AGREEMENT AND PLAN OF MERGER
by and among
TAKE-TWO INTERACTIVE SOFTWARE, INC.,
(a Delaware corporation)
TALONSOFT, INC.,
(a Delaware corporation)
TALONSOFT, INC.,
(a Maryland corporation)
XXXX XXXXXXXX,
XXXXX XXXXXXXX,
XXXXX XXXX,
and
XXXXXXX XXXX
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December 22, 1998
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TABLE OF CONTENTS
Page
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1. The Merger ...................................................... 1
1.1. The Merger ............................................ 1
1.2. Effective Date ........................................ 2
1.3. Effect of the Merger .................................. 2
1.4. Certificate of Incorporation; By-Laws ................. 2
1.5. Directors and Officers of Surviving Corporation ....... 2
1.6. Conversion of Securities .............................. 3
2. Representations and Warranties as to Talonsoft .................. 3
2.1. Organization, Standing and Power ...................... 3
2.2. Capitalization ........................................ 4
2.3. Ownership of Talonsoft Common Stock ................... 4
2.4. Interests in Other Entities ........................... 5
2.5. Authority ............................................. 5
2.6. Noncontravention ...................................... 6
2.7. Financial Statements .................................. 6
2.8. Absence of Undisclosed Liabilities .................... 7
2.9. Guaranties ............................................ 7
2.10. Accounts and Notes Receivable ......................... 7
2.11. Absence of Changes .................................... 7
2.12. Litigation ............................................ 8
2.13. No Violation of Law ................................... 8
2.14. Properties ............................................ 8
2.15. Intangibles/Inventions ................................ 9
2.16. Systems and Software .................................. 9
2.17. Tax Matters ........................................... 10
2.18. Insurance ............................................. 11
2.19. Banks; Powers of Attorney ............................. 11
2.20. Employee Arrangements ................................. 11
2.21. ERISA ................................................. 12
2.22. Environmental Matters ................................. 12
2.23. Business Practices and Commitments .................... 12
2.24. Certain Business Matters .............................. 13
2.25. Certain Contracts ..................................... 13
2.26. Customers and Suppliers ............................... 14
2.27. Approvals/Consents .................................... 14
2.28. Information as to Talonsoft ........................... 14
2.29. Pooling of Interests .................................. 14
2.30. Securities Act Representation ......................... 15
3. Representations and Warranties as to TTIS and
Subsidiary ..................................................... 15
3.1. Organization, Standing and Power ...................... 15
3.2. Interests in Other Entities ........................... 16
3.3. Capitalization ........................................ 16
3.4. Authority ............................................. 16
3.5. Securities and Exchange Commission Filings;
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Financial Statements .................................. 17
3.6. Stock Issuable in Merger .............................. 18
3.7. Absence of Changes .................................... 18
3.8. Information as to TTIS and Subsidiary ................. 18
4. Indemnification ................................................. 18
4.1. Indemnification by Talonsoft and the
Shareholders .......................................... 18
4.2. Indemnification by TTIS and Subsidiary ................ 19
4.3. Third Party Claims .................................... 19
4.4. Litigation ............................................ 20
4.5. Assistance ............................................ 20
5. Covenants ....................................................... 20
5.1. Investigation ......................................... 20
5.2. [Intentionally Omitted] ............................... 21
5.3. Consummation of Transaction ........................... 21
5.4. Cooperation/Further Assurances ........................ 21
5.5. Accuracy of Representations ........................... 22
5.6. Notification of Certain Matters ....................... 22
5.7. Broker ................................................ 22
5.8. No Solicitation of Transactions ....................... 22
5.9. Prohibited Conduct .................................... 23
5.10. Tax-Free Reorganization ............................... 25
5.11. Pooling of Interests .................................. 25
5.12. Payment of Taxes Upon Merger .......................... 25
5.13. Stock Options ......................................... 25
5.14. Employment Agreements ................................. 26
5.15. Registration Rights Agreement ......................... 26
5.16. Business Plan ......................................... 26
6. Conditions of Merger ............................................ 26
6.1. Conditions to Obligations of TTIS and Subsidiary
to Effect the Merger .................................. 26
(a) Accuracy of Representations and Warranties .... 26
(b) Performance of Agreements ..................... 26
(c) Results of Investigation ...................... 27
(d) Board Authorization ........................... 27
(e) Pooling of Interests .......................... 27
(f) Tax Free Reorganization ....................... 27
(g) Affiliate Letters ............................. 27
(h) Financing Arrangements ........................ 27
(i) Minimum Net Assets ............................ 27
(j) Opinion of Counsel for Talonsoft .............. 27
(k) Litigation .................................... 27
(l) Consents and Approvals ........................ 28
(m) Date of Consummation .......................... 28
(n) Validity of Transactions ...................... 28
(o) No Material Adverse Change .................... 28
(p) Employment Agreements ......................... 28
(q) Closing Certificate ........................... 28
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6.2. Conditions to Obligations of Talonsoft and the
Shareholders to Effect the Merger ..................... 29
(a) Accuracy of Representations and Warranties .... 29
(b) Performance of Agreements ..................... 29
(c) Board Authorization ........................... 29
(d) Litigation .................................... 29
(e) Consents and Approvals ........................ 29
(f) Date of Consummation .......................... 30
(g) Validity of Transactions ...................... 30
(h) Stock Options ................................. 30
(i) Employment Agreements ......................... 30
(i) Registration Rights Agreement ................. 30
(k) Closing Certificate ........................... 30
7. The Closing ..................................................... 30
7.1. Deliveries by TTIS and Subsidiary at the Closing ...... 30
7.2. Deliveries by Talonsoft and/or the Shareholders at
the Closing ........................................... 31
7.3. Other Deliveries ...................................... 32
8. Termination, Amendment and Waiver ............................... 32
8.1. Termination ........................................... 32
8.2. Effect of Termination ................................. 33
8.3. Fees and Expenses ..................................... 33
8.4. Waiver ................................................ 33
9. Survival of Representations and Warranties ...................... 33
10. General Provisions .............................................. 33
10.1. Notices ............................................... 33
10.2. Severability .......................................... 34
10.3. Entire Agreement ...................................... 34
10.4. Amendment ............................................. 35
10.5. No Assignment ......................................... 35
10.6. Governing Law ......................................... 35
10.7. Counterparts .......................................... 35
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 22, 1998 (the
"Agreement"), among Take-Two Interactive Software, Inc., a Delaware corporation
("TTIS"); Talonsoft, Inc., a Delaware corporation and a wholly-owned subsidiary
of TTIS ("Subsidiary"); Talonsoft, Inc., a Maryland corporation ("Talonsoft");
Xxxx Xxxxxxxx ("Xxxx"), Xxxxx Xxxxxxxx ("Xxxxx"), Xxxxx Xxxx ("Xxxxx") and
Xxxxxxx Xxxx ("Xxxxxxx"). John, Greta, Xxxxx and Xxxxxxx are sometimes referred
to as the "Shareholders."
W I T N E S S E T H :
WHEREAS, Talonsoft is in the business of developing and publishing computer
software (the "Business"); and
WHEREAS, TTIS desires to acquire all of the outstanding capital stock of
Talonsoft; and
WHEREAS, the Board of Directors of TTIS, the Board of Directors of
Subsidiary, TTIS as the sole shareholder of Subsidiary, and the Board of
Directors of Talonsoft and the Shareholders have: (a) determined that it is in
the best interests of their respective companies for Talonsoft to to be merged
with and into the Subsidiary upon the terms and subject to the conditions set
forth herein; and (b) approved the merger of Talonsoft with and into the
Subsidiary (the "Merger") in accordance with the Delaware General Corporation
Law of the State of Delaware ("Delaware Law") and the General Corporation Law of
the State of Maryland ("Maryland Law"), and upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto do hereby agree as follows:
1. The Merger.
1.1. The Merger. At the Effective Date (as defined in Subsection 1.2), and
subject to and upon the terms and conditions of this Agreement, Delaware Law and
Maryland Law, Talonsoft shall be merged with and into the Subsidiary, the
separate corporate existence of Talonsoft shall cease, and the Subsidiary shall
continue as the surviving corporation, operating as a wholly-owned subsidiary of
TTIS. The Subsidiary, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2. Effective Date. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Section 6, unless this Agreement shall
have been terminated and the transactions contemplated herein shall have been
abandoned pursuant to Section 8.1, Subsidiary and Talonsoft shall cause the
Merger to be consummated by filing a Certificate of Merger (the "Certificate of
Merger") with the Secretaries of State of the States of Delaware and Maryland in
the form of Exhibit A and making such other filings as may be required by the
Delaware Law and the Maryland Law, in such form as required by and executed in
accordance with such laws (the time of the last of such filings to be made being
the "Effective Date").
1.3. Effect of the Merger. At the Effective Date, the effect of the Merger
shall be as provided in the applicable provisions of Delaware Law and Maryland
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Date, all the rights, privileges, powers, franchises and all
property (real, personal and mixed) of Talonsoft and all debts due Talonsoft
shall vest in the Subsidiary, and all debts, liabilities, obligations and duties
of Talonsoft shall become the debts, liabilities, obligations and duties of the
Subsidiary.
1.4. Certificate of Incorporation; By-Laws.
(a) The Certificate of Incorporation of the Subsidiary, as in effect
immediately prior to the Effective Date (annexed hereto as Exhibit B), as
amended to provide for a name change to Talonsoft, Inc., shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law or such Certificate of Incorporation.
(b) The By-Laws of the Subsidiary, as in effect immediately prior to the
Effective Date (annexed hereto as Exhibit C), shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by law or by the
Certificate of Incorporation of the Surviving Corporation or the By-Laws of the
Surviving Corporation.
