AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of March ___, 2003, is
by and among (i) Togs For Tykes, Inc., a Nevada corporation ("Parent"); (ii)
Togs for Tykes Acquisition Corp., a Nevada corporation and a wholly-owned
subsidiary of Parent ("Acquiring Corp"); and (iii) Biogentec Incorporated, a
Nevada corporation ("Acquired Corp"). Parent, Acquiring Corp and Acquired Corp
may sometimes be referred to herein as the "Parties" or individually as a
"Party".
BACKGROUND
A. Acquiring Corp is a wholly-owned subsidiary of Parent and was formed to merge
with and into Acquired Corp so that as a result of the Merger, as defined below,
Acquired Corp will survive and become a wholly-owned subsidiary of Parent.
B. The Boards of Directors of each of Parent, Acquiring Corp and Acquired Corp
have determined that this Agreement and the merger of Acquiring Corp with and
into Acquired Corp (the "Merger") in accordance with the provisions of the
Nevada Revised Statutes ("NRS") and subject to the terms and conditions of this
Agreement, is advisable and in the best interests of Parent, Acquired Corp,
Acquiring Corp and their respective stockholders.
C. The Parties desire that the Merger and related transactions qualify as a
"plan of reorganization" under section 368(a) of the Code and not subject the
holders of shares or warrants of Acquired Corp to tax under the Code.
D. Certain capitalized terms used in this Agreement without definition shall
have the respective meanings given them in Section 16.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1. THE MERGER.
1.1 GENERAL.
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with the NRS at the Effective Time (as defined in
Section 1.1(b)), (i) Acquired Corp shall be merged with and into Acquiring Corp,
(ii) the separate corporate existence of Acquiring Corp shall cease, and (iii)
Acquired Corp shall be the surviving corporation (the "Surviving Corporation").
As a result of the Merger, the outstanding shares of capital stock of Acquired
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Corp shall be exchanged and cancelled in the manner provided in Section 1.5.
With respect to references in this Agreement relating to any obligations or
duties of Acquired Corp accruing after the Effective Time, the usage of the
defined term "Acquired Corp" as opposed to "Surviving Corporation" shall not
operate to negate any such obligations or duties.
(b) The Merger shall become effective on the Closing as
defined below. The Articles of Merger ("Articles of Merger") filed by Acquiring
Corp shall provide for a delayed effectiveness as provided for herein. The
Articles of Merger shall be filed with the Secretary of State of the State of
Nevada in accordance with the provisions of section 92A.240 of the NRS, or at
such later time as may be stated in the Articles of Merger (the "Effective
Time"). Subject to the terms and conditions of this Agreement, Acquired Corp and
Acquiring Corp shall duly execute and file the Articles of Merger with the
Secretary of State of the State of Nevada at the time of the closing of the
Merger (the "Closing"). The Closing shall occur ten (10) business days following
the date on which the conditions specified in Section 7 have been satisfied. The
Parties will use their best efforts to effectuate the Closing shall take place
on or about March ___, 2003 at the offices of MC Law Group, Inc., located at
0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx, commencing at 10:00
a.m. or on such other date, (not later than the Expiration Date), time and place
as the parties may mutually agree (the "Closing Date").
(c) At the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the NRS. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Acquired Corp and
Acquiring Corp shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of Acquired Corp
and Acquiring Corp shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
1.2 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Acquired Corp, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided therein or by applicable law.
1.3 BY-LAWS. The By-laws of Acquired Corp, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
1.4 DIRECTORS AND OFFICERS. From and after the Effective Time, (a) the
directors of Parent and Acquiring Corp at the Effective Time shall resign and
Acquired Corp shall have the right to determine all of the Surviving Corp's
Board of Directors as well as all of Parent's Board of Directors, each to hold
office in accordance with the Articles of Incorporation and By-laws of the
Surviving Corporation and Parent, respectively, (b) the officers of Acquiring
Corp and Parent at the Effective Time shall resign and Surviving Corporation's
and Parent's new Board of Directors shall have the right to appoint new
officers, in each case, until their respective successors are duly elected or
appointed and qualified.
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Acquiring Corp,
Acquired Corp or the holders of any of the following securities:
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(a) Each issued and outstanding share of common stock of
Acquiring Corp shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation;
(b) Each share of capital stock of Acquired Corp ("Acquired
Corp Capital Stock") of any class or series owned or held in treasury by
Acquired Corp shall be cancelled and retired without any conversion thereof and
no payment or distribution shall be made with respect thereto;
(c) Subject to the provisions of Sections 1.6, each share of
Acquired Corp Common Stock, par value $.001 per share ("Acquired Corp Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than (i) shares cancelled in accordance with Section 1.5(b) and (ii) Dissenting
Shares (as defined in Section 1.7 below)) shall be converted into one (1) (such
number to be adjusted in accordance with Section 1.6 (as so adjusted, the
"Acquired Corp Common Stock Exchange Ratio")) validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of Parent (the
"Parent Common Stock"). Throughout this Agreement, "Parent Common Stock" shall
refer to stock issued by Parent whether such stock is issued to Acquired Corp
Stockholders or otherwise. As of the Effective Time, each share of Acquired Corp
Common Stock shall no longer be outstanding and shall automatically be cancelled
and retired, and each holder of record of a certificate representing any shares
of Acquired Corp Common Stock shall cease to have any rights with respect
thereto, other than the right to receive shares of the Parent Common Stock to be
issued in consideration therefore upon the surrender of such certificate, if and
to the extent requested by such holder.
1.6 ADJUSTMENT OF THE EXCHANGE RATIOS. The following shall cause
Acquired Corp Common Stock Exchange Ratio to be adjusted and the Parties shall
make appropriate and proportionate adjustments to the Acquired Corp Common Stock
Exchange Ratio and thereafter all references to Acquired Corp Common Stock
Exchange Ratio shall be deemed to be Acquired Corp Common Stock Exchange Ratio
as so adjusted: if, subsequent to the date of this Agreement, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
occurs with respect to the Parent Common Stock, any change or conversion of
Parent Common Stock into other securities, or any other dividend or distribution
with respect to the Parent Common Stock occurs or, if a record date with respect
to any of the foregoing occurs.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, shares of Acquired Corp Capital Stock that are outstanding immediately
prior to the Effective Time and which are held of record by stockholders who
have not voted in favor of the Merger or consented thereto in writing and have
demanded properly in writing appraisal for such shares in accordance with
section 92A.380 of the NRS (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the consideration set forth in
Section 1.5(c). Such stockholders shall be entitled to receive such
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consideration as is determined to be due with respect to such Dissenting Shares
in accordance with the provisions of section 92A.380 of the NRS, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares under section 92A.380 of the NRS, shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the shares of Parent Common Stock specified in Section
1.5(c), without any interest thereon, upon surrender, in the manner provided in
Section 1.9.
(b) Acquired Corp shall give Parent (i) prompt notice of any
demands for appraisal received by Acquired Corp, withdrawals of such demands,
and any other instruments served pursuant to the NRS and received by Acquired
Corp and (ii) the opportunity to direct and control all negotiations and
proceedings with respect to demands for appraisal under the NRS. Acquired Corp
shall not, except with the prior written consent of Parent, offer to settle any
such appraisal demands.
1.8 NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued pursuant to the Merger. All
conversions shall be rounded up to the nearest full share.
1.9 EXCHANGE PROCEDURES; DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED
SHARES; STOCK TRANSFER BOOKS.
(a) As soon as practicable after the Effective Time, Acquired
Corp shall send to each Person who shall have been, at the Effective Time, a
holder of record of certificates which represented outstanding Acquired Corp
Capital Stock (the "Certificates") and who is a Requesting Holder, which shares
were converted into the right to receive Parent Common Stock pursuant to Section
1.5(c), a letter of transmittal which shall specify that the contemplated
transaction between the parties hereto has occurred and that the Requesting
Holder is entitled to shares of Parent Common Stock. Such letter shall also
contain instructions for use in obtaining the certificates representing the
Parent Common Stock. Upon providing Parent with such letter of transmittal duly
executed and such other documents as Parent may reasonably require, such
Requesting Holder shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Common Stock into which
the applicable portion of Acquired Corp Capital Stock shall have been converted
at the Effective Time. Until Parent receives the documents and information as
contemplated by this Section 1.9(a), each Acquired Corp Shareholder shall be
deemed to have only the right to receive the number of shares of Parent Common
Stock into which their Acquired Corp Capital Stock shall have been converted.
(b) If any certificate representing Parent Common Stock is to
be issued to any Person other than the registered holder of Acquired Corp
Capital Stock, it shall be a condition to such exchange that such Person either
(i) shall pay to Parent any transfer or other taxes required as a result of the
issuance of such certificates of Parent Common Stock and the distribution of
such cash payment to such Person or (ii) shall establish to the satisfaction of
Parent that such tax has been paid or is not applicable.
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(c) From and after the Effective Time, the holders of shares
of Acquired Corp Capital Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares except as
otherwise provided herein or by applicable law.
1.10 STOCK CERTIFICATE LEGENDS. Each stock certificate delivered by
Parent to a stockholder of Acquired Corp (an "Acquired Corp Stockholder") whose
address in the books and records of Acquired Corp is in the United States will
be imprinted with legends substantially in the following form:
THE SHARES THIS CERTIFICATE REPRESENTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE SECURITIES AND
EXCHANGE COMMISSION COVERING SUCH SHARES UNDER THE SECURITIES ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
Each stock certificate delivered by Parent to an Acquired Corp Stockholder whose
address is other than in the United States will be imprinted with legends
substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE
ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),
ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE SURVIVING CORPORATION'S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE SURVIVING
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CORPORATION AND IN THE CASE OF THE FOREGOING CLAUSE (D), A CERTIFICATE OF
TRANSFER (A FORM OF WHICH MAY BE OBTAINED FROM THE SURVIVING CORPORATION)
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE SURVIVING CORPORATION. HEDGING
TRANSACTIONS WITH REGARD TO THIS SECURITY MAY NOT BE CONDUCTED BY THE HOLDER
HEREOF UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
1.11 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either
Acquired Corp or Acquiring Corp or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either Acquired Corp or Acquiring Corp all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of Acquired
Corp or Acquiring Corp, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of
Acquired Corp or Acquiring Corp, as applicable, and otherwise to carry out the
purposes of this Agreement.
2. REPRESENTATIONS AND WARRANTIES CONCERNING ACQUIRED CORP.
Acquired Corp represents and warrants to Parent and Acquiring Corp that the
statements contained in this Section 2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and, except as expressly provided in a representation or
warranty, as though the Closing Date were substituted for the date of this
Agreement throughout this Section 2, except as set forth in the disclosure
schedules, if any, Acquired Corp has delivered to Parent on the date hereof).
2.1 ORGANIZATION. Acquired Corp is an entity which is duly organized,
validly existing and in good standing under the laws of Nevada and has all
requisite power and authority and all necessary governmental approval to carry
on its business as it has been and is now being conducted and any businesses in
which it currently proposes to engage. Acquired Corp is duly qualified or
licensed as a foreign entity to do business, and is in good standing, in each
jurisdiction where such qualification or license is required, except where the
failure so to qualify would not have a Material Adverse Effect.
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2.2 CAPITALIZATION; OPTIONS AND OTHER RIGHTS.
