance," "hazardous waste," "hazardous
material" or "toxic substance" or words of similar import, under any law,
including but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act of 1976, as amended; the Federal Water Pollution Control Act,
as amended; the Clean Air Act, as amended, and the regulations promulgated
pursuant to such laws.
3.17 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Parent has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.18 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Schedule 3.18 hereto contains a true and complete list of all
the following agreements or plans of Parent which are in effect and which
pertain to any of the Personnel:
(i) "employee welfare benefit plans" and "employee pension
benefit plans," as defined in Sections 3(l) and 3(2), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, health, hospitalization, medical, life insurance, vision,
dental, prescription drug, supplemental unemployment, layoff, automobile,
apprenticeship and training, day care, scholarship, group legal benefits, fringe
benefits, or other employee benefit plan, program, policy, or arrangement,
whether written or unwritten, formal or informal, which Parent maintains or to
which Parent has any outstanding, present, or future obligation to contribute to
or make payments under, whether voluntary, contingent, or otherwise (the plans,
programs, policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Plans").
24
(iii) Parent does not presently contribute and/or has never
contributed or been obligated to contribute to a multiemployer plan as defined
in section 3(37)(A) of ERISA.
(iv) No Plan is subject to Title IV of ERISA.
(v) No Plan has been terminated nor has any accumulated funding
deficiency (as defined in Code Section 412(a)) been incurred, nor has any waiver
from the Internal Revenue Service been received or requested.
(b) EMPLOYMENT MATTERS. Parent (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(c) LABOR. No work stoppage or labor strike against Parent is
pending or, to the best knowledge of Parent, threatened. Parent is not involved
in or, to the knowledge of Parent, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to Parent. Parent has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a liability to Parent. Parent is not presently, nor has it
been in the past, a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees and no collective bargaining
agreement is being negotiated by Parent.
3.19 EMPLOYEES. To Parent's knowledge, no employee of Parent (i) is in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by Parent because of
the nature of the business conducted or presently proposed to be conducted by
Parent or to the use of trade secrets or proprietary information of others and
(ii) has given notice to Parent, nor is Parent otherwise aware, that any
employee intends to terminate his or her employment with Parent.
3.20 NO INTERFERENCE OR CONFLICT. To the knowledge of Parent, no
shareholder, officer, employee or consultant of Parent is obligated under any
contract or agreement subject to any judgment, decree or order of any court or
administrative agency that would interfere with such person's efforts to
promote the interests of Parent or that would interfere with Parent's business.
Neither the execution nor delivery of this Agreement, nor the carrying on of
Parent's business as presently conducted or proposed to be conducted nor any
activity of such officers, directors, employees or consultants in connection
with the carrying on of Parent's business as presently conducted or currently
proposed to be conducted, will, to the knowledge of Parent, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract or agreement under which any of such officers,
directors, employees or consultants is now bound.
3.21 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. Parent possesses all
material consents, licenses, permits, grants or other authorizations issued to
such Parent by a Governmental Entity (i) pursuant to which Parent currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
therein (collectively called "PARENT AUTHORIZATIONS"), which Parent
Authorizations are in full force and effect and constitute all
25
Parent Authorizations required to permit Parent to operate or conduct its
business or hold any interest in its properties or assets.
3.22 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Parent in this Agreement (as modified by Parent Schedules), nor any
statement made in any schedule or certificate furnished by Parent pursuant to
this Agreement, or furnished in or in connection with documents mailed or
delivered to the shareholders of Parent in connection with soliciting their
consent to this Agreement and the Mergers, 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.
3.23 DISCLOSURE. No statement by Parent contained in this Agreement and
the exhibits attached hereto and any written statement or certificate furnished
or to be furnished to Parent pursuant hereto or in connection with the
transactions contemplated hereby (when read together) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SALE AND REGISTRATION OF SHARES; SHAREHOLDER MATTERS.