1.5. Directors and Officers of Surviving Corporation.
(a) Xxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxxxxx Xxx, the directors of the
Subsidiary, and Xxxx Xxxxxxxx, shall, at the Effective Date, be the duly
appointed directors of the Surviving Corporation, to hold office in accordance
with applicable law, the Certificate of Incorporation and By-Laws of the
Surviving Corporation until resignation, removal or replacement.
(b) Each of Xxxx Xxxxxxxx and Xxxxx Xxxx shall, at the Effective Date, be
duly nominated and appointed as
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Chief Executive Officer and President, respectively, of the Surviving
Corporation, and shall constitute the initial officers of the Surviving
Corporation, in each case to serve at the pleasure of the Board of Directors of
the Surviving Corporation until their respective resignation, removal or
placement.
1.6. Conversion of Securities. At the Effective Date, by virtue of the
Merger and without any action on the part of TTIS, Subsidiary, Talonsoft or the
Shareholders:
(a) The outstanding shares of Talonsoft Common Stock (as defined in
Section 2.2 hereof) shall be converted into an aggregate of 1,033,336
shares of Common Stock, $.01 par value per share, of TTIS ("TTIS Common
Stock") (hereafter referred to as the "Share Consideration"), to be
distributed to the Shareholders, pro rata, as set forth in Schedule 1.6(a).
(b) Any warrant or option convertible or exchangeable into Talonsoft
Common Stock shall be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(c) Each share of the common stock, par value $.01 per share, of the
Subsidiary issued and outstanding at the Effective Date shall remain
outstanding and unchanged.
(d) From and after the Effective Date, the holders of certificates
evidencing ownership of shares of Talonsoft Common Stock shall cease to
have any rights with respect to the shares of Talonsoft Common Stock.
(e) No fractional shares of TTIS Common Stock shall be issued in
connection with the Merger.
2. Representations and Warranties as to Talonsoft. Each of the Shareholders
and Talonsoft, jointly and severally, represents and warrants to TTIS and
Subsidiary as follows:
2.1. Organization, Standing and Power. Talonsoft is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, with full corporate power and corporate authority to (i) own, lease
and operate its properties, (ii) carry on the Business as currently conducted by
it and (iii) execute and deliver, and perform its obligations under this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto. Except as set forth on Schedule 2.1, there are no states
or jurisdictions in which the character and location of any of the properties
owned or leased by Talonsoft, or the conduct of the Business makes it necessary
for Talonsoft to qualify to do business as a foreign corporation. True and
complete copies of the Certificate of Incorporation of Talonsoft and all
amendments
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thereof, and of the By-Laws of Talonsoft, as amended to date, have heretofore
been furnished to TTIS. Talonsoft's minute books contain complete and accurate
records of all meetings and other corporate actions of Talonsoft's stockholders
and Board of Directors (including committees of its Board of Directors).
2.2. Capitalization. (a) The authorized capital stock of Talonsoft consists
of: 1000 shares of common stock, par value $1.00 per share (the "Talonsoft
Common Stock"), of which 100 shares of Talonsoft Common Stock are outstanding.
All of the Talonsoft Common Stock is duly authorized, validly issued, fully paid
and nonassessable. Schedule 2.2 sets forth a true and complete list of the
holders of all outstanding shares of Talonsoft Common Stock, and the holders of
all outstanding options and warrants issued by Talonsoft, which shares, options
and warrants are held by them in the amounts set forth on Schedule 2.2. Except
as contemplated by the Merger and except as set forth on Schedule 2.2, there are
no options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Talonsoft or
obligating Talonsoft to issue or sell any shares of capital stock of or other
equity interests in Talonsoft. There is no personal liability, and there are no
preemptive rights with regard to the capital stock of Talonsoft, and no
right-of-first refusal or similar catch-up rights with regard to such capital
stock. Except as set forth on Schedule 2.2 and except for the transactions
contemplated by this Agreement, there are no outstanding contractual obligations
or other commitments or arrangements of Talonsoft to (A) repurchase, redeem or
otherwise acquire any shares of Talonsoft Common Stock (or any interest therein)
or (B) to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity, or (C) issue or
distribute to any person any capital stock of Talonsoft, or (D) issue or
distribute to holders of any of the capital stock of Talonsoft any evidences of
indebtedness or assets of Talonsoft. All of the outstanding securities of
Talonsoft have been issued and sold by Talonsoft in full compliance with
applicable federal and state securities laws.
2.3. Ownership of Talonsoft Common Stock. The Shareholders have good and
marketable title to all of the issued and outstanding shares of Talonsoft Common
Stock, free and clear of any and all liens, adverse claims, security interests,
pledges, mortgages, charges and encumbrances of any nature whatsoever ("Liens"),
and on the Closing Date (as defined in Section 7 hereof) will own all of the
Talonsoft Common Stock, free and clear of any and all Liens, including, but not
limited to, any claims by any present or former stockholders of Talonsoft.
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2.4. Interests in Other Entities.
(a) Schedule 2.4 sets forth a true and complete list of all direct or
indirect subsidiaries of Talonsoft, together with the jurisdiction of
incorporation of each such subsidiary and the percentage of each such
subsidiary's outstanding capital stock owned by Talonsoft.
(b) None of the Shareholders (individually or jointly) own, directly or
indirectly, of record or beneficially, any shares of voting stock or other
equity securities of any other corporation engaged in the same or similar
business to that business engaged in by Talonsoft at the Effective Date (other
than not more than one percent (1%) of the publicly-traded capital stock of
corporations engaged in such business held solely for investment purposes); (i)
have any ownership interest, direct or indirect, of record or beneficially, in
any unincorporated entity engaged in the same or similar business to that
business engaged in by Talonsoft at the Effective Date; and (ii) have any
obligation, direct or indirect, present or contingent, (A) to purchase or
subscribe for any interest in, advance or loan monies to, or in any way make
investments in, any other person or entity engaged in the same or similar
business to that business engaged in by Talonsoft at the Effective Date, or (B)
to share any profits or capital investments or both from a entity engaged in the
same or similar business to that business engaged in by Talonsoft at the
Effective Date.
2.5. Authority. The execution and delivery by Talonsoft of this Agreement
and of all of the agreements to be executed and delivered by Talonsoft pursuant
hereto (collectively, the "Talonsoft Documents"), the performance by Talonsoft
of its obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of Talonsoft
(including, but not limited to, the unanimous consents of the Board of Directors
of Talonsoft and of the Shareholders) and Talonsoft has all necessary corporate
power and corporate authority with respect thereto. The Shareholders are
individuals having all necessary capacity, power and authority to execute and
deliver this Agreement and such other agreements to be executed and delivered by
either of them pursuant hereto (collectively, the "Shareholder Documents") and
to consummate the transactions contemplated hereby and thereby. This Agreement
is, and when executed and delivered by Talonsoft and the Shareholders, each of
the other agreements to be delivered by either or both of them pursuant hereto
will be, the valid and binding obligations of Talonsoft and the Shareholders, to
the extent they are parties thereto, in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally and subject
to the
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rules of law governing (and all limitations on) specific performance, injunctive
relief, and other equitable remedies.
2.6. Noncontravention. Except as set forth on Schedule 2.6, neither the
execution and delivery by Talonsoft or the Shareholders of this Agreement or of
any other Talonsoft Documents or Shareholder Documents to be executed and
delivered by either or both of them, nor the consummation of any of the
transactions contemplated hereby or thereby, nor the performance by either or
both of them of any of their respective obligations hereunder or thereunder,
will (nor with the giving of notice or the lapse of time or both would) (a)
conflict with or result in a breach of any provision of the Certificate of
Incorporation, ByLaws or other constituent documents of Talonsoft, each as
amended to date, or (b) give rise to a default, or any right of termination,
cancellation or acceleration, or otherwise be in conflict with or result in a
loss of contractual benefits to any of them, under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which either or both of them is a party or by
which either or both of them or any of their respective assets may be bound, or
require any consent, approval or notice under the terms of any such document or
instrument, or (c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority which is applicable to
either or both of them, or (d) result in the creation or imposition of any lien,
adverse claim, restriction, charge or encumbrance upon any of the assets of
Talonsoft (the "Assets") or the Talonsoft Common Stock, or (e) interfere with or
otherwise adversely affect the ability of Talonsoft to carry on the Business
after the Effective Date on substantially the same basis as is now conducted by
Talonsoft.
2.7. Financial Statements. Talonsoft has heretofore delivered to each of
TTIS and Subsidiary (a) its financial statements consisting of the unaudited
balance sheets at December 31, 1995, 1996 and 1997, and the related statements
of income and stockholders' equity for the three years then ended, which have
been compiled by X.X. Xxxxx & Company, LLP, independent certified public
accountants, and (b) its unaudited balance sheet at September 30, 1998 (the
"Balance Sheet") statements of income and stockholders' equity for the nine
months ended September 30, 1998 (collectively, the "Talonsoft Financial
Statements"). The Talonsoft Financial Statements were prepared in accordance
with generally accepted accounting principles ("GAAP"), consistently applied,
and present fairly the financial position of Talonsoft as at the dates thereof
and the results of operations for the periods and the cash flow indicated. The
books and records of Talonsoft are complete and correct, have been maintained in
accordance with good business practices, and accurately reflect the basis for
the financial condition, results of operations and cash flow of Talonsoft as set
forth in the Talonsoft Financial Statements.