(a) SCHEDULE 2.2(a). The total authorized shares of capital
stock of Acquired Corp consist of 25,000,000 shares of Acquired Corp Common
Stock, of which 19,716,208 shares are issued and outstanding. No shares of
preferred stock are authorized. SCHEDULE 2.2(a) sets forth a true and complete
list of all holders of Acquired Corp Capital Stock (including the amount and
type of security beneficially owned by such holder), together with the address
of each such stockholder as currently shown on Acquired Corp's books and
records. All of the issued and outstanding shares of Acquired Corp Common Stock
have been duly and validly authorized and issued and are fully paid and
nonassessable. None of Acquired Corp Capital Stock has been issued, and none of
Acquired Corp Capital Stock will be issued, in violation of the preemptive
rights of any Acquired Corp Stockholder. The issued and outstanding shares of
Acquired Corp Common Stock have been issued in compliance in all material
respects with applicable Federal and state securities laws and regulations.
(b) SCHEDULE 2.2(b). Except as specified on Schedule 2.2(b),
there are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any Person any interest in or the right to purchase or otherwise
acquire from Acquired Corp or granting to Acquired Corp any interest in or the
right to purchase or otherwise acquire from any Person, at any time, or upon the
occurrence of any stated event, any securities of Acquired Corp, whether or not
presently issued or outstanding, nor are there any outstanding securities of
Acquired Corp or any other entity which are convertible into or exchangeable for
other securities of Acquired Corp, nor are there any agreements, subscriptions,
options, warrants, calls, commitments or rights of any kind granting to any
Person any interest in or the right to purchase or otherwise acquire from
Acquired Corp or any other Person any securities so convertible or exchangeable.
(c) There are no proxies, agreements or understandings with
respect to the voting of any of the shares of Acquired Corp Capital Stock or the
direction of the business operations or conduct of Acquired Corp, except as
contemplated by this Agreement.
(d) To the Best Knowledge of Acquired Corp, no stockholder of
Acquired Corp is a party to any (i) contract that would require such stockholder
to sell, transfer or otherwise dispose of the Capital Stock of Acquired Corp
(other than this Agreement) or (ii) other contract with respect to any capital
stock of Acquired Corp.
2.3 AUTHORITY; NO CONFLICTS; CONSENTS.
(a) Acquired Corp has full power and authority to execute,
deliver and perform this Agreement and the transactions contemplated hereunder.
The execution, delivery and performance of this Agreement by Acquired Corp has
been duly authorized and approved by all necessary corporate or other action,
including, but not limited to, shareholders' consent, and no other corporate or
other proceedings on the part of Acquired Corp are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
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authorized, executed and delivered by Acquired Corp and is the legal, valid and
binding obligation of Acquired Corp, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by Acquired Corp
of this Agreement and the consummation of the Merger do not, and will not, (i)
violate or conflict with any provision of the Articles of Incorporation or
By-laws of Acquired Corp, (ii) violate any law, rule, regulation, order, writ,
injunction, judgment or decree of any court, governmental authority or
regulatory agency applicable to Acquired Corp, except for violations which,
individually or in the aggregate, would not have a Material Adverse Effect, or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any note, bond, indenture,
lien, mortgage, lease, permit, guaranty or other agreement, instrument or
obligation to which Acquired Corp is a party or by which any of their respective
assets may be bound, except for violations, breaches or defaults which,
individually or in the aggregate, would not have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by Acquired
Corp does not, and the performance by Acquired Corp of this Agreement will not,
require any consent, approval, authorization or permission of, or filing with or
notification of any governmental or regulatory authority, domestic or foreign,
or any other Person except for (i) the filing and recordation of appropriate
merger documents as required by the NRS, (ii) the approval of Acquired Corp
Stockholders and (iii) any such consent, approval, authorization, permission,
notice or filing which, if not obtained or made, would not have a Material
Adverse Effect.
(d) The Board of Directors of Acquired Corp is properly
constituted. The Board of Directors of Acquired Corp has approved this Agreement
and the transactions contemplated hereby, has determined that the terms of the
Merger are in the best interests of Acquired Corp Stockholders, and has resolved
to recommend the approval of the Merger and the adoption of this Agreement and
the consummation of the transactions contemplated hereby to Acquired Corp
Stockholders.
(e) Pursuant to the provisions of the NRS, the Articles of
Incorporation of Acquired Corp, the By-laws of Acquired Corp and any other
applicable law, the only approval of Acquired Corp Stockholders required to
approve the Merger and to approve and adopt this Agreement and the transactions
contemplated hereby is the approval of a majority of the outstanding shares of
Acquired Corp Common Stock entitled to vote.
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2.4 CHARTER DOCUMENTS. Acquired Corp has previously furnished to Parent
a true, complete and correct copy of the Articles of Incorporation and By-laws
of Acquired Corp as in effect as of the date of this Agreement. Acquired Corp is
not in violation of any provision of any document referred to in the foregoing
sentence, other than violations that would not have a Material Adverse Effect.
2.5 FINANCIAL STATEMENTS.
(a) As of the date of execution of this Agreement, Acquired
Corp has furnished to Parent true and complete copies of the audited balance
sheet; (the "Balance Sheet") statements of operations, stockholders' equity and
cash flows as of and for the fiscal years ended December 31, 2001, and December
31, 2002 (collectively the "Financial Statements");
(b) The Financial Statements were each prepared on the basis
of the books and records of Acquired Corp (in each case, as of the date of such
Financial Statements) and present fairly, in all material respects, the
financial position of Acquired Corp as of the dates thereof and the consolidated
results of the operations and changes in stockholders' equity and cash flows of
Acquired Corp for each of the periods then ended in conformity with GAAP.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES; INDEBTEDNESS.
(a) Except as set forth in the notes to the Financial
Statements, Acquired Corp has no liability or obligation of any nature (whether
absolute, accrued or contingent or otherwise) which is materially in excess of
amounts shown or reserved therefor in the Financial Statements other than (a)
liabilities or obligations not required under GAAP on a basis consistent with
that of preceding accounting periods to be reported on such Financial Statements
and (b) liabilities or obligations incurred after the date of the Balance Sheet
incurred in the ordinary course of business and consistent with past practice.
(b) Acquired Corp has no Indebtedness which has not been
incurred in the ordinary course of business and consistent with past practice.
2.7 OPERATIONS AND OBLIGATIONS.
(a) Except as reported on the Balance Sheet, since December
31, 2002:
(i) there has been no event or condition that has had or
would have a Material Adverse Effect; and
(ii) there has been no impairment, damage, destruction,
loss or claim, whether or not covered by insurance, or
condemnation or other taking which would have a Material
Adverse Effect.
(b) Except for actions required to be taken hereunder or
approved in advance thereof by Parent in writing, since December 31, 2002,
Acquired Corp has conducted its business only in the ordinary course and
consistent with past practice. Without limiting the generality of the foregoing,
since December 31, 2002, except as otherwise disclosed to Parent in writing,
Acquired Corp has not:
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(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any
option, warrant or other right to purchase, any of its
capital stock or other equity interest or any security
convertible into its capital stock or other equity
interest;
(ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any bonds, notes or
other debt securities, or borrowed or agreed to borrow any
funds (other than inter-company debt) in excess of $20,000
or entered into any lease the obligations of which, in
accordance with generally accepted accounting principles,
would be capitalized, which lease has a capitalized value
in excess of $20,000;
(iii) other than liabilities reflected or reserved against
in the Balance Sheet and liabilities incurred since
December 31, 2002, in the ordinary course of business
consistent with past practice, paid any obligation or
liability (absolute or contingent) in excess of $20,000;
(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders
or purchased or redeemed, or agreed to purchase or redeem,
any capital stock;
(v) except in the ordinary course of business consistent
with past practice, made or permitted any material
amendment or termination of any agreement to which
Acquired Corp is a party;
(vi) undertaken or committed to undertake capital
expenditures exceeding $15,000 for any single project or
related series of projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered
to be imposed any Lien on, any of the assets reflected on
the Balance Sheet having an aggregate value of greater
then $20,000 or any assets acquired by Acquired Corp after
December 31, 2002, having an aggregate value of greater
than $20,000, except for inventory and personal property
sold or otherwise disposed of for fair value in the
ordinary course of its business consistent with past
practice and except for Permitted Liens:
(viii) cancelled any debts owed to or claims held by
Acquired Corp in excess of $20,000 per obligation
(including the settlement of any claims or litigation);
(ix) entered into or become committed to enter into any
other material transaction involving more than $15,000
except in the ordinary course of business;
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(x) except for increases in the ordinary course of
business consistent with past practice, instituted any
increase in any compensation payable to any employee of
Acquired Corp, amended any Benefit Plan or modified any
other benefits made available to any such employees;
(xi) made any change in the accounting principles or made
any material change in accounting practices used by
Acquired Corp from those applied in the preparation of the
Financial Statements; or
(xii) taken any of the actions which, under Section 4.2,
it is prohibited from taking between the date hereof and
the Closing Date.
(c) There are no accrued and unpaid dividends or distributions
with respect to the any capital stock of Acquired Corp.
2.8 PROPERTIES. Acquired Corp has good, marketable, and indefeasible
title to, or a valid leasehold interest in, all buildings, machinery, equipment,
and other tangible assets (i) located on their premises, shown on the Financial
Statements, or acquired after the date thereof and (ii) necessary for the
conduct of their business as currently conducted and as currently proposed to be
conducted, in each case free and clear of all encumbrances, except for
properties and assets disposed of in the ordinary course of business since the
date thereof and except for Permitted Liens. Each such tangible asset is free
from defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition (subject to normal wear and
tear), and is suitable for the purposes for which it is currently used and
currently is proposed to be used.
2.9 CONTRACTS. SCHEDULE 2.9 lists any of the following:
(a) Each contract or commitment which creates an obligation,
on the part of Acquired Corp in excess of obligations created in the normal and
usual course of business and not described in clauses (b) through (k) below;
(b) Each written debt instrument, including, without
limitation, any loan agreement, line of credit, promissory note, security
agreement or other evidence of indebtedness, where Acquired Corp is a lender,
borrower or guarantor, in a principal amount in excess of $15,000;
(c) Each written contract or commitment restricting Acquired
Corp from engaging in any line of business;
(d) Each written contract to which Acquired Corp is a party
which contains a provision relating to a change in control of Acquired Corp that
(i) permits the other party thereto to modify in any material respect or to
terminate such contract or (ii) requires notice to such other party of such
change in control of Acquired Corp;
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(e) Each written contract or commitment in excess of $20,000
to which Acquired Corp is a party for any charitable contribution;
(f) Each written joint venture or partnership agreement to
which Acquired Corp is a party;
(g) Each written distributorship, sales agency, sales
representative, reseller or marketing, value added reseller, original equipment
manufacturing, technology transfer, source code license or other license or
other agreement containing the right to sublicense software and/or technology,
in each case, to which Acquired Corp is a party;
(h) Each written agreement in excess of $20,000 to which
Acquired Corp is a party with respect to any assignment, discounting or
reduction of any receivables of Acquired Corp;
(i) Each agreement, option or commitment or right with, or
held by, any third party to acquire any assets or properties of Acquired Corp
having a value in excess of $20,000, except for contracts for the sale of
inventory, machinery or equipment in the ordinary course of business;
(j) Each written employment or consulting contract entered
into by Acquired Corp which iscurrently in effect; and
(k) Each supply agreement to which Acquired Corp is a party,
which Acquired Corp could not readily replace without a material impact on
Acquired Corp.