(a) SALE OF SHARES. The parties hereto acknowledge and agree that the
shares of Parent Common Stock issuable to the shareholders pursuant to Section
1.6 hereof, shall constitute "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). The certificates for
shares of Parent Common Stock to be issued in the Merger shall bear appropriate
legends to identify such privately placed shares as being restricted under the
Securities Act, to comply with applicable state securities laws and, if
applicable, to notice the restrictions on transfer pursuant to the Affiliate
Agreement (as defined below). It is acknowledged and understood that Parent is
relying upon certain written representations made by each stockholder.
(b) COMPANY SHAREHOLDER APPROVAL. As promptly as practicable after
the execution of this Agreement the Company shall submit this Agreement and the
transactions contemplated hereby to its shareholders for approval and adoption
as provided by Texas Law and its Articles of Incorporation and Bylaws. The
Company shall use its best efforts to solicit and obtain the written consent of
its shareholders to approve the Merger and this Agreement and to enable the
Closing to occur as promptly as practicable.
(c) REGISTRATION RIGHTS. Parent and the Shareholders shall enter into
a Registration Rights Agreement on substantially the terms and conditions set
forth in the Registration Rights Agreement attached hereto as EXHIBIT D, which
shall include the right to demand registration of any shares of Parent Common
Stock (constituting at least 20% of the shares owned by the Shareholders)
obtained by the Shareholders pursuant to the transactions contemplated by this
Agreement, and including shares underlying options, on two separate occasions
following the date six months after the commencement of trading of Parent Common
Stock, and to unlimited piggyback rights in connection with any registration
after such date of shares by Parent (other than pursuant to a Form S-8 or Form
S-4 or successor forms), unless Parent shall be advised by its investment
bankers in a registration that such registration rights are not reasonably
possible in light of market conditions or would impair the likelihood that the
offering could be consummated;
26
provided further that the Shareholders shall enter into lockup agreements if
requested by Parent's investment bankers on substantially the same terms as the
executive officers of Parent.
(d) ADDITIONAL ASSURANCES. At the request of Parent, the Company
shall use its commercially reasonable efforts to cause the Company's
shareholders to execute and deliver to Parent such instruments and do and
perform such acts and things as may be necessary or desirable for complying with
all applicable securities laws and state corporate law.
5.2 ACCESS TO INFORMATION. Each party shall afford the others and their
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the others may reasonably request,
subject, in the case of Parent, to reasonable limits on access to its technical
and other nonpublic information. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions of the
parties to consummate the Merger.
5.3 CONFIDENTIALITY. Each party agrees to keep information or knowledge
obtained in any investigation pursuant hereto, or pursuant to the negotiation
and execution of this Agreement or the effectuation of the transactions
contemplated hereby, confidential, and also agrees not to use such knowledge or
information; provided, however, that the foregoing shall not apply to
information or knowledge which (a) a party can demonstrate was already lawfully
in its possession on a non-confidential basis prior to the disclosure thereof
by the other party, (b) is generally known to the public and did not become so
known through any violation of law, (c) became known to the public through no
fault of such party, (d) is later lawfully acquired by such party from other
sources, (e) is required to be disclosed by order of court or government agency
with subpoena powers or is required to be disclosed under applicable federal
securities laws or (f) which is disclosed in the course of any litigation
between any of the parties hereto.
5.4 EXPENSES. If the Merger is not consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby shall be the obligation
of the respective party incurring such fees and expenses.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, federal and state securities laws) prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Company prior to release, provided that such approval shall not
be unreasonably withheld or delayed.
5.6 CONSENTS. The Company shall use its commercially reasonable efforts
to obtain the consents, waivers and approvals of parties to any Contract as may
be required in connection with the Merger, or for any such Contract to remain
in full force and effect without limitation, modification or alteration after
the Effective Time (all of such consents, waivers and approvals are set forth
in the Company Schedules) so as to preserve all rights of and benefits to the
Company and Parent thereunder.