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2.8. Absence of Undisclosed Liabilities. Talonsoft has no liabilities or
obligations of any nature whatsoever, whether accrued, matured, unmatured,
absolute, contingent, direct or indirect or otherwise, which have not been (a)
in the case of liabilities and obligations of a type customarily reflected on a
corporate balance sheet, prepared in accordance with GAAP, set forth on the
Balance Sheet, or (b) incurred in the ordinary course of business since
September 30, 1998, or (c) in the case of other types of liabilities and
obligations, described in Schedule 2.8, or (d) incurred, consistent with past
practice, in the ordinary course of business of Talonsoft (in the case of
liabilities and obligations of the type referred to in clause (a) above).
2.9. Guaranties. Schedule 2.9 hereto is a complete and accurate list and
summary description of all written guaranties currently in effect heretofore
issued by the Shareholders to any bank or other lender in connection with any
credit facilities extended by such creditors to Talonsoft or issued by the
Shareholders in connection with any other contracts or agreements (collectively,
the "Guaranties"), including the name of such creditor and the amount of the
indebtedness, together with any interest and fees currently owing and expected
to be outstanding as of the Effective Date.
2.10. Accounts and Notes Receivable/Inventories.
(a) Schedule 2.10 hereto is a complete and accurate list of the accounts
and notes receivable as of October 30, 1998, which are good and collectible in
the ordinary course of business at the aggregate recorded amounts thereof, less
the respective amount of the allowances for doubtful accounts and notes
receivable, if any, reflected thereon, and are not subject to offsets other than
in the ordinary course of business. The accounts and notes receivable of
Talonsoft which were added after October 30, 1998 are good and collectible in
the ordinary course of business, less the respective amount of the allowances
for doubtful accounts and notes receivable, if any, reflected thereon (which
allowances were established on a basis consistent with prior practice), and are
not subject to offsets.
(b) The inventories reflected on the Balance Sheet consist of items of a
quality and quantity usable or saleable in the ordinary course of business,
except for obsolete materials, slow-moving items, materials of below standard
quality and not readily marketable items, all of which have been (i) written
down to net realizable value or (ii) adequately reserved against on the books
and records of Talonsoft. All inventories are stated at the lower of cost or
market.
2.11. Absence of Changes. Since September 30, 1998, there have not been (a)
any adverse change (other than as is normal in the ordinary course of business)
in the condition
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(financial or otherwise), assets, liabilities, business, prospects, results of
operations or cash flows of Talonsoft (including, without limitation, any such
adverse change resulting from damage, destruction or other casualty loss,
whether or not covered by insurance), (b) any waivers by Talonsoft of any right,
or cancellation of any debt or claim, of substantial value, (c) any
declarations, set asides or payments of any dividend or other distributions or
payments in respect of the Talonsoft Common Stock, or (d) any changes in the
accounting principles or methods which are utilized by Talonsoft.
2.12. Litigation. Except as set forth in Schedule 2.12, there are no
claims, suits or actions, or administrative, arbitration or other proceedings or
governmental investigations, pending or, to the best knowledge of Talonsoft and
the Shareholders, threatened, against or relating to Talonsoft or the
Shareholders, the transactions contemplated hereby or any of the Assets. There
are no judgments, orders, stipulations, injunctions, decrees or awards in effect
which relate to Talonsoft, this Agreement, the transactions contemplated, the
Business or any of the Assets, the effect of which is (a) to limit, restrict,
regulate, enjoin or prohibit any business practice of Talonsoft in any area, or
the acquisition by Talonsoft of any properties, assets or businesses, or (b)
otherwise materially adverse to the Business, any of the Assets or Talonsoft
Common Stock.
2.13. No Violation of Law. Talonsoft is not engaging in any activity or
omitting to take any action as a result of which it is in violation of any law,
rule, regulation, zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or governmental or administrative
body or agency, applicable to Talonsoft, the Business or any of the Assets,
including, but not limited to, those relating to: occupational safety and health
matters; issues of environmental and ecological protection (e.g., the use,
storage, handling, transport or disposal of pollutants, contaminants or
hazardous or toxic materials or wastes, and the exposure of persons thereto);
business practices and operations; labor practices; employee benefits; and
zoning and other land use laws and regulations.
2.14. Properties. All plants, structures and equipment which are utilized
in the Business, or are material to the condition (financial or otherwise) of
Talonsoft are owned or leased by Talonsoft, are free and clear of all Liens, are
in good operating condition and repair (ordinary wear and tear excepted), and
are adequate and suitable for the purposes for which they are used. Schedule
2.14 sets forth all (a) real property which is owned, leased (whether as lessor
or lessee) or subject to contract or commitment of purchase or sale or lease
(whether as lessor or lessee) by Talonsoft, or which is subject to a title
retention or conditional sales agreement or other security
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device, and (b) tangible personal property which is owned, leased (whether as
lessor or lessee) or subject to contract or commitment of purchase or sale or
lease (whether as lessor or lessee) by Talonsoft.
2.15. Intangibles/Inventions. Schedule 2.15 identifies (by a summary
description) the Intangibles (as defined below) the ownership thereof and, if
applicable, Talonsoft's authority for use of the same, which Schedule is
complete and correct and encompasses: (A) all United States and foreign patents,
trademark and trade name registrations, trademarks and trade names, brandmarks
and brand name registrations, servicemarks and servicemark registrations,
assumed names and copyrights and copyright registrations, owned in whole or in
part or used by Talonsoft, and all applications therefor (collectively, the
"Marks"), (B) all inventions, discoveries, improvements, processes, formulae,
technology, know-how, processes and other intellectual property, proprietary
rights and trade secrets relating to the Business (collectively, the
"Inventions") and (C) all licenses and other agreements to which Talonsoft is a
party or otherwise bound which relate to any of the Intangibles or the
Inventions or Talonsoft's use thereof in connection with the Business
(collectively, the "Licenses, and together with the Marks and the Inventions,
the "Intangibles"). No violations of the terms of any of the aforesaid licenses
and/or agreements have occurred. Except as disclosed on Schedule 2.15, (A)
Talonsoft owns or is authorized to use in connection with the Business all of
the Intangibles; (B) no proceedings have been instituted, are pending, or to the
best knowledge of Talonsoft and the Shareholders, are threatened which challenge
the rights of Talonsoft with respect to the Intangibles or its use thereof in
connection with the Business and/or the Assets or the validity thereof and,
there is no valid basis for any such proceedings; (C) neither Talonsoft's
ownership of the Intangibles nor their use thereof in connection with the
Business and/or the Assets violates any laws, statutes, ordinances or
regulations, or has at any time infringed upon or violated any rights of others,
or is being infringed by others; (D) none of the Intangibles, or Talonsoft's use
thereof in connection with the Business and/or the Assets is subject to any
outstanding order, decree, judgment, stipulation or any lien, security interest
or other encumbrance; and (E) Talonsoft has not granted any license to third
parties with regard to its Intangibles.
2.16. Systems and Software. Talonsoft owns or has the right to use pursuant
to lease, license, sublicense, agreement, or permission all computer hardware,
software and information systems necessary for the operation of its business as
presently conducted (collectively, "Systems"). Each System owned or used by
Talonsoft immediately prior to the Effective Date will be owned or available for
use by Talonsoft on identical terms and conditions immediately subsequent to the
Effective Date. With respect to each System owned by a third party and
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used by Talonsoft pursuant to lease, license, sublicense, agreement or
permission: (a) the lease, license, sublicense, agreement or permission covering
the System is legal, valid, binding, enforceable, and in full force and effect;
(b) the lease, license, sublicense, agreement or permission will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the Effective Date; (c) no party to any such lease, license,
sublicense, agreement or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, and permit termination, modification or acceleration thereunder; (d) no
party to any such lease, license, sublicense, agreement or permission has
repudiated any provision thereof; (e) Talonsoft has not granted any sublicense,
sublease or similar right with respect to any such lease, license, sublicense,
agreement or permission; (f) Talonsoft's use and continued use of such Systems
does not and will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any intellectual property rights of third
parties as a result of the continued operation of the Business.
2.17. Tax Matters.
(a) Talonsoft has filed with the appropriate governmental agencies all tax
returns and reports required to be filed by it, and has paid in full or
contested in good faith or made adequate provision for the payment of, Taxes (as
defined herein) shown to be due or claimed to be due on such tax returns and
reports. The provisions for Taxes which are set forth on the Balance Sheet are
adequate for all accrued and unpaid taxes of Talonsoft as of September 30, 1998,
whether (i) incurred in respect of or measured by income of Talonsoft for any
periods prior to the close of business on that date, or (ii) arising out of
transactions entered into, or any state of facts existing, on or prior to such
date. Talonsoft has duly withheld all payroll taxes, FICA and other federal,
state and local taxes and other items requiring to be withheld by it from
employer wages, and has duly deposited the same in trust for or paid over to the
proper taxing authorities. Talonsoft has not executed or filed with any taxing
authority any agreement extending the periods for the assessment or collection
of any Taxes, and is not a party to any pending or, to the best knowledge of
Talonsoft and the Shareholders, threatened, action or proceeding by any
governmental authority for the assessment or collection of Taxes. Within the
past three years, the United States federal income tax returns of Talonsoft have
not been examined by the Internal Revenue Service ("the IRS"), nor has any
states taxing authority examined any merchandize, personal property, sales or
use tax returns of Talonsoft.
(b) Talonsoft (i) has not agreed to or been required to make any adjustment
pursuant to Section 481(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) has
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no knowledge that the IRS or any other taxing authority has proposed any such
adjustment or change in accounting method, and (iii) has no application pending
with any governmental authority requesting permission for any change in
accounting method.