Except as set forth in Schedule 2.9, (i) to the Best Knowledge of Acquired Corp,
there are no oral contracts or commitments of the types described in this
Section 2.9 which create an obligation on the part of Acquired Corp which are
individually in excess of $20,000 or in the aggregate in excess of $50,000, (ii)
there are no contracts or commitments between Acquired Corp and any Affiliate or
between Acquired Corp and any Affiliate that is not listed on any other
schedule, (iii) there are no contracts, commitments or arrangements between
Acquired Corp and any employee or between Acquired Corp and any employee which
require the payment of any compensation upon the occurrence of change in control
of Acquired Corp, (iv) there are no contracts or arrangements to which Acquired
Corp is a party, except this Agreement, which require notice to, the consent of,
or other than with respect to services provided in connection with the Merger,
any payment of any compensation (whether as a penalty, liquidated damages or
otherwise) to any party with respect to the Merger or any of the transactions
contemplated hereby or in the event of the termination of such contract or
arrangement on or following the Effective Time, (v) there are no contracts to
which Acquired Corp is a party which would create rights in any Person against
Parent or any of its Affiliates (other than rights against Acquired Corp and as
in effect on the Closing Date) and (vi) Acquired Corp has been duly authorized
to enter into each of the contracts listed in 2.9 and each of the contracts
listed in Section 2.9 is binding and enforceable in accordance with its terms.
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2.10 ABSENCE OF DEFAULT. Except as disclosed to Parent, in writing:
(a) Each of the agreements listed on SCHEDULE 2.9 that creates
obligations of any Person in excess of $20,000 is, and, after giving effect to
the Merger, will be, valid and binding and in full force and effect, in each
case, without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without notice to, the consent, approval
or act of, or the making of any filing with, any other Person;
(b) Acquired Corp has fulfilled and performed in all material
respects its obligations under each such agreement to which it is a party to the
extent such obligations are required by the terms thereof to have been fulfilled
or performed through the date hereof;
(c) Acquired Corp is not alleged in writing to be, and no
other party to any such agreement is, in default under, nor is there alleged in
writing to be any basis for termination of, any such agreement;
(d) No event has occurred and no condition or state of facts
exists which, with the passage of time or the giving of notice or both, would
constitute such a default or breach by Acquired Corp or by any such other party;
and
(e) Acquired Corp is not currently renegotiating any such
agreement or paying liquidated damages in lieu of performance thereunder.
2.11 LITIGATION AND GOVERNMENTAL ENFORCEMENT. To the Best Knowledge of
Acquired Corp, neither it nor any of its affiliates, officers, directors or
shareholders owning 5% or over of its capital stock is a party to any action,
suit, arbitration, legal or administrative proceeding or investigation pending
or threatened against it by any federal, state, municipal or governmental body,
including, but not limited to, the SEC nor are any such entities or individuals
acting on behalf of such governmental bodies. To the Best Knowledge of each
entity, neither Acquired Corp nor any of its affiliates, officers, directors or
shareholders owning 5% or over of each entities capital stock have ever been
fined, sanctioned, disciplined or imprisoned for any securities violation. There
is no judgment, order, writ, injunction or decree of any court, governmental
agency, tribunal or other governmental or regulatory authority as to which any
of the assets, properties or business of Acquired Corp or any of its affiliates,
officers, directors or shareholders owning 5% or over of its capital stock is
subject. Acquired Corp agrees to immediately provide Parent and Acquiring Corp
with written notification of any inquiry by any of the aforementioned regulatory
bodies should they receive notice of same prior to the Effective Time.
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2.12 COMPLIANCE WITH LAW.
(a) Acquired Corp has complied in all respects with, and is
not in violation of, any law, ordinance or governmental rule or regulation
(collectively, "Laws") to which it or its business is subject other than
failures to comply and violations which do not have a Material Adverse Effect;
and
(b) Acquired Corp has obtained all licenses, permits,
certificates or other governmental authorizations (collectively
"Authorizations") necessary for the ownership or use of its assets and
properties or the conduct of its business other than Authorizations (i) which
are ministerial in nature and (ii) which, the failure of Acquired Corp to
possess, would not subject Acquired Corp to penalties or fines exceeding $50,000
in the aggregate ("Immaterial Authorizations").
2.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.13(a) contains a summary description of each
Patent owned by Acquired Corp. All Patents required to be listed that have been
registered with the United States Patent and Trademark Office, with a
corresponding state office or with any international patent and/or trademark
office are currently in compliance with all formal legal requirements (including
the timely post-registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees, taxes, or actions falling due within 90 days after the Closing
Date. No Patent required to be listed has been or is now involved in any
opposition, invalidation, or cancellation and no such action is threatened with
respect to any such Patent.
(b) SCHEDULE 2.13(b) lists each Trademark owned or held by
Acquired Corp. All Trademarks required to be listed that have been registered
with the United States Patent and Trademark Office, with a corresponding state
office or with any international patent and /or trademark office are currently
in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance
fees, taxes, or actions falling due within 90 days after the Closing Date. No
Trademark required to be listed has been or is now involved in any opposition,
invalidation, or cancellation and no such action is threatened with the respect
to any such Trademark. All products and materials containing a Trademark
required to be listed bear the proper legal notice where permitted by law.
(c) SCHEDULE 2.13(c) lists any domain names or websites held
by Acquired Corp. No domain name or website required to be listed has been or is
now involved in any trade name, domain name or anti-cyber-squatting dispute, and
no such action is threatened with the respect to any such domain name or
website. All materials contained on such websites are the property of Acquired
Corp or are duly licensed for such use and bear the proper legal notice where
permitted by law.
(d) Acquired Corp has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of each of its Trade Secrets,
the loss of which would have a Material Adverse Effect (such Trade Secrets being
referred to in this Agreement as "Material Trade Secrets"). To the Best
Knowledge of Acquired Corp, no Material Trade Secret of Acquired Corp is part of
the public knowledge or literature, or has been used, divulged, or appropriated
either for the benefit of any third person or to Acquired Corp's detriment. No
Material Trade Secret is subject to any adverse claim nor has any adverse claim
been threatened with respect to any such Material Trade Secret and there is no
basis therefor.
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(e) Acquired Corp owns or has the right to use all
Intellectual Property necessary to operate its business as currently conducted.
Each item of Intellectual Property that Acquired Corp owns or uses immediately
prior to the Closing will be owned or available for use by the Surviving
Corporation on identical terms and conditions immediately subsequent to the
Closing.
(f) To the Best Knowledge of Acquired Corp, Acquired Corp has
not interfered with, infringed upon, misappropriated, or otherwise violated or
come into conflict with any other person's Intellectual Property ("Third Party
Intellectual Property"). Acquired Corp has not received any notice alleging any
such interference, infringement, misappropriation, violation, or conflict
(including any claim that Acquired Corp must license or refrain from using any
Third Party Intellectual Property) and is not aware of any basis for such notice
or claim. To the Best Knowledge of Acquired Corp, no third person has any Third
Party Intellectual Property that interferes or would be likely to materially
interfere with Acquired Corp's use of any Intellectual Property. To the Best
Knowledge of Acquired Corp, it will not materially interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any Third Party
Intellectual Property Rights as a result of the continued operation of its
businesses as currently conducted. To the Best Knowledge of Acquired Corp, no
other person has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with Acquired Corp's Intellectual Property.
(g) SCHEDULE 2.13(g) identifies each contract pursuant to
which Acquired Corp has granted to a third party rights under or with respect to
any of its Intellectual Property (together with any exceptions). SCHEDULE
2.13(g) further identifies each contract pursuant to which Acquired Corp has a
right to use any Third Party Intellectual Property. Acquired Corp has made
available to Parent and Acquiring Corp correct and complete copies of all
contracts with respect to such use as amended to date.
(h) All former and current employees of Acquired Corp whose
position required the development of Intellectual Property for Acquired Corp
have executed written contracts with Acquired Corp that assign all rights to any
inventions, improvements, discoveries or information relating to the business
Acquired Corp; and no employee of Acquired Corp has entered into any contract
that restricts or limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his or her work to any person other than
Acquired Corp.
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2.14 TAX MATTERS. Except as disclosed to Parent in writing,
(a) Acquired Corp has filed all Tax Returns required to be filed; (b) (1) all
such Tax Returns are complete and accurate in all material respects, except to
the extent that a reserve for Taxes has been established on the Balance Sheet,
and (2) all Taxes shown to be due on such Tax Returns have been timely paid; (c)
all Taxes (whether or not shown on any Tax Return) owed by Acquired Corp have
been timely paid or Acquired Corp has established or caused to be established
adequate reserves therefor on its financial statements on at least a quarterly
basis; (d) Acquired Corp has not waived or been requested to waive any statute
of limitations in respect of Taxes, which waiver or request is still in effect;
(e) none of the Tax Returns referred to in clause (a) have been examined by the
Internal Revenue Service or any applicable taxing authorities; (f) there is no
action, suit, investigation, audit, claim or assessment pending or proposed or
threatened with respect to Taxes of Acquired Corp; (g) all deficiencies asserted
or assessments made as a result of any examination of the Tax Returns referred
to in clause (a) have been paid in full or have been reserved against and
entered into the books and records of Acquired Corp; (h) there are no liens for
Taxes upon the assets of Acquired Corp except liens relating to current Taxes
not yet due and payable; (i) all Taxes which Acquired Corp is required by law to
withhold or to collect for payment have been duly withheld and collected, and
have been paid or accrued, reserved against and entered on the books of Acquired
Corp; (j) Acquired Corp is not a party to any tax sharing or indemnification
agreement; (k) Acquired Corp is not a "United States Real Property Holding
Company" as defined in section 897 of the Code; (l) during the five-year period
ending on the date hereof, Acquired Corp has no distributing corporation or a
controlled corporation in a transaction intended to be governed by section 355
of the Code; (m) no election has been made under section 301.7701-3 or any
similar provision of Tax law to treat any Affiliate of Acquired Corp or Acquired
Corp as an association, corporation or partnership; (n) Acquired Corp is not
disregarded as an entity for U.S. federal income tax purposes; (o) Acquired
Corp's or Acquired Corp net operating loss is not a "dual consolidated loss" as
defined in section 1503 of the Code; and (p) none of Acquired Corp's non-U.S.
subsidiaries is a "passive foreign investment company" as defined in section
1297 of the Code or a "foreign personal holding company" as defined in section
553 of the Code.
2.15 EMPLOYEE BENEFIT PLANS.
(a) All amounts which Acquired Corp is required by law or by
agreement with its employees to deduct from such employees' salaries and/or
transfer to such employees' pension, life insurance, incapacity insurance,
continuing education fund or other plans have been duly paid into the
appropriate fund or funds, and Acquired Corp has no outstanding obligation to
make any such transfer or provision.
(b) Acquired Corp has no "employee pension benefit plan" (as
defined in section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or "employee welfare benefit plans" (as defined in
section 3(1) of ERISA). Acquired Corp has made available to Parent true,
complete and correct copies of (i) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) the most recent summary
plan description for each Benefit Plan for which such summary plan description
is required, (iii) each trust agreement and group annuity contract relating to
any Benefit Plan and (iv) all correspondence with the IRS, the United States
Department of Labor or other governmental entity relating to any outstanding
controversy or audit. Except as could not reasonably be expected to have a
Material Adverse Effect, each Benefit Plan has been administered in accordance
with its terms.