5.7 FIRPTA COMPLIANCE. On or prior to the Closing Date, The Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.8 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to ensure that its representations and
warranties remain true and correct in all material respects, and to take
promptly, or cause
27
to be taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals, to effect all necessary
registrations and filings, and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement; provided that Parent
shall not be required to agree to any divestiture by Parent or the Company or
any of Parent's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Parent or its subsidiaries or affiliates or the
Company or its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.9 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
5.10 CERTAIN BENEFIT PLANS. At or prior to the Closing, the Company
shall terminate its existing profit sharing plan and cause the assets of the
Plan to be distributed among its participants.
5.11 COMPANY'S AUDITORS. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of Company Financial
Statements (including pro forma financial statements if required) as required
by Parent to comply with applicable SEC regulations, (ii) the review of the
Company's audit work papers for up to the past two fiscal years, including
interim periods and access for review or examination of selected interim
financial statements and data, and (iii) the delivery of such representations
from the Company's independent accountants as may be reasonably requested by
Parent or its accountants.
5.12 NON-COMPETITION AGREEMENTS. The Company and Shareholders shall
deliver or use reasonable efforts to cause to be delivered to Parent an
executed Non-Competition Agreement in substantially the form attached hereto as
EXHIBIT E concurrently with the execution of this Agreement from each of the
persons listed on SCHEDULE 5.12.
5.13 TAX-FREE REORGANIZATION. Parent and the Company shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code.
5.14 RELEASES OF LIABILITY. Parent shall use its best efforts to obtain
the release of the Shareholders from any personal liability or contingent
liability due to their guaranty of any obligations of Companies identified in
SCHEDULE 5.14. If any such release is not obtainable, Parent shall indemnify
the Shareholders against any liability therefor.
5.15 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of the other 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.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the stockholders of Company by the requisite vote
under applicable law and the Company's Articles of Incorporation.
(b) GOVERNMENT APPROVALS. All approvals of governments and
governmental agencies necessary to consummate the transactions hereunder shall
have been received, and the Merger Certificates shall have been filed with the
Secretaries of State of Texas and Delaware, and the Merger shall have become
effective.
(c) 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.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
Company to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a material adverse
effect on Parent; and the Company shall have received a certificate to such
effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) OMITTED
(d) OPINION OF COUNSEL. Shareholders shall have received an opinion
of Parent's counsel in the form of Exhibit F hereto.
(e) SUBSTANTIAL ADVERSE CHANGE. There shall not have occurred any
adverse change in the business, assets, (including intangible assets),
liabilities, financial condition, results of operations or prospects of the
Company since the date of this Agreement having a Substantial Adverse Effect as
defined in Section 6.3(b) below.
(f) CONTEMPORANEOUS CLOSING. Parent shall have closed the Stock
Purchase Agreement dated the date hereof with the Shareholders for the purchase
of all outstanding common stock of FCI Services, Inc. and Forward
Communications, Inc.
29
(g) EMPLOYMENT AGREEMENT. Parent shall have executed and delivered to
the Employment Agreement with Xxxx X. Xxxxxx in the form attached hereto as
EXHIBIT H.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES AT SIGNING. The representations
and warranties of the Company contained in this Agreement shall have been true
and correct in all material respects (except for those representations and
warranties which are by their terms qualified by a standard of materiality,
which representations and warranties shall have been true and correct in all
respects) as of the date of this Agreement.
(b) REPRESENTATIONS AND WARRANTIES AT CLOSING. The representations
and warranties of the Company contained in this Agreement shall be true and
correct in all material respects (except for those representations and
warranties which are by their terms qualified by a standard of materiality,
which representations and warranties shall be true and correct in all respects)
on and as of the Closing Date (without regard to any updates to Company
Schedules, unless otherwise agreed by Parent), except for changes contemplated
by this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date, except, in all such cases, for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a substantial adverse effect on the
business, financial condition, results of operations, assets, liabilities or
prospects of the Company or Parent (hereinafter referred to as a "SUBSTANTIAL
ADVERSE EFFECT"); and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by an executive officer of the
Company.