(c) As used herein, the term "Taxes" means all federal, state, county,
local and other taxes and governmental assessments, including but not limited to
income taxes, estimated taxes, withholding taxes, excise taxes, ad valorem
taxes, payroll related taxes (including but not limited to premiums for worker's
compensation insurance and statutory disability insurance), employment taxes,
franchise taxes and import duties, together with any related liabilities,
penalties, fines, additions to tax or interest.
2.18. Insurance. Schedule 2.18 is a complete and correct list and summary
description of all contracts and policies of insurance relating to any of the
Assets, the Business or the Shareholders in which Talonsoft is an insured party,
beneficiary or loss payable payee. Such policies are in full force and effect,
all premiums due and payable with respect thereto have been paid, and no notice
of cancellation or termination has been received by Talonsoft with respect to
any such policy.
2.19. Banks; Powers of Attorney. Schedule 2.19 is a complete and correct
list showing (a) the names of each bank in which Talonsoft has an account or
safe deposit box and the names of all persons authorized to draw thereon or who
have access thereto, and (b) the names of all persons, if any, holding powers of
attorney from Talonsoft.
2.20. Employee Arrangements. Schedule 2.20 is a complete and correct list
and summary description of all (a) union, collective bargaining, employment,
management, termination and consulting agreements to which Talonsoft is a party
or otherwise bound, and (b) compensation plans and arrangements; bonus and
incentive plans and arrangements; deferred compensation plans and arrangements;
pension and retirement plans and arrangements; profit-sharing and thrift plans
and arrangements; stock purchase and stock option plans and arrangements;
hospitalization and other life, health or disability insurance or reimbursement
programs; holiday, sick leave, severance, vacation, tuition reimbursement,
personal loan and product purchase discount policies and arrangements; and other
plans or arrangements providing for benefits for employees of Talonsoft. Said
Schedule also lists the names and compensation of all employees of Talonsoft
whose earnings during the last fiscal year were $10,000 or more (including
bonuses and other incentive compensation), and all employees who are expected to
receive at least said amount in respect of the current fiscal year.
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2.21. ERISA. Talonsoft neither maintains nor is obligated to contribute to
an "employee pension benefit plan" as such term is defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Talonsoft "welfare benefit plan", as such term is defined in Section 3(1) of
ERISA.
2.22. Environmental Matters. Talonsoft has obtained and is in compliance
with the terms and conditions of all required permits, licenses, registrations
and other authorizations required under Environmental Laws (as hereinafter
defined). No asbestos in a friable condition, equipment containing
polychlorinated biphenyls, leaking underground or above-ground storage tanks are
contained in or located at any facility currently, or was contained or located
at any facility previously owned, leased or controlled by Talonsoft. Talonsoft
has not released, discharged or disposed of on, under or about any facility
currently or previously owned, leased or controlled by Talonsoft, any Hazardous
Substance (as hereinafter defined), and to the best knowledge of Talonsoft and
the Shareholders, no third party has released, discharged or disposed of on,
under or about any facility currently or previously owned, leased or controlled
by Talonsoft, and Hazardous Substances (as hereinafter defined). Talonsoft is in
compliance with all applicable Environmental Laws. Talonsoft has fully disclosed
to TTIS all past and present noncompliance with, or liability under,
Environmental Laws, and all past discharges, emissions, leaks, releases or
disposals by it of any substance or waste regulated under or defined by
Environmental Laws that have formed or could reasonably be expected to form the
basis of any claim, action, suit, proceeding, hearing or investigation under any
applicable Environmental Laws. Talonsoft has not received notice of any past or
present events, conditions, circumstances, activities, practices, incidents,
actions or plans of Talonsoft that have resulted in or threaten to result in any
common law or legal liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation under, any applicable Environmental
Laws. For purposes of this Section 2.22, (a) "Environmental Laws: mean
applicable federal, state, local and foreign laws, regulations and codes
relating in any respect to pollution or protection of the environment and (b)
"Hazardous Substances" means any toxic, caustic or otherwise dangerous substance
(whether or not regulated under federal, state or local environmental statutes,
rules, ordinances, or orders), including (i) "hazardous substance" as defined in
42 U.S.C. Section 9601, and (ii) petroleum products, derivatives, byproducts and
other hydrocarbons.
2.23. Business Practices and Commitments. Set forth on Schedule 2.23 is a
description of and a list and the amount of all of Talonsoft's outstanding
obligations with respect to (i) Talonsoft's rebate and volume discount practice
and obligations, (ii) Talonsoft's allowance and customer return
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practice and obligations, (iii) Talonsoft's co-op advertising and other
promotional practices, and (iv) Talonsoft's warranty practice and obligations as
each of the foregoing relate to the customers and suppliers of Talonsoft.
2.24. Certain Business Matters. Except as is set forth in Schedule 2.24,
(a) Talonsoft is not a party to or bound by any development, publishing,
distributorship, dealership, sales agency, franchise or similar agreement which
relates to the development, sale or distribution of any of the products and
services of the Business, (b) Talonsoft has no sole-source supplier of
significant goods or services (other than utilities) with respect to which
practical alternative sources are not available on comparable terms and
conditions, (c) there are no pending or, to the best knowledge of Talonsoft and
the Shareholders, threatened labor negotiations, work stoppages or work
slowdowns involving or affecting the Business, and no union representation
questions exist, and there are no organizing activities, in respect of any of
the employees of Talonsoft, (d) the product and service warranties given by
Talonsoft or by which it is bound (complete and correct copies or descriptions
of which have heretofore been delivered by Talonsoft to TTIS) entail no greater
obligations than are customary in the Business, (e) neither Talonsoft nor the
Shareholders is a party to or bound by any agreement which limits its or his, as
the case may be, freedom to compete in any line of business or with any person,
or which is otherwise materially burdensome to Talonsoft or the Shareholders,
and (f) Talonsoft is not a party to or bound by any agreement in which any
officer, director or stockholder of Talonsoft (or any affiliate of any such
person) has, or had when made, a direct or indirect material interest. Talonsoft
has not granted any overlapping or conflicting rights to third parties with
respect to any of its agreements.
2.25. Certain Contracts. Schedule 2.25 is a complete and correct list of
all material contracts, commitments, obligations and understandings which are
not set forth in any other Schedule delivered hereunder and to which Talonsoft
is a party or otherwise bound, except for (a) purchase orders from vendors or
customers and (b) each of those which (i) were made in the ordinary course of
business and (ii) either (A) are terminable by Talonsoft (and will be terminable
by Talonsoft) without liability, expense or other obligation on 30 days' notice
or less, or (B) may be anticipated to involve aggregate payments to or by
Talonsoft of $5,000 (or the equivalent) or less calculated over the full term
thereof, and (C) are not otherwise material to the Business. Complete and
correct copies of all contracts, commitments, obligations and undertakings set
forth on any of the Schedules delivered pursuant to this Agreement have been
furnished by Talonsoft to TTIS. Except as expressly stated on any of such
Schedules, (1) each of agreements listed on Schedule 2.25 is in full force and
effect, no person or entity which is a party thereto or otherwise bound thereby
is in
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material default thereunder, and no event, occurrence, condition or act exists
which does (or which with the giving of notice or the lapse of time or both
would) give rise to a material default or right of cancellation, acceleration or
loss of contractual benefits thereunder; (2) there has been no threatened
cancellations thereof, and there are no outstanding disputes thereunder; (3)
none of them is materially burdensome to Talonsoft; and (4) each of them is
fully assignable without the consent, approval, order or any waiver by, or any
other action of or with any individual or individuals, without the payment of
any penalty, the incurrence of any additional debt, liability or obligation of
any nature whatsoever or the change of any term.
2.26. Customers and Suppliers. Schedule 2.26 sets forth a complete and
correct list, as of September 30, 1998, of (a) the 20 largest customers of the
Business and the amount for which each such customer was invoiced, and (b) the
20 largest suppliers (including developers) of the Business and the amount of
goods and services purchased from each such supplier. There are no (i)
threatened cancellations by the aforesaid customers or suppliers with respect to
the Business, (ii) outstanding disputes by such customers or suppliers with
Talonsoft and the Business, or (iii) any adverse changes in the business
relationship between the Business and any such customer or supplier. The
aforesaid suppliers and customers will continue their respective relationships
with the Business after the Closing Date on substantially the same basis as now
exists.
2.27. Approvals/Consents. Except as set forth on Schedule 2.27, Talonsoft
currently holds all governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises which are
necessary for the operation of the Business, all of which are in full force and
effect and are transferable pursuant to the transaction contemplated hereby
without the payment of any penalty, the incurrence of any additional debt,
liability or obligation of any nature whatsoever or the change of any term.
Schedule 2.27 is a complete and correct list of all such governmental and
administrative consents, permits, appointments, approvals, licenses,
certificates and franchises. No material violations of the terms thereof have
heretofore occurred or are known by the Shareholders to exist as of the date of
this Agreement.
2.28. Information as to Talonsoft. None of the representations or
warranties made by the Shareholders in this Agreement is, or contained in any of
the Talonsoft Documents to be executed and delivered hereto will be, false or
misleading with respect to any material fact, or omits to state any material
fact necessary in order to make the statements therein contained not misleading.
2.29. Pooling of Interests. Each of the parties hereto intends that the
Merger be accounted for under the pooling
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of interests methods under the requirements of XXX Xx. 00 of the AICPA, as
amended by the SFAS Board and the related interpretations of the AICPA, the SFAS
Board and the rules and regulations of the Securities and Exchange Commission.