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(c) Acquired Corp has not maintained, contributed to or been
obligated to contribute to any plan that is subject to Title IV of ERISA.
(d) No employee of Acquired Corp will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement.
2.16 EXECUTIVE EMPLOYEES.
(a) SCHEDULE 2.16(a) lists the names, titles and current
annual salary rates of and bonuses paid in the years 2000 through 2002 or
currently payable to all present officers and employees of Acquired Corp whose
annual base salary in such year exceeded $50,000 (the "Executive Employees").
(b) SCHEDULE 2.16(b) lists Acquired Corp's employment
agreements and employee benefit plan (within the meaning of section 3(3) of
ERISA) with respect to, any Executive Employees. There are no agreements with
respect to any Executive Employees which would obligate Acquired Corp to make
any payment or provide any benefit the deduction of which is limited by section
280G of the Code or that could be subject to tax under section 4999 of the Code.
2.17 EMPLOYEES.
(a) There are no controversies pending or threatened between
Acquired Corp and any of its employees, which controversies have or could
reasonably be expected to have a Material Adverse Effect;
(b) Acquired Corp is not liable for any arrears of wages or
any taxes or penalties for failure to comply with any such laws, rules or
regulations;
(c) Acquired Corp is not subject to, nor do any of its
employees benefit from, any payment or undertaking with respect to the terms of
their employment (including, without limitation, amounts payable in respect of
severance pay) that is not usual and customary for an individual with similar
duties and responsibilities;
(d) Acquired Corp is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Acquired Corp, nor are there any activities or proceedings of any labor union to
organize any such employees; and
(e) Acquired Corp has received no written notice that any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws intends to conduct an investigation of or relating to it, and
no such investigation is in progress.
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2.18 NO ENVIRONMENTAL MATTERS. Acquired Corp has received no notice
of nor is aware of any environmental matters which could have a Material
Adverse Effect.
2.19 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY. SCHEDULE
2.19 has been separately provided to Parent under an agreement of
confidentiality and lists (a) all bank accounts, lock boxes and safe deposit
boxes relating to the business and operations of Acquired Corp (including the
name of the bank or other institution where such account or box is located and
the name of each authorized signatory thereto), (b) all outstanding letters of
credit issued by financial institutions for the account of Acquired Corp
(setting forth, in each case, the financial institution issuing such letter of
credit, the maximum amount available under such letter of credit, the material
terms (including the expiration date) of such letter of credit and the party or
parties in whose favor such letter of credit was issued), and (c) the name and
address of each Person who has a power of attorney to act on behalf of Acquired
Corp. Acquired Corp has heretofore delivered to Parent true, correct and
complete copies of each letter of credit and each power of attorney described in
SCHEDULE 2.19.
2.20 SUBSIDIARIES. Acquired Corp has no subsidiaries.
2.21 AFFILIATE TRANSACTIONS. Except as previously disclosed to Parent
in writing, (a) no officer or director of Acquired Corp has any significant
interest in any Person that is engaged in a business which is in competition
with the business of Acquired Corp and (b) no officer or director of Acquired
Corp is a supplier to, or a customer of Acquired Corp, or is a party to any
contract.
2.22 INSURANCE. SCHEDULE 2.22 lists all policies of insurance
maintained, owned or held by Acquired Corp as of the date hereof. Acquired Corp
shall use all commercially reasonable efforts to keep such insurance or
comparable insurance in full force and effect through the Closing Date. To the
best knowledge of Acquired Corp, Acquired Corp has complied in all material
respects with each such insurance policy to which it is a party and has not
failed to give any notice or present any claim thereunder in a due and timely
manner, other than instances which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. To the Best Knowledge
of Acquired Corp, the full policy limits (subject to deductibles provided in
such policies) are available and unimpaired under each such policy and no
insurer under any of such policies has a basis to void such policy on grounds of
non-disclosure on the part of Acquired Corp thereunder. Each such policy is in
full force and effect and will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement.
2.23 LEASES. SCHEDULE 2.23 lists all outstanding leases, both capital
and operating, or licenses, pursuant to which Acquired Corp has (i) obtained the
right to use or occupy any real or personal property where the value of such
personal property exceeds $10,000 in the case of any single lease or $20,000 in
the aggregate, or (ii) granted to any other Person the right to use any property
described in SCHEDULE 2.23.
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2.24 PRODUCT WARRANTY. Each product designed, manufactured, sold,
leased, or delivered by Acquired Corp has been in material conformity with all
applicable law, contracts, and all express and implied warranties, and Acquired
Corp has no material liability (and there is no basis for any present or future
action against it giving rise to any liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve,
if any, for product warranty claims set forth on the face of the Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the ordinary course of
business, consistent with GAAP. No product designed, manufactured, sold, leased,
or delivered by Acquired Corp is subject to any guaranty, warranty, or other
indemnity or similar liability beyond the applicable standard terms and
conditions of sale or lease.
2.25 PRODUCT LIABILITY. Acquired Corp, to its respective Best
Knowledge, has no liability (and there is no basis that is known to Acquired
Corp for any present or future action against any of them giving rise to any
liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product designed, manufactured, sold,
leased, or delivered by Acquired Corp.
2.26 COMPLETE COPIES OF MATERIALS. Acquired Corp has delivered or made
available true and complete copies of each document that has been requested by
Parent or its counsel in connection with their legal and accounting review of
Acquired Corp.
2.27 ACCURACY OF INFORMATION FURNISHED. No representation, statement or
information contained in this Agreement (including the schedules), or any
contract or document executed in connection herewith or delivered pursuant
hereto or made available or furnished to Parent or its representatives by
Acquired Corp contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make the
information contained therein not misleading. Acquired Corp has provided Parent
with correct and complete copies of all documents listed or described in the
Schedules.
2.28 ACQUIRED CORP REVIEW. Each Acquired Corp Stockholder that has
consented to the Merger has agreed that Acquired Corp may represent and warrant
to the following on behalf of such stockholder and for the benefit of Parent.
Acquired Corp represents and warrants that to its Best Knowledge:
(a) Each Acquired Corp Stockholder who will be receiving
Parent Common Stock and whose address on the books and records of Acquired Corp
is within the United States or its territories or possession is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, as presently in effect; or the total number of non-accredited,
sophisticated shareholders entitled to receive Parent Common Stock does not
exceed 35.
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(b) As to each Acquired Corp Stockholder whose address on the
books and records of Acquired Corp is other than within the United States or its
territories or possession, such Acquired Corp Stockholder (i) is not a U.S.
Person within the meaning of Regulation S under the Securities Act and is not
acquiring the Parent Common Stock for the account or the benefit of a U.S.
Person and (ii) will resell the Parent Common Stock, subject at all times to the
additional transfer restrictions stated in this Agreement, only in accordance
with the provisions of Regulation S under the Securities Act, pursuant to
registration under the Securities Act or pursuant to an available exemption from
registration and will not engage in hedging transactions with regard to the
Parent Common Stock unless in compliance with the Securities Act.
2.29 REORGANIZATION. Acquired Corp has not taken any action or failed
to take any action which action or failure would reasonably be expected to
jeopardize the qualification of the Merger as a reorganization within the
meaning of section 368(a) of the Code.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORP AND PARENT.
Each of Acquiring Corp and Parent represents and warrants to Acquired Corp as
follows:
3.1 ORGANIZATION. Parent and Acquiring Corp are corporations duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation, and have all requisite corporate and
authority and all necessary governmental approvals to enter into this Agreement
and the transactions contemplated hereby to be performed by them.
3.2 CAPITAL STRUCTURE.
(a) SCHEDULE 3.2(a) sets forth the authorized capitalization
of Parent and the number of shares of each class or series of Parent's capital
stock ("Parent Common Stock") that are issued and outstanding as of the date of
this Agreement, including the number of shares of Parent's common stock that are
so issued and outstanding and the number of shares of Parent Common Stock that
(A) have been reserved for conversion of shares of any class of stock that is
convertible into Parent Common Stock ("Parent Convertible Shares"), (B) have
been reserved for issuance upon exercise of warrants to purchase shares of
Parent Common Stock ("Reserved Parent Warrant Shares") and (C) shares that have
been reserved for issuance upon exercise of options to purchase shares of Parent
Common Stock ("Reserved Parent Option Shares"). Parent is authorized to issue
20,000,000 shares of $.001 par value common stock and 5,000,000 shares of $.001
preferred stock. As of the date of execution of this Agreement, Parent has
5,532,000 shares of its common stock issued and outstanding. All of the issued
and outstanding shares of Parent Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable. All the Parent
Common Stock when issued upon the conversion of the Parent Convertible Shares,
20
all the Reserved Parent Warrant Shares, when issued upon the exercise of the
underlying warrants, and all the Reserved Parent Option Shares, when issued upon
the due exercise of the underlying options, will be duly and validly authorized
and issued and fully paid and nonassessable. All the shares of Parent Common
Stock have been duly and validly authorized and issued and are fully paid and
nonassessable. None of the Parent Common Stock has been issued and none of the
Parent Common Stock will be issued in violation of the preemptive rights of any
stockholder of Parent. The issued and outstanding Parent Common Stock has been
issued, and the Parent Convertible Shares, the Reserved Parent Warrant Shares
and the Reserved Parent Option Shares will be issued, in compliance in all
material respects with all applicable Federal and state securities laws and
regulations. The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly and validly authorized and issued, will be fully paid and
nonassessable and will be issued in compliance with all applicable Federal and
state securities laws and regulations. The authorized capital stock of Acquiring
Corp consists of 50,000,000 shares of common stock, $0.001 par value per share,
of which 1,000 shares are issued and outstanding and 5,000,000 shares of
preferred stock, $0.001 par value per share, of which none are issued and
outstanding.
(b) Except as set forth in SCHEDULE 3.2(b), there are no
existing agreements, subscriptions, options, warrants, calls, commitments,
trusts (voting or otherwise), or rights of any kind whatsoever granting to any
Person any interest in or the right to purchase or otherwise acquire from Parent
or granting to Parent any interest in or the right to purchase or otherwise
acquire from any Person, at any time, or upon the occurrence of any stated
event, any securities of Parent, whether or not presently issued or outstanding,
nor are there any outstanding securities of Parent, or any other entity which
are convertible into or exchangeable for other securities of Parent, nor are
there any agreements, subscriptions, options, warrants, calls, commitments or
rights of any kind granting to any Person any interest in or the right to
purchase or otherwise acquire from Parent or any other Person any securities so
convertible or exchangeable, nor, to the Best Knowledge of Parent, are there any
proxies, agreements or understandings with respect to the voting of the Parent
Common Stock or the direction of the business operations or conduct of Parent,
except as contemplated by this Agreement.