(c) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time (excluding solely the covenants of Section 5.6, the satisfaction
of which shall not constitute a condition to Parent's or Merger Sub's
obligations to consummate the Merger and the transactions contemplated by this
Agreement), except for non-performance of such agreements and covenants which
neither has, nor reasonably could be expected to have, a Substantial Adverse
Effect, and Parent and Merger Sub shall have received a certificate to such
effect signed by a duly authorized officer of the Company.
(d) EMPLOYMENT AND CONSULTING AND NON-COMPETITION AGREEMENTS. Xxxx X.
Xxxxxx shall have executed and delivered to Parent an Employment Agreement in
the form attached hereto as Exhibit H, and Xxxxx X. Xxxxx shall have executed
and delivered to Parent a Consulting and Non-Competition Agreement in the form
attached hereto as EXHIBIT E.
(e) SHAREHOLDER APPROVAL. The Shareholders holding all of the shares
of Company Capital Stock shall have approved this Agreement, the Merger and the
transactions contemplated hereby and thereby.
(f) SUBSTANTIAL ADVERSE CHANGE. There shall not have occurred any
adverse change in the business, assets (including intangible assets),
liabilities, financial condition, results of operations or prospects of the
Company since the date of this Agreement having a Substantial Adverse Effect.
30
(g) DISSENTERS' RIGHTS. Holders of more than 5% of the outstanding
shares of Company Capital Stock shall not have exercised, nor shall they have
any continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(h) OPINION. Parent shall have received an opinion of Shareholders
counsel in the form attached hereto as Exhibit G.
ARTICLE VII
ESCROW AND INDEMNIFICATION
7.1 ESCROW. Subject to the following requirements, the Escrow Fund (as
defined in the Escrow Agreement attached hereto as EXHIBIT C) shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., Texas time, on the date which is ten days after receipt of the audit or
review (at Parent's option) of the Company's financial statements for the year
ending December 31, 1999, but in no event later than April 15, 2000 (the
"ESCROW PERIOD"); provided that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Parent, subject to the objection of the Shareholders and
the subsequent arbitration of the matter in the manner provided in Section 7.3
hereof, to satisfy any claims concerning facts and circumstances existing prior
to the termination of such Escrow Period specified in any Officer's Certificate
(as defined in the Escrow Agreement attached hereto as EXHIBIT C) delivered to
the Escrow Agent prior to termination of such Escrow Period; provided further
that the Escrow Fund will terminate in full upon final and complete resolution
of all disputed matters. The Escrow Fund shall be held, invested and disbursed
in accordance with the provisions of the Escrow Agreement attached hereto as
EXHIBIT C.
7.2 INDEMNIFICATION.
(1) Parent's Losses. (a) Shareholders severally agree to indemnify
and hold harmless Parent, Merger Sub and the Company and their respective
directors, officers, employees, representatives, agents and attorneys,
successors and assigns from, against and in respect of any and all Parent's
Losses (as defined below) suffered, sustained, incurred or required to be paid
by any of them by reason of (i) any representation or warranty made the Company
or Shareholders in or pursuant to this Agreement being untrue or incorrect in
any respect; or (ii) any failure by the Company or Shareholders to observe or
perform their covenants and agreements set forth in this Agreement or any other
agreement or document executed by them in connection with the transactions
contemplated hereby.
(b) "Parent's Losses" shall mean all damages (including, without
limitation, amounts paid in settlement with Shareholders' consent, which consent
may not be unreasonably withheld), losses, obligations, liabilities, liens,
deficiencies, costs (including, without limitation, reasonable attorneys' fees),
penalties, fines, interest, monetary sanctions and expenses, including, without
limitation, reasonable attorneys' fees and costs incurred to comply with
injunctions and other court and agency orders, and other costs and expenses
incident to any suit, action, investigation, claim or proceeding or to establish
or enforce Parent's or such other persons' right to indemnification hereunder.