Neither Talonsoft nor the Shareholders has, through the date of this Agreement,
taken or agreed to take any action which would impair the ability of Talonsoft
to account for the business combination to be effected by the Merger as a
pooling of interests. Except as set forth on Schedule 2.29:
(a) Neither Talonsoft nor the Shareholders own or will have, since the
date two years prior to the Effective Date, owned any shares of TTIS Common
Stock, nor shall Talonsoft have been a subsidiary or a division of another
entity since the date two years prior to the Effective Date, except that
Xxxx Xxxxxxxx owns 2,000 shares of TTIS Common Stock.
(b) Talonsoft has no equity investments or rights to purchase equity
investments of any kind in TTIS other than as pursuant to this Agreement
and the other agreements referenced herein; and
(c) Talonsoft has not disposed of a significant amount of assets other
than in the ordinary course of business since the date two years prior to
the Effective Date.
The equity transactions and the capital stock transactions for Talonsoft
and for each Shareholder since the date two years prior to the date hereof are
set forth on Schedule 2.29.
2.30. Securities Act Representation. Each Shareholder is acquiring the TTIS
Common Stock solely for investment purposes, with no intention of distributing
or reselling any such stock or any interest therein. Each Shareholder is aware
that the TTIS Common Stock will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and that neither the TTIS Common Stock
nor any interest therein may be sold, pledged, or otherwise transferred unless
the TTIS Common Stock is registered under the Securities Act or qualifies for an
exemption under the Securities Act.
3. Representations and Warranties as to TTIS and Subsidiary. TTIS and
Subsidiary, jointly and severally, represent and warrant to Talonsoft and the
Shareholders as follows:
3.1. Organization, Standing and Power. Each of TTIS and Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and Delaware, the laws of the jurisdiction of its
respective incorporation, with full corporate power and corporate authority to
(i) own, lease and operate its properties, (ii)
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carry on its business as currently conducted by it and (iii) execute and
deliver, and perform under this Agreement and each other agreement and
instrument to be executed and delivered by it pursuant hereto.
3.2. Interests in Other Entities. Schedule 3.2 sets forth a true and
complete list of all direct or indirect subsidiaries of TTIS (other than the
Subsidiary) that are material to the financial condition of TTIS and its
subsidiaries, together with the jurisdiction of incorporation of each such
subsidiary and the percentage of each such subsidiary's outstanding capital
stock owned by TTIS or another of TTIS's subsidiaries. Each of such subsidiaries
are duly organized corporations, validly existing and in good standing under the
laws of the jurisdiction of its respective incorporation (as well as all
applicable foreign jurisdictions necessary to its business operations) and have
the requisite corporate power and authority and governmental authority to own,
operate or lease the properties that each purports to own, operate or lease and
to carry on its business as it is now being conducted.
3.3. Capitalization.
(a) The authorized capital stock of TTIS consists of 50,000,000 shares of
TTIS Common Stock and 5,317,000 shares of Preferred Stock, par value $.01 per
share. As of the date hereof, (i) 17,038,636 shares of TTIS Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable, (ii) 2,810,284 (net of forfeitures) shares of TTIS
Common Stock are issuable upon exercise of options (plan and non-plan) and (iii)
913,164 shares of TTIS Common Stock are reserved for future issuance upon
exercise of outstanding common stock purchase warrants. No shares of Preferred
Stock are outstanding.
(b) The outstanding shares of capital stock of each of the subsidiaries of
TTIS, including the Subsidiary, are duly authorized, validly issued, fully paid
and nonassessable, and, except as set forth on Schedule 3.3, such shares are
owned by TTIS, directly or indirectly, free and clear of all security interests,
liens, adverse claims, pledges, agreements, limitations on TTIS's voting rights,
charges and other encumbrances of any nature whatsoever. Except as noted on
Schedule 3.3, there are no options, warrants or similar right outstanding with
respect to shares of capital stock of the Subsidiary.
3.4. Authority. The execution and delivery by TTIS and Subsidiary of this
Agreement and of each agreement to be executed and delivered by either of them
pursuant hereto (collectively, the "TTIS Documents"), the performance by each of
them of its obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby,
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have been duly and validly authorized by all necessary corporate action on the
part of TTIS and Subsidiary, and TTIS and Subsidiary have all necessary
corporate power and corporate authority with respect thereto. This Agreement is,
and when executed and delivered by TTIS and Subsidiary each other TTIS Document
will be, the valid and binding obligation of TTIS or Subsidiary, as the case may
be to the extent it is a party thereto, in accordance with the respective terms,
thereof, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and subject to the rules of law governing (and all limitations on)
specific performance, injunctive relief, and other equitable remedies.
3.5. Securities and Exchange Commission Filings; Financial Statements.
(a) TTIS has filed on XXXXX all forms, reports, statements and
documents required to be filed with the Securities and Exchange Commission
("SEC") (collectively, the "SEC Reports"), each of which has complied in
form in all material respects with the applicable requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, each as in effect on the date so filed.
None of such reports (including but not limited to any financial statements
or schedules included or incorporated by reference therein) filed by TTIS,
when filed (except to the extent revised or superseded by a subsequent
filing with the SEC) contained any untrue statement of a material fact.
(b) Each of the consolidated financial statements contained in the SEC
Reports has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may otherwise be indicated in the notes thereto) and each
presents fairly, in all material respects, the consolidated financial
position of TTIS and its subsidiaries as at the respective dates thereof
and the consolidated results of its operations and cash flow position for
the periods indicated.
(c) Except as and to the extent set forth on the balance sheet of TTIS
and its subsidiaries as at July 31, 1998, including the notes thereto, and
TTIS and its subsidiaries taken as a whole, do not have any liabilities or
obligations, whether or not accrued, contingent or otherwise, that would be
required to be included on a balance sheet prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course
of business since July 31, 1998, none of which would, individually or in
the aggregate, have a material adverse effect on the financial condition,
or results of the operations or cash flows of TTIS and its subsidiaries, on
a consolidated basis.
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3.6. Stock Issuable in Merger. The Share Consideration, when issued, will
be duly authorized and validly issued, fully paid and non-assessable, will be
delivered hereunder free and clear of any liens, adverse claims, security
interests, pledges, mortgages, charges and encumbrances of any nature
whatsoever, except that the shares of TTIS Common Stock constituting the Share
Consideration will be "restricted securities", as such term is defined in the
rules and regulations of the SEC promulgated under the Securities Act, and will
be subject to restrictions on transfers pursuant to such rules and regulations.
3.7. Absence of Changes. Since July 31, 1998, there have not been (a) any
material adverse change (other than as is normal in the ordinary course of
business, in the condition (financial or otherwise), assets, liabilities,
business, prospects, results of operations or cash flows of TTIS and Subsidiary
(including, without limitation, any such adverse change resulting from damage,
destruction or other casualty loss, whether or not covered by insurance), (b)
any waivers by TTIS or Subsidiary of any right, or cancellation of any debt or
claim, of substantial value, (c) any declarations, set asides or payments of any
dividend or other distributions or payments in respect of the TTIS Common Stock,
or (d) any changes in the accounting principles or methods which are utilized by
TTIS or Subsidiary.
3.8. Information as to TTIS and Subsidiary. None of the representations or
warranties made by TTIS or Subsidiary in this Agreement, or contained in any of
the TTIS Documents, to be executed and delivered hereto, is or will be, false or
misleading with respect to any material fact, or omits to state any material
fact necessary in order to make the statements therein contained not misleading.
4. Indemnification.
4.1. Indemnification by Talonsoft and the Shareholders. Each of Talonsoft
(before the Effective Date) and the Shareholders, jointly and severally, hereby
indemnifies and agrees to defend and hold harmless each of TTIS and Subsidiary
from and against any and all losses, obligations, deficiencies, liabilities,
claims, damages, costs and expenses (including, without limitation, the amount
of any settlement entered into pursuant hereto, and all reasonable legal and
other expenses incurred in connection with the investigation, prosecution or
defense of any matter indemnified pursuant hereto) which either of them may
sustain, suffer or incur and which arise out of, are caused by, relate to, or
result or occur from or in connection any misrepresentation of a fact contained
in any representation of Talonsoft and/or the Shareholders contained in, or the
breach by Talonsoft, or the Shareholders of any warranty or covenant made by any
one or all of them in, any Talonsoft Document and/or any Shareholder Document.
The foregoing indemnification shall
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also apply to direct claims by TTIS and/or Subsidiary against the Shareholders.
4.2. Indemnification by TTIS and Subsidiary. Each of TTIS and Subsidiary,
jointly and severally, indemnifies and agrees to defend and hold harmless each
of Talonsoft (before the Effective Date) and the Shareholders from and against
any and all losses, obligations, deficiencies, liabilities, claims, damages,
costs and expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution or defense of any
matter indemnified pursuant hereto), which it or he may sustain, suffer or incur
and which arise out of, are caused by, relate to, or result or occur from or in
connection with any misrepresentation of a fact contained in any representation
of TTIS and/or Subsidiary contained in, or the breach by TTIS or Subsidiary of
any warranty or covenant made by either or both of them in, any TTIS Document.
The foregoing indemnification shall also apply to direct claims by Talonsoft or
the Shareholders against TTIS and/or Subsidiary.