3.3 AUTHORITY; NO CONFLICTS; CONSENTS.
(a) Each of Parent and Acquiring Corp has full corporate power
and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The execution, delivery and performance of
this Agreement by each of Parent and Acquiring Corp has been duly authorized and
approved by each of Acquiring Corp and Parent by all necessary corporate action
and no other corporate proceedings other than actions previously taken on the
part of each of Parent or Acquiring Corp are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by each of Parent and Acquiring Corp and is
the legal, valid and binding obligation of each of Parent and Acquiring Corp
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors rights generally and by the
effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) The execution, delivery and performance by each of Parent
and Acquiring Corp of this Agreement and the consummation of the Merger do not,
and will not, (i) violate or conflict with any provision of the Articles of
Incorporation or By-laws of either Parent or Acquiring Corp, (ii) violate any
law, rule, regulation, order, writ, injunction, judgment or decree of any court,
governmental authority, or regulatory agency, except for violations which,
21
individually or in the aggregate, will not have a Material Adverse Effect on
Parent or Acquiring Corp taken as a whole, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any note, bond, indenture, lien, mortgage, lease, permit, guaranty or
other agreement, instrument or obligation, oral or written, to which Parent or
Acquiring Corp is a party or by which any of the properties of Parent or
Acquiring Corp may be bound, except for violations, breaches or defaults which,
individually or in the aggregate, will not have a Material Adverse Effect on
Parent or Acquiring Corp taken as a whole.
(c) The execution and delivery of this Agreement by each of
Parent and Acquiring Corp does not, and the performance by each of Parent and
Acquiring Corp of this Agreement will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, or any other Person except for (i)
the filing and recordation of appropriate merger documents as required by the
NRS, (ii) the approval of the at least a majority of holders of Parent's shares
which are issued and entitled to vote on such matters, (iii) any such consent,
approval, authorization, permission, notice or filing which is required under
the Securities Act, the Exchange Act and applicable state securities laws, and
(iv) any such consent, approval, authorization, permission, notice or filing
which if not obtained or made would not have a Material Adverse Effect on Parent
and Acquiring Corp or on the transactions contemplated by this Agreement.
3.4 CHARTER DOCUMENTS. Parent has provided a copy of its Articles of
Incorporation and the By-laws as in effect as of the date of this Agreement. The
Articles of Incorporation and By-laws of Parent are each in full force and
effect. Parent is not in violation of any provision of its Articles of
Incorporation or By-laws.
3.5 FINANCIAL STATEMENTS.
(a) Parent has previously furnished to Acquired Corp true and
complete copies of the following financial statements of Parent (the "PARENT
FINANCIAL STATEMENTS"):
(i) the audited balance sheet as of and for December 31,
2002 (the "PARENT BALANCE SHEET"), together with a report
by its independent certified public accountants;
(ii) the audited statements of operations, stockholders'
equity and cash flows as of and for December 31, 2002
year, together with a report by its independent certified
public accountants;
(iii) the unaudited balance sheet as of September 30,
2002 (the "PARENT UNAUDITED BALANCE SHEET"); and
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(iv) the unaudited statements of operations, stockholders'
equity and cash flows for the interim period, as of
September 30, 2002.
(b) The Parent Financial Statements were prepared in
accordance with GAAP (except, in the case of the unaudited financial statements,
for normal and recurring year-end adjustments and the omission of footnotes).
The Parent Financial Statements were prepared on the basis of the books and
records of Parent (in each case, as of the date of such Parent Financial
Statements) and present fairly, in all material respects, the financial position
of Parent as of the dates thereof and the consolidated results of Parent's
operations and changes in stockholders' equity and cash flows for each of the
periods then ended in conformity with GAAP.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES; INDEBTEDNESS.
(a) Except as set forth in the notes to the Parent Financial
Statements, Parent has no liability or obligation of any nature (whether
absolute, accrued or contingent or otherwise) which is materially in excess of
amounts shown or reserved therefor in the Parent Financial Statements other than
(i) liabilities or obligations not required under GAAP on a basis consistent
with that of preceding accounting periods to be reported on such Parent
Financial Statements and (ii) liabilities or obligations incurred after the date
of the Parent Balance Sheet incurred in the ordinary course of business and
consistent with past practice, it being understood that, for all purposes of
this Agreement, Parent's ordinary course of business shall refer to the minimal
business conducted by an inactive business with dormant or liquidating
operations.
(b) SCHEDULE 3.6(b). Other than as specified on SCHEDULE
3.6(b), Parent has no Indebtedness which has not been incurred in the ordinary
course of business and consistent with past practice except as disclosed in the
Parent Financial Statements.
3.7 OPERATIONS AND OBLIGATIONS.
(a) Except as reported on the Parent Balance Sheet, since
December 31, 2002, as to Parent:
(i) there has been no event or condition that has had or
would have a Material Adverse Effect; and
(ii) there has been no impairment, damage, destruction,
loss or claim, whether or not covered by insurance, or
condemnation or other taking which could reasonably be
expected to have a Material Adverse Effect.
(b) Since December 31, 2002, Parent has conducted its business
only in the ordinary course and consistent with past practice. Without limiting
the generality of the foregoing, since December 31, 2002, Parent has not:
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(i) except as otherwise specified, issued, delivered or
agreed (conditionally or unconditionally) to issue or
deliver, or granted any option, warrant or other right to
purchase, any of its capital stock or other equity
interest or any security convertible into its capital
stock or other equity interest;
(ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any bonds, notes or
other debt securities, or borrowed or agreed to borrow any
funds (other than intercompany debt) or entered into any
lease the obligations of which, in accordance with
generally accepted accounting principles, would be
capitalized;
(iii) paid any obligation or liability (absolute or
contingent) other than liabilities reflected or reserved
against in the Parent Balance Sheet and liabilities
incurred since December 31, 2001, in the ordinary course
of business consistent with past practice;
(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders
or purchased or redeemed, or agreed to purchase or redeem,
any Parent Common Stock;
(v) except in the ordinary course of business consistent
with past practice, made or permitted any material
amendment or termination of any agreement to which Parent
is a party;
(vi) undertaken or committed to undertake capital
expenditures exceeding $20,000 for any single project or
related series of projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered
to be imposed any Lien on, any of the assets as of
December 31, 2002, except for inventory and personal
property sold or otherwise disposed of for fair value in
the ordinary course of its business consistent with past
practice and except for Permitted Liens;
(viii) cancelled any debts owed to or claims held by
Parent (including the settlement of any claims or
litigation) other than intercompany debt;
(ix) entered into or become committed to enter into any
other material transaction except in the ordinary course
of business;
(x) except for increases in the ordinary course of
business consistent with past practice, instituted any
increase in any compensation payable to any employee of
Parent, amended any Benefit Plan or modified any other
benefits made available to any such employees;
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(xi) made any change in the accounting principles or made
any material change in accounting practices used by
Parent, in each case, from those applied in the
preparation of the Parent Financial Statements; or
(xii) taken any of the actions which, under Section 5.2,
it is prohibited from taking between the date hereof and
the Closing Date.
(c) There are no accrued and unpaid dividends or distributions
with respect to Parent Common Stock.
3.8 EMPLOYEE BENEFIT PLANS.
(a) All amounts which Parent is required by law or by
agreement with its employees to deduct from such employees' salaries and/or
transfer to such employees' pension, life insurance, incapacity insurance,
continuing education fund or other plans have been duly paid into the
appropriate fund or funds, and Parent has no outstanding obligation to make any
such transfer or provision.
(b) Parent does not have any "employee pension benefit plan"
(as defined in section 3(2) of ERISA), or "employee welfare benefit plans" (as
defined in section 3(1) of ERISA).
(c) Parent has not maintained, contributed to or been
obligated to contribute to any plan that is subject to Title IV of ERISA.
(d) Since the date of the most recent audited financial
statements, there has not been any adoption or amendment by Parent of any
Benefit Plan, or any change in any actuarial or other assumption used to
calculate funding obligations with respect to any Benefit Plan, or any change in
the manner in which contributions to any Benefit Plan are made or the basis on
which such contributions are determined.
(e) Parent has no outstanding Options.
(f) Except as provided by this Agreement, no employee of
Parent will be entitled to any additional compensation or benefits or any
acceleration of the time of payment or vesting of any compensation or benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(g) Parent has not issued any Parent Common Stock under any
restricted stock purchase arrangement and Parent is not a party to any
restricted stock purchase arrangement.
3.9 EMPLOYEES. SCHEDULE 3.9 contains true, full and accurate
particulars of the names and salaries of all the employees and officers of
Parent whose total compensation in Parent's last fiscal year exceeded $50,000.
The salary figures set forth in SCHEDULE 3.9 include all remuneration payable,
vacation pay balances, balances in pension funds, or customs, manager's
insurance and any profit sharing commission, incentive or discretionary bonus
arrangements to which Parent is a party. Except as previously disclosed by
Parent:
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(a) There are no controversies pending or threatened between
Parent and any of its employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect;
(b) Parent is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Parent, nor are there any activities or proceedings of any labor union to
organize any such employees; and
(c) There is no strike, slowdown, work stoppage or lockout
existing or threatened by, or with respect to, any employees of Parent.
3.10 TAX MATTERS. Except as previously disclosed by Parent: (a) Parent
has filed all Tax Returns required to be filed; (b) (i) all such Tax Returns are
complete and accurate in all material respects, except to the extent that a
reserve for Taxes has been established on the unaudited balance sheet as of the
end of its most recent fiscal year, and (ii) all Taxes shown to be due on such
Tax Returns have been timely paid; (c) all Taxes (whether or not shown on any
Tax Return) owed by Parent have been timely paid or Parent has established or
caused to be established adequate reserves therefor on its financial statements
on at least a quarterly basis; (d) Parent has not waived or been requested to
waive any statute of limitations in respect of Taxes, which waiver or request is
still in effect; (e) none of the Tax Returns referred to in clause (a) have been
examined by the Internal Revenue Service; (f) to the Best Knowledge of Parent,
there is no action, suit, investigation, audit, claim or assessment pending or
proposed or threatened with respect to Taxes of Parent; (g) all deficiencies
asserted or assessments made as a result of any examination of the Tax Returns
referred to in clause (a) have been paid in full or have been reserved against
and entered into the books and records of Parent; (h) there are no liens for
Taxes upon the assets of Parent except liens relating to current Taxes not yet
due and payable as are being contested in good faith; (i) all Taxes which Parent
is required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued, reserved against and entered on
the books of Parent in accordance with GAAP; and (j) Parent is not and has not
been a member of any group of corporations filing a consolidated tax return for
United States federal income tax purposes.
3.11 MINUTE BOOKS. The minute books, if any, of Parent contain, in all
material respects, a complete and accurate summary of all meetings of directors
and stockholders or actions by written resolutions since the time of
organization of Parent through the date of this Agreement, and reflect all
transactions referred to in such minutes and resolutions accurately, except for
omissions which are not material. Parent has provided true and complete copies
of all such minute book to Acquired Corp's representatives.
3.12 COMPLETE COPIES OF MATERIALS. Parent has delivered or made
available true and complete copies of each document that has been requested by
Acquired Corp or its counsel in connection with their legal and accounting
review of Parent.
3.13 REORGANIZATION. Parent has not taken any action or failed to take
any action which action or failure would reasonably be expected to jeopardize
the qualification of the Merger as a reorganization within the meaning of
section 368(a) of the Code.