(2) Shareholders' Losses. (a) Parent and the Company jointly and
severally agree to indemnify and hold harmless Shareholders, and their
respective representatives, agents, attorneys, successors and assigns from,
against, for and in respect of any all Shareholders' Losses (defined below)
suffered, sustained, incurred or required to be paid by either Shareholder by
reason of (i) any representation or warranty made by Parent in or pursuant to
this Agreement being untrue or incorrect in any respect; (ii) any failure by
Parent to observe or perform its covenants and agreements set forth in this
Agreement or any other agreement or document executed by it in connection with
the transactions contemplated hereby; (iii) those liabilities, obligations,
claims,
31
contingencies and encumbrances accruing or arising after the Closing in
connection with the business of the Company, except to the extent that such
liabilities, obligations, claims, contingencies or encumbrances are
attributable to a breach of warranty, representation or covenant by the Company
and/or Shareholders prior to the Closing; or (iv) those matters described in
Section 5.14.
(b) "Shareholders' Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with Parent's consent, which
consent may not be reasonably withheld), losses, obligations, liabilities,
claims, deficiencies, costs (including, without limitation, reasonable
attorneys' fees) and expenses, including, without limitation, reasonable
attorneys' fees and costs incurred to comply with injunctions and other court
and agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce Shareholders' or
such other persons' right to indemnification hereunder.
(3) Notice of Loss. Except to the extent set forth in the next
sentence, Parent and Shareholders will not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice setting forth in reasonable detail the breach or other matter
which is asserted has been given to the Indemnifying Party (defined below) and,
in addition, if such matter arises out of a suit, action, investigation,
proceeding or claim, such notice is given promptly, but in any event within ten
(10) days after the Indemnified Party (defined below) is given notice of the
claim or the commencement of the suit, action, investigation or proceeding.
Notwithstanding the preceding sentence, failure of the Indemnified Party to give
notice hereunder shall not release the Indemnifying Party from its obligations
under this Article, except to the extent the Indemnifying Party is actually
prejudiced by such failure to give notice. With respect to Parent's Losses,
Shareholders, jointly and severally, shall be the Indemnifying Party and Parent,
Company and their respective directors, officers, employees, representatives,
agents and attorneys shall be Indemnified Parties. With respect to Shareholders'
Losses, Parent shall be the Indemnifying Party and Shareholders and their
respective directors, officers, employees, representatives, agents and attorneys
shall be the Indemnified Party.
(4) Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding ("Action") for which indemnification might be
claimed by an Indemnified Party, the Indemnifying Party shall be entitled to
defend, contest or otherwise protect against any Action at its own cost and
expense, and the Indemnified Party must cooperate in any such defense or other
action. The Indemnified Party shall have the right, but not obligation, to
participate at its own expense in defense thereof by counsel of its choosing,
but the Indemnifying Party shall be entitled to control the defense unless the
Indemnified Party has relieved the Indemnifying Party from liability with
respect to the particular matter or the Indemnifying Party fails to assume
defense of the matter. In the event the Indemnifying Party fails to defend,
contest or otherwise protect in a timely manner against any such Action, the
Indemnified Party shall have the right, but not obligation, to defend, contest
or otherwise protect against the same and make any compromise or settlement
thereof and recover the entire cost thereof from the Indemnifying Party
including, without limitation, reasonable attorneys' fees, disbursements and all
amounts paid as a result of such Action or the compromise or settlement thereof;
provided, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise, which
settlement or compromise the Indemnifying Party may reject, in its reasonable
judgment, within thirty days of receipt of notice. Failure to reject such notice
within such thirty day period shall be deemed acceptance of such settlement or
compromise. The Indemnified Party shall have the right to effect a settlement or
compromise over the objection of the Indemnifying Party; provided, that if (i)
the Indemnifying Party is contesting such claim in good faith or (ii) the
Indemnifying Party has assumed the defense from the Indemnified Party, the
Indemnified Party waives any right to indemnity therefor. If the Indemnifying
Party undertakes the defense of such matters, the Indemnified Party shall not,
so long as the Indemnifying Party does not abandon the defense thereof, be
entitled to recover from the Indemnifying Party any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation undertaken by Indemnified
Party with prior written consent of Indemnifying Party.