4.3. Third Party Claims. If a claim by a third party is made against any
party or parties hereto and the party or parties against whom said claim is made
intends to seek indemnification with respect thereto under Subsections 4.1 or
4.2, the party or parties seeking such indemnification shall promptly notify the
indemnifying party or parties, in writing, of such claim; provided, however,
that the failure to give such notice shall not affect the rights of the
indemnified party or parties hereunder except to the extent that such failure
materially and adversely affects the indemnifying party or parties due to the
inability to timely defend such action. The indemnifying party or parties shall
have 10 business days after said notice is given to elect, by written notice
given to the indemnified party or parties, to undertake, conduct and control,
through counsel of their own choosing (subject to the consent of the indemnified
party or parties, such consent not to be unreasonably withheld) and at their
sole risk and expense, the good faith settlement or defense of such claim, and
the indemnified party or parties shall cooperate with the indemnifying parties
in connection therewith; provided: (a) all settlements require the prior
reasonable consultation with the indemnified party and the prior written consent
of the indemnified party, which consent shall not be unreasonably withheld, and
(b) the indemnified party or parties shall be entitled to participate in such
settlement or defense through counsel chosen by the indemnified party or
parties, provided that the fees and expenses of such counsel shall be borne by
the indemnified party or parties. So long as the indemnifying party or parties
are contesting any such claim in good faith, the indemnified party or parties
shall not pay or settle any such claim; provided, however, that notwithstanding
the foregoing, the indemnified party or parties shall have the right to pay or
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settle any such claim at any time, provided that in such event they shall waive
any right of indemnification therefor by the indemnifying party or parties. If
the indemnifying party or parties do not make a timely election to undertake the
good faith defense or settlement of the claim as aforesaid, or if the
indemnifying parties fail to proceed with the good faith defense or settlement
of the matter after making such election, then, in either such event, the
indemnified party or parties shall have the right to contest, settle or
compromise (provided that all settlements or compromises require the prior
reasonable consultation with the indemnifying party and the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld) the claim at their exclusive discretion, at the risk and expense of
the indemnifying parties.
4.4. Limitation. In no event shall the maximum liability of the
Shareholders under Section 4 exceed the Share Consideration.
4.5. Assistance. Regardless of which party is controlling the defense of
any claim, each party shall act in good faith and shall provide reasonable
documents and cooperation to the party handling the defense.
5. Covenants
5.1. Investigation.
(a) Between the date hereof and the Closing Date, TTIS and/or Subsidiary,
on the one hand, and Talonsoft and the Shareholders, on the other hand, may,
directly and through their representatives, make such investigation of each
other corporate party and their respective businesses and assets of the other
corporate party or parties as each deems necessary or advisable (the entity
and/or its representatives making such investigation being the "Investigating
Party"), but such investigation shall not affect any of the representations and
warranties contained herein or in any instrument or document delivered pursuant
hereto. In furtherance of the foregoing, the Investigating Party shall have
reasonable access, during normal business hours after the date hereof, to all
properties, books, contracts, commitments and records of each other, and shall
furnish to the other and their representatives such financial and operating data
and other information as may from time to time be reasonably requested relating
to the transactions contemplated by this Agreement. Each of TTIS and Subsidiary,
on the one hand, and Talonsoft and the Shareholders, on the other, and the
respective management, employees, accountants and attorneys of the corporate
parties shall cooperate fully with the Investigating Party in connection with
such investigation.
(b) The parties hereto hereby agree that all confidential information of a
party to which an Investigating
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Party obtains access shall be deemed "Confidential Information." As used in this
Section, the term "Confidential Information" shall mean any and all information
(verbal and written) relating to the Business, including, but not limited to,
information relating to: identity and description of goods and services used;
purchasing; costs; pricing; sources; machinery and equipment; technology;
research, test procedures and results; customers and prospects; marketing; and
selling and servicing;
(c) After the Effective Date each of the Shareholders agrees not to, at any
time, directly or indirectly, use, communicate, disclose or disseminate any
Confidential Information in any manner whatsoever except such disclosures which
are necessary to comply with their duties as officers of the Surviving
Corporation.
5.2. [Intentionally Omitted]
5.3. Consummation of Transaction. Each of the parties hereto hereby agrees
to use its best efforts to cause all conditions precedent to his or its
obligations (and to the obligations of the other parties hereto to consummate
the transactions contemplated hereby) to be satisfied, including, but not
limited to, using all reasonable efforts to obtain all required (if so required
by this Agreement) consents, waivers, amendments, modifications, approvals,
authorizations, novations and licenses; provided, however, that nothing herein
contained shall be deemed to modify any of the absolute obligations imposed upon
any of the parties hereto under this Agreement or any agreement executed and
delivered pursuant hereto.
5.4. Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees to fully cooperate with the
other parties hereto in preparing and filing any notices, applications, reports
and other instruments and documents which are required by, or which are
desirable in the reasonable opinion of any of the parties hereto, or their
respective legal counsel, in respect of, any statute, rule, regulation or order
of any governmental or administrative body in connection with the transactions
contemplated by this Agreement.
(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record, or cause such other parties to the
extent permitted by law to execute, acknowledge, deliver, file and/or record
such other documents as may be required by this Agreement and as TTIS and/or
Subsidiary, on the one hand, and/or Talonsoft and/or the Shareholders, on the
other, or their respective legal counsel may reasonably require in order to
document and carry out the transactions contemplated by this Agreement.
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5.5. Accuracy of Representations. Each party hereto agrees that prior to
the Effective Date he or it will enter into no transaction and take no action,
and will use his or its best efforts to prevent the occurrence of any event (but
excluding events which occur in the ordinary course of business and events over
which such party has no control), which would result in any of his or its
representations, warranties or covenants contained in this Agreement or in any
agreement, document or instrument executed and delivered by him or it pursuant
hereto not to be true and correct, or not to be performed as contemplated, at
and as of the time immediately after the occurrence of such transaction or
event.
5.6. Notification of Certain Matters. Talonsoft and the Shareholders shall
give prompt notice to TTIS and Subsidiary, and TTIS or Subsidiary shall give
prompt notice to Talonsoft and the Shareholders, as the case may be, of (a) the
occurrence, or nonoccurrence, or any event the occurrence, or nonoccurrence, of
which would be likely to cause any representation contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Date and (b) any material failure of Talonsoft and/or the Shareholders, on the
one hand, and of TTIS and/or Subsidiary, on the other, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by him or
it hereunder; provided, however, that the delivery of any notice pursuant to
this Subsection 5.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.7. Broker. Each of TTIS, Subsidiary, Talonsoft, and the Shareholders
represents and warrants to the other parties that no broker or finder was
engaged or dealt with in connection with any of the transactions contemplated by
this Agreement other than Xxxxxx Xxxxx & Company, Inc. ("Xxxxxx Xxxxx"), and
each of the parties shall indemnify and hold the other harmless from and against
any and all claims or liabilities asserted by or on behalf of any alleged broker
or finder other than Xxxxxx Xxxxx for broker's fees, finder's fees, commissions
or like payments.
5.8. No Solicitation of Transactions. Prior to the earlier of the Effective
Date or the termination of this Agreement, neither Talonsoft nor any of the
Shareholders will, directly or indirectly, through any director, officer,
employee, investment banker, financial advisor, attorney, accountant or other
agent or representative of Talonsoft otherwise, solicit, initiate or encourage
the submission of proposals or offers from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the Talonsoft Common Stock, Assets or Business of, or
any equity interest in, Talonsoft, or any business combination with Talonsoft
(other than the Merger contemplated hereby) and other than with TTIS and/or
Subsidiary, participate in any negotiations
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regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing. Talonsoft and the Shareholders shall immediately cease and cause to
be terminated any existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing (other than in respect
of the transaction contemplated hereby). Talonsoft and the Shareholders shall
promptly notify TTIS if any such proposal or offer, or any inquiry or contact
with any person with respect thereto, is made and shall, in any such notice to
TTIS, indicate in reasonable detail the identity of the offeror and the terms
and conditions of any proposal or offer.
5.9. Prohibited Conduct. Each of Talonsoft and the Shareholders, jointly
and severally, covenants and agrees that, during the period from the date hereof
to the Effective Date, except pursuant to the terms hereof or unless TTIS shall
otherwise agree in writing, the Business shall be conducted only, and Talonsoft
shall not take any action except, in the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable laws; and
Talonsoft shall use its best efforts to preserve intact its Assets, the Business
and the business organization of Talonsoft, to keep available the services of
the present officers, employees and consultants of Talonsoft, and to preserve
the present relationships of Talonsoft with customers, suppliers and other
persons with whom Talonsoft has business relations. By way of illustration, and
not limitation, neither Talonsoft nor the Shareholders shall, between the date
of this Agreement and the Effective Date, directly or indirectly, do or propose
or commit to do, any of the following without the prior written consent of TTIS:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of the Talonsoft Common Stock, or (ii)
split, combine or reclassify any of the Talonsoft Common Stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of the Talonsoft Common Stock, or otherwise;
(b) authorize for issuance, issue, deliver, sell or agree to commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber, any shares of Talonsoft Common
Stock, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities convertible securities or any other securities or equity
equivalents;
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(c) (i) increase the compensation payable or to become payable to any
officer, director, employees or consultant of Talonsoft, except pursuant to
the terms of contracts, policies or benefit arrangements in effect on the
date hereof, or (ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer,
other employee or consultant of Talonsoft, except pursuant to the terms of
contracts, policies and benefit arrangements in effect on the date hereof,
or (iii) establish, adopt, enter into or amend any collective bargaining
(other than in accordance with past practice), bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers, employees or consultants of Talonsoft;
(d) amend the Certificate of Incorporation, By-Laws or other
comparable charter or organizational documents of Talonsoft or alter
through merger, liquidation, reorganization, restructuring, or in any other
fashion, the corporate structure or ownership of Talonsoft;
(e) acquire, or agree to acquire, (i) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any business or corporation, partnership, joint
venture, association or other business organization or division thereof, or
(ii) any assets that are material, individually or in the aggregate, to
Talonsoft, except purchases consistent with past practice;
(f) sell, lease, license, mortgage or otherwise encumber or subject to
any lien, security interest, pledge or encumbrance or otherwise dispose of
any of the Assets, except sales in the ordinary course of business
consistent with past practice;
(g) permit Talonsoft to incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
Talonsoft, guarantee any debt securities of another person, or enter into
any arrangement having the economic effect of any of the foregoing, except
for short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (ii) permit the Shareholders to issue any
guaranties of any indebtedness of Talonsoft;
(h) except in the ordinary course of business, enter into any
agreement, contract, commitment, involving a commitment on the part of
Talonsoft to purchase, sell, lease or otherwise dispose of assets or
require payment by Talonsoft in excess of $5,000;
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(i) make any capital expenditures;
(j) adopt a plan of complete or partial liquidation of Talonsoft or
resolutions providing for or authorizing such a liquidation or the
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization of Talonsoft;
(k) cause Talonsoft to recognize any labor union (unless legally
required to do so) or enter into or amend any collective bargaining
agreement;
(l) change any accounting principles used by Talonsoft, unless
required by the Financial Accounting Standards Board;
(m) make any tax election of, or settle, compromise any income tax
liability of, or file any federal income tax return prior to the last day
(including extensions) prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of the
operations of Talonsoft;
(n) settle or compromise any litigation in which Talonsoft is a
defendant (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid, which
payments are individually in an amount in excess of $5,000 and in the
aggregate in an amount in excess of $10,000; and
(o) authorize any of, or commit or agree to take any of, the foregoing
actions.