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3.14 SEC DOCUMENTS. SCHEDULE 3.14 sets forth all reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein (the "Parent SEC Documents")), if any, that
Parent has filed with the SEC since the date that Parent filed its first
document with the SEC. The Parent SEC Documents constitute all reports,
schedules, forms, statements and other documents that Parent was required to
file with the SEC under the Securities Act or the Exchange Act since the Parent
filed its first document with the SEC. As of their respective dates, the Parent
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents. The financial statements of Parent included in the Parent SEC
Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
3.15 ABSENCE OF CERTAIN CHANGES. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated by this
Agreement or in the Parent SEC Documents, since December 31, 2002, Parent has
conducted its business only in the ordinary course, and there has not been (a)
any event or occurrence which could have a Material Adverse Effect, (b) except
insofar as may have been or required by a change in GAAP, any change in
accounting methods, principles or practices by Parent materially affecting its
assets, liabilities or business, (c) any tax election that individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect or
any of its tax attributes or any settlement or compromise of any material income
tax liability or (d) any change in control of Parent.
3.16 INTERIM OPERATIONS OF ACQUIRING CORP. Acquiring Corp was formed
solely for the purpose of engaging in transactions of the type contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
3.17 DISCLOSURE. No representation, statement, or information contained
in this Agreement (including the schedules) or any contract or document executed
in connection herewith or delivered pursuant hereto or made available or
furnished to Acquired Corp or its representatives by Parent contains or will
omit to state any untrue statement of a material fact or omits or will omit any
material fact necessary to make the information contained therein not
misleading. Parent has provided Acquired Corp with correct and complete copies
of all documents listed or described in the Schedules.
4. ACQUIRED CORP'S CONDUCT PENDING CLOSING; ACQUIRED CORP'S COVENANTS.
4.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof until
the Closing, Acquired Corp shall:
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(a) maintain its existence and remain in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement;
(c) maintain its business and accounting records consistently
with its past practices; and
(d) use its Reasonable Best Efforts (i) to preserve its
business intact, (ii) to keep available the services of its present officers and
employees, and (iii) to preserve the goodwill of its suppliers, customers and
others having business relations with Acquired Corp.
4.2 PROHIBITED ACTIONS PENDING CLOSING. Unless otherwise provided for
herein or approved by Parent in writing, from the date hereof until the Closing,
Acquired Corp shall not:
(a) issue or sell or authorize for issuance as sale, or grant
any options or make other agreements with respect to, any shares of capital
stock or any of its securities;
(b) increase the number of shares eligible for grant under any
stock option;
(c) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(d) acquire (including by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof;
(e) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;
(f) take any action, other than in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);
(g) make any material Tax election or settle or compromise any
material federal, state, local or foreign Tax liability;
(h) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the transactions
contemplated by this Agreement;
(i) except in connection with the sale of Acquired Corp's
products in the ordinary course of business and consistent with past practice,
sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Intellectual Property Rights; or
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(j) announce an intention, commit or agree to do any of the
foregoing.
4.3 ACCESS; DOCUMENTS; SUPPLEMENTAL INFORMATION. From and after the
date hereof until the Closing, Acquired Corp shall afford to (a) the officers,
independent certified public accountants, counsel and other representatives of
Acquiring Corp and Parent, upon reasonable notice, free and full access at all
reasonable times, to the properties, books and records, including tax returns
filed and those in the process of being prepared by Acquired Corp, and the right
to consult with the officers, employees, accountants, counsel and other
representatives, of Acquired Corp in order that Acquiring Corp and Parent may
have full opportunity to make such investigations as they shall reasonably
desire to make of the operations, properties, business, financial condition and
prospects of Acquired Corp, and (b) Acquiring Corp and Parent and their
representatives, such additional financial and operating data and other
information as to the properties, operations, business, financial condition and
prospects of Acquired Corp as Acquiring Corp and Parent or their respective
representatives shall from time to time reasonably require.
5. PARENT AND ACQUIRING CORP CONDUCT PENDING CLOSING; PARENT AND ACQUIRING CORP
COVENANTS.
5.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof until
the Closing, Parent will:
(a) maintain its existence in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement; and
(c) maintain its business and accounting records consistently
with its past practices.
5.2 PROHIBITED ACTIONS PENDING CLOSING. Unless otherwise provided for
herein or approved by Acquired Corp in writing, from the date hereof until the
Closing, Parent shall not, and shall cause Acquiring Corp not to:
(a) issue or sell or authorize for issuance or sale, or grant
any options or make other agreements with respect to, any shares of its capital
stock or any other of its securities;
(b) increase the number of shares eligible for grant under its
option plan;
(c) declare, set aside, make or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect to any
of its capital stock;
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(d) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;
(e) take any action, other than in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables); or
(f) announce an intention, commit or agree to do any of the
foregoing.
5.3 ACCESS; DOCUMENTS; SUPPLEMENTAL INFORMATION. From and after the
date hereof until the Closing, Parent and Acquiring Corp shall afford to (a) the
officers, independent certified public accountants, counsel and other
representatives of Acquired Corp, upon reasonable notice, free and full access
at all reasonable times, to the properties, books and records, including tax
returns filed and those in the process of being prepared by Parent and Acquiring
Corp, and the right to consult with the officers, employees, accountants,
counsel and other representatives, of Parent and Acquiring Corp in order that
Acquired Corp may have full opportunity to make such investigations as it shall
reasonably desire to make of the operations, properties, business, financial
condition and prospects of Parent and Acquiring Corp, and (b) Acquired Corp and
its representatives, such additional financial and operating data and other
information as to the properties, operations, business, financial condition and
prospects of Parent and Acquiring Corp as Acquired Corp or its representatives
shall from time to time reasonably require.
5.4 REVIEW OF PRE-CLOSING DOCUMENTS AND PRESS RELEASES. All pre-Closing
press releases and regulatory filings shall be presented to Acquired Corp for
review and approval prior to release which approval Acquired Corp agrees not to
unreasonably withhold or delay.
6. JOINT COVENANTS.
6.1 NOTIFICATION OF CERTAIN MATTERS. Acquired Corp shall give prompt
notice to Parent, and Parent shall give prompt notice to Acquired Corp, of (a)
the occurrence, or non-occurrence, of any event which would be likely to cause
(i) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied and (b) any
failure of any Acquired Corp, or Parent or Acquiring Corp, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; PROVIDED, that the delivery of any notice
pursuant to this Section 6.1 shall not limit or otherwise affect the remedies
available to the party receiving such notice.
6.2 TAX RETURNS; COOPERATION. Acquired Corp on the one hand, and
Parent, on the other, will cooperate with each other and provide such
information as the other Party may require in order to file any return to
determine Tax liability or a right to a Tax refund or to conduct a Tax audit or
other Tax proceeding. Such cooperation shall include making employees available
on a mutually convenient basis to explain any documents or information provided
hereunder or otherwise as required in the conduct of any audit or other
proceeding.
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6.3 REORGANIZATION. Each of Parent, Acquired Corp and Acquiring Corp
shall, both before and after the Closing Date, use its reasonable Best Efforts
to cause the business combination of the Merger to be qualified as a
reorganization under section 368(a) of the Code.
6.4 FORM 8-K; OTHER FILINGS. As promptly as practicable after the date
of this Agreement, Parent will, with Acquired Corp's cooperation, prepare its
current report on SEC Form 8-K (the "Form 8-K") to be dated as of the Effective
Time and any other filings required to be filed by it under the Exchange Act,
the Securities Act or any other Federal, foreign or blue sky or related laws
relating to the Merger and the transactions contemplated by this Agreement (the
"Other Filings"). Without limitation, Parent will comply with the Accounting and
Financial Reporting Interpretations and Guidance issued by the Accounting Staff
Members in the SEC's Division of Corporate Finance on March 31, 2001, as the
same relate to "Reverse Acquisitions - Reporting Issues." Acquired Corp will
promptly review the Other Filings and confirm the accuracy of all matters
contained therein that are based on written disclosures made by Acquired Corp.
After obtaining consent of Parent and Acquired Corp, Parent will file the Form
8-K on the date of the Effective Time. After the Effective Time, Parent will
timely file all reports with the SEC, the stock exchange or trading system on
which the Parent's shares are listed or quoted and such other governmental
agencies as may require the filing of Other Filings.
6.5 ACQUIRED CORP INFORMATION STATEMENT. As promptly as practicable
after the execution of this Agreement and Acquired Corp's receipt of the
approval of this Agreement from its stockholders by written consent of a
majority of the holders of its shares entitled to vote thereon, Acquired Corp
shall, in consultation with Parent, prepare and mail to Acquired Corp
Stockholders who have not executed the written consent of stockholders pursuant
to which the Merger was approved an information statement containing
substantially the same information as the Form 8-K, and otherwise complying with
the applicable provisions of the NRS, including section 92A.380 thereof.
6.6 REGULATORY APPROVAL BY PARENT. Prior to the Effective Time, Parent
shall obtain all regulatory approvals needed to ensure that Parent Common Stock
to be issued in the Merger will be exempt from registration or qualification
under the Securities Act and the securities law of every jurisdiction in which
any registered holder of Acquired Corp Capital Stock has an address of record as
of the Closing; provided, that Parent shall not be required to consent generally
to the service of process in any jurisdiction in which it is not so subject.
6.7 NOTICES FROM GOVERNMENTAL AGENCIES. Parent will notify Acquired
Corp promptly upon the receipt of any communication from the SEC or its staff or
any other government officials regarding the transactions contemplated by this
Agreement and will provide Acquired Corp with copies of all correspondence
between Parent or any of Parent's representatives, on the one hand, and the SEC
31
or its staff or any other government officials, on the other hand, with respect
to the transactions contemplated hereby. In addition, subject to applicable laws
relating to the exchange of information, each Party will promptly furnish to the
other Parties copies of written communications (and memoranda setting forth the
substance of all oral communications) received by such party, or any of its
subsidiaries, affiliates or associates (as such terms are defined in Rule 12b-2
under the Exchange Act as in effect on the date hereof), from, or delivered by
any of the foregoing to, any governmental or regulatory authority, domestic or
foreign, relating to or in respect of the transactions contemplated under this
Agreement.
6.8 ACTIONS BY THE PARTIES. Upon the terms and subject to the
conditions set forth in this Agreement, each of the Parties will use its
Reasonable Best Efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable law
and regulations to consummate and make effective in the most expeditious manner
practicable, the transactions contemplated by this Agreement including (a)
obtaining all necessary actions and non-actions, waivers and consents, if any,
from any governmental agency or authority, making all necessary registrations
and filings and taking all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
governmental agency or authority; (b) obtaining all necessary consents,
approvals or waivers from any other Person; (c) defending any claim,
investigation, action, suit or other legal proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby; and (d) executing additional instruments
necessary to consummate the transactions contemplated by this Agreement. Each
Party will promptly consult with the other and provide necessary information
(including copies thereof) with respect to all filings made by such party with
the any agency or authority in connection with this Agreement and the
transactions contemplated hereby.
7. CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the fulfillment or satisfaction, prior to or on the Closing Date, of
the following conditions:
(a) The Merger shall have been duly approved by the requisite
vote of the outstanding shares of Acquired Corp Capital Stock and Acquiring Corp
Common Stock entitled to vote thereon in accordance with the NRS.
(b) All other authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any governmental or regulatory authority, domestic or foreign, which
the failure to obtain, make or occur would have the effect of making the Merger
or any of the transactions contemplated hereby illegal or would have a Material
Adverse Effect on Parent or Acquired Corp, assuming the Merger had taken place,
shall have been obtained, made or occurred.