(5) Cooperation. The Company, Parent, Shareholders and each of their
Affiliates, successors and
32
assigns shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party and, during normal business
hours, shall afford each other access to their books and records and employees
relating to such suit, action, investigation, proceeding or claim and shall
furnish each other all such further information that they have the right and
power to furnish as may reasonably be necessary to defend such suit, action,
investigation, proceeding or claim, including, without limitation, reports,
studies, correspondence and other documentation relating to EPA, OSHA, and EEOC
matters.
(6) Waiver of Contribution and Indemnification. Shareholders hereby
waive and release any rights of indemnification or contribution they may have
against the Company as a result of payments made under this Article.
(7) Time to Assert Claims. Any claim asserted pursuant to Section
7.2(1) or (2) above must be asserted by written notice given by one party to the
other on or before the later of (i) the date of the release of the first audit
report of Parent containing combined financial statements of Parent and the
Company and (ii) the date which is one (1) year from the date of Closing or the
expiration of the statute of limitations period with respect to claims based on
breaches of representations concerning taxes or environmental matters.
(8) Access to Records. Shareholders, or their agents, shall be
afforded reasonable access to Parent's and Company's books and records during
normal business hours upon reasonable notice for the purpose of verifying any
claim against Shareholders hereunder. Shareholders or their agents may be
required to sign an appropriate confidentiality agreement prior to any
inspection of books and records hereunder. Parent or its agents shall be
afforded reasonable access to the Shareholders' and Company's books and records
during normal business hours upon reasonable notice for the purpose of verifying
any claim against Parent or Shareholders hereunder. Parent or its agents may be
required to sign an appropriate confidentiality agreement prior to any
inspection of books and records hereunder.
(9) Limitations on Indemnification. Notwithstanding anything to the
contrary, no Indemnifying Party shall have any liability (for indemnification or
otherwise) or obligation to indemnify an Indemnified Party until the total of
all Losses exceeds $150,000 and then, the Indemnifying Party shall be liable for
all amounts of such Losses; provided that, in no event shall an Indemnifying
Party have any liability (for indemnification or otherwise) or obligation to
indemnify an Indemnified Party for any amounts of any Losses in excess of an
aggregate amount of $1,000,000 (other than with respect to third party claims
arising under Sections 2.8, 2.15 or 2.18). The limitations provided for in this
Section shall be aggregated with the limitations set forth in Section 7.1(9) of
the Stock Purchase Agreement dated the date hereof among Parent and the
Shareholders, among others.
(10) Sole Remedy. The provisions of this Article VII shall be the
sole remedies of the parties for any claim arising under this Agreement or as a
result of the dealings of the parties leading up to and embodied in this
Agreement, except with respect to acts or omissions constituting fraud or
intentional misrepresentation.
7.4 RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case of any dispute between the parties under the
indemnification provisions of this Agreement or the Escrow Agreement, the
Shareholders and Parent shall attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders may demand arbitration of the
matter unless the amount of the damage or loss is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by one arbitrator.