5.10. Tax-Free Reorganization. Each of the parties hereto agree to use all
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code.
5.11. Pooling of Interests. Neither Talonsoft nor the Shareholders shall
take any action which would affect the likelihood of treating, for financial
reporting purposes, the Merger as a "pooling of interests."
5.12. Payment of Taxes Upon Merger. The Shareholders shall be responsible
for, and shall pay, any and all sales, use, purchase, transfer and similar taxes
(real estate or otherwise), and any and all filing, recording, registration and
similar fees, arising out of the transfer of Talonsoft Common Stock pursuant to
the Merger.
5.13. Stock Options. At the Effective Date, TTIS shall reserve an
additional 100,000 shares of previously authorized TTIS Common Stock for the
granting of stock options to
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key employees of the Surviving Corporation after the Effective Date, as to be
mutually determined by the Chief Executive Officer of the Surviving Corporation
and the Compensation Committee of TTIS.
5.14. Employment Agreements. At the Effective Date, each of Xxxx Xxxxxxxx
and Xxxxx Xxxx shall enter into an employment agreement with the Surviving
Corporation in the form of Exhibits D and E hereto, respectively (the
"Employment Agreements").
5.15. Registration Rights Agreement. At the Closing, TTIS shall enter into
a registration rights agreement with the Shareholders, substantially in the form
attached hereto as Exhibit F (the "Registration Rights Agreement"), with respect
to a portion of the Share Consideration.
5.16. Business Plan. Talonsoft shall prepare a plan of operation mutually
agreeable to the parties with respect to the combination of business operations
of the Surviving Corporation and Alliance Inventory Management Systems, Inc., a
wholly-owned subsidiary of TTIS. Any such plan of operation shall provide, in
part, that Baltimore, Maryland shall be the principal place of business for the
Surviving Corporation for the next four (4) years.
6. Conditions of Merger.
6.1. Conditions to Obligations of TTIS and Subsidiary to Effect the Merger.
The respective obligations of TTIS and Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of each of Talonsoft and the Shareholders contained in any
Shareholders Document or Talonsoft Document delivered by either or both of
them shall have been true when made, and, in addition, shall be true in all
material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
(b) Performance of Agreements. Each of Talonsoft and the Shareholders,
as the case may be, shall have performed, observed and complied in all
material respects with all of their obligations, covenants and agreements,
and shall have satisfied or fulfilled in all material respects conditions
contained in any Shareholders Document or Talonsoft Document and required
to be performed, observed or complied with, or to be satisfied or
fulfilled, by Talonsoft or the Shareholders at or prior to the Effective
Date.
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(c) Results of Investigation. TTIS and Subsidiary shall be satisfied
with the results of any investigation of the business and affairs of
Talonsoft undertaken by them pursuant to Subsection 5.1 hereof, including,
without limitation, satisfaction that the transaction would be "accretive"
to the Earnings Per Share (fully diluted basis) of TTIS for the 1998 and
1999 fiscal years.
(d) Board Authorization. Approval by the Board of Directors and the
shareholders of Talonsoft with respect to the execution and delivery of,
and the performance by Talonsoft of its obligations under, this Agreement
and the transactions contemplated hereunder.
(e) Pooling of Interests. TTSI shall have received confirmation from
X.X. Xxxxx & Company, LLP and PriceWaterhouseCoopers, LLP that the Merger
will be treated, for financial reporting purposes, as a pooling of
interests.
(f) Tax Free Reorganization. TTIS shall have received confirmation
from each of X.X. Xxxxx & Company, LLP and PriceWaterhouseCoopers, LLP, to
the effect that the Merger will be treated for federal income tax purposes
as a tax-free reorganization within the meaning of Section 368(a) of the
Code.
(g) Affiliate Letters. TTIS shall have received a letter in
substantially the form annexed hereto as Exhibit G from each of Talonsoft,
its officers and directors, the holders of Talonsoft Common Stock (or other
securities of Talonsoft) and any of its other "affiliates" within the
meaning of Rule 145 of the Securities Act.
(h) Financing Arrangements. On or before the Closing, the lender(s)
providing the financing arrangements with respect to on-going operations of
Talonsoft (and the Surviving Corporation following the Merger) shall
confirm that all conditions precedent to such financing have been complied
with and satisfied in all respects and that Talonsoft (and the Surviving
Corporation) shall have received sufficient funds thereunder to continue
operating the Business subsequent to the Merger.
(i) Minimum Net Assets. Talonsoft shall have a tangible net worth of
at least $900,000 as of the Closing Date.
(j) Opinion of Counsel for Talonsoft. TTIS and Subsidiary shall have
received an opinion of Xxxxxx, Xxxxxx & Melfa, counsel for Talonsoft and
the Shareholders, dated the Closing Date, in substantially the form of
Exhibit H hereto.
(k) Litigation. No order of any court or administrative agency shall
be in effect which restrains or
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prohibits the transactions contemplated hereby, and no claim, suit, action,
inquiry, investigation or proceeding in which it will be, or it is, sought
to restrain, prohibit or change the terms of or obtain damages or other
relief in connection with this Agreement or any of the transactions
contemplated hereby, shall have been instituted or threatened by any person
or entity, and which, in the reasonable judgment of TTIS (based on the
likelihood of success and material consequences of such claim, suit,
action, inquiry or proceeding), makes it inadvisable to proceed with the
consummation of such transactions.
(l) Consents and Approvals. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments or modifications to existing agreements
with third parties) (the "Consents") including, without limitation, all
Consents from the primary lending institutions of each of Talonsoft and
TTIS, required as a precondition to the performance by Talonsoft and the
Shareholders of their respective obligations hereunder and under any
agreement delivered pursuant hereto, or which in TTIS's reasonable judgment
are necessary to continue unimpaired, subsequent to the Effective Date, any
rights in and to the Assets and/or the Business which could be impaired by
the Merger, shall have been duly obtained and shall be in full force and
effect.
(m) Date of Consummation. The Merger shall have been consummated on or
prior to December 31, 1998, or such later date as the parties shall agree
by a written instrument signed by all of them.
(n) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by
Talonsoft and the Shareholders pursuant hereto, shall be satisfactory in
all material respects to TTIS and its counsel.
(o) No Material Adverse Change. Except as otherwise provided by this
Agreement, there shall not have occurred after the date hereof, in the
reasonable judgment of TTIS, a material adverse change in the financial or
business condition of Talonsoft.
(p) Employment Agreements. Each of Xxxx Xxxxxxxx and Xxxxx Xxxx shall
have executed and delivered their respective Employment Agreements.
(q) Closing Certificate. Each of the Shareholders shall have furnished
TTIS and Subsidiary with certificates, all dated the Closing Date, to the
effect that all the representations and warranties of Talonsoft and the
Shareholders are true and complete and all covenants to be
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performed by Talonsoft or the Shareholders at or as of the Closing have
been performed and conditions to be satisfied at or as of the Closing have
been waived or satisfied.
6.2. Conditions to Obligations of Talonsoft and the Shareholders to Effect
the Merger. The obligations of Talonsoft and the Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Date of
the following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of TTIS and Subsidiary contained in any TTIS Documents
delivered by either TTIS or Subsidiary or both of them shall have been true
when made, and, in addition, shall be true in all material respects, on and
as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
(b) Performance of Agreements. Each of TTIS and Subsidiary shall have
performed, observed and complied, in all material respects, with all
obligations, covenants and agreements, and shall have satisfied or
fulfilled in all material respects all conditions contained in any TTIS
Document and required to be performed, observed or complied with, or
satisfied or fulfilled, by either or both of them at or prior to the
Closing Date.
(c) Board Authorization. Approval by the TTIS Board of the execution
and delivery of, and the performance by TTIS of its obligations under, this
Agreement and the transactions contemplated thereunder.
(d) Litigation. No order of any court or administrative agency shall
be in effect which restrains or prohibits the transactions contemplated
hereby, and no claim, suit, action, inquiry, investigation or proceeding in
which it will be, or it is, sought to restrain, prohibit or change the
terms of or obtain damages or other relief in connection with this
Agreement or any of the transactions contemplated hereby shall have been
instituted or threatened by any person or entity, and which in the
reasonable judgment of the Shareholders (based on the likelihood of success
and material consequences of such claim, suit, action, inquiry or
proceeding), makes it inadvisable to proceed with the consummation of such
transactions.