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7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT. Parent's obligation
to effect the Merger and consummate the other transactions contemplated to occur
in connection with the Closing and thereafter is subject to the satisfaction of
each condition precedent listed below:
(a) Each representation and warranty set forth in Article 2
shall have been accurate and complete in all material respects (except with
respect to any provisions including the word "material" or words of similar
import, with respect to which such representations and warranties shall have
been accurate and complete) as of the date of this Agreement, and shall be
accurate and complete in all material respects (except with respect to any
provisions including the word "material" or words of similar import, with
respect to which such representations and warranties must have been accurate and
complete) as of the Closing Date, as if made on the Closing Date. Acquired Corp
shall have received certificates dated the Closing Date and signed by the chief
executive officer or corporate secretary of Parent, substantially in the form
attached hereto as Exhibit I, certifying that the conditions set forth in
Section 7.2(a), 7.2(b), 7.2(c) and 7.2(d) have been satisfied.
(b) Acquired Corp shall have performed and complied in all
material respects with its covenants to be performed or complied with at or
prior to the Closing.
(c) Since the date hereof there has been no event, series of
events or the lack of occurrence thereof which, singularly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Acquired Corp.
(d) Acquired Corp shall have delivered to Parent all required
documentation to demonstrate that Acquired Corp's shareholders are "accredited
investors" under applicable federal and state securities laws, information
statements provided by Acquired Corp's shareholders.
(e) No action is pending or threatened by or before any
governmental body, arbitrator, or mediator which seeks to restrain, prohibit,
invalidate, or collect any damages arising out of the transactions contemplated
by this Agreement.
7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED CORP. Acquired
Corp's obligation to effect the Merger and consummate the other transactions
contemplated to occur in connection with the Closing and thereafter is subject
to the satisfaction of each condition precedent listed below:
(a) Each representation and warranty set forth in Section 3
shall have been accurate and complete in all material respects (except with
respect to any provisions including the word "material" or words of similar
import, and except with respect to materiality, as reflected under GAAP, in the
representations in Section 3.5 relating to the Financial Statements, with
respect to which such representations and warranties must have been accurate and
complete) as of the date of this Agreement, and shall be accurate and complete
in all material respects (except with respect to any provisions including the
word "material" or words of similar import and except with respect to
materiality, as reflected under GAAP, in the representations in Section 3.5
relating to the Financial Statements, with respect to which such representations
and warranties must have been accurate and complete) as of the Closing Date, as
if made on the Closing Date, after giving full effect to any supplements to the
schedules as amended from time to time so long as such modification does not
constitute a Material Adverse Effect. Acquired Corp shall have received a
certificate dated the Closing Date and signed by the chief executive officer or
corporate secretary of Parent certifying that the conditions specified in
Section 7.3(a), 7.3(b) and 7.3(c) have been satisfied.
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(b) Parent shall have performed and complied in all material
respects with its covenants and obligations required by this Agreement to be
performed or complied with at or prior to the Closing.
(c) Each of the officers and directors of Parent and Acquiring
Corp shall have delivered to Acquired Corp an executed letter specifying that
each such officer and director has resigned.
(d) Since the date hereof there has been no event, series of
events or the lack of occurrence thereof which, singularly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Parent or
Acquiring Corp.
(e) No action is pending or threatened by or before any
governmental body, arbitrator, or mediator which seeks to restrain, prohibit,
invalidate, or collect any damages arising out of the transactions contemplated
by this Agreement.
8. SURVIVAL OF REPRESENTATION AND WARRANTIES
The representations and warranties of the Parties contained in this Agreement
(including the schedules to the Agreement which are hereby incorporated by
reference) or in any instrument delivered pursuant to this Agreement shall not
survive the Effective Time. This Section shall not limit any claim for fraud or
any covenant or agreement by the parties which contemplates performance after
the Effective Time.
9. BROKERS' AND FINDERS' FEES
Acquired Corp, Parent and Acquiring Corp represent and warrant that, no broker,
investment banker or financial advisor is entitled to receive a brokerage fee,
financing commission or other commission from Acquired Corp, Parent or Acquiring
Corp, respectively, in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
10. EXPENSES
Each of Acquired Corp, Parent and Acquiring Corp shall pay its own costs and
expenses relating to this Agreement, including, without limitation, in
connection with the preparation and negotiation of this Agreement, meetings of
shareholders of any Party required to approve the Merger and other related fees
and expenses of attorneys, appraisers, and other third parties, the carrying out
of the provisions of this Agreement and the structuring and consummation of the
transactions contemplated hereby.
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11. PRESS RELEASES
Upon the execution of this Agreement, Parent shall issue such press release or
announcement of the transactions contemplated by this Agreement as may be
required by the reporting requirements of the Exchange Act, subject to the
applicable requirements of Rules 135a and 135c under the Securities Act, and
such release or announcement will be reasonably satisfactory in form and
substance to Acquired Corp and its counsel. Parent and Acquired Corp shall not
issue any other press release or otherwise make public any information with
respect to this Agreement or the transactions contemplated hereby, prior to the
Closing, without the prior written consent of the other Parties which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, if required
by law, Parent or Acquired Corp may issue such a press release or otherwise make
public such information as long as such disclosing Party notifies the other
Parties of such requirement and discusses with such other Parties in good faith
the contents of such disclosure.
12. CONFIDENTIAL INFORMATION
Except as may be required by law, the Over-the-Counter Bulletin Board or other
regulation or as otherwise expressly contemplated herein, no Party or their
respective Affiliates, employees, agents and representatives will disclose to
any Person the existence of this Agreement, the subject matter or terms hereof
or any Confidential Information concerning the business or affairs of any other
Party that it may have acquired from such Party in the course of pursuing the
transactions without the prior written consent of Acquired Corp or Parent, as
the case may be; provided, however, any Party may disclose any such Confidential
Information as follows: (a) to such Party's Affiliates and its or its
Affiliates' employees, lenders, counsel, or accountants, the actions for which
the applicable Party will be responsible; (b) to comply with any applicable law
or order, provided that prior to making any such disclosure the Party making the
disclosure notifies the other Party of any action of which it is aware which may
result in disclosure and uses its Reasonable Best Efforts to limit or prevent
such disclosure; (c) to the extent that the Confidential Information is or
becomes generally available to the public through no fault of the Party or its
Affiliates making such disclosure; (d) to the extent that the same information
is in the possession (on a non-confidential basis) of the Party making such
disclosure prior to receipt of such Confidential Information; (e) to the extent
that the Party that received the Confidential Information independently develops
the same information without in any way relying on any Confidential Information;
or (f) to the extent that the same information becomes available to the Party
making such disclosure on a non-confidential basis from a source other than a
Party or its Affiliates, which source, to the disclosing Party's Best Knowledge,
is not prohibited from disclosing such information by a legal, Contractual, or
fiduciary obligation to the other Party. If the transactions are not
consummated, each Party will return or destroy as much of the Confidential
Information concerning the other Party as the Parties that have provided such
information may reasonably request. Notwithstanding the foregoing, Parent may
make such public disclosure of the existence of this Agreement, the principal
economic terms thereof, and the status with respect to achieving the Closing as
it desires; provided, that Parent will consult with Acquired Corp prior to
releasing any such public disclosure so that Acquired Corp may notify its
employees of the transactions. Neither Acquired Corp nor any of its Affiliates
will issue any press release or other public announcement related to this
Agreement or the transactions without Parent's prior written approval.
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13. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ENTIRE AGREEMENT.
This Agreement and the agreements referred to or contemplated herein set forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby, and, except as set forth in this Agreement, such other
agreements and the exhibits hereto, there are no representations or warranties,
express or implied, made by any party to this Agreement with respect to the
subject matter of this Agreement. Any and all previous agreements and
understandings between or among the parties regarding the subject matter hereof,
whether written or oral, are superseded by this Agreement and the agreements
referred to or contemplated herein. All statements contained in schedules,
exhibits, certificates and other instruments attached hereto shall be deemed
representations and warranties (or exceptions thereto) by Acquired Corp,
Acquiring Corp or Parent, as the case may be.
14. ASSIGNMENT AND BINDING EFFECT
All terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
15. TERMINATION
15.1 TERMINATION OF AGREEMENT.
The Parties may terminate this Agreement as provided below:
(a) Parent and Acquired Corp may terminate this Agreement as
to all Parties by mutual written consent at any time prior to the Closing.
(b) Parent or Acquired Corp may terminate this Agreement upon
delivery of notice if the Closing has not occurred prior to the Expiration Date;
PROVIDED that the Party delivering such notice has not directly or indirectly
caused such failure to close; and PROVIDED FURTHER, that if the Closing has not
occurred within ninety (90) days of the execution of this Agreement by all
parties hereto Acquired Corp may commence discussions and negotiations with
parties other than Parent.
(c) Parent may terminate this Agreement by giving written
notice to Acquired Corp at any time prior to the Closing if Acquired Corp has
breached any representation, warranty, or covenant contained in this Agreement
in any material respect (except with respect to materiality for any provisions
including the word "material" or words of similar import and Section 2.5, in
which case such termination rights will arise upon any breach).
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(d) Acquired Corp may terminate this Agreement by giving
notice to Parent at any time prior to the Closing, if Parent or Acquiring Corp
breached any representation, warranty, or covenant contained in this Agreement
in any material respect (except with respect to materiality for any provisions
including the word "material" or words of similar import, in which case such
termination rights will arise upon any breach).
(e) Parent or Acquired Corp may terminate this Agreement by
giving written notice to the other at any time prior to the Closing if either
Party is not reasonably satisfied in its sole discretion with the results of,
and its due diligence investigations with respect to, the material operations,
affairs, prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of Acquired Corp or
Parent.
15.2 EFFECT OF TERMINATION. Except for the obligations under Sections
10, 11, 12 and 15, if this Agreement is terminated under Section 15.1, then, all
further obligations of the Parties under this Agreement will terminate.
16. DEFINITIONS
As used in this Agreement the terms set forth below shall have the following
meanings:
(a) "AFFILIATE" of a Person means any other Person who (i)
directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(b) "BENEFIT PLAN" means any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, fringe benefit or other plan, arrangement or
understanding (whether or not legally binding) providing material benefits to
any current or former employee, officer or director of Acquired Corp.
(c) "BEST KNOWLEDGE" in respect of any representation and
warranty of (i) Acquired Corp set forth in this Agreement means (A) the actual
knowledge of any of the officers and directors of Acquired Corp (the "Acquired
Corp Knowledgeable Officers") and (B) except as otherwise set forth in such
representation or warranty, the constructive knowledge of Acquired Corp
Knowledgeable Officers to the extent such knowledge would have been obtained by
their due inquiry of the employees charged with responsibility for the
particular matter which is the subject of such representation or warranty and
(ii) Parent or Acquiring Corp set forth in this Agreement shall mean the actual
knowledge of Parent's president and Acquiring Corp's president (the "Parent
Knowledgeable Officers").
37
(d) "CODE" means the Internal Revenue Code of 1986, as
amended.
(e) "CONFIDENTIAL INFORMATION" means any confidential
information concerning the businesses and affairs of Parent, Acquiring Corp or
Acquired Corp.