Parent and the Shareholders shall agree on such arbitrator; provided that if
Parent and the Shareholders cannot agree on such arbitrator, either Parent or
the Shareholders can request that the American Arbitration Association ("AAA")
select the arbitrator. The arbitrator selected by
33
AAA shall determine the dispute in accordance with Article VII of this
Agreement. The arbitrator shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing
the parties an opportunity, adequate in the sole judgment of the arbitrator, to
discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator shall rule upon motions to compel or
limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a court of competent law or
equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator as to the validity
and amount of any claim in such Officer's Certificate (as defined in the Escrow
Agreement attached hereto as EXHIBIT C) shall be binding and conclusive upon
the parties to this Agreement, and the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Dallas County, Texas under the rules then in effect of the American Arbitration
Association.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Subject to the provisions of Sections 8.2 and 8.3
below, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Central time) on June 30 1999, (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the primary cause of, or resulted in, the failure of the Effective Time
to occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any governmental
entity that would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of all or any portion of the business of
the Company or (ii) compel Parent or the Company to dispose of or hold separate
all or a material portion of the business or assets of the Company or Parent as
a result of the Merger;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and (i) such breach has not been cured within ten (10) business days
after written notice to the Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a result
of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as the case
may be, would not then be satisfied;
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and (i) such breach has not been cured within ten (10)
business days after written notice to Parent (provided that, no cure period
shall be required for a breach which by its nature
34
cannot be cured), and (ii) as a result of such breach the conditions set forth
in Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Parent, Merger Sub or
the Company, or their respective officers, directors or stockholders, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; and provided further that, the provisions of Sections 5.3 and
5.4 and Articles VIII and IX (other than Section 9.1) of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
8.3 AMENDMENT. Except as is otherwise required by applicable law after
the shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided, however, that
Parent may in its sole discretion amend this Agreement and all related
agreements to the extent necessary to provide for the consummation of the
acquisition of the Company contemplated hereby through the statutory merger of
Company with and into Merger Sub.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
consummation of the Mergers and shall (except to the extent that survival is
necessary to resolve unsatisfied claims) terminate on the later of one (1) year
after the Closing Date or the expiration of the relevant statute of limitations
period with respect to tax or environmental matters.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
If to the Company
or the Shareholders:
Forward Freight Inc.
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
E-Mail: xxxxx@xxxxxxxxxxxxxxxx.xxx
35
with a copy to:
Glast, Xxxxxxxx & Xxxxxx, PC
2200 One Galleria Tower
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
E-Mail: xxxxxxxx@xxx-xxx.xxx
If to Parent, the Companies
or the Merger Sub:
Xxxxxxxxx.xxx, inc.
0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
E-Mail: xxxxxxxxx@xxxxxxxxx.xxx
with a copy to:
Wood, Exall & Bonnet, L.L.P.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
E-Mail: xxxxx@xxxxxxxxx.xxx
9.3 INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
9.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and
36
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon them
in any manner authorized by the laws of the State of Texas for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
- SIGNATURES FOLLOW -
37
IN WITNESS WHEREOF, Parent, the Merger Sub, the Company and the
Stockholders have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
XXXXXXXXX.XXX, INC.
By: /s/ XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx, President
F3 ACQUISITION CORPORATION
By: /s/ XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx, President
FORWARD FREIGHT INC.
By: /s/ XXXXX X. XXXXX
------------------------------------
Xxxxx X. Xxxxx, President
THE STOCKHOLDERS
/s/ XXXXX X. XXXXX
----------------------------------------
Xxxxx X. Xxxxx
/s/ XXXX X. XXXXXX
----------------------------------------
Xxxx X. Xxxxxx
38
SCHEDULE 1.6(a)
CAPITALIZATION OF THE COMPANY; MERGER CONSIDERATION
FORWARD FREIGHT INC.
Merger Consideration
Stockholder Number of Shares % of Shares Cash Parent Shares Options
----------- ---------------- ----------- ---- ------------- -------
Xxxxx X. Xxxxx 50,000 50.00 500,000 150,000 100,000
Xxxx X. Xxxxxx 50,000 50.00 0 400,000 100,000
Total 100,000 100.00% $500,000 550,000 200,000