(e) Consents and Approvals. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments and modifications to existing agreements
with third parties) required as a precondition to the performance by TTIS
and Subsidiary of their respective obligations hereunder and under any
agreement delivered pursuant hereto, shall have been duly obtained and
shall be in full force and effect.
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(f) Date of Consummation. The Merger shall have been consummated on or
prior to December 31, 1998, or such later date as the parties shall agree
by a written instrument signed by all of them.
(g) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by TTIS
and Subsidiary pursuant hereto, shall be satisfactory in all material
respects to the Shareholders and its counsel.
(h) Stock Options. TTIS shall have authorized the issuance of options
to purchase up to an aggregate of 100,000 shares of the TTIS Common Stock
to key employees of the Surviving Corporation.
(i) Employment Agreements. The Surviving Corporation shall have
executed and delivered to each of Xxxx Xxxxxxxx and Xxxxx Xxxx their
respective Employment Agreements.
(j) Registration Rights Agreement. TTIS shall have entered into the
Registration Rights Agreement.
(k) Closing Certificate. Each of TTIS and Subsidiary shall have
furnished Talonsoft with certificates, each executed by their respective
presidents, dated the Closing Date, to the effect that all the
representations and warranties of TTIS or Subsidiary, as the case may be,
are true and complete in all material respects and all covenants to be
performed by each of TTIS or Subsidiary, as the case may be, at or as of
the Closing have been performed in all material respects and conditions to
be satisfied at or as of the Closing have been waived or satisfied in all
material respects.
7. The Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8, the closing of the Merger (the "Closing") will take place at the offices of
Xxxxxx Xxxxxxxxxx LLP as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions set forth in
Section 6 but in no event later than December 31, 1998 (the "Closing Date"); or
such later date as shall have been fixed by a written instrument signed by the
parties.
7.1. Deliveries by TTIS and Subsidiary at the Closing. At the Closing, TTIS
and Subsidiary shall deliver the following:
(a) stock certificate(s), representing the Share Consideration
registered in the names of the Shareholders;
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(b) copies of (i) resolutions adopted by the TTIS Board authorizing
TTIS to execute and deliver the TTIS Documents to which it is a party, to
perform its obligations thereunder and to effect the Merger upon the terms
and subject to the conditions set forth therein, and (ii) resolutions
adopted by the board of directors of the Subsidiary, and the written
consent of the sole shareholder, authorizing Subsidiary to execute and
deliver the Subsidiary Documents to which it is a party, to perform its
obligations thereunder and to effect the Merger upon the terms and subject
to the conditions set forth therein, duly certified by the Secretaries or
Assistant Secretaries of TTIS and the Subsidiary, respectively;
(c) certificates of the Secretary or Assistant Secretary of each of
TTIS and Subsidiary certifying as to the incumbency and specimen signatures
of the officers of TTIS and Subsidiary executing the TTIS Documents on
behalf of such corporation;
(d) confirmation, in the form of satisfactory to the parties hereto,
from the States of Delaware and Maryland that the Certificate of Merger of
the Subsidiary with and into Talonsoft has been filed with such Secretaries
of State; together with a copy of the executed form of such agreement;
(e) the Registration Rights Agreement duly executed by TTIS.
7.2. Deliveries by Talonsoft and/or the Shareholders at the Closing. At the
Closing, Talonsoft and/or the Shareholders, as applicable, shall deliver to TTIS
and/or Subsidiary, as the case may be, the following:
(a) stock certificate(s) representing the Talonsoft Common Stock, duly
executed by the Shareholders;
(b) a copy of the resolutions of the Board of Directors of Talonsoft,
and the written consent of the Shareholders, authorizing Talonsoft to
execute and deliver the Talonsoft Documents, to perform its obligations
thereunder and to effect the Merger upon the terms and conditions
thereunder, duly certified by the Secretary or assistant Secretary of
Talonsoft;
(c) certificates of the Secretary or Assistant Secretary of Talonsoft
certifying as to the incumbency and specimen signatures of the officers of
Talonsoft executing the Talonsoft Documents on behalf of such corporation;
(d) the Employment Agreements, duly executed by Xxxx Xxxxxxxx and
Xxxxx Xxxx; and
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(e) the Registration Rights Agreement duly executed by the
Shareholders.
7.3. Other Deliveries. In addition, the parties shall execute and deliver
such other documents as may be required by this Agreement and as either of them
or their respective counsel may reasonably require in order to document and
carry out the transactions contemplated by this Agreement.
8. Termination, Amendment and Waiver.
8.1. Termination. This Agreement may be terminated at any time prior to the
Effective Date:
(a) By mutual consent of the Boards of Directors of TTIS, Subsidiary
and Talonsoft; or
(b) By TTIS and Subsidiary, on the one hand, or Talonsoft and the
Shareholders, on the other hand, if any of the conditions precedent with
respect to the other party, as set forth in Sections 6.1 and 6.2,
respectively, have not been satisfied or waived on or before the Effective
Date.
(c) By TTIS and Subsidiary, on the one hand, or Talonsoft and the
Shareholders, on the other hand, if (i) the Merger shall not have been
consummated by December 31, 1998, or such later date as the parties shall
have fixed by written instrument signed by the parties hereto; provided,
however, that the right to terminate this Agreement under this Subsection
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of
the Effective Date to occur on or before such date or (ii) a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties
hereto shall use their reasonable efforts to vacate), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement.
(d) By TTIS and Subsidiary, on the one hand, or by Talonsoft and the
Shareholders, on the other hand, if, in the reasonable judgment of TTIS and
Subsidiary or Talonsoft and the Shareholders, as the case may be, (and
provided such parties are not then in material breach of their respective
obligations hereunder), it shall have been determined that the transaction
contemplated by this Agreement has become inadvisable or impracticable by
reason of the institution or threat by state, local or federal governmental
authorities or by any other person of material litigation or proceedings
against TTIS or Talonsoft.
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(e) By TTIS and Subsidiary, on the one hand, or Talonsoft and the
Shareholders, on the other hand, if, in the reasonable judgment of TTIS and
Subsidiary or Talonsoft or the Shareholders, as the case may be (and
provided such parties are not then in material breach of their respective
obligations hereunder), it shall be determined that the business or assets
or financial condition of the other unrelated corporate party hereto has
been materially and adversely affected since September 30, 1998, whether by
reason of changes, developments or operations in the normal course of
business or otherwise.
8.2. Effect of Termination. In the event of the termination of this
Agreement as provided in this Section 8, this Agreement shall, forthwith become
null and void and there shall be no liability on the part of any party hereto
and nothing herein shall relieve any party from liability for any wilful breach
hereof. Such termination shall not, however, affect the obligations of the
parties with respect to any Confidential Information in accordance with Section
5.1 hereof.
8.3. Fees and Expenses. TTIS and the Subsidiary shall bear all expenses in
connection with the transactions contemplated hereby.
8.4. Waiver. At any time prior to the Effective Date, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
9. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that: (i) representations and
warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto with respect to tax matters,
environmental compliance and ERISA matters shall survive the respective statutes
of limitations for such matters; and (ii) all other representations or
warranties made herein shall survive the Closing Date for a period of two (2)
years after the Effective Date.
10. General Provisions.
10.1. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the earlier of the date delivered or mailed if delivered personally, by
overnight courier or mailed by express, registered or certified mail (postage
prepaid, return receipt requested) or by
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facsimile transmittal, confirmed by express, certified or registered mail, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
If to TTIS or Subsidiary: Take-Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Chief Executive Officer
with a copy to: Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
If to Talonsoft or
the Shareholders: Talonsoft, Inc.
White Xxxxx Business Center I
Suite F
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxxx
Chief Financial Officer
with a copy to: Xxxxxx Xxxxxx & Melfa P.A.
000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
10.2. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.
10.3. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement, and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
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10.4. Amendment. This Agreement may not be amended except by an instrument
in writing signed by each of the parties hereto.
10.5. No Assignment. This Agreement shall not be assigned by operation of
law or otherwise, and any assignment shall be null and void.
10.6. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York without regard to its choice
of law principles. Each of TTIS, Subsidiary, Talonsoft and the Shareholders
hereby irrevocably and unconditionally consents to submit to the jurisdiction of
the courts of the State of New York and of the United States located in the
County of New York, State of New York for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in such courts and
agrees not to plead or claim that such litigation brought in any such courts has
been brought in an inconvenient forum.
10.7. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of Take-Two Interactive Software, Inc.,
Subsidiary, Talonsoft, Inc., by their respective officers thereunto duly
authorized, the Shareholders, individually, have caused this Agreement to be
executed as of the date first written above.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------------
Xxxx X. Xxxxx
Chief Executive Officer
TALONSOFT, INC. (Delaware)
By: /s/ Xxxx X. Xxxxx
----------------------------------
Xxxx X. Xxxxx
President
TALONSOFT, INC. (Maryland)
By: /s/ Xxxx Xxxxxxxx
----------------------------------
Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
/s/ Xxxx Xxxxxxxx
---------------------------------------
XXXX XXXXXXXX
/s/ Xxxxx Xxxxxxxx
---------------------------------------
XXXXX XXXXXXXX
/s/ Xxxxx Xxxx
---------------------------------------
XXXXX XXXX
/s/ Xxxxxxx Xxxx
---------------------------------------
XXXXXXX XXXX
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