(f) "COPYRIGHTS" means all copyrights in both published works
and unpublished works.
(g) "DOLLARS" or "$" means the lawful currency of the United
States of America.
(h) "XXXXX" means the Electronic Data Gathering, Analysis and
Retrieval of the SEC.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(j) "EXPIRATION DATE" means ninety (90) days from Closing.
(k) "GAAP" means United States generally accepted accounting
principles.
(l) "INDEBTEDNESS" means as at any date of determination, the
sum of the following items of a Party, without duplication: (i) obligations
created, issued or incurred for borrowed money, including all fees and
obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations to pay the
deferred purchase price or acquisition price of property or services, other than
trade or accounts payable arising, and accrued expenses incurred, in the
ordinary course of business consistent with past practice, (iii) the face amount
of all letters of credit issued for the account of any Party and all drafts
thereunder, (iv) capital lease obligations, if any, and (v) any obligation
guaranteeing any Indebtedness or other obligations of any other Person.
(m) "INTELLECTUAL PROPERTY" means the following intellectual
property:
(i) (A) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements
thereon, and all Patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions
and re-examinations thereof, (B) all Trademarks, including
all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (C)
all Copyrights and copyrightable works and all
38
applications, registrations and renewals in connection
therewith and all moral rights relating thereto insofar as
such moral rights have been assigned Acquired Corp, (D)
all Trade Secrets and confidential business information
(including ideas, research and development, know-how,
formulas, compositions, manufacturing and production
processes and techniques, methods, schematics, technology,
technical data, designs, drawings, flowcharts, block
diagrams, specifications, customer and supplier lists,
pricing and cost information and business and marketing
plans and proposals), and (E) all Software and firmware in
whatever form (including data, databases and related
documentation);
(ii) all documents, records and files relating to design,
end user documentation, quality control, sales, marketing
or customer support for, and other tangible embodiments
of, all intellectual property described herein;
(iii) all proprietary rights and other tangible or
intangible proprietary information and materials; and
(iv) all licenses, agreements and other permissions or
rights in any third party product or any third party
intellectual property described in (i) through (iii)
above;
that are owned or held by or on behalf of Acquired Corp or
that are being used in the business as it is currently
conducted.
(n) "LIENS" means any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.
(o) "MATERIAL ADVERSE EFFECT" means (unless otherwise
specified), as to a Party, any condition or event that may (i) have a material
adverse effect on the assets, business, financial condition, operations of such
Party or Parties taken as a whole, in an amount in excess of $500,000, (ii)
materially impair the ability of such Party to perform its obligations under
this Agreement or (iii) prevent or delay beyond the Expiration Date the
consummation of the transactions contemplated under this Agreement.
(p) "NRS" means the Nevada Revised Statutes.
(q) "PARENT COMMON STOCK" is defined in Section 3.2(a).
(r) "PARTIES" means Parent, Acquiring Corp and Acquired Corp.
(s) "PATENTS" means all (i) patents and patent applications,
and (ii) business methods, inventions, and discoveries that may be patentable.
39
(t) "PERMITTED LIENS" means (i) Liens for taxes, assessments,
or similar charges, incurred in the ordinary course of business that are not yet
due and payable or are being contested in good faith; (ii) pledges or deposits
made in the ordinary course of business; (iii) Liens of mechanics, material men,
warehousemen or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable or are being contested in
good faith; and (iv) similar Liens and encumbrances which are incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of such assets or properties or materially impair the use thereof
in the operation of such business.
(u) "PERSON" means any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.
(v) "REASONABLE BEST EFFORTS" means prompt, substantial and
persistent efforts as a prudent Person desirous of achieving a result would use
in similar circumstances; provided that Acquired Corp, Parent or Acquiring Corp,
as applicable, shall be required to expend only such resources as are
commercially reasonable in the applicable circumstances.
(w) "REQUESTING HOLDER" means a holder of Acquired Corp Common
Stock that requests, in accordance with section 92A.325 of the NRS, the written
statement containing the information specified therein is represented by share
certificates.
(x) "RULE 144" means Rule 144 promulgated under the Securities
Act, as in effect from time to time.
(y) "SEC" means the U.S. Securities and Exchange Commission.
(z) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(aa) "SOFTWARE" means computer software or middleware.
(bb) "SUBSIDIARY" of a Person means any corporation,
partnership, joint venture or other entity in which such Person (i) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (ii) is a general partner.
(cc) "TAX" (and, with correlative meaning, "TAXES" and
"TAXABLE") means (i) any United States, state, local, municipal or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp, or environmental tax, or any other tax, custom, duty, tariff levy,
import, governmental fee or other like assessment or charge, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental authority; (ii) in the case of Acquired Corp or any Subsidiary,
liability for the payment of any amount of the type described in clause (i) as a
result of being or having been before the Closing Date a member of an
affiliated, consolidated, combined or unitary group; and (iii) liability of
Acquired Corp or any Subsidiary for the payment of any amount as a result of
being a party to any tax sharing or indemnification agreement.
40
(dd) "TAX RETURN" means any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(ee) "TRADE SECRETS" means all know-how, trade secrets,
confidential information, customer lists, Software (source code and object
code), technical information, data, process technology, plans, drawings, and
blue prints.
(ff) "TRADEMARKS" means any trademark, trade name, trade
dress, logo, service xxxx, corporate name, domain name, URL, sign, symbol,
brand, emblem, word, motto, design or any combination thereof, whether or not
registered, together with all translations, adaptations, derivations and
combinations thereof, adopted and used by a Person to identify goods made or
sold by him or her, and to distinguish them from goods made or sold by others.
17. SCHEDULES
(a) Disclosures in any schedule or any supplement thereto,
shall be deemed to relate to any other representation or warranty in this
Agreement.
(b) If there is any inconsistency between the statements in
the body of this Agreement and those in the schedules (other than an exception
expressly set forth in the schedules with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.
18. SUCCESSORS
All of the terms, agreements, covenants, representations, warranties, and
conditions of this Agreement are binding upon, and inure to the benefit of and
are enforceable by, the Parties and their respective successors.
19. ASSIGNMENTS
No Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written consent of Parent and Acquired
Corp.
20. NOTICES
All notices, requests, demands, claims and other communications hereunder will
be in writing. Any notice, request, demand, claim or other communication
hereunder will be deemed duly given if (and then three Business Days after) it
is sent by registered or certified mail (if sent from the United States to an
addressee in the United States), return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
41
If to Parent or Acquiring Corp:
Togs For Tykes, Inc.
Attn: Xxxxx Xxxxxxx
0000 Xxxxxxx, Xxxxx 0,
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to Acquired Corp:
Biogentec Incorporated
Attention: Xx. Xxxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Copy to (which will not constitute notice):
MC Law Group, Inc. - Counsel to Acquired Corp
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Xxxxx Xxxxxx & Xxxx LLP - Counsel to Parent
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: X. Xxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication will be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
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21. SPECIFIC PERFORMANCE
Each Party acknowledges and agrees that the other Parties would be damaged
irreparably if any provision of this Agreement is not performed in accordance
with its specific terms or is otherwise breached. Accordingly, each Party agrees
that the other Parties will be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and its terms and provisions in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, subject to Section 22, in addition to any other remedy
to which they may be entitled, at law or in equity.
22. SUBMISSION TO JURISDICTION; PROCESS AGENT
Each Party submits to the jurisdiction of any state or federal court sitting in
the State of California, in any action arising out of or relating to this
Agreement and agrees that all claims in respect of the action may be heard and
determined in any such court. Each Party also agrees not to bring any action
arising out of or relating to this Agreement in any other court. Each Party
agrees that a final judgment in any action so brought will be conclusive and may
be enforced by action on the judgment or in any other manner provided at law or
in equity. Each Party waives any defense of inconvenient forum to the
maintenance of any action so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
23. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which will
be deemed an original but all of which together will constitute one and the same
instrument.
24. HEADINGS
The article and section headings contained in this Agreement are inserted for
convenience only and will not affect in any way the meaning or interpretation of
this Agreement.
25. GOVERNING LAW
This Agreement and the performance of the transactions and obligations of the
Parties hereunder will be governed by and construed in accordance with the laws
of the State of California, without giving effect to any choice of law
principles.
26. AMENDMENTS
Parties may amend this Agreement by action taken by or on behalf of the
respective Boards of Directors of Parent, Acquiring Corp and Acquired Corp at
any time prior to the Effective Time. Amendments to this Agreement must be in
writing and signed the Parties.
43
27. EXTENSIONS; WAIVER
(a) At any time prior to the Effective Time, the Parent, on
the one hand, and Acquired Corp, on the other, to the extent legally allowed,
may (i) extend the time for the performance of any of the obligations of the
other Party up to and including the Expiration Date, (ii) waive any inaccuracies
in the representations and warranties made to such Party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf of such Party.
(b) No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, may be
deemed to extend to any prior or subsequent default, misrepresentation, or
Breach of warranty or covenant hereunder or affect in any way any rights arising
because of any prior or subsequent such occurrence.
28. SEVERABILITY
The provisions of this Agreement will be deemed severable and the invalidity or
unenforceability of any provision will not affect the validity or enforceability
of the other provisions hereof; provided that if any provision of this
Agreement, as applied to any Party or to any circumstance, is adjudged by a
governmental body, arbitrator, or mediator not to be enforceable in accordance
with its terms, the Parties agree that the governmental body, arbitrator, or
mediator making such determination will have the power to modify the provision
in a manner consistent with its objectives such that it is enforceable, and/or
to delete specific words or phrases, and in its reduced form, such provision
will then be enforceable and will be enforced.
29. CONSTRUCTION
The Parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties and no
presumption or burden of proof will arise favoring or disfavoring any Party
because of the authorship of any provision of this Agreement. Any reference to
any federal, state, local, or foreign law will be deemed also to refer to law as
amended and all rules and regulations promulgated thereunder, unless the context
requires otherwise. The words "include," "includes," and "including" will be
deemed to be followed by "without limitation." Pronouns in masculine, feminine,
and neuter genders will be construed to include any other gender, and words in
the singular form will be construed to include the plural and vice versa, unless
the context otherwise requires. The words "this Agreement," "herein," "hereof,"
"hereby," "hereunder," and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
Parties intend that each representation, warranty, and covenant contained herein
will have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached will not detract from or mitigate the fact that the Party
is in breach of the first representation, warranty, or covenant.
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30. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES
The exhibits, annexes, schedules, and other attachments identified in this
Agreement are incorporated herein by reference and made a part hereof.
31. REMEDIES
Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and in addition to any other rights,
obligations or remedies otherwise available at law or in equity. Except as
expressly provided herein, nothing herein will be considered an election of
remedies.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have duly executed this Agreement as of the date first above written.
Parent: Acquired Corp:
Togs For Tykes, Inc. Biogentec Incorporated
By: /s/ Xxxxx Xxxxx By: /s/ Chaslov Xxxxxxxx
---------------------------- ----------------------------
Xxxxx Xxxxx Chaslov Xxxxxxxx
Its: President Its: President
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxxxx
---------------------------- ----------------------------
Xxxxx Xxxxxxx Xxxxxxx Xxxxxxxx
Its: Secretary Its: Secretary
Acquiring Corp:
Togs For Tykes Acquisition Corp.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------
Xxxxx Xxxxxxx
Its: President and Secretary